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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
(Mark One)
[x] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED DECEMBER 28, 1997
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934 (NO FEE REQUIRED)
FOR THE TRANSITION PERIOD FROM______TO_______.
COMMISSION FILE NUMBER 0001-000052
[SUNBEAM LOGO]
SUNBEAM CORPORATION
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
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DELAWARE 25-1638266
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER IDENTIFICATION NUMBER)
INCORPORATION OR ORGANIZATION)
1615 S. CONGRESS AVENUE, SUITE 200
DELRAY BEACH, FLORIDA 33445
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
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(561) 243-2100
(REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE)
SECURITIES REGISTERED PURSUANT TO SECTION 12(B) OF THE ACT:
TITLE OF EACH CLASS: NAME OF EACH EXCHANGE ON WHICH REGISTERED:
COMMON STOCK, $0.01 PAR VALUE NEW YORK STOCK EXCHANGE
SECURITIES REGISTERED PURSUANT TO SECTION 12(G) OF THE ACT: NONE
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes [x] No [ ]
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K (section 229.405 of this chapter) is not contained herein,
and will not be contained, to the best of registrant's knowledge, in definitive
proxy or information statements incorporated by reference in Part III of this
Form 10-K or any amendment to this Form 10-K. [x]
The aggregate market value of all classes of the registrant's voting stock
held by non-affiliates as of February 27, 1998 was approximately $2,801,018,606.
On February 27, 1998, there were 86,457,201 shares of the registrant's
Common Stock outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the Proxy Statement for the 1998 Annual Meeting of
Shareholders are incorporated by reference in Part III hereof.
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SUNBEAM CORPORATION AND SUBSIDIARIES
ANNUAL REPORT
ON FORM 10-K
TABLE OF CONTENTS
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PART I
ITEM 1. BUSINESS
General. ..................................................... 1
Restructuring and Growth Plan ................................ 1
Pending Acquisitions.......................................... 2
Products ..................................................... 2
Competitive Strengths ........................................ 4
Customers .................................................... 5
Patents and Trademarks ....................................... 5
Employees .................................................... 6
Seasonality .................................................. 6
Raw Materials ................................................ 6
Environmental Matters ........................................ 6
Cautionary Statements......................................... 7
ITEM 2. PROPERTIES ................................................... 10
ITEM 3. LEGAL PROCEEDINGS ............................................ 10
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS .......... 11
EXECUTIVE OFFICERS OF THE REGISTRANT ......................... 11
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED
STOCKHOLDER MATTERS .......................................... 12
ITEM 6. SELECTED FINANCIAL DATA ...................................... 13
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS .......................... 14
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA .................. 19
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE .......................... 19
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT ........... 19
ITEM 11. EXECUTIVE COMPENSATION ....................................... 19
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT ................................................... 20
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS ............... 20
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS
ON FORM 8-K .................................................. 20
SIGNATURES................................................................ 22
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PART I
ITEM 1. BUSINESS
GENERAL
Sunbeam Corporation (collectively with its subsidiaries, the "Company" or
"Sunbeam") is a leading designer, manufacturer and marketer of branded consumer
products. The Company's primary business is the manufacture, marketing and
distribution of durable household consumer products through mass market and
other distributors in the United States and internationally. The Company also
sells its products to commercial end users such as hotels and other
institutions (the "Away From Home" category of the business).
The Company's product categories are: (1) Appliances (mixers, blenders,
food steamers, bread makers, rice cookers, coffee makers, toasters, irons and
garment steamers) (2) Health at Home (vaporizers, humidifiers, air cleaners,
water filters, massagers, hot and cold packs, blood pressure monitors and
scales) (3) Personal Care and Comfort (shower massagers, hair clippers and
trimmers, electric warming blankets and throws) (4) Outdoor Cooking (electric,
gas and charcoal grills and grill accessories) and (5) Away From Home (clippers
and related products for the professional beauty, barber and veterinarian trade
and sales of products to commercial and institutional channels). The
International Group is responsible for sales (primarily of small appliances,
personal care, grills and comfort products, professional clippers and related
products) in all countries other than the United States.
Sunbeam products enjoy a long-standing reputation for quality, and a
majority of the Company's sales are from products which hold the number one or
two market share in their respective product categories.
The Company was organized in 1989 (as Sunbeam-Oster Company, Inc.) and in
September 1990, Sunbeam acquired the assets and assumed certain liabilities,
through a reorganization, of Allegheny International, Inc. (the "Predecessor"),
an entity operating as a debtor-in-possession under Chapter 11 of the United
States Bankruptcy Code since 1988. In August 1992, the Company completed a
public offering of 20,000,000 shares of its common stock. In May 1995, the
Company changed its name from Sunbeam-Oster Company, Inc. to Sunbeam
Corporation.
RESTRUCTURING AND GROWTH PLAN
In the Fall of 1996, under newly elected Chairman, Albert J. Dunlap, the
Company announced a major restructuring and growth plan. The restructuring
portion of the plan was completed during 1997, resulting in a significant
reduction in employees, facilities and costs, all of which is anticipated to
generate approximately $225 million in annual savings for the Company. As a
part of the restructuring plan, the Company divested its non-core businesses
and assets, including furniture, time and temperature, decorative bedding, gas
heaters and logs, Counselor/registered trademark/ and Borg/registered
trademark/ scale businesses and the Company's Biddeford, Maine textile mill.
The Company's restructuring plan included the closure of 18 factories, 43
warehouses and 5 headquarters, resulting in the consolidation of all corporate
offices into a single headquarters office located in Delray Beach, Florida and
an operations center at its Hattiesburg manufacturing and distribution
facility. The number of manufacturing facilities has been reduced from
twenty-six to eight (four in the US and four international). See "Properties"
below.
The Company has also consolidated all purchasing functions, substantially
reduced the number of stock keeping units maintained by the Company and
outsourced certain administrative, manufacturing and distribution activities.
The Company has developed a comprehensive three year growth plan for its
core businesses. Sunbeam's goal is for revenues to double, reaching $2 billion
by 1999, with operating margins improving
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to 20% of sales. This revenue growth is anticipated to be derived, in large
part, by the development of new innovative products and the globalization of the
Company. Domestically, the goal is to introduce at least 30 new products each
year; during 1997, the Company introduced 35 new domestic products and 54 new
international products. In its international business, the Company has a goal to
triple international sales to $600 million by 1999. During 1997 the Company
entered into 25 new international distribution/license agreements. The Company
has also identified new channels of distribution as additional sales growth
opportunities, including commercial organizations and "direct to the consumer"
channels such as catalogs, the Internet and Sunbeam/registered trademark/
factory outlet stores. These growth plans do not reflect the impact of the
Company's pending acquisitions of The Coleman Company, Inc., Signature Brands
USA, Inc. and First Alert, Inc. See "PENDING ACQUISITIONS".
Both international expansion and new product introductions will be
supported by a significant investment in a major new advertising program that is
geared to continually strengthening the Sunbeam/registered trademark/,
Oster/registered trademark/, Grillmaster/registered trademark/ and other brands
in the marketplace.
PENDING ACQUISITIONS
On March 2, 1998, the Company announced that it had entered into three
separate agreements to acquire The Coleman Company, Inc., Signature Brands USA,
Inc. and First Alert, Inc. The three transactions are subject to customary
conditions, including the receipt of required regulatory approvals, and are
expected to close early this spring.
The Coleman Company, Inc. ("Coleman"), with 1997 revenues of approximately
$1.1 billion, is the world's leading manufacturer and marketer of outdoor
recreational products. It manufactures and distributes widely diversified
product lines for camping, leisure time and hardware markets, under the
Coleman/registered trademark/, Powermate/registered trademark/, Camping
Gaz/registered trademark/ and Eastpak/registered trademark/ brand names. The
Coleman transaction is valued at approximately $2.0 billion, consisting of
approximately $811 million in Company common stock, approximately $260 million
in cash and the assumption of debt.
Signature Brands USA, Inc. ("Signature Brands"), with 1997 revenues of
approximately $279 million, is a leading manufacturer of a comprehensive line of
consumer and professional products, including coffee makers marketed under the
Mr. Coffee/registered trademark/ brand name and consumer health products
marketed under the Health-o-Meter/registered trademark/, Counselor/registered
trademark/ and Borg/registered trademark/ brand names. The Signature Brands
transaction is valued at approximately $250 million, consisting of cash and the
assumption of debt.
First Alert, Inc. ("First Alert"), with revenues of approximately $187
million, is the worldwide leader in residential safety equipment including smoke
and carbon monoxide detectors marketed under the First Alert/registered
trademark/ brand name. The First Alert transaction is valued at approximately
$175 million, consisting of cash and the assumption of debt.
In connection with the three transactions, the Company intends to seek to
negotiate a new bank credit facility and to issue other debt securities. See
"Item 7 - Management's Discussion and Analysis of Financial Condition and
Results of Operation - Liquidity and Capital Resources."
PRODUCTS
The Company's core product categories are as follows:
APPLIANCES
Small kitchen appliances including Mixmaster/registered trademark/ stand
mixers, hand mixers, Osterizer/registered trademark/ blenders, food processors,
rice cookers, food steamers, toasters, can openers, coffee makers, bread
makers, waffle makers, ice cream makers, frying pans, deep fryers and culinary
accessories, are sold primarily under the Sunbeam/registered trademark/ and
Oster/registered trademark/ brand names. The Company holds the number one or
two market positions in blenders, mixers, and bread makers. The Appliance
category also encompasses garment care appliances consisting of irons and
steamers. Sales of appliances accounted for approximately 32% of the Company's
domestic net sales in 1997.
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HEALTH AT HOME
The Company markets its home health products under the Sunbeam/registered
trademark/ name and the trademark Health at Home/registered trademark/. These
products include heating pads, bath scales, blood pressure and other health-
monitoring instruments, massagers, vaporizers, humidifiers and dental care
products. This product category also includes the recently introduced
AllergySmart/trademark/ air detector and air cleaner and the
FreshSource/trademark/ power water filter. Sales of health care products
accounted for approximately 10% of the Company's domestic net sales in 1997.
PERSONAL CARE AND COMFORT
The Company's personal care and comfort products include a broad line of
electric blankets, comforters and Cuddle-Up/registered trademark/ heated
throws, shower massagers, and hair clippers and trimmers for animals and humans
which are sold through retail channels. The Company holds the number one market
position in electric blankets, heated throws and retail hair clippers. Sales of
personal care and comfort products accounted for approximately 18% of the
Company's domestic net sales in 1997.
OUTDOOR COOKING
Sunbeam is a leading supplier of outdoor barbecue grills. Sunbeam has the
leading market share position in the gas grill industry. Barbecue grills
consist of propane, natural gas, electric and charcoal models sold primarily
under the Sunbeam/registered trademark/ and Grillmaster/registered trademark/
brand names. Sales of outdoor cooking products accounted for approximately 34%
of the Company's domestic net sales in 1997.
AWAY FROM HOME
The Company markets a line of professional barber, beauty and animal
equipment, including electric and battery clippers, replacement blades and
other grooming accessories sold to both
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conventional retailers and through professional distributors. In addition, the
Company is expanding the marketing of its appliances, scales and personal care
and comfort products to institutional and commercial channels. Sales of away
from home products accounted for approximately 6% of the
Company's domestic net sales in 1997.
INTERNATIONAL
The Company markets a variety of products (primarily small kitchen
appliances, personal care and comfort products, grills, professional clippers
and related products ) outside the U.S. While the Company sells many of the
same products domestically and internationally, it also sells products designed
specifically to appeal to foreign markets. The Company, through its foreign
subsidiaries, has manufacturing facilities in Mexico and Venezuela, and sales
offices in Canada, the United Kingdom, Hong Kong and Australia. The Company's
international products are sourced from the Company's United States, Mexican or
Venezuelan manufacturing operations or from vendors primarily located in Asia.
International sales accounted for approximately 21% of the Company's total net
sales in 1997.
To date, the Company's activities outside the United States have been
primarily focused in Mexico, Latin America and Canada. The Company enjoys a
strong market position in a number of product categories in Latin America. The
Oster/registered trademark/ brand has the leading market share in small
appliances in a number of Latin American countries.
The Company's pending acquisitions of Coleman, Signature Brands and First
Alert are anticipated to provide new opportunities for international expansion
of the Company's activities. See "Pending Acquisitions".
COMPETITIVE STRENGTHS
Worldwide, Sunbeam competes in markets with a number of well-established
United States and foreign companies on the basis of various strengths,
depending on the country, product category and distribution channels. The
Company believes that it is well-positioned to pursue continued growth as a
result of several competitive strengths, which include the following:
DISTRIBUTION NETWORK. The Company has one of the premier mass merchant
distribution networks serving large national retailers in the United States.
The Company also has a strong network of well-established distributors and
service organizations in Latin America. The Company supports its customers
needs with strong warehousing and distribution capabilities, a broad,
high-quality product portfolio, electronic data interchange ("EDI") and
just-in-time product delivery capabilities. The Company markets its products
through virtually every category of retailer including mass merchandisers,
catalog showrooms, warehouse clubs, department stores, catalogues,
Company-owned outlet stores, television shopping channels, hardware stores,
home improvement centers, drug and grocery stores, and pet supply retailers, as
well as independent distributors and military post exchange outlets.
STRONG POSITION IN CONSOLIDATING RETAIL ENVIRONMENT. The consolidation
trend in the retail industry has resulted in the emergence and global expansion
of large mass merchandisers that demand financially strong, efficient suppliers
which offer a broad range of innovative, quality products with the ability to
make timely shipments in large volumes and provide strong customer, promotional
and merchandising support. The Company has benefited from this trend and
believes it has the opportunity to further expand distribution with a number of
retailers and increase its penetration of existing
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accounts. In 1997, the Company sold products to virtually all of the top 100
U.S. retailers, including Wal-Mart, Price Costco, Kmart, Target Stores, Home
Depot, Sears, Roebuck & Co., Service Merchandise, Menards, Lowe's and J.C.
Penney.
BRAND NAME RECOGNITION. The Sunbeam/registered trademark/ and
Oster/registered trademark/ brands have been household names for generations.
The Company believes that these brands, along with its other well-known
secondary names such as Mixmaster/registered trademark/ and
Osterizer/registered trademark/ draw customers into retail stores specifically
to purchase products bearing these brand names. During the past year, the
Company has spent over $56 million for advertising and sales promotion to
support brand recognition.
MARKET LEADERSHIP. The majority of Sunbeam sales are from products in
which the Company holds the number one or two market share position. The
Company believes that this combination of leading brand-name products and
breadth of product offerings makes Sunbeam an attractive vendor to retailers
who are consolidating their suppliers.
CUSTOMERS
The rapid growth of large mass merchandisers and warehouse clubs and
changes in consumer shopping patterns have contributed to a significant
consolidation of the U.S. retail industry and the formation of dominant
multi-category retailers. Sunbeam has positioned itself to respond to the
challenges of this changing retail environment by pursuing strategic
relationships with large, high-volume merchandisers. The Company markets its
products through virtually every category of retailer including mass
merchandisers, catalog showrooms, warehouse clubs, department stores, hardware
stores, catalogues, television shopping channels, home centers, drug and
grocery stores, and pet supply retailers, as well as independent distributors
and the military post exchange services. The Company's largest customer,
Wal-Mart Stores, Inc., accounted for approximately 21% of sales in 1997.
Retailers are pursuing a number of strategies in their competition to
deliver the highest-quality, lowest-cost brand name products. A growing trend
among retailers is to purchase on a "just-in-time" basis in order to reduce
inventory costs and increase returns on investment. This trend has required
increased working capital investments for manufacturers and requires
manufacturers to more closely monitor consumer buying patterns as retailers
shorten their lead times for orders. Currently, most Sunbeam products sold to
U.S. retailers are manufactured at the Company's own facilities in North
America. However, one of the Company's goals for 1998 is to "source"
approximately fifty percent (50%) of parts and/or products from others,
including suppliers in Asia, in order to reduce capital investment in plants
while growing sales volume and to improve operating margins. The Company
intends to continue to support its retail partners' "just-in-time" inventory
strategies through investments in, among other things, improved forecasting
systems, more responsive manufacturing and distribution capabilities and
electronic communications. Currently, Sunbeam has approximately 90% of its U.S.
customer sales on electronic data interchange (EDI) systems.
The amount of backlog orders at any point in time is not a significant
factor in the Company's business.
PATENTS AND TRADEMARKS
Sunbeam believes that an integral part of its strength is its ability to
capitalize on the Sunbeam/registered trademark/ and Oster/registered trademark/
trademarks which are registered in the United States and in numerous foreign
countries. Widely recognized throughout North America, South and Central
America and Europe, these registered trademarks, along with
Osterizer/registered trademark/, Mixmaster/registered trademark/, Toast
Logic/registered trademark/, Steammaster/registered trademark/,
Oskar/registered trademark/, Grillmaster/registered trademark/ and Blanket
with a Brain/registered trademark/ brands are important to the success of the
Company's products. Other important trademarks within Sunbeam include Oster
Designer/registered trademark/ line, Cuddle-Up/registered trademark/ and
A5/registered trademark/.
Sunbeam holds numerous patents covering a wide variety of products, the
loss of any one of which would not have a material adverse effect on the
Company's business taken as a whole.
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EMPLOYEES
The Company currently has approximately 3,300 full-time domestic employees
and 4,200 international employees. None of the Company's domestic full-time
workforce has union representation. Sunbeam has had no material labor-related
work stoppages and, in the opinion of management, relations with its employees
are generally good.
SEASONALITY
On a consolidated basis, Sunbeam sales do not exhibit substantial
seasonality. However, sales of outdoor cooking products are strongest in the
first half of the year, while sales of appliances and personal care and comfort
products are strongest in the second half of the year. In addition, sales of a
number of the Company's products, including warming blankets, vaporizers,
humidifiers and grills may be impacted by unseasonable weather conditions.
During 1997, the Company initiated early buy programs for highly seasonal
products such as grills and warming blankets in order to more levelize
production and distribution activities.
RAW MATERIALS
The raw materials used in the manufacture of the Company's products are
available from numerous suppliers in quantities sufficient to meet normal
requirements. The Company's primary raw materials include aluminum, steel,
resin, copper, and corrugated cardboard for cartons.
ENVIRONMENTAL MATTERS
The Company's operations, like those of comparable businesses, are subject
to certain federal, state, local and foreign environmental laws and regulations
in addition to laws and regulations regarding labeling and packaging of
products and the sale of products containing certain environmentally sensitive
materials ("Environmental Laws"). The Company believes it is in substantial
compliance with all Environmental Laws which are applicable to its operations.
Compliance with Environmental Laws involves certain continuing costs; however,
such costs of ongoing compliance have not resulted, and are not anticipated to
result, in a material increase in the Company's capital expenditures or to have
a material adverse effect on the Company's results of operations, financial
condition or competitive position.
In addition to ongoing environmental compliance at its operations, the
Company also is actively engaged in certain environmental remediation
activities relating primarily to divested operations. As of December 31, 1997,
the Company had been identified by the United States Environmental Protection
Agency ("EPA") or a state environmental agency as a potentially responsible
party ("PRP") in connection with seven (7) sites subject to the federal
Superfund law and two (2) sites subject to state Superfund laws comparable to
the federal law (collectively the "Environmental Sites"), exclusive of sites at
which the Company has been designated (or expects to be designated) as a de
minimis (less than 1%) participant.
The Superfund Act, and related state environmental remediation laws,
generally authorize governmental authorities to remediate a Superfund site and
to assess the costs against the PRPs or to order the PRPs to remediate the site
at their expense. Liability under the Superfund Law is joint and several and is
imposed on a strict basis, without regard to degree of negligence or
culpability. As a result, the Company recognizes its responsibility to
determine whether other PRPs at a Superfund site are financially capable of
paying their respective shares of the ultimate cost of remediation of the site.
Whenever the Company has determined that a particular PRP is not financially
responsible, it has assumed for purposes of establishing reserve amounts that
such PRP will not pay its respective share of the costs of remediation. To
minimize the Company's potential liability with respect to the Environmental
Sites, the Company has actively participated in steering committees and other
groups of PRPs established with respect to such sites. The Company currently is
engaged in active remediation activities at nine (9) sites, four (4) of which
are among the Environmental Sites referred to above, and five (5) of which have
not been designated as Superfund sites under federal or state law.
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In addition, the Company is engaged in environmental remediation
activities at a site located in Newburgh Heights, Ohio, where a subsidiary
formerly conducted operations. The Company has been actively cooperating with
the United States Nuclear Regulatory Commission and state regulatory
authorities in developing and implementing a plan for remediation of this site;
which remediation is anticipated to be substantially completed in 1998.
The Company's costs for environmental remediation activities have not had
a material adverse effect on the Company's results of operations, financial
condition or competitive position. The Company has established reserves to
cover the anticipated probable costs of remediation, based upon periodic
reviews of all sites for which the Company has, or may have, remediation
responsibility. As of December 28, 1997, the amount of such reserves was
approximately four percent (4%) of the Company's total liabilities as set forth
in the consolidated financial statements. Such environmental reserves do not
anticipate any offsets for potential insurance recoveries from certain of the
Company's liability insurance carriers which the Company continues to pursue.
Due to uncertainty over the remedial measures to be adopted at some sites,
the possibility of changes in the Environmental Laws, and the fact that joint
and several liability with the right of contribution is possible at federal and
state Superfund sites, the Company's ultimate future liability with respect to
sites at which remediation has not been completed may vary from the amounts
reserved at fiscal year end 1997. However, the Company believes, based on
existing information, that the costs of completing the environmental
remediation of all sites for which the Company has a remediation responsibility
have been adequately reserved and that the ultimate resolution of these matters
will not have a material adverse effect upon the Company's financial condition.
In December 1996, the Company reached a negotiated settlement with the EPA
with regard to a notice of violation concerning the construction and operation
of two paint lines at the Company's Neosho, MO facility prior to obtaining the
necessary permits for construction and operation. The negotiated settlement
amount of $829,825 recognizes the benefits of a "supplemental environmental
project" which consisted of the Company's installation of nominal emission
powder coating lines to replace solvent paint lines. In October 1997, the
Company executed a Consent Decree documenting the settlement and is awaiting
the EPA's execution of the Consent Decree; the Company anticipates formal
resolution of this matter by the second quarter of 1998.
The Company is not a party to any other administrative or judicial
proceeding to which a governmental authority is a party and which involves
potential monetary sanctions, exclusive of interest and costs, of $100,000 or
more.
CAUTIONARY STATEMENTS
Certain of the information contained herein (including Management's
Discussion and Analysis of Financial Condition and Results of Operations)
contains "forward-looking" information, as that term is defined in the Private
Securities Litigation Reform Act of 1995, as the same may be amended (herein the
"Act") and in releases made by the Securities and Exchange Commission ("SEC")
from time to time. Such "forward-looking" information may in included herein
under the following captions, among others: Item 1. Business--Restructuring and
Growth Plan, Pending Acquisitions, International, Competitive Strengths,
Customers, Raw Materials, Environmental Matters and Item 7--Management's
Discussion and Analysis of Financial Condition and Results of Operation.
These Cautionary Statements are being made pursuant to the Act, with the
intention of obtaining the benefits of the "Safe Harbor" provisions of the Act.
The Company cautions investors that any forward-looking statements made by the
Company are not guarantees of future performance and that actual results may
differ materially from those in the forward-looking statements as a result of
various factors.
/bullet/ The Company believes that it has sufficient management resources
to complete the pending acquisitions of Coleman, Signature Brands and First
Alert without negatively impacting on the Company's ongoing operations. In
addition, the Company expects to benefit from various operating synergies
arising from these acquisitions. If the Company fails to maintain its current
operations in the manner anticipated or fails to obtain the expected operating
synergies, such failures could negatively effect the Company's financial and/or
operating performance, which effect could be material.
/bullet/ The Company expects to significantly increase the amount of its
outstanding indebtedness and to enter into financing arrangements which may
contain various restrictive covenants, in order to finance the acquisitions of
Coleman, Signature Brands and First Alert. The continuing cost of
servicing such debt could negatively effect the Company's future operations,
which effect could be material.
/bullet/ The Company's performance should be expected to be affected by
the strength of the retail economy, primarily in the United States, but also in
Canada, Latin America and Asia. Weakness in
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consumer confidence and retail outlets (including the financial weakness or
bankruptcy of retail outlets, especially mass merchants) should be expected to
adversely impact the Company's future financial results. In addition, the
extended credit terms provided by the Company in connection with its "early buy"
program increase the Company's risk of collection of accounts receivable.
/bullet/ The Company operates in a highly competitive environment with
numerous competitors which are financially strong and capable of competing
effectively with the Company in the marketplace. Such competitors may take
actions to meet the Company's new product introductions and other initiatives.
Some competitors may be willing to accept lower margins and to reduce prices to
compete with the Company. As a result, the Company could fail to achieve
anticipated sales increases, to realize anticipated price increases, or
otherwise fail to meet its anticipated goals. Any of such circumstances would
likely have an adverse effect on future financial performance, which effect
could be material.
/bullet/ The Company currently manufactures approximately 70% of its
products. One of the Company's goals for 1998 is to source approximately 50% of
the Company's parts and/or products from third parties. The Company's ability
to realize sales and operating profits at anticipated levels is dependent upon
its ability to timely manufacture, source and deliver products which may be
sold for a profit. Labor difficulties, delays in delivery or pricing of raw
materials and/or sourced products, scheduling and transportation difficulties,
management dislocations and delays in development and manufacture of new
products can negatively affect operating profits. Although the Company will use
its best efforts to select suppliers for sourced product which are reliable and
dependable, the Company's planned increase in the percentage of sourced
products will decrease the Company's immediate control of product and, if such
suppliers fail to deliver products as anticipated, could have an adverse effect
on future financial performance, which effect could be material.
/bullet/ As a consumer goods distributor, the Company's results of
operations can be negatively impacted by product liability lawsuits, product
recall actions and/or by higher than anticipated rates of warranty returns or
other returns of goods.
/bullet/ The Company expects to substantially increase the amount of
business conducted by it outside North America. If the Company fails to achieve
anticipated market penetration in areas of the world into which the Company
currently expects to expand its sales, such event is likely to have an adverse
effect on the Company's future financial performance, which effect could be
material. Expansion of the Company's sales in foreign markets depends upon many
factors, including the states of economies in foreign countries, the strength
of consumer demand in those countries for products which the Company sells (or
expects to sell in those markets), the strength of competition from other
global consumer products companies and other factors which may negatively
affect the Company's anticipated performance in those markets. Although the
recent financial instability in Asia has not currently had any material impact
on the Company, if such conditions continue and/or worsen, they could
negatively impact the Company's ability to achieve anticipated sales growth in
such countries, the effect of which could be material to the Company's future
financial performance.
/bullet/ The Company currently manufactures some products and has sales in
such economies as those of Mexico and Venezuela, both of which economies have
been unstable or hyperinflationary in recent years. The economies of other
foreign countries important to the Company's expansion plans, including other
countries in Latin America and Asia, could suffer similar instability in the
future. Such factors as currency devaluations, new tariffs, changes in monetary
policies, inflation, governmental instability and similar matters could
negatively affect the Company's anticipated performance in foreign markets.
Although the Company plans to take advantage of recent economic and currency
fluctuations in certain Asian countries by increasing the Company's purchases
of products from such countries at lower prices, there is no guarantee that
such purchasing advantage will be fulfilled or will fully overcome any lost
sales opportunities in those same countries. As a result, the economic
conditions discussed above or any of these circumstances could have an adverse
effect on future financial performance, which effect could be material.
/bullet/ A significant portion of the cost of goods manufactured by the
Company in North America is the cost of raw materials and/or components. The
Company has implemented changes in its purchasing
8
<PAGE>
function which have enabled the Company to purchase materials more efficiently
and economically than it has in the past. The future success of the Company's
purchasing initiatives may be affected by many factors beyond the Company's
control, such as commodity pricing generally and higher prices for the specific
materials required by the Company. Although there are numerous suppliers
available for the materials and components sourced by the Company, any
unanticipated change in suppliers could be disruptive and costly to the
Company. In addition, the Company's future initiatives to reduce the cost of
materials simply may not achieve savings in amounts comparable to those
previously obtained by the Company. A significant failure by the Company to
maintain material costs as anticipated would likely have an adverse effect on
anticipated future financial performance, which effect could be material.
/bullet/ The Company anticipates realizing price increases from time to
time for certain of its products. The Company operates in a highly competitive
industry, and its ability to realize price increases may be limited due to
competitive pressures. If there is a material failure to realize anticipated
price increases, margins likely will be lower than anticipated by the Company,
and this will likely have an adverse effect on future financial performance,
which effect could be material.
/bullet/ The Company anticipates that it will be able to more rapidly
develop and introduce a substantial number of new and innovative products in
the future. However, the Company may prove unable to meet its more aggressive
schedules for future product development. Failure to develop and manufacture
new products in the amounts and with the quality anticipated or a failure to
reduce the cycle time for new product introductions would likely have an
adverse effect on future financial performance, which effect could be material.
/bullet/ Sales of certain of the Company's products can be negatively
impacted by unseasonable weather conditions during different seasons and
quarters of the year. For instance, the Company's sales of warming blankets
were negatively impacted in the fourth quarter of 1997 by moderate temperatures
in the northern states. The Company has attempted to levelize production,
marketing and other activities related to seasonal products by implementing an
"early buy" program; such a program shifts certain of the weather related risks
of negative sales impact for such seasonal products to later months of the
season and, as result, could have a negative impact on future financial
performance.
/bullet/ The Company has entered into various arrangements with third
parties for the provision of back-office administrative services previously
provided with internal resources, including provision of all necessary computer
systems. Failure of any of these third party service providers to perform in
accordance with their respective agreements with the Company could result in
disruptions of the Company's normal business operations with a consequent
impact on sales, collections, cash flow and/or profitability.
/bullet/ The Company's profitability may be negatively impacted by
underabsorption of manufacturing costs resulting from underutilization of
manufacturing capacity if the Company's sales growth is less than anticipated.
9
<PAGE>
ITEM 2. PROPERTIES
Active United States and International manufacturing, warehouse, and
office locations are set forth below. In addition to the facilities set forth
below, the Company leases warehouse space on a short term basis when needed.
Except as otherwise noted, each location is used for manufacturing, warehousing
and related administrative office space.
<TABLE>
<CAPTION>
UNITED STATES SQUARE FEET TITLE
- ----------------------------------- ------------- -------------
<S> <C> <C>
Brownsville, Texas ................ 48,000 Leased(1)
Delray Beach, Florida ............. 51,073 Leased(2)
Del Rio, Texas .................... 10,560 Leased(1)
Hattiesburg, Mississippi .......... 725,000 Owned
Hattiesburg, Mississippi .......... 300,000 Leased(1)
McMinnville, Tennessee ............ 169,400 Leased
Neosho, Missouri .................. 887,200 Owned/Leased
Waynesboro, Mississippi ........... 853,714 Leased
-------
Total ........................... 3,044,947
=========
</TABLE>
<TABLE>
<CAPTION>
INTERNATIONAL SQUARE FEET TITLE
- ---------------------------------- ------------- ----------
<S> <C> <C>
Acuna, Mexico .................... 110,000 Owned
Barquisimeto, Venezuela .......... 75,686 Owned
Caracas, Venezuela ............... 9,867 Leased(3)
Hong Kong ........................ 20,550 Leased(4)
Matamoros, Mexico ................ 91,542 Owned
Milton Keynes, England ........... 2,000 Leased(3)
Mississauga, Canada .............. 19,891 Leased(3)
Tlalnepantla, Mexico ............. 297,927 Owned
-------
Total .......................... 627,463
=======
</TABLE>
- ----------------
(1) Warehouse only
(2) Corporate headquarters
(3) Administration
(4) Warehouse and administration
In addition, the Company has 17 United States and 5 Canadian retail outlet
stores under lease totalling 103,000 square feet.
The Company believes that its existing facilities will adequately provide
sufficient suitable capacity to implement its operating plans.
ITEM 3. LEGAL PROCEEDINGS
The Company and its subsidiaries are involved in various lawsuits arising
from time to time which the Company considers to be ordinary routine litigation
incidental to its business. In the opinion of the Company, the resolution of
these matters, and of certain matters relating to prior operations of the
Predecessor, individually or in the aggregate, will not have a material adverse
effect upon the financial position or results of operations of the Company. The
Company has established reserves for pending litigation which the Company
considers to be adequate to cover loss contingencies determined by the Company
associated with such proceedings.
See "Environmental Matters" under Item 1 for a description of certain
legal proceedings related to environmental matters, which provision is
incorporated herein by reference.
10
<PAGE>
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
During the quarter ended December 28, 1997, there were no matters
submitted to a vote of the Company's security holders.
EXECUTIVE OFFICERS OF THE REGISTRANT
The executive officers of the Company are as follows:
<TABLE>
<CAPTION>
NAME AGE TITLE
- --------------------------- ----- --------------------------------------------------------
<S> <C> <C>
Albert J. Dunlap .......... 60 Chairman, Chief Executive Officer and Director
Russell A. Kersh .......... 44 Vice Chairman and Chief Financial Officer
David C. Fannin ........... 52 Executive Vice President, General Counsel and Secretary
Donald R. Uzzi ............ 45 Executive Vice President, Consumer Products Worldwide
</TABLE>
ALBERT J. DUNLAP has been Chairman and Chief Executive Officer of Sunbeam
Corporation since July 18, 1996. From April 1994 to December 1995, he was
Chairman and Chief Executive Officer of Scott Paper Company. From 1991 to 1993,
Mr. Dunlap was the Managing Director and Chief Executive Officer of
Consolidated Press Holdings Limited (an Australian media, chemicals and
agricultural operation).
DAVID C. FANNIN has been Executive Vice President, General Counsel and
Secretary since January 1994. From 1979 until 1993, he was a partner in the law
firm of Wyatt, Tarrant and Combs.
RUSSELL A. KERSH has been Vice Chairman and Chief Financial Officer of
Sunbeam Corporation since February 1, 1998. Prior to that date, he served as
Executive Vice President, Finance and Administration of Sunbeam Corporation
from July 22, 1996. From June 1994 to December 1995 he was Executive Vice
President, Finance and Administration of Scott Paper Company. Mr. Kersh served
as the Chief Operating Officer of Adidas America from January 1993 to May 1994.
DONALD R. UZZI has been Executive Vice President, Consumer Products
Worldwide since January 1997. From November 1996 to January 1997, he held the
position of Senior Vice President, Global Marketing. Mr. Uzzi joined the
Company in September 1996 as Vice President, Marketing and Product Development.
From January 1993 to July 1996, Mr. Uzzi served as President of the Beverage
Division of Quaker Oats. During 1990 to 1992, Mr. Uzzi was employed by Pepsi
Cola as Senior Vice President for North America (1992) and Vice President and
General Manager of the Mid-Atlantic Division (1990-1991).
11
<PAGE>
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
The Common Stock is listed and traded on the New York Stock Exchange under
the symbol "SOC". The Company has paid quarterly cash dividends of $.01 per
share since December 15, 1992. The Company presently intends to continue to pay
cash dividends at a quarterly rate of $.01 per share; however, future payments
of cash dividends will be at the discretion of the Company's Board of Directors
and dependent upon the Company's results of operations, financial condition and
other relevant factors.
The following table sets forth the high and low sale prices for the Common
Stock for the calendar quarters indicated as reported by the New York Stock
Exchange Composite Tape:
<TABLE>
<CAPTION>
MARKET PRICE
------------------------
HIGH LOW
----------- ----------
<S> <C> <C>
1997:
Fourth Quarter ......... $50 7/16 $37
Third Quarter .......... $45 3/4 $35 3/8
Second Quarter ......... $40 3/4 $29 3/4
First Quarter .......... $34 1/2 $24 5/8
1996:
Fourth Quarter ......... $29 1/2 $22 3/4
Third Quarter .......... $24 3/4 $12 1/4
Second Quarter ......... $17 1/8 $13 1/2
First Quarter .......... $19 3/4 $15 1/8
</TABLE>
On February 27, 1998 there were approximately 1,311 record holders of the
Company's Common Stock.
12
<PAGE>
ITEM 6. SELECTED FINANCIAL DATA
The following is a summary of certain financial information relating to
the Company. The summary should be read in conjunction with the Consolidated
Financial Statements of the Company included in this report. All amounts in the
table are expressed in millions, except per share data.
<TABLE>
<CAPTION>
FISCAL YEARS ENDED
----------------------------------------------------------------------------
DECEMBER 28, DECEMBER 29, DECEMBER 31, JANUARY 1, JANUARY 2,
1997 1996(1) 1995 1995 1994
-------------- -------------- -------------- ------------- -----------
<S> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Net sales .....................................$ 1,168.2 $ 984.2 $ 1,016.9 $ 1,044.3 $ 927.5
Cost of goods sold ............................ 837.7 900.6 809.1 764.4 674.2
Selling, general and administrative
expense ..................................... 131.1 214.0 137.5 128.9 119.3
Restructuring, impairment and other costs ..... -- 154.8 -- -- --
----------- ----------- ----------- ----------- ---------
Operating earnings (loss) .....................$ 199.4 $ (285.2) $ 70.3 $ 151.0 $ 134.0
=========== =========== =========== =========== =========
Earnings (loss) from continuing
operations ..................................$ 123.1 $ (196.7) $ 37.6 $ 85.3 $ 76.9
Earnings from discontinued operations,
net of taxes(2) ............................. -- 0.8 12.9 21.7 11.9
Loss on sale of discontinued operations,
net of taxes(2) ............................. (13.7) (32.4) -- -- --
Net earnings(loss) ............................$ 109.4 $ (228.3) $ 50.5 $ 107.0 $ 88.8
EARNINGS PER SHARE DATA(3):
Average common and common equivalent
shares outstanding .......................... 87.5 82.9 82.8 82.6 87.9
Diluted earnings (loss) per share from
continuing operations .......................$ 1.41 $ (2.37) $ 0.45 $ 1.03 $ 0.87
Diluted earnings (loss) per share .............$ 1.25 $ (2.75) $ 0.61 $ 1.30 $ 1.01
Cash dividends declared per share .............$ 0.04 $ 0.04 $ 0.04 $ 0.04 $ 0.04
BALANCE SHEET DATA
(AT PERIOD END):
Working capital ...............................$ 459.9 $ 352.6 $ 411.7 $ 294.8 $ 261.4
Total assets .................................. 1,120.3 1,072.7 1,158.7 1,008.9 928.8
Long-term debt ................................ 194.6 201.1 161.6 124.0 133.4
Shareholder's equity .......................... 531.9 395.3 601.0 454.7 370.0
</TABLE>
- ----------------
(1) Includes special charges of $337.6 million before taxes. See Notes 8 and 9
to Notes to Consolidated Financial Statements.
(2) Represents earnings from the Company's furniture business, net of taxes and
the estimated loss on disposal. See Note 9 to Notes to Consolidated
Financial Statements.
(3) Reflects the adoption of SFAS No. 128, EARNINGS PER SHARE.
13
<PAGE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATION
YEAR ENDED DECEMBER 28, 1997 COMPARED TO THE YEAR ENDED DECEMBER 29, 1996
In November 1996, the Company initiated a major restructuring and growth
plan designed to substantially reduce its cost structure and grow the business
in order to restore higher levels of profitability for the Company. By July
1997, the Company completed the major phases of the restructuring plan. The
$225.0 million of annualized cost savings anticipated from the restructuring
results primarily from the consolidation of administrative functions within the
Company, the rationalization of manufacturing and warehouse facilities
(including a reduction in the number of production facilities from 26 to 8 and
warehouses from 61 to 18), the elimination of over 6,000 positions (including
3,300 from the divestiture of non-core businesses described below and
approximately 2,800 other positions), the centralization of the Company's
procurement function and re-negotiation of supply contracts resulting in
procurement savings for raw materials, components and sourced finished products
and the reduction of the Company's product offerings and stock keeping units
("SKU's"). The restructuring and growth plan also included a redefinition of the
Company's core product categories and the elimination of those businesses and
product lines that did not fit the core categories. Sunbeam's core product
categories are Appliances, Health at Home, Personal Care and Comfort, Outdoor
Cooking and Away From Home. Product categories and businesses determined to be
non-core were divested in 1997, including the Company's furniture business and
its time and temperature, decorative bedding and Counselor/registered trademark/
and Borg/registered trademark/ scale product lines. In addition, the Company
sold its textile mill in Biddeford, Maine in 1997.
Net sales from continuing operations for 1997 were $1,168.2 million, an
increase of $183.9 million or 18.7% over 1996. Net sales on a normalized basis,
after excluding divested product lines which are not classified as discontinued
operations (time and temperature products, decorative bedding and
Counselor/registered trademark/ and Borg/registered trademark/ branded scales),
increased 22.4% during the year.
Global sales, on a normalized basis, increased during 1997 in all five of
the Company's product categories primarily from new product introductions,
improved distribution (particularly with the Company's top ten customers),
international geographic expansion and improved price realization for certain
products. Global sales growth on a normalized basis exceeded 25% in the
Appliance, Outdoor Cooking and Away From Home categories with sales increases
of 26.8%, 27.2% and 28.6%, respectively. Sales in the Health at Home category
increased 10.7% on a normalized basis and sales in the Personal Care and
Comfort category increased 3.4% during 1997.
The Company's Appliance category sales increases were driven by new
products, such as re-designed blenders and mixers, coffeemakers, irons, deep
fryers and toasters, and by increased distribution with large national mass
retailers. Sales of Outdoor Cooking products increased in 1997 after three
straight years of declines as a result of increased merchandising and
advertising programs, new distribution and the introduction of an entirely new
line of grills and accessories for the 1998 season that began to ship in the
fourth quarter of 1997 under a new "early buy" marketing program that included
among other things, extended credit terms with due dates in the second quarter
of 1998. The Company sold approximately $50.0 million of Outdoor Cooking
Products under this program in the fourth quarter of 1997. The early buy program
for Outdoor Cooking products is designed to improve customer service levels and
production efficiencies with more level seasonal production and distribution
activities that have historically peaked in the first half of each year and to
drive additional retail sell-through of Outdoor Cooking products by reducing the
likelihood of retail stock-outs during the important first and second quarter
1998 selling season.
Sales of Personal Care and Comfort products were up over 30% through
September 1997, but suffered during the fourth quarter as a result of lower
than expected retail sell through of electric blankets in key northern markets
in late 1997 coupled with the inability to service demand for king and queen
sized blankets due to shortages of blanket shells. The Company anticipates
shifting to a more
14
<PAGE>
level production for blankets in 1998 in order to more adequately service the
seasonal demand for bedding products. Health at Home category sales increased
as a result of new products and improved distribution in the drug channels.
Away from Home sales increased in 1997 as a result of new products, including
cordless clippers and titanium blades coupled with increased distribution of
commercially rated appliances. Also contributing to the Company's sales growth
in 1997 were its new retail outlet stores, of which 22 were open by the end of
1997.
International sales, which represented 21% of total revenues in 1997, grew
31.2% during the year. This sales growth was driven primarily by 54 new 220
volt product introductions and the execution of 25 new international
distribution and license agreements. Revenue growth of approximately 34% was
achieved both in Mexico and by the Company's Latin American export sales
organization, and sales in Venezuela and Canada increased approximately 23%
each. European sales fell slightly in 1997, however the Company expects that
expanded electric blanket and clipper sales along with the help of additional
new distribution agreements will benefit European sales in 1998.
The gross margin percentage for 1997 increased 19.8 percentage points to
28.3%. This increase reflects the results of many cost savings and margin
enhancement initiatives undertaken as part of the Company's restructuring plan
coupled with the incremental margin attributable to new products and higher
revenues associated with the Company's growth plan. The Company initiated a
manufacturing refinement program in the second quarter of 1997 targeted at
aggressively improving factory productivity at all of its remaining operations,
including the Neosho, Missouri Outdoor Cooking Products facility which suffered
from poor productivity and operating inefficiencies during the 1997 grill
season. The benefits of the refinement program began to favorably impact
factory productivity in several factories during the third quarter of 1997. The
refinement of the Neosho facility, which was completed prior to the initiation
of production for the 1998 grill season in the fourth quarter, included a
revised plant layout to improve material flow, increased usage of common parts
in the manufacturing process and modifications to the paint system to increase
capacity and throughput.
Operating earnings for 1997 were $199.4 million, an increase of $195.0
million over 1996, excluding the impact of the 1996 special charge. As a
percentage of sales, the operating margin of 17.1% increased 16.6 percentage
points above last year's operating margin, excluding 1996 special charges. The
operating margin improvements for 1997 were the result of the improved gross
margin discussed above and lower selling, general and administrative ("SG&A")
costs in 1997 associated with the consolidation of six divisional and regional
headquarters into one corporate headquarters and one administrative operations
center, reduced staffing levels, the outsourcing of certain administrative and
distribution functions, a reduction in the number of warehouses, and Company
wide cost control initiatives. In addition, SG&A during 1996 included
incremental compensation costs associated with restricted stock awards and
other costs related to the employment of a new senior management team, higher
than normal expenditures for market research, packaging and other initiatives
related to the launch of the Company's growth plan, and higher bad debt
expenses associated with certain of the Company's customers. The cost reduction
initiatives and one time items in 1996 coupled with increased sales in 1997
resulted in SG&A decreasing as a percentage of sales from 17.4% in 1996
(excluding the impact of special charges) to 11.2% for 1997.
Interest expense decreased from $13.6 million in 1996 to $11.4 million in
1997 primarily as a result of lower average borrowing levels in 1997 due to
improved cash flows.
The effective income tax of 35% for 1997 and 1996 for earnings (loss) from
continuing operations was lower than the statutory federal and state rates as a
result of lower foreign taxes from the utilization of foreign tax credits and
loss carryforwards and lower state income taxes as a result of certain state
income tax credits.
The Company's diluted earnings per share from continuing operations was
$1.41 per share versus a loss per share from continuing operations in 1996 of
$2.37. The Company's share base utilized in the diluted earnings per share
calculation increased approximately 6% during 1997 as a result of an increase
in the number of shares of common stock and common stock equivalents
outstanding due to the exercise of stock options and a higher market value of
the Company's common stock in 1997.
15
<PAGE>
The Company's discontinued furniture operations, which were sold in March
1997, had revenues of $51.6 million in the first quarter of 1997 prior to the
sale and break-even earnings. In 1996, the discontinued furniture operations
had net income of $.8 million on revenues of $227.5 million and an estimated
loss on disposal of the business of $32.4 million, net of applicable income tax
benefits. The sale of the Company's furniture business assets (primarily
inventory, property, plant and equipment) was completed in March 1997.
The Company received $69 million in cash and retained accounts receivable
related to the furniture business of approximately $50.0 million as of the
closing date. The final purchase price for the furniture business was subject
to a post-closing adjustment based on the terms of the Asset Purchase Agreement
and in the first quarter of 1997, after completion of the sale, the Company
recorded an additional loss on disposal of $13.7 million, net of income tax
benefits. See discussion of Restructuring, Impairment and Other Costs in Note 8
and Discontinued Operations and Assets Held For Sale in Note 9 to the Company's
consolidated financial statements for further information regarding the
individual components of the 1996 special charge and details of the 1997
activity in the Company's restructuring accrual.
YEAR ENDED DECEMBER 29, 1996 COMPARED TO THE YEAR ENDED DECEMBER 31, 1995
The Company's operating results for 1996 include the effects of a pre-tax
special charge of $337.6 million recorded in conjunction with the
implementation of its restructuring and growth plan announced in November 1996.
Approximately 20% of the charge was for cash items primarily for severance
costs and lease and other facility exit costs. The special charge to earnings
in 1996 is included in the following categories on the consolidated statement
of operations (in millions):
<TABLE>
<CAPTION>
PRE-TAX DOLLAR AFTER-TAX
AMOUNT PER SHARE AMOUNT
---------------- -----------------
<S> <C> <C>
Restructuring, impairment and other costs ........... $ 154.9 $ (1.21)
Cost of sales ....................................... 92.3 (0.72)
Selling, general and administrative ................. 42.5 (0.33)
Estimated loss from discontinued operations ......... 47.9 (0.39)
-------- -------
Total ............................................... $ 337.6 $ (2.65)
======== =======
</TABLE>
Net sales from continuing operations of $984.2 million for 1996 represents
a decrease of $32.7 million, or 3.2%, from 1995. The Company experienced a loss
from continuing operations of $196.7 million or $2.37 per share for 1996 versus
earnings from continuing operations of $37.6 million or $.45 per share
(diluted) in 1995 primarily as a result of the restructuring activities
discussed above. The net loss for 1996 was $228.3 million, or $2.75 per share,
compared to net earnings of $50.5 million, or $0.61 per share (diluted), for
1995. Excluding the impact of special charge items for 1996, earnings from
continuing operations before income taxes decreased from $60.6 million in 1995
to a loss of $12.9 million in 1996.
Domestic sales represented approximately 80% of total sales of the Company
in 1996 and decreased $28.5 million or 3.4% from 1995. This sales decline was
driven by lower sales of outdoor cooking products, which declined 7.3% and
lower sales of bedding products which declined 9.0% from 1995, primarily as
result of lower decorative bedding sales (divested in December 1996). Domestic
sales of appliance products were flat with sales increases from new products
such as vegetable steamers and toaster ovens being offset by reduced pricing on
breadmakers. Sales of other product categories such as health and personal care
products and time and temperature products (divested in March 1997) were either
flat or declined slightly from 1995 levels.
International sales decreased $4.2 million or 2.2% from 1995 primarily as
a result of lower sales in Latin America due to political and/or economic
instability in several countries such as Ecuador, Peru, Columbia and Venezuela
(which suffered a bolivar devaluation in April 1996), a sales decline of 11.2%
16
<PAGE>
in Canada as a result of the bankruptcy filing of the Company's then largest
Canadian customer offset by a 55.0% increase in sales in Mexico as a result of
a more stable economic environment in 1996.
The Company's gross margin percentage, excluding the impact of special
charges, was 17.9% of sales in 1996, down from 20.4% in 1995, primarily from
the underabsorption of higher manufacturing costs and excess manufacturing
capacity that has been realigned for 1997 and beyond by the Company's
restructuring and growth plan cost reduction initiatives.
Selling, general and administrative ("SG&A") expenses, excluding the
impact of special charges described above, were 17.6% of sales in 1996
primarily as a result of an inflated cost structure that has been realigned for
1997 and beyond. In addition, a $12.0 million fourth quarter 1996 media
advertising campaign and one-time expenditures for market research, new
packaging, and other growth plan initiatives resulted in higher than normal
SG&A spending in 1996. Also included in 1996 SG&A costs were $7.7 million of
compensation expense resulting from restricted stock awards made in connection
with the employment of a new senior management team.
Interest expense for 1996 increased from $9.4 million in 1995 to $13.6
million as a result of increased indebtedness of the Company for working
capital requirements and non-recurring capitalized interest in 1995 related to
the construction of the Hattiesburg manufacturing and distribution center.
The effective income tax rate for 1996 decreased 3 percentage points from
1995 to 35.0% as a result of certain foreign and state operating losses for
which no tax benefits were recorded and the non-deductibility of compensation
expense related to restricted stock awards.
The Company's discontinued furniture operations had revenues of $227.5
million in 1996, up 22.6% from $185.6 million in 1995. This revenue growth was
the result of the acquisition of the Samsonite/registered trademark/ furniture
business in November 1995. Excluding the impact of this acquisition, furniture
business sales declined 2.1%. Earnings from the discontinued furniture
operations, net of taxes, declined from $12.9 million in 1995 to $.8 million in
1996 primarily as a result of lower gross margins from reduced pricing,
underabsorption of higher manufacturing costs and higher raw material costs. In
addition, SG&A costs increased due to the inclusion of the Samsonite/registered
trademark/ furniture business, higher distribution and warehousing costs,
particularly with resin furniture products and higher bad debt expenses.
FOREIGN OPERATIONS
During 1997 approximately 90% of the Company's business was conducted in
U.S. dollars (including both domestic sales, U.S. dollar denominated export
sales primarily to certain Latin American markets, Asian sales and the majority
of European sales). The Company's exposure to market risk from changes in
foreign currency and interest rates is generally insignificant. The Company's
non-U.S. dollar denominated sales are made principally by subsidiaries in
Mexico, Venezuela and Canada. Venezuela is considered a hyperinflationary
economy for accounting purposes for 1995, 1996 and 1997 and Mexico reverted to
hyperinflationary status for accounting purposes in 1997; therefore, translation
adjustments related to Venezuelan and Mexican net monetary assets are included
as a component of net earnings. Such translation adjustments were not material
to 1995, 1996 and 1997 operating results.
On a limited basis, the Company selectively uses derivatives (foreign
exchange option and forward contracts) to manage foreign exchange exposures
that arise in the normal course of business. No derivative contracts are
entered into for trading or speculative purposes. The use of derivatives did
not have a material impact on the Company's financial results in 1995, 1996 and
1997. See Note 4 to the Company's consolidated financial statements.
LIQUIDITY AND CAPITAL RESOURCES
As of December 28, 1997, the Company had cash and cash equivalents of
$52.4 million and total debt of $195.2 million. Cash used in operating
activities during 1997 was $8.2 million compared to $14.2
17
<PAGE>
million provided by operating activities in 1996. This decrease is primarily
attributable to an increase in earnings before non-cash charges in 1997 and the
utilization of tax benefits generated from the implementation of the Company's
restructuring plan, offset by higher accounts receivable due to increased sales
in 1997 and certain seasonal dating terms, increased inventory levels in 1997
necessary to support continued anticipated sales growth and the Company's
initiatives to improve customer service levels and 1997 cash expenditures
required to implement the restructuring plan. In addition, cash used in
operating activities reflects $59 million of proceeds from the sale of trade
accounts receivable under the Company's revolving trade accounts receivable
securitization program entered into in December 1997 as more fully described in
Note 3 to the Company's consolidated financial statements.
Capital spending totaled $58.3 million in 1997 and was primarily for new
products, cost reduction and capacity expansion initiatives. Capital spending
in 1996 was $75.3 million (including $14.5 million related to the discontinued
furniture operations) and was primarily attributable to new product
development, cost reduction initiatives and a $5.0 million warehouse expansion
financed with a capital lease. Capital spending in 1995 reflected approximately
$59.4 million associated with the Hattiesburg facility, $27.4 million related
to new product development and $10.8 million attributable to the discontinued
furniture business. The remaining 1995 capital spending was related to cost
reduction projects, productivity initiatives and environmental compliance
including $14.4 million for a powder coat paint system for Outdoor Cooking
products. The Company anticipates 1998 capital spending to be approximately 5%
of sales and primarily related to new product introductions, capacity additions
and certain facility rationalization initiatives.
Cash provided by investing activities also reflects $91.0 million in
proceeds from sales of businesses, assets and product categories determined to
be non-core to the Company's ongoing operations in conjunction with the 1996
restructuring plan. Cash used in investing activities for 1995 includes the
purchase of a portion of the Company's furniture business, which was
subsequently divested in full in March 1997.
Cash provided by financing activities totaled $16.4 million in 1997 and
reflects net borrowings of $5.0 million under the Company's revolving credit
facility, $12.2 million of debt repayments related to the divested furniture
operations and other assets sold and $26.6 million in cash proceeds from the
exercise of stock options, substantially all by former employees of the
Company. In 1996, cash provided by financing activities of $45.3 million was
primarily from increased revolving credit facility borrowings to support
working capital and capital spending requirements, $11.5 million in new
issuances of long-term debt and $4.6 million in proceeds from the sale of
treasury shares to certain executives of the Company. In July 1997, the Company
reduced the amount of available borrowings under its September 1996 unsecured
five year revolving credit facility from $500 million to $250 million.
The Company is a party to various environmental proceedings, substantially
all related to previously divested operations. In connection with the Company's
restructuring plan a comprehensive review of environmental exposures was
undertaken and the Company accelerated its strategy for the resolution and
settlement of certain environmental claims. This review and change in strategy
resulted in additional environmental reserves being recorded in 1996 as more
fully described in Note 12 to the consolidated financial statements. In
management's opinion, the ultimate resolution of these environmental matters
will not have a material adverse effect upon the Company's financial condition.
On March 2, 1998, the Company announced the signing of definitive
agreements to acquire The Coleman Company, Inc., Signature Brands USA, Inc. and
First Alert, Inc. Completion of the acquisitions, which is expected in the
second quarter of 1998, is contingent on customary conditions, including
regulatory approvals, and acquisition debt issuances. In connection with the
acquisitions, the Company plans to refinance existing revolving and term debt of
the acquired companies as well as all or substantially all of its existing
long-term debt. The Company expects to finance the cash portion of the
acquisitions and all debt refinancings through a combination of new revolving
and term credit facilities and zero coupon notes that will be issued concurrent
with the acquisition closings. Refer to Note 14 for additional information
regarding the pending acquisitions.
The Company believes its cash flow from operations, existing cash and cash
equivalent balances, its receivable securitization program, with the proceeds of
the anticipated new debt financings discussed above will be sufficient to
support working capital needs, capital spending, debt service and acquisition
related cash requirements for the foreseeable future.
18
<PAGE>
NEW ACCOUNTING STANDARDS
See Note 1 to the Company's consolidated financial statements for a
discussion of Statement of Financial Accounting Standards ("SFAS") No. 130,
REPORTING COMPREHENSIVE INCOME and SFAS No. 131, DISCLOSURES ABOUT SEGMENTS OF
AN ENTERPRISE AND RELATED INFORMATION, both of which are required to be adopted
for fiscal years beginning after December 15, 1997. The adoption of these
standards will not impact the Company's consolidated results of operations,
financial position, or cash flows.
YEAR 2000
The Company has assessed and continues to assess the impact of the Year
2000 issue on its operations, including the development and implementation of
project plans and cost estimates required to make its information systems
infrastructure Year 2000 compliant. Based on existing information, the Company
believes that anticipated spending necessary to become Year 2000 compliant will
not have a material effect on the financial position, cash flows or results of
operations of the Company, nor will the Year 2000 issues cause any material
adverse effect on the future business operations of the Company.
CAUTIONARY STATEMENTS
The Company's Cautionary Statements set forth in Part I, Item 1 of this
report, under the heading "Cautionary Statements," are incorporated herein by
reference.
SUBSEQUENT EVENTS
Refer to Note 14 for a discussion of the Company's pending acquisitions of
Coleman, Signature Brands and First Alert and new three year employment
contracts entered into with the Company's Chairman and Chief Executive Officer
and two other senior executives of the Company.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The response to this item appears in Item 14(a) of this report.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
Information regarding the Company's directors is incorporated by reference
to the information set forth under the caption "Election of Directors" in the
Company's Proxy Statement for the 1998 Annual Meeting of Shareholders (the
"Proxy Statement"), which Proxy Statement will be filed with the Securities and
Exchange Commission (the "SEC") not later than 120 days after the end of the
Company's fiscal year pursuant to Regulation 14A. Information regarding
executive officers of the Registrant is included under a separate caption in
Part I hereof. Information regarding compliance with Section 16(a) of the
Exchange Act is incorporated by references to the information included under
the caption "Section 16(a) Beneficial Ownership Reporting Compliance" in the
Company's Proxy Statement.
ITEM 11. EXECUTIVE COMPENSATION
Information regarding this item is incorporated by reference to the
information included under the captions "Executive Compensation," "Compensation
Committee Interlocks and Insider Participation"
19
<PAGE>
and "Directors' Compensation" in the Company's Proxy Statement, which will be
filed with the SEC not later than 120 days after the end of the Company's
fiscal year pursuant to Regulation 14A.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
Information regarding this item is incorporated by reference to the
information included under the captions "Security Ownership of Certain
Shareholders" and "Security Ownership by Management" in the Company's Proxy
Statement, which will be filed with the SEC not later than 120 days after the
end of the Company's fiscal year pursuant to Regulation 14A.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Information regarding this item is incorporated by reference to the
information included under the caption "Certain Relationships and Related
Transactions" in the Company's Proxy Statement, which will be filed with the
SEC not later than 120 days after the end of the Company's fiscal year pursuant
to Regulation 14A.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
(a) 1. The consolidated financial statements, related notes thereto and
the report of independent certified public accountants required by Item 8 are
listed on page F-1 herein.
2. The listing of financial statement schedules appears on page F-1
herein.
3. The exhibits listed in the accompanying index to exhibits are filed
as part of this report and include the management contracts or compensatory
plans or arrangements required pursuant to Item 601, which are designated as
Exhibits 10a to 10g.
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION
- -------- --------------------------------------------------------------------------------------------
<S> <C>
3.a Amended and Restated Certificate of Incorporation of Sunbeam(3)
3.b By-laws of Sunbeam, as amended(6)
10.a Employment Agreement dated as of February 20, 1998, by and between Sunbeam and
Albert J. Dunlap
10.b Employment Agreement dated as of February 20, 1998, by and between Sunbeam and Russell
A. Kersh
10.c Employment Agreement dated as of February 20, 1998, by and between Sunbeam and David
C. Fannin
10.d Employment Agreement dated as of January 1, 1997, by and between Sunbeam and Donald
Uzzi(5)
10.e Sunbeam Executive Benefit Replacement Plan
10.f Amended and Restated Sunbeam Corporation Stock Option Plan
10.g Performance Based Compensation Plan
10.h Tax Sharing Agreement dated as of October 31, 1990, by and among Sunbeam, SAIL, SOHO,
Montey and the subsidiaries of Sunbeam listed therein(1)
10.i Guarantee Agreement, dated as of June 1, 1994, between Sunbeam and Continental Bank,
N.A., as Trustee(2)
10.j Trust Indenture, dated as of June 1, 1994, between Mississippi Business Finance Corporation
("MBFC"), and Continental Bank, N.A., as Trustee(2)
10.k Loan Agreement, dated as of June 1, 1994, between MBFC and Sunbeam(2)
10.l $75 million Sunbeam promissory note, dated as of June 21,1994, payable to MBFC(2)
</TABLE>
20
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION
- -------- --------------------------------------------------------------------------------------------
<S> <C>
10.m Leasehold Deed of Trust and Security Agreement, dated as of June 1, 1994,among Sunbeam,
Jim B. Tohill, as Trustee, and MBFC(2)
10.n Credit Agreement dated as of September 16, 1996, among the Company, The Chase
Manhattan Bank and the Lenders named therein(4)
10.o First Amendment dated as of November 21, 1996 to the Credit Agreement dated as of
September 16, 1996, among the Company, The Chase Manhattan Bank and the Lenders
named therein(5)
10.p Second Amendment dated as of January 31, 1997 to the Credit Agreement dated as of
September 16, 1996, among the Company, The Chase Manhattan Bank and the Lenders
named therein(5)
10.q Third Amendment dated as of November 6, 1997, to the Credit Agreement dated as of
September 16, 1996, among the Company, The Chase Manhattan Bank and the Lenders
named therein.
10.r Receivables Sale and Contribution Agreement dated as of December 4, 1997, between
Sunbeam Products, Inc. and Sunbeam Asset Diversification, Inc.
10.s Receivables Purchase and Servicing Agreement dated as of December 4, 1997, between
Sunbeam Products, Inc., Llama Retail, L.P., Capital USA, LLC and Sunbeam Asset
Diversification, Inc.
10.t Agreement and Plan of Merger among Sunbeam Corporation, Laser Acquisition Corp., CLN
Holdings, Inc., and Coleman (Parent) Holdings, Inc. dated as of February 27, 1998.
10.u Agreement and Plan of Merger among Sunbeam Corporation, Camper Acquisition Corp., and
The Coleman Company, Inc. dated as of February 27, 1998.
10.v Agreement and Plan of Merger between Sunbeam Corporation, Java Acquisition Corp., and
Signature Brands USA, Inc. dated as of February 28, 1998.
10.w Stock Purchase Agreement among Java Acquisition Corp. and the Sellers named therein dated
as of February 28, 1998.
10.x Agreement and Plan of Merger by and among Sunbeam Corporation, Sentinel Acquisition Corp.,
and First Alert, Inc. dated as of February 28, 1998.
10.y Stock Sale Agreement among Sunbeam Corporation and the Shareholders named therein dated
as of February 28, 1998.
21 Subsidiaries of the Registrant.
23 Consent of Arthur Andersen LLP.
27 Financial Data Schedule, submitted electronically to the Securities and Exchange Commission
for information only and not filed.
99.a Press Release dated January 28, 1997 regarding Sunbeam's 1997 earnings.
99.b Press Release dated March 2, 1998 regarding Sunbeam's acquisitions of The Coleman Company,
Inc., Signature Brands USA, Inc. and First Alert, Inc.
</TABLE>
- ----------------
(1) Incorporated by reference to the Company's Annual Report on Form 10-K for
the fiscal year ended September 30, 1990.
(2) Incorporated by reference to the Company's Quarterly Report on Form 10-Q
for the quarter ended July 3, 1994.
(3) Incorporated by reference to the Company's Quarterly Report on Form 10-Q
for the quarter ended June 30, 1996.
(4) Incorporated by reference to the Company's Quarterly Report on Form 10-Q
for the quarter ended September 29, 1996.
(5) Incorporated by reference to the Company's Annual report on Form 10-K for
the fiscal year ended December 29, 1996.
(6) Incorporated by reference to the Company's Quarterly Report on Form 10-Q
for the quarter ended March 30, 1997.
(b) Reports on Form 8-K.
No reports on Form 8-K were filed during the fourth quarter of 1997.
(c) The exhibits required by Item 601 are filed herewith.
(d) The Financial Statement Schedules required by Regulation S-X are filed
herewith.
21
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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.
SUNBEAM CORPORATION
BY: /s/ RUSSELL A. KERSH
--------------------------------------
RUSSELL A. KERSH
Vice Chairman and
Chief Financial Officer
(Principal Financial Officer)
Dated: March 6, 1998
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the date indicated.
<TABLE>
<CAPTION>
NAME AND SIGNATURE TITLE DATE
- ------------------------------- ------------------------------- ---------------
<S> <C> <C>
/s/ ALBERT J. DUNLAP Chairman of the Board and March 6, 1998
- ----------------------------- Chief Executive Officer
Albert J. Dunlap (Principal Executive Officer)
/s/ CHARLES M. ELSON Director March 6, 1998
- -----------------------------
Charles M. Elson
/s/ RUSSELL A. KERSH Vice Chairman and March 6, 1998
- ----------------------------- Chief Financial Officer and
Russell A. Kersh Director
/s/ HOWARD G. KRISTOL Director March 6, 1998
- -----------------------------
Howard G. Kristol
/s/ PETER A. LANGERMAN Director March 6, 1998
- -----------------------------
Peter A. Langerman
/s/ WILLIAM T. RUTTER Director March 6, 1998
- -----------------------------
William T. Rutter
/s/ FAITH WHITTLESEY Director March 6, 1998
- -----------------------------
Faith Whittlesey
/s/ ROBERT J. GLUCK Vice President, Controller March 6, 1998
- ----------------------------- (Principal Accounting Officer)
Robert J. Gluck
</TABLE>
22
<PAGE>
SUNBEAM CORPORATION AND SUBSIDIARIES
INDEX TO FINANCIAL STATEMENTS AND FINANCIAL STATEMENT SCHEDULE
<TABLE>
<CAPTION>
PAGE
-----
<S> <C>
FINANCIAL STATEMENTS:
Report of Independent Certified Public Accountants .................................... F-2
Consolidated Statements of Operations
for the Fiscal Years Ended December 28, 1997, December 29, 1996 and December 31, 1995 F-3
Consolidated Balance Sheets as of December 28, 1997 and December 29, 1996 ............. F-4
Consolidated Statements of Shareholders' Equity
for the Fiscal Years Ended December 28, 1997, December 29, 1996 and December 31, 1995 F-5
Consolidated Statements of Cash Flows
for the Fiscal Years Ended December 28, 1997, December 29, 1996 and December 31, 1995 F-6
Notes to Consolidated Financial Statements ............................................ F-7
FINANCIAL STATEMENT SCHEDULE:*
II. Valuation and Qualifying Accounts ................................................. F-29
</TABLE>
- ----------------
* All other schedules for which provision is made in the applicable accounting
regulations of the Securities and Exchange Commission are not required under
the related instructions or are inapplicable, and therefore not included
herein.
F-1
<PAGE>
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
To the Board of Directors and Shareholders of
Sunbeam Corporation:
We have audited the accompanying consolidated balance sheets of Sunbeam
Corporation (a Delaware corporation) and subsidiaries as of December 29, 1996
and December 28, 1997 and the related consolidated statements of operations,
shareholders' equity and cash flows for each of the three fiscal years in the
period ended December 28, 1997. These consolidated financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Sunbeam Corporation and
subsidiaries as of December 29, 1996 and December 28, 1997, and the results of
its operations and its cash flows for each of the three fiscal years in the
period ended December 28, 1997 in conformity with generally accepted accounting
principles.
ARTHUR ANDERSEN LLP
Fort Lauderdale, Florida,
January 28, 1998, except with respect
to the matters discussed in Note 14,
as to which the date is March 2, 1998.
F-2
<PAGE>
SUNBEAM CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
FISCAL YEARS ENDED
-----------------------------------------------
DECEMBER 28, DECEMBER 29, DECEMBER 31,
1997 1996 1995
-------------- -------------- -------------
<S> <C> <C> <C>
Net sales ..................................................... $1,168,182 $ 984,236 $1,016,883
Cost of goods sold ............................................ 837,683 900,573 809,130
Selling, general and administrative expense ................... 131,056 214,029 137,508
Restructuring, impairment and other costs ..................... -- 154,869 --
---------- ---------- ----------
Operating earnings (loss) ..................................... 199,443 (285,235) 70,245
Interest expense .............................................. 11,381 13,588 9,437
Other (income) expense, net ................................... (1,218) 3,738 173
---------- ---------- ----------
Earnings (loss) from continuing operations before
income taxes ................................................. 189,280 (302,561) 60,635
Income taxes (benefit):
Current ...................................................... 8,369 (28,062) (2,105)
Deferred ..................................................... 57,783 (77,828) 25,146
---------- ---------- ----------
66,152 (105,890) 23,041
---------- ---------- ----------
Earnings (loss) from continuing operations .................... 123,128 (196,671) 37,594
Earnings from discontinued operations, net of taxes ........... -- 839 12,917
Loss on sale of discontinued operations, net of taxes ......... (13,713) (32,430) --
---------- ---------- ----------
Net earnings (loss) ........................................... $ 109,415 $ (228,262) $ 50,511
========== ========== ==========
Earnings (loss) per share of common stock from
continuing operations:
Basic ....................................................... $ 1.45 $ (2.37) $ 0.46
========== ========== ==========
Diluted ..................................................... 1.41 (2.37) 0.45
========== ========== ==========
Net earnings (loss) per share of common stock:
Basic ....................................................... $ 1.29 $ (2.75) $ 0.62
========== ========== ==========
Diluted ..................................................... 1.25 (2.75) 0.61
========== ========== ==========
Weighted average common shares outstanding:
Basic ....................................................... 84,945 82,925 81,626
========== ========== ==========
Diluted ..................................................... 87,542 82,925 82,819
========== ========== ==========
</TABLE>
See Notes to Consolidated Financial Statements.
F-3
<PAGE>
SUNBEAM CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
DECEMBER 28, DECEMBER 29,
1997 1996
-------------- -------------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents ............................................... $ 52,378 $ 11,526
Receivables, net ........................................................ 295,550 213,438
Inventories ............................................................. 256,180 162,252
Net assets of discontinued operations and other assets
held for sale ......................................................... -- 102,847
Deferred income taxes ................................................... 36,706 93,689
Prepaid expenses and other current assets ............................... 17,191 40,411
---------- ----------
Total current assets ................................................. 658,005 624,163
Property, plant and equipment, net ....................................... 240,897 220,088
Trademarks and trade names, net .......................................... 194,372 200,262
Other assets ............................................................. 27,010 28,196
---------- ----------
$1,120,284 $1,072,709
========== ==========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Short-term debt and current portion of long-term debt ................... $ 668 $ 921
Accounts payable ........................................................ 105,580 107,319
Restructuring accrual ................................................... 10,938 63,834
Other current liabilities ............................................... 80,913 99,509
---------- ----------
Total current liabilities ............................................ 198,099 271,583
Long-term debt ........................................................... 194,580 201,115
Other long-term liabilities .............................................. 141,109 152,451
Deferred income taxes .................................................... 54,559 52,308
Commitments and contingencies (Note 12)
Shareholders' equity:
Preferred stock (2,000,000 shares authorized, none outstanding) ......... -- --
Common stock (issued 89,984,425 and 88,441,479 shares) .................. 900 884
Paid-in capital ......................................................... 483,384 447,948
Retained earnings ....................................................... 141,134 35,118
Other ................................................................... (30,436) (25,310)
---------- ----------
594,982 458,640
Treasury stock, at cost (4,454,394 and 4,478,814 shares) ................ (63,045) (63,388)
---------- ----------
Total shareholders' equity ........................................... 531,937 395,252
---------- ----------
$1,120,284 $1,072,709
========== ==========
</TABLE>
See Notes to Consolidated Financial Statements.
F-4
<PAGE>
SUNBEAM CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
COMMON PAID-IN RETAINED OTHER TREASURY
STOCK CAPITAL EARNINGS (NOTE 2) STOCK
-------- ----------- ------------ ------------- --------------
<S> <C> <C> <C> <C> <C>
Balance at January 1, 1995 ...................... $ 932 $ 461,876 $ 285,990 $ (20,118) $ (174,070)
Net earnings ................................... -- -- 50,511 -- --
Common dividends ($.04 per share) .............. -- -- (3,268) -- --
Exercise of stock options ...................... 20 17,013 -- -- --
Amortization of unearned compensation .......... -- -- -- 582 --
Retirement of treasury shares .................. (74) (37,103) (66,535) -- 103,712
Purchase of common stock for treasury .......... -- -- -- -- (13,091)
Minimum pension liability ...................... -- -- -- (199) --
Translation adjustments ........................ -- -- -- (5,145) --
----- --------- ---------- --------- ----------
Balance at December 31, 1995 .................... 878 441,786 266,698 (24,880) (83,449)
----- --------- ---------- --------- ----------
Net loss ....................................... -- -- (228,262) -- --
Common dividends ($.04 per share) .............. -- -- (3,318) -- --
Exercise of stock options ...................... 6 7,313 -- -- --
Grant of restricted stock ...................... -- (1,120) -- (14,346) 15,466
Amortization of unearned compensation .......... -- -- -- 7,707 --
Minimum pension liability ...................... -- -- -- 4,963 --
Retirement and sale of treasury shares ......... -- (31) -- -- 4,595
Translation adjustments ........................ -- -- -- 1,246 --
----- --------- ---------- --------- ----------
Balance at December 29, 1996 .................... 884 447,948 35,118 (25,310) (63,388)
----- --------- ---------- --------- ----------
Net earnings ................................... -- -- 109,415 -- --
Common dividends ($.04 per share) .............. -- -- (3,399) -- --
Exercise of stock options ...................... 16 34,680 -- -- --
Amortization of unearned compensation .......... -- -- -- 5,322 --
Minimum pension liability ...................... -- -- -- (9,709) --
Other stock issuances .......................... -- 756 -- -- 343
Translation adjustments ........................ -- -- -- (739) --
----- --------- ---------- --------- ----------
Balance at December 28, 1997 .................... $ 900 $ 483,384 $ 141,134 $ (30,436) $ (63,045)
===== ========= ========== ========= ==========
</TABLE>
See Notes to Consolidated Financial Statements.
F-5
<PAGE>
SUNBEAM CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
FISCAL YEARS ENDED
-----------------------------------------------
DECEMBER 28, DECEMBER 29, DECEMBER 31,
1997 1996 1995
-------------- -------------- -------------
<S> <C> <C> <C>
OPERATING ACTIVITIES:
Net earnings (loss) ............................................... $ 109,415 $ (228,262) $ 50,511
Adjustments to reconcile net earnings (loss) to net cash
provided by (used in) operating activities:
Depreciation and amortization ................................... 38,577 47,429 44,174
Restructuring, impairment and other costs ....................... -- 154,869 --
Other non-cash special charges .................................. -- 128,800 --
Loss on sale of discontinued operations,
net of taxes ................................................. 13,713 32,430 --
Deferred income taxes ........................................... 57,783 (77,828) 25,146
Increase (decrease) in cash from changes
in working capital:
Receivables, net ................................................ (84,576) (13,829) (4,499)
Inventories ..................................................... (100,810) (11,651) (4,874)
Account payable ................................................. (1,585) 14,735 9,245
Restructuring accrual ........................................... (43,378) -- --
Prepaid expenses and other current assets
and liabilities .............................................. (9,004) 2,737 (8,821)
Income taxes payable ............................................ 52,844 (21,942) (18,452)
Payment of other long-term and non-operating liabilities .......... (14,682) (27,089) (21,719)
Other, net ........................................................ (26,546) 13,764 10,805
---------- ---------- ----------
Net cash provided by (used in)
operating activities ...................................... (8,249) 14,163 81,516
---------- ---------- ----------
INVESTING ACTIVITIES:
Capital expenditures .............................................. (58,258) (75,336) (140,053)
Decrease in investments restricted for plant construction ......... -- -- 45,755
Proceeds from sale of divested operations
and other assets ................................................ 90,982 -- --
Purchase of businesses ............................................ -- -- (13,053)
Other, net ........................................................ -- (860) --
---------- ---------- ----------
Net cash provided by (used in)
investing activities ...................................... 32,724 (76,196) (107,351)
---------- ---------- ----------
FINANCING ACTIVITIES:
Net borrowings under revolving credit facility .................... 5,000 30,000 40,000
Issuance of long-term debt ........................................ -- 11,500 --
Payments of debt obligations ...................................... (12,157) (1,794) (5,417)
Proceeds from exercise of stock options ........................... 26,613 4,684 9,818
Purchase of common stock for treasury ............................. -- -- (13,091)
Sale of treasury stock ............................................ -- 4,578 --
Payments of dividends on common stock ............................. (3,399) (3,318) (3,268)
Other financing activities ........................................ 320 (364) (264)
---------- ---------- ----------
Net cash provided by financing activities ..................... 16,377 45,286 27,778
---------- ---------- ----------
Net increase (decrease) in cash and
cash equivalents .......................................... 40,852 (16,747) 1,943
Cash and cash equivalents at beginning of year ..................... 11,526 28,273 26,330
---------- ---------- ----------
Cash and cash equivalents at end of year ........................... $ 52,378 $ 11,526 $ 28,273
========== ========== ==========
</TABLE>
See Notes to Consolidated Financial Statements.
F-6
<PAGE>
SUNBEAM CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. OPERATIONS AND SIGNIFICANT ACCOUNTING POLICIES
ORGANIZATION
Sunbeam Corporation ("Sunbeam" or the "Company") is a leading manufacturer
and marketer of branded consumer products. The Sunbeam/registered trademark/
and Oster/registered trademark/ brands have been household names for
generations, and the Company is a market share leader in many of its product
categories.
The Company markets its products through virtually every category of
retailer including mass merchandisers, catalog showrooms, warehouse clubs,
department stores, catalogs, television shopping channels, Company-owned outlet
stores, hardware stores, home centers, drug and grocery stores, pet supply
retailers, as well as independent distributors and the military. The Company
also sells its products to commercial end users such as hotels and other
institutions.
Approximately 79% of total Company sales are generated in the United
States. The remaining sales are generated primarily in Latin America, Mexico,
Canada, Europe and Asia.
PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include the accounts of the Company
and all majority-owned subsidiaries that it controls. All material intercompany
balances and transactions have been eliminated.
PRESENTATION OF FISCAL PERIODS
The Company's fiscal year ends on the Sunday nearest December 31. Fiscal
years 1997, 1996 and 1995 ended on December 28, 1997, December 29, 1996, and
December 31, 1995 respectively, which encompassed 52-week periods.
USE OF ESTIMATES
The preparation of the consolidated financial statements in conformity
with generally accepted accounting principles requires management to make
estimates and assumptions that affect the amounts reported in the consolidated
financial statements and accompanying notes. Actual results could differ from
those estimates. Significant accounting estimates include the establishment of
the allowance for doubtful accounts, reserves for product warranty, product
liability, excess and obsolete inventory, litigation and environmental
exposures.
CONCENTRATIONS OF CREDIT RISK
Substantially all of the Company's trade receivables are due from
retailers and distributors located throughout the United States, Latin America
and Canada. Approximately 36% of the Company's sales in 1997 were to its five
largest customers. The Company establishes its credit policies based on an
ongoing evaluation of its customers' creditworthiness and competitive market
conditions and establishes its allowance for doubtful accounts based on an
assessment of exposures to credit losses at each balance sheet date. The
Company believes its allowance for doubtful accounts is sufficient based on the
credit exposures outstanding at December 28, 1997. However, certain retailers
filed for bankruptcy protection in the last several years and it is possible
that additional credit losses could be incurred if the trends of retail
consolidation continue.
F-7
<PAGE>
SUNBEAM CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
1. OPERATIONS AND SIGNIFICANT ACCOUNTING POLICIES--(CONTINUED)
INVENTORIES
Inventories are stated at the lower of cost or market with cost being
determined principally by the first-in, first-out method.
PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment is stated at cost. The Company provides for
depreciation using primarily the straight-line method in amounts that allocate
the cost of property, plant and equipment over the following useful lives:
<TABLE>
<S> <C>
Buildings and improvements ............... 20 to 40 years
Machinery, equipment and tooling ......... 3 to 15 years
Furniture and fixtures ................... 3 to 10 years
</TABLE>
Leasehold improvements are amortized on a straight-line basis over the
shorter of its estimated useful life or the term of the lease.
LONG-LIVED ASSETS
The Company accounts for long-lived assets pursuant to Statement of
Financial Accounting Standards ("SFAS") No. 121, ACCOUNTING FOR THE IMPAIRMENT
OF LONG-LIVED ASSETS AND FOR LONG-LIVED ASSETS TO BE DISPOSED OF. See Notes 8
and 9 for a discussion of asset impairment charges in 1996.
CAPITALIZED INTEREST
Interest costs for the construction of certain long-term assets are
capitalized and amortized over the related assets' estimated useful lives.
Total interest costs during 1997 and 1996 amounted to $12.3 million and $14.0
million respectively, of which $.9 million and $.4 million respectively, was
capitalized into the construction cost of the long-term assets.
AMORTIZATION PERIODS
Trademarks and trade names are being amortized on a straight-line basis
over 40 years.
REVENUE RECOGNITION
The Company recognizes revenues from product sales principally at the time
of shipment to customers. In limited circumstances, at the customers request
the Company may sell seasonal product on a bill and hold basis provided that
the goods are completed, packaged and ready for shipment, such goods are
segregated and the risks of ownership and legal title have passed to the
customer. The amount of such bill and hold sales at December 29, 1997 was
approximately 3% of consolidated revenues.
Net sales is comprised of gross sales less provisions for expected
customer returns, discounts, promotional allowances and cooperative
advertising.
WARRANTY COSTS
The Company provides for warranty costs in amounts it estimates will be
needed to cover future warranty obligations for products sold during the year.
Estimates of warranty costs are periodically reviewed and adjusted, when
necessary, to consider actual experience.
F-8
<PAGE>
SUNBEAM CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
1. OPERATIONS AND SIGNIFICANT ACCOUNTING POLICIES--(CONTINUED)
ADVERTISING COSTS
Media advertising costs included in "Selling, General and Administrative
Expense," are expensed as incurred. Co-operative advertising costs are expensed
ratably over the year in relation to revenues.
FOREIGN CURRENCY TRANSLATION
The assets and liabilities of subsidiaries, other than those operating in
highly inflationary environments, are translated into U.S. dollars at year-end
exchange rates, with resulting translation gains and losses accumulated in a
separate component of shareholders' equity. Income and expense items are
converted into U.S. dollars at average rates of exchange prevailing during the
year.
For subsidiaries operating in highly inflationary environments, (Venezuela
and Mexico) inventories and property, plant and equipment are translated at the
rate of exchange on the date the assets were acquired, while other assets and
liabilities are translated at year-end exchange rates. Translation adjustments
for those operations are included in "Other (income) expense, net" on the
Accompanying Consolidated Statements of Operations.
STOCK-BASED COMPENSATION PLANS
SFAS No. 123, ACCOUNTING FOR STOCK-BASED COMPENSATION allows either
adoption of a fair value method for accounting for stock-based compensation
plans or continuation of accounting under Accounting Principles Board ("APB")
Opinion No. 25, ACCOUNTING FOR STOCK ISSUED TO EMPLOYEES, and related
interpretations with supplemental disclosures.
The Company has chosen to account for its stock options using the
intrinsic value based method prescribed in APB Opinion No. 25 and, accordingly,
does not recognize compensation expense for stock option grants made at an
exercise price equal to or in excess of the fair market value of the stock at
the date of grant. Pro forma net income and earnings per share amounts as if
the fair value method had been adopted are presented in Note 5 herein. SFAS No.
123 does not impact the Company's results of operations, financial position or
cash flows.
F-9
<PAGE>
SUNBEAM CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
1. OPERATIONS AND SIGNIFICANT ACCOUNTING POLICIES--(CONTINUED)
EARNINGS PER SHARE OF COMMON STOCK
In 1997, the Company adopted SFAS No. 128, EARNINGS PER SHARE. Basic
earnings per common share calculations are determined by dividing earnings
available to common shareholders by the weighted average number of shares of
common stock. Diluted earnings per share are determined by dividing earnings
available to common shareholders by the weighted average number of shares of
common stock and dilutive common stock equivalents outstanding (all related to
outstanding stock options and restricted stock discussed in Note 5). The
Company's reported primary earnings per share for 1995 has been restated to
comply with the requirements of SFAS No. 128. SFAS No. 128 had no impact on the
Company's reported loss per share for 1996 and no impact on the diluted
earnings per share reported in 1995. The effect of this accounting change on
previously reported earnings per share (EPS) for 1995 was as follows:
<TABLE>
<S> <C>
Earnings per share from continuing operations
Primary EPS as reported .................... $ 0.45
Effect of SFAS No. 128 ..................... 0.01
Basic EPS as restated ...................... 0.46
Earnings per share
Primary EPS as reported .................... $ 0.61
Effect of SFAS No. 128 ..................... 0.01
Basic EPS as restated ...................... 0.62
</TABLE>
RECLASSIFICATION
Certain prior year amounts have been reclassified to conform with the 1997
presentation.
NEW ACCOUNTING STANDARDS
In June 1997, the Financial Accounting Standards Board ("FASB") issued
SFAS No. 130, REPORTING COMPREHENSIVE INCOME. SFAS No. 130 establishes
standards for reporting and display of comprehensive income and its components
in the financial statements. SFAS No. 130 is effective for fiscal years
beginning after December 15, 1997. Reclassification of financial statements for
earlier periods provided for comparative purposes is required. The Company is
in the process of determining its preferred format. The adoption of SFAS No.
130 will have no impact on the Company's consolidated results of operations,
financial position or cash flows.
In June 1997, the FASB issued SFAS No. 131, DISCLOSURES ABOUT SEGMENTS OF
AN ENTERPRISE AND RELATED INFORMATION. SFAS No. 131 establishes standards for
the way that public business enterprises report information about operating
segments in annual financial statements and requires that those enterprises
report selected information about operating segments in interim financial
reports issued to shareholders. It also establishes standards for related
disclosures about products and services, geographic areas, and major customers.
SFAS No. 131 is effective for financial statements for fiscal years beginning
after December 15, 1997. Financial statement disclosures for prior periods are
required to be restated. The Company is in the process of evaluating the
disclosure requirements. The adoption of SFAS No. 131 will have no impact on
consolidated results of operations, financial position or cash flow.
F-10
<PAGE>
SUNBEAM CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
2. SHAREHOLDERS' EQUITY
The Company has 200,000,000 shares of $.01 par value common stock
authorized. At December 28, 1997 there were 9,404,068 shares of common stock
reserved for issuance upon the exercise of outstanding stock options.
In June 1995, the Company retired 7,376,395 shares of common stock held in
treasury, and such shares were returned to the status of authorized but
unissued shares. As a result, $103.7 million assigned to treasury stock has
been eliminated with a corresponding decrease to common stock, paid-in capital
and retained earnings. In 1995, the Company repurchased 905,600 shares of its
common stock at a total cost of $13.1 million.
In July 1996, the Company sold 321,786 shares of common stock for total
proceeds of approximately $4.4 million, and granted 1,100,000 shares of
restricted stock in connection with the employment of a new Chairman and Chief
Executive Officer and certain other officers of the Company. Compensation
expense attributable to the restricted stock awards is being amortized to
expense beginning in 1996 over the periods in which the restrictions lapse
(which in the case of 333,333 shares, was immediately upon the date of grant,
in the case of 666,667 shares, is equally over two years from the date of grant
and in the case of the remaining restricted shares, is equally over three years
from the dates of grant).
On February 20, 1998 the Company entered into new three-year employment
agreements with its Chairman and Chief Executive Officer and two other senior
officers of the Company. These agreements replaced previous employment
agreements entered into in July 1996 that were scheduled to expire in July 1999.
Refer to Note 14 for additional information regarding the new employment
contracts, including the acceleration of vesting of restricted stock grants
discussed above.
Information regarding other changes in shareholders' equity is summarized
below (in thousands):
<TABLE>
<CAPTION>
CURRENCY MINIMUM
TRANSLATION PENSION UNEARNED
ADJUSTMENTS LIABILITY COMPENSATION TOTAL
------------- ------------- -------------- -------------
<S> <C> <C> <C> <C>
Balance at January 1, 1995 ..................... $ (8,212) $ (10,927) $ (979) $ (20,118)
Amortization of unearned compensation ......... -- -- 582 582
Increase in minimum pension liability
(net of tax of $127) ........................ -- (199) -- (199)
Translation adjustments ....................... (5,145) -- -- (5,145)
--------- --------- --------- ---------
Balance at December 31, 1995 ................... (13,357) (11,126) (397) (24,880)
Grant of restricted stock ..................... -- -- (14,346) (14,346)
Amortization of unearned compensation ......... -- -- 7,707 7,707
Decrease in minimum pension liability
(net of tax of $2,672) ...................... -- 4,963 -- 4,963
Translation adjustments ....................... 1,246 -- -- 1,246
--------- --------- --------- ---------
Balance at December 29, 1996 ................... (12,111) (6,163) (7,036) (25,310)
Amortization of unearned compensation ......... -- -- 5,322 5,322
Increase in minimum pension liability (net
of tax of $5,228) ........................... -- (9,709) -- (9,709)
Translation adjustments ....................... (739) -- -- (739)
--------- --------- --------- ---------
Balance at December 28, 1997 ................... $ (12,850) $ (15,872) $ (1,714) $ (30,436)
========= ========= ========= =========
</TABLE>
F-11
<PAGE>
SUNBEAM CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
3. CREDIT FACILITIES AND LONG-TERM DEBT
In 1994, the Mississippi Business Finance Corporation ("MBFC") issued $75
million of 7.85% Industrial Development Revenue Notes (the "Notes") maturing
serially in eleven equal annual installments beginning June 1999 to certain
institutional investors through a private placement. The MBFC loaned the
proceeds of the Notes to a subsidiary of the Company under a non-recourse loan
agreement (the "Hattiesburg Loan") restricting the use of such funds to the
acquisition, design, construction and equipping of the Hattiesburg, Mississippi
manufacturing and distribution center. The Notes are guaranteed by the Company
and the Hattiesburg Loan is secured by the Hattiesburg facility.
In September 1996 (as subsequently amended), the Company entered into a
$500 million syndicated unsecured five year revolving credit facility (the
"Credit Agreement") which replaced a previous credit facility of $500 million.
In July 1997, the Company reduced the amount of available borrowings under the
facility to $250 million. Under the Credit Agreement, the Company can borrow
under a competitive bid option, or at a spread above LIBOR (currently .5%) or
at a bank base rate. In addition, the Company pays an annual facility fee
(currently .25%). The Credit Agreement contains certain financial covenants.
F-12
<PAGE>
SUNBEAM CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
3. CREDIT FACILITIES AND LONG-TERM DEBT--(CONTINUED)
During 1997, the Company repaid $12.2 million of long-term borrowings
related to the divested furntiture operations and other assets sold.
The aggregate annual principal payments on long-term debt, excluding
amounts outstanding under the Credit Agreement, due in each of the years
1998-2002, are $.7 million, $7.5 million, $7.6 million, $7.6 million and $7.7
million, respectively.
Long-term debt at the end of each fiscal year consists of the following
(in thousands):
<TABLE>
<CAPTION>
1997 1996
----------- -----------
<S> <C> <C>
Revolving credit facility, weighted average interest rate of 5.99% and
5.60% for 1997, and for 1996, respectively .......................... $110,000 $105,000
Hattiesburg industrial revenue bond due 2009, fixed interest rate
of 7.85% ............................................................ 75,000 75,000
Other long-term borrowings, due through 2012, weighted average
interest rate of 3.92% and 4.95%, at December 28, 1997 and
December 29, 1996, respectively ..................................... 10,248 22,036
-------- --------
$195,248 $202,036
======== ========
</TABLE>
In December 1997, the Company entered into a revolving trade accounts
receivable securitization program to sell without recourse, through a
wholly-owned subsidiary, certain trade accounts receivable. The maximum amount
of receivables that can be sold through this program is $70 million. At December
28, 1997, the Company had received approximately $59 million from the sale of
trade accounts receivable. The proceeds from the sale were used to reduce
borrowings under the Company's revolving credit facility. Costs of the program,
which primarily consist of the purchaser's financing cost of issuing commercial
paper backed by the receivables, totaled $.2 million during 1997, and have been
classified as interest expense in the accompanying Consolidated Statements of
Operations. The Company, as agent for the purchaser of the receivables, retains
collection and administrative responsibilities for the purchased receivables.
4. FINANCIAL INSTRUMENTS
FAIR VALUE OF FINANCIAL INSTRUMENTS
The carrying amounts of the Company's financial instruments as of December
28, 1997 approximate market values based upon the following methods and
assumptions:
CASH AND CASH EQUIVALENTS--The carrying amount of cash and cash
equivalents is assumed to approximate fair value as cash equivalents include
all highly liquid, short-term investments with original maturities of three
months or less.
SHORT AND LONG TERM DEBT--The carrying value of the Company's various debt
outstanding as of December 28, 1997 approximates market. The fair value of the
Company's fixed rate debt is estimated using discounted cash flow analysis,
based upon the market yield of public debt securities of comparable credit
quality and maturity. The carrying value of the Company's variable rate debt is
assumed to approximate market based upon periodic adjustments of the interest
rate to the current market rate in accordance with the terms of the debt
agreements.
F-13
<PAGE>
SUNBEAM CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
4. FINANCIAL INSTRUMENTS--(CONTINUED)
LETTERS OF CREDIT--The Company utilizes stand-by letters of credit to back
certain financing instruments and insurance policies and commercial letters of
credit guaranteeing various international trade activities. The contract
amounts of the letters of credit approximate their fair value.
DERIVATIVE FINANCIAL INSTRUMENTS
The Company selectively uses derivatives to manage interest rate and
foreign exchange exposures that arise in the normal course of business. The use
of derivatives did not have a material impact on the Company's results of
operations in 1997, 1996 and 1995. No derivatives are entered into for trading
or speculative purposes. Foreign exchange option and forward contracts are used
to hedge a portion of the Company's underlying exposures denominated in foreign
currency. Although the market value of derivative contracts at any single point
in time will vary with changes in interest and/or foreign exchange rates, the
difference between the carrying value and fair value of such contracts at
December 29, 1996 and December 31, 1995 is not considered to be material,
either individually or in the aggregate. The Company had no derivative
financial instruments outstanding at December 28, 1997. The Company enters into
derivative contracts with counterparties that it believes to be creditworthy.
The Company does not enter into any leveraged derivative transactions.
As of December 28, 1996, $10.0 million of the Company's outstanding
floating rate debt was subject to interest rate swap agreements.
In order to mitigate the transaction exposures that may arise from changes
in foreign exchange rates, the Company purchases foreign currency option
contracts to hedge anticipated transactions. The option contracts typically
expire within one year. Any realized gains on options are not deferred but are
recognized in income in the period when the hedged exposure is recognized. The
Company purchased options with a notional value of $16.6 million in 1997, $18.2
million in 1996 and $11.7 million in 1995. Options with notional value of $17.9
million, $25.4 million and $3.2 million expired in 1997, 1996 and 1995,
respectively. The Company held purchased option contracts with a notional value
of $1.4 million at December 29, 1996.
5. EMPLOYEE STOCK OPTIONS AND AWARDS
The Company has one stock-based compensation plan, the Amended and
Restated Sunbeam Corporation Stock Option Plan (the "Plan"). Under the Plan,
all employees are eligible for grants of options to purchase up to an aggregate
of 11,300,000 shares of the Company's common stock at an exercise price equal
to or in excess of the fair market value of the stock on the date of grant. The
term of each option commences on the date of grant and expires on the tenth
anniversary of the date of grant. Options generally become exercisable over a
three to five year period.
The Plan also provides for the grant of restricted stock awards of up to
200,000 shares, in the aggregate, to employees and non-employee directors. See
Note 2 for a discussion of restricted stock awards made outside the Plan.
In July 1996, options to purchase an aggregate of 3,000,000 shares (of
which 2,750,000 options were outstanding at December 28, 1997) were granted
outside of the Plan at exercise prices equal to the fair market value of the
Company's common stock on the dates of grant in connection with the employment
of a new Chairman and Chief Executive Officer and certain other executive
officers of the Company. These outstanding options have terms of ten years and,
with respect to options for 2,500,000 shares, are
F-14
<PAGE>
SUNBEAM CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
5. EMPLOYEE STOCK OPTIONS AND AWARDS--(CONTINUED)
exercisable in three annual installments beginning July 17, 1996. Options
for the remaining 250,000 shares still outstanding are exercisable in three
annual installments beginning on the first anniversary of the July 22, 1996
grant date. On February 20, 1998 the vesting provisions of the options granted
outside the Plan were accelerated as further described in Note 14.
The Company applies APB Opinion No. 25 and related interpretations in
accounting for its stock options. Accordingly, no compensation cost has been
recognized for outstanding stock options. Had compensation cost for the
Company's outstanding stock options been determined based on the fair value at
the grant dates for those options consistent with SFAS No. 123, the Company's
net earnings (loss) and diluted earnings (loss) per share would have been
reduced to the pro forma amounts indicated below (in thousands except per share
amounts):
<TABLE>
<CAPTION>
1997 1996 1995
------------- -------------- ------------
<S> <C> <C> <C>
Net earnings/(loss)
As reported .................... $ 109,415 $ (228,262) $ 50,511
Pro forma ...................... $ 94,887 $ (238,186) $ 49,731
Diluted earnings/(loss) per share
As reported .................... $ 1.25 $ (2.75) $ 0.61
Pro forma ...................... $ 1.08 $ (2.87) $ 0.60
</TABLE>
The fair value of each option grant is estimated on the date of grant
using the Black-Scholes option-pricing model with the following
weighted-average assumptions:
<TABLE>
<CAPTION>
1997 1996 1995
----------- ----------- -----------
<S> <C> <C> <C>
Expected volatility .............. 34.19% 36.78% 36.78%
Risk-free interest rate .......... 6.36% 6.34% 6.34%
Dividend yield ................... .1% .1% .1%
Expected life .................... 6 years 5 years 5 years
</TABLE>
F-15
<PAGE>
SUNBEAM CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
5. EMPLOYEE STOCK OPTIONS AND AWARDS--(CONTINUED)
A summary of the status of the Company's outstanding stock options as of
December 28, 1997, December 29, 1996 and December 31, 1995, and changes during
the years ending on those dates is presented below:
<TABLE>
<CAPTION>
1997 1996 1995
-------------------------------- -------------------------------- -------------------------------
WEIGHTED WEIGHTED WEIGHTED
AVERAGE AVERAGE AVERAGE
SHARES EXERCISE PRICE SHARES EXERCISE PRICE SHARES EXERCISE PRICE
--------------- ---------------- --------------- ---------------- --------------- ---------------
<S> <C> <C> <C> <C> <C> <C>
PLAN OPTIONS
Outstanding at
beginning of year ......... 6,271,837 $ 19.43 4,610,387 $ 16.67 5,230,221 $ 14.85
Granted ..................... 3,105,263 32.40 4,061,450 20.39 1,928,500 18.61
Exercised ................... (1,549,196) 17.20 (622,994) 7.51 (1,142,348) 6.32
Canceled .................... (1,173,836) 21.10 (1,777,006) 18.64 (1,405,986) 21.06
---------- ---------- ----------
Outstanding at
end of year ............... 6,654,068 25.61 6,271,837 19.43 4,610,387 16.67
========== ========== ==========
Options exercisable
at year-end ............... 1,547,198 $ 19.13 1,655,450 $ 16.13 1,539,836 $ 11.47
Weighted-average fair
value of options
granted during
the year .................. $ 15.46 $ 14.76 $ 8.28
OPTIONS OUTSIDE PLAN
Outstanding at
beginning of year ......... 2,750,000 $ 12.43 692,500 $ 16.70 750,000 $ 16.70
Granted ..................... -- 3,000,000 12.65 -- --
Exercised ................... -- (57,500) 16.70
Canceled .................... -- (942,500) 16.27 -- --
------------ ------------ ------------
Outstanding at
end of year ............... 2,750,000 12.43 2,750,000 12.43 692,500 16.70
============ ============ ============
Options exercisable
at year-end ............... 1,750,000 $ 12.35 833,333 $ 12.25 505,000 $ 16.70
Weighted-average fair
value of options
granted during
the year .................. $ -- $ 5.99 $ --
</TABLE>
F-16
<PAGE>
SUNBEAM CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
5. EMPLOYEE STOCK OPTIONS AND AWARDS--(CONTINUED)
The following table summarizes information about stock options outstanding
at December 28, 1997:
<TABLE>
<CAPTION>
OPTIONS OUTSTANDING
--------------------------------------------------------------
NUMBER WEIGHTED-AVERAGE
RANGE OF OUTSTANDING REMAINING WEIGHTED-AVERAGE
EXERCISE PRICES AT 12/28/97 CONTRACTUAL LIFE (YEARS) EXERCISE PRICE
- ----------------------------- ------------- -------------------------- -----------------
<S> <C> <C> <C>
$5.00 to $14.99 ......... 3,514,556 8.2 $ 12.50
$15.00 to $19.99 ......... 485,240 7.4 16.30
$20.00 to $24.99 ......... 2,090,187 8.2 22.39
$25.00 to $29.99 ......... 1,786,007 9.0 25.99
$30.00 to $34.99 ......... 448,468 9.3 32.01
$35.00 to $39.99 ......... 336,820 9.5 38.77
$40.00 to $44.99 ......... 680,290 9.7 42.99
$45.00 and over .......... 62,500 9.7 46.22
--------- ----- --------
$5.00 to $49.71 ......... 9,404,068 8.5 $ 21.76
========= ===== ========
</TABLE>
<TABLE>
<CAPTION>
OPTIONS EXERCISABLE
---------------------------------
NUMBER
RANGE OF EXERCISABLE WEIGHTED-AVERAGE
EXERCISE PRICES AT 12/28/97 EXERCISE PRICE
- ----------------------------- ------------- -----------------
<S> <C> <C>
$5.00 to $14.99 ......... 2,108,255 $ 12.08
$15.00 to $19.99 ......... 219,466 16.50
$20.00 to $24.99 ......... 842,601 22.27
$25.00 and over........... 126,876 26.41
--------- --------
$5.00 to $27.36 ......... 3,297,198 $ 15.54
========= ========
</TABLE>
6. EMPLOYEE BENEFIT PLANS
RETIREMENT PLANS
The Company sponsors several defined benefit pension plans covering
eligible U.S. salaried and hourly employees. Benefit accruals under such plans
covering all U.S. salaried employees were frozen, effective December 31, 1990.
Therefore no credit in the pension formula is given for service or compensation
after that date. However, employees continue to earn service toward vesting in
their interest in the frozen plans as of December 31, 1990. Employees of
non-U.S. subsidiaries generally receive retirement benefits from Company
sponsored plans or from statutory plans administered by governmental agencies
in their countries.
F-17
<PAGE>
SUNBEAM CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
6. EMPLOYEE BENEFIT PLANS--(CONTINUED)
The funded status of the Company's U.S. defined benefit pension plans at
the end of each fiscal year follows (in thousands):
<TABLE>
<CAPTION>
1997 1996
----------- -----------
<S> <C> <C>
Actuarial present value of benefit obligations:
Vested ............................................................. $ 126,941 $ 122,379
Non-vested ......................................................... 288 375
--------- ---------
Accumulated benefit obligations ..................................... 127,229 122,754
Plan assets at fair value ........................................... 116,485 116,522
--------- ---------
Accumulated benefit obligations in excess of plan assets ............ 10,744 6,232
Unrecognized net loss ............................................... (25,192) (19,537)
Additional minimum liability ........................................ 25,192 10,255
--------- ---------
Pension liability (prepaid) recognized on the balance sheet ......... $ 10,744 $ (3,050)
========= =========
</TABLE>
Net periodic pension cost for the Company's U.S. defined benefit pension
plans for each fiscal year include the following components (in thousands):
<TABLE>
<CAPTION>
1997 1996 1995
------------ ----------- ------------
<S> <C> <C> <C>
Service cost-benefits earned during the period .......... $ 157 $ 411 $ 331
Interest cost-accumulated benefit obligations ........... 8,970 9,071 10,620
Actual return on plan assets ............................ (12,511) (816) (20,985)
Net amortization and deferral ........................... 4,338 (7,518) 11,332
--------- -------- ---------
Net periodic pension cost ............................... $ 954 $ 1,148 $ 1,298
========= ======== =========
Assumptions:
Discount rate .......................................... 7.25% 7.75% 7.25%
Long-term rate of return on assets ..................... 7.25% 7.75% 9.50%
</TABLE>
The Company funds its pension plans in amounts consistent with applicable
laws and regulations. Pension plan assets include corporate and U.S. government
bonds and cash equivalents.
The assets, liabilities and pension costs of the Company's non-U.S.
defined benefit retirement plans are not material to the consolidated financial
statements.
OTHER POSTRETIREMENT BENEFITS
The Company provides health care and life insurance benefits to certain
former employees who retired from the Company prior to March 31, 1991. The
Company has consistently followed a policy of funding the cost of
postretirement health care and life insurance benefits on a pay-as-you-go
basis.
Effective July 1993, various amendments to the Company's postretirement
benefits program were adopted. The amendments included increases in retiree
contribution levels for certain retiree groups and the discontinuation of
medical and/or life insurance coverage for certain retirees who qualify for
Medicare. These amendments resulted in an unrecognized reduction in prior
service cost which is being amortized over future years.
F-18
<PAGE>
SUNBEAM CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
6. EMPLOYEE BENEFIT PLANS--(CONTINUED)
The following table presents the funded status reconciled with the amounts
recognized in the Company's consolidated balance sheet at the end of each
fiscal year (in thousands):
<TABLE>
<CAPTION>
1997 1996
---------- ----------
<S> <C> <C>
Accumulated postretirement benefit obligation .......... $14,220 $14,555
Plan assets ............................................ -- --
------- -------
Accumulated postretirement benefit obligation in excess
of plan assets ........................................ 14,220 14,555
Unrecognized reduction in prior service cost ........... 15,934 18,877
Unrecognized net gain .................................. 240 95
------- -------
Accrued postretirement benefit obligation recognized
on the balance sheet .................................. $30,394 $33,527
======= =======
</TABLE>
Net periodic postretirement benefit cost for each fiscal year includes the
following components (in thousands):
<TABLE>
<CAPTION>
1997 1996
----------- -----------
<S> <C> <C>
Interest cost ............................................ $ 983 $ 1,042
Amortization of reduction in prior service cost .......... (2,943) (2,943)
-------- --------
Net periodic postretirement benefit credit ............... $ (1,960) $ (1,901)
======== ========
</TABLE>
The assumed health care cost trend rate used in measuring the accumulated
postretirement benefit obligation is 8.8% for 1998 and is assumed to decrease
gradually to 6% by 2003 and remain at that level thereafter. A one percentage
point increase in the assumed health care cost trend rate for each year would
increase the accumulated postretirement benefit obligation as of December 28,
1997 and the net periodic postretirement benefit cost for 1997 by approximately
8%. The weighted average discount rate used in determining the accumulated
postretirement benefit obligation was 7.25% at December 28, 1997 and December
29, 1996.
DEFINED CONTRIBUTION PLANS
The Company sponsors defined contribution profit sharing plans covering
eligible employees. Company contributions to these plans include employer
matching contributions as well as discretionary profit sharing contributions
depending on the performance of the Company, in an amount up to 10% of eligible
compensation. The Company provided $1.8 million in 1997, $1.7 million in 1996
and $4.1 million in 1995 for its defined contribution plans.
F-19
<PAGE>
SUNBEAM CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
7. SUPPLEMENTARY FINANCIAL STATEMENT DATA
Supplementary Balance Sheet data at the end of each fiscal year is as
follows (in thousands):
<TABLE>
<CAPTION>
1997 1996
------------- -------------
<S> <C> <C>
Receivables:
Trade ............................................. $ 305,219 $ 227,043
Sundry ............................................ 7,794 2,412
---------- ----------
313,013 229,455
Valuations allowances ............................. (17,463) (16,017)
---------- ----------
$ 295,550 $ 213,438
========== ==========
Inventories:
Finished goods .................................... $ 142,976 $ 84,813
Work in process ................................... 26,237 25,167
Raw materials and supplies ........................ 86,967 52,272
---------- ----------
$ 256,180 $ 162,252
========== ==========
Property, plant and equipment:
Land .............................................. $ 1,793 $ 2,524
Buildings and improvements ........................ 98,054 95,619
Machinery and equipment ........................... 245,824 258,199
---------- ----------
345,671 356,342
Accumulated depreciation and amortization ......... (104,774) (136,254)
---------- ----------
$ 240,897 $ 220,088
========== ==========
Trademarks and trade names:
Gross ............................................. $ 237,095 $ 245,307
Accumulated amortization .......................... (42,723) (45,045)
---------- ----------
$ 194,372 $ 200,262
========== ==========
</TABLE>
Inventory and property, plant and equipment in 1996 exclude assets of
discontinued operations and other assets held for sale.
<TABLE>
<CAPTION>
1997 1996
---------- ----------
<S> <C> <C>
Other current liabilities:
Payrolls, commissions and employee benefits ......... $ 14,051 $ 18,536
Advertising and sales promotion ..................... 27,524 23,816
Product warranty .................................... 24,154 23,883
Other ............................................... 15,184 33,274
-------- --------
$ 80,913 $ 99,509
======== ========
Other long-term liabilities:
Accrued postretirement benefit obligation ........... $ 30,394 $ 33,527
Accrued pension ..................................... 10,744 --
Other ............................................... 99,971 118,924
-------- --------
$141,109 $152,451
======== ========
</TABLE>
F-20
<PAGE>
SUNBEAM CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
7. SUPPLEMENTARY FINANCIAL STATEMENT DATA--(CONTINUED)
Supplementary Statements of Operations and Cash Flows data for each fiscal
year are summarized as follows (in thousands):
<TABLE>
<CAPTION>
1997 1996 1995
------------ ------------ ------------
<S> <C> <C> <C>
Other (income) expense, net:
Interest income .......................... $ (1,555) $ (1,255) $ (3,657)
Other .................................... 337 4,993 3,830
--------- -------- --------
$ (1,218) $ 3,738 $ 173
========= ======== ========
Advertising and sales promotion ........... $ 56,448 $ 71,524 $ 57,274
========= ======== ========
Cash paid (received) during the period for:
Interest (net of capitalization) ......... $ 13,058 $ 13,397 $ 12,555
========= ======== ========
Income taxes (net of refunds) ............ $ (44,508) $ (540) $ 13,936
========= ======== ========
</TABLE>
NON-CASH TRANSACTIONS
In connection with a warehouse expansion related to the electric blanket
business, the Company entered into a $5 million capital lease obligation in
1996.
8. RESTRUCTURING, IMPAIRMENT AND OTHER COSTS
In November 1996, the Company announced the details of its restructuring
and growth plan. The cost reduction phase of the plan included the
consolidation of administrative functions within the Company, the
rationalization of manufacturing and warehouse facilities, the centralization
of the Company's procurement function, and reduction of the Company's product
offerings and stock keeping units ("SKU's"). The Company also announced plans
to divest several lines of business which it determined are not core for
Sunbeam (see Note 9).
In connection with the restructuring plan, the Company consolidated six
divisional and regional headquarters functions into a single worldwide
corporate headquarters in Delray Beach, Florida and outsourced certain back
office activities resulting in a 50% reduction in total
back-office/administrative headcount. Overall, the restructuring plan calls for
a reduction in the number of production facilities from 26 to 8 and the
elimination of over 6,000 positions from the Company's workforce, including
3,300 from the disposition of non-core business operations and the elimination
of approximately 2,800 other positions. The Company completed the major phases
of the restructuring plan by January 1997.
In conjunction with the implementation of the restructuring and growth
plan, the Company recorded a pre-tax special charge to earnings of
approximately $337.6 million in the fourth quarter of 1996. This amount is
allocated as follows in the accompanying Consolidated Statement of Operations:
$154.9 million to Restructuring, Impairment and Other Costs as further
described below; $92.3 million to Cost of Goods Sold related principally to
inventory write-downs from the reduction in SKU's and costs of inventory
liquidation programs; $42.5 million to Selling, General and Administrative
expenses principally for increases in environmental and litigation reserves
(see Note 12) and other reserve categories; and the estimated pre-tax loss on
the divestiture of the Company's furniture business of approximately $47.9
million. During the first quarter of 1997, upon completion of the sale, the
Company provided for additional losses on the disposal of the furniture
business of $13.7 million, net of applicable income tax benefits as a result of
lower than anticipated sales proceeds.
F-21
<PAGE>
SUNBEAM CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
8. RESTRUCTURING, IMPAIRMENT AND OTHER COSTS--(CONTINUED)
Amounts included in Restructuring, Impairment and Other Costs in 1996 in
the accompanying Consolidated Statement of Operations include cash items such
as severance and other employee costs of $43.0 million, lease obligations and
other exit costs associated with facility closures of $12.6 million, $7.5
million of start-up costs on back office outsourcing initiatives and other
costs related to the implementation of the restructuring and growth plan.
Non-cash Restructuring, Impairment and Other Costs in 1996 include $91.8
million related to asset write-downs to net realizable value for disposals of
excess facilities and equipment and non-core product lines, write-offs of
redundant computer systems from the administrative back-office consolidations
and outsourcing initiatives and intangible, packaging and other asset
write-downs related to exited product lines and SKU reductions. The following
table sets forth the details and the cumulative activity in the restructuring
accrual as of December 28, 1997 (in millions):
<TABLE>
<CAPTION>
ACCRUAL BALANCE ACCRUAL BALANCE
AT DECEMBER 29, CASH NON-CASH AT DECEMBER 28,
1996 REDUCTIONS REDUCTIONS 1997
----------------- ------------ ------------ ----------------
<S> <C> <C> <C> <C>
Severance and other employee costs ......... $ 36.9 $ 18.6 $ 9.5 $ 8.8
Closure and consolidation of facilities
and related exit costs .................... 26.9 24.8 -- 2.1
------- ------- ----- ------
Total ...................................... $ 63.8 $ 43.4 $ 9.5 $ 10.9
======= ======= ===== ======
</TABLE>
9. DISCONTINUED OPERATIONS AND OTHER ASSETS HELD FOR SALE
As part of the restructuring plan and redefinition of its core businesses,
the Company also announced the divestiture of the furniture business, by a sale
of assets. In February 1997, the Company entered into an agreement to sell the
business to U.S. Industries, Inc. which was completed on March 17, 1997. In
connection with the sale of these assets (primarily inventory, property, plant
and equipment), the Company received $69 million in cash. The Company retained
accounts receivable related to the furniture business of approximately $50.0
million as of the closing date.
In connection with the furniture divestiture, the Company recorded a
provision for estimated losses to be incurred on the sale of $32.4 million in
1996, net of applicable income tax benefits and an additional loss of $13.7
million, net of applicable income tax benefits in the first quarter of 1997 as a
result of lower than anticipated sales proceeds. Earnings from the discontinued
furniture business were $.8 million in 1996 and $12.9 million in 1995, net of
applicable income taxes of $.5 million and $7.9 million, respectively. Earnings
from the discontinued furniture business in 1997 were not material. Revenues for
the discontinued furniture business were $51.6 million in 1997, $227.5 million
in 1996 and $185.6 million in 1995. These revenues are not included in net sales
as reported in the accompanying Consolidated Statements of Operations.
In addition to the furniture business divestiture, the Company also
completed the sale of other non-core product lines and assets in 1997 as part
of its restructuring plan, including time and temperature products,
Counselor/registered trademark/ and Borg/registered trademark/ scales and a
textile facility. Losses incurred on the disposal of these assets, which
consist primarily of write-downs of assets to net realizable value, are
included in Restructuring, Impairment and Other Costs in 1996 in the
Consolidated Statements of Operations as described in Note 8.
F-22
<PAGE>
SUNBEAM CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
10. INCOME TAXES
Earnings (loss) from continuing operations before income taxes for each
fiscal year is summarized as follows (in thousands):
<TABLE>
<CAPTION>
1997 1996 1995
----------- -------------- ----------
<S> <C> <C> <C>
Domestic .......... $167,822 $ (285,011) $54,646
Foreign ........... 21,458 (17,550) 5,989
-------- ---------- -------
$189,280 $ (302,561) $60,635
======== ========== =======
</TABLE>
Income tax provisions include current and deferred taxes (tax benefits)
for each fiscal year as follows (in thousands):
<TABLE>
<CAPTION>
1997 1996 1995
--------- ------------- ------------
<S> <C> <C> <C>
Current:
Federal ......... $ 3,420 $ (28,567) $ (1,329)
State ........... 3,266 (202) (1,402)
Foreign ......... 1,683 707 626
------- ---------- --------
8,369 (28,062) (2,105)
------- ---------- --------
Deferred:
Federal ......... 49,513 (65,833) 23,127
State ........... 3,962 (11,050) 1,962
Foreign ......... 4,308 (945) 57
------- ---------- --------
57,783 (77,828) 25,146
------- ---------- --------
$66,152 $ (105,890) $ 23,041
======= ========== ========
</TABLE>
A reconciliation of income tax expense with the expected income tax
computed by applying the federal statutory income tax rate to earnings (loss)
from continuing operations before income taxes for each fiscal year is as
follows (in thousands):
<TABLE>
<CAPTION>
1997 1996 1995
---------- -------------- ----------
<S> <C> <C> <C>
Income tax computed at the federal statutory
tax rate ................................................... $ 66,248 $ (105,896) $21,222
State and local taxes (net of federal benefit) .............. 4,698 (7,313) 364
Foreign earnings and dividends taxed at other rates ......... (3,611) 5,967 419
Other, net .................................................. (1,183) 1,352 1,036
-------- ---------- -------
$ 66,152 $ (105,890) $23,041
======== ========== =======
</TABLE>
F-23
<PAGE>
SUNBEAM CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
10. INCOME TAXES--(CONTINUED)
The major components of the Company's net current deferred tax asset and
net long-term deferred tax liability at the end of each fiscal year are as
follows (in thousands):
<TABLE>
<CAPTION>
1997 1996
------------------------------- ------------------------------
CURRENT LONG-TERM CURRENT LONG-TERM
DEFERRED TAX DEFERRED TAX DEFERRED TAX DEFERRED TAX
ASSET LIABILITY ASSET LIABILITY
-------------- -------------- -------------- -------------
<S> <C> <C> <C> <C>
Operating reserves and accruals ......... $11,721 $ 29,966 $60,307 $ 28,447
Book/tax basis difference in
trademarks and trade names ............. -- (70,881) -- (72,587)
Book/tax basis difference in
other assets ........................... 11,937 (22,645) 19,276 (13,406)
Reserves for non-operating assets
and non-operating liabilities .......... 3,062 21,849 8,905 24,043
Other ................................... 9,986 (12,848) 5,201 (18,805)
------- --------- ------- ---------
$36,706 $ (54,599) $93,689 $ (52,308)
======= ========= ======= =========
</TABLE>
Deferred U.S. income taxes are not provided on the undistributed earnings
of foreign subsidiaries, since such earnings are considered to be permanently
reinvested. At December 28, 1997, the cumulative amount of undistributed
earnings of foreign subsidiaries on which U.S. federal income taxes have not
been provided was approximately $51.5 million. Determination of the amount of
unrecognized deferred U.S. income tax liability is not practical because of the
complexities associated with its hypothetical calculation; however,
unrecognized foreign tax credit carryovers would be available to reduce some
portion of the U.S. liability.
11. CUSTOMER AND GEOGRAPHIC DATA
Classes of products which contributed more than 10% to consolidated sales
were outdoor home use durable products and indoor home use durable products.
Sales of outdoor home use durable products amounted to $325.8 million in 1997,
$256.9 million in 1996 and $269.0 million in 1995. Sales of indoor home use
durable products were $769.6 million in 1997, $680.7 million in 1996 and $688.3
million in 1995.
The Company's largest customer accounted for approximately 21% of
consolidated net sales in 1997 and 19% in 1996 and 1995.
F-24
<PAGE>
SUNBEAM CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
11. CUSTOMER AND GEOGRAPHIC DATA--(CONTINUED)
The Company's operations are conducted in the United States and
international markets, principally in Latin America, Canada and Mexico.
Information about the Company's domestic and international operations for each
fiscal year is as follows (in thousands):
<TABLE>
<CAPTION>
1997 1996 1995
------------- -------------- -------------
<S> <C> <C> <C>
Net sales:
Domestic ........................................... $ 927,660 $ 800,969 $ 829,423
International (includes U.S. export sales) ......... 240,522 183,267 187,460
---------- ---------- ----------
$1,168,182 $ 984,236 $1,016,883
========== ========== ==========
Operating earnings (loss):
Domestic ........................................... $ 175,858 $ (244,477) $ 70,423
International (includes U.S. export sales) ......... 53,641 (5,022) 24,301
---------- ---------- ----------
229,499 (249,499) 94,724
Unallocated expenses and eliminations .............. (30,056) (35,736) (24,479)
---------- ---------- ----------
$ 199,443 $ (285,235) $ 70,245
========== ========== ==========
Identifiable assets:
Domestic ........................................... $ 923,527 $ 781,788 $1,040,591
International ...................................... 131,359 73,430 67,563
---------- ---------- ----------
1,054,886 855,218 1,108,154
Corporate assets ................................... 65,398 217,491 50,530
---------- ---------- ----------
$1,120,284 $1,072,709 $1,158,684
========== ========== ==========
</TABLE>
Unallocated expenses and eliminations include corporate administrative
expenses, intangible amortization, certain pension and postretirement benefit
costs or credits, and eliminations of intercompany income and expense.
Identifiable assets are those used directly in the operations, and exclude
non-operating corporate and deferred tax assets. Sales between geographic areas
are not material and are made primarily at cost plus a markup.
12. COMMITMENTS AND CONTINGENCIES
ENVIRONMENTAL MATTERS
The Company's operations, like those of comparable businesses, are subject
to certain federal, state, local and foreign environmental laws and
regulations. As of December 28, 1997, the Company had been identified as a
potentially responsible party ("PRP") in connection with seven sites subject to
the federal Superfund law and two sites subject to state Superfund laws
comparable to the federal law (collectively the "Environmental Sites"),
exclusive of sites at which the Company has been designated (or expects to be
designated) as a de minimis (less than 1%) participant. Substantially all of
these sites relate to divested operations of the Company.
The Company currently is engaged in active remediation activities at nine
sites, four of which are among the Environmental Sites referred to above, and
five of which have not been designated as Superfund sites under federal or
state law. In addition, the Company is engaged in environmental remediation
activities at a site in Newburgh Heights, Ohio, where a subsidiary formerly
conducted
F-25
<PAGE>
SUNBEAM CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
12. COMMITMENTS AND CONTINGENCIES--(CONTINUED)
operations. The Company has been actively cooperating with the United States
Nuclear Regulatory Commission and state regulatory authorities in developing a
plan for remediation of this site; which remediation is expected to be
substantially completed during 1998.
The Company has established reserves, in accordance with SFAS No. 5,
Accounting for Contingencies, to cover the anticipated probable costs of
remediation, based upon periodic reviews of all sites for which the Company
has, or may have remediation responsibility. As of December 28, 1997, the
amount of such reserves was less than 5% of the Company's total liabilities as
set forth in the consolidated financial statements. Liability under the
Superfund law is joint and several and is imposed on a strict basis, without
regard to degree of negligence or culpability. As a result, the Company
recognizes its responsibility to determine whether other PRP's at a Superfund
site are financially capable of paying their respective shares of the ultimate
cost of remediation of the site. Whenever the Company has determined that a
particular PRP is not financially responsible, it has assumed for purposes of
establishing reserve amounts that such PRP will not pay its respective share of
the costs of remediation. To minimize the Company's potential liability with
respect to the Environmental Sites, the Company has actively participated in
steering committees and other groups of PRP's established with respect to such
sites. The Company continues to pursue the recovery of some environmental
remediation costs from certain of its liability insurance carriers; however,
such potential recoveries have not been offset against potential liabilities
and have not been considered in determining the Company's environmental
reserves.
Due to uncertainty over remedial measures to be adopted at some sites, the
possibility of changes in environmental laws and regulations and the fact that
joint and several liability with the right of contribution is possible at
federal and state Superfund sites, the Company's ultimate future liability with
respect to sites at which remediation has not been completed may vary from the
amounts reserved as of December 28, 1997. In connection with the Company's
restructuring plan, in the fourth quarter of 1996 a comprehensive review of all
environmental exposures was performed, and the Company accelerated its strategy
for the resolution and settlement of certain environmental claims. As a result,
the Company recorded additional environmental reserves of approximately $9.0
million in the fourth quarter of 1996. The Company believes, based on existing
information, that the costs of completing environmental remediation of all
sites for which the Company has a remediation responsibility have been
adequately reserved, and that the ultimate resolution of these matters will not
have a material adverse effect upon the Company's financial condition.
LEASES
The Company rents certain facilities, equipment and retail stores under
operating leases. Rental expense for operating leases amounted to $7.4 million
in 1997, $8.0 million for 1996 and $8.6 million for 1995. The minimum future
rentals due under noncancelable operating leases as of December 28, 1997
aggregated $30.9 million. The amounts payable in each of the years 1998-2002 and
thereafter are $4.8 million, $4.6 million, $4.2 million, $3.9 million, $3.4
million and $10.0 million, respectively.
CERTAIN DEBT OBLIGATIONS
Responsibility for servicing certain debt obligations of the Company's
predecessor were assumed by third parties in connection with the acquisition of
former businesses, although the Company's predecessor remained the primary
obligor in accordance with the respective loan documents. Such
F-26
<PAGE>
SUNBEAM CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
12. COMMITMENTS AND CONTINGENCIES--(CONTINUED)
obligations, which amounted to approximately $19.0 million at December 28,
1997, and the corresponding receivables from the third parties, are not
included in the consolidated balance sheets since these transactions occurred
prior to the issuance of SFAS No. 76, Extinguishment of Debt. Management
believes that the third parties will continue to meet their obligations
pursuant to the assumption agreements.
Letters of credit aggregating $28.6 million were outstanding as of
December 28, 1997.
LITIGATION
The Company is involved in various lawsuits arising from time to time in
the ordinary course of business or and related to divested operations of the
Company. The Company has established reserves, in accordance with SFAS No. 5,
Accounting for Contingencies, to cover the anticipated probable costs of
litigation matters, based upon periodic reviews of all cases.
The Company believes, based on existing information, that anticipated
probable costs of litigation matters have been adequately reserved, and that
the ultimate resolution of these matters will not have a material adverse
effect upon the Company's financial condition.
PRODUCT LIABILITY MATTERS
The Company is party to various personal injury and property damage
lawsuits relating to its products and incidental to its business. Annually, the
Company sets its product liability insurance program based on the Company's
current and historical claims experience and the availability and cost of
insurance. The Company's program for 1997 was comprised of a self-insurance
retention of $1 million per occurrence.
Cumulative amounts estimated to be payable by the Company with respect to
pending and potential claims for all years in which the Company is liable under
its self-insurance retention have been accrued as liabilities. Such accrued
liabilities are necessarily based on estimates (which include actuarial
determinations made by independent actuarial consultants as to liability
exposure, taking into account prior experience, numbers of claims and other
relevant factors); thus, the Company's ultimate liability may exceed or be less
than the amounts accrued. The methods of making such estimates and establishing
the resulting liability are reviewed continually and any adjustments resulting
therefrom are reflected in current operating results.
Historically, product liability awards have rarely exceeded the Company's
individual per occurrence self-insured retention. There can be no assurance,
however, that the Company's future product liability experience will be
consistent with its past experience. Based on existing information, the Company
believes that the ultimate conclusion of the various pending product liability
claims and lawsuits of the Company, individually or in the aggregate, will not
have a materially adverse effect on the financial position or results of
operations of the Company.
F-27
<PAGE>
SUNBEAM CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
13. UNAUDITED QUARTERLY FINANCIAL DATA
FISCAL 1997(a)
<TABLE>
<CAPTION>
FIRST SECOND THIRD FOURTH
QUARTER QUARTER QUARTER QUARTER
----------- ----------- ----------- -----------
(DOLLARS IN MILLIONS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C>
Net sales .......................................................... $ 253.5 $ 287.6 $ 289.0 $ 338.1
Gross profit ...................................................... 67.7 74.5 88.8 99.5
Operating earnings ................................................ 34.7 43.0 54.9 66.8
Earnings from continuing operations ................................ 20.6 26.2 34.6 41.7
Basic earnings per share from continuing operations ................ $ .24 $ .31 $ .41 $ .49
Diluted earnings per share from continuing
operations ........................................................ .24 .30 .39 .47
Earning from discontinued operations, net of taxes ................. -- -- -- --
Loss on sale of discontinued operations, net of taxes .............. (13.7) -- -- --
Net earnings ....................................................... 6.8 26.2 34.6 41.8
Basic earnings per shares(c) ....................................... .08 .31 .41 .49
Diluted earnings per share(c) ...................................... .08 .30 .39 .47
Market price for common stock
--high ............................................................ $ 34 1/2 $ 40 3/4 $ 45 3/4 $ 50 7/16
--low ............................................................. 24 5/8 29 3/4 35 3/8 37
Dividends paid ..................................................... $ .01 $ .01 $ .01 $ .01
</TABLE>
FISCAL 1996(a)
<TABLE>
<CAPTION>
FIRST SECOND THIRD FOURTH
QUARTER QUARTER QUARTER QUARTER
----------- ----------- ----------- -----------------
(DOLLARS IN MILLIONS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C>
Net sales ...................................................... $ 229.7 $ 253.9 $ 231.8 $ 268.8
Gross profit (loss) ............................................ 48.1 47.2 28.8 (40.5)
Operating earnings (loss) ...................................... 15.5 9.2 (20.7) (289.2)(b)
Earnings (loss) from continuing operations ..................... 6.7 2.8 (15.8) (190.4)
Basic earnings (loss) per share from continuing operations ..... $ .08 .03 $ (.19) $ (2.29)
Diluted earnings (loss) from continuing operations ............. .08 .03 (.19) (2.29)
Earnings (loss) from discontinued operations, net of taxes ..... 10.7 4.4 (2.3) (12.0)
Loss on sale of discontinued operations, net of taxes .......... -- -- -- (32.4)
Net earnings (loss) ............................................ 17.4 7.2 (18.1) (234.8)
Basic earnings (loss) per shares(c) ............................ .21 .09 (.22) (2.83)
Diluted earnings (loss) per share(c) ........................... .21 .09 (.22) (2.83)
Market price for common stock
--high ........................................................ $ 19 3/4 $ 17 1/8 $ 24 3/4 $ 29 1/2
--low ......................................................... 15 1/8 13 1/2 12 1/4 22 3/4
Dividends paid ................................................. $ .01 $ .01 $ .01 $ .01
</TABLE>
- ----------------
(a) Each quarter consists of a 13-week period.
(b) Refer to Notes 8 and 9 regarding the Company's 1996 restructuring and
growth plan.
(c) Reflects the adoption of SFAS No. 128, EARNINGS PER SHARE.
14. SUBSEQUENT EVENTS
NEW EMPLOYMENT AGREEMENTS
On February 20, 1998 the Company entered into new three-year employment
agreements with its Chairman and Chief Executive Officer and two other senior
officers of the Company. These agreements replaced previous employment
agreements entered into in July 1996 that were scheduled to expire in July
1999.
The new employment agreement for the Company's Chairman provides for,
among other items, the acceleration of vesting of 200,000 shares of restricted
stock and the forfeiture of the remaining 133,333 shares of unvested restricted
stock granted under the July 1996 agreement as further described in Note 2, a
new equity grant of 300,000 shares of unrestricted stock, a new grant of a
ten-year option to purchase 3,750,000 shares of the Company's common stock with
an exercise price equal to the fair market value of the stock at the date of
grant and exercisable in three equal annual installments beginning on the date
of grant and the acceleration of vesting of 833,333 outstanding stock options
granted under the July 1996 agreement as further described in Note 5. In
addition, the new employment agreement with the Chairman and Chief Executive
Officer provides for tax gross-ups with respect to any tax assessed on the
equity grant and acceleration of vesting of restricted stock.
The new employment agreements with the two other senior officers provide
for, among other items, the grant of a total of 180,000 shares of restricted
stock that vest in four equal annual installments beginning the date of grant,
the acceleration of vesting of 44,000 shares of restricted stock and the
forfeiture of the remaining 29,332 shares of unvested restricted stock granted
under the July 1996 agreements, new grants of ten-year options to purchase a
total of 1,875,000 shares of the Company's common stock with an exercise price
equal to the fair market value of the stock at the date of grant and
exercisable in four equal annual installments beginning on the date of grant
and the acceleration of vesting of 383,334 outstanding stock options granted
under the July 1996 agreements. In addition, the new employment agreements
provide for tax gross-ups with respect to any tax assessed on the restricted
stock grants and acceleration of vesting of restricted stock.
Compensation expense attributed to the equity grant, the acceleration of
vesting of restricted stock and the related tax gross-ups will be recognized in
the first quarter of 1998 and compensation expense related to the new
restricted stock grants and related tax gross-ups will be amortized to expense
beginning in the first quarter of 1998 over the period in which the
restrictions lapse. Total after-tax compensation expense to be recognized in
the first quarter of 1998 related to these items is expected to be
approximately $30.0 million.
PENDING ACQUISITIONS
On March 2, 1998, the Company announced the signing of three definitive
agreements to acquire The Coleman Company, Inc., Signature Brands USA, Inc. and
First Alert, Inc., Completion of the acquisitions, which is expected in the
second quarter of 1998, is contingent on customary conditions, including
regulatory approvals, and acquisition financings. Each of the acquisitions will
be accounted for under the purchase method, whereby the purchase price will be
allocated to the underlying assets acquired and liabilities assumed based upon
their estimated fair values.
The acquisition of The Coleman Company, Inc., the global leader in outdoor
recreational and hardware products is valued at approximately $2.0 billion,
consisting of the Company's common stock valued at approximately $811 million,
cash of approximately $260 million and assumed debt. Shareholders of The Coleman
Company, Inc. will receive $6.44 in cash and .5677 shares of the Company's stock
for each share of Coleman stock.
The acquisition of Signature Brands USA, Inc., the North American leader in
coffeemakers marketed under the Mr. Coffee/registered trademark/ brand name and
a leader in consumer health products marketed under the Health O
Meter/registered trademark/ brand is valued at approximately $250 million,
consisting of cash of $8.25 per share of Signature Brand common stock and the
assumption of existing debt.
The acquisition of First Alert, Inc., the worldwide leader in residential
safety equipment, including smoke detectors and carbon monoxide detectors is
valued at approximately $175 million, consisting of cash of $5.25 per share of
First Alert common stock and the assumption of existing debt.
The Company plans on refinancing all or substantially all of the assumed
debt of the acquired companies concurrent with the transactions closings.
F-28
<PAGE>
SUNBEAM CORPORATION AND SUBSIDIARIES
SCHEDULE II
VALUATION AND QUALIFYING ACCOUNTS
FISCAL YEARS 1997, 1996 AND 1995
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
BALANCE AT CHARGED TO BALANCE AT
BEGINNING COSTS AND END OF
DESCRIPTION OF PERIOD EXPENSES DEDUCTIONS PERIOD
- --------------------------------------------------- ------------ ------------ ------------------ -----------
<S> <C> <C> <C> <C>
Allowance for doubtful accounts and cash discounts:
$ (2,000)(a)
Fiscal year ended 8,948 (b)
December 28, 1997 .............................. $16,017 $ 8,411 17 (c) $17,463
======= ======= ========= =======
$ (233)(a)
Fiscal year ended 19,911 (b)
December 29, 1996 .............................. $12,326 $23,369 -- (c) $16,017
======= ======= ========= =======
$ 715(a)
Fiscal year ended 6,988 (b)
December 31, 1995 .............................. $ 9,416 $10,651 38 (c) $12,326
======= ======= ========= =======
</TABLE>
- ----------------
Notes: (a) Reclassified to/from accrued liabilities for customer deductions.
(b) Accounts written off as uncollectible.
(c) Foreign currency translation adjustment.
F-29
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT INDEX
EXHIBIT
NO. DESCRIPTION
- -------- --------------------------------------------------------------------------------------------
<S> <C>
10.a Employment Agreement dated as of February 20, 1998, by and between Sunbeam and
Albert J. Dunlap
10.b Employment Agreement dated as of February 20, 1998, by and between Sunbeam and Russell
A. Kersh
10.c Employment Agreement dated as of February 20, 1998, by and between Sunbeam and David
C. Fannin
10.e Sunbeam Executive Benefit Replacement Plan
10.f Amended and Restated Sunbeam Corporation Stock Option Plan
10.g Performance Based Compensation Plan
10.q Third Amendment dated as of November 6, 1997, to the Credit Agreement dated as of
September 16, 1996, among the Company, The Chase Manhattan Bank and the Lenders
named therein.
10.r Receivables Sale and Contribution Agreement dated as of December 4, 1997, between
Sunbeam Products, Inc. and Sunbeam Asset Diversification, Inc.
10.s Receivables Purchase and Servicing Agreement dated as of December 4, 1997, between
Sunbeam Products, Inc., Llama Retail, L.P., Capital USA, LLC and Sunbeam Asset
Diversification, Inc.
10.t Agreement and Plan of Merger among Sunbeam Corporation, Laser Acquisition Corp., CLN
Holdings, Inc., and Coleman (Parent) Holdings, Inc. dated as of February 27, 1998.
10.u Agreement and Plan of Merger among Sunbeam Corporation, Camper Acquisition Corp., and
The Coleman Company, Inc. dated as of February 27, 1998.
10.v Agreement and Plan of Merger between Sunbeam Corporation, Java Acquisition Corp., and
Signature Brands USA, Inc. dated as of February 28, 1998.
10.w Stock Purchase Agreement among Java Acquisition Corp. and the Sellers named therein dated
as of February 28, 1998.
10.x Agreement and Plan of Merger by and among Sunbeam Corporation, Sentinel Acquisition Corp.,
and First Alert, Inc. dated as of February 28, 1998.
10.y Stock Sale Agreement among Sunbeam Corporation and the Shareholders named therein dated
as of February 28, 1998.
21 Subsidiaries of the Registrant.
23 Consent of Arthur Andersen LLP.
27 Financial Data Schedule, submitted electronically to the Securities and Exchange Commission
for information only and not filed.
99.a Press Release dated January 28, 1997 regarding Sunbeam's 1997 earnings.
99.b Press Release dated March 2, 1998 regarding Sunbeam's acquisitions of The Coleman Company,
Inc., Signature Brands USA, Inc., and First Alert, Inc.
</TABLE>
Exhibit 10a
EMPLOYMENT AGREEMENT
AGREEMENT, effective as of February 1, 1998 (the "Effective
Date"), and executed on February 20, 1998 (the "Execution Date"), by and between
ALBERT J. DUNLAP (the "Executive") and SUNBEAM CORPORATION, a Delaware
corporation (the "Company").
WHEREAS, the Executive is a party to the Employment Agreement
with the Company dated as of July 18, 1996 (the "Prior Agreement"):
WHEREAS, the Board of Directors of the Company (the "Board")
desires to continue to employ the Executive and the Executive desires to
continue to furnish services to the Company on the terms and conditions
hereinafter set forth;
WHEREAS, the parties desire to enter into this Agreement
setting forth the terms and conditions of the employment relationship of the
Executive with the Company; and
WHEREAS, the parties desire to provide for the termination of
the Prior Agreement, effective upon the Effective Date;
NOW, THEREFORE, in consideration of the premises and the
mutual agreements set forth below, the parties hereby agree as follows:
1. EMPLOYMENT. The Company hereby agrees to employ the
Executive, and the Executive hereby accepts such employment, on the terms and
conditions hereinafter set forth.
2. EMPLOYMENT PERIOD. The period of employment of the
Executive by the Company hereunder (the "Employment Period") shall commence as
of the Effective Date and shall end on January 31, 2001 (or the Date of
Termination (as defined in Section 6 below), if earlier). All options awards
granted pursuant to the Prior Agreement shall vest and become exercisable in
full as of the Execution Date. In addition, 40% of the restricted stock granted
pursuant to the Prior Agreement which is subject to restrictions immediately
prior
<PAGE>
to the Execution Date shall be forfeited as of the Execution Date, and the
remaining shares of such restricted stock shall become vested in full as of the
Execution Date and the Company shall reimburse the Executive on a grossed up
basis for any federal income tax assessed upon him upon the vesting of such
restricted stock. Commencing on February 1, 2001, the Employment Period shall be
extended for successive one year periods (individually, a "Renewal Period"),
unless a notice not to extend this Agreement shall have been given by either
party hereto to the other not later than August 1 immediately preceding the
commencement of a Renewal Period or unless the Date of Termination shall have
previously occurred; provided, however, that the last such Renewal Period shall
be the Renewal Period ending on January 31, 2003. Unless the context suggests
otherwise, the Employment Period hereunder shall for all purposes of this
Agreement be deemed to include any Renewal Period.
3. POSITION AND DUTIES. The Executive shall serve as Chairman
of the Board and Chief Executive Officer and as a director of the Company and
shall report directly to the Board. During the Employment Period, subject to the
supervisory powers of the Board, the Executive shall have those powers and
duties consistent with his position as Chairman of the Board and Chief Executive
Officer, which powers shall in all cases include, without limitation, the power
of supervision and control over and responsibility for the general management
and operation of the Company. The Executive agrees to devote substantially all
his working time, attention and energies to the performance of his duties for
the Company. It shall not be a violation of this Agreement for the Executive to
(i) serve on corporate, civic or charitable boards or committees, (ii) give
speeches and make media appearances to discuss matters of public interest and
(iii) manage his personal investments, so long as such activities do not
unreasonably interfere with the performance of the Executive's responsibilities
as an officer of the Company in accordance with this Agreement. It is understood
that the Executive has made a commitment to appear in various cities in the
United States in connection with a book entitled Mean Business, of which he is a
co-author, and it shall not be a violation of this Agreement for the Executive
to make such appearances (the expenses relating to such appearances to be borne
by the Executive). The Company shall nominate the Executive as a director of the
Company and shall use its best efforts to have the Executive elected and
reelected to the Board for the duration of the Employment Period. The Company
shall also use its best efforts to cause three individuals, designated by the
Executive to be elected and reelected as directors of the Company for the
duration of the Employment Period. In the event that any of such individuals
fails to qualify or be elected (or, having been elected, resigns, is removed or
fails to be re-elected) during the Employment
2
<PAGE>
Period, the Executive shall designate a successor reasonably acceptable to the
Board and the Company shall nominate such person as a director and shall use its
best efforts to cause such person to be elected and reelected.
4. PLACE OF PERFORMANCE. The principal place of employment of
the Executive shall be at the Company's principal executive offices in Palm
Beach County, Florida, or such other location as may be agreed to by the Board
and the Executive. In the event that the Company's principal executive offices
are moved from Palm Beach County, Florida, the Company shall promptly pay, or
reimburse the Executive for, all reasonable expenses incurred by the Executive
for a period of one year relating to any change of the Executive's residence
from Boca Raton, Florida, in connection with his employment hereunder,
including, without limitation, reasonable expenses for himself and his family of
travel, moving, storage and suitable lodging and maintenance, and the Company
shall reimburse the Executive on a grossed up basis in the event that any tax is
assessed upon him in relation to any such expenses. The Company shall pay or
reimburse the Executive for all reasonable costs and expenses of residential
relocation incurred by him for a period of one year in connection with each and
every additional change, if any, in the location of the principal executive
offices of the Company, and the Executive shall be reimbursed by the Company on
a grossed up basis in the event that any tax is assessed upon him in relation to
any such costs or expenses.
5. COMPENSATION AND RELATED MATTERS.
(a) BASE SALARY. As compensation for the performance
by the Executive of his duties hereunder, during the Employment Period the
Company shall pay the Executive a base salary at an annual rate of $2,000,000,
which rate shall be retroactive to the Effective Date (the base salary, at the
rate in effect from time to time, is hereinafter referred to as the "Base
Salary"). Except for the adjustment necessary to implement the retroactive
increase in Base Salary described in the immediately preceding sentence, the
Base Salary shall be payable in equal semi-monthly installments and may be
increased from time to time at the discretion of the Company's Compensation
Committee (or any successor thereof) and the Board. Base Salary shall not be
reduced after any increase thereof.
(b) EQUITY GRANTS.
(1) SHARES. Effective as of the Execution Date, the Executive
is hereby granted, without cost to the Executive, 300,000 shares (the "Shares")
of the
3
<PAGE>
Company's Common Stock, on the terms and conditions set forth herein. Such
shares shall be fully vested upon the Execution Date. All such Shares, shall be
the sole property of the Executive, shall be unrestricted and shall be freely
tradeable by the Executive, subject to applicable legal restrictions. Within six
(6) months after the Effective Date, the Company shall cause all such Shares to
be registered or qualified for resale under the Securities Act of 1933 and
applicable state laws. The Company shall reimburse the Executive on a grossed up
basis with respect to any tax assessed upon him upon the grant of the Shares.
(i) RIGHTS AS A STOCKHOLDER. The Executive shall have all the
rights of a stockholder with respect to the Shares, including the right
to receive dividends or other distributions and the right to vote such
Shares.
(ii) DELIVERY OF SHARE CERTIFICATES. Upon the grant of the
Shares, the certificates evidencing such Shares shall be delivered
promptly to the Executive. In the case of Executive's death, such
certificates will be delivered to the beneficiary designated in writing
by the Executive pursuant to a form of designation provided by the
Company, to the Executive's legatee or legatees, or to his personal
representatives or distributees, as the case may be. Unless and until
registered under the Securities Act of 1933, as amended, certificates
evidencing the Shares and shares acquired pursuant to the exercise of
the Option (as defined in Section 5(b)(2) below) shall bear the
following legend:
THE SHARES EVIDENCED BY THIS CERTIFICATE MAY NOT BE SOLD,
TRANSFERRED, PLEDGED, HYPOTHECATED OR OTHERWISE DISPOSED OF
UNLESS REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED, OR UNLESS, IN THE OPINION OF COUNSEL FOR THE COMPANY,
SUCH REGISTRATION IS NOT REQUIRED.
(2) STOCK OPTION. Effective as of the Effective Date, subject
to shareholder approval by Company's shareholders at the annual meeting to be
held on May 12, 1998 (or on such other date on which such meeting will be held)
(the "Annual Meeting"), the Executive is hereby granted a non-qualified stock
option (the "Option") to purchase 3,750,000 shares of Common Stock (the "Option
Award"). The Option Award is subject to the following conditions: (i) the
exercise price per share of Common Stock shall be $36.85 per share, which is the
average of the high and low selling price per share on the NYSE on January 30,
4
<PAGE>
1998, (ii) the Option Award shall vest and become exercisable with respect to
one-third (1/3) of the shares of Common Stock subject to such award on the
Effective Date and, an additional one-third (1/3) of the shares of Common Stock
subject to such award, on each of the first and second anniversaries of the
Effective Date (subject to earlier vesting provisions set forth in Section
5(b)(3) and earlier vesting and forfeiture provisions set forth in Section 7),
and (iii) the Option Award shall expire on the tenth anniversary of the
Effective Date, subject to earlier termination as provided herein. Within six
(6) months after the Effective Date, the Company shall cause all shares subject
to the Option to be registered or qualified for resale under the Securities Act
of 1933 and applicable state laws.
In the event that Company's shareholders fail to approve the
grant of the Option at the Annual Meeting, the Company and the Executive shall
negotiate in good faith a mutually acceptable alternative compensation
arrangement; provided, however, that the Executive, in his sole discretion, may
elect to terminate this Agreement, in which event it shall be deemed to have
been terminated pursuant to Section 6(d) hereof and the Executive shall be
entitled to receive the compensation, rights and benefits provided in Section
7(e) hereof (other than in respect of stock options).
(3) SPECIAL VESTING OF EQUITY GRANTS. Anything herein to the
contrary notwithstanding, if a Change in Control occurs during the Employment
Period and the Executive has remained continually employed by the Company from
the Effective Date to the date of the Change in Control, the Option Award, to
the extent not theretofore vested and exercisable, shall become fully vested and
exercisable upon the occurrence of such Change in Control. For purposes of this
Agreement, a Change in Control shall mean the occurrence of any one of the
following events:
(A) any "person" as such term is used in Sections 3(a)(9)
and 13(d) of the Securities Exchange Act of 1934, as
amended, becomes a "beneficial owner," as such term
is used in Rule 3d-3 promulgated under that act, of
25% or more of the voting stock of the company (other
than a person that is currently the beneficial owner
of such percentage of the Company's voting stock);
(B) the majority of the Board consists of individuals
other than Incumbent Directors, which term means the
members of the Board on the date of this Agreement,
the Executive and the
5
<PAGE>
individuals designated as directors by the Executive
in accordance with Section 3 hereof; provided that
any person becoming a director subsequent to such
date whose election or nomination for election was
supported by two-thirds of the directors who then
comprised the Incumbent Directors shall be considered
to be an Incumbent Director;
(C) the Company, without the Executive's consent, adopts
any plan of liquidation providing for the
distribution of all or substantially all of its
assets; or
(D) all or substantially all of the assets or business of
the Company are disposed of pursuant to a merger,
consolidation or other transaction (unless the
shareholders of the Company immediately prior to such
merger, consolidation or other transaction
beneficially own, directly or indirectly, in
substantially the same proportion as they owned the
voting stock of the Company, all of the voting stock
or other ownership interests of the entity or
entities, if any, that succeed to the business of the
Company).
(c) EXPENSES. During the Employment Period, the
Company shall reimburse the Executive for all reasonable business expenses in
accordance with applicable policies and procedures then in force, including,
without limitation, first class travel, lodging and other expenses incurred by
him. In light of the fact that the Executive may be required to travel for
extended period of time, such expenses shall include all reasonable expenses of
the Executive's wife for travel with the Executive in the service of the
Company.
(d) VACATION AND OTHER ABSENCES. The Executive shall
be entitled to paid vacation and other paid absences, whether for holidays,
illness, personal time or any similar purposes, during the Employment Period in
accordance with policies applicable generally to senior executives of the
Company; provided, however, that the Executive shall always be entitled to at
least six weeks of paid vacation in each calendar year and pro rata for part of
a year and shall be compensated at the conclusion of each calendar year for any
unused vacation days.
(e) AUTOMOBILE. Within 90 days immediately following
the Effective Date, the Company shall replace with a comparable vehicle the
Mercedes automobile currently owned by the Company and provided to the
6
<PAGE>
Executive for his exclusive use, and shall provide to the Executive, every two
years thereafter, during the Employment Period, a new automobile, comparable in
type and style, for his exclusive use. The Company shall reimburse the Executive
for all reasonable expenses incurred in the use and maintenance of such
automobile, and will also provide the Executive with a driver on a full-time
basis for security and safety reasons. The Company shall reimburse the Executive
on a grossed up basis in the event that any tax is assessed upon him in relation
to such driver or expenses.
(f) CLUB MEMBERSHIP. During the Employment Period,
the Company shall pay any and all initiation fees, monthly membership dues, and
Company-related expenses in connection with the continuation of the Executive's
current country club membership and for comparable country club membership in
the event of a relocation of the Company's principal executive office. The
Company shall reimburse the Executive on a grossed up basis in the event that
any tax is assessed upon him in relation to such fees, dues and expenses.
(g) FINANCIAL PLANNING, ETC. During the Employment
Period, the Company shall provide the Executive with financial consulting
services, including tax-related advice and services, without cost or expense to
him and shall reimburse the Executive on a grossed up basis in the event that
any tax is assessed upon him in relation to such services. The Company shall pay
the reasonable fees and disbursements of legal, accounting and tax advisors
incurred by the Executive in connection with the negotiation, preparation and
implementation of this Agreement and any additional instruments and agreements
related hereto, and any transactions contemplated hereby, and the Company shall
reimburse the Executive on a grossed up basis in the event that any tax is
assessed upon him in relation to any such fees and disbursements.
(h) OTHER BENEFITS. During the Employment Period, the
Executive shall be eligible to participate at no cost or expense to him in
welfare plans and programs (including any tax-deferred savings plan, group life
insurance plan, medical and dental insurance plan, and accident and disability
insurance plan) ("Benefit Plans") applicable generally to employees and/or
senior executives of the Company, but shall not be eligible to participate in
the Company's short-term or long-term incentive plans or in the Company's
employee defined benefit pension plans.
6. TERMINATION. The Executive's employment hereunder, as the
case may be, may be terminated as follows:
7
<PAGE>
(a) DEATH. The Executive's employment shall terminate
upon his death, and the date of his death shall be the Date of Termination.
(b) DISABILITY. If, as a result of the Executive's
incapacity due to physical or mental illness, the Executive shall have been
absent from his duties hereunder on a full-time basis for one hundred and twenty
(120) consecutive days and, within thirty (30) days after written Notice of
Termination (as defined in Section 6(f) hereof) is given, shall not have
returned to the performance of his duties hereunder on a full-time basis
("Disability"), the Company may terminate the Executive's employment hereunder.
In this event, the Date of Termination shall be thirty (30) days after Notice of
Termination is given (provided that the Executive shall not have returned to the
performance of his duties on a full-time basis during such thirty (30) day
period).
(c) CAUSE. The Company may terminate the Executive's
employment hereunder for Cause. For purposes of this Agreement, the Company
shall have "Cause" to terminate the Executive's employment hereunder:
(i) upon the Executive's conviction for the
commission of a felony (or a plea of nolo contendere thereto); or
(ii) willful failure by the Executive
substantially to perform his duties hereunder (other than any such
failure resulting from the Executive's incapacity due to Disability).
For purposes hereof, no act or failure to act by the
Executive shall be considered "willful" unless done or omitted to be
done by him not in good faith or without reasonable belief that his
action or omission was in the best interests of the Company or contrary
to a formal resolution of the Board. Cause shall not exist unless and
until there shall have been delivered to the Executive a copy of a
resolution, duly adopted by the affirmative vote of not less than two
thirds of the entire membership of the Board at a meeting of the Board
held for the purpose (after ten (10) days' prior notice to the
Executive of such meeting and the purpose thereof and an opportunity
for him, together with his counsel, to be heard before the Board at
such meeting), finding that in the good faith opinion of the Board, the
Executive was guilty of conduct set forth above in clause (ii) of this
Section 6(c) and specifying the particulars thereof in detail. The Date
of Termination shall be the date specified in the Notice of
Termination; provided, however, that, in the case of a termination for
Cause under
8
<PAGE>
clause (ii) above, the Date of Termination shall not be earlier than 30
days after delivery of the Notice of Termination. Anything herein to
the contrary notwithstanding, if, following a termination of the
Executive's employment by the Company for Cause based upon the
conviction of the Executive for a felony, such conviction is overturned
in a final determination on appeal, the Executive shall be entitled to
the payments and the economic equivalent of the benefits the Executive
would have received if his employment had been terminated by the
Company without Cause.
(d) GOOD REASON. The Executive may terminate his
employment hereunder for Good Reason, provided that the Executive shall have
delivered a Notice of Termination (as defined in Section 6(f) hereof) within
ninety (90) days after the occurrence of the event of Good Reason giving rise to
such termination. For purposes of this Agreement, "Good Reason" shall mean the
occurrence of one or more of the following circumstances, without the
Executive's express written consent, which are not remedied by the Company
within thirty (30) days of receipt of the Executive's Notice of Termination:
(i) an assignment to the Executive of any
duties materially inconsistent with his positions, duties,
responsibilities and status with the Company or any material limitation
of the powers of the Executive not consistent with the powers of the
Executive contemplated by Section 3 hereof;
(ii) any removal of the Executive from, or
any failure to re-elect the Executive to, the positions specified in
Section 3 of this Agreement;
(iii) the change of the Executive's title as
specified by Section 3 of this Agreement;
(iv) the Company's requiring the Executive
without his consent to be based at any office or location other than as
described in Section 4 of this Agreement;
(v) a reduction in the Executive's Base
Salary as in effect from time to time;
9
<PAGE>
(vi) the failure of the Company to continue
in effect any Benefit Plan that was in effect on the date hereof or
provide the Execu tive with equivalent benefits;
(vii) the failure of the Company to continue
to maintain the Executive as a member of its Board of Directors at all
times for so long as he shall serve as Chief Executive Officer of the
Company;
(viii) the failure of the Company to cause
three individuals (or their successors) designated by the Executive to
be elected and reelected as directors of the Company in accordance with
Section 3 hereof;
(ix) any other material breach by the
Company of this Agreement; or
(x) a Change in Control.
In the event of a termination for Good Reason, the Date of
Termination shall be the date specified in the Notice of Termination, which
shall be no more than thirty (30) days after the Notice of Termination.
(e) OTHER TERMINATIONS. Notwithstanding the
foregoing, the Company may terminate the Executive's employment hereunder at any
time and the Executive may terminate his employment at any time, in each case
subject to the provisions of Sections 7(d) and (e) hereof. If the Executive's
employment is terminated hereunder for any reason other than as set forth in
Sections 6(a) through 6(d) hereof, the date on which a Notice of Termination is
given or any later date (within 30 days) set forth in such Notice of Termination
shall be the Date of Termination.
(f) NOTICE OF TERMINATION. Any termination of the
Executive's employment hereunder by the Company or by the Executive (other than
termination pursuant to Section 6(a) hereof) shall be communicated by written
Notice of Termination to the other party hereto in accordance with Section 13
hereof. For purposes of this Agreement, a "Notice of Termination" shall mean a
notice which shall indicate the specific termination provision in this Agreement
relied upon and shall set forth in reasonable detail the facts and circumstances
claimed to provide a basis for termination of the Executive's employment under
the provision so indicated. If any dispute concerning a Notice of Termination of
10
<PAGE>
the Executive's employment under Section 6(b), 6(c) or 6(d) hereof results in a
determination that a proper basis for such termination did not exist under such
section, the Executive's employment under this Agreement shall be treated, with
respect to a Notice of Termination pursuant to Section 6(b) or 6(c) hereof, as
having been terminated pursuant to Section 6(e) hereof or, with respect to a
Notice of Termination pursuant to Section 6(d) hereof, as having not been
terminated.
7. COMPENSATION UPON TERMINATION OR DURING DISABILITY.
(a) DISABILITY PERIOD. During any period during the
Employment Period that the Executive fails to perform his duties hereunder as a
result of incapacity due to physical or mental illness ("Disability Period"),
the Executive shall continue to (i) receive his full Base Salary and (ii)
participate in the Benefit Plans. Such payments made to the Executive during the
Disability Period shall be reduced by the sum of the amounts, if any, payable to
the Executive at or prior to the time of any such payment under disability
benefit plans of the Company or under the Social Security disability insurance
program, and which amounts were not previously applied to reduce any such
payment.
(b) DEATH. If the Executive's employment hereunder is
terminated as a result of death, then:
(i) the Company shall pay the Executive's
estate or designated beneficiary, as soon as practicable after the Date
of Termination, any Base Salary installments due in the month of death
and any reimbursable expenses, accrued or owing the Executive hereunder
as of the Date of Termination;
(ii) the Options granted to the Executive
pursuant to the Option Award shall become vested and exercisable, as of
the Date of Termination, to the extent such Option Award would have
otherwise become vested on or before the first anniversary of the Date
of Termination, and all vested Options, as well as all stock options
granted pursuant to the Prior Agreement ("Prior Agreement Options"),
shall remain exercisable for a period of one year following such Date
of Termination and shall thereafter be completely forfeited and
cancelled; any Options that would not have become vested and
exercisable on or before the first anniversary of the Date of
Termination shall terminate and be forfeited as of the Date of
Termination.
11
<PAGE>
(c) DISABILITY. If the Executive's employment
hereunder is terminated as a result of Disability, then:
(i) the Company shall pay the Executive, as
soon as practicable after the Date of Termination, any Base Salary and
any reimbursable expenses, accrued or owing the Executive hereunder for
services as of the Date of Termination; and
(ii) the Options granted to the Executive
pursuant to the Option Award shall become vested and exercisable, as of
the Date of Termination, to the extent such Option Award would have
otherwise become vested on or before the first anniversary of the Date
of Termination, and all vested Options, as well as all Prior Agreement
Options, shall remain exercisable for a period of three years following
the Date of Termination, and shall thereafter be completely forfeited
and cancelled; any Options that would not have become vested and
exercisable on or before the first anniversary of the Date of
Termination shall terminate and be forfeited as of the Date of
Termination.
(d) CAUSE OR BY EXECUTIVE OTHER THAN FOR GOOD REASON.
If the Executive's employment hereunder is terminated by the Company for Cause
or by the Executive (other than for Good Reason), then:
(i) the Company shall pay the Executive, as
soon as practicable after the Date of Termination, any Base Salary and
any reimbursable expenses accrued or owing the Executive hereunder for
services as of the Date of Termination; and
(ii) in the event of termination by the
Company for Cause, the Executive shall have the right to exercise the
vested unexercised portion of the Option Award, as well as all Prior
Agreement Options, for a period of ninety (90) days after the Date of
Termination, and any options not so exercised shall be forfeited
thereafter. In the event of termination by the Executive other than for
Good Reason, the Executive shall have the right to exercise the vested
unexercised portion of the Option Award, as well as all Prior Agreement
Options, for a period of one year following the Date of Termination and
any options not so exercised shall be forfeited thereafter.
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(e) TERMINATION BY COMPANY WITHOUT CAUSE OR BY THE
EXECUTIVE WITH GOOD REASON. If the Executive's employment hereunder is
terminated by the Company (other than for Cause or Disability) or by the
Executive for Good Reason, then:
(i) the Company shall pay the Executive, as
soon as practicable after the Date of Termination, any Base Salary and
any reimbursable expenses, accrued or owing the Executive hereunder for
services as of the Date of Termination;
(ii) the Company shall immediately pay to
the Executive as liquidated damages and not as a penalty a lump sum
amount equal to the total Base Salary that would have otherwise been
payable to the Executive with respect to the period commencing
immediately following the Date of Termination and ending on January 31,
2001, or, if applicable, the expiration of the Renewal Period (the
"Salary Continuation Period") at the annualized rate in effect at the
time Notice of Termination is given;
(iii) the Options granted to the Executive
pursuant to the Option Award shall become fully vested and exercisable
as of the Date of Termination. The Option Award, as well as each Prior
Agreement Option, shall remain exercisable for the balance of its
original 10-year term; and
(iv) for a period of three years immediately
following the Date of Termination, the Executive shall continue to
participate in all employee benefit plans and programs in which the
Executive was entitled to participate immediately prior to the Date of
Termination in accordance with the terms of such plans and programs as
in effect from time to time; provided that the Executive's continued
participation is permitted under the general terms and provisions of
such plans and programs. In the event that the Executive's
participation in any such plan or program is barred, the Company shall
arrange to provide the Executive and his dependents with benefits
substantially the same as those which the Executive and his dependents
would otherwise have been entitled to receive under such plans and
programs from which their continued participation is barred or provide
their economic equivalent.
8. GROSS-UP FOR EXCISE TAX. In the event that the Executive
receives any payment or benefit (including but not limited to the payments or
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benefits pursuant to Section 7 of this Agreement) (a "Payment") that is subject
to the excise tax (the "Excise Tax") under Section 4999 of the Internal Revenue
Code of 1986, as amended (the "Code"), the Company shall pay to the Executive,
as soon thereafter as practicable, an additional amount (a "Gross-Up Payment")
such that the net amount retained by the Executive, after deduction of any
Excise Tax imposed upon the Payment and any federal, state and local income tax
and Excise Tax imposed upon the Gross-Up Payment shall be equal to the Payment.
The determination of whether an Excise Tax is due in respect of any payment or
benefit, the amount of the Excise Tax and the amount of the Gross-Up Payment
shall be made by an independent auditor (the "Auditor") jointly selected by the
Company and the Executive and paid by the Company. If the Executive and the
Company cannot agree on the firm to serve as the Auditor, then the Executive and
the Company shall each select one nationally recognized accounting firm and
those two firms shall jointly select the nationally recognized accounting firm
to serve as the Auditor. Notwithstanding the foregoing, for purposes of
determining the Gross-Up Payment in respect of any Payment, (i) any other
payments or benefits received or to be received by the Executive in connection
with a Change in Control or the Executive's termination of employment (whether
pursuant to the terms of this Agreement or any other plan, arrangement or
agreement with the Company, any person whose actions result in a Change in
Control or any person affiliated with the Company or such person) shall be
treated as "parachute payments" within the meaning of Section 280G(b)(2) of the
Code, and all "excess parachute payments" within the meaning of Section 280G of
the Code shall be treated as subject to the Excise Tax, unless in the opinion of
tax counsel selected by the Auditor, such other payments or benefits (in whole
or in part) do not constitute parachute payments, or are otherwise not subject
to the Excise Tax, and (ii) the Executive shall be deemed to pay federal income
tax at the highest marginal rate applicable in the calendar year in which the
Gross-Up Payment is made, and state and local income taxes at the highest
marginal rate of taxation in the state and locality of the Executive's residence
on the Date of Termination, net of the maximum reduction in federal income taxes
which could be obtained from deduction of such state and local taxes. In the
event the actual Excise Tax or such income tax is more or less than the amount
used to calculate the Gross-Up Payment, the Executive or the Company, as the
case may be, shall pay to the other an amount reflecting the actual Excise Tax
or such income tax, plus interest on the amount of such repayment at the rate
provided in Section 1274(b)(2)(B) of the Code.
9. MITIGATION. The Executive shall not be required to mitigate
amounts payable pursuant to Section 7 hereof by seeking other employment or
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otherwise, nor shall there be any offset against such payments on account of (a)
any remuneration attributable to any subsequent employment that he may obtain or
(b) any claims the Company may have against the Executive.
10. CONFIDENTIAL INFORMATION, REMOVAL OF DOCUMENTS,
NON-COMPETITION.
(a) CONFIDENTIAL INFORMATION. The Executive shall
hold in a fiduciary capacity for the benefit of the Company and its subsidiaries
(the "Sunbeam Entities") all trade secrets, confidential information, and
knowledge or data relating to the Sunbeam Entities and the businesses and
investments of the Sunbeam Entities, which shall have been obtained by the
Executive during the Executive's employment by the Company, including such
information with respect to any products, improvements, formulas, designs or
styles, processes, services, customers, suppliers, marketing techniques,
methods, future plans or operating practices ("Confidential Information");
PROVIDED, HOWEVER, that Confidential Information shall not include any
information known generally to the public (other than as a result of
unauthorized disclosure by the Executive) or any specific information or type of
information generally not considered confidential by persons engaged in the same
business as the Company, or information disclosed by the Company or any officer
thereof to a third party without restrictions on the disclosure of such
information. Except as may be required or appropriate in connection with his
carrying out his duties under this Agreement, the Executive shall not, without
the prior written consent of the Company or as may otherwise be required by law
or legal process, communicate or divulge any such Confidential Information to
anyone other than the Company and those designated by the Company.
(b) REMOVAL OF DOCUMENTS. All records, files,
drawings, documents, models, and the like relating to the business of the
Sunbeam Entities, which the Executive prepares, uses or comes into contact with
and which contain Confidential Information shall not be removed by the Executive
from the premises of any Sunbeam Entity (without the written consent of the
Company) during or after the Employment Period unless such removal shall be
required or appropriate in connection with his carrying out his duties under
this Agreement, and, if so removed by the Executive, shall be returned to such
Sunbeam Entity immediately upon termination of the Executive's employment
hereunder.
(c) NON-COMPETITION. During (i) the Executive's
employment with the Company and (ii) the two (2) year period immediately
following
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the Executive's Date of Termination, the Executive (A) shall not engage,
anywhere within the geographical areas in which any Sunbeam Entity is then
conducting its business operations, directly or indirectly, alone, in
association with or as a shareholder, principal, agent, partner, officer,
director, employee or consultant of any other organization, in any business (a
"Competitive Business") which competes with any business then being conducted by
such Sunbeam Entity; (B) shall not solicit or encourage any officer, employee or
consultant of any of the Sunbeam Entities to leave the employ of any of the
Sunbeam Entities for employment by or with any Competitive Business; and (C)
shall not solicit, divert or take away, or attempt to divert or to take away,
the business or patronage of any of the customers or accounts, or prospective
customers or accounts, of any Sunbeam Entity, which were contacted, solicited or
served by the Executive while employed by the Company; provided, however, that
nothing herein shall prohibit the Executive from owning a maximum of two percent
(2%) of the outstanding stock of any publicly traded corporation. Following the
Date of Termination, ownership by the Executive of not more than five percent
(5%) of any publicly traded corporation shall not constitute a violation hereof.
If, at any time, the provisions of this Section 10(c) shall be determined to be
invalid or unenforceable, by reason of being vague or unreasonable as to area,
duration or scope of activity, this Section 10(c) shall be considered divisible
and shall become and be immediately amended to only such area, duration and
scope of activity as shall be determined to be reasonable and enforceable by the
court or other body having jurisdiction over the matter; and the Executive
agrees that this Section 10(c) as so amended shall be valid and binding as
though any invalid or unenforceable provision had not been included herein. For
purposes of this Section 10(c), the design, manufacture and marketing of outdoor
barbecue grills and small kitchen appliances shall be construed to be a
Competitive Business; provided, however, that the gross revenues derived from
sales of such products by such competitor are greater than the lesser of (i) 10%
of its total revenues and (ii) $500,000,000.
(d) REMEDIES. In the event of a breach or threatened
breach of this Section 10, the Executive agrees that the Company shall be
entitled to apply for injunctive relief in a court of appropriate jurisdiction
to remedy any such breach or threatened breach, the Executive acknowledging that
damages would be inadequate and insufficient.
(e) CONTINUING OPERATION. Any termination of the
Executive's employment or of this Agreement shall have no effect on the
continuing operation of this Section 10.
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11. INDEMNIFICATION. The Company shall indemnify the Executive
to the full extent permitted by law and the By-laws of the Company for all
expenses, costs, liabilities and legal fees which the Executive may incur in the
discharge of all his duties hereunder, including, without limitation, the right
to be paid in advance by the Company for his expenses in defending a civil or
criminal action, proceeding or investigation prior to the final disposition
thereof. The Executive shall be insured under the Company's Directors' and
Officers' Liability Insurance Policy as in effect from time to time.
Notwithstanding any other provision of this Agreement to the contrary, any
termination of the Executive's employment or of this Agreement shall have no
effect on the continuing operation of this Section 11.
12. SUCCESSORS; BINDING AGREEMENT.
(a) COMPANY'S SUCCESSORS. No rights or obligations of
the Company under this Agreement may be assigned or transferred by the Company
except that such rights or obligations may be assigned or transferred pursuant
to a merger or consolidation in which the Company is not the continuing entity,
or the sale or liquidation of all or substantially all of the business and/or
assets of the Company, provided that the assignee or transferee is the successor
to all or substan tially all of the business and/or assets of the Company and
such assignee or transferee assumes the liabilities, obligations and duties of
the Company, as contained in this Agreement, either contractually or as a matter
of law. The Company will require any such successor to expressly assume and
agree to perform this Agreement in the same manner and to the same extent that
the Company would be required to perform it if no such succession had taken
place. As used in this Agreement (except in the definition of Change in
Control), "Company" shall mean the Company as hereinbefore defined and any
successor to its business and/or assets as aforesaid which executes and delivers
the agreement provided for in this Section 12 or which otherwise becomes bound
by all the terms and provisions of this Agreement or by operation of law.
(b) EXECUTIVE'S SUCCESSORS. This Agreement shall not
be assignable by the Executive. This Agreement and all rights of the Executive
hereunder shall inure to the benefit of and be enforceable by the Executive's
personal or legal representatives, executors, administrators, successors, heirs,
distributees, devisees and legatees. Upon the Executive's death, all amounts to
which he is entitled hereunder, unless otherwise provided herein, shall be paid
in accordance with the terms of this Agreement to the Executive's devisee,
legatee, or other designee or, if there be no such designee, to the Executive's
estate.
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13. NOTICE. For the purposes of this Agreement, notices,
demands and all other communications provided for in this Agreement shall be in
writing and shall be deemed to have been duly given when delivered or (unless
otherwise specified) mailed by United States certified or registered mail,
return receipt requested, postage prepaid, addressed as follows:
If to the Executive:
Albert J. Dunlap
422 Addison Park Lane
Boca Raton, Florida 33432
If to the Company:
Sunbeam Corporation
1615 S. Congress Ave.
Delray Beach, Florida 33445
Attn: Chairman of the Compensation Committee
(With a copy to:
Skadden, Arps, Slate, Meagher & Flom
One Rodney Square
Wilmington, Delaware 19801
Attn: Richard L. Easton, Esq.)
or to such other address as any party may have furnished to the other in writing
in accordance herewith, except that notices of change of address shall be
effective only upon receipt.
14. MISCELLANEOUS. No provisions of this Agreement may be
modified unless such modification is agreed to in writing signed by the
Executive and an authorized officer of the Company. Any waiver or discharge must
be in writing and signed by the Executive or such an authorized officer of the
Company, as the case may be. No waiver by either party hereto at any time of any
breach by the other party hereto of, or compliance with, any condition or
provision of this Agreement to be performed by such other party shall be deemed
a waiver of similar or dissimilar provisions or conditions at the same or at any
prior
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or subsequent time. The validity, interpretation, construction and performance
of this Agreement shall be governed by the laws of the State of Delaware without
regard to its conflicts of law principles.
15. WITHHOLDING. Any payments provided for in this Agreement
shall be paid net of any applicable withholding of taxes required under federal,
state or local law.
16. ARBITRATION. Except as otherwise provided herein, all
controversies, claims or disputes arising out of or related to this Agreement
shall be settled under the rules of the American Arbitration Association then in
effect in the State of Florida, as the sole and exclusive remedy of either
party, and judgment upon such award rendered by the arbitrator(s) may be entered
in any court of competent jurisdiction. The costs of the arbitration shall be
borne as determined by the arbitrators PROVIDED, HOWEVER, that if the Company's
position is not substantially upheld, as determined by the arbitrators, the
expenses of the Executive (including, without limitation, fees and expenses
payable to the AAA and the arbitrators, fees and expenses payable to witnesses,
including expert witnesses, fees and expenses payable to attorneys and other
professionals, expenses of the Executive in attending the hearings, costs in
connection with obtaining and presenting evidence and costs of transcription of
the proceedings), as determined by the arbitrators, shall be reimbursed to him
by the Company.
17. VALIDITY. The invalidity or unenforceability of any
provision or provisions of this Agreement shall not affect the validity or
enforceability of any other provision of this Agreement, which shall remain in
full force and effect.
18. COUNTERPARTS. This Agreement may be executed in one or
more counterparts, each of which shall be deemed to be an original but all of
which together will constitute one and the same instrument.
19. ENTIRE AGREEMENT. This Agreement between the Company and
the Executive sets forth the entire agreement of the parties hereto in respect
of the subject matter contained herein and supersedes all prior agreements,
promises, covenants, arrangements, communications, representations or
warranties, whether oral or written, by the parties hereto in respect of the
subject matter contained herein; and any prior agreement of the parties hereto
in respect of the subject matter contained herein (including the Prior
Agreement) is hereby terminated and cancelled.
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IN WITNESS WHEREOF, the parties hereto have executed this
Agreement on February 20, 1998, to be effective as of the Effective Date.
SUNBEAM CORPORATION
By: /s/ PETER A. LANGERMAN
--------------------------------------
Name: Peter A. Langerman
Title: Chairman, Compensation Committee
/s/ ALBERT J. DUNLAP
--------------------------------------
Albert J. Dunlap
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EXHIBIT 10.b
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT, effective as of February 1, 1998 (the
"Effective Date"), and executed on February 20, 1998 (the "Execution Date")
by and between RUSSELL A. KERSH (the "Executive") and SUNBEAM CORPORATION, a
Delaware corporation (the "Company").
RECITALS
WHEREAS, the Executive is a party to the Employment Agreement with the
Company dated as of July 22, 1996 (the "Prior Agreement"):
WHEREAS, the Company desires to continue to employ the Executive and the
Executive desires to continue to furnish services to the Company on the terms
and conditions hereinafter set forth;
WHEREAS, the parties desire to enter into this Agreement setting forth
the terms and conditions of the employment relationship of the Executive with
the Company; and
WHEREAS, the parties desire to provide for the termination of the Prior
Agreement, effective upon the Effective Date;
NOW, THEREFORE, in consideration of the premises and the mutual
agreements set forth below, the parties hereby agree as follows:
1. EMPLOYMENT. The Company hereby agrees to employ the Executive, and
the Executive hereby accepts such employment, on the terms and conditions
hereinafter set forth.
2. EMPLOYMENT PERIOD. The period of employment of the Executive by the Company
hereunder (the "Employment Period") shall commence as of the Effective Date and
shall end on January 31, 2001 (or the Date of Termination (as defined in Section
10 below), if earlier). All options awards granted pursuant to the Prior
Agreement shall vest and become exercisable in full as of the Execution Date. In
addition, 40% of the restricted stock granted pursuant to the Prior Agreement
which is subject to restrictions immediately prior to the Execution Date shall
be forfeited as of the Execution Date, and the remaining shares of such
restricted stock shall become vested in full as of the Execution Date and the
Company shall reimburse the
<PAGE>
Executive on a grossed up basis for any federal income tax assessed upon him
upon the vesting of such restricted stock.
3. POSITION AND DUTIES. The Executive shall serve as Vice Chairman of the
Company and as Executive Vice President, Finance and Administration, and shall
have such responsibilities, duties and authority as are consistent with such
position and such other duties as may from time to time be assigned to him by
the Chief Executive Officer. The Executive agrees to devote substantially all
his working time, attention and energies to the performance of his duties for
the Company. The Company shall nominate the Executive as a director of the
Company and shall use its best efforts to have the Executive elected and
reelected to the Board for the duration of the Employment Period.
4. PLACE OF PERFORMANCE. The principal place of employment of the Executive
shall be at the Company's principal executive offices in either Broward or Palm
Beach County, Florida, or such other location as may be agreed to by the Board.
In the event that the Company's principal executive offices are moved from
Broward or Palm Beach County Florida, the Company shall promptly pay, or
reimburse the Executive for, all reasonable expenses incurred by the Executive
relating to any change of the Executive's residence from Broward or Palm Beach
County, Florida, in connection with his employment hereunder, including, without
limitation, reasonable expenses for himself and his family of travel, moving,
storage and suitable lodging and maintenance, and the Company shall reimburse
the Executive on a grossed up basis in the event that any tax is assessed upon
him in relation to any such expenses. The Company shall pay or reimburse the
Executive for all reasonable costs and expenses of residential relocation
incurred by him in connection with each and every additional change, if any, in
the location of the principal executive offices of the Company, and the
Executive shall be reimbursed by the Company on a grossed up basis in the event
that any tax is assessed upon him in relation to any such costs or expenses.
5. COMPENSATION AND RELATED MATTERS.
(a) BASE SALARY. As compensation for the performance by the Executive
of his duties hereunder, during the Employment Period the Company shall pay the
Executive a base salary at an annual rate of $875,000, which rate shall be
retroactive to the Effective Date (the "Base Salary"). Except for the adjustment
necessary to implement the retroactive increase in Base Salary described in the
immediately preceding sentence, the Base Salary shall be payable in
substantially equal semi-monthly installments. It is agreed that there shall be
no increase or decrease in the Base Salary during the Employment Period. The
parties agree that the Executive shall not be entitled to participate in any
other bonus or incentive compensation programs of the Company.
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(b) EQUITY AND STOCK OPTION GRANTS.
(i) RESTRICTED SHARES. Effective as of the Effective Date, the
Executive has been granted, without cost to the Executive, 150,000
shares of Restricted Stock (as defined in the Company's Stock Option
Plan) (herein referred to as the "Restricted Shares"). The Restricted
Shares are granted upon the terms and conditions as set forth in the
Option Plan, except that twenty-five percent of such Restricted Shares
shall be vested and unrestricted as of the Execution Date, and an
additional twenty-five percent of such Restricted Shares shall vest and
cease to be restricted on each of the first, second and third
anniversaries of the Effective Date (subject to earlier vesting
provisions set forth in Section 11) provided that the Executive
continues to be employed pursuant to this Agreement upon such
anniversary dates and shall be subject to and modified by all other
terms and provisions of this Agreement, as expressly set forth herein.
All such Restricted Shares, once vested, shall be the sole property of
the Executive, shall be unrestricted and shall be freely tradeable by
the Executive, subject to applicable legal restrictions. The Company
shall reimburse the Executive on a grossed up basis with respect to any
tax assessed upon him in connection with the vesting of any such
Restricted Shares.
(A) ISSUANCE OF CERTIFICATES. The Restricted Shares shall be
registered in the Executive's name, but the certificates
evidencing the Restricted Shares shall be retained by the Company
until such shares become vested and the restrictions thereon
lapse. The period prior to the time that any particular
Restricted Shares become vested and the restrictions thereon
lapse is hereinafter referred to as the "Restricted Period" with
respect to such shares. The Executive shall execute a stock
power, in blank, with respect to such Restricted Shares and
deliver the same to the Company.
(B) RIGHTS AS A STOCKHOLDER. Except as provided herein, during
the Restricted Period, the Executive shall have all the rights of
a stockholder with respect to Restricted Shares, including the
right to receive dividends or other distributions and the right
to vote such shares; provided that, in the discretion of the
Company any such dividends or other distributions may be retained
by the Company unless and until the Restricted Shares in respect
of which such dividends or other distributions were paid shall
vest.
(C) NON-TRANSFERABILITY. During the Restricted Period, the
Executive may not sell, transfer, pledge, or otherwise encumber
or dispose of the Restricted Shares, and any attempted sale,
transfer, pledge or other encumbrance or
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disposition (whether voluntary or involuntary) in violation of
this Section 5(b)(i)(C) shall be null and void.
(D) DELIVERY OF SHARE CERTIFICATES. Upon the vesting of any
Restricted Shares, the certificates evidencing such Restricted
Shares, together with any dividends or other distributions
retained by the Company pursuant to Section 5(b)(i)(B), shall be
delivered promptly to the Executive. In the case of Executive's
death, such certificates, dividends and distributions will be
delivered to the beneficiary designated in writing by the
Executive pursuant to a form of designation provided by the
Company, to the Executive's legatee or legatees, or to his
personal representatives or distributees, as the case may be.
(ii) STOCK OPTION. Effective as of the Effective Date, subject to
shareholder approval by the Company's shareholders at the annual meeting
to be held on May 12, 1998 (or on such other date on which such meeting
will be held) (the "Annual Meeting"), the Executive has been granted a
stock option (the "Option") to purchase 1,125,000 shares of Common Stock
(the "Option Award"). The Option is subject to the following conditions:
(i) the exercise price per share of Common Stock shall be $36.85, which
is the average of the high and low selling price per share on the NYSE
on January 30, 1998; (ii) the Option Award shall be vested and
exercisable with respect to twenty-five percent of the shares subject
thereto as of the Effective Date and shall become vested and exercisable
with respect to an additional twenty-five percent of the shares subject
thereto on each of the first, second and third anniversaries of the
Effective Date; and (iii) the Option Award shall expire on the tenth
anniversary of the Effective Date, subject to earlier termination as
provided herein.
In the event that Company's shareholders fail to approve the
grant of the Option Award at the Annual Meeting, the Company and the
Executive shall negotiate in good faith a mutually acceptable
alternative compensation arrangement; provided, however, that the
Executive, in his sole discretion, may elect to terminate this
Agreement, in which event it shall be deemed to have been terminated
pursuant to Section 10(d) hereof, and the Executive shall be entitled to
receive the compensation, rights and benefits provided in Section 11(e)
hereof (other than in respect of the stock options).
(iii) REGISTRATION RIGHTS. Within six months after the Effective
Date, the Company shall cause the Restricted Shares and all shares of
stock subject to the Option Award to be registered or qualified for
resale under the Securities Act of 1933 and applicable state laws.
Unless and until registered under the Securities Act of 1933,
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as amended, certificates evidencing the Restricted Shares and shares
acquired pursuant to the exercise of the Option shall bear the following
legend:
THE SHARES EVIDENCED BY THIS CERTIFICATE MAY NOT BE SOLD,
TRANSFERRED, PLEDGED, HYPOTHECATED OR OTHERWISE DISPOSED OF
UNLESS REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED,
OR UNLESS, IN THE OPINION OF COUNSEL FOR THE COMPANY, SUCH
REGISTRATION IS NOT REQUIRED.
6. EXPENSES. During the Employment Period, the Company shall reimburse the
Executive for all reasonable business expenses in accordance with applicable
policies and procedures then in force.
7. VACATION AND OTHER ABSENCES. The Executive shall be entitled to paid vacation
and other paid absences, whether for holidays, illness, personal time or any
similar purposes, during the Employment Period in accordance with policies
applicable generally to senior executives of the Company; provided, however,
that the Executive shall always be entitled to at least six weeks of paid
vacation in each calendar year and pro rata for part of a year. Up to four weeks
per year of unused vacation may be maintained by the Executive on a cumulative
basis and may be subsequently used in any year or if not so used, the Executive
shall be compensated for any unused vacation days upon the termination of this
Agreement for any reason.
8. TAX PLANNING SERVICES. During the Employment Period, the Company shall
provide the Executive with tax-related advice and services without cost or
expense to him and shall reimburse the Executive on a grossed up basis in the
event that any tax is assessed upon him in relation to such services.
9. OTHER BENEFITS. During the Employment Period, the Executive shall be eligible
to participate at no cost or expense to him in welfare plans and programs
(including any tax-deferred savings plan, group life insurance plan, medical and
dental insurance plan, and accident and disability insurance plan) ("Benefit
Plans") applicable generally to employees and/or senior executives of the
Company. The Company will waive, or obtain the waiver of, any waiting periods
for eligibility under the Benefit Plans or will provide comparable benefits to
the Executive without cost to him during the waiting period.
10. TERMINATION. The Executive's employment hereunder, as the case may be, may
be terminated as follows:
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(a) DEATH. The Executive's employment shall terminate upon his death,
and the date of his death shall be the Date of Termination.
(b) DISABILITY. If, as a result of the Executive's incapacity due to
physical or mental illness, the Executive shall have been absent from his duties
hereunder on a full-time basis for one hundred and twenty (120) consecutive days
and, within thirty (30) days after written Notice of Termination (as defined in
Section 10(g) hereof), shall not have returned to the performance of his duties
hereunder on a full-time basis ("Disability"), the Company may terminate the
Executive's employment hereunder. In this event, the Date of Termination shall
be thirty (30) days after Notice of Termination is given (provided that the
Executive shall not have returned to the performance of his duties on a
full-time basis during such thirty (30) day period).
(c) CAUSE. The Company may terminate the Executive's employment
hereunder for Cause. For purposes of this Agreement, the Company shall have
"Cause" to terminate the Executive's employment hereunder:
(i) upon the Executive's conviction for the commission of
a felony (or a plea of nolo contendere thereto); or
(ii) willful failure by the Executive substantially to
perform his duties hereunder (other than any such failure resulting from
the Executive's incapacity due to Disability).
For purposes hereof, no act or failure to act by the Executive shall
be considered "willful" unless done or omitted to be done by him not in good
faith or without reasonable belief that his action or omission was in the best
interests of the Company or contrary to written instructions of the Chief
Executive Officer or the Board of Directors. The Date of Termination shall be
the date specified in the Notice of Termination; provided, however, that, in the
case of a termination for Cause under clause (ii) above, the Date of Termination
shall not be earlier than 30 days after delivery of the Notice of Termination.
Anything herein to the contrary notwithstanding, if, following a termination of
the Executive's employment by the Company for Cause based upon the conviction of
the Executive for a felony, such conviction is overturned in a final
determination on appeal, the Executive shall be entitled to the payments and the
economic equivalent of the benefits the Executive would have received if his
employment had been terminated by the Company without Cause.
(d) TERMINATION BY THE EXECUTIVE FOR GOOD REASON. The Executive may
terminate his employment hereunder for Good Reason, provided that the Executive
shall have delivered a Notice of Termination (as defined in Section 10(g)
hereof) within ninety (90) days after the
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occurrence of the event of Good Reason giving rise to such termination. For
purposes of this Agreement, "Good Reason" shall mean the occurrence of one or
more of the following circum stances, without the Executive's express written
consent, which are not remedied by the Company within thirty (30) days of
receipt of the Executive's Notice of Termination:
(i) an assignment to the Executive of any duties
materially inconsistent with his positions, duties, responsibilities and
status with the Company or any material limitation of the powers of the
Executive not consistent with the powers of the Executive contemplated
by Section 3 hereof; or
(ii) any removal of the Executive from, or any failure to
re-elect the Executive to, the executive officer position specified in
Section 3 of this Agreement, or, without the Executive's consent,
failure to re-elect the Executive as a Director of the Company; or
(iii) any other material breach by the Company of this
Agreement.
In the event of a termination for Good Reason, the Date of
Termination shall be the date specified in the Notice of Termination, which
shall be no more than thirty (30) days after the Notice of Termination.
(e) OTHER TERMINATIONS. The Company may terminate the Executive's
employment hereunder at any time, subject to the provisions of Section 11(e)
hereof. The Executive may terminate his employment at any time, subject to the
provisions of Section 11(d) hereof. If the Executive's employment is terminated
hereunder for any reason other than as set forth in Sections 10(a) through 10(d)
hereof, the date on which a Notice of Termination is given or any later date
(within 30 days) set forth in such Notice of Termination shall be the Date of
Termination.
(f) TERMINATION BY THE EXECUTIVE UPON CHANGE IN CONTROL. Upon a Change
in Control (as defined below), the Executive shall have the right, upon delivery
to the Company of a Notice of Termination (which shall specify a Date of
Termination not less than 30 days after such Notice of Termination), to
terminate his employment under this Agreement and to receive the payments
provided pursuant to Section 11(f) below. If the Executive shall elect to
terminate his employment with the Company other than upon a Change in Control,
he shall receive only the compensation referred to in Section 11(d) below. For
purposes of this Agreement, a Change in Control shall mean the occurrence of any
one of the following events:
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(i) any "person" as such term is used in Sections 3(a)(9)
and 13(d) of the Securities Exchange Act of 1934, as amended, becomes a
"beneficial owner,'" as such term is used in Rule 3d-3 promulgated under
that Act, of 25% or more of the voting stock of the Company (other than
a person that is currently the beneficial owner of such percentage of
the Company's voting stock);
(ii) the majority of the Board consists of individuals
other than Incumbent Directors, which term means the members of the
Board on the date of this Agreement, the Executive and the individuals
designated as directors by the Chief Executive Officer of the Company;
provided that any person becoming a director subsequent to such date
whose election or nomination for election was supported by two-thirds of
the directors who then comprised the Incumbent Directors shall be
considered to be an Incumbent Director;
(iii) the Company, without the Executive's consent, adopts
any plan of liquidation providing for the distribution of all or
substantially all of its assets; or
(iv) all or substantially all of the assets or business of
the Company are disposed of pursuant to a merger, consolidation or other
transaction (unless the shareholders of the Company immediately prior to
such merger, consolidation or other transaction beneficially own,
directly or indirectly, in substantially the same proportion as they
owned the voting stock of the Company, all of the voting stock or other
ownership interests of the entity or entities, if any, that succeed to
the business of the Company).
(g) NOTICE OF TERMINATION. Any termination of the Executive's employment
hereunder by the Company or by the Executive (other than termination pursuant to
Section 10(a) hereof) shall be communicated by written Notice of Termination to
the other party hereto in accordance with Section 17 hereof. For purposes of
this Agreement, a "Notice of Termination" shall mean a notice which shall
indicate the specific termination provision in this Agreement relied upon and
shall set forth in reasonable detail the facts and circumstances claimed to
provide a basis for termination of the Executive's employment under the
provision so indicated. If any dispute concerning a Notice of Termination of the
Executive's employment under Section 10(b), 10(c) or 10(d) hereof results in a
determination that a proper basis for such termination did not exist under such
section, the Executive's employment under this Agreement shall be treated, with
respect to a Notice of Termination pursuant to Section 10(b) or 10(c) hereof, as
having been terminated pursuant to Section 10(e) hereof or, with respect to a
Notice of Termination pursuant to Section 10(d) hereof, as having not been
terminated.
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11. COMPENSATION UPON TERMINATION OR DURING DISABILITY.
(a) DISABILITY PERIOD. During any period during the Employment Period
that the Executive fails to perform his duties hereunder as a result of
incapacity due to physical or mental illness ("Disability Period"), the
Executive shall continue to (i) receive his full Base Salary and (ii)
participate in the Benefit Plans. Such payments made to the Executive during the
Disability Period shall be reduced by the sum of the amounts, if any, payable to
the Executive at or prior to the time of any such payment under disability
benefit plans of the Company or under the Social Security disability insurance
program, and which amounts were not previously applied to reduce any such
payment.
(b) DEATH. If the Executive's employment hereunder is terminated as a
result of death, then:
(i) the Company shall pay the Executive's estate or
designat- ed beneficiary, as soon as practicable after the Date of
Termination, any Base Salary installments due in the month of death and
any reimbursable expenses, accrued or owing the Executive hereunder as
of the Date of Termination;
(ii) the Options granted to the Executive pursuant to the
Option Award (if such Option Award has been approved by the shareholders
as provided in Section 5(b)(ii)) shall become vested and exercisable, as
of the Date of Termination, to the extent such Option Award would have
otherwise become vested on or before the first anniversary of the Date
of Termination, and all vested Options, as well as all stock options
granted pursuant to the Prior Agreement ("Prior Agreement Options"),
shall remain exercisable for a period of one year following such Date of
Termination and shall thereafter be completely forfeited and cancelled;
any Options that would not have become vested and exercisable on or
before the first anniversary of the Date of Termination shall terminate
and be forfeited as of the Date of Termination; and
(iii) the portion of the Restricted Shares that have not
vested as of the Date of Termination equal to the number of such
unvested Restricted Shares multiplied by a fraction, the numerator of
which is 36 minus the number of full months remaining in the Employment
Period (disregarding the earlier termination thereof) after the Date of
Termination and denominator of which is 36, shall become vested as of
the Date of Termination and the restrictions imposed thereon shall
lapse. The balance of such unvested Restricted Shares shall be forfeited
to the Company (without further action on the part of the Company or the
Executive) as of the Date of
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Termination, and the Executive shall have no further rights with respect
to such balance.
(c) DISABILITY. If the Executive's employment hereunder is terminated as
a result of Disability, then:
(i) the Company shall pay the Executive, as soon as
practica ble after the Date of Termination, any Base Salary and any
reimbursable expenses, accrued or owing the Executive hereunder for
services as of the Date of Termination;
(ii) the Option granted to the Executive pursuant to the
Option Award (if such Option Award has been approved by the shareholders
as provided in Section 5(b)(ii)) shall become vested and exercisable, as
of the Date of Termination, to the extent such Option Award would have
otherwise become vested on or before the first anniversary of the Date
of Termination, and all vested Options, including the Prior Agreement
Options, shall remain exercisable for a period of three years following
such Date of Termination and shall thereafter be completely forfeited
and cancelled; any Options that would not have become vested and
exercisable on or before the first anniversary of the Date of
Termination shall terminate and be forfeited as of the Date of
Termination; and
(iii) the portion of the Restricted Shares that have not
vested as the Date of Termination equal to the number of such unvested
Restricted Shares multiplied by a fraction, the numerator of which is 36
minus the number of full months remaining in the Employment Period
(disregarding the earlier termination thereof) after the Date of
Termination and denominator of which is 36, shall become vested, and the
restrictions imposed thereon shall lapse. The balance of such unvested
Restricted Shares shall be forfeited to the Company (without further
action on the part of the Company or the Executive) as of the Date of
Termination, and the Executive shall have no further rights with respect
to such balance.
(d) CAUSE OR BY EXECUTIVE OTHER THAN FOR GOOD REASON. If the Executive's
employ ment hereunder is terminated by the Company for Cause or by the Executive
other than for Good Reason, then:
(i) the Company shall pay the Executive, as soon as
practica ble after the Date of Termination, any Base Salary and any
reimbursable expenses accrued or owing the Executive hereunder for
services as of the Date of Termination; and
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(ii) the Executive shall immediately forfeit any unvested
Restricted Shares and any unvested portion of the Option Award. In the
event of termination by the Company for Cause, the Executive shall have
the right to exercise the vested unexercised portion of the Option Award
for a period of ninety (90) days after the Date of Termination, and the
unexercised portion of such Option Award shall be forfeited thereafter.
In the event of termination by the Executive other than for Good Reason
the Executive shall have the right to exercise the vested unexercised
portion of the Option Award for a period of one year following the Date
of Termination and the unexercised portion of such Option Award shall be
forfeited thereafter.
(e) TERMINATION BY COMPANY WITHOUT CAUSE OR BY THE EXECUTIVE WITH GOOD
REASON. If the Executive's employment hereunder is terminated by the Company
(other than for Cause or Disability) or by the Executive for Good Reason, then:
(i) the Company shall pay the Executive, as soon as
practica ble after the Date of Termination, any Base Salary and any
reimbursable expenses, accrued or owing the Executive hereunder for
services as of the Date of Termination;
(ii) the Company shall immediately pay to the Executive as
liquidated damages and not as a penalty a lump sum amount equal to the
total Base Salary that would have otherwise been payable to the
Executive with respect to the period commencing immediately following
the Date of Termination and ending on January 31, 2001, at the
annualized rate in effect at the time Notice of Termination is given;
(iii) the Option granted to the Executive pursuant to the
Option Award shall become fully vested and exercisable, and the
Restricted Shares shall become fully vested, as of the Date of
Termination. The Option Award, as well as each Prior Agreement Option,
shall remain exercisable for the balance of its original 10-year term;
and
(iv) the Executive shall continue to participate in all
employee benefit plans and programs in which the Executive was entitled
to participate immediately prior to the Date of Termination, in
accordance with the terms of such plans and programs as in effect from
time to time, through January 31, 2001; provided that the Executive's
continued participation is permitted under the general terms and
provisions of such plans and programs. In the event that the Executive's
participation in any such plan or program is barred, the Company shall
arrange to provide the Executive and his dependents with benefits
substantially the same as those which the Executive and his dependents
would otherwise have been entitled to receive under such plans and
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<PAGE>
programs from which their continued participation is barred or provide
their economic equivalent.
(f) TERMINATION UPON CHANGE IN CONTROL. If the Executive shall elect to
terminate his employment under this Agreement upon a Change in Control, the
Company shall pay to the Executive the payments described in Sections 11(e)(i),
(ii), (iii) and (iv) above.
12. GROSS-UP FOR EXCISE TAX. In the event that the Executive receives any
payment or benefit (including but not limited to the payments or benefits
pursuant to Section 11 of this Agreement) (a "Payment") that is subject to the
excise tax (the "Excise Tax") under Section 4999 of the Internal Revenue Code of
1986, as amended (the "Code"), the Company shall pay to the Executive, as soon
thereafter as practicable, an additional amount (a "Gross-Up Payment") such that
the net amount retained by the Executive, after deduction of any Excise Tax
imposed upon the Payment and any federal, state and local income tax and Excise
Tax imposed upon the Gross-Up Payment shall be equal to the Payment. The
determination of whether an Excise Tax is due in respect of any payment or
benefit, the amount of the Excise Tax and the amount of the Gross-Up Payment
shall be made by an independent auditor (the "Auditor") jointly selected by the
Company and the Executive and paid by the Company. If the Executive and the
Company cannot agree on the firm to serve as the Auditor, then the Executive and
the Company shall each select one nationally recognized accounting firm and
those two firms shall jointly select the nationally recognized accounting firm
to serve as the Auditor. Notwithstanding the foregoing, for purposes of
determining the Gross-Up Payment in respect of any Payment, (i) any other
payments or benefits received or to be received by the Executive in connection
with a Change in Control or the Executive's termination of employment (whether
pursuant to the terms of this Agreement or any other plan, arrangement or
agreement with the Company, any person whose actions result in a Change in
Control or any person affiliated with the Company or such person) shall be
treated as "parachute payments" within the meaning of Section 280G(b)(2) of the
Code, and all "excess parachute payments" within the meaning of Section 280G of
the Code shall be treated as subject to the Excise Tax, unless in the opinion of
tax counsel selected by the Auditor, such other payments or benefits (in whole
or in part) do not constitute parachute payments, or are otherwise not subject
to the Excise Tax, and (ii) the Executive shall be deemed to pay federal income
tax at the highest marginal rate applicable in the calendar year in which the
Gross-Up Payment is made, and state and local income taxes at the highest
marginal rate of taxation in the state and locality of the Executive's residence
on the Date of Termination, net of the maximum reduction in federal income taxes
which could be obtained from deduction of such state and local taxes. In the
event the actual Excise Tax or such income tax is more or less than the amount
used to calculate the Gross-Up Payment, the Executive or the Company, as the
case may be, shall pay to the other an amount reflecting the actual Excise Tax
or such income tax, plus interest on the amount of such repayment at the rate
provided in Section 1274(b)(2)(B) of the Code.
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13. MITIGATION. The Executive shall not be required to mitigate amounts payable
pursuant to Section 11 hereof by seeking other employment or otherwise, nor
shall there be any offset against such payments on account of (a) any
remuneration attributable to any subsequent employment that he may obtain or (b)
any claims the Company may have against the Executive.
14. CONFIDENTIAL INFORMATION, REMOVAL OF DOCUMENTS, NON-COMPETITION.
(a) CONFIDENTIAL INFORMATION. The Executive shall hold in a fiduciary
capacity for the benefit of the Company and its subsidiaries (the "Sunbeam
Entities") all trade secrets, confidential information, and knowledge or data
relating to the Sunbeam Entities and the businesses and investments of the
Sunbeam Entities, which shall have been obtained by the Executive during the
Executive's employment by the Company, including such information with respect
to any products, improvements, formulas, designs or styles, processes, services,
customers, suppliers, marketing techniques, methods, future plans or operating
practices ("Confidential Information"); PROVIDED, HOWEVER, that Confidential
Information shall not include any information known generally to the public
(other than as a result of unauthorized disclosure by the Executive) or any
specific information or type of information generally not considered
confidential by persons engaged in the same business as the Company, or
information disclosed by the Company or any officer thereof to a third party
without restrictions on the disclosure of such information. Except as may be
required or appropriate in connection with his carrying out his duties under
this Agreement, the Executive shall not, without the prior written consent of
the Company or as may otherwise be required by law or legal process, communicate
or divulge any such Confidential Information to anyone other than the Company
and those designated by the Company.
(b) REMOVAL OF DOCUMENTS. All records, files, drawings, documents,
models, and the like relating to the business of the Sunbeam Entities, which the
Executive prepares, uses or comes into contact with and which contain
Confidential Information shall not be removed by the Executive from the premises
of any Sunbeam Entity (without the written consent of the Company) during or
after the Employment Period unless such removal shall be required or appropriate
in connection with his carrying out his duties under this Agreement, and, if so
removed by the Executive, shall be returned to such Sunbeam Entity immediately
upon termination of the Executive's employment hereunder.
(c) NON-COMPETITION. During (i) the Executive's employment with the
Company and (ii) the two (2) year period immediately following the Executive's
Date of Termination, the Executive (A) shall not engage, anywhere within the
geographical areas in which any Sunbeam Entity is then conducting its business
operations, directly or indirectly, alone, in association with or as a
shareholder, principal, agent, partner, officer, director, employee or
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consultant of any other organization, in any business (a "Competitive Business")
which competes with any business then being conducted by such Sunbeam Entity;
(B) shall not solicit or encourage any officer, employee or consultant of any of
the Sunbeam Entities to leave the employ of any of the Sunbeam Entities for
employment by or with any Competitive Business; and (C) shall not solicit,
divert or take away, or attempt to divert or to take away, the business or
patronage of any of the customers or accounts, or prospective customers or
accounts, of any Sunbeam Entity, which were contacted, solicited or served by
the Executive while employed by the Company; provided, however, that nothing
herein shall prohibit the Executive from owning a maximum of two percent (2%) of
the outstanding stock of any publicly traded corporation. Following the Date of
Termination, ownership by the Executive of not more than five percent (5%) of
any publicly traded corporation shall not constitute a violation hereof. If, at
any time, the provisions of this Section 14(c) shall be determined to be invalid
or unenforceable, by reason of being vague or unreasonable as to area, duration
or scope of activity, this Section 14(c) shall be considered divisible and shall
become and be immediately amended to only such area, duration and scope of
activity as shall be determined to be reasonable and enforceable by the court or
other body having jurisdiction over the matter; and the Executive agrees that
this Section 14(c) as so amended shall be valid and binding as though any
invalid or unenforceable provision had not been included herein. For purposes of
this Section 14(c), the design, manufacture and marketing of outdoor barbecue
grills and small kitchen appliances shall be construed to be a Competitive
Business; provided, however, that the gross revenues derived from sales of such
products by such competitor are greater than the lesser of (i) 10% of its total
revenues and (ii) $500,000,000.
(d) REMEDIES. In the event of a breach or threatened breach of this
Section 14, the Executive agrees that the Company shall be entitled to apply for
injunctive relief in a court of appropriate jurisdiction to remedy any such
breach or threatened breach, the Executive acknowledging that damages would be
inadequate and insufficient.
(e) CONTINUING OPERATION. Any termination of the Executive's employment
or of this Agreement shall have no effect on the continuing operation of this
Section 14.
15. INDEMNIFICATION. The Company shall indemnify the Executive to the full
extent permitted by law and the By-laws of the Company for all expenses, costs,
liabilities and legal fees which the Executive may incur in the discharge of all
his duties hereunder, including, without limitation, the right to be paid in
advance by the Company for his expenses in defending a civil or criminal action,
proceeding or investigation prior to the final disposition thereof. The
Executive shall be insured under the Company's Directors' and Officers'
Liability Insurance Policy as in effect from time to time. Notwithstanding any
other provision of this Agreement to the contrary, any termination of the
Executive's employment or of this Agreement shall have no effect on the
continuing operation of this Section 15.
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16. SUCCESSORS; BINDING AGREEMENT.
(a) COMPANY'S SUCCESSORS. No rights or obligations of the Company under
this Agreement may be assigned or transferred by the Company except that such
rights or obligations may be assigned or transferred pursuant to a merger or
consolidation in which the Company is not the continuing entity, or the sale or
liquidation of all or substantially all of the business and/or assets of the
Company, provided that the assignee or transferee is the successor to all or
substantially all of the business and/or assets of the Company and such assignee
or transferee assumes the liabilities, obligations and duties of the Company, as
contained in this Agreement, either contractually or as a matter of law. The
Company will require any such successor to expressly assume and agree to perform
this Agreement in the same manner and to the same extent that the Company would
be required to perform it if no such succession had taken place. As used in this
Agreement (except in the definition of Change in Control), "Company" shall mean
the Company as hereinbefore defined and any successor to its business and/or
assets as aforesaid which executes and delivers the agreement provided for in
this Section 16 or which otherwise becomes bound by all the terms and provisions
of this Agreement or by operation of law.
(b) EXECUTIVE'S SUCCESSORS. This Agreement shall not be assignable by
the Executive. This Agreement and all rights of the Executive hereunder shall
inure to the benefit of and be enforceable by the Executive's personal or legal
representatives, executors, administrators, successors, heirs, distributees,
devisees and legatees. Upon the Executive's death, all amounts to which he is
entitled hereunder, unless otherwise provided herein, shall be paid in
accordance with the terms of this Agreement to the Executive's devisee, legatee,
or other designee or, if there be no such designee, to the Executive's estate.
17. NOTICE. For the purposes of this Agreement, notices, demands and all other
communications provided for in this Agreement shall be in writing and shall be
deemed to have been duly given when delivered or (unless otherwise specified)
mailed by United States certified or registered mail, return receipt requested,
postage prepaid, addressed as follows:
If to the Executive:
Russell A. Kersh
3609 NW 62nd Street
Boca Raton, Florida 33496
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If to the Company:
Sunbeam Corporation
1615 S. Congress Avenue
Delray Beach, Florida 33445
Attn: Chairman of the Compensation Committee
or to such other address as any party may have furnished to the other in writing
in accordance herewith, except that notices of change of address shall be
effective only upon receipt.
18. MISCELLANEOUS. No provisions of this Agreement may be modified unless such
modification is agreed to in writing signed by the Executive and an authorized
officer of the Company. Any waiver or discharge must be in writing and signed by
the Executive or such an authorized officer of the Company, as the case may be.
No waiver by either party hereto at any time of any breach by the other party
hereto of, or compliance with, any condition or provision of this Agreement to
be performed by such other party shall be deemed a waiver of similar or
dissimilar provisions or conditions at the same or at any prior or subsequent
time. The validity, interpretation, construction and performance of this
Agreement shall be governed by the laws of the State of Delaware without regard
to its conflicts of law principles.
19. WITHHOLDING. Any payments provided for in this Agreement shall be paid net
of any applicable withholding of taxes required under federal, state or local
law.
20. ARBITRATION.
(a) Except as otherwise provided herein, all controversies, claims or
disputes arising out of or related to this Agreement shall be settled under the
rules of the American Arbitration Association then in effect in the State of
Florida, as the sole and exclusive remedy of either party, and judgment upon
such award rendered by the arbitrator(s) may be entered in any court of
competent jurisdiction. The costs of the arbitration shall be borne as
determined by the arbitrators PROVIDED, HOWEVER, that if the Company's position
is not substantially upheld, as determined by the arbitrators, the expenses of
the Executive (including, without limitation, fees and expenses payable to the
AAA and the arbitrators, fees and expenses payable to witnesses, including
expert witnesses, fees and expenses payable to attorneys and other
professionals, expenses of the Executive in attending the hearings, costs in
connection with obtaining and presenting evidence and costs of transcription of
the proceedings), as determined by the arbitrators, shall be reimbursed to him
by the Company.
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(b) Notwithstanding the provisions of Section 20(a) above, the parties
agree that nothing contained herein shall preclude the Company from bringing an
action in a court of competent jurisdiction (whether prior to or during any
arbitration proceeding) seeking to specifically enforce the provisions of
Section 14 hereof by means of seeking an injunction or other equitable relief.
21. ENTIRE AGREEMENT; COUNTERPARTS. This Agreement and the terms of the Option
Plan set forth the entire agreement of the parties hereto in respect of the
subject matter contained herein, supersede all prior agreements, promises,
covenants, arrangements, communications, representations or warranties, whether
oral or written, by any officer, employee or representative of any party hereto;
and any prior agreement of the parties hereto or thereto in respect of the
subject matter contained herein or therein, including but not limited to the
Prior Agreement, is hereby terminated and cancelled. This Agreement may be
signed in counterparts.
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement on
February 20, 1998, to be effective as of the Effective Date.
SUNBEAM CORPORATION
By: /s/ PETER LANGERMAN
--------------------------
Name: Peter Langerman
Title: Chairman, Executive Development
and Compensation Committee
RUSSELL A. KERSH
/s/ RUSSELL A. KERSH
--------------------
18
Exhibit 10c
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT, effective as of February 1, 1998 (the
"Effective Date"), and executed on February 20, 1998 (the "Execution Date") by
and between DAVID C. FANNIN (the "Executive") and SUNBEAM CORPORATION, a
Delaware corporation (the "Company").
RECITALS
WHEREAS, the Executive is a party to the Employment Agreement with the
Company dated as of July 29, 1996 (the "Prior Agreement");
WHEREAS, Company desires to continue to employ the Executive and the
Executive desires to continue to furnish services to the Company on the terms
and conditions hereinafter set forth;
WHEREAS, the parties desire to enter into this Agreement setting forth
the revised terms and conditions of the employment relationship of the Executive
with the Company; and
WHEREAS, the parties desire to provide for the termination of the Prior
Agreement, effective upon the Effective Date;
NOW, THEREFORE, in consideration of the premises and the mutual
agreements set forth below, the parties hereby agree as follows:
1. EMPLOYMENT. The Company hereby agrees to employ the
Executive, and the Executive hereby accepts such employment, on the terms and
conditions hereinafter set forth.
2. EMPLOYMENT PERIOD. The period of employment of the Executive
by the Company hereunder (the "Employment Period") shall commence as of the
Effective Date and shall end on January 31, 2001 (or the Date of Termination (as
defined in Section 10 below), if earlier). All options awards granted pursuant
to the Prior Agreement shall vest and become exercisable in full as of the
Execution Date. In addition, 40% of the restricted stock granted pursuant to the
Prior Agreement which is subject to restrictions immediately prior to the
Execution Date shall be forfeited as of the Execution Date, and the remaining
shares of such restricted stock shall become vested in full as of the Execution
Date and the
<PAGE>
Company shall reimburse the Executive on a grossed up basis for any federal
income tax assessed upon him upon the vesting of such restricted stock.
3. POSITION AND DUTIES. The Executive shall serve as Executive
Vice President, General Counsel and Corporate Secretary, and shall have such
responsibilities, duties and authority as are consistent with such position and
such other duties as may from time to time be assigned to him by the Chief
Executive Officer. The Executive agrees to devote substantially all his working
time, attention and energies to the performance of his duties for the Company.
4. PLACE OF PERFORMANCE. The principal place of employment of
the Executive shall be at the Company's principal executive offices in Broward
or Palm Beach County, Florida, or such other location as may be agreed to by the
Board. In the event that the Company's principal executive offices are moved
from Broward or Palm Beach County, Florida, the Company shall promptly pay, or
reimburse the Executive for, all reasonable expenses incurred by the Executive
relating to any change of the Executive's residence from Broward or Palm Beach
County, Florida, in connection with his employment hereunder, including, without
limitation, reasonable expenses for himself and his family of travel, moving,
storage and suitable lodging and maintenance, and the Company shall reimburse
the Executive on a grossed up basis in the event that any tax is assessed upon
him in relation to any such expenses. The Company shall pay or reimburse the
Executive for all reasonable costs and expenses of residential relocation
incurred by him in connection with each and every additional change, if any, in
the location of the principal executive offices of the Company, and the
Executive shall be reimbursed by the Company on a grossed up basis in the event
that any tax is assessed upon him in relation to any such costs or expenses.
5. COMPENSATION AND RELATED MATTERS.
(a) BASE SALARY. As compensation for the performance
by the Executive of his duties hereunder, during the Employment Period the
Company shall pay the Executive a base salary at an annual rate of $595,000,
which rate shall be retroactive to the Effective Date (the "Base Salary").
Except for the adjustment necessary to implement the retroactive increase in
Base Salary described in the immediately preceding sentence, the Base Salary
shall be payable in substantially equal semi-monthly installments. It is agreed
that there shall be no increase or decrease in the Base Salary during the
Employment Period. The parties agree that the Executive shall not be entitled to
participate in any other bonus or incentive compensation programs of the
Company.
(b) EQUITY AND STOCK OPTION GRANTS.
(i) RESTRICTED SHARES. Effective as of the
Effective Date, the Executive has been granted without cost to the
Executive, 30,000 shares of Restricted Stock (as defined in the
Company's Stock Option Plan) (herein referred to as the "Restricted
Shares"). The Restricted Shares are granted upon the terms and
conditions as set forth in the Option Plan, except that twenty-five
percent of such Restricted
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Shares shall be vested and unrestricted as of the Execution Date, and
an additional twenty-five percent of such Restricted Shares shall vest
and cease to be restricted on each of the first, second and third
anniversaries of the Effective Date (subject to earlier vesting
provisions set forth in Section 11) provided that the Executive
continues to be employed pursuant to this Agreement upon such
anniversary dates and shall be subject to and modified by all other
terms and provisions of this Agreement, as expressly set forth herein.
All such Restricted Shares, once vested, shall be the sole property of
the Executive, shall be unrestricted and shall be freely tradeable by
the Executive, subject to applicable legal restrictions. The Company
shall reimburse the Executive on a grossed up basis with respect to any
tax assessed upon him in connection with the vesting of any such
Restricted Shares.
(A) ISSUANCE OF CERTIFICATES. The Restricted Shares shall be
registered in the Executive's name, but the certificates
evidencing the Restricted Shares shall be retained by the
Company until such shares become vested and the restrictions
thereon lapse. The period prior to the time that any particular
Restricted Shares become vested and the restrictions thereon
lapse is hereinafter referred to as the "Restricted Period"
with respect to such shares. The Executive shall execute a
stock power, in blank, with respect to such Restricted Shares
and deliver the same to the Company.
(B) RIGHTS AS A STOCKHOLDER. Except as provided herein, during
the Restricted Period, the Executive shall have all the rights
of a stockholder with respect to Restricted Shares, including
the right to receive dividends or other distributions and the
right to vote such shares; provided that, in the discretion of
the Company any such dividends or other distributions may be
retained by the Company unless and until the Restricted Shares
in respect of which such dividends or other distributions were
paid shall vest.
(C) NON-TRANSFERABILITY. During the Restricted Period, the
Executive may not sell, transfer, pledge, or otherwise encumber
or dispose of the Restricted Shares, and any attempted sale,
transfer, pledge or other encumbrance or disposition (whether
voluntary or involuntary) in violation of this Section
5(b)(i)(C) shall be null and void.
(D) DELIVERY OF SHARE CERTIFICATES. Upon the vesting of any
Restricted Shares, the certificates evidencing such Restricted
Shares, together with any dividends or other distributions
retained by the Company pursuant to Section 5(b)(i)(B), shall
be delivered promptly to the Executive. In the case of
Executive's death, such certificates, dividends and
distributions will be delivered to the beneficiary designated
in writing by the Executive pursuant to a form of designation
provided by the Company, to the Executive's legatee or
legatees, or to his personal representatives or distributees,
as the case may be.
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(ii) STOCK OPTION. Effective as of the
Effective Date, subject to shareholder approval by the Company's
shareholders at the annual meeting to be held on May 12, 1998 (or on
such other date on which such meeting will be held) (the "Annual
Meeting"), the Executive has been granted a stock option (the "Option")
to purchase 750,000 shares of Common Stock (the "Option Award"). The
Option is subject to the following conditions: (i) the exercise price
per share of Common Stock shall be $36.85, which is the average of the
high and low selling price per share on the NYSE on January 30, 1998;
(ii) the Option Award shall be vested and exercisable with respect to
twenty-five percent of the shares subject thereto as of the Effective
Date and shall become vested and exercisable with respect to an
additional twenty-five percent of the shares subject thereto on each of
the first, second and third anniversaries of the Effective Date; and
(iii) the Option Award shall expire on the tenth anniversary of the
Effective Date, subject to earlier termination as provided herein.
In the event that Company's shareholders fail to approve the
grant of the Option Award at the Annual Meeting, the Company and the
Executive shall negotiate in good faith a mutually acceptable
alternative compensation arrangement; provided, however, that the
Executive, in his sole discretion, may elect to terminate this
Agreement, in which event it shall be deemed to have been terminated
pursuant to Section 10(d) hereof, and the Executive shall be entitled
to receive the compensation, rights and benefits provided in Section
11(e) hereof (other than in respect of the stock options).
(iii) REGISTRATION RIGHTS. Within six months
after the Effective Date, the Company shall cause the Restricted Shares
and all shares of stock subject to the Option Award to be registered or
qualified for resale under the Securities Act of 1933 and applicable
state laws. Unless and until registered under the Securities Act of
1933, as amended, certificates evidencing the Restricted Shares and
shares acquired pursuant to the exercise of the Option shall bear the
following legend:
THE SHARES EVIDENCED BY THIS CERTIFICATE MAY NOT BE SOLD,
TRANSFERRED, PLEDGED, HYPOTHECATED OR OTHERWISE DISPOSED OF
UNLESS REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED,
OR UNLESS, IN THE OPINION OF COUNSEL FOR THE COMPANY, SUCH
REGISTRATION IS NOT REQUIRED.
6. EXPENSES. During the Employment Period, the Company shall
reimburse the Executive for all reasonable business expenses in accordance with
applicable policies and procedures then in force.
7. VACATION AND OTHER ABSENCES. The Executive shall be entitled
to paid vacation and other paid absences, whether for holidays, illness,
personal time or any similar purposes, during the Employment Period in
accordance with policies applicable generally to senior executives of the
Company; provided, however, that the Executive shall always be
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entitled to at least six weeks of paid vacation in each calendar year and pro
rata for part of a year. Up to four weeks per year of unused vacation may be
maintained by the Executive on a cumulative basis and may be subsequently used
in any year or if not so used, the Executive shall be compensated for any unused
vacation days upon the termination of this Agreement for any reason.
8. TAX PLANNING SERVICES. During the Employment Period, the
Company shall provide the Executive with tax-related advice and services without
cost or expense to him and shall reimburse the Executive on a grossed up basis
in the event that any tax is assessed upon him in relation to such services.
9. OTHER BENEFITS. During the Employment Period, the Executive
shall be eligible to participate at no cost or expense to him in welfare plans
and programs (including any tax-deferred savings plan, group life insurance
plan, medical and dental insurance plan, and accident and disability insurance
plan) ("Benefit Plans") applicable generally to employees and/or senior
executives of the Company. The Company will waive, or obtain the waiver of, any
waiting periods for eligibility under the Benefit Plans or will provide
comparable benefits to the Executive without cost to him during the waiting
period.
10. TERMINATION. The Executive's employment hereunder, as the
case may be, may be terminated as follows:
(a) DEATH. The Executive's employment shall terminate
upon his death, and the date of his death shall be the Date of Termination.
(b) DISABILITY. If, as a result of the Executive's
incapacity due to physical or mental illness, the Executive shall have been
absent from his duties hereunder on a full-time basis for one hundred and twenty
(120) consecutive days and, within thirty (30) days after written Notice of
Termination (as defined in Section 10(g) hereof), shall not have returned to the
performance of his duties hereunder on a full-time basis ("Disability"), the
Company may terminate the Executive's employment hereunder. In this event, the
Date of Termination shall be thirty (30) days after Notice of Termination is
given (provided that the Executive shall not have returned to the performance of
his duties on a full-time basis during such thirty (30) day period).
(c) CAUSE. The Company may terminate the Executive's
employment hereunder for Cause. For purposes of this Agreement, the Company
shall have "Cause" to terminate the Executive's employment hereunder:
(i) upon the Executive's conviction for the
commission of a felony (or a plea of nolo contendere thereto); or
(ii) willful failure by the Executive
substantially to perform his duties hereunder (other than any such
failure resulting from the Executive's incapacity due to Disability).
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For purposes hereof, no act or failure to act by the Executive
shall be considered "willful" unless done or omitted to be done by him not in
good faith or without reasonable belief that his action or omission was in the
best interests of the Company or contrary to written instructions of the Chief
Executive Officer or the Board of Directors. The Date of Termination shall be
the date specified in the Notice of Termination; provided, however, that, in the
case of a termination for Cause under clause (ii) above, the Date of Termination
shall not be earlier than 30 days after delivery of the Notice of Termination.
Anything herein to the contrary notwithstanding, if, following a termination of
the Executive's employment by the Company for Cause based upon the conviction of
the Executive for a felony, such conviction is overturned in a final
determination on appeal, the Executive shall be entitled to the payments and the
economic equivalent of the benefits the Executive would have received if his
employment had been terminated by the Company without Cause.
(d) TERMINATION BY THE EXECUTIVE FOR GOOD REASON. The
Executive may terminate his employment hereunder for Good Reason, provided that
the Executive shall have delivered a Notice of Termination (as defined in
Section 10(g) hereof) within ninety (90) days after the occurrence of the event
of Good Reason giving rise to such termination. For purposes of this Agreement,
"Good Reason" shall mean the occurrence of one or more of the following
circumstances, without the Executive's express written consent, which are not
remedied by the Company within thirty (30) days of receipt of the Executive's
Notice of Termination:
(i) an assignment to the Executive of any
duties materially inconsistent with his positions, duties,
responsibilities and status with the Company or any material limitation
of the powers of the Executive not consistent with the powers of the
Executive contemplated by Section 3 hereof; or
(ii) any removal of the Executive from, or
any failure to re-elect the Executive to, the executive officer
position specified in Section 3 of this Agreement; or
(iii) any other material breach by the
Company of this Agreement.
In the event of a termination for Good Reason, the Date of
Termination shall be the date specified in the Notice of Termination, which
shall be no more than thirty (30) days after the Notice of Termination.
(e) OTHER TERMINATIONS. The Company may terminate the
Executive's employment hereunder at any time, subject to the provisions of
Section 11(e) hereof. The Executive may terminate his employment at any time
subject to the provisions of Section 11(d) hereof. If the Executive's employment
is terminated hereunder for any reason other than as set forth in Sections 10(a)
through 10(d) hereof, the date on which a
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Notice of Termination is given or any later date (within 30 days) set forth in
such Notice of Termination shall be the Date of Termination.
(f) TERMINATION BY THE EXECUTIVE UPON CHANGE IN
CONTROL. Upon a Change in Control (as defined below), the Executive shall have
the right, upon delivery to the Company of a Notice of Termination (which shall
specify a Date of Termination not less than 30 days after such Notice of
Termination), to terminate his employment under this Agreement and to receive
the payments provided pursuant to Section 11(f) below. If the Executive shall
elect to terminate his employment with the Company other than upon a Change in
Control, he shall receive only the compensation referred to in Section 11(d)
below. For purposes of this Agreement, a Change in Control shall mean the
occurrence of any one of the following events:
(i) any "person" as such term is used in
Sections 3(a)(9) and 13(d) of the Securities Exchange Act of 1934, as
amended, becomes a "beneficial owner," as such term is used in Rule
3d-3 promulgated under that Act, of 25% or more of the voting stock of
the Company (other than a person that is currently the beneficial owner
of such percentage of the Company's voting stock),
(ii) the majority of the Board consists of
individuals other than Incumbent Directors, which term means the
members of the Board on the date of this Agreement and the individuals
designated as directors by the Chief Executive Officer of the Company;
provided that any person becoming a director subsequent to such date
whose election or nomination for election was supported by two-thirds
of the directors who then comprised the Incumbent Directors shall be
considered to be an Incumbent Director;
(iii) the Company, without the Executive's
consent, adopts any plan of liquidation providing for the distribution
of all or substantially all of its assets; or
(iv) all or substantially all of the assets
or business of the Company are disposed of pursuant to a merger,
consolidation or other transaction (unless the shareholders of the
Company immediately prior to such merger, consolidation or other
transaction beneficially own, directly or indirectly, in substantially
the same proportion as they owned the voting stock of the Company, all
of the voting stock or other ownership interests of the entity or
entities, if any, that succeed to the business of the Company).
(g) NOTICE OF TERMINATION. Any termination of the
Executive's employment hereunder by the Company or by the Executive (other than
termination pursuant to Section 10(a) hereof) shall be communicated by written
Notice of Termination to the other party hereto in accordance with Section 17
hereof. For purposes of this Agreement, a "Notice of Termination" shall mean a
notice which shall indicate the specific termination provision in this Agreement
relied upon and shall set forth in reasonable detail the facts and
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circumstances claimed to provide a basis for termination of the Executive's
employment under the provision so indicated. If any dispute concerning a Notice
of Termination of the Executive's employment under Section 10(b), 10(c) or 10(d)
hereof results in a determination that a proper basis for such termination did
not exist under such section, the Executive's employment under this Agreement
shall be treated, with respect to a Notice of Termination pursuant to Section
10(b) or 10(c) hereof, as having been terminated pursuant to Section 10(e)
hereof or, with respect to a Notice of Termination pursuant to Section 10(d)
hereof, as having not been terminated.
11. COMPENSATION UPON TERMINATION OR DURING DISABILITY.
(a) DISABILITY PERIOD. During any period during the
Employment Period that the Executive fails to perform his duties hereunder as a
result of incapacity due to physical or mental illness ("Disability Period"),
the Executive shall continue to (i) receive his full Base Salary and (ii)
participate in the Benefit Plans. Such payments made to the Executive during the
Disability Period shall be reduced by the sum of the amounts, if any, payable to
the Executive at or prior to the time of any such payment under disability
benefit plans of the Company or under the Social Security disability insurance
program, and which amounts were not previously applied to reduce any such
payment.
(b) DEATH. If the Executive's employment hereunder is
terminated as a result of death, then:
(i) the Company shall pay the Executive's
estate or designated beneficiary, as soon as practicable after the Date
of Termination, any Base Salary installments due in the month of death
and any reimbursable expenses, accrued or owing the Executive hereunder
as of the Date of Termination;
(ii) the Options granted to the Executive
pursuant to the Option Award (if such Option Award has been approved by
the shareholders as provided in Section 5(b)(ii)) shall become vested
and exercisable, as of the Date of Termination, to the extent such
Option Award would have otherwise become vested on or before the first
anniversary of the Date of Termination, and all vested Options, as well
as all stock options granted pursuant to the Prior Agreement ("Prior
Agreement Options") shall remain exercisable for a period of one year
following such Date of Termination and shall thereafter be completely
forfeited and cancelled; any Options that would not have become vested
and exercisable on or before the first anniversary of the Date of
Termination shall terminate and be forfeited as of the Date of
Termination; and
(iii) the portion of the Restricted Shares
that have not vested as of the Date of Termination equal to the number
of such unvested Restricted Shares multiplied by a fraction, the
numerator of which is 36 minus the number of full months remaining in
the Employment Period (disregarding the earlier termination thereof)
after the Date of Termination and denominator of which is 36, shall
become
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vested as of the Date of Termination and the restrictions imposed
thereon shall lapse. The balance of such unvested Restricted Shares
shall be forfeited to the Company (without further action on the part
of the Company or the Executive) as of the Date of Termination, and the
Executive shall have no further rights with respect to such balance.
(c) DISABILITY. If the Executive's employment
hereunder is terminated as a result of Disability, then:
(i) the Company shall pay the Executive, as
soon as practicable after the Date of Termination, any Base Salary and
any reimbursable expenses, accrued or owing the Executive hereunder for
services as of the Date of Termination;
(ii) the Option granted to the Executive
pursuant to the Option Award (if such Option Award has been approved by
the shareholders as provided in Section 5(b)(ii)) shall become vested
and exercisable, as of the Date of Termination, to the extent such
Option Award would have otherwise become vested on or before the first
anniversary of the Date of Termination, and all vested Options, as well
as the Prior Agreement Options, shall remain exercisable for a period
of three years following such Date of Termination and shall thereafter
be completely forfeited and cancelled; any Options that would not have
become vested and exercisable on or before the first anniversary of the
Date of Termination shall terminate and be forfeited as of the Date of
Termination; and
(iii) the portion of the Restricted Shares
that have not vested as of the Date of Termination equal to the number
of such unvested Restricted Shares multiplied by a fraction, the
numerator of which is 36 minus the number of full months remaining in
the Employment Period (disregarding the earlier termination thereof)
after the Date of Termination and denominator of which is 36, shall
become vested, and the restrictions imposed thereon shall lapse. The
balance of such unvested Restricted Shares shall be forfeited to the
Company (without further action on the part of the Company or the
Executive) as of the Date of Termination, and the Executive shall have
no further rights with respect to such balance.
(d) CAUSE OR BY EXECUTIVE OTHER THAN FOR GOOD REASON.
If the Executive's employment hereunder is terminated by the Company for Cause
or by the Executive other than for Good Reason, then:
(i) the Company shall pay the Executive, as
soon as practicable after the Date of Termination, any Base Salary and
any reimbursable expenses accrued or owing the Executive hereunder for
services as of the Date of Termination; and
(ii) the Executive shall immediately forfeit
any unvested Restricted Shares and any unvested portion of the Option
Award. In the event of
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termination by the Company for Cause, the Executive shall have the
right to exercise the vested unexercised portion of the Option Award
for a period of ninety (90) days after the Date of Termination, and the
unexercised portion of such Option Award shall be forfeited thereafter.
In the event of termination by the Executive other than for Good Reason
the Executive shall have the right to exercise the vested unexercised
portion of the Option Award for a period of one year following the Date
of Termination and the unexercised portion of such Option Award shall
be forfeited thereafter.
(e) TERMINATION BY COMPANY WITHOUT CAUSE OR BY THE
EXECUTIVE WITH GOOD REASON. If the Executive's employment hereunder is
terminated by the Company (other than for Cause or Disability) or by the
Executive for Good Reason, then:
(i) the Company shall pay the Executive, as
soon as practicable after the Date of Termination, any Base Salary and
any reimbursable expenses, accrued or owing the Executive hereunder for
services as of the Date of Termination;
(ii) the Company shall immediately pay to the
Executive as liquidated damages and not as a penalty a lump sum amount
equal to the total Base Salary that would have otherwise been payable
to the Executive with respect to the period commencing immediately
following the Date of Termination and ending on January 31, 2001, at
the annualized rate in effect at the time Notice of Termination is
given;
(iii) the Option granted to the Executive
pursuant to the Option Award shall become fully vested and exercisable,
and the Restricted Shares shall become fully vested, as of the Date of
Termination. The Option Award, as well as each Prior Agreement Option,
shall remain exercisable for the balance of its original 10-year term;
and
(iv) the Executive shall continue to
participate in all employee benefit plans and programs in which the
Executive was entitled to participate immediately prior to the Date of
Termination, in accordance with the terms of such plans and programs as
in effect from time to time, through January 31, 2001; provided that
the Executive's continued participation is permitted under the general
terms and provisions of such plans and programs. In the event that the
Executive's participation in any such plan or program is barred, the
Company shall arrange to provide the Executive and his dependents with
benefits substantially the same as those which the Executive and his
dependents would otherwise have been entitled to receive under such
plans and programs from which their continued participation is barred
or provide their economic equivalent.
(f) TERMINATION UPON CHANGE IN CONTROL. If the
Executive shall elect to terminate his employment under this Agreement upon a
Change in Control, the Company shall pay to the Executive the payments described
in Sections 11(e)(i), (ii), (iii) and (iv) above.
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12. GROSS-UP FOR EXCISE TAX. In the event that the Executive
receives any payment or benefit (including but not limited to the payments or
benefits pursuant to Section 11 of this Agreement) (a "Payment") that is subject
to the excise tax (the "Excise Tax") under Section 4999 of the Internal Revenue
Code of 1986, as amended (the "Code"), the Company shall pay to the Executive,
as soon thereafter as practicable, an additional amount (a "Gross-Up Payment")
such that the net amount retained by the Executive, after deduction of any
Excise Tax imposed upon the Payment and any federal, state and local income tax
and Excise Tax imposed upon the Gross-Up Payment shall be equal to the Payment.
The determination of whether an Excise Tax is due in respect of any payment or
benefit, the amount of the Excise Tax and the amount of the Gross-Up Payment
shall be made by an independent auditor (the "Auditor") jointly selected by the
Company and the Executive and paid by the Company. If the Executive and the
Company cannot agree on the firm to serve as the Auditor, then the Executive and
the Company shall each select one nationally recognized accounting firm and
those two firms shall jointly select the nationally recognized accounting firm
to serve as the Auditor. Notwithstanding the foregoing, for purposes of
determining the Gross-Up Payment in respect of any Payment, (i) any other
payments or benefits received or to be received by the Executive in connection
with a Change in Control or the Executive's termination of employment (whether
pursuant to the terms of this Agreement or any other plan, arrangement or
agreement with the Company, any person whose actions result in a Change in
Control or any person affiliated with the Company or such person) shall be
treated as "parachute payments" within the meaning of Section 28OG(b)(2) of the
Code, and all "excess parachute payments" within the meaning of Section 28OG of
the Code shall be treated as subject to the Excise Tax, unless in the opinion of
tax counsel selected by the Auditor, such other payments or benefits (in whole
or in part) do not constitute parachute payments, or are otherwise not subject
to the Excise Tax, and (ii) the Executive shall be deemed to pay federal income
tax at the highest marginal rate applicable in the calendar year in which the
Gross-Up Payment is made, and state and local income taxes at the highest
marginal rate of taxation in the state and locality of the Executive's residence
on the Date of Termination, net of the maximum reduction in federal income taxes
which could be obtained from deduction of such state and local taxes. In the
event the actual Excise Tax or such income tax is more or less than the amount
used to calculate the Gross-Up Payment, the Executive or the Company, as the
case may be, shall pay to the other an amount reflecting the actual Excise Tax
or such income tax, plus interest on the amount of such repayment at the rate
provided in Section 1274(b)(2)(B) of the Code.
13. MITIGATION. The Executive shall not be required to mitigate
amounts payable pursuant to Section 11 hereof by seeking other employment or
otherwise, nor shall there be any offset against such payments on account of (a)
any remuneration attributable to any subsequent employment that he may obtain or
(b) any claims the Company may have against the Executive.
14. CONFIDENTIAL INFORMATION, REMOVAL OF DOCUMENTS,
NON-COMPETITION.
(a) CONFIDENTIAL INFORMATION. The Executive shall hold
in a fiduciary capacity for the benefit of the Company and its subsidiaries (the
"Sunbeam
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Entities") all trade secrets, confidential information, and knowledge or data
relating to the Sunbeam Entities and the businesses and investments of the
Sunbeam Entities, which shall have been obtained by the Executive during the
Executive's employment by the Company, including such information with respect
to any products, improvements, formulas, designs or styles, processes, services,
customers, suppliers, marketing techniques, methods, future plans or operating
practices ("Confidential Information"); PROVIDED, HOWEVER, that Confidential
Information shall not include any information known generally to the public
(other than as a result of unauthorized disclosure by the Executive) or any
specific information or type of information generally not considered
confidential by persons engaged in the same business as the Company, or
information disclosed by the Company or any officer thereof to a third party
without restrictions on the disclosure of such information. Except as may be
required or appropriate in connection with his carrying out his duties under
this Agreement, the Executive shall not, without the prior written consent of
the Company or as may otherwise be required by law or legal process, communicate
or divulge any such Confidential Information to anyone other than the Company
and those designated by the Company.
(b) REMOVAL OF DOCUMENTS. All records, files,
drawings, documents, models, and the like relating to the business of the
Sunbeam Entities, which the Executive prepares, uses or comes into contact with
and which contain Confidential Information shall not be removed by the Executive
from the premises of any Sunbeam Entity (without the written consent of the
Company) during or after the Employment Period unless such removal shall be
required or appropriate in connection with his carrying out his duties under
this Agreement, and, if so removed by the Executive, shall be returned to such
Sunbeam Entity immediately upon termination of the Executive's employment
hereunder.
(c) NON-COMPETITION. During (i) the Executive's
employment with the Company and (ii) the two (2) year period immediately
following the Executive's Date of Termination, the Executive (A) shall not
engage, anywhere within the geographical areas in which any Sunbeam Entity is
then conducting its business operations, directly or indirectly, alone, in
association with or as a shareholder, principal, agent, partner, officer,
director, employee or consultant of any other organization, in any business (a
"Competitive Business") which competes with any business then being conducted by
such Sunbeam Entity; (B) shall not solicit or encourage any officer, employee or
consultant of any of the Sunbeam Entities to leave the employ of any of the
Sunbeam Entities for employment by or with any Competitive Business; and (C)
shall not solicit, divert or take away, or attempt to divert or to take away,
the business or patronage of any of the customers or accounts, or prospective
customers or accounts, of any Sunbeam Entity, which were contacted, solicited or
served by the Executive while employed by the Company; provided, however, that
nothing herein shall prohibit the Executive from owning a maximum of two percent
(2%) of the outstanding stock of any publicly traded corporation. Following the
Date of Termination, ownership by the Executive of not more than five percent
(5%) of any publicly traded corporation shall not constitute a violation hereof.
If, at any time, the provisions of this Section 14(c) shall be determined to be
invalid or unenforceable, by reason of being vague or unreasonable as to area,
duration or scope of activity, this Section 14(c) shall be considered divisible
and shall become and be immediately amended to only such area, duration and
scope of activity as
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shall be determined to be reasonable and enforceable by the court or other body
having jurisdiction over the matter; and the Executive agrees that this Section
14(c) as so amended shall be valid and binding as though any invalid or
unenforceable provision had not been included herein. For purposes of this
Section 14(c), the design, manufacture and marketing of outdoor barbecue grills
and small kitchen appliances shall be construed to be a Competitive Business;
provided, however, that the gross revenues derived from sales of such products
by such competitor are greater than the lesser of (i) 10% of its total revenues
and (ii) $500,000,000.
(d) REMEDIES. In the event of a breach or threatened
breach of this Section 14, the Executive agrees that the Company shall be
entitled to apply for injunctive relief in a court of appropriate jurisdiction
to remedy any such breach or threatened breach, the Executive acknowledging that
damages would be inadequate and insufficient.
(e) CONTINUING OPERATION. Any termination of the
Executive's employment or of this Agreement shall have no effect on the
continuing operation of this Section 14.
15. INDEMNIFICATION. The Company shall indemnify the Executive
to the full extent permitted by law and the By-laws of the Company for all
expenses, costs, liabilities and legal fees which the Executive may incur in the
discharge of all his duties hereunder, including, without limitation, the right
to be paid in advance by the Company for his expenses in defending a civil or
criminal action, proceeding or investigation prior to the final disposition
thereof. The Executive shall be insured under the Company's Directors' and
Officers' Liability Insurance Policy as in effect from time to time.
Notwithstanding any other provision of this Agreement to the contrary, any
termination of the Executive's employment or of this Agreement shall have no
effect on the continuing operation of this Section 15.
16. SUCCESSORS; BINDING AGREEMENT.
(a) COMPANY'S SUCCESSORS. No rights or obligations of
the Company under this Agreement may be assigned or transferred by the Company
except that such rights or obligations may be assigned or transferred pursuant
to a merger or consolidation in which the Company is not the continuing entity,
or the sale or liquidation of all or substantially all of the business and/or
assets of the Company, provided that the assignee or transferee is the successor
to all or substantially all of the business and/or assets of the Company and
such assignee or transferee assumes the liabilities, obligations and duties of
the Company, as contained in this Agreement, either contractually or as a matter
of law. The Company will require any such successor to expressly assume and
agree to perform this Agreement in the same manner and to the same extent that
the Company would be required to perform it if no such succession had taken
place. As used in this Agreement (except in the definition of Change in
Control), "Company" shall mean the Company as hereinbefore defined and any
successor to its business and/or assets as aforesaid which executes and
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delivers the agreement provided for in this Section 16 or which otherwise
becomes bound by all the terms and provisions of this Agreement or by operation
of law.
(b) EXECUTIVE'S SUCCESSORS. This Agreement shall not
be assignable by the Executive. This Agreement and all rights of the Executive
hereunder shall inure to the benefit of and be enforceable by the Executive's
personal or legal representatives, executors, administrators, successors, heirs,
distributees, devisees and legatees. Upon the Executive's death, all amounts to
which he is entitled hereunder, unless otherwise provided herein, shall be paid
in accordance with the terms of this Agreement to the Executive's devisee,
legatee, or other designee or, if there be no such designee, to the Executive's
estate.
17. NOTICE. For the purposes of this Agreement, notices,
demands and all other communications provided for in this Agreement shall be in
writing and shall be deemed to have been duly given when delivered or (unless
otherwise specified) mailed by United States certified or registered mail,
return receipt requested, postage prepaid, addressed as follows:
If to the Executive:
David C. Fannin
3900 Galt Ocean Drive
Apartment 1601
Playa del Mar
Fort Lauderdale, FL 33308
If to the Company:
Sunbeam Corporation
1615 S. Congress Avenue
Delray Beach, Florida 33445
Attn: Chairman of the Compensation Committee
or to such other address as any party may have furnished to the other in writing
in accordance herewith, except that notices of change of address shall be
effective only upon receipt.
18. MISCELLANEOUS. No provisions of this Agreement may be
modified unless such modification is agreed to in writing signed by the
Executive and an authorized officer of the Company. Any waiver or discharge must
be in writing and signed by the Executive or such an authorized officer of the
Company, as the case may be. No waiver by either party hereto at any time of any
breach by the other party hereto of, or compliance with, any condition or
provision of this Agreement to be performed by such other party shall be deemed
a waiver of similar or dissimilar provisions or conditions at the same or at any
prior or subsequent time. The validity, interpretation, construction and
performance of this
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Agreement shall be governed by the laws of the State of Delaware without regard
to its conflicts of law principles.
19. WITHHOLDING. Any payments provided for in this Agreement
shall be paid net of any applicable withholding of taxes required under federal,
state or local law.
20. ARBITRATION.
(a) Except as otherwise provided herein, all
controversies, claims or disputes arising out of or related to this Agreement
shall be settled under the rules of the American Arbitration Association then in
effect in the State of Florida, as the sole and exclusive remedy of either
party, and judgment upon such award rendered by the arbitrator(s) may be entered
in any court of competent jurisdiction. The costs of the arbitration shall be
borne as determined by the arbitrators PROVIDED, HOWEVER, that if the Company's
position is not substantially upheld, as determined by the arbitrators, the
expenses of the Executive (including, without limitation, fees and expenses
payable to the AAA and the arbitrators, fees and expenses payable to witnesses,
including expert witnesses, fees and expenses payable to attorneys and other
professionals, expenses of the Executive in attending the hearings, costs in
connection with obtaining and presenting evidence and costs of transcription of
the proceedings), as determined by the arbitrators, shall be reimbursed to him
by the Company.
(b) Notwithstanding the provisions of Section 20(a)
above, the parties agree that nothing contained herein shall preclude the
Company from bringing an action in a court of competent jurisdiction (whether
prior to or during any arbitration proceeding) seeking to specifically enforce
the provisions of Section 14 hereof by means of seeking an injunction or other
equitable relief.
21. ENTIRE AGREEMENT; COUNTERPARTS. This Agreement and the
terms of the Option Plan set forth the entire agreement of the parties hereto in
respect of the subject matter contained herein, supersede all prior agreements,
promises, covenants, arrangements, communications, representations or
warranties, whether oral or written, by any officer, employee or representative
of any party hereto; and any prior agreement of the parties hereto or thereto in
respect of the subject matter contained herein or therein, including but not
limited to the Prior Agreement, is hereby terminated and cancelled. This
Agreement may be signed in counterparts.
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement on
February 20, 1998, to be effective as of the Effective Date.
SUNBEAM CORPORATION
By: /s/ PETER LANGERMAN
---------------------------------------
Name: Peter Langerman
Title: Chairman, Compensation Committee
DAVID C. FANNIN
/s/ DAVID C. FANNIN
---------------------------------------
16
EXHIBIT 10.e
SUNBEAM CORPORATION EXECUTIVE BENEFIT REPLACEMENT PLAN
(As Amended and Restated Effective December 15, 1994)
SECTION 1
INTRODUCTION
1.1. THE PLAN, THE COMPANY. SUNBEAM CORPORATION (formerly known as Sunbeam-Oster
Company, Inc.) (the "Company") established the Sunbeam-Oster Company, Inc. Execu
tive Benefit Retirement Plan effective as of December 15, 1994, and hereby
adopts the amendment and restatement of the plan, now known as SUNBEAM
CORPORATION EXEC UTIVE BENEFIT REPLACEMENT PLAN (the "Plan"). The Plan as set
forth herein is effec tive December 15, 1994 (the "Effective Date"), except as
otherwise specifically provided.
1.2. EMPLOYERS. The Company and each other organization that is an employer
under SUN BEAM CORPORATION 401(k) SAVINGS AND PROFIT SHARING PLAN (the "401(k)
Plan") shall be an "Employer" under this Plan unless specified to the contrary
by the Company by writing filed with the Committee described in subsection 1.4.
1.3. PURPOSE. The Company and certain related businesses maintain and are
employers under the 401(k) Plan, which is intended to meet the requirements of a
"qualified plan" under Sec tion 401(a) of the Internal Revenue Code. The purpose
of this Plan, a nonqualified plan, is generally to provide for eligible
employees benefits that such employees do not earn under the 401(k) Plan because
such employees do not participate in the 401(k) Plan.
The Plan generally will allow Participants to elect to "make" before-tax
contributions to the Plan in the same amount and same manner as under the terms
of the 401(k) Plan; the Employ ers will provide "matching contributions" based
on a Participant's before-tax contributions; lastly, the Employers will
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provide "profit sharing contributions" allocated based on each Participant's
Compensation for a year. This Plan is an unfunded plan maintained primarily for
the purpose of providing deferred compensation for a select group of management
or highly-compensated employees, as such plans are described in Sections 201(2),
301(a)(3), and 401(a)(1) of the Employee Retirement Income Security Act of 1974.
"Contributions" to the Plan are reflected through credits to bookkeeping
accounts that are adjusted periodically to reflect hypothetical investment
earnings. Participants are entitled to receive from the general assets of the
Employers cash payments equal to the vested portion of their account balances,
as set forth in the Plan.
1.4. PLAN ADMINISTRATION. The Plan is administered by the administrative
committee (the "Committee") that is responsible for administration of the 401(k)
Plan. To the extent appropriate, the Committee has the same powers, rights,
duties and obligations as are vested in the committee responsible for
administration of the 401(k) Plan.
1.5. COMPENSATION. For purposes of computing contributions and benefits under
the Plan, an employee's "Compensation" shall mean his compensation as defined
from time to time in Section 1.14 of the 401(k) Plan, determined, however,
without regard to any limits under Section 401(a)(17) of the Internal Revenue
Code.
SECTION 2
ELIGIBILITY FOR PARTICIPATION
2.1. COVERED EMPLOYEE. A "Covered Employee" means an employee of an Employer
under the Plan who is selected by the Company's board of directors or by a
person or committee authorized to act on behalf of the board of directors. An
employee who is selected shall con tinue as a Covered Employee until he
terminates employment with all Employers or until he is removed as a Covered
Employee by the Company's board of directors or by the
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person or committee authorized to act on its behalf effective as of the end of a
calendar year, whichever occurs first.
2.2. ELIGIBILITY. Subject to the conditions and limitations of the Plan, an
employee of an Em ployer shall become eligible to enroll in this Plan and shall
become a "Participant" on the first date occurring on or after the Effective
Date on which he is a Covered Employee.
2.3. PERIOD OF PARTICIPATION. An employee of an Employer who becomes a
Participant in this Plan will continue as a Participant in the Plan in
accordance with its provisions until all bene fits to which he is entitled under
the Plan have been distributed to him.
SECTION 3
BENEFITS
3.1. INTENT. Commencing on the Effective Date, the provisions of this Section 3
are intended to allow a Participant to elect to make before-tax contributions,
to earn "matching contribu tions" that are at the same rate as those made by his
Employer on behalf of 401(k) Plan Partic ipants, and to earn "profit sharing
contributions" at the same rate as those made on behalf of participants under
the 401(k) Plan.
3.2. BEFORE-TAX CONTRIBUTIONS.
(a) For 1994, a Participant may elect to make Before-Tax
Contributions of any or all of his Compensation attributable
to services performed after the Effective Date (but not more
than $9,240). Beginning January 1, 1995, a Participant may
elect to make Before-Tax Contributions in whole multiples of
his Compensation from 1% to 10%, but not in excess of the
amount by which Before-Tax Contributions are limited in the
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401(k) Plan because of Section 402(g) of the Internal Revenue
Code. A Participant's Before-Tax Contributions under this
subsection 3.2 shall be made pursuant to a compensation
deferral election by which the Participant elects to have his
Compensation reduced by the amount provided in the election,
and the Employer shall credit such amount to the Participant's
account as provided in subsection 3.6.
(b) An election shall be filed with the Participant's Employer
prior to the calendar year such contributions are to begin,
or, for contributions to be made in 1994, within ten days of
the Effective Date. If a Participant first becomes eligible to
make such contributions after the Effective Date and during,
but after the beginning of, any subsequent calendar year, such
Participant's deferral election must be filed with his Em
ployer not more than 30 days after so becoming eligible.
(c) A Participant's compensation deferral election under this
subsection 3.2 shall apply to Compensation otherwise payable
after the later to occur of the date the Participant becomes
eligible to make Before-Tax Contri butions and the date the
election is filed with his Employer. A Partici pant's
compensation deferral election, however, may be revoked by the
Participant before the beginning of any subsequent calendar
year. The revocation shall be effective as to Compensation the
Participant is enti tled to receive during that and subsequent
calendar years unless prior to the commencement of any
subsequent calendar year the Participant makes another
compensation deferral election. Such later election shall
apply as to Compensation otherwise payable during calendar
years beginning after such later election is made.
(d) Notwithstanding the foregoing, a Participant's compensation
deferral election automatically
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shall be revoked for any period he ceases, in the sole opinion
of the Committee, to be a member of a select group of
management or a highly-compensated employee.
3.3. EMPLOYER MATCHING CONTRIBUTIONS.
(a) For 1994, a Participant's Employer shall make a matching
contribution equal to 50% of the Participant's Before-Tax
Contributions for 1994; in addition the Participant's Employer
shall make a matching contribution equal to the matching
contribution the Participant is precluded from receiving under
the 401(k) Plan because of the limits of Internal Reve nue
Code Section 401(m). In no event will the matching
contribution for 1994 exceed $4,620.
(b) Beginning January 1, 1995, each calendar quarter a
Participant's Em ployer shall make a matching contribution on
behalf of the Participant equal to 100% of the Participant's
Before-Tax Contributions (disregard ing Before-Tax
Contributions in excess of 2% of a Participant's Compensation)
and 50% of the additional Before-Tax Contributions
(disregarding such contributions in excess of 4% of
Compensation) during the quarter, provided the Participant is
employed by an Em ployer on the last day of the quarter.
(c) In addition, beginning with the 1995 calendar year, a
Participant's Em ployer shall make an additional matching
contribution on behalf of the Participant as of the last day
of each calendar quarter so that the match ing contributions
for the Participant are equal to 100% of the Participant's
Before-Tax Contributions (disregarding Before-Tax Con
tributions in excess of 2% of the Participant's Compensation)
and 50% of the additional Before-Tax Contributions
(disregarding such contribu tions in excess of 4% of
Compensation) during the year, provided the
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Participant is employed by an Employer on the last day of the
quarter.
(d) Such Employer contributions shall be called "Employer Matching
Con tributions." The Employers shall make such contributions
by crediting Participants' accounts as provided in subsection
3.6. Beginning with the 1995 calendar year, the Employer
Matching Contribution for a Par ticipant for any year shall
not exceed 50% of the then current limit un der Section 402(g)
of the Internal Revenue Code.
3.4. EMPLOYER PROFIT SHARING CONTRIBUTIONS. Each calendar year, a Participant's
Employer shall make on behalf of the Participant an "Employer Profit Sharing
Contribution" in an amount equal to a percentage of the Participant's
Compensation for the year, such percentage to be the percentage of compensation
received as a profit sharing contribution for such year by eligible participants
in the 401(k) Plan; provided a Participant shall not receive a Profit Shar ing
Contribution for a year unless he is employed by an Employer on the last day of
the year or terminated employment with all Employers during the year because of
death, Disability or Retirement (as such terms are defined in the 401(k) Plan).
The Employer shall make the contributions by crediting the Participants'
accounts as provided in subsection 3.6.
3.5. LIMITATION ON CONTRIBUTIONS. Notwithstanding the provisions of subsection
3.2, 3.3 and 3.4, in no event shall the contributions to the Plan made by or on
on behalf of a Participant ex ceed for any year the lesser of (a) $30,000 (or
such greater amount as may be provided under Section 415(c)(1)(A) of the
Internal Revenue Code); or (b) 25% of taxable earnings from the Employers as
reflected on Form W-2 (which earnings shall be adjusted by addition of any
compensation deferral contributions under this Plan and any deferrals or
reductions under Sections 401(k) and 125 of the Internal Revenue Code). The
limitation of this subsection shall be applied to reduce (i) first, Employer
Profit Sharing Contributions otherwise made on behalf of the Participant, and
(ii) then, Participant Before-Tax Contri-
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butions and any corre sponding Employer Matching Contributions made on behalf of
the Participant. The Employ ers shall compensate the Participant for any
Before-Tax Contributions that the Participant elected to make to the Plan but
that cannot be made because of such limitations.
3.6. SEPARATE ACCOUNTS. The Committee shall maintain separate bookkeeping
accounts in the name of each Participant to reflect the Participant's Before-Tax
Contributions, and the Em ployer Matching and Profit Sharing Contributions made
on his behalf. Contributions shall be credited (and payments shall be debited)
to accounts in such manner and at such time as the Committee shall determine on
a uniform basis. A Participant's accounts shall be deemed invested in
hypothetical investment funds ("Funds") in such proportions as the Participant
may elect. The Funds shall be those in which 401(k) Plan participants may direct
the invest ment of their accounts, unless the Committee shall determine
otherwise. Each Participant shall elect the Funds in which his accounts are
deemed to be invested pursuant to rules adopt ed by the Committee. If the
Participant fails to select such Funds, the Participant shall be deemed to have
elected such Fund as the Committee shall determine. Each Participant's ac counts
shall be adjusted as of such dates specified by the Committee to reflect
contributions, payments and the investment gains and losses of the Funds. One of
the Funds shall reflect investment in common stock of the Company ("Company
Stock") subject to the following rules:
(a) Employer Matching and Profit Sharing Contributions that are
credited to accounts on or after September 30, 1997 shall be
deemed invested in Company Stock, and Participants may not
elect otherwise.
(b) A Participant may elect that any percentage (up to 100%) of
the other portion of his existing accounts be deemed invested
in Company Stock, and any such election may not be reversed. A
Participant may elect that all or any percentage of his future
compensation deferrals be deemed invested in Company Stock,
and any such percentage may not be reduced.
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(c) Any election to have any portion of his accounts deemed
invested in Company Stock shall be subject to such rules as
the Committee may determine for any reason, including
compliance with federal or state securities laws.
3.7. TIME OF DISTRIBUTION; VESTING OF ACCOUNTS. Upon a Participant's termination
of employ ment with all Employers on account of death, Disability or Retirement,
the Participant (or in the event of his death, his Plan Beneficiary, as defined
in subsection 4.1) shall be entitled to receive the entire balance in all his
accounts in the manner provided in subsection 3.8. Upon a Participant's
termination of employment for any reason other than death, Disability or Retire
ment, the Participant shall be entitled to receive the entire balance in his
Before-Tax Contribu tion Account and the following percentage of his Employer
Matching and Profit Sharing Con tribution Accounts, based on his Years of
Service:
YEARS OF SERVICE VESTING PERCENTAGE
---------------- ------------------
Less than three 0%
Three but less than four 25%
Four but less than five 50%
Five or more 100%
For this purpose, Years of Service shall be Years of Qualifying Service as
determined under the 401(k) Plan. A Participant who is removed as a Covered
Employee (as provided in sub section 2.1) shall not be eligible to make
Before-Tax Contributions or to have Employer Matching Contributions or Employer
Profit Sharing Contributions made on his behalf for any period he is not a
Covered Employee; such a Participant may continue to elect the investment of his
accounts among the Funds as provided in subsection 3.6 and may be eligible for
pay ment of benefits in accordance with subsection 3.10 and 3.11, but shall not
be eligible for a distribution of accounts under subsections 3.7 and 3.8 until
he terminates employment with all Employers; such a Participant shall continue
to accrue Years of Service for vesting until he terminates employment with all
Employers.
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3.8. DISTRIBUTION OF ACCOUNTS. Unless the Participant elects installment
distributions as pro vided below, benefits that become payable under this Plan
shall be paid in a lump sum as soon as practicable after the Participant has
terminated employment with all Employers. A Partici pant may elect to receive
his accounts in annual installments with the first installment due by January 31
of the calendar year following the year in which the Participant terminates
employ ment; each successive installment shall be due by January 31 of the next
year. The distribu tion period shall be five years, and the amount of each
installment shall be equal to the ac count balances as of the December 31
preceding the distribution divided by the number of remaining installments, with
the last installment equal to the entire remaining account bal ances. Any such
election to receive installments must be made and filed with the Committee at
least twelve months before termination of employment. Upon the death of a
Participant, any remaining amounts in his accounts shall be paid to his
Beneficiary as soon as practicable after the Participant's death.
3.9. CHANGE IN CONTROL. Notwithstanding the provisions of subsections 3.7 and
3.8, a Partici pant shall be fully vested in his entire account balances upon a
Change in Control (as defined below). A Participant's entire account balances
shall be paid in a lump sum within 30 days after a Change in Control. A Change
in Control shall mean any of the following:
(a) any person other than an entity owned directly or indirectly
by the Ben eficial Owners of 50% or more of the combined
voting power of the Company's outstanding securities on the
effective date of this Plan be comes the Beneficial Owner
(directly or indirectly) of 50% or more of the combined voting
power of the Company's then outstanding securi ties; or
(b) a transaction or series of related transactions that results
in the sale of all or substantially all of the Company's
assets. As used in the preced ing sentence, the terms "person"
and "Beneficial Owner" shall have the meanings set forth in
Section 15 of the Equity Team Plan.
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3.10. IN-SERVICE PAYMENT OF BENEFITS. Prior to his termination of employment
with the Em ployers a Participant may elect to receive a portion (up to 90% but
subject to such minimum as the Committee may determine) of the vested balance in
his accounts provided that the Participant shall forfeit from the remaining
portion of his vested accounts 10% of the amount the Participant elects to
receive pursuant to this subsection. A Participant who receives a payment of
benefits pursuant to this subsection will be ineligible to make Participant
Before-Tax Contributions or to have Matching Contributions made on his behalf
for the twelve-month period beginning on the date he receives such benefits.
3.11. HARDSHIP WITHDRAWALS. A Participant may elect to receive all or a portion
(but subject to such minimum as the Committee may determine) of the vested
balance in his accounts if he has a "financial hardship," as determined by the
Committee. For this purpose a hardship may mean the following:
(a) Purchase (excluding mortgage payments) of a principal
residence for the Participant.
(b) Payment of tuition for the next semester, or quarter of
post-secondary education for the Participant, his or her
spouse, children or dependents.
(c) Unreimbursed medical expenses described in Section 213(d) of
the In ternal Revenue Code incurred by the Participant, his or
her spouse, or any dependents of the Participant (as defined
in Section 152 of the In ternal Revenue Code).
(d) The need to prevent the eviction of the Participant from his
or her prin cipal residence or foreclosure on the mortgage of
the Participant's prin cipal residence.
(e) Any other event that the Committee determines constitutes a
severe financial hardship to the Participant resulting from a
sudden and unex-
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pected illness or accident or other similar extraordinary and
unforesee able circumstances arising as a result of events
beyond the control of the Participant.
A determination by the Committee as to whether a hardship exists shall be
binding and con clusive on all parties. A Participant who receives a payment of
benefits pursuant to this sub secton will be ineligible to make Participant
Before-Tax Contributions or to have Matching Contributions made on his behalf
for the twelve-month period beginning on the date he re ceives such benefits.
SECTION 4
BENEFICIARIES, FUNDING
4.1. PLAN BENEFICIARY. A "Plan Beneficiary" means a person designated by a
Participant in writing and filed with the Committee prior to the Participant's
death. If a Participant failed to designate a Plan Beneficiary, or if the
designated person predeceases the Participant, the Par ticipant's Beneficiary
under the Plan shall be the same Beneficiary designated under the 401(k) Plan,
and in the absence of a designated Beneficiary under the 401(k) Plan, the Plan
Beneficiary shall be determined pursuant to the beneficiary rules contained in
the 401(k) Plan.
4.2. FUNDING. The Plan is an unfunded plan. Benefits payable under this Plan to
a Participant or his Plan Beneficiary shall be paid directly by the Employers
from their general assets.
SECTION 5
GENERAL PROVISIONS
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5.1. STATEMENT OF ACCOUNTS. The Committee shall furnish each Participant with a
statement of his accounts under this Plan quarterly or as otherwise determined
by the Committee.
5.2. EMPLOYMENT RIGHTS. Establishment of the Plan shall not be construed to give
any Participant the right to be retained in the employ of the Company or any
other Employer or to any benefits not specifically provided by this Plan.
5.3. INTERESTS NOT TRANSFERABLE. Except as to withholding of any tax under the
laws of the United States or any state or municipality or pursuant to a valid
"domestic relations order," the interests of Participants and their Plan
Beneficiaries in the Plan are not subject to the claims of their creditors and
may not be voluntarily or involuntarily transferred, assigned, alienated or
encumbered. For purposes of this subsection, a valid domestic relations order
shall mean a state court divorce order or property settlement agreement that is
part of a divorce order that directs payment of all or a portion of a
Participant's accounts in a lump sum, without interest, to the Participant's
spouse, former spouse or children.
5.4. CONTROLLING LAW. The laws of Florida shall be controlling in all matters
relating to the Plan.
5.5. GENDER AND NUMBER. Where the context admits, words in the masculine gender
shall include the feminine and neuter genders, the plural shall include the
singular, and the singular shall include the plural.
5.6. ACTION BY THE COMPANY. Any action required of or permitted by the Company
under the Plan shall be by resolution of its Board of Directors or by resolution
of its duly authorized committee or person or persons.
5.7. SUCCESSOR TO THE COMPANY OR ANY OTHER EMPLOYER. The term "Company" as used
in the Plan shall include any successor to
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the Company by reason of merger, consolidation, the purchase or transfer of all
or substantially all of the Company's assets, or otherwise. The term "Employer"
as used in the Plan with respect to the Company or any subsidiary shall include
any successor to that corporation by reason of merger, consolidation, the
purchase or transfer of all or substantially all of the assets of that
corporation, or otherwise. After a Change in Control, as defined in subsection
3.9, the benefits of Participants and beneficiaries shall be guaranteed by any
entity that, directly or indirectly, owns more than 50% of the outstanding
shares of common stock or the combined voting power of the Company.
5.8. FACILITY OF PAYMENT. Any amounts payable hereunder to any person under a
legal disability or who, in the judgment of the Committee, is unable to properly
manage his affairs may be paid to the legal representative of such person or may
be applied for the benefit of such person in any manner which the Committee may
select. Any payment made in accordance with the next preceding sentence shall be
a full and complete discharge of any liability for such payment under the Plan.
5.9. TAX WITHHOLDING. The Employers may withhold for tax purposes (including
income tax and FICA) from amounts otherwise payable under this Plan or from
amounts otherwise payable from the Employers to Participants.
SECTION 6
AMENDMENT AND TERMINATION
Although the Employers expect to continue the Plan, the Company must necessarily
reserve and reserves the right to amend the Plan from time to time or to
terminate the Plan at any time. However, no amendment of the Plan, nor the
termination of the Plan, may cause the reduction or cessation of any benefits
that were accrued and payable up to the date of such amendment or termination.
With respect to the preceding sentence, an accrued benefit shall equal amounts
allocated to a Participant's
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accounts prior to the date of the amendment or termination of the Plan.
SECTION 7
CLAIMS AND REVIEW
7.1. CLAIMS PROCEDURE. If a claim for benefits under the Plan is denied in whole
or in part, the employee will receive written notification. The notification
will include specific reasons for the denial, specific reference to pertinent
Plan provisions, a description of any additional material or information
necessary to process the claim and why such material or information is
necessary, and an explanation of the claims review procedure. If the Committee
fails to respond within 90 days, the claim is treated as denied.
7.2. REVIEW PROCEDURE. Within 60 days after the claim is denied or, if the claim
is deemed denied, within 150 days after the claim is filed, an employee (or his
duly authorized repre sentative) may file a written request with the Committee
for a review of his denied claim. The employee may review pertinent documents
that were used in processing his claim, submit pertinent documents, and address
issues and comments in writing to the Committee. The Committee will notify the
employee of its final decision in writing. In its response, the Committee will
explain the reason for the decision, with specific references to pertinent Plan
provisions on which the decision was based. If the Committee fails to respond to
the request for review within 60 days, the review is treated as denied.
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EXHIBIT 10.f
AMENDED AND RESTATED
SUNBEAM CORPORATION
STOCK OPTION PLAN
(Amended as of October 30, 1997)
1. PURPOSE.
The purpose of the Sunbeam Corporation Stock Option Plan is to provide
incentives for selected executives, key employees, Outside Directors
and Designated Others to promote the financial success and progress of
Sunbeam Corporation. Capitalized terms used throughout this Plan shall
have the meanings ascribed to them in Section 16 hereof.
2. STOCK SUBJECT TO THE PLAN.
(a) Subject to the provisions of this Section and Section 9, the
maximum number of shares of Stock that may be issued under the
Plan is 11,500,000 shares, to be allocated as follows:
(i) 11,300,000 shares may be issued in connection with
the grant of Options pursuant to Section 3; and
(ii) 200,000 shares may be issued in connection with the
grant of Restricted Stock Awards pursuant to Section
3.
Such shares may be either authorized but unissued shares or
treasury shares.
(b) The number of shares subject to an Option or a Restricted
Stock Award that has been granted under the Plan shall no
longer be charged against the limitation provided in Section
2(a), and may again be made subject to Options or Restricted
Stock Awards, as the case may be, to the extent that Options
expire unexercised or are terminated, surrendered or canceled
before exercise or Restricted Stock Awards are forfeited,
terminated, surrendered or canceled due to a Participant's
termination of employment or service as an Outside Director or
for any other reason.
3. GRANTS OF OPTIONS AND RESTRICTED STOCK AWARDS.
(a) Subject to the provisions of the Plan, the Committee may at
any time, or from time to time, grant Options to officers, key
employees, Outside Directors of the Company (or its
subsidiaries) and Designated Others.
(b) Subject to the provisions of the Plan, the Committee may at
any time, or from time to time, grant shares of Stock which
are subject to the Restrictions set forth in Section 4(b)
("Restricted Stock") to officers, key employees and Outside
Directors of the Company (or its subsidiaries) and Designated
Others.
(c) The Committee shall cause shares of Restricted Stock to be
issued to each Outside Director immediately and automatically
upon his or her election, re-election or appointment as a
Director of the Company. If such Outside Director is elected
at an Annual Meeting of the Shareholders of the Company (the
"Annual Meeting"), the number of shares of Restricted Stock to
be issued shall be 1,500. The number of shares of Restricted
Stock to be issued to an Outside Director who is
<PAGE>
elected or appointed at any time other than at an Annual
Meeting shall be 1,500 multiplied by a fraction, the numerator
of which shall be the number of days after the date of such
election to and including the date of the next Annual Meeting
(which for such purpose shall be assumed to be the next May
15) and the denominator of which shall be 365; provided,
however, (i) that in the case of an Outside Director elected
to the Board for the first time during the period beginning
August 1, 1996 and ending December 31, 1996, the number of
such shares shall not be prorated, and each such Outside
Director shall receive 1,500 shares for the period of his
service between the date of his election and the date of the
next Annual Meeting (assumed to be May 15, 1997); and (ii)
that each incumbent Outside Director, elected prior to August
1, 1996, shall receive that number of shares of Restricted
Stock which results from applying to 1,500 such shares the
proration formula provided above, using for such calculation
the period from August 6, 1996 until and including the date of
the next Annual Meeting (assumed to be May 15, 1997).
(d) Deleted.
(e) Each Option shall be evidenced by a Stock Option Agreement,
and each Restricted Stock Award shall be evidenced by a
Restricted Stock Award Agreement, each in a form approved by
the Committee or by a Company officer designated by the
Committee.
(f) Notwithstanding any other provision of the Plan, no person
shall be granted Options for more than 250,000 shares of Stock
or Restricted Stock Awards for more than 25,000 shares of
Stock in any single fiscal year of the Company.
4. TERMS AND CONDITIONS.
(a) OPTIONS.
(i) An Option shall entitle the Participant who holds it
to exercise the Option on and subject to the terms,
conditions and restrictions of the Plan (as the Plan
may be amended from time to time) and such additional
terms, conditions and restrictions as may be imposed
by the Committee at the time of grant.
(ii) Unless otherwise specified by the Committee, the term
of each Option granted prior to May 15, 1996 (herein
the "1996 Amendment Date") and which is In-the-Money
as of the 1996 Amendment Date shall commence on the
date of grant of the Option and shall expire at the
close of business on the earlier of (A) the tenth
anniversary of the date of grant or (B) the 45th day
following the termination of the Participant's
employment with, or service as director of, the
Company (or a subsidiary). Unless otherwise specified
by the Committee, the term of each Option granted on
or after the 1996 Amendment Date and the term of each
Option granted prior to the 1996 Amendment Date which
is Out- of-the-Money as of the 1996 Amendment Date,
shall commence on the Grant Date of the Option and
shall expire at the close of business on the earliest
of (A) the tenth anniversary of the Grant Date; or
(B) the third anniversary of the date of termination
of the Participant's employment with, or service as a
director of, the Company (or a subsidiary), in the
case of retirement or termination by the Company
without Cause; or (C) 90 days after the date of
termination of employment in the case of resignation,
voluntary departure or termination by the Company
with Cause; or (D) in the case of a Designated Other,
the
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<PAGE>
date specified in the Stock Option Agreement.
Notwithstanding the foregoing sentence, Participants
who are subject to Section 16(b) of the Exchange Act
shall have until the earlier of (A) the tenth
anniversary of the Grant Date; or (B) the third
anniversary of the date of termination of their
employment with, or service as a director of the
Company, regardless of the cause, within which to
exercise Options which are granted on or after the
1996 Amendment Date and Options which are
Out-of-the-Money as of the 1996 Amendment Date;
provided, however, that no such Option may be
exercised by any such person during the period
beginning on the date of termination and ending on
the six month anniversary of the date of termination.
(iii) All Restrictions shall lapse with respect to the
Restricted Stock subject to a Restricted Stock Award
made to an Outside Director pursuant to Section 3(c)
hereof immediately and automatically upon the
Director's acceptance of election or appointment as a
Director of the Company, as evidenced in such manner
as may be established by the Committee. Unless
otherwise specified by the Committee (which is
empowered to provide different vesting schedules with
respect to any grant of Options or Restricted Stock),
all other Options granted under the Plan (from and
after July 18, 1996) shall become exercisable with
respect to one-third of the shares subject to the
Option beginning on the first anniversary of the
Grant Date and as to an additional one-third on each
of the second and third anniversaries of the Grant
Date (each twelve month period ending on an
anniversary of a Grant Date being referred to herein
as an "Option Year"), provided in each case that the
Participant shall have remained an employee or a
director of the Company (or a subsidiary), or in the
case of a Designated Other, shall have remained in
the position set forth in the Stock Option Agreement,
continuously since the Grant Date. Notwithstanding
the foregoing, during the remaining term of any
options (if not already so exercisable) : (A) if a
Participant's employment or service as a director, or
in the case of a Designated Other, the period of
service as defined in the Stock Option Agreement,
terminates due to death, all Options held by the
Participant at death shall become immediately
exercisable in full; (B) upon a Change in Control,
all Options held by such Participant who is then an
employee or director of the Company (or a subsidiary)
shall become immediately exercisable in full; and (C)
in the event that the exercisability of an Option
accelerates due to a Change in Control, Participants
who are subject to Section 16(b) of the Exchange Act
may not sell the shares acquired upon such
accelerated exercise within six months of the Grant
Date of such Option.
(iv) Except to the extent permitted by Rule 16b-3 or its
successor, Options shall not be sold, assigned,
transferred, pledged, hypothecated, or otherwise
disposed of, except by will or the laws of descent
and distribution, pursuant to a qualified domestic
relations order ("QDRO") as defined in the Code or
ERISA (or the rules thereunder) or as otherwise set
forth in this Section 4(a)(iv). Each Option shall be
exercisable during the lifetime of a Participant only
by the Participant to whom it was granted, and after
the Participant's death only by the Participant's
estate or legal representative. To the extent
exercisable, an Option may be exercised in whole at
any time, or in part from time to time, during the
term of the Option.
(v) Any Option may be converted, modified, forfeited or
canceled, prospectively or retroactively, in whole or
in part, by the Committee in its sole discretion;
provided, phowever, that no such action shall
adversely affect the rights of any Participant under
any
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<PAGE>
Option granted prior to such action without his
consent. Except as may be otherwise provided in an
Agreement, the Committee may, in its sole discretion,
in whole or in part, waive any restrictions or
conditions applicable to, or accelerate the vesting
of, any Option.
(b) STOCK AWARDS.
(i) Upon the grant of a Restricted Stock Award, a stock
certificate representing a number of shares of Stock
equal to the number of shares of Restricted Stock
granted to a Participant shall be registered in the
Participant's name but shall be held in custody by
the Company for the Participant's account. The
Participant shall generally have the rights and
privileges of a stockholder as to such Restricted
Stock, including the right to vote such Restricted
Stock, except that the following restrictions (the
"Restrictions") shall apply: (A) the Participant
shall not be entitled to delivery of the certificate
until the Restricted Period (set forth in paragraph
(iii) below) applicable to such Restricted Stock has
expired or terminated and until any other conditions
prescribed by the Committee are satisfied; (B) none
of the Restricted Stock may be sold, transferred,
assigned, pledged, or otherwise encumbered or
disposed of during the Restricted Period applicable
to such Restricted Stock and prior to the
satisfaction of any other conditions prescribed by
the Committee; and (C) shares of Restricted Stock
shall be forfeited and all rights of the Participant
to such Restricted Stock shall terminate without
further obligation on the part of the Company unless
the Participant has (1) remained an employee or a
director of the Company (or a subsidiary) until the
expiration or termination of the Restricted Period
applicable to such Restricted Stock (or in the case
of a Designated Other, the duration specified in the
Restricted Stock Award Agreement) and (2) satisfied
any other conditions prescribed by the Committee
applicable to such Restricted Stock. At the
discretion of the Committee, cash and stock dividends
with respect to the Restricted Stock may be either
currently paid or withheld by the Company for the
Participant's account. Cash dividends so withheld by
the Committee shall not be subject to forfeiture.
Upon the forfeiture of any shares of Restricted
Stock, such forfeited Restricted Stock shall be
transferred to the Company without further action by
the Participant. The Participant shall have the same
rights and privileges, and be subject to the
Restrictions, with respect to any shares or other
property received pursuant to Section 9.
(ii) Upon the expiration or termination of the Restricted
Period with respect to shares of Restricted Stock and
the satisfaction of any other conditions prescribed
by the Committee, the Restrictions applicable to such
Restricted Stock shall lapse and a stock certificate
for the number of shares of Stock with respect to
which the Restricted Period has lapsed shall be
delivered, free of all restrictions, except any that
may be imposed by law, to the Participant or the
Participant's beneficiary or estate, as the case may
be. The Company shall not be required to deliver any
fractional share of Stock but will pay, in lieu
thereof, the Fair Market Value (determined as of the
date the Restricted Period expires or terminates) of
such fractional share to the Participant or the
Participant's beneficiary or estate, as the case may
be. No payment will be required from the Participant
upon the issuance or delivery of any shares of Stock
under this paragraph, except that any amount
necessary to satisfy applicable federal, state or
local tax requirements shall be withheld or paid
promptly upon notification of the amount due and
prior to or concurrently with the issuance or
delivery of a certificate representing such shares.
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<PAGE>
(iii) Unless otherwise specified by the Committee at the
time of the award and included in the Restricted
Stock Award Agreement, the Restrictions shall also
lapse with respect to one- third of the Restricted
Stock subject to all other Restricted Stock Awards on
each of the first through the third anniversaries of
the Grant Date, provided in each case that the
Participant shall have remained an employee or a
director of the Company (or a subsidiary)
continuously since the date of grant (or in the case
of a Designated Other, shall have complied with the
terms and conditions of the Restricted Stock Award
Agreement). Notwithstanding the foregoing: (A) if a
Participant's employment or service as a director, or
in the case of a Designated Other, the period defined
in the Restricted Stock Award Agreement, terminates
due to death, the Restrictions shall lapse with
respect to all Restricted Stock Awards held by the
Participant at death (if not already so lapsed); (B)
upon a Change in Control, the Restrictions shall
lapse with respect to all Restricted Stock Awards
held by such Participant who is an employee or
director of the Company (or a subsidiary) (if not
already so lapsed); and (C) in the event of an
accelerated lapse of Restrictions due to a Change in
Control, Participants who are subject to Section
16(b) of the Exchange Act may not sell the shares of
Stock whose Restrictions have so lapsed within six
months of the Grant Date of the Restricted Stock
Award pursuant to which such Stock was received. The
"Restricted Period" as to any shares constituting
part of a Restricted Stock Award shall be the period
of time commencing with the Grant Date of a
Restricted Stock Award and ending with the date on
which the Restrictions lapse with respect to any such
shares, or any portion thereof.
(c) In the event that the acceleration of (i) the exercisability
of an Option or (ii) the lapse of Restrictions relating to
Restricted Stock upon a Change in Control and a Change in
Status results in excise tax pursuant to Section 4999 of the
Code, or any successor or similar provision thereto, or
comparable state or local tax laws, the Company shall pay to
the Participant such additional compensation as is necessary
(after taking into account all Federal, state and local income
and excise taxes payable by the Participant as a result of the
receipt of such compensation ) to place the Participant in the
same after-tax position he would have been in had no such
excise tax (or any interest or penalties thereon) been paid or
incurred. The amount of such payment shall be determined by
the independent accounting firm serving as the Company's
outside auditor immediately prior to the Change in Control.
5. EXERCISE OF OPTIONS.
(a) The Exercise Price of the shares purchasable under an Option
shall be the Fair Market Value per share on the Grant Date of
such Option, subject to subsequent adjustment pursuant to the
provisions of Section 9.
(b) Options shall be considered exercised (herein the "Exercise
Date") on the date written notice, in such form as the
Committee may prescribe, is received by the Option Plan
Administrator of the Company, advising of the exercise of an
Option and either transmitting payment of the total Exercise
Price for the number of shares of Stock involved or electing
one of the alternative payment procedures set forth in Section
5(c) below.
(c) The Exercise Price shall be paid in cash (including cash
obtained through a margin loan on the shares as to which the
Option is being exercised) or (and provided (x) the use of the
following procedure by a Participant would comply with
safeguards established by the Committee designed to
5
<PAGE>
to avoid "short-swing" profits to the Participant under
Section 16(b) of the Exchange Act, and (y) does not otherwise
violate any applicable laws) through (i) a broker-assisted
cashless exercise program established by the Committee, based
on the actual proceeds from the sale of share of Stock; or
(ii) in shares of Stock, valued on the basis of the closing
market price of the Stock on the Exercise Date.
(d) Subject to the provisions of Section 6 and the other
provisions of the Plan, the Stock Option Agreement and the
Option, the Company shall issue shares of Stock in the
Participant's name as soon as practicable (but in no event
later than 30 days) after the Exercise Date. The Participant
shall not be deemed to be a holder of any shares pursuant to
an Option, and shall not have any rights as a stockholder in
connection with such shares, until the date of transfer of
shares of Stock to the Participant. The Company shall have no
liability of any nature whatsoever to any Participant by
reason of any change in the market price of the Stock during
the period of time between the Exercise Date and the date on
which any shares of Stock resulting from the exercise are
issued or sold.
6. RESTRICTIONS.
(a) Notwithstanding any other provision of the Plan, an Option or
Restricted Stock Award to the contrary, no Option shall be
exercised, and the Company shall not be obligated to issue or
transfer shares of Stock under any Option or Restricted Stock
Award, until the Company shall have received such assurances
as the Company may reasonably request from its counsel that
the exercise of the Option and the issuance and transfer of
shares pursuant to the Option or Restricted Stock Award will
not violate the Securities Act of 1933, as amended, or any
other applicable Federal or state laws. In connection with any
such issuance or transfer, the Participant shall, if requested
by the Company, give assurances satisfactory to counsel to the
Company, in respect of the Participant's investment intent or
such other matters as counsel to the Company may deem
necessary or desirable to assure compliance with all
applicable legal requirements.
(b) No provisions of the Plan or any Option or Restricted Stock
Award shall be interpreted or construed to obligate the
Company to register any Stock under Federal or state law.
(c) The Company and the Committee reserve the right to investigate
at any time the circumstances surrounding any exercise of
Options, including any investigation regarding whether a
Participant is in compliance with the provisions of Section 13
hereof (or has threatened or is reasonably believed to intend
to violate the provisions of Section 13 hereof), and the
Company and the Committee shall have no liability or
responsibility to any Participant for any alleged damage
sustained by the Participant by reason of any delay in the
implementation of an Option exercise during the pendency of
any such investigation, whether by reason of any change in the
market price of the Stock or otherwise.
(d) Notwithstanding any other provision hereof, the Committee
shall have the right at any time to deny or delay a
Participant's exercise of Options if such Participant is
reasonably believed by the Committee (i) to be engaged in
material conduct adversely affecting the Company or (ii) to be
contemplating such conduct, unless and until the Committee
shall have received reasonable assurance that the Participant
is not engaged in, and is not contemplating, such material
conduct adverse to the interests of the Company.
6
<PAGE>
(e) Participants are and at all times shall remain subject to the
trading window policies adopted by the Company from time to
time throughout the period of time during which they may
exercise Options or sell Restricted Stock granted pursuant to
the Plan. Participants may request at any time a copy of any
calendar of scheduled open windows by contacting the Option
Plan Administrator.
7. FAIR MARKET VALUE.
(a) During any period that the Company's Stock is Actively Traded,
Fair Market Value shall be equal to the average selling price
of a share of Stock on the exchange or national market system
on which the Stock is traded, on the date of grant of an
option to acquire Stock pursuant to the Plan, or pursuant to
such other method as the Committee may reasonably specify for
determining the Stock's Fair Market Value.
(b) During any period during which the Company's Stock is not
Actively Traded, Fair Market Value shall be determined by the
Committee.
8. TERM.
This Amended and Restated Plan shall be effective as of the date set
forth on the first page hereof. No Option or Restricted Stock Award
shall be granted under the Plan after February 12, 2006, but the Plan
shall continue in effect thereafter with respect to any previously
granted Options and Restricted Stock Awards that remain outstanding and
the duration of any such grant or award shall not be affected by the
expiration of the Plan.
9. ADJUSTMENTS.
In the event that any recapitalization, or reclassification, split-up
or consolidation of shares of Stock shall be effected, or the
outstanding shares of Stock shall, in connection with a merger or
consolidation of the Company or a transaction or series of related
transactions that results in the sale of all or substantially all of
the Company's assets, be exchanged for a different number or class of
shares of stock or other securities or property of the Company or any
other Person, or a record date or dates for determination of holders of
Stock entitled to receive a dividend payable in stock or a liquidating
dividend (or series of dividends) shall occur, equitable and
proportional adjustments aimed at preventing the inequitable
enlargement or dilution of any rights hereunder shall be made to (i)
the number and class of shares or other securities or property that may
be issued or transferred pursuant to the Plan and any outstanding
Options and Restricted Stock Awards and (ii) the Exercise Price to be
paid per share under any outstanding Options; PROVIDED, HOWEVER, that
in the event of a merger or consolidation of the Company, or similar
transaction pursuant to which the outstanding Stock is exchanged for
cash or other property, the unexercised Options shall thereafter be
exercisable for, and the Restricted Stock Awards shall entitle the
Participant to receive, the cash or other property which an Option or
Restricted Stock Award holder, as the case may be, would have been
entitled to receive had the Options been exercised, or the Restrictions
relating to the Restricted Stock Award lapsed, immediately prior to the
record date for such merger, consolidation or similar transaction
except to the extent that provision is made in writing in connection
with such transaction for (1) the assumption of the Options by, or the
substitution for the Options of new options covering the stock of, a
successor acquiring corporation, in each case providing terms no less
favorable to the holder of such Options than would an assumption or
substitution described in Treasury Regulation /section/1.425-1(a) that
would not constitute a "modification" for purposes of Code
/section/424(a), and (2) the substitution for Restricted Stock Awards
of stock of a successor or acquiring corporation having terms no less
favorable to the holder thereof than the terms
7
<PAGE>
of the Restricted Stock Award in effect before such transaction.
10. ADMINISTRATION.
(a) The Plan shall be administered by the Committee. The Committee
shall, subject to the provisions of the Plan, have full power
and authority to administer the Plan, to select the
Participants in the Plan, and, except for grants and awards
which are automatically made to Outside Directors as provided
pursuant to Section 3 of the Plan, to determine the number of
shares to be made subject to each Option and Restricted Stock
Award and all terms and conditions of each Option and
Restricted Stock Award. The Committee shall have the power to
interpret the Plan and to adopt such rules for the
administration, interpretation and application of the Plan as
are consistent therewith and to interpret, amend or revoke any
such rules. All actions taken and all interpretations and
determinations made by the Committee shall be final and
binding upon all Participants, the Company and all other
interested persons, absent a determination by a court of
competent jurisdiction that the Committee has acted in bad
faith or has engaged in reckless or willful misconduct.
(b) Members of the Committee and the Board and officers
administering this Plan shall be fully protected in taking
actions under the Plan or in relying upon the advice of
counsel and shall incur no liability except for bad faith,
recklessness or willful misconduct in the performance of their
duties.
(c) Except as required by Rule 16b-3 with respect to grants of
Options to individuals who are subject to Section 16 of the
Exchange Act, or as otherwise required for compliance with
Rule 16b-3 or other applicable law, the Committee may delegate
all or any part of its authority under the Plan to an
employee, employees or committee of employees.
(d) To the extent the Committee deems it necessary, appropriate or
desirable to comply with foreign law or practices and to
further the purpose of the Plan, the Committee may, without
amending this Plan, establish special rules applicable to
Options granted to Participants who are foreign nationals, are
employed outside the United States, or both, including rules
that differ from those set forth in the Plan, and grant
Options to such Participants in accordance with those rules.
(e) Determinations by the Committee under the Plan relating to the
form, amount and terms and conditions of grants and awards
need not be uniform, and may be made selectively among persons
who receive or are eligible to receive grants and awards under
the Plan, whether or not such persons are similarly situated.
11. GENERAL PROVISIONS.
(a) Nothing in this Plan or in any instrument executed pursuant
hereto shall confer upon any Person any right to continue in
the employment or other service of the Company (or any
subsidiary), or shall affect the right of the Company (or any
subsidiary) to terminate the employment or other service of
any person at any time with or without Cause.
(b) The Company may make appropriate provisions for the
withholding of any taxes which the Company determines it is
required to withhold in connection with any Option or
Restricted Stock Award including, at the request of a
Participant and provided that it does not violate any
applicable
8
<PAGE>
laws, the payment of such withholding taxes through a
broker-assisted sale of a sufficient number of shares
underlying the Option or subject to the Restricted Stock Award
or by delivery to the Company of shares of Stock previously
owned by the Participant, in either case having an actual sale
price equal to the amount of such taxes. Notwithstanding the
foregoing, a Participant whose transactions in Stock are
subject to Section 16(b) of the Exchange Act may make a share
withholding election only if it complies with safeguards
established by the Committee designed to avoid "short swing"
profits to the Participant under Section 16(b) of the Exchange
Act. The certificates evidencing a Restricted Stock Award made
to an Outside Director pursuant to Section 3(c) hereof shall
be automatically reduced by 28% to provide for the estimated
Federal income tax payment obligation of the Outside Director,
or by such other higher percentage as may be required by law
to be withheld, with the Company remitting to the appropriate
tax authorities the fair market value of the Restricted Stock
Award for which the certificates are not so delivered.
(c) By accepting any benefits under the Plan, each Participant,
and each Person claiming under or through the Participant,
shall be conclusively deemed to have indicated acceptance and
ratification of, and consent to, all provisions of the Plan.
Each Participant hereby further agrees that amendments and
modifications to the Plan, which may be adopted from time to
time by the Committee and/or the Board of the Corporation (as
set forth in Section 12 hereof), shall be binding upon such
Participant and upon all Options or Restricted Stock which the
Participant may hold, including (with retroactive effect)
Options or Restricted Stock previously granted to the
Participant, except to the extent set forth in Section 12
hereof.
(d) With respect to Participants subject to Section 16 of the
Exchange Act, transactions under the Plan are intended to
comply with all applicable provisions of Rule 16b-3 or its
successor. To the extent any provision the Plan or action by
the Plan administrators fails to so comply, it shall be deemed
null and void, to the extent permitted by law and deemed
advisable by the Committee.
(e) A Participant shall have no rights as a stockholder of the
Company with respect to any Shares to be issued upon exercise
of an Option until such Participant has exercised such Option
and becomes a holder of such Shares.
12. AMENDMENTS; MODIFICATION AND TERMINATION.
This Plan may be amended or modified by the Committee, with
ratification by the Board, or terminated by the Board, at any time and
in any respect, except that no amendment shall be made without the
approval of the shareholders of the Company if shareholder approval
would be required by Rule 16b-3 under the Exchange Act or any other law
or rule of any governmental authority, stock exchange or other
self-regulatory organization to which the Company is subject. No such
amendment, modification or termination shall have effect to reduce the
number of shares as to which any Option or Restricted Stock Award
previously has been granted to a Participant; to extend the vesting
schedule with respect to any Option or Restricted Stock Award or to
extend the period of non-competition or confidentiality as set forth in
Section 13 hereof. In the event of the passage of any law, rule or
regulation or a determination by any regulatory agency or court,
requiring an adverse change in the Company's accounting or tax
treatment relating to the Plan, the Committee shall have the right to
modify the terms of outstanding Options and Restricted Stock Awards to
the extent necessary to avoid the adverse consequences of such change.
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<PAGE>
13. CONFIDENTIALITY AND NON-COMPETITION; CONDUCT NOT IN THE INTEREST OF THE
CORPORATION.
By accepting Options or Restricted Stock Awards under the Plan and as a
condition to the exercise of Options and the enjoyment of any of the
benefits of the Plan, each Participant agrees as follows:
(a) CONFIDENTIALITY -- During the period of each Participant's
employment or service as a director with the Company (or the
Participant's engaging in any other activity with or for the
Company) and for a two year period thereafter, each
Participant shall treat and safeguard as confidential and
secret all Confidential Information received by such
Participant at any time. Without the prior written consent of
the Company, except as required by law, such Participant will
not disclose or reveal any Confidential Information to any
third party whatsoever or use the same in any manner except in
connection with the businesses of the Company and its
subsidiaries. In the event that a Participant is requested or
required (by oral questions, interrogatories, requests for
information or documents, subpoena, civil investigative demand
or other process) to disclose (i) any Confidential Information
or (ii) any information relating to his opinion, judgment or
recommendations concerning the Company or its subsidiaries as
developed from the Confidential Information, Participant will
provide the Company with prompt written notice of any such
request or requirement so that the Company may seek an
appropriate protective order or waive compliance with the
provisions contained herein. If, failing the entry of a
protective order or the receipt of a waiver hereunder,
Participant is, in the reasonable opinion of his counsel,
compelled to disclose Confidential Information, Participant
shall disclose only that portion of the Confidential
Information which his counsel advises that he is compelled to
disclose and will exercise best efforts to obtain assurances
that confidential treatment will be accorded such Confidential
Information.
(b) NON-COMPETITION -- During the period of employment with the
Company or its subsidiaries of any Participant (other than a
director) compensated at a rate (including bonuses) in excess
of $75,000 per year in cash compensation from his employment
with the Company or any of its subsidiaries (determined as of
the most recently completed fiscal year of the Company), and,
for a two-year period thereafter (the "Non-Compete Period"),
each such Participant shall not, without prior written consent
of the Committee, do, directly or indirectly, any of the
following:
(1) own, manage, control or participate in the ownership,
management, or control of, or be employed or engaged
by or otherwise affiliated or associated with, any
other corporation, partnership, proprietorship, firm,
association or other business entity, or otherwise
engage in any business which competes with the
business of the Company or any of its subsidiaries
(as such business is conducted during the term of
such Participant's employment with the Company or its
subsidiaries) in the geographical regions in which
such business is conducted; PROVIDED, HOWEVER, that
the ownership of a maximum of one percent of the
outstanding stock of any publicly traded corporation
shall not violate this covenant; or
(2) employ, solicit for employment or assist in employing
or soliciting for employment any present, former or
future employee, officer or agent of the Company or
any of its subsidiaries.
In the event any court of competent jurisdiction should
determine that the foregoing covenant of non-competition is
not enforceable because of the extent of the geographical area
or the duration
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thereof, then the Company and the affected Participant hereby
petition such court to modify the foregoing covenant to the
extent, but only to the extent, necessary to create a covenant
which is enforceable in the opinion of such court, with the
intention of the parties that the Company shall be afforded
the maximum enforceable covenant of non-competition which may
be available under the circumstances and applicable law.
(c) Each Participant acknowledges that remedies at law for any
breach by him of this section 13 may be inadequate and that
the damages resulting from any such breach are not readily
susceptible to being measured in monetary terms. Accordingly,
each Participant acknowledges that upon his violation of any
provision of this Section 13, the Company will be entitled to
immediate injunctive relief and may obtain an order
restraining any threatened or future breach. Each Participant
further agrees, subject to the proviso at the end of this
sentence, that if he violates any provision of this Section
13, he shall immediately forfeit any rights and benefits under
this Plan and shall return to the Company any unexercised
Options and forfeit the rights under any Restricted Stock
Awards and shall return any shares of Stock held by such
Participant received upon exercise of any Option or the lapse
of the Restrictions relating to Restricted Stock Awards
granted hereunder, together with any proceeds from sales of
any shares of Stock received upon exercise of such Options or
the lapse of Restrictions of such Restricted Stock Awards;
PROVIDED, HOWEVER, that upon violation of subsection (b) of
this Section, the forfeiture and return provisions contained
in this sentence shall apply only to Options which have become
exercisable, and Restricted Stock, the Restrictions with
respect to which have lapsed, and in any such case the
proceeds of sales therefrom, during the two year period
immediately prior to termination of the Participant's
employment. Nothing in this Section 13 will be deemed to
limit, in any way, the remedies at law or in equity of the
Company, for a breach by Participant of any of the provisions
of this Section 13.
(d) Each Participant agrees to provide written notice of the
provisions of this Section 13 to any future employer of
Participant, and the Company expressly reserves the right to
provide such notice to the Participant's future employer(s).
(e) If any provision or part of any provision of this Section 13
is held for any reason to be unenforceable, (i) the remainder
of this Section 13 shall nevertheless remain in full force and
effect and (ii) such provision or part shall be deemed to be
amended in such manner as to render such provision
enforceable.
14. GOVERNING LAW.
The validity, construction and effect of the Plan and any rules
relating to the Plan shall be determined in accordance with the laws of
the State of Delaware and applicable Federal law.
15. ARBITRATION.
The Company and each Participant hereby agree that in the event of any
dispute or controversy arising with respect to the Plan, any Stock
Option Agreement, the exercise of any Option (or the disallowance of
any exercise at any time, for any reason) or any other matter relating
to Options or Restricted Stock Awards, then such dispute or controversy
shall be submitted by the parties to mandatory and binding arbitration
before a panel of arbitrators appointed by the American Arbitration
Association ("AAA"), each of whom shall be knowledgeable in matters of
securities in general and, if possible, the administration of stock
option
11
<PAGE>
programs similar to the Plan. The arbitration proceedings shall be
conducted in whichever of the following cities is closest to the work
location of the affected Participant: Delray Beach, Florida; New York,
New York; Kansas City, Missouri; Jackson, Mississippi; or Atlanta,
Georgia. The decision of the Company as to which city is closest to the
work location of the Participant shall be conclusive and binding,
except for manifest error. The decision of the arbitrators shall be
rendered in writing, shall be promptly rendered after a hearing on the
matter and shall be final, conclusive and binding and may be
incorporated in a final judgment rendered by any court of competent
jurisdiction.
Notwithstanding the foregoing, nothing contained herein shall preclude
the Company from seeking injunctive or other relief from any court of
competent jurisdiction to enforce the provisions of Section 13 hereof.
16. DEFINITIONS.
The following terms, when used in the Plan, shall have the meanings set
forth below:
ACTIVELY TRADED: Trading of Company Stock on the New York
Stock Exchange, the American Stock Exchange or the NASDAQ
National Market System in an average weekly volume that equals
at least 0.20% of the then outstanding Company Stock for each
of at least four weeks in a row.
BENEFICIAL OWNER: With respect to any securities of the
Company, any Person who is a beneficial owner of such
securities as defined in rule 13d-3 under the Exchange Act.
The Committee may from time to time adopt interpretations or
pronouncements as to who shall be deemed to be Beneficial
Owners of the Company's outstanding voting securities as of a
given date, which interpretation shall be final and binding on
all Participants, the Company and all other interested
Persons.
BOARD: The Board of Directors of the Company.
CAUSE: Any cause stated in an employment agreement between the
Company and the Participant and/or material violations of
employment agreements or the terms of this Plan, acts of
dishonesty with respect to the Company, insubordination,
divulging confidential information about the Company,
interference with the relationship between the Company and any
supplier, client, customer, similar person, or performance of
any act or omission which the Committee, in its sole
discretion, deems to be sufficiently injurious to the interest
of the Company to constitute cause.
CHANGE IN CONTROL: The occurrence of any of the following: (i)
a merger or consolidation to which the Company is a party if
the individuals and entities who were stockholders of the
Company immediately prior to the effective date of such merger
or consolidation are Beneficial Owners of less than 50% of the
total combined voting power for election of directors of the
surviving corporation following the effective date of such
merger or consolidation; or (ii) any Person becomes the
Beneficial Owner in the aggregate of securities of the Company
representing 50% or more of the total combined voting power of
the Company's then issued and outstanding securities unless
such Person (or a Person owned directly or indirectly by such
Person) was the Beneficial Owner, directly or indirectly, as
of the Grant Date applicable to the affected Participant, of
more than 50% of the Company's voting securities outstanding
as of such Grant Date; or (iii) the sale of all or
substantially all of the assets of the Company to any person
or entity that is not a wholly-owned subsidiary of the
Company; or (iv) the stockholders of the Company approve any
12
<PAGE>
plan or proposal for the liquidation of the Company.
CODE: Internal Revenue Code of 1986, as amended.
COMMITTEE: A committee designated by the Board consisting of
not less than two members of the Board who are "non-employee
directors" as defined in Rule 16b-3 under the Exchange Act, to
administer the Plan.
COMPANY: Sunbeam Corporation (formerly known as Sunbeam-Oster
Company, Inc.)
CONFIDENTIAL INFORMATION: Any information not generally known
to the public, including, without limiting the generality of
the foregoing, any customer lists, supplier lists, trade
secrets, invention, formulas, methods or processes, whether or
not patented or patentable, channels of distribution, business
plans, pricing policies and records, financial information of
any sort and inventory records of the Company or any affiliate
(and such other information normally understood to be
confidential or otherwise designated as such in writing by the
Company or its subsidiaries). It is not necessary, however,
that any information be formally designated as "confidential"
if it falls within any of the foregoing categories and is not
generally known to the public.
DESIGNATED OTHER: Any consultant, advisor, contractor or agent
of the Company or its subsidiaries, who is not an employee,
officer or Outside Director of the Company and who is granted
Options or a Restricted Stock Award pursuant to this Plan.
EFFECTIVE DATE: January 1, 1991; Amended and Restated as of
May 15, 1996.
ERISA: Titles I and IV of the Employee Retirement Income
Security Act of 1974, as amended.
EXCHANGE ACT: The Securities Exchange Act of 1934, as amended.
EXERCISE PRICE: The Exercise Price of shares purchasable upon
exercise of an Option, as determined pursuant to the terms of
Section 5(a).
FAIR MARKET VALUE: The fair market value of a share of Stock,
as determined pursuant to the terms of Section 7.
GRANT DATE: The date as of which the Committee (or such other
committee of the Board of Directors of the Company as shall be
empowered to grant Options or to make awards of Restricted
Stock) shall grant Options or Restricted Stock, as the case
may be, to a Participant under the Plan, as so designated by
such Committee.
IN-THE-MONEY: Options to acquire Stock are considered to be
"in-the-money" if the exercise price of the Option is less
than the current market price of the Stock.
NEXT OPTION INCREMENT: This term shall have the meaning
ascribed to it in Section 4(a)(iii).
OPTION: An option, granted under the Plan, to purchase shares
of Stock at the Exercise Price. Options granted under the Plan
shall not be incentive stock options pursuant to Section 422
of the Code.
13
<PAGE>
OPTION YEAR: This term shall have the meaning ascribed to it
in Section 4(a)(iii).
OUT-OF-THE-MONEY: Options to acquire Stock are considered to
be "out-of-the-money" if the exercise price is equal to or
greater than the current market price of the Stock.
OUTSIDE DIRECTOR: A director of the Company who is not either:
(i) an officer or employee of the Company, or (ii) a
Beneficial Owner of, or an officer or employee of any Person
which is a direct or indirect Beneficial Owner of, more than
10% of the outstanding Stock.
PARTICIPANT: An officer, employee, Outside Director of the
Company (or a subsidiary of the Company) or Designated Other
who is granted an Option or a Restricted Stock Award under the
Plan by the Committee. Upon the death of a Participant, the
"Participant" shall be deemed to mean the Participant's estate
or legal representative.
PERSON: Any individual, corporation, partnership, association,
company, trust, joint venture or other organization or entity
or group of associated persons or entities acting in concert.
As used herein, references to the male gender shall include
the female gender or the neuter, as applicable.
PLAN: The Sunbeam Corporation Stock Option Plan herein set
forth, as it may be amended from time to time.
RESTRICTED PERIOD: This term shall have the meaning ascribed
to it in Section 4(b)(iii).
RESTRICTED STOCK: Shares of Stock granted pursuant to Section
3(b) or (c) of the Plan.
RESTRICTED STOCK AWARD: The grant of Shares of Restricted
Stock to a Participant pursuant to Section 3(b) or 3(c) of the
Plan.
RESTRICTED STOCK AWARD AGREEMENT: The agreement described in
Section 3(e).
RESTRICTIONS: The restrictions described in Section 4(b)
relating to Restricted Stock.
"SHARES" or "STOCK": The Common Stock, $0.01 par value per
share, of the Company, or such other class of securities as
may be applicable pursuant to the provisions of Section 9.
STOCK OPTION AGREEMENT: The agreement described in Section
3(e).
14
EXHIBIT 10g
SUNBEAM BONUS PLAN
ELIGIBILITY: All exempt and non-exempt salaried employees. Note: "hourly"
production workers, Operating Committee members and certain other executives are
not eligible to participate. Additionally, any employee hired after October 1
will not be eligible until the following year.
PLAN DESIGN: 1. Each fiscal year, the Operating Committee will establish a
minimum level of acceptable performance, below which the Bonus Pool will be
zero. Performance of the corporation will be expressed in terms of Earnings Per
Share (EPS).
2. All payouts under the Plan as well as Plan parameters are fully
discretionary and any payments under the Plan must be authorized by the
Operating Committee.
3. All payments will be in cash, paid during the first quarter
following the end of the fiscal year, to all eligible participants actively
employed at the time of the payment.
TARGET BONUS
POOL: The target bonus pool will be the sum total of each participant's target
bonus amount. The actual earned bonus pool will be determined at fiscal year end
by comparing actual financial performance to targeted performance as determined
by the Corporate Business Plan. No bonuses will be paid if the Company fails to
reach its minimum objectives.
TARGET PAYOUTS: EXEMPT - a percentage of base earnings
NON-EXEMPT - a flat dollar amount (prorated for partial -year
service)
PAYOUT
PARAMETERS: 1. below minimum performance standard = 0
payout
2. target minimum payout threshold = 75% of target
3. target maximum payout limit = 200% of target
Individual Payouts
1. four (4) quantitative objectives established for
each employee
2. objectives reviewed by supervisor
3. payout will be determined by a combination of
Company EPS performance and individual performance
against mutually agreed upon goals & objectives
<PAGE>
1998 SUNBEAM BONUS PLAN
Self Funding Structure
===============================================================================
EPS* Available % of Target Bonus
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
$1.89 or less 0%
- -------------------------------------------------------------------------------
$1.90 - $2.04 75%
- -------------------------------------------------------------------------------
$2.05 - $2.19 85%
- -------------------------------------------------------------------------------
$2.20 - $2.29 100%
- -------------------------------------------------------------------------------
$2.30 - $2.39 120%
- -------------------------------------------------------------------------------
$2.40 - $2.49 140%
- -------------------------------------------------------------------------------
$2.50 - $2.59 160%
- -------------------------------------------------------------------------------
$2.60 - $2.69 180%
- -------------------------------------------------------------------------------
$2.70 or more 200%
===============================================================================
* Earnings per share (EPS): Basically, net sales minus total cost of doing
business (overhead, materials, direct labor) equals operating profit. Operating
profit minus taxes and debt expense equals net earnings. Net earnings divided by
outstanding shares of stock equals EPS.
What does this mean to me? If our sales go up and/or if our expenses and debt
are reduced, then earnings per share (and the value of Sunbeam stock) goes up.
EXAMPLES:
At the end of 1998, the EPS is $2.25. 100% of the target bonus is available for
payout.
If the EPS is $1.75, then our minimum threshold is not reached and no bonuses
will be paid.
If the EPS is $2.75, then the maximum 200% of target bonus will be available for
payout.
Remember, once the Company performance has established the AVAILABLE bonus
amount (e.g., 100% of target in our first example and 200% of target in our
third example), your INDIVIDUAL bonus will be determined by your performance on
your four (4) objectives.
All awards are discretionary and must be approved by the Operating Committee.
EXHIBIT 10.q
THIRD AMENDMENT dated as of November 6, 1997 (this
"Amendment") to the Credit Agreement dated as of
September 16, 1996 (as amended, the "Credit
Agreement"), among SUNBEAM CORPORATION (the
"Company"), the BORROWING SUBSIDIARIES (as defined
therein), - the LENDERS (as defined therein), and THE
CHASE MANHATTAN BANK, as Administrative Agent.
A. Pursuant to the Credit Agreement, the Lenders have agreed to extend
credit to the Borrowers, in each case pursuant to the terms and subject to the
conditions set forth therein.
B. The Company has requested that certain provisions contained in the
Credit Agreement be amended as set forth herein.
C. The Lenders are willing to so amend the Credit Agreement pursuant to
the terms and subject to the conditions set forth herein.
D. Capitalized terms used herein without definition shall have the
meanings ascribed to them in the Credit Agreement.
In consideration of the premises and the agreements, provisions and
covenants herein contained, the parties hereto hereby agree, on the terms and
subject to the conditions set forth herein, as follows:
SECTION 1. AMENDMENT TO SECTION 1.01 OF THE CREDIT AGREEMENT. The
following definition is hereby added to Section 1.01 of the Credit Agreement:
"PERMITTED RECEIVABLES PROGRAM" shall mean one or more receivables
securitization programs pursuant to which
<PAGE>
the Company or any of its Subsidiaries sells accounts receivable in "true sale"
transactions (rather than financing transactions) to a bankruptcy remote special
purpose subsidiary of Sunbeam Products Inc. that will own no other assets and
will conduct no business other than the purchase and sale of such receivables,
and the transfer of such accounts receivable by such special purpose subsidiary
in transactions recorded as sales for accounting purposes to one or more third
party purchasers; PROVIDED, that (a) it is the intention of the parties that no
such program will result in the recording of indebtedness on a consolidated
balance sheet of the Company in accordance with GAAP and applicable regulations
of the Securities and Exchange Commission and (b) the amount of such receivables
programs will at no point in time exceed $100,000,000 in the aggregate for all
such programs.
SECTION 2. AMENDMENT TO DEFINITION OF INDEBTEDNESS. The definition of
"Indebtedness" in Section 1.01 of the Credit Agreement is hereby amended and
restated as follows:
"INDEBTEDNESS" of any Person means, without duplication, (a) all
obligations of such Person for borrowed money or with respect to deposits or
advances of any kind, (b) all obligations of such Person evidenced by bonds,
debentures, notes or similar instruments, (c) all obligations of such Person
upon which interest charges are customarily paid, (d) all obligations of such
Person under conditional sale or other title retention agreements relating to
property acquired by such Person, (e) all obligations of such Person in respect
of the deferred purchase price of property or services (excluding current
accounts payable incurred in the ordinary course of business), (f) all
Indebtedness of others secured by (or for which the holder of such Indebtedness
has an existing right, contingent or otherwise, to be secured by) any Lien on
property owned or acquired by such Person, whether or not the Indebtedness
secured thereby has been assumed, (g) all Guarantees by such Person of
Indebtedness of others, (h) all Capital Lease Obligations of such Person, and
(i) all obligations, contingent or otherwise, of such Person as an account party
in respect of letters of credit, letters of guaranty and bankers' acceptances.
The Indebtedness of any Person shall include the Indebtedness of any other
entity
<PAGE>
(including any partnership in which such Person is a general partner) to the
extent such Person is liable therefor as a result of such Person's ownership
interest in or other relationship with such entity, except to the extent the
terms of such Indebtedness provide that such Person is not liable therefor;
PROVIDED, HOWEVER, that when used in connection with the Company or any
Subsidiary, Indebtedness shall not include any obligation of the Company or any
Subsidiary in connection with any Permitted Receivables Program.
SECTION 3. AMENDMENT TO SECTION 6.02 OF THE CREDIT AGREEMENT. Section
6.02 of the Credit Agreement is hereby amended to add a new subsection (f) at
the end thereof as follows:
(f) sales of accounts receivable pursuant to Permitted
Receivables Programs, and Liens arising in connection with Permitted
Receivables Programs (to the extent the sale by the Company or any
Subsidiary of accounts receivable pursuant to any such program is
deemed to give rise to a Lien in favor of the purchaser thereof).
SECTION 4. REPRESENTATIONS AND WARRANTIES. The Company represents and
warrants to each of the Lenders and the Agent that:
(a) Before and after giving effect to this Amendment, the
representations and warranties set forth in Article 3 of the Credit
Agreement are true and correct in all material respects with the same
effect as if made on and as of the date hereof, except to the extent
such representations and warranties expressly relate to an earlier date
(specifically excluding herefrom representations and warranties made
only as of the date of the Credit Agreement).
(b) After giving effect to this Amendment, no Event of Default
or Default has occurred and is continuing.
SECTION 5. CONDITION TO EFFECTIVENESS. This Amendment shall become
effective as of the date when the Agent shall have received counterparts of this
Amendment
<PAGE>
that, when taken together, bear the signatures of the Company and the Required
Lenders.
SECTION 6. CREDIT AGREEMENT. Except as specifically stated herein, the
provisions of the Credit Agreement are and shall remain in full force and
effect. As used therein, the terms "Agreement", "herein", "hereunder",
"hereinafter", "hereto", "hereof" and words of similar import shall, unless the
context otherwise requires, refer to the Credit Agreement as amended hereby.
SECTION 7. APPLICABLE LAW. THIS AMENDMENT SHALL BE GOVERNED BY, AND
CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK.
SECTION 8. COUNTERPARTS. This Amendment may be executed in two or more
counterparts, each of which shall constitute an original but all of which when
taken together shall constitute but one contract.
SECTION 9. EXPENSES. The Company agrees to reimburse the Agent for its
out-of-pocket expenses in connection with this Amendment, including the
reasonable fees, charges and disbursements of Cravath, Swaine & Moore, counsel
for the Agent.
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be
duly executed by their respective authorized officers as of the day and year
first written above.
SUNBEAM CORPORATION,
by
/s/ Steven A. Dalberth
-------------------------------------
Name: Steven A. Dalberth
Title: Director of Treasury
THE CHASE MANHATTAN BANK,
individually and as Administrative
Agent,
by
/s/ K. M. Sharf
-------------------------------------
<PAGE>
Name: K. M. Sharf
Title: Vice President
BANK OF AMERICA NT & SA,
by
/s/ Michelle W. Kacergis
----------------------------------
Name: Michelle W. Kacergis
Title: Managing Director
NATIONSBANK,
by
/s/ Andrew M. Airheart
----------------------------------
Name: Andrew M. Airheart
Title: Senior Vice President
THE BANK OF NEW YORK,
by
/s/ David C. Siegel
----------------------------------
Name: David C. Siegel
Title: Vice President
THE BANK OF NOVA SCOTIA,
by
/s/ W. J. Brown
----------------------------------
Name: W. J. Brown
Title: Vice President
CREDIT LYONNAIS, NEW YORK BRANCH,
by
/s/ Walter N. Brenner
----------------------------------
Name: Walter N. Brenner
Title: Executive Vice President
<PAGE>
THE FIRST NATIONAL BANK OF CHICAGO,
by
/s/ Robert H. Wolohan
----------------------------------
Name: Robert H. Wolohan
Title: Assistant Vice
President/ Authorized
Agent
FIRST UNION NATIONAL BANK OF
FLORIDA,
by
/s/ Mary A. Morgan
----------------------------------
Name: Mary A. Morgan
Title: Senior Vice President
NORTHERN TRUST COMPANY,
by
/s/ James F.T. Marhart
----------------------------------
Name: James F.T. Marhart
Title: Vice President
WACHOVIA BANK OF GEORGIA, N.A.,
by
/s/ Patrick A. Phelan
----------------------------------
Name: Patrick A. Phelan
Title: AVP
THE BANK OF TOKYO-MITSUBISHI,
by
/s/ R. Glass
----------------------------------
Name: R. Glass
Title: Vice President
CREDIT SUISSE,
<PAGE>
by
/s/ R. Finney
----------------------------------
Name: R. Finney
Title: Managing Director
by
/s/ Christian Bourqui
----------------------------------
Name: Christian Bourqui
Title: Associate
THE FUJI BANK LIMITED,
by
/s/ Raymond Ventura
----------------------------------
Name: Raymond Ventura
Title: Vice President & Manager
SAKURA BANK, LIMITED,
by
/s/ Hiroyasu Imanishi
----------------------------------
Name: Hiroyasu Imanishi
Title: V.P. & Senior Manager
EXHIBIT 10.r
================================================================================
RECEIVABLES SALE
AND
CONTRIBUTION AGREEMENT
dated as of December 4, 1997
SUNBEAM PRODUCTS, INC.
and
SUNBEAM ASSET DIVERSIFICATION, INC.
================================================================================
<PAGE>
RECEIVABLES SALE AND CONTRIBUTION AGREEMENT (this "SALE AGREEMENT"),
dated as of December 4, 1997, by and between
1. Sunbeam Products, Inc., a Delaware corporation (the "PARENT"),
and
2. Sunbeam Asset Diversification, Inc. , a Delaware corporation
("FUNDING").
It is agreed as follows:
Section 1. DEFINITIONS.
Unless otherwise defined herein, all capitalized terms shall have the
meanings set forth in the Receivables Purchase and Servicing Agreement (the
"RECEIVABLES PURCHASE AGREEMENT") dated as of December 4, 1997, by and among
Funding, as Seller, Llama Retail Funding, L.P., as Purchaser, Capital USA,
L.L.C., as Administrative Agent and the Parent, in its individual capacity and
as Servicer.
Section 2. AGREEMENT TO TRANSFER.
(a) The Parent hereby agrees, on each Weekly Settlement Date (as
defined below), to sell, transfer, absolutely assign, set-over, convey and/or
contribute to the capital of Funding, all Receivables of each Designated Obligor
owned by the Parent as of the close of business on the immediately preceding
Weekly Settlement Date. The Parent and Funding shall enter into a certificate of
assignment (the "SALE ASSIGNMENT"), dated as of the date hereof, in the form of
Exhibit A hereto, evidencing such sale, transfer, absolute assignment, set-over,
conveyance and/or contribution of such Receivables by the Parent to Funding.
Each Receivable so sold, transferred, absolutely assigned, conveyed, set-over
and/or contributed to Funding is referred to herein as a "SOLD RECEIVABLE."
(b) On the first Business Day of each week or such other day of the
week as agreed to from time to time by the Parent and Funding (each, a "WEEKLY
SETTLEMENT DATE"), Funding shall pay the Parent in respect of all Sold
Receivables constituting (as of the date such Receivable was transferred to
Funding) Eligible Receivables sold, transferred, absolutely assigned, conveyed
or set-over to Funding during the week immediately preceding such Weekly
Settlement Date an amount (the "Sale Price") equal to the lesser of (i) the cash
received by Funding on such day in respect of its financing of such Eligible
Receivables and (ii) the fair market value of such Eligible Receivables. To the
extent that the Sale Price for such Eligible Receivables is less than the fair
market value thereof, the difference shall be deemed a capital contribution by
the Parent to Funding. The Sale Price shall be payable by Funding in full by
wire transfer on each Weekly Settlement Date to an account designated by the
Parent on or before such Weekly Settlement Date. The fair market value of each
Sold Receivable that, as of the date such Receivable was transferred to Funding,
did not constitute an Eligible Receivable shall be deemed a capital contribution
by the Parent to Funding.
2
<PAGE>
(c) Upon the sale, transfer, absolute assignment, set-over, conveyance
and/or contribution of the Sold Receivables the ownership of each such
Receivable shall be vested in Funding and the Parent shall not take any action
inconsistent with such ownership and shall not claim any ownership interest in
any such Sold Receivable.
(d) The Parent shall indicate in its Records that ownership of each
Sold Receivable is held by Funding or its assignee. In addition, the Parent
shall respond to any inquiries with respect to ownership of a Sold Receivable by
stating that it is no longer the owner of such Receivable and that ownership of
such Sold Receivable is held by Funding or its assignee.
(e) The Parent shall provide for the direct remittance by each Obligor
of all Collections with respect to each Sold Receivable to the account specified
to it by the Administrative Agent.
(f) Until such time as it is notified that Funding has transferred
ownership of a Sold Receivable or it is otherwise directed by Funding, the
Parent shall conduct the servicing, administration and collection of such Sold
Receivable and shall take, or cause to be taken, all such actions as may be
necessary or advisable to service, administer and collect such Sold Receivable,
from time to time, all in accordance with (i) customary and prudent servicing
procedures for receivables of a similar type, (ii) all applicable laws, rules
and regulations, and (iii) without limitation as to its obligations under the
preceding clauses (i) and (ii), no less a standard of care than that which it
applies to Receivables it services for its own account.
Section 3. REPRESENTATIONS AND WARRANTIES OF THE PARENT.
The Parent, as of each day on which it transfers Receivables, hereby
represents to Funding for the benefit of Funding and each of its successors and
assigns as follows:
(a) The Parent is an entity of the type set forth next to its name in
the first paragraph of this Agreement and is duly organized, validly existing
and in good standing under the laws of its jurisdiction of organization and is
duly qualified to do business, is in good standing, in each jurisdiction in
which the nature of its business requires it to be so qualified, has the power
and authority to own and convey all of its properties and to execute and deliver
this Agreement and the Related Documents and to perform the transactions
contemplated hereby and thereby. The Parent has complied in all material
respects with all applicable laws, rules, regulations, and orders with respect
to it, its business and properties, and the performance of its obligations
hereunder and pursuant to the Related Documents.
(b) The Parent is intended to be operated in such a manner that Funding
would not be substantively consolidated in the bankruptcy estate of the Parent
(that is, such that the separate existence of Funding and the Parent would be
disregarded), in the event of a bankruptcy or insolvency of the Parent and in
such regard the specific matters set forth in the representation and warranty of
the Seller in Section 4.1(b) of the Receivables Purchase Agreement regarding the
independent operation of the Parent and the Seller are true and correct in all
respects.
3
<PAGE>
(c) The execution, delivery and performance by the Parent of this
Agreement, the Related Documents and the transactions contemplated hereby and
thereby (i) have been duly authorized by all necessary corporate or other action
on the part of the Parent, (ii) do not contravene or cause the Parent to be in
default under (A) the Parent's formation, governance or other organizational
documents, any contractual restriction contained in any indenture, loan or
credit agreement, lease, mortgage, security agreement, bond, note, or other
agreement or instrument binding on or affecting the Parent or its property, or
(B) any law, rule, regulation, order, license requirement writ, judgment, award,
injunction, or decree applicable to, binding on or affecting the Seller or its
property or the Parent or its property, and (iii) do not result in or require
the creation of any Adverse Claim upon or with respect to any of the property of
Funding or the Parent (other than in favor of the Purchaser or the Collateral
Agent as contemplated under the Related Documents).
(d) This Agreement and the Related Documents have each been duly
executed and delivered by the Parent and constitute the legal, valid and binding
obligation of the Parent enforceable against the Parent in accordance with its
respective terms.
(e) No consent of, notice to, filing with or permits, qualifications or
other action by any Governmental Authority or any other party is required (i)
for the due execution, delivery and performance by the Parent of this Agreement
or any of the Related Documents, (ii) for the perfection of or the exercise by
each of Funding, the Purchaser, the Administrative Agent or any assignee of the
Purchaser of any of its rights or remedies hereunder or thereunder other than
consents, notices, filings and other actions which have been obtained or made
and complete copies of which have been provided to Funding, the Purchaser or the
Administrative Agent.
(f) There is no pending or threatened, nor any reasonable basis for
any, action, suit or proceeding, against or affecting the Parent, its officers
or directors, or the property of the Parent, in any court or tribunal, before
any arbitrator of any kind or before or by any Governmental Authority (A)
asserting the invalidity of this Agreement or any of the Related Documents, (B)
seeking to prevent the transfer, sale or pledge of any Sold Receivable or the
consummation of any of the transactions contemplated hereby or thereby, (C)
seeking any determination or ruling that might materially and adversely affect
(1) the performance by each of Funding or the Parent of its obligations under
this Agreement or any of the Related Documents, (2) the validity or
enforceability of this Agreement or any of the Related Documents, (3) the Sold
Receivables or the Contracts, or (4) the federal income tax attributes of the
contribution, sale or pledge of the Sold Receivables, or (D) asserting a claim
for payment of money in excess of the Parent Judgment Amount (other than such
judgments or orders in respect of which adequate insurance, after application of
any deductible, is maintained by the Parent for the payment thereof).
(g) The principal place of business and chief executive office of the
Parent are located at the address set forth under its name on the signature page
hereof and there are now no, and during the past four months there have not
been, any other locations where the Parent is located (as that term is used in
the UCC of the jurisdiction where such principal place of business is located)
or keeps Records, except, in each case, as set forth on Schedule 1 hereto. The
legal name of the Parent is as set forth at the beginning of this Agreement and
the Parent has not changed its name in the last six years, and during such
period the Parent did not use, nor does the Parent now use, any
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tradenames, fictitious names, assumed names or "doing business as" names except
as set forth on Schedule 1 hereto.
(h) The Parent is solvent and will not become insolvent after giving
effect to the transactions contemplated by this Agreement and the Related
Documents; the Parent is paying its Debts as they mature; the Parent has not
incurred Debts beyond its ability to pay as they mature; and the Parent, after
giving effect to the transactions contemplated by this Agreement and the Related
Documents, will have an adequate amount of capital to conduct its business in
the foreseeable future.
(i) For federal income tax, reporting and accounting purposes, the
Parent will treat the sale of each Receivable sold, contributed or assigned to
Funding pursuant hereto as a sale or absolute assignment, of its full right,
title and ownership interest in such Receivable to Funding (and those
Receivables contributed to Funding by the Parent pursuant hereto shall be
accounted for as an increase in the stated capital of Funding), and the Parent
has not in any other respect accounted for or treated the transactions
contemplated hereby.
(j) The Parent has complied in all material respects with all
applicable laws, rules, regulations and orders with respect to it, its business
and properties and all Receivables and related Contracts (including without
limitation, the Fair Labor Standards Act) and all restrictions contained in any
indenture, loan or credit agreement, mortgage, security agreement, bond, note or
other agreement or instrument binding on or affecting the Parent or its
property, and has and maintains all permits, licenses, authorizations,
registrations, approvals and consents of Governmental Authorities for (A) the
activities and business of the Parent and each of its Subsidiaries as currently
conducted and as proposed to be conducted, (B) the ownership, use, operation and
maintenance by each of them of its properties, facilities and assets, and (C)
the performance by the Parent and Funding of this Agreement and the Related
Documents.
(k) The Parent has filed on a timely basis all tax returns (federal,
state and local) required to be filed and has paid or made adequate provisions
for the payment of all taxes, assessments and other governmental charges due
from the Parent.
(l) No transaction contemplated by this Agreement requires compliance
with any bulk sales act or similar law.
(m) With respect to the Parent and each of its Subsidiaries, there has
occurred no event which has or is reasonably likely to have a material adverse
effect on the Parent's operations, including its ability to perform its
obligations under this Agreement or the Related Documents as Parent, Servicer or
otherwise.
(n) The consolidated balance sheets of the Parent and its consolidated
Subsidiaries for each of the last two years in the period ending as at the
Balance Sheet Date and the related statements of income and shareholders' equity
of the Parent and its consolidated Subsidiaries for the years then ended,
certified without qualification by independent certified public accountants,
copies of which have been furnished to the Purchaser and Administrative Agent,
fairly present the
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consolidated financial condition, business and operations of the Parent and its
consolidated Subsidiaries as at such date and the consolidated results of the
operations of the Parent and its consolidated Subsidiaries for the period ended
on such date, all in accordance with GAAP, and since the Balance Sheet Date
there has been no material adverse change in any such condition, business or
operations.
(o) Each pension plan or profit sharing plan to which the Parent is a
party has been administered and fully funded in accordance with the obligations
of the Parent under law and as set forth in such plan, and the Parent has
complied with the applicable provisions of ERISA in effect as of each date on
which it transfers Receivables to Funding.
(p) The Parent has valid business reasons for selling or contributing
its interests in the Receivables transferred hereunder rather than obtaining a
loan secured by such Receivables.
(q) All information heretofore or hereafter furnished with respect to
the Parent to any of Funding, the Purchaser or the Administrative Agent in
connection with any transaction contemplated by this Agreement or the Related
Documents, including, without limitation, each Request Notice, is and will be
true and complete in all material respects and does not and will not omit to
state a material fact necessary to make the statements contained herein or
therein not misleading.
It is understood and agreed that the foregoing representations and warranties
shall survive the transfer of the Sold Receivables to Funding and any transfer
by Funding of any Sold Receivable or interest in any Sold Receivable by Funding
to any subsequent purchaser and shall continue so long as any Sold Receivable
shall remain outstanding.
Section 4. BREACH OF REPRESENTATIONS AND WARRANTIES; REPURCHASE OF SOLD
RECEIVABLES.
Upon discovery by the Parent, Funding or (with respect to Sold
Receivables) any subsequent purchaser or its assignee of a breach of any of the
representations and warranties in Section 3 hereof which materially and
adversely affects the value of a Sold Receivable or the interests of Funding or
its assignees therein, the party discovering such breach shall give prompt
written notice of such breach to the other parties. Thereafter, if requested by
notice from Funding or (with respect to Sold Receivables) any subsequent
purchaser, the Parent shall on the next succeeding Weekly Settlement Date
repurchase such Sold Receivable by remitting in the manner specified in such
notice the Outstanding Balance of such Receivable, provided, however, that if
the Parent fails to so remit the Outstanding Balance of such Receivable, Funding
shall offset such amount from any amount from the Sale Price to be paid on such
Weekly Settlement Date and any future Weekly Settlement Date until the entire
amount of such Outstanding Balance has been recovered by Funding. Any such
repurchase shall be made without recourse against, or warranty, express or
implied, of the transferee of such repurchased Receivable. Such transferee shall
execute and deliver such instruments of transfer or assignments as are necessary
to vest ownership of such Receivable in the Parent.
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Section 5. INTENT OF THE PARTIES.
It is the intention of the parties hereto that the purchase and sale of
Receivables from the Parent to Funding be treated for all purposes as a sale of
such Receivables and the proceeds thereof. However, if a court of competent
jurisdiction were to hold that the transaction evidenced hereby is not a
purchase, it is the intention of the parties hereto that this Agreement shall
constitute a security agreement under applicable law, and that the transactions
effected hereby shall be deemed to be secured financings in each case under
applicable law and, to that end, the Parent hereby grants to Funding a first
priority perfected security interest in all of the Parent's right, title and
interest in, to and under the following, whether now existing or hereafter
created: the Receivables and all documents and instruments executed pursuant
thereto, all collections on such Receivables, all other rights relating to and
payments made in respect of this Agreement, and all proceeds of any of the
foregoing.
Section 6. INDEMNIFICATION.
Without limiting any other rights that Funding, its assignee or any
director, officer, employer or agent thereof (each, an "INDEMNIFIED PARTY") may
have hereunder or under applicable law, the Parent hereby agrees to indemnify
each Indemnified Party from and against any and all claims, losses and
liabilities and related costs and expenses, including reasonable attorneys' fees
and disbursements which may be imposed on, incurred by or asserted against an
Indemnified Party in any way arising out of or resulting from this Sale
Agreement or the use by the Parent of the proceeds of any Sale Price or in
respect of any Sold Receivable, any Contract or any fees, costs or expenses
imposed on Funding under the Receivables Purchase Agreement, excluding, however,
(a) Indemnified Amounts to the extent resulting from gross negligence or willful
misconduct on the part of such Indemnified Party or (b) the uncollectability of
any Sold Receivable unrelated to a breach of a representation and warranty set
forth in Section 3 hereof (all of the foregoing being collectively referred to
as "INDEMNIFIED AMOUNTS"). Without limiting or being limited by the foregoing,
the Parent shall pay on demand to each Indemnified Party any and all amounts
necessary to indemnify such Indemnified Party from and against any and all
Indemnified Amounts relating to or resulting from:
(i) reliance on any representation or warranty made or
deemed made by the Parent (or any of its officers) under or in
connection with this Sale Agreement (except with respect to a Sold
Receivable, as to which Funding's remedies are set forth in Section 4),
any report or any other information delivered by the Parent pursuant
hereto, which shall have been incorrect in any material respect when
made or deemed made or delivered; or
(ii) the failure by the Parent to comply with any term,
provision or covenant contained in this Sale Agreement, or any
agreement executed in connection with this Sale Agreement or with any
applicable law, rule or regulation with respect to any Sold Receivable
or the related Contract, or the nonconformity of any Sold Receivable or
the related Contract with any such applicable law, rule or regulation.
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The Parent acknowledges that, pursuant to the Receivables Purchase Agreement,
Funding may assign its rights of indemnity granted hereunder to the Purchaser
and its successors and assigns and upon such assignment, the Purchaser and its
successors and assigns shall have all rights of Funding hereunder and may in
turn assign such rights. The Parent agrees that, upon such assignment, the
Purchaser or its successors and assigns may enforce directly, without joinder of
Funding, the indemnities set forth in this Section.
In addition, in order to facilitate the sale of the Receivables, in the
event Funding fails to pay any amounts owing by it pursuant to Section 8.1 or
10.3 of the Receivables Purchase Agreement within 15 days of the date such
amount is due, the Parent agrees to reimburse the Purchaser and its successors
and assigns for such unpaid amounts.
Section 7. NOTICES, ETC.
All notices and other communications provided for hereunder shall,
unless otherwise stated herein, be in writing (including telecommunication and
express mail) and mailed or telecommunicated, or delivered as to each party
hereto, at its address set forth under its name on the signature page hereof or
at such other address as shall be designated by such party in a written notice
to the other parties hereto. All such notices and communications shall not be
effective until received by the party to whom such notice or communication is
addressed.
Section 8. BINDING EFFECT; ASSIGNABILITY; SURVIVAL.
This Sale Agreement shall be binding upon and inure to the benefit of
the Parent and Funding, and their respective successors and permitted assigns.
The Parent may not assign any of its rights and obligations hereunder or any
interest herein without the prior written consent of Funding and acknowledges
that Funding may, and intends to, assign its rights hereunder pursuant to the
Receivables Purchase Agreement. The Parent agrees to reasonably cooperate with
Funding and its assignees to facilitate such assignments. This Sale Agreement
shall create and constitute the continuing obligations of the parties hereto in
accordance with its terms, and shall remain in full force and effect until its
termination; PROVIDED, that the rights and remedies with respect to any breach
of any representation and warranty made by the Parent pursuant to Section 3 and
the indemnification and payment provisions of Section 6 shall be continuing and
shall survive any termination of this Sale Agreement.
Section 9. NO PROCEEDINGS.
The Parent hereby agrees that it will not, directly or indirectly,
institute, or cause to be instituted, against Funding any proceeding of the type
referred to in Section 7.1(c) of the Receivables Purchase Agreement so long as
there shall not have elapsed one year plus one day since the Capital Investment
under the Receivables Purchase Agreement has been paid in full in cash.
Section 10. AMENDMENTS; CONSENTS AND WAIVERS; REMEDIES.
8
<PAGE>
No modification, amendment or waiver of, or with respect to, any
provision of this Sale Agreement, and all other agreements, instruments and
documents delivered pursuant thereto, nor consent to any departure by the Parent
or Funding from any of the terms or conditions thereof shall be effective unless
it shall be in writing and signed by each of the parties hereto, and following
any assignment of the type described in Section 3 or 6, the Purchaser's
assignee. Any waiver or consent shall be effective only in the specific instance
and for the purpose for which given. No consent to or demand by the Parent or
Funding in any case shall, in itself, entitle it to any other consent or further
notice or demand in similar or other circumstances. This Sale Agreement and the
documents referred to herein embody the entire agreement of the Parent and
Funding with respect to the Sold Receivables and supersede all prior agreements
and understandings relating to the subject hereof. No failure on the part of the
Parent or Funding to exercise, and no delay in exercising, any right hereunder
shall operate as a waiver thereof; nor shall any single or partial exercise of
any right hereunder preclude any other or further exercise thereof or the
exercise of any other right. The remedies herein provided are cumulative and not
exclusive of any other remedies provided by law.
Section 11. SEVERABILITY.
In case any provision in or obligation under this Sale Agreement shall
be invalid, illegal or unenforceable in any jurisdiction, the validity, legality
and enforceability of the remaining provisions or obligations, or of such
provision or obligation, shall not in any way be affected or impaired thereby in
any other jurisdiction.
Section 12. GOVERNING LAW; CONSENT TO JURISDICTION; WAIVER OF JURY
TRIAL.
(a) THIS SALE AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN
ACCORDANCE WITH, THE INTERNAL LAWS (AS OPPOSED TO CONFLICT OF LAWS
PROVISIONS) OF THE STATE OF NORTH CAROLINA.
(b) THE PARENT AND FUNDING HEREBY SUBMIT TO THE NON-EXCLUSIVE
JURISDICTION OF THE COURTS OF THE STATE OF NORTH CAROLINA AND THE UNITED STATES
DISTRICT COURT LOCATED IN CHARLOTTE, NORTH CAROLINA, AND EACH WAIVES PERSONAL
SERVICE OF ANY AND ALL PROCESS UPON IT AND CONSENTS THAT ALL SUCH SERVICE OF
PROCESS BE MADE BY REGISTERED MAIL DIRECTED TO THE ADDRESS SET FORTH ON THE
SIGNATURE PAGE HEREOF AND SERVICE SO MADE SHALL BE DEEMED TO BE COMPLETED FIVE
DAYS AFTER THE SAME SHALL HAVE BEEN DEPOSITED IN THE U.S. MAILS, POSTAGE
PREPAID. THE PARENT AND FUNDING EACH HEREBY WAIVE ANY OBJECTION BASED ON FORUM
NON CONVENIENS, AND ANY OBJECTION TO VENUE OF ANY ACTION INSTITUTED HEREUNDER
AND CONSENTS TO THE GRANTING OF SUCH LEGAL OR EQUITABLE RELIEF AS IS DEEMED
APPROPRIATE BY THE COURT. NOTHING IN THIS SECTION SHALL AFFECT THE RIGHT OF THE
PARENT OR FUNDING TO SERVE LEGAL PROCESS IN ANY OTHER MANNER PERMITTED BY LAW OR
AFFECT EITHER'S
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RIGHT TO BRING ANY ACTION OR PROCEEDING IN THE COURTS OF ANY OTHER JURISDICTION.
(c) THE PARENT AND FUNDING EACH HEREBY WAIVES ANY RIGHT TO HAVE A JURY
PARTICIPATE IN RESOLVING ANY DISPUTE, WHETHER SOUNDING IN CONTRACT, TORT, OR
OTHERWISE ARISING OUT OF, CONNECTED WITH, RELATED TO, OR IN CONNECTION WITH THIS
SALE AGREEMENT. INSTEAD, ANY DISPUTE RESOLVED IN COURT WILL BE RESOLVED IN A
BENCH TRIAL WITHOUT A JURY.
Section 13. EXECUTION IN COUNTERPARTS.
This Sale Agreement may be executed by the parties hereto in separate
counterparts, each of which when so executed shall be deemed to be an original
and both of which when taken together shall constitute one and the same
agreement.
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IN WITNESS WHEREOF, the parties have caused this Sale Agreement to be
executed by their respective officers thereunto duly authorized, as of the date
first written above.
SUNBEAM PRODUCTS, INC.
By: /s/ Steven A. Dalberth
---------------------------------
Name: Steven A. Dalberth
Title: Director, Treasury Operations
1615 South Congress Avenue, Suite 200
Delray Beach, Florida 32445
Attn: Treasurer
Telecopier Number: (561) 243-2027
SUNBEAM ASSET DIVERSIFICATION, INC.
By: /s/ Steven A. Dalberth
---------------------------------
Name: Steven A. Dalberth
Title: Vice President & Treasurer
300 Delaware Avenue, Suite 1704
Wilmington, DE 19801
Attn:
Telecopier Number:
<PAGE>
EXHIBIT A
To
RECEIVABLES SALE AND
CONTRIBUTION AGREEMENT
SALE ASSIGNMENT, dated as of December 4, 1997, between Sunbeam
Products, Inc. (the "PARENT") and Sunbeam Asset Diversification, Inc.
("FUNDING").
1. We refer to the Receivables Sale and Contribution Agreement, dated
as of December 4, 1997, by and between the Parent and Funding (the "SALE
AGREEMENT"). All provisions of the Sale Agreement are incorporated herein by
reference. All capitalized terms shall have the meanings set forth in the Sale
Agreement.
2. The Parent does hereby sell, transfer, assign, set over, convey
and/or contribute to Funding, without recourse, all right, title and interest of
the Parent in and to all Receivables of each Designated Obligor from time to
time arising and owned by the Parent.
3. The Parent does hereby make the representations and warranties
referred to in Section 3 of the Sale Agreement with respect to each Sold
Receivable with full force and effect as if fully set forth herein.
IN WITNESS WHEREOF, the parties have caused this Sale Assignment to be
executed by their respective officers thereunto duly authorized, as of the date
first above written.
SUNBEAM PRODUCTS, INC.
By:_______________________________
Name:
Title:
SUNBEAM ASSET DIVERSIFICATION, INC.
By:_______________________________
Name:
Title:
<PAGE>
ATTACHMENT TO EXHIBIT 10r FILED BY SUNBEAM CORPORATION
The following Exhibit and Schedule are not filed herewith but will be
provided to the Commission upon request.
EXHIBIT A - SALE ASSIGNMENT
SCHEDULE 1 - NAMES AND LOCATION OF RECORDS
EXHIBIT 10.s
RECEIVABLES PURCHASE AND SERVICING AGREEMENT
dated as of December 4, 1997
by and among
LLAMA RETAIL FUNDING, L.P.,
as purchaser,
CAPITAL USA, L.L.C.,
as administrative agent,
SUNBEAM ASSET DIVERSIFICATION, INC.,
as seller, and
SUNBEAM PRODUCTS, INC.,
as servicer
<PAGE>
<TABLE>
<CAPTION>
TABLE OF CONTENTS
PAGE
ARTICLE I
DEFINITIONS
<S> <C>
Section 1.1. Certain Defined Terms.......................................................................1
Section 1.2. Other Terms.................................................................................1
ARTICLE II
PURCHASE OF RECEIVABLES
Section 2.1. Facility....................................................................................2
Section 2.2. Making Purchases from the Seller............................................................2
Section 2.3. Receivables Interest........................................................................3
Section 2.4. Dividing or Combining Receivables Interest..................................................3
Section 2.5. Establishment of Collection Account.........................................................4
Section 2.6. Determinations by the Administrative Agent..................................................4
Section 2.7. Deposits to the Collection Account and the Escrowed Amounts
Subaccount...............................................................................................4
Section 2.8. Disbursements From the Collection Account - Revolving Period................................4
Section 2.9. Liquidation Settlement Procedures...........................................................5
Section 2.10. General Settlement Procedures..............................................................6
Section 2.11. Investment of Accounts.....................................................................7
Section 2.12. Availability of Information................................................................7
Section 2.13. Construction of Agreement..................................................................7
Section 2.14. Further Action Evidencing Purchases........................................................8
Section 2.15. Separate Transactions......................................................................8
Section 2.16. Eligible Receivables.......................................................................8
Section 2.17. Payments and Computations, Etc.............................................................9
ARTICLE III
CONDITIONS TO PURCHASE
Section 3.1. Conditions Precedent to Effectiveness of Agreement..........................................9
Section 3.2. Conditions Precedent to All Purchases under this Agreement..................................9
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
Section 4.1. Representations and Warranties of the Seller...............................................10
Section 4.2. Representations and Warranties of the Seller With Respect to the Pool
Receivables.............................................................................................13
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<S> <C>
Section 4.3. Representations and Warranties of the Servicer.............................................13
Section 4.4. Representations and Warranties of the Purchaser............................................13
ARTICLE V
COVENANTS
Section 5.1. Affirmative Covenants of the Seller........................................................14
Section 5.2. Negative Covenants of the Seller...........................................................15
Section 5.3. Reporting Requirements of the Seller.......................................................15
Section 5.4. Change of Ownership of the Seller..........................................................15
Section 5.5 Agreements of the Administrative Agent......................................................15
ARTICLE VI
THE SERVICER
Section 6.1. Appointment of the Servicer; Subservicers..................................................16
Section 6.2. Servicing Fees.............................................................................17
Section 6.3. Negative Covenants of the Servicer.........................................................17
Section 6.4. Reporting..................................................................................18
Section 6.5. Covenants of the Servicer Regarding the Pool Receivables and
Servicing Records.......................................................................................18
Section 6.6. Servicer Not to Resign.....................................................................19
Section 6.7. Indemnities by the Servicer................................................................19
Section 6.8. Appointment of the Successor Servicer......................................................19
Section 6.9. Duties of the Servicer Following Appointment of a Successor
Servicer................................................................................................20
Section 6.10. Effect of Termination or Resignation......................................................20
ARTICLE VII
TERMINATION EVENTS
Section 7.1. Termination Events.........................................................................20
Section 7.2. Actions Upon Termination Event.............................................................22
ARTICLE VIII
INDEMNIFICATION
Section 8.1. Indemnities by the Seller..................................................................23
ARTICLE IX
THE ADMINISTRATIVE AGENT
Section 9.1. Authorization and Action...................................................................24
Section 9.2. Reliance, Etc..............................................................................24
Section 9.3. Capital USA, L.L.C. and Affiliates.........................................................25
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<S> <C>
Section 9.4. Communication with Obligors................................................................25
ARTICLE X
MISCELLANEOUS
Section 10.1. Notices, Etc..............................................................................25
Section 10.2. Binding Effect; Assignability; Survival...................................................25
Section 10.3. Costs, Expenses and Taxes.................................................................26
Section 10.4. Confidentiality...........................................................................26
Section 10.5. No Proceedings............................................................................27
Section 10.6. Amendments; Waivers; Consents; Remedies...................................................27
Section 10.7. Severability..............................................................................27
Section 10.8. Descriptive Headings......................................................................28
Section 10.9. GOVERNING LAW; CONSENT TO JURISDICTION; WAIVER
OF JURY TRIAL...........................................................................................28
Section 10.10. Execution in Counterparts...............................................................28
</TABLE>
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<PAGE>
RECEIVABLES PURCHASE AND
SERVICING AGREEMENT
RECEIVABLES PURCHASE AND SERVICING AGREEMENT, dated as of December 4,
1997 (the "AGREEMENT"), by and among SUNBEAM ASSET DIVERSIFICATION, INC., a
Delaware corporation as Seller (the "SELLER"), LLAMA RETAIL FUNDING, L.P., a
Delaware limited partnership, as purchaser (in such capacity, together with its
successors and assigns, the "PURCHASER"), SUNBEAM PRODUCTS, INC., a Delaware
corporation as originator of the Receivables (the "ORIGINATOR") and as servicer
(in such capacity, together with its successors and assigns, the "SERVICER") and
CAPITAL USA, L.L.C., a Delaware corporation in its capacity as administrator
hereunder (as such, together with its successors and assigns, the
"ADMINISTRATIVE AGENT").
W I T N E S S E T H:
WHEREAS, the Seller desires to sell certain trade receivables
originated by the Originator from time to time and the Purchaser desires to
purchase such trade receivables in accordance with the terms of this Agreement;
WHEREAS, the Administrative Agent has been requested and is
willing to provide certain administrative services on behalf of the Purchaser in
connection with the making and financing of such purchases;
WHEREAS, the Purchaser desires that a Servicer be appointed to
service receivables purchased by the Purchaser under this Agreement and the
Originator has been requested and is willing to act as the Servicer;
NOW, THEREFORE, the parties agree as follows:
ARTICLE I
DEFINITIONS
SECTION 1.1. CERTAIN DEFINED TERMS.
Defined terms used herein shall have the meanings set forth in Annex I
hereto.
SECTION 1.2. OTHER TERMS.
All accounting terms not specifically defined herein shall be construed
in accordance with GAAP. All terms used in Article 9 of the UCC of the State of
New York, and not specifically defined herein, are used herein as defined in
such Article 9. All hourly references herein shall refer to New York City time.
Except as otherwise indicated, all agreements defined in this Agreement refer to
the same as from time to time amended or supplemented.
<PAGE>
ARTICLE II
PURCHASE OF RECEIVABLES
SECTION 2.1. FACILITY.
The Purchaser may, on the terms and conditions set forth herein, and in
its sole discretion, make Purchases of Receivables Interests from the Seller.
Purchases may be made until the occurrence of the Purchase Termination Date. The
Purchaser will not make any Purchase if, after giving effect to such Purchase,
the aggregate Capital Investment for all Receivables Interests hereunder would
exceed the Purchase Limit. Nothing in this Agreement shall be deemed to be or
construed as a commitment by the Purchaser to purchase any Receivables Interest.
In the event the Purchaser is not able to make a Purchase that it otherwise has
agreed to make solely as a result of a CP Disruption Event, the Purchaser will,
to the extent an advance is permitted to be made under the Liquidity Agreement,
request such an advance under the Liquidity Agreement and, upon receipt of the
proceeds of such advance, will make such Purchase in an amount equal to the
amount of such advance.
SECTION 2.2. MAKING PURCHASES FROM THE SELLER.
(a) Purchases that the Purchaser agrees to make will be made on
Purchase Dates. A Purchase will only be made if the Seller has delivered a
Request Notice to the Administrative Agent by 1:00 p.m. on the Business Day
immediately prior to the requested Purchase Date.
(b) The Administrative Agent, on behalf of the Purchaser, will promptly
notify the Seller of the Purchaser's decision to make a Purchase or not to make
a Purchase and, if so, whether the amount specified by the Seller in the Request
Notice is acceptable to the Purchaser. Each notification will be made by
delivery of a Purchase Notification on the related Purchase Date to the Seller.
(c) On the date of a Purchase, the Administrative Agent on behalf of
the Purchaser shall, upon satisfaction of the Purchase Conditions, make
available to the Collection Account the Capital Investment for such Receivables
Interest (as set forth in related Purchase Notification, which amount may be
reduced by any amounts due under Sections 2.10, 8.1 or 10.3 that remain unpaid
on such day of Purchase) in same day funds, which amount shall be made
immediately available to the Seller at the account of the Seller specified in
writing to the Administrative Agent by the Seller from time to time.
(d) Effective on the date of each Purchase pursuant to this Section
2.2, the Seller hereby sells and assigns to the Purchaser an undivided
percentage ownership interest, to the extent of the Receivables Interest then
being purchased, in each Pool Receivable then existing and in the Related
Security and Collections with respect thereto.
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SECTION 2.3. RECEIVABLES INTEREST.
(a) The Administrative Agent will calculate the Receivables Interest
purchased on each Purchase Date and shall, on such Purchase Date, combine such
Receivables Interest, pursuant to the provisions of Section 2.4, with any
outstanding Receivables Interest and calculate the combined Receivable Interest,
after giving effect to the Purchase made on that Purchase Date, and notify the
Seller of the combined Receivables Interest in the Purchase Notification. The
undivided percentage interest of any Receivables Interest is equal to the
percentage equivalent of a fraction:
CI + R
------
NRPB
where:
CI = the Capital Investment on the date the Receivables
Interest is calculated.
R = the sum of the Applicable Margin Reserve, the
Dilution Reserve, the Fee Reserve and the Yield
Reserve, each on the date the Receivables Interest is
calculated.
NRPB = The Net Receivables Pool Balance on the date the
Receivables Interest is calculated.
(b) A Receivables Interest shall become zero on the later to occur of
(a) the date the Purchaser shall have (i) received the Accrued Daily Yield for
such Receivables Interest, plus any amount reasonably allocated by the
Administrative Agent in respect of the discount on Commercial Paper and the
interest on Liquidity Loans to mature after the date the Receivables Interest
becomes zero, (ii) recovered its Capital Investment and (iii) received all other
amounts payable to the Purchaser pursuant to this Agreement, and (b) the date
the Servicer shall have received the accrued Servicing Fee for such Receivables
Interest. A Receivables Interest shall remain constant until the next Purchase
Date on which a Purchase is made and shall remain constant at all times on and
after the Purchase Termination Date.
SECTION 2.4. DIVIDING OR COMBINING RECEIVABLES INTEREST.
The Administrative Agent may at any time either (i) divide any
Receivables Interests into two or more Receivables Interests having aggregate
Capital Investment equal to the Capital Investment of such divided Receivables
Interest, or (ii) combine any two or more Receivables Interest into a single
Receivables Interest having Capital Investment equal to the aggregate of the
Capital Investment of such original Receivables Interests.
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SECTION 2.5. ESTABLISHMENT OF COLLECTION ACCOUNT.
Prior to or simultaneously with the execution and delivery of this
Agreement, the Purchaser and the Administrative Agent shall establish an
Eligible Bank Account in the name of the Purchaser titled as specified in the
Receivables Purchase Agreement (the "COLLECTION ACCOUNT"). In addition, the
Administrative Agent shall establish and maintain a subaccount of the Collection
Account (the "ESCROWED AMOUNT SUBACCOUNT") into which all Escrowed Amounts shall
be deposited and retained until the expiration of the related Escrow Period.
Notwithstanding the agreement of any Obligor to deposit all amounts owing in
respect of the Pool Receivables directly to the Lockbox Account, each of the
Seller and the Servicer shall deposit all Collections it may receive in respect
of Pool Receivables into the Lockbox Account no later than the first Business
Day following the date of receipt thereof. Any Collections in respect of Pool
Receivables held by the Seller or the Servicer pending transfer to the
applicable Collection Account as provided in this Agreement shall be held in
trust for the benefit of the Purchaser until such amounts are deposited into the
applicable Collection Account.
SECTION 2.6. DETERMINATIONS BY THE ADMINISTRATIVE AGENT.
(a) The Administrative Agent's determinations and calculations made
under, or pursuant to, this Agreement shall in all cases be conclusive in the
absence of manifest error.
(b) On each Business Day, the Administrative Agent shall determine the
amount of Collections received on Pool Receivables. The Administrative Agent
shall notify the Purchaser, the Seller and the Servicer of its determinations
under this Section 2.6.
SECTION 2.7. DEPOSITS TO THE COLLECTION ACCOUNT AND THE ESCROWED
AMOUNTS SUBACCOUNT.
(a) On each Business Day all Collections in the Lockbox Account shall
be transferred by the Administrative Agent to the Collection Account.
(b) On any Business Day, the Purchaser may deposit into the Collection
Account all or a portion of the net proceeds of Commercial Paper or of any
Liquidity Loan or any other funds available to the Purchaser for deposit.
(c) Amounts in respect of the Escrowed Amounts shall be retained in the
Escrowed Amounts Subaccount until the expiration of the related Escrow Period at
which time such amounts shall be included in Available Funds and disbursed as
provided in Sections 2.8 and 2.9.
SECTION 2.8. DISBURSEMENTS FROM THE COLLECTION ACCOUNT - REVOLVING
PERIOD.
On each Business Day during the Revolving Period the Administrative
Agent shall allocate all Available Funds on deposit in the Collection Account in
the following priority (to the extent funds are available therefor):
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(a) an amount equal to Accrued Daily Yield shall be deposited into the
Collateral Account;
(b) an amount equal to any Accrued Daily Servicing Fee due to any
Successor Servicer appointed hereunder shall be retained in the Collection
Account or if such Business Day is a Settlement Date, an amount equal to any
accrued and unpaid Servicing Fee due to the Successor Servicer through the end
of the related Settlement Period shall be paid to such Successor Servicer;
(c) an amount equal to Accrued Daily Fees and Expenses shall be
deposited into the Collateral Account;
(d) to the extent not paid pursuant to clause (b) above, an amount
equal to any Accrued Daily Servicing Fee due to the Servicer shall be retained
in the Collection Account or if such Business Day is a Settlement Date, an
amount equal to any accrued and unpaid Servicing Fee due to the Servicer through
the end of the related Settlement Period shall be paid to the Servicer;
(e) that portion of the remaining amount up to the current Capital
Investment shall be deposited into the Collateral Account in reduction of such
Capital Investment or, if such Business Day is a Purchase Date, an amount up to
Capital Investment for the Receivables Interest to be purchased on such day, net
of amounts payable by the Seller pursuant to Sections 2.10, 8.1 and 10.3 or
otherwise hereunder (which shall be deposited into the Collateral Account or, to
the extent such amounts constitute Escrowed Amounts, retained in the Collection
Account until the expiration of the related Escrow Period), shall be paid on
behalf of the Purchaser to purchase any Receivables Interest to be purchased on
such Purchase Date;
(f) if such Business Day is also a Settlement Date, an amount equal to
any unpaid amounts owing by the Seller pursuant to Sections 2.10, 8.1 and 10.3
or otherwise hereunder (other than Escrowed Amounts which shall be retained in
the Collection Account until the expiration of the related Escrow Period) shall
be deposited into the Collateral Account on behalf of the Purchaser; and
(g) if such Business Day is also either a Settlement Date or a Purchase
Date, the balance in the Collection Account as of the end of such Settlement
Period shall be paid to the Seller.
SECTION 2.9. LIQUIDATION SETTLEMENT PROCEDURES.
On each Business Day on and after the Purchase Termination Date, the
Administrative Agent shall allocate all Available Funds on deposit in the
Collection Account in the following priority (to the extent funds are available
therefor):
(a) to the Collateral Account, an amount equal to the sum of the
following:
(i) unpaid Accrued Daily Yield through and including such
date;
(ii) the outstanding Capital Investment;
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(iii) all unpaid amounts owing by the Seller to the Purchaser
pursuant to Sections 2.10, 8.1 or 10.3 or otherwise hereunder (other
than Escrowed Accounts which shall be retained in the Collection
Account until the expiration of the Escrow Period); and
(iv) unpaid Accrued Daily Fees and Expenses through and
including such date;
(b) to any Successor Servicer, an amount equal to any accrued and
unpaid Servicing Fee owing to such Successor Servicer;
(c) to the Servicer, an amount equal to the accrued and unpaid
Servicing Fee owing to the Servicer; and
(d) the remaining balance shall be released to the Seller.
SECTION 2.10. GENERAL SETTLEMENT PROCEDURES.
If, on any day the Outstanding Balance of any Eligible Receivable is
reduced or canceled as a result of either (i) any event giving rise to a
Dilution or (ii) a setoff in respect of any claim by the Obligor thereof against
the Seller or any Affiliate of Seller (whether such claim arises out of the same
or a related transaction or an unrelated transaction), then, the Seller shall be
deemed to have received on such day a Collection of such Receivable in the
amount of such Dilution, reduction or cancellation. If, on any day the
representations and warranties in Section 4.2 of this Agreement are no longer
true with respect to any Pool Receivable, the Seller shall be deemed to have
received on such day a Collection of such Pool Receivable in full. The Seller or
the Servicer, on behalf of the Seller, no later than the fifteenth day after
such deemed receipt, shall deposit such amount to the Collection Account for
deposit to the Escrowed Amount Subaccount; PROVIDED, HOWEVER, that if a Purchase
is made by the Purchaser during such 15-day period, the Purchaser shall reduce
the Cash Purchase Price otherwise payable by it for such Purchase by the amount
of any such deemed collection, which reduction shall constitute payment in full
of such deemed collection by the Seller. If and to the extent the Purchaser
shall be required for any reason to pay over to an Obligor, any bankruptcy
trustee of any Obligor, any Obligor as debtor-in-possession or otherwise any
amount received on the Purchaser's behalf hereunder, such amount shall be deemed
not to have been so received by the Purchaser, but rather to have been retained
by the Seller and, accordingly, the Purchaser shall have a claim against the
Seller for such amount, payable when and to the extent that any distribution
from or on behalf of such Obligor is made in respect thereof. Except as
otherwise provided in this Section 2.10, or as otherwise required by applicable
law or the relevant Contract, all Collections received from an Obligor of any
Receivables shall be applied to the Receivables of such Obligor in the order of
the age of such Receivables, starting with the oldest such Receivable, unless
such Obligor designates its payment for application to specific Receivables.
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SECTION 2.11. INVESTMENT OF ACCOUNTS.
Subject to the provisions of this Section 2.11, amounts on deposit in
the Collection Account (including any amounts held in the Escrowed Amount
Subaccount) shall be invested in Permitted Investments. Until the Purchase
Termination Date, to the extent there are uninvested amounts deposited in the
Collection Account (including any amounts held in the Escrowed Amount
Subaccount) in excess of the Minimum Investment Amount, the Administrative Agent
shall invest all such amounts in Permitted Investments selected by the
Purchaser, that mature no later than the immediately succeeding Purchase Date.
On and after the Purchase Termination Date, any investment of such amounts in
Permitted Investments shall be solely at the discretion of the Purchaser. All
investment earnings shall be disbursed in the same manner and priority as all
other amounts in the Collection Account except that net investment earnings on
the Escrowed Amount Subaccount shall be deposited into the Yield Subaccount of
the Collateral Account on behalf of the Purchaser.
SECTION 2.12. AVAILABILITY OF INFORMATION.
(a) The Administrative Agent shall provide written notice,
substantially in the form of Exhibit B, to the Seller, the Servicer and the
Purchaser of the determinations and disbursements made on each Business Day,
Purchase Date and Settlement Date pursuant to this Article 2.
(b) In the event that the Administrative Agent is unable to obtain
information from the Seller or the Servicer with respect to any Receivable which
information is necessary for it to make the determinations set forth in Sections
2.6, 2.7 , 2.8, 2.9 or 2.10 there shall be a presumption that such Receivable
has not been paid and the Administrative Agent shall make the determinations set
forth in Section 2.6 and the allocations and distributions in Sections 2.8 and
2.9 based on such presumption. Upon such information becoming available, the
Administrative Agent shall take reasonable steps to recalculate the
determinations made subject to the presumption set forth above. The
Administrative Agent is hereby authorized to withdraw and disburse amounts from
the Lockbox Account and the Collection Account following the recalculation of
such determinations so as to achieve the same result as if disbursements of
amounts in such accounts had been made with knowledge of the correct information
in accordance with the terms of this Agreement.
SECTION 2.13. CONSTRUCTION OF AGREEMENT.
It is the intention of the parties hereto that the purchase and sale of
Receivables Interests from the Seller to the Purchaser be treated for all
purposes as a sale of such Receivables Interests and the proceeds thereof.
However, if a court of competent jurisdiction were to hold that the transaction
evidenced hereby is not a purchase, it is the intention of the parties hereto
that this Agreement shall constitute a security agreement under applicable law,
and that the transactions effected hereby shall be deemed to be secured
financings in each case under applicable law and, to that end, the Seller grants
to the Purchaser a first priority perfected security interest in all of the
Seller's right, title and interest in, to and under the following, whether now
existing or
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hereafter created: the Receivables, the Receivables Sale Agreement and all
documents and instruments executed pursuant thereto, all Collections on such
Receivables, all amounts on deposit from time to time in the Lockbox Account and
the Collection Account, all other rights relating to and payments made in
respect of this Agreement, and all proceeds of any of the foregoing.
SECTION 2.14. FURTHER ACTION EVIDENCING PURCHASES.
(a) The Seller agrees that, from time to time, at its expense, it will
promptly execute and deliver all further instruments and documents, and take all
further action, that may be necessary or appropriate, or that the Purchaser or
the Administrative Agent may reasonably request, in order to perfect, protect or
more fully evidence the transfer of ownership of the Pool Receivables or to
enable the Purchaser to exercise or enforce any of its rights hereunder. Without
limiting the generality of the foregoing, the Seller will, upon the request of
the Purchaser, (i) execute and file such financing or continuation statements,
or amendments thereto or assignments thereof, and such other instruments or
notices, as may be necessary or appropriate, or as the Purchaser may reasonably
request, and (ii) segregate all invoices of Pool Receivables and indicate by
legend and in a conspicuous manner that such invoices relate to Pool
Receivables, an interest in which has been transferred to the Purchaser. The
manner by which the Servicer segregates and legends the invoices of Pool
Receivables is subject to approval by the Administrative Agent on behalf of the
Purchaser.
(b) The Seller hereby authorizes the Purchaser to file one or more
financing or continuation statements, and amendments thereto and assignments
thereof, relating to all or any of the Pool Receivables and Collections with
respect thereto without the signature of the Seller.
SECTION 2.15. SEPARATE TRANSACTIONS.
The Seller, the Originator, the Purchaser and the Administrative Agent
acknowledge that the parties are entering into the transactions described in
this Agreement in reliance on the Seller's identity as a separate legal entity
from the Originator. The Originator and the Seller agree to (a) maintain the
Seller's identity as a separate legal entity and (b) not to make any
representation to any third party as to the Seller's identity which might be
construed to be in conflict with the Seller's existence as an entity with assets
and liabilities distinct from those of the Originator.
SECTION 2.16. ELIGIBLE RECEIVABLES.
The Purchaser may from time to time unilaterally amend any of the
Schedules to this Agreement to reflect (a) in its judgment, the historical
experience of the Seller and the Purchaser with respect to Receivables, and (b)
criteria of eligibility of Receivables to be purchased under this Agreement.
Such amendment shall be made solely at the discretion of the Purchaser and shall
be effected by delivery by the Purchaser of a notice to each other party hereto
containing a copy of the revised Schedule or Schedules. The effective date of
such amendment shall be five Business Days after such delivery.
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SECTION 2.17. PAYMENTS AND COMPUTATIONS, ETC.
(a) All amounts to be paid or deposited by the Seller or the Servicer
hereunder shall be paid or deposited no later than 11:00 A.M. on the day when
due in same day funds.
(b) The Seller or the Servicer, as the case may be, shall, to the
extent permitted by law, pay interest on any amount not paid or deposited by it
on the date when due hereunder, at an interest rate per annum equal to 2.0% per
annum above the Yield Discount, payable on demand.
(c) The Administrative Agent, on behalf of the Seller and the Servicer
agrees to calculate each Receivables Interest, the Capital Investment, the Net
Receivables Pool Balance and each of the Yield Reserve, the Fee Reserve, the
Applicable Margin Reserve and the Dilution Reserve, together with all subsidiary
calculations. The Administrative Agent will promptly notify the Servicer in
writing of each such calculation. Unless the Servicer shall notify the
Administrative Agent in writing that such calculation is incorrect (and such
writing specifies the nature of such error), each such calculation made by the
Administrative Agent shall be conclusive.
(d) All computations of interest under subsection (b) above shall be
made on the basis of a year of 360 days for the actual number of days elapsed.
Whenever any payment or deposit to be made hereunder shall be due on a day other
than a Business Day, such payment or deposit shall be made on the next
succeeding Business Day and such extension of time shall be included in the
computation of such payment or deposit.
ARTICLE III
CONDITIONS TO PURCHASE
SECTION 3.1. CONDITIONS PRECEDENT TO EFFECTIVENESS OF AGREEMENT.
The effectiveness of this Agreement is subject to the condition
precedent that the Purchaser and the Administrative Agent shall each have
received on or before the Effective Date each of the items set forth in Annex II
hereof, each in form and substance satisfactory to the Administrative Agent.
SECTION 3.2. CONDITIONS PRECEDENT TO ALL PURCHASES UNDER THIS
AGREEMENT.
Each Purchase hereunder (including the initial Purchase) shall be
subject to the satisfaction of each of the conditions precedent set forth in
Annex III hereof.
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ARTICLE IV
REPRESENTATIONS AND WARRANTIES
SECTION 4.1. REPRESENTATIONS AND WARRANTIES OF THE SELLER.
The Seller represents and warrants to the Purchaser and the
Administrative Agent as of the date hereof, as of the Effective Date and on each
subsequent Purchase Date as follows:
(a) The Seller is an entity of the type set forth next to its name in
the first paragraph of the Receivables Purchase Agreement duly organized,
validly existing and in good standing under the laws of its jurisdiction of
formation and is duly qualified to do business, is in good standing, in each
jurisdiction in which the nature of its business requires it to be so qualified,
has the power and authority to own and convey all of its properties and to
execute and deliver this Agreement and the Related Documents and to perform the
transactions contemplated hereby and thereby.
(b) The Seller is intended to be operated in such a manner that it
would not be substantively consolidated in the bankruptcy estate of another
Person (that is, such that the separate corporate existence of the Seller and
the Originator would be disregarded), in the event of a bankruptcy or insolvency
of the Originator.
(c) The Seller is a limited purpose entity whose activities are
restricted in its formation documents;
(d) Neither the Originator nor any Affiliate of the Originator is
involved in the day-to-day management of the Seller (except pursuant to written
management agreements, copies of which have been provided to the Administrative
Agent);
(e) Other than the purchase and contribution of Receivables pursuant to
the Receivables Sale Agreement, the payment of dividends and the return of
capital, and the payment of Servicing Fees to the Servicer under this Agreement,
the Seller engages in no intercorporate transactions with the Originator or any
Affiliate of the Originator;
(f) The Seller maintains separate corporate or other applicable records
and books of account from the Originator, holds regular corporate or other
applicable meetings and otherwise observes corporate or other applicable
formalities;
(g) The financial statements and books and records of the Seller and
the Originator prepared after the Effective Date reflect the separate existence
of the Seller;
(h) The Seller maintains its assets separately from the assets of the
Originator and any other Affiliate of the Originator (including through the
maintenance of separate bank accounts), and the Seller's funds and assets, and
records relating thereto, have not been and are not commingled with those of the
Originator or any other Affiliate of the Originator;
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(i) Neither the Originator nor any Affiliate of the Originator (A) pays
the Seller's expenses, (B) guarantees the Seller's payment obligations, or (C)
advances funds to the Seller for the payment of expenses or otherwise; PROVIDED,
HOWEVER, the Originator may from time to time contribute Receivables to the
Seller as an increase of stated capital;
(j) All business correspondence of the Seller and other communications
are conducted in the Seller's own name, on its own stationery, and the Seller
has a separately-listed telephone number and a separate office from the
Originator (which office may be located within the Originator's offices pursuant
to a written agreement between the Originator and the Seller for the provision
of such office);
(k) The Seller does not act as agent for the Originator, but instead
presents itself to the public as an entity separate from the Originator,
independently engaged in the business of purchasing and financing Receivables;
and
(l) If the Seller is a corporation, it maintains (or, if the Seller is
a limited partnership or limited liability company, its general partner or at
least one member is a corporation that maintains) at least one independent
director at all times who shall at no time be a shareholder, director, officer,
or employee of the Originator or any Affiliate of the Originator (other than the
Seller) as provided in its certificate or articles of incorporation.
(m) The Seller has not engaged, and does not presently engage, in any
activity other than the activities undertaken pursuant to this Agreement and the
Related Documents, nor has the Seller entered into any agreement other than this
Agreement and the Related Documents.
(n) The execution, delivery and performance by the Seller of this
Agreement, the Related Documents and the transactions contemplated hereby and
thereby (i) have been duly authorized by all necessary corporate or other action
on the part of the Seller, (ii) do not contravene or cause the Seller to be in
default under (A) the Seller's formation or governance documents, (B) any
contractual restriction contained in any indenture, loan or credit agreement,
lease, mortgage, security agreement, bond, note, or other agreement or
instrument binding on or affecting the Seller, any Affiliate or their respective
property, or (C) any law, rule, regulation, order, license requirement, writ,
judgment, award, injunction, or decree applicable to, binding on or affecting
the Seller, any Affiliate or their respective property, that, with respect to
any contravention or default by any such Affiliate, would materially and
adversely affect the results of operations or property of such Affiliate, and
(iii) do not result in or require the creation of any Adverse Claim upon or with
respect to any of the property of the Seller or any Affiliate (other than in
favor of the Purchaser as contemplated hereunder).
(o) This Agreement and the Related Documents have each been duly
executed and delivered by the Seller and constitute the legal, valid and binding
obligation of the Seller enforceable against the Seller in accordance with its
respective terms.
(p) No consent of, notice to, filing with or permits, qualifications or
other action by any Governmental Authority or any other party is required (i)
for the due execution, delivery and performance by the Seller of this Agreement
or any of the Related Documents, or (ii) for the
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perfection of or the exercise by each of the Purchaser, the Administrative Agent
or any assignee of the Purchaser of any of its rights or remedies hereunder or
thereunder, in each case other than consents, notices, filings and other actions
which have been obtained or made and complete copies of which have been provided
to the Administrative Agent.
(q) There is no pending or threatened, nor any reasonable basis for
any, action, suit or proceeding against or affecting the Seller, its officers or
directors, or the property of the Seller, in any court or tribunal, before any
arbitrator of any kind or before or by any Governmental Authority and no
injunction, writ, restraining order or other order of any nature adverse to the
Seller or the conduct of its business or which is inconsistent with the due
consummation of the transactions contemplated by this Agreement or the Related
Documents has been issued by a Governmental Authority nor been sought by any
Person.
(r) The principal place of business and chief executive office of the
Seller, and the office where the Seller keeps its Records and the original
copies of the Contracts are located at the address of the Seller for notices
under Section 10.1, and there are currently no, and during the past four months
(or such shorter time as the Seller has been in existence) there have not been,
any other locations where the Seller is located (as that term is used in the UCC
of the jurisdiction where such principal place of business is located) or keeps
Records except as set forth on the attached Schedule 2. The Seller does not have
and has never conducted business using tradenames, fictitious names, assumed
names or "doing business as" names. The Seller does not have any Subsidiaries.
(s) The Seller is solvent and will not become insolvent after giving
effect to the transactions contemplated by this Agreement and the Receivables
Sale Agreement. The Seller has no Debts to any Person other than pursuant to
this Agreement and the Related Documents. The Seller, after giving effect to the
transactions contemplated by this Agreement and the Related Documents, will have
an adequate amount of capital to conduct its business in the foreseeable future.
(t) For federal income tax, reporting and accounting purposes, the
Seller will treat the purchase or absolute assignment of each Pool Receivable
pursuant to the Receivables Sale Agreement as a purchase or absolute assignment
of the Originator's full right, title and ownership interest in such Pool
Receivable to the Seller (and those Receivables contributed to the Seller by the
Originator pursuant to the Receivables Sale Agreement shall be accounted for as
an increase in the stated capital of the Seller) and the Seller has not in any
other manner accounted for or treated such transactions.
(u) The Seller has complied in all material respects with all
applicable laws, rules, regulations and orders with respect to it, its
businesses and properties and all Receivables and related contracts and the
performance of its obligations hereunder and pursuant to the Related Documents.
(v) The Seller has filed on a timely basis all tax returns (federal,
state and local) required to be filed, is not liable for taxes payable by any
other Person and has paid or made
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adequate provisions for the payment of all taxes, assessments and other
governmental charges due from the Seller.
(w) No transaction contemplated by this Agreement requires compliance
with any bulk sales act or similar law.
(x) No provision of the Receivables Sale Agreement, any Related
Document, or the Seller's articles or certificate of incorporation or by-laws,
has been amended, modified or waived from the form of such documents delivered
to the Administrative Agent pursuant to Section 3.1.
(y) All information heretofore or hereafter furnished by or on behalf
of the Seller to the Administrative Agent or the Purchaser in connection with
this Agreement or any transaction contemplated hereby, including, without
limitation, any information contained in any Request Notice or Officer's
Certificate is and will be true and complete in all material respects and does
not and will not omit to state a material fact necessary to make the statements
contained therein not misleading.
SECTION 4.2. REPRESENTATIONS AND WARRANTIES OF THE SELLER WITH RESPECT
TO THE POOL RECEIVABLES.
With respect to each Receivable designated as an Eligible Receivable,
the Seller represents and warrants to the Purchaser as of each Business Day
(including any Purchase Date) that each such Receivable is an Eligible
Receivable.
SECTION 4.3. REPRESENTATIONS AND WARRANTIES OF THE SERVICER.
The Servicer hereby represents and warrants to the Purchaser as of the
date hereof and throughout the term of this Agreement that the representations
and warranties contained in Section 3(a) through (e), (h), and (j) through (n)
of the Receivables Sale Agreement are true and correct as to it as Servicer.
SECTION 4.4. REPRESENTATIONS AND WARRANTIES OF THE PURCHASER.
The Purchaser hereby represents as follows:
(a) The Purchaser is a limited partnership, duly organized, validly
existing and in good standing under the laws of the State of Delaware and is
duly qualified to do business, is in good standing, in each jurisdiction in
which the nature of its business requires it to be so qualified, has the power
and authority to execute and deliver this Agreement and to perform the
transactions contemplated hereby and thereby. The Purchaser has complied in all
material respects with all applicable laws, rules, regulations, and orders with
respect to it, its business and properties, and the performance of its
obligations hereunder.
(b) The execution and delivery by the Purchaser of this Agreement and
the performance by the Purchaser of the transactions contemplated hereby and
thereby (i) have been duly authorized by all necessary partnership or other
action on the part of the Purchaser, (ii) do not contravene or
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cause the Purchaser to be in default under (A) the Purchaser's limited
partnership agreement, or (B) any law, rule, regulation, order, license
requirement writ, judgment, award, injunction, or decree applicable to, binding
on or affecting it or its property.
(c) This Agreement has been duly executed and delivered by the
Purchaser and constitutes the legal, valid and binding obligation of the
Purchaser enforceable against it in accordance with its terms, subject to the
effect of bankruptcy, insolvency and similar laws and to general principles of
equity.
ARTICLE V
COVENANTS
SECTION 5.1. AFFIRMATIVE COVENANTS OF THE SELLER.
The Seller shall, unless the Purchaser and the Liquidity Agent shall
otherwise consent in writing:
(a) operate its business such that its representations and warranties
in Section 4.1 shall be true and correct at all times and notify the
Administrative Agent promptly in writing if any such provision ceases to be true
and correct;
(b) use the proceeds of the Purchases made under the Receivables
Purchase Agreement solely for (i) the purchase of Receivables from the
Originator, (ii) payment of dividends to its shareholder, and (iii) payment of
administrative expenses;
(c) permit the Administrative Agent to make or cause to be made (and,
after the occurrence of and during the continuance of a Termination Event, at
the Seller's expense) inspections and audits of any books, records and papers of
the Seller and shall cause the Originator to permit the Administrative Agent to
make or cause to be made (and, after the occurrence of and during the
continuance of a Termination Event, at the Seller's expense) inspections and
audits of any books, records and papers of the Originator and to make extracts
therefrom and copies thereof, or to make inspections and examinations of any
properties and facilities of the Seller and shall cause the Originator to permit
the Administrative Agent to make extracts therefrom and copies thereof, or to
make inspections and examinations of any properties and facilities of the
Originator, on reasonable notice, at all such reasonable times and as often as
required in order to assure that the Seller is and will be in compliance with
its obligations under this Agreement and the Related Documents;
(d) comply or direct the Servicer to comply with the terms of the
Contracts and perform or direct the Servicer to perform its obligations, if any
thereunder, in accordance with the provisions of the Contract;
(e) comply and direct the Servicer to comply with the Credit and
Collection Policies; and
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(f) inform the Administrative Agent of any ERISA "reportable events".
SECTION 5.2. NEGATIVE COVENANTS OF THE SELLER.
The Seller shall not, unless the Purchaser and the Liquidity Agent
shall otherwise consent in writing:
(a) sell, assign (by operation of law or otherwise) or otherwise
dispose of, or create or suffer to exist any Adverse Claim upon or with respect
to, or assign any right to receive income in respect of, (i) any Pool Receivable
or related Contract with respect thereto, or upon or with respect to the Lockbox
Account or the Collection Account, or any other account in which any Collections
of any Pool Receivable are deposited, (ii) any Receivables Interest or (iii) any
of the Seller's property; provided, however, the Seller may, in the ordinary
course of its operations and in compliance with its business purposes set forth
in its certificate of incorporation and as permitted by law, at any time prior
to the existence of a Termination Event, pay dividends and pay for its ordinary
operations;
(b) extend, amend, forgive, discharge, compromise, cancel or otherwise
modify the terms of the Receivables Sale Agreement, any Related Document or of
any Pool Receivable, or amend, modify or waive any term or condition of any
Contract related thereto; and
(c) amend its certificate of incorporation, its by-laws or any other
organizational documents, any Related Document or the Credit and Collection
Policies.
SECTION 5.3. REPORTING REQUIREMENTS OF THE SELLER.
The Seller shall furnish, or cause to be furnished, to the
Administrative Agent each report described in Annex IV hereto, at the times set
forth therein.
SECTION 5.4. CHANGE OF OWNERSHIP OF THE SELLER.
The Seller shall not, without the written consent of the Purchaser and
the Administrative Agent, merge with or into, consolidate with or into, convey,
transfer, lease or otherwise dispose of all or substantially all of its assets
(whether now owned or hereafter acquired) to, or acquire all or substantially
all of the assets or capital stock or other ownership interest of, any Person
(whether in one transaction or in a series of transactions).
SECTION 5.5 AGREEMENTS OF THE ADMINISTRATIVE AGENT.
The Administrative Agent agrees during the term of this Agreement as
follows:
(a) It will use its reasonable efforts to effect the renewal of the
Liquidity Agreement.
(b) It will request, on behalf of the Purchaser, to the extent an
advance is permitted to be made under the Liquidity Agreement, an advance under
the Liquidity Agreement to effect
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Purchases hereunder no later than 12 noon on any Purchase Date, to the extent
any Purchase is not funded by the issuance of the Purchaser's short-term
commercial paper notes.
(c) It will, upon receipt to the Collateral Account of the proceeds of
any draw referred to in subsection 5.5(b), institute one or more wire transfers
of such funds to the account of the Seller specified to the Administrative Agent
pursuant to Section 2.2(c) by 3:00 p.m. (New York City time) on such Purchase
Date. The Administrative Agent shall have no liability hereunder to the extent
either (i) no funds have been received under the Liquidity Agreement as
contemplated by subsection 5.5(b) or (ii) funds are not received by the Seller
if the wire transfer has been initiated in conformance herewith.
ARTICLE VI
THE SERVICER
SECTION 6.1. APPOINTMENT OF THE SERVICER; SUBSERVICERS.
(a) The Purchaser hereby appoints the Servicer as its agent to service
the Pool Receivables and enforce its rights and interests in and under each Pool
Receivable and each related Contract and to serve in such capacity for each
Collection Period unless earlier terminated by the Purchaser in the Purchaser's
sole discretion by delivery to the Servicer of written termination notice from
the Administrative Agent (any such termination to be effective on the date set
forth in such termination notice). The Servicer hereby agrees to perform the
duties and obligations with respect thereto set forth herein. The Servicer may
not delegate any of its duties hereunder or otherwise sub-contract with any
Person for the collection, servicing or administration of the Pool Receivables,
except to CIT Corporation or such other Persons as may be reasonably approved by
the Administrative Agent and in no such case shall any delegation or
sub-contracting relieve the Servicer from its responsibilities hereunder.
(b) The Servicer shall perform its obligations pursuant to this
Agreement on behalf of and for the benefit of the Purchaser in accordance with
the terms of this Agreement, the respective Contracts and applicable law in the
same manner in which, and with the same care, skill, prudence and diligence with
which, it services and administers similar receivables for its own account.
(c) Documents relating to Pool Receivables shall be held in trust by
the Servicer for the benefit of the Purchaser and assignees as the owners
thereof, and possession of any incident of ownership relating to the Pool
Receivables so retained is for the sole purpose of facilitating the servicing of
the Pool Receivables. Such retention and possession thereof is at the will of
the Purchaser and its assignees and in a custodial capacity for their benefit
only.
(d) Each of the Seller and the Purchaser hereby authorizes the Servicer
(including any successor thereto) to take any and all reasonable steps in its
name and on its behalf necessary or desirable and not inconsistent with the
ownership of the Pool Receivables by the Purchaser and the pledge by the Seller
to the Purchaser of the Pool Receivables in the determination of the Servicer,
to collect all amounts due under any and all Pool Receivables. The Originator,
the
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Seller and the Purchaser shall furnish the Servicer (and any successors thereto)
with any powers of attorney and other documents necessary or appropriate to
enable the Servicer to carry out its servicing and administrative duties
hereunder, and shall cooperate with the Servicer to the fullest extent in order
to ensure the collectibility of the Pool Receivables. In no event shall the
Servicer be entitled to make the Purchaser or the Administrative Agent a party
to any litigation without such party's express prior written consent.
SECTION 6.2. SERVICING FEES.
As compensation for its servicing activities hereunder and as
reimbursement for its expenses in connection therewith, the Servicer shall be
entitled to receive, monthly in arrears, on each Settlement Date, the Servicing
Fee. The Servicer shall be required to pay for all expenses incurred by the
Servicer in connection with its activities hereunder (including any payments to
accountants, counsel or any other Person) and shall not be entitled to any
payment therefor other than the Servicing Fee.
SECTION 6.3. NEGATIVE COVENANTS OF THE SERVICER.
The Servicer shall not, without the written consent of the Purchaser:
(a) sell, assign (by operation of law or otherwise) or otherwise
dispose of, or create or suffer to exist any Adverse Claim upon or with respect
to (and any such purported disposition shall be null and void), any Pool
Receivable or related Contract with respect thereto, any Receivables Interest,
or upon or with respect to the Collection Account or any other account to which
any Collections of any Receivable are deposited, or assign any right to receive
income in respect thereof;
(b) make any change in the Originator's instructions to the Obligor of
any Pool Receivable to make payments to the account specified to the Originator
by the Administrative Agent;
(c) consolidate with or merge into any other Person or convey or
transfer its properties and assets substantially as an entirety to any Person,
unless:
(i) the Person formed by such consolidation or into which the
Servicer is merged or the Person which acquires by conveyance or
transfer the properties and assets of the Servicer substantially as an
entirety, shall be, if the Servicer is not the surviving entity,
organized and existing under the laws of the United States of America
or any State or the District of Columbia and shall expressly assume, by
an agreement supplemental hereto, executed and delivered to the
Administrative Agent in form satisfactory to the Administrative Agent,
the performance of every covenant and obligation of the Servicer
hereunder, and shall benefit from all the rights granted to the
Servicer, as applicable hereunder;
(ii) the Servicer has delivered to the Administrative Agent an
Officer's Certificate and an opinion of counsel each stating that such
consolidation, merger,
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conveyance or transfer and such supplemental agreement comply with this
Agreement and that all conditions precedent herein provided for
relating to such transaction have been complied with and, in the case
of the opinion of counsel, that such supplemental agreement is legal,
valid and binding with respect to the Servicer;
(iii) the Servicer shall have delivered notice of such
consolidation, merger, conveyance or transfer to the Administrative
Agent; and
(iv) after giving effect thereto, no Termination Event or an
event which with notice or lapse of time or both would constitute a
Termination Event shall have occurred.
(d) extend, amend, forgive, discharge, compromise, cancel or otherwise
modify the terms of any Related Document to which it is a party or of any Pool
Receivable, or amend, modify or waive any term or condition of any Contract
related thereto.
SECTION 6.4. REPORTING.
During the term of this Agreement, the Servicer shall furnish to the
Purchaser and the Administrative Agent each report described in Annex V hereto,
at the times set forth therein. The Servicer shall provide prompt written notice
to the Administrative Agent of any default by the Servicer under any instrument
or agreement evidencing, securing or providing for the issuance of Debt of the
Servicer in a Material Amount, such notice to specify the nature of such default
in reasonable detail.
SECTION 6.5. COVENANTS OF THE SERVICER REGARDING THE POOL RECEIVABLES
AND SERVICING RECORDS.
The Servicer shall, for not less than three years or for such longer
period as may be required by law, from the date on which any Pool Receivable
arose, maintain the Records with respect to each Pool Receivable, including
records of all payments received, credits granted and merchandise returned. The
Servicer will permit representatives of the Purchaser at any time and from time
to time during normal business hours, and at such times outside of normal
business hours as the Purchaser shall reasonably request, (i) to inspect and
make copies of and abstracts from such records, and (ii) to visit the properties
of the Servicer utilized in connection with the collection, processing or
servicing of the Pool Receivables for the purpose of examining such Records, and
to discuss matters relating to the Receivables or the Servicer's performance
under this Agreement with any officer or employee of the Servicer having
knowledge of such matters. In connection therewith, the Purchaser may institute
procedures to permit it to confirm balances in respect of any Pool Receivables.
The Servicer agrees to render to the Purchaser such clerical and other
assistance as may be reasonably requested with regard to the foregoing. If a
Termination Event shall have occurred and be continuing the Servicer shall
promptly upon request therefor deliver to the Purchaser records reflecting
activity through the close of business on the Business Day immediately preceding
the occurrence of such Termination Event and turn over to the Purchaser or to
its representatives all of the Servicer's books and records pertaining to the
Pool Receivables, including all Records.
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SECTION 6.6. SERVICER NOT TO RESIGN.
The Servicer shall not resign from the obligations and duties hereby
imposed on it except upon determination that (a) the performance of its duties
hereunder has become impermissible under applicable law, and (b) there is no
reasonable action which the Servicer could take to make the performance of its
duties hereunder permissible under applicable law. Any such determination
permitting the resignation of the Servicer shall be evidenced as to clause (a)
above by an opinion of counsel to such effect delivered to the Purchaser. No
such resignation shall become effective until a successor Servicer shall have
assumed the responsibilities and obligations of the Servicer in accordance
herewith.
SECTION 6.7. INDEMNITIES BY THE SERVICER.
(a) Without limiting any other rights that an Indemnified Party may
have hereunder or under applicable law, the Servicer hereby agrees to indemnify
each Indemnified Party from and against any and all Indemnified Amounts which
may be imposed on, incurred by or asserted against an Indemnified Party in any
way arising out of or relating to any breach of the Servicer's obligations under
this Agreement. Without limiting or being limited by the foregoing, the Servicer
shall pay on demand to each Indemnified Party any and all amounts necessary to
indemnify such Indemnified Party from and against any and all Indemnified
Amounts relating to or resulting from:
(i) reliance on any representation or warranty made or deemed
made by the Servicer (or any of its officers) under or in connection
with this Agreement, any Related Document or any report or other
information delivered by the Servicer pursuant hereto which shall have
been incorrect in any material respect when made or deemed made or
delivered; or
(ii) the failure by the Servicer to comply with any term,
provision or covenant contained in this Agreement, any Related Document
or any agreement executed by it in connection with this Agreement or
with any applicable law, rule or regulation with respect to any Pool
Receivable or its related Contract, or the imposition of any Adverse
Claim (except as permitted hereunder) with respect to a Pool Receivable
as a result of the Servicer's actions hereunder.
(b) Any Indemnified Amounts subject to the indemnification provisions
of this Section 6.7 shall be paid to the Indemnified Party within five Business
Days following demand therefor.
SECTION 6.8. APPOINTMENT OF THE SUCCESSOR SERVICER.
In connection with any termination of the Servicer's responsibilities
under this Agreement, the Administrative Agent shall (a) succeed to and assume
all of the Servicer's responsibilities, rights, duties and obligations as
Servicer (but not in any other capacity, including specifically not its
obligations under Section 6.7) under this Agreement (and except that the
Administrative Agent makes no representations and warranties pursuant to Section
4.3),
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or (b) appoint a successor servicer to the Servicer which shall be acceptable to
the Purchaser and shall succeed to all rights and assume all of the
responsibilities, duties and liabilities of the Servicer under this Agreement
(the Administrative Agent, in such capacity, or such successor servicer being
referred to as the "SUCCESSOR SERVICER"); PROVIDED, that the Successor Servicer
shall have no responsibility for any actions of the Servicer prior to the date
of its appointment as Successor Servicer. In selecting a Successor Servicer, the
Administrative Agent may obtain bids from any potential Successor Servicer and
may agree to any bid it deems appropriate and consistent with the servicing fees
charged by servicers providing similar services. The Successor Servicer shall
accept its appointment by executing, acknowledging and delivering to the
Administrative Agent, the Purchaser and the Seller an instrument in form and
substance acceptable to the Administrative Agent and the Purchaser.
SECTION 6.9. DUTIES OF THE SERVICER FOLLOWING APPOINTMENT OF A
SUCCESSOR SERVICER.
At any time following the appointment of a Successor Servicer, Servicer
agrees that it will terminate its activities as Servicer hereunder in a manner
acceptable to the Purchaser and the Successor Servicer so as to facilitate the
transfer of servicing to the Successor Servicer including, without limitation,
timely delivery to the Successor Servicer, at a place selected by the Successor
Servicer, of all Servicing Records and other information with respect to the
Pool Receivables. The Servicer shall account for all funds and shall execute and
deliver such instruments and do such other things as may reasonably be required
to more fully and definitely vest and confirm in the Successor Servicer all
rights, powers, duties, responsibilities, obligations and liabilities of the
Servicer.
SECTION 6.10. EFFECT OF TERMINATION OR RESIGNATION.
Any termination or resignation of the Servicer under this Agreement
shall not affect any claims that the Purchaser or the Administrative Agent may
have against the Servicer for events or actions taken or not taken by the
Servicer arising prior to any such termination or resignation.
ARTICLE VII
TERMINATION EVENTS
SECTION 7.1. TERMINATION EVENTS.
If any of the following events (each, a "TERMINATION EVENT") shall
occur and be continuing:
(a) (i) the Seller shall default in the payment of any amount owed by
it hereunder and such failure shall remain unremedied for two Business Days, or
(ii) the Seller or the Servicer shall fail to perform or observe any other term,
covenant or agreement contained in this Agreement and such failure shall remain
unremedied for ten Business Days, in each case after written notice thereof
shall have been given by the Administrative Agent to the Seller or the Servicer,
as the case may be;
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(b) a default shall have occurred and be continuing under any
instrument or agreement evidencing, securing or providing for the issuance of
Debt of the Originator or the Servicer in a Material Amount or Debt of the
Seller in any amount, and such failure has continued for a period in excess of
any applicable grace period (without giving effect to any waiver or extension of
such grace period);
(c) (i) a court or governmental agency having jurisdiction in the
premises shall enter a decree or order for relief in respect of any of the
Originator, the Servicer or the Seller in an involuntary case under any
applicable bankruptcy, insolvency or other similar law now or hereafter in
effect, or appoint a receiver, liquidator, assignee, custodian, trustee,
sequestrator or similar official of any of the Originator, the Servicer or the
Seller or for any substantial part of any of their respective property or
ordering the winding up or liquidation of any of the Originator's, the
Servicer's or the Seller's affairs; or (ii) an involuntary case under any
applicable bankruptcy, insolvency or other similar law now or hereafter in
effect is commenced against any of the Originator, the Servicer or the Seller;
or (iii) any of the Originator, the Servicer or the Seller shall commence a
voluntary case under any applicable bankruptcy, insolvency or other similar law
now or hereafter in effect, or consent to the entry of an order for relief in an
involuntary case under any such law, or consent to the appointment or taking
possession by a receiver, liquidator, assignee, custodian, trustee, sequestrator
or similar official of such Person or any substantial part of its property or
make any general assignment for the benefit of creditors; or (iv) any of the
Originator, the Servicer or the Seller shall admit in writing its inability to
pay its debts generally as they become due or any action shall be taken by such
Person in furtherance of any of the aforesaid purposes; or (v) the Originator,
the Servicer or the Seller shall take any corporate action to authorize any of
the actions set forth in this subsection;
(d) judgments or orders for the payment of money in excess of the
Originator Judgment Amount in the aggregate against the Originator, the Servicer
or any of their respective Affiliates (other than such judgments or orders in
respect of which adequate insurance is maintained for the payment thereof after
giving effect to any deductible) shall remain unpaid, unstayed on appeal,
undischarged, unbonded or undismissed for a period of 30 days or more;
(e) a judgment or order for the payment of money is rendered against
the Seller;
(f) there is a material breach of any of the representations and
warranties of either (i) the Seller set forth in Section 4.1 or 4.2 or (ii) of
the Servicer set forth in Section 4.3;
(g) any Governmental Authority (including the Internal Revenue Service
or the Pension Benefit Guaranty Corporation) shall file notice of a lien with
regard to any assets of the Originator (other than a lien (i) limited by its
terms to assets other than Receivables and (ii) not materially adversely
affecting the financial condition of the Originator or the Originator's ability
to perform as Servicer hereunder);
(h) any Governmental Authority (including the Internal Revenue Service
or the Pension Benefit Guaranty Corporation) shall file notice of a lien with
regard to any of the assets of the Seller;
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(i) the Administrative Agent shall have reasonably determined in good
faith that any event which materially adversely affects the collectibility of
the Receivables has occurred, or that any other event which materially adversely
affects the financial condition of the Seller or the ability of the Seller to
perform hereunder has occurred;
(j) (i) the Receivables Sale Agreement shall for any reason cease to
evidence the transfer to the Seller (or its assignees or transferees) of the
legal and equitable title to, and beneficial ownership of, the Pool Receivables
or any Receivables Interest or (ii) this Agreement shall for any reason cease to
evidence the transfer to the Purchaser of the legal and equitable title to, and
beneficial ownership of, and a first priority perfected interest in the Pool
Receivables;
(k) the Receivables Sale Agreement shall have been amended or
terminated without the written consent of the Purchaser and the Administrative
Agent;
(l) the Administrative Agent shall have determined that the purchase of
Receivables Interests hereunder is impracticable due to a lowering or withdrawal
of any of the ratings assigned to the Commercial Paper or restrictions in the
amount of Pool Receivables it may purchase;
(m) the aggregate Receivables Interest exceeds the Maximum Investment
Percentage for a period of fifteen (15) consecutive days;
(n) an event of default or an event which with the giving of notice or
the passage of time, or both, would constitute an event of default shall have
occurred under either of the Liquidity Agreement or the Collateral Agreement;
(o) the Servicer shall assign or purport to assign any of its
obligations hereunder or under the Receivables Sale Agreement without the prior
written consent of the Administrative Agent; or
(p) the Capital Investment exceeds the Purchase Limit for any two
consecutive Business Days;
then, and in any such event, the Administrative Agent on behalf of the Purchaser
may, and at the direction of the Liquidity Agent will, by written notice to the
Seller, declare the Purchase Termination Date to have occurred, whereupon the
Purchase Termination Date shall forthwith occur, without demand, protest or
further notice of any kind, all of which are hereby expressly waived by the
Seller; PROVIDED, that in the event that any of the Termination Events described
in subsection (c)(i), (iii), (iv) or (v) herein shall have occurred, the
Purchase Termination Date shall automatically occur, without demand, protest or
any notice of any kind, all of which are hereby expressly waived by the Seller.
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SECTION 7.2. ACTIONS UPON TERMINATION EVENT.
If any Termination Event shall have occurred and be continuing and the
Purchaser shall have declared the Purchase Termination Date to have occurred or
the Purchase Termination Date shall have been deemed to have occurred pursuant
to Section 7.1, then the Purchaser or, the Administrative Agent on behalf of the
Purchaser, may exercise, in addition to any and all other rights and remedies
otherwise available to it, all of the rights and remedies of a purchaser under
the UCC (such rights and remedies to be cumulative and nonexclusive).
ARTICLE VIII
INDEMNIFICATION
SECTION 8.1. INDEMNITIES BY THE SELLER.
(a) Without limiting any other rights that the Purchaser, the
Administrative Agent or any director, officer, employee or agent of such party
(each an "INDEMNIFIED PARTY") may have hereunder, or under applicable law, the
Seller hereby agrees to indemnify each Indemnified Party from and against any
and all claims, losses, liabilities, obligations, damages, penalties, actions,
judgments, suits, and related costs and expenses of any nature whatsoever
(including reasonable legal fees and disbursements) (other than taxes imposed or
measured by the net income of the Purchaser or any Administrative Agent in the
jurisdiction in which such party has its principal office), which may be imposed
on, incurred by or asserted against an Indemnified Party in any way arising out
of or relating to any breach of the Seller's obligations under this Agreement,
excluding, however, Indemnified Amounts to the extent resulting solely from
gross negligence or willful misconduct on the part of such Indemnified Party
(all of the foregoing being collectively referred to as "INDEMNIFIED AMOUNTS").
Without limiting or being limited by the foregoing, the Seller shall pay on
demand to each Indemnified Party any and all amounts necessary to indemnify such
Indemnified Party from and against any and all Indemnified Amounts relating to
or resulting from:
(i) reliance on any representation or warranty made or deemed
made by the Seller (or any of its officers) under or in connection with
this Agreement, any Related Document or any report or other information
delivered by the Seller pursuant hereto or thereto which shall have
been incorrect in any material respect when made or deemed made or
delivered; or
(ii) the failure by the Seller to comply with any term,
provision or covenant contained in this Agreement, any Related Document
or any agreement executed by it in connection with this Agreement or
with any applicable law, rule or regulation with respect to any Pool
Receivable or its related Contract, or the nonconformity of any Pool
Receivable or its related Contract with any such applicable law, rule
or regulation.
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(b) Any Indemnified Amounts subject to the indemnification provisions
of this Section 8.1 shall be paid to the Indemnified Party within five Business
Days following demand therefor.
(c) The Seller certifies that it may assign the rights of indemnity
granted to it by the Originator under the Receivables Sale Agreement to the
Purchaser and the Purchaser may in turn assign such rights. The Seller hereby
assigns to the Purchaser such rights of indemnity. The Originator hereby
acknowledges such assignment and agrees that the Purchaser may enforce such
indemnities directly without joinder of the Seller.
ARTICLE IX
THE ADMINISTRATIVE AGENT
SECTION 9.1. AUTHORIZATION AND ACTION.
The Administrative Agent may take such action and carry out such
functions under this Agreement as are specified by the terms of this Agreement
or otherwise contemplated hereby or thereby or are reasonably incidental thereto
or are delegated to it by the Purchaser under this Agreement or otherwise;
PROVIDED, that the duties of the Administrative Agent hereunder shall be
determined solely by the express provisions of this Agreement and any permissive
right of the Administrative Agent hereunder shall not be construed as a duty.
SECTION 9.2. RELIANCE, ETC.
None of the Administrative Agent, any Affiliate thereof nor any of
their respective directors, officers, agents or employees will be liable for any
action taken or omitted to be taken by any of them under or in connection with
this Agreement, or the Related Documents, except when caused solely by their own
gross negligence or willful misconduct. Without limiting the generality of the
foregoing or notwithstanding any term or provision hereof to the contrary, the
Seller, the Servicer and the Purchaser hereby acknowledge and agree that the
Administrative Agent: (a) acts as agent hereunder for the Purchaser, and has no
duties or obligations to, will incur no liabilities or obligations to, and does
not act as an agent in any capacity for, the Seller or the Originator, (b) may
consult with legal counsel, independent public accountants and other experts
selected by it and shall not be liable for any action taken or omitted to be
taken in good faith by it in accordance with the advice of such counsel,
accountants or experts, (c) makes no warranty or representation hereunder and
shall not be responsible for any statements, warranties or representations made
in or in connection with this Agreement or the Related Documents, (d) shall not
have any duty to ascertain or to inquire as to the performance or observance of
any of the terms, covenants or conditions of this Agreement or the Related
Documents on the part of the Seller, the Servicer or the Purchaser or to inspect
the property (including the books and records) of the Seller, the Servicer or
the Purchaser, (e) shall not be responsible to the Seller, the Servicer or the
Purchaser for the due execution, legality, validity, enforceability,
genuineness, sufficiency or value of this Agreement or any other instrument or
document furnished pursuant hereto (including the Related Documents), (f) shall
incur no liability under or in respect of this
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Agreement or the Related Documents by acting upon any notice or communication
(including a communication by telephone), consent, certificate or other
instrument or writing believed by it to be genuine and signed, sent or
communicated by the proper party or parties and (g) shall not be bound to make
any investigation into the facts or matters stated in any notice or other
communication hereunder and may rely on the accuracy of such facts or matters.
SECTION 9.3. CAPITAL USA, L.L.C. AND AFFILIATES.
Capital USA, L.L.C. and its Affiliates may generally engage in any kind
of business with the Seller, the Originator, the Servicer, the Purchaser or any
Obligor any of their respective Affiliates and any Person who may do business
with or own securities of such parties or any of their respective Affiliates,
all as if Capital USA, L.L.C. were not the Administrative Agent, and without the
duty to account therefor to the Seller, the Originator, the Servicer, the
Purchaser or any other Person.
SECTION 9.4. COMMUNICATION WITH OBLIGORS.
Each of the Seller, the Originator and the Servicer acknowledge and
agree that the Administrative Agent may confirm the status and outstanding
amount of any Receivable with the Obligor thereof.
ARTICLE X
MISCELLANEOUS
SECTION 10.1. NOTICES, ETC.
All notices and other communications provided for hereunder, unless
otherwise stated herein, shall be in writing and mailed or telecommunicated, or
delivered as to each party hereto, at its address set forth on Schedule 3 or at
such other address as shall be designated by such party in a written notice to
the other parties hereto. All such notices and communications shall not be
effective until received by the party to whom such notice or communication is
addressed.
SECTION 10.2. BINDING EFFECT; ASSIGNABILITY; SURVIVAL.
This Agreement shall be binding upon and inure to the benefit of the
Seller, the Originator, the Servicer, the Purchaser, the Administrative Agent
and their respective permitted successors and assigns. None of the Seller, the
Originator or the Servicer may assign any of their rights and obligations
hereunder or any interest herein without the prior written consent of the
Purchaser and the Administrative Agent. The Purchaser and the Administrative
Agent may, at any time, without the consent of the Seller, the Originator or the
Servicer assign any of their respective rights and obligations hereunder or
interest herein to any Person and, in such respect, specific references in this
Agreement to assignees of the Purchaser or the Administrative Agent are for
convenience only and not by way of limitation of such general rights. Any such
assignee may further assign at any time its rights and obligations hereunder or
interests herein without the
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consent of the Seller, the Originator or the Servicer. Without limiting the
generality of the foregoing, the Purchaser hereby notifies the Seller, the
Originator and the Servicer that it intends to fund its purchases of Receivables
under this Agreement through the issuance of Commercial Paper and intends to
assign its interests hereunder to a collateral agent or trustee for the holders
of the Commercial Paper and the lenders or purchasers under the Liquidity
Agreement. The Seller, the Originator and the Servicer agree to reasonably
cooperate with the Purchaser and the Administrative Agent in all matters
facilitating such assignments. This Agreement shall create and constitute the
continuing obligations of the parties hereto in accordance with its terms, and
shall remain in full force and effect until its termination; PROVIDED, that the
rights and remedies with respect to any breach of any representation and
warranty made by the Seller, the Originator or the Servicer pursuant to Article
IV and the indemnification and payment provisions of Article VIII shall be
continuing and shall survive any termination of this Agreement.
SECTION 10.3. COSTS, EXPENSES AND TAXES.
(a) In addition to the rights of indemnification under Section 8.1
hereof, the Seller agrees to pay to the Purchaser, upon demand, the Seller's
Share of all Additional Liquidity Costs and reasonable out-of-pocket costs and
expenses and taxes (other than taxes imposed or measured by the net income of
the Purchaser or any Administrative Agent in the jurisdiction in which the
Purchaser or the Administrative Agent, as the case may be, has its principal
office) incurred by the Purchaser or the Administrative Agent in connection with
the administration (including periodic auditing, Rating Agency requirements,
modification and amendment) of this Agreement, the Related Documents and the
other documents to be delivered hereunder, including, without limitation, the
reasonable fees and out-of-pocket expenses of counsel for the Purchaser and the
Administrative Agent with respect thereto and with respect to advising the
Purchaser and the Administrative Agent as to its rights and remedies under this
Agreement, the Related Documents and the other agreements executed pursuant
hereto (collectively, "OTHER COSTS"). The Seller further agrees to pay within
five Business Days after demand all reasonable costs, counsel fees and expenses
in connection with the negotiation, preparation, execution and delivery and/or
enforcement (whether through negotiation, legal proceedings or otherwise) of
this Agreement, the Related Documents and the other agreements and documents to
be delivered hereunder, including, without limitation, reasonable counsel fees
and expenses in connection with the enforcement of rights under this Section
10.3; PROVIDED, however, that legal fees for the negotiation, preparation,
execution and delivery of this Agreement and the Related Documents shall not
exceed the amount set forth in the commitment letter (the "Cap"), expenses shall
be in addition to the Cap.
(b) The Administrative Agent will notify the Seller of any event
occurring after the date of this Agreement that will result in Other Costs as
promptly as practicable after the Administrative Agent obtains knowledge thereof
and will provide the Seller with a notice setting forth the basis and amount of
each such determination, which determination shall be conclusive.
(c) If the Seller, the Originator or the Servicer fails to perform any
agreement or obligation contained herein, the Purchaser or the Administrative
Agent may (but shall not be required to) itself perform, or cause performance
of, such agreement or obligation, and the
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expenses of such party incurred in connection therewith shall be payable by the
party which has failed to so perform upon such party's demand therefor.
SECTION 10.4. CONFIDENTIALITY.
Except to the extent otherwise required by applicable law or unless the
Purchaser shall otherwise consent in writing, each of the Seller, the Originator
and the Servicer agrees to maintain the confidentiality of this Agreement (and
all drafts hereof and documents ancillary hereto [and thereto]) in its
communications with third parties and otherwise and not to disclose, deliver or
otherwise make available to any third party (other than its directors, officers,
employees, accountants or counsel) the original or any copy of all or any part
of this Agreement (or any draft hereof and documents ancillary hereto).
SECTION 10.5. NO PROCEEDINGS.
The Seller, the Originator and the Servicer each hereby agree that it
will not, directly or indirectly, institute, or cause to be instituted, against
the Purchaser or the general partner of the Purchaser any proceeding of the type
referred to in Section 7.1(c) so long as there shall not have elapsed one year
plus one day since the latest maturing Commercial Paper have been paid in full
in cash. The Originator, the Servicer, the Purchaser and the Administrative
Agent each hereby agree that it will not, directly or indirectly, institute, or
cause to be instituted, against the Seller any proceeding of the type referred
to in Section 7.1(c) so long as there shall not have elapsed one year plus one
day since the termination of this Agreement. The requirements of this Section
10.5 shall survive the termination and assignment of this Agreement. The
Administrative Agent shall provide the Originator with written notice of the
maturity date of such latest maturing Commercial Paper.
SECTION 10.6. AMENDMENTS; WAIVERS; CONSENTS; REMEDIES.
No modification, amendment or waiver of or with respect to any
provision of this Agreement, the Related Documents or any other agreements,
instruments and documents delivered pursuant hereto, nor consent to any
departure by the Seller, the Originator or the Servicer from any of the terms or
conditions thereof, shall be effective unless it shall be in writing and signed
by each of the parties hereto. Any waiver or consent shall be effective only in
the specific instance and for the purpose for which given. No consent to or
demand on the Seller, the Originator or the Servicer in any case shall, in
itself, entitle it to any other consent or further notice or demand in similar
or other circumstances. This Agreement, the Related Documents and the documents
referred to therein embody the entire agreement among the Seller, the Purchaser,
the Originator, the Administrative Agent and the Servicer and supersede all
prior agreements and understandings relating to the subject hereof. No failure
on the part of the Purchaser or the Administrative Agent to exercise, and no
delay in exercising, any right hereunder shall operate as a waiver thereof; nor
shall any single or partial exercise of any right hereunder preclude any other
or further exercise thereof or the exercise of any other right. The remedies
herein provided are cumulative and not exclusive of any other remedies provided
by law.
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SECTION 10.7. SEVERABILITY.
In case any provision in or obligation under this Agreement shall be
invalid, illegal or unenforceable in any jurisdiction, the validity, legality
and enforceability of the remaining provisions or obligations, shall not in any
way be affected or impaired thereby in such jurisdiction and the validity,
legality and enforceability of the remaining provisions or obligations, shall
not be impaired thereby in any other jurisdiction.
SECTION 10.8. DESCRIPTIVE HEADINGS.
The descriptive headings of the various sections of this Agreement are
inserted for convenience of reference only and shall not be deemed to affect the
meaning or construction of any of the provisions hereof.
SECTION 10.9. GOVERNING LAW; CONSENT TO JURISDICTION; WAIVER OF JURY
TRIAL.
(a) THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE
WITH, THE INTERNAL LAWS (AS OPPOSED TO CONFLICT OF LAWS PROVISIONS) OF THE STATE
OF NORTH CAROLINA.
(b) EACH OF THE PARTIES TO THIS AGREEMENT HEREBY SUBMITS TO THE
NON-EXCLUSIVE JURISDICTION OF THE COURTS OF THE STATE OF NORTH CAROLINA AND THE
UNITED STATES DISTRICT COURT LOCATED IN CHARLOTTE, NORTH CAROLINA AND EACH
WAIVES PERSONAL SERVICE OF ANY AND ALL PROCESS UPON IT AND CONSENTS THAT ALL
SUCH SERVICE OF PROCESS BE MADE BY REGISTERED MAIL DIRECTED TO THE ADDRESSES SET
FORTH ON THE ATTACHED SCHEDULE 3, AND SERVICE SO MADE SHALL BE DEEMED TO BE
COMPLETED FIVE DAYS AFTER THE SAME SHALL HAVE BEEN DEPOSITED IN THE U.S. MAILS,
POSTAGE PREPAID. TO THE EXTENT PERMITTED BY APPLICABLE LAW, EACH OF THE PARTIES
TO THIS AGREEMENT HEREBY WAIVES ANY OBJECTION BASED ON FORUM NON CONVENIENS AND
ANY OBJECTION TO VENUE OF ANY ACTION INSTITUTED HEREUNDER, AND CONSENTS TO THE
GRANTING OF SUCH LEGAL OR EQUITABLE RELIEF AS IS DEEMED APPROPRIATE BY THE
COURT. NOTHING IN THIS SECTION 10.9(b) SHALL AFFECT THE RIGHT OF ANY PARTY TO
THIS AGREEMENT TO SERVE LEGAL PROCESS IN ANY OTHER MANNER PERMITTED BY LAW OR
AFFECT ANY SUCH PARTY'S RIGHT TO BRING ANY ACTION OR PROCEEDING IN THE COURTS OF
ANY OTHER JURISDICTION.
(c) TO THE EXTENT PERMITTED BY APPLICABLE LAW, EACH OF THE PARTIES TO
THIS AGREEMENT HEREBY WAIVES ANY RIGHT TO HAVE A JURY PARTICIPATE IN RESOLVING
ANY DISPUTE, WHETHER SOUNDING IN CONTRACT, TORT OR OTHERWISE ARISING OUT OF,
CONNECTED WITH, RELATED TO OR IN CONNECTION WITH THIS AGREEMENT. INSTEAD, ANY
DISPUTE RESOLVED IN COURT WILL BE RESOLVED IN A BENCH TRIAL WITHOUT A JURY.
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SECTION 10.10. EXECUTION IN COUNTERPARTS.
This Agreement may be executed by the parties hereto in separate
counterparts, each of which when so executed shall be deemed to be an original
and all of which when taken together shall constitute one and the same
agreement.
[remainder of page intentionally left blank]
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IN WITNESS WHEREOF, the parties hereto have caused this
Receivables Purchase and Servicing Agreement to be executed by their respective
officers thereunto duly authorized as of the date first written above.
SUNBEAM ASSET DIVERSIFICATION, INC.,
as the Seller
By: /s/ Steven A. Dalberth
-----------------------------------------
Name: Steven A. Dalberth
Title: Vice President & Treasurer
LLAMA RETAIL FUNDING, L.P.,
as Purchaser,
By Llama Retail Funding Corp.,
its general partner
By: /s/ Michael J. Bevacqua
-----------------------------------------
Name: Michael J. Bevacqua
Title: Vice President
SUNBEAM PRODUCTS, INC.,
individually and as Servicer
By: /s/ Steven A. Dalberth
-----------------------------------------
Name: Steven A. Dalberth
Title: Director, Treasury Operations
CAPITAL USA, L.L.C.,
as Administrative Agent
By: /s/ Michael J. Bevacqua
-----------------------------------------
Name: Michael J. Bevacqua
Title: Vice President
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ANNEX I
DEFINITIONS
ACCRUED DAILY FEES AND EXPENSES: With respect to any Collection Period, the
product of (a) the Purchase Limit less the average of the daily Capital
Investment during such Collection Period, (b) a fraction (i) the numerator of
which is the number of days in the Collection Period ending on such day and (ii)
the denominator of which is 360, and (c) the Program Fee Rate.
ACCRUED DAILY SERVICING FEE: With respect to any Collection Period, the product
of (a) the Servicing Fee Rate, (b) the Average Outstanding Balance of all Pool
Receivables for such Collection Period, and (c) the actual number of days in
such Collection period divided by 360.
ACCRUED DAILY YIELD: With respect to any Collection Period, the sum of (a) the
product of (i) a fraction (A) the numerator of which is the number of days in
the Collection Period ending on such day and (B) the denominator of which is
360, (ii) the Applicable Margin and (iii) the average of the daily Capital
Investment during such Collection Period, plus (b) the Seller's Share of (i) the
amount of discount which has accrued during such Collection Period on Commercial
Paper issued by the Purchaser, and (ii) the amount of interest which has accrued
during such Collection Period on Liquidity Loans, minus (c) the Seller's Share
of the amount of net gains and net income realized on Permitted Investments in
the investment subaccount of the Collateral Account during such Collection
Period, as determined by the Administrative Agent.
ADDITIONAL LIQUIDITY COSTS: Any additional costs to the Purchaser under any
Liquidity Agreement resulting from any: (a) changes in the basis of taxation of
any amounts payable to the lender under the Liquidity Agreement; (b) imposition
or modification of any reserve, special deposit or similar requirements relating
to any assets or liabilities of such lender, or the commitment of such entity to
make Liquidity Loans; (c) alteration of the amount of capital required to be
maintained in respect of its Liquidity Loans; (d) change in or interpretation of
any law or regulation or compliance with any guideline or request from any
central bank or other governmental authority (whether or not having the force of
law); or (e) imposition of any other condition affecting this Agreement.
ADMINISTRATIVE AGENT: Capital USA, L.L.C. as Administrative Agent hereunder,
together with its successors and assigns.
ADVERSE CLAIM: Any claim of ownership or any lien, security interest, title
retention, trust or other charge or encumbrance, or other type of preferential
arrangement having the effect or purpose of creating a lien or security
interest, other than the security interest created under this Agreement.
AFFILIATE: As to any Person, any other Person that, directly or indirectly, is
in control of, is controlled by, or is under common control with, such Person
within the meaning of control under Section 15 of the Securities Act of 1933, as
amended.
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AGREEMENT: This Receivables Purchase Agreement which include the exhibits,
annexes and schedules hereto and thereto and any amendment or supplement hereto
and thereto.
APPLICABLE MARGIN: .27% per annum as to Tier I Obligors and .57% per annum as to
Tier II Obligors.
APPLICABLE MARGIN RESERVE: As defined in Exhibit A.
AVAILABLE FUNDS: On any Business Day, all amounts on deposit in the Collection
Account, including, without limitation, funds deposited pursuant to Section
2.7(b) other than Escrowed Amounts.
AVERAGE OUTSTANDING BALANCE OF ALL POOL RECEIVABLES: For any period, the sum of
the Outstanding Balance of Pool Receivables (other than Defaulted Receivables)
on each day during such period, divided by the number of days in such period.
BALANCE SHEET DATE: December 29, 1996.
BILLED AMOUNT: With respect to any Receivable, the amount billed to the Obligor
thereof, net of contractual adjustments, discounts, Promotional Allowances, or
other reductions permitted under the terms of the related Contract.
BILLING DATE: The date on which the invoice with respect to a Receivable was
generated by the Originator.
BUSINESS DAY: Any day of the year other than a Saturday, Sunday or any day on
which banks generally are required, or authorized, to close in New York, New
York or Fayetteville, Arkansas.
CAPITAL INVESTMENT: At any time, the (a) original amount paid to the Seller for
a Receivable Interest at the time of its purchase by the Purchaser pursuant to
this Agreement, MINUS (b) any amounts deposited into the Collateral Account in
reduction of such Capital Investment pursuant to Sections 2.8, 2.9 or 2.10 (such
reduction to be effective only after the expiration of the Escrow Period, if
applicable).
CLOSING DATE: December 4, 1997.
COLLATERAL ACCOUNT: The account maintained with the Collateral Agent into which
amounts payable to the Purchaser hereunder are to be deposited.
COLLATERAL AGENT: The financial institution acting as collateral agent on behalf
of the Purchaser, the Liquidity Agent and the Depositary.
COLLATERAL AGREEMENT: Any agreement among the Collateral Agent, the Purchaser,
the Administrative Agent, a Liquidity Agent and the Depositary in connection
with the administration of the Collateral Account and the grant of the security
interest by the Purchaser to the Collateral Agent of certain assets of the
Purchaser.
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COLLECTION ACCOUNT: The Eligible Bank Account described in Section 2.5.
COLLECTION PERIOD: With respect to any calculation or disbursement of Accrued
Daily Yield, Accrued Daily Fees and Expenses or Accrued Daily Servicing Fees,
the number of days elapsed from and including the last date as of which
calculations or disbursements of Accrued Daily Yield, Accrued Daily Fees and
Expenses or Accrued Daily Servicing Fees were made to but excluding the
effective date of such calculation or disbursement.
COLLECTIONS: With respect to any Receivable, all (a) cash collections and other
cash proceeds of such Receivable, (b) all amounts deemed to have been received
pursuant to Section 2.10 and (c) all other proceeds of such Receivables.
COMMERCIAL PAPER: Commercial paper notes issued by the Purchaser to fund the
Purchases hereunder and under Other Receivables Purchase Agreements.
CONTRACT: Any written agreement (or agreements) pursuant to, or under, which the
Obligor thereof shall be obligated to make one or more payments to the
Originator.
CP DISRUPTION EVENT: The inability of the Purchaser, at any time, whether as a
result of a prohibition, a contractual restriction or any other event or
circumstances whatsoever, to raise funds through the issuance of its commercial
paper notes (whether or not constituting commercial paper notes issued to fund
Purchases hereunder) in the United States commercial paper market.
CREDIT AND COLLECTION POLICIES: The credit, collection, customer relations and
service policies of the Originator in effect on the Effective Date, as set forth
in writing and delivered to and approved by the Purchaser, the Administrative
Agent and the Liquidity Agent on or before the Effective Date pursuant to
Section 3.1(o), and, as such policies may hereafter be amended, modified or
supplemented from time to time with the written consent of the Administrative
Agent and the Liquidity Agent; PROVIDED, however, that no such consent shall be
required for any amendment, modification or supplement that does not have an
adverse effect on either (I) the collectibility of any Receivable or (II) the
timeliness of any payment in respect of any Receivable.
CUMULATIVE SALES: For any period, the Billed Amounts of all Eligible Receivables
originated by the Originator during such period.
DEBT: As to any Person: any and all (a) indebtedness of such Person for borrowed
money, (b) obligations of such Person evidenced by bonds, debentures, notes or
other similar instruments, (c) obligations of such Person to pay the deferred
purchase price of property or services, (d) obligations of such Person as lessee
under leases which have been or should be, in accordance with GAAP, recorded as
capital leases, (e) obligations secured by any lien or other charge upon
property or assets owned by such Person, even though such Person has not assumed
or become liable for the payment of such obligations, (f) obligations of such
Person under direct or indirect guaranties in respect of, and obligations
(contingent or otherwise) to purchase or otherwise
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acquire, or otherwise to assure a creditor against loss in respect of,
indebtedness or obligations of others of the kinds referred to in clauses (a)
through (e) above, and (g) liabilities in respect of unfunded vested benefits
under plans covered by ERISA. For the purposes hereof, the term "guarantee"
shall include any agreement, whether such agreement is on a contingency or
otherwise, to purchase, repurchase or otherwise acquire Debt of any other
Person, or to purchase, sell or lease, as lessee or lessor, property or
services, in any such case primarily for the purpose of enabling another person
to make payment of Debt, or to make any payment (whether as an advance capital
contribution, purchase of an equity interest or otherwise) to assure a minimum
equity, asset base, working capital or other balance sheet or financial
condition, in connection with the Debt of another Person, or to supply funds to
or in any manner invest in another Person in connection with Debt of such
Person.
DEFAULTED RECEIVABLE: Each Receivable the Obligor of which has taken any action,
or suffered any event to occur, of the type described in Section 7.1(c).
DELINQUENT RECEIVABLE: Any Receivable, other than a Defaulted Receivable, as to
which any payment, or part thereof, remains unpaid for more than 30 days past
its Receivables Maturity Date.
DEPOSITARY: United States Trust Company of New York, or any other Person
designated as the successor Depositary from time to time in connection with the
issuance by the Purchaser of Commercial Paper.
DESIGNATED OBLIGOR: Each Tier I Obligor and Tier II Obligor listed on Schedule 4
to the Receivables Purchase Agreement, as the same may be revised from time to
time by the Administrative Agent.
DILUTED RECEIVABLE: Any Receivable as to which (a) all or any portion of the
Billed Amount thereof is reduced or canceled for any reason other than payment,
(b) the Servicer determines in accordance with its usual collection policies to
be uncollectible or (c) any payment or portion thereof remains unpaid for more
than 90 days from the related Receivables Maturity Date.
DILUTION RESERVE: As defined in Exhibit A.
DILUTIONS: On any date of determination and for any indicated period, the sum of
(a) all reductions and cancellations of the Billed Amount of Receivables that
occur for any reason other than payment, (b) the full Billed Amount of all
Receivables the Servicer has determined in accordance with its usual collection
policies to be uncollectible and (c) the full Billed Amount of all Receivables
as to which any payment or portion thereof remains unpaid for more than 90 days
from the related Receivables Maturity Date.
DOLLAR and $: Lawful currency of the United States of America.
EFFECTIVE DATE: The date on which all conditions precedent to the effectiveness
of this Agreement have been satisfied as designated by the Administrative Agent.
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ELIGIBLE BANK ACCOUNT: Any account that is: (a) a segregated deposit account
maintained with a depository institution or trust company whose short-term
unsecured debt obligations are rated not less than A-1 by S&P and P-1 by
Moody's, or (b) a segregated trust account maintained with, and on the corporate
trust side of, a federally or state chartered depository institution, (i) whose
long-term unsecured debt obligations are rated at least BBB by S&P and Baa2 by
Moody's or (ii) as to which the Liquidity Agent has consented and the Rating
Agencies have indicated in writing that the maintenance of such Eligible Bank
Account with such depository institution will not result in the reduction or
withdrawal of its then-existing rating of the Commercial Paper; PROVIDED that
deposits with the commercial, savings or other department of such depository
institution or trust company shall not constitute Permitted Investments (if
otherwise satisfying the definition therefor) for such segregated trust account
unless other Permitted Investments in an amount at least equal to the amount
deposited have been pledged by such depository institution to and set aside
under control of the trust department as collateral security for the deposit.
ELIGIBLE RECEIVABLE: At any time, a Receivable:
(a) the Obligor of which is a Designated Obligor;
(b) which is denominated and payable in Dollars in the United States of
America;
(c) the Billed Amount of which is (i) net of any set-off, recoupment,
or other reductions (including, without limitation, reductions resulting from
product returns and billing errors) and (ii) required to be paid pursuant to the
terms of the related Contract, if any;
(d) which has not been disputed, compromised, adjusted, extended,
satisfied, subordinated, rescinded or modified;
(e) which is not a Delinquent Receivable, a Defaulted Receivable or a
Diluted Receivable;
(f) which was created in accordance with the requirements of (i)
applicable law, (ii) the Contract pertaining thereto (a copy of which has been
delivered to the Administrative Agent) and (iii) the Credit and Collection
Policies;
(g) which was purchased on or prior to the relevant Purchase Date
pursuant to the Receivables Sale Agreement and which immediately prior to its
transfer to the Purchaser hereunder was owned by the Seller free and clear of
any Adverse Claim and as to which, upon its inclusion in the Receivables Pool,
the Purchaser will have purchased an undivided interest therein free and clear
of any Adverse Claim;
(h) as to which all necessary documentation (including an invoice) for
payment of such Receivable by the Obligor thereof has been submitted to such
Obligor and all other obligations of the Originator in respect thereof have been
fulfilled;
(i) which is an "account" within the meaning of the UCC of the
jurisdiction where each of the Originator's and the Seller's principal executive
office(s) are located;
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(j) which does not in any material respect contravene any laws, rules
or regulations applicable thereto;
(k) which constitutes the legal, valid and binding obligation of the
Obligor thereof and is not subject to any dispute, claim or offset;
(l) as to which neither the Originator nor the Seller had any knowledge
of any fact which should have led either to expect at the time of sale of such
Receivable that the Billed Amount of such Receivable would not be paid in full
when due;
(m) which is required to be paid in full by its Receivables Maturity
Date;
(n) which arises out of a "current transaction" as defined in Section
3(a)(3) of the Securities Act of 1933, as amended; and
(o) which complies with such additional criteria and requirements as
the Administrative Agent may from time to time specify to the Seller following 5
days' notice (the initial such other criteria and requirements being described
on Schedule 1 to this Agreement);
PROVIDED, however, that any Receivable the Obligor of which is either a Tier I
Obligor or a Tier II Obligor on the date such Receivable becomes a Pool
Receivable shall remain an Eligible Receivable for 180 days after such Obligor's
rating is reduced below the Required Rating (such Obligor being an "Affected
Obligor"), PROVIDED, FURTHER, however, that no Receivable of an Affected Obligor
arising on or after the date of such downgrade shall constitute an Eligible
Receivable.
ERISA: The Employee Retirement Income Security Act of 1974, as it may be amended
from time to time, and the regulations promulgated thereunder.
ESCROW PERIOD: With respect to any Escrowed Amount, the period expiring on the
91st day (or such longer period as may be required by Section 547 of the United
States Bankruptcy Code to the extent the Seller or the Originator was an
"insider" within the meaning of Section 547 of the United States Bankruptcy Code
at the time of such transfer) following the deposit or allocation of such
Escrowed Amount into the Escrowed Amount Subaccount.
ESCROWED AMOUNT: On any Business Day, an amount equal to the sum of all amounts
required to be paid by the Seller, the Servicer or the Originator pursuant to
Sections 2.10, 8.1, 10.3 or otherwise, to the extent such amounts have been
deposited into the Collection Account by the Seller, the Originator or the
Servicer or allocated in accordance with Sections 2.7, 2.8 or 2.10 out of
amounts otherwise payable to the Seller, the Servicer or the Originator, as the
case may be, and with respect to which the related Escrow Period shall not have
expired. In no event shall Escrowed Amounts include payments made by an Obligor
in respect of the Pool Receivables.
ESCROWED AMOUNT SUBACCOUNT: Has the meaning specified in Section 2.5.
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EURODOLLAR LOAN: A Liquidity Loan which bears interest at a rate per annum
determined on the basis of the London interbank offered rate.
FEE RESERVE: As defined in Exhibit A.
FINAL PURCHASE DATE: The earlier of (i) December 3, 1998 and (ii) the expiration
date of the Liquidity Agreement, or such later date as may be agreed to in
writing by the Administrative Agent, in its sole discretion.
GAAP: Generally accepted accounting principles as in effect in the United
States, consistently applied, as of the date of such application.
GOVERNMENTAL AUTHORITY: The United States of America, any state, local or other
political subdivision thereof and any entity exercising executive, legislative,
judicial, regulatory or administrative functions thereof or pertaining thereto.
INCIPIENT EVENT: An event which, upon the giving of notice or the passage of
time, or both, would become a Termination Event.
INDEMNIFIED AMOUNTS: Has the meaning specified in Section 8.1(a).
INDEMNIFIED PARTY: Has the meaning specified in Section 8.1(a).
LIQUIDITY AGENT: The financial institution acting as liquidity agent under a
Liquidity Agreement.
LIQUIDITY AGREEMENT: Any agreement with financial entities in connection with
the provision of liquidity and/or credit support for Commercial Paper issued by
the Purchaser.
LIQUIDITY LOANS: Borrowings or sales by the Purchaser under a Liquidity
Agreement.
LOCKBOX ACCOUNT: The bank account established with the Lockbox Bank pursuant to
the Lockbox Agreement into which all Collections in respect of Pool Receivables
shall be deposited.
LOCKBOX AGREEMENT: The agreement among the Administrative Agent, the Agent, the
Purchaser and the Lockbox Bank, with respect to the Lockbox Account.
LOCKBOX BANK: State Street Bank and its successors and permitted assigns.
MATERIAL AMOUNT: $50,000,000, as adjusted in the reasonable judgment of the
Administrative Agent and the Liquidity Agent upon written notice to the
Originator and the Servicer.
MAXIMUM INVESTMENT PERCENTAGE: 100%.
MINIMUM DILUTION RESERVE AMOUNT: $0.
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MINIMUM INVESTMENT AMOUNT: $100,000.
MINIMUM PURCHASE AMOUNT: $100,000.
MONTHLY REPORT: The monthly report of the Servicer, substantially in the form of
Exhibit C hereto.
MOODY'S: Moody's Investors Service, Inc. and any successor thereto.
NET RECEIVABLES POOL BALANCE: As defined in Exhibit A.
OBLIGOR: A Person obligated to make payments pursuant to a Contract.
OFFICER'S CERTIFICATE: With respect to any Person, a certificate signed by the
Chairman of the Board, Vice Chairman of the Board, the President, a Vice
President, the Treasurer, the Secretary or any other duly authorized officer of
such Person acceptable to the Administrative Agent.
ORIGINATOR: Has the meaning specified in the Receivables Sale Agreement.
ORIGINATOR JUDGMENT AMOUNT: A Material Amount, as defined in this Annex.
OTHER COSTS: Has the meaning specified in Section 10.3(a).
OTHER RECEIVABLES PURCHASE AGREEMENTS: Other agreements for the purchase or
funding of trade receivables of any Designated Obligor entered into from time to
time by the Purchaser.
OUTSTANDING BALANCE: Of any Receivable, at any time, an amount (not less than
zero) equal to (a) its Billed Amount, MINUS (b) all Collections received with
respect thereto, MINUS (c) (without duplication) all amounts for discounts or
any other modifications to the Billed Amount; PROVIDED, that if the
Administrative Agent or the Servicer makes a determination that all payments
with respect to such Receivable have been made, its Outstanding Balance shall be
deemed to be zero for all purposes.
PERMITTED INVESTMENTS: One or more of the following obligations which (a) are
denominated and payable in Dollars (b) acquired at a purchase price of not
greater than par, (c) have a predetermined and unalterable fixed Dollar amount
of principal due at maturity and (d) do not have an "r" suffix to its rating by
S&P:
(i) direct obligations of, or guaranteed as to the full and timely
payment of principal and interest by, the United States or obligations of any
agency or instrumentality thereof, when such obligations are backed by the full
faith and credit of the United States;
(ii) repurchase agreements on obligations specified in clause (i);
provided, that the short-term debt obligations of the party agreeing to
repurchase are rated at least A-1 by S&P and P-1 by Moody's;
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<PAGE>
(iii) federal funds, certificates of deposit, time deposits and
bankers' acceptances (which shall each have an original maturity of not more
than 90 days or, in the case of bankers' acceptances, shall in no event have an
original maturity of more than 365 days) of any United States depository
institution or trust company incorporated under the laws of the United States or
any state; provided, that the short-term obligations of such depository
institution or trust company are rated at least A-1 by S&P and P-1 by Moody's;
(iv) commercial paper (having original maturities of not more than 30
days) of any corporation incorporated under the laws of the United States or any
state thereof which on the date of acquisition are rated at least A-1 by S&P and
P-1 by Moody's;
(v) securities of money market funds rated at least Am by S&P, and A by
Moody's; and
(vi) such other investments as may be acceptable to the Purchaser and
the Liquidity Agent and with respect to which each Rating Agency shall have
confirmed in writing to the Purchaser and the Administrative Agent that such
investment shall not result in a withdrawal or reduction of the then current
rating by such Rating Agency of the Commercial Paper.
PERSON: An individual, partnership, corporation (including a business trust),
joint stock company, limited liability company, limited partnership, trust,
association, joint venture, Governmental Authority or any other entity of
whatever nature.
POOL RECEIVABLE: A Receivable in the Receivables Pool.
PROGRAM DOCUMENTS: The Liquidity Loan Agreement, the Collateral Agent Agreement,
the Depositary Agreement, the Commercial Paper, the Administrative Agent
Agreement, the Lockbox Agreement, the Indemnification Letter and the Dealer
Agreements.
PROGRAM FEE RATE: .125%, as adjusted from time to time by written notice from
the Administrative Agent to the Seller; any such change to be as a result of
either a change in the credit quality of the Originator or a change in the
pricing to the Purchaser under the Liquidity Agreement, as determined by the
Administrative Agent.
PROMOTIONAL ALLOWANCE: With respect to any Receivable, the maximum amount of
promotional discounts or similar deductions or rebates that the Originator has
indicated to the Obligor thereof in writing may be charged against such
Receivable.
PURCHASE: Each purchase by the Purchaser of a Receivables Interest in accordance
with the provisions of Article II hereof.
PURCHASE CONDITIONS: The conditions precedent to each Purchase required to be
satisfied pursuant to Section 4.2 of this Agreement.
PURCHASE DATE: Any Business Day on which the Purchaser makes a Purchase .
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PURCHASE LIMIT: $70,000,000.
PURCHASE NOTIFICATION: The written notice from the Administrative Agent, on
behalf of the Purchaser, delivered to the Seller notifying the Seller that the
Purchaser has determined to make a Purchase requested by the Seller, which
notice shall be in form of Exhibit E.
PURCHASE TERMINATION DATE: The earliest to occur of: (a) the date so designated
pursuant to Section 7.1 of this Agreement as a result of the occurrence of a
Termination Event, (b) the date designated in writing by the Seller to each of
the Purchaser and the Administrative Agent, such date to occur no earlier than
10 Business Days following receipt by the last party to receive such notice and
(c) the Final Purchase Date.
PURCHASER: Llama Retail Funding, L.P., a Delaware limited partnership.
RATING AGENCY: Each of Moody's and S&P.
RECEIVABLE: On any day, any indebtedness of any Obligor under a Contract,
whether constituting an account, chattel paper, instrument or general
intangible, (a) that arises from a sale of merchandise or the performance of
services by the Originator and (b) in which the Seller has acquired an interest
pursuant to the Receivables Sale Agreement. Each Receivable shall include the
right to payment of any interest or finance charges and other obligations of
such Obligor with respect thereto.
RECEIVABLE MATURITY DATE: For any Receivable, the due date for payment specified
in the related Contract (not greater than 120 days), or, if no due date is so
specified, 120 days from the Billing Date for such Receivable; notwithstanding
the foregoing, with the prior written consents of the Administrative Agent and
the Liquidity Agent, up to 15% of the Net Receivables Pool Balance may be
comprised of Eligible Receivables with payment due dates of up to 180 days.
RECEIVABLES INTEREST: At any time, an undivided percentage ownership interest at
such time in (i) all then outstanding Pool Receivables, (ii) all Related
Security with respect to such Pool Receivables and (iii) all Collections with
respect to, and other proceeds of, such Pool Receivables and the Related
Security.
RECEIVABLES POOL: At any time, all then outstanding Receivables. If, with
respect to any Receivables Interest, a Receivable is a Pool Receivable on the
day immediately preceding the Purchase Termination Date, such Receivable shall
continue to be considered a Pool Receivable with respect to such Receivables
Interest at all times thereafter.
RECEIVABLES SALE AGREEMENT: The Receivables Sale and Contribution Agreement,
dated as of an even date herewith, between the Originator and the Seller in the
form delivered to the Administrative Agent pursuant to the requirements of
Section 3.1 with such amendments as may have been approved by the Administrative
Agent, the Agent and the Liquidity Agent.
RECORDS: All Contracts and other documents, books, records and other information
(including, without limitation, computer programs, tapes, disks, punch cards,
data processing software and
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related property and rights) prepared and maintained by the Originator, the
Servicer or the Seller with respect to Receivables and Obligors.
REGULATORY CHANGE: Any and all changes after the Effective Date in federal,
state or foreign law or regulations or the adoption or making after such date of
any interpretation, directive or request applying to the provider of the
Liquidity Loans of or under any federal, state or foreign law or regulations
(whether or not having the force of law) by any Governmental Authority
(including the Federal Reserve Board), or foreign governmental authority,
charged with the interpretation or administration thereof.
RELATED DOCUMENTS: The Receivables Sale Agreement, the Sale Assignment, the
Receivables Purchase Agreement and all agreements, instruments, certificates,
financing statements or other documents required to be delivered hereunder or
thereunder.
RELATED SECURITY: With respect to any Pool Receivable:
(i) all of the Seller's right, title and interest in and to all
purchase orders or other agreements that relate to such Pool Receivable;
(ii) all of the Seller's interest in the merchandise (including
returned merchandise), if any, relating to the sale which gave rise to such Pool
Receivable;
(iii) all other security interests or liens and property subject
thereto from time to time purporting to secure payment of such Pool Receivable,
whether pursuant to the Contract related to such Pool Receivable or otherwise;
(iv) all guarantees and other agreements or arrangements of whatever
character from time to time supporting or securing payment of such Pool
Receivable whether pursuant to the Contract related to such Pool Receivable or
otherwise;
(v) all Collections and Records with respect to any of the foregoing;
and
(vi) all proceeds of any of the foregoing.
REQUEST NOTICE: A notice consisting of (a) an Officer's Certificate of the
Seller, substantially in the form of Exhibit D, together with all schedules
thereto and (b) data in the form of a computer print-out, tape or other form to
be agreed upon from time to time by the Administrative Agent and the Seller,
which enables the Administrative Agent to identify all Receivables of the Seller
and the Required Information with respect thereto.
REQUIRED INFORMATION: With respect to a Receivable, (a) the invoice number, (b)
the Billed Amount, (c) any discounts, (d) the Receivable Maturity Date thereof,
(e) the Billing Date, (f) whether or not such Receivable is an Eligible
Receivable, (g) the Obligor thereof and (h) such other additional items from
time to time requested by the Administrative Agent.
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REQUIRED RATING: As to any Tier I Obligor or Tier II Obligor either of the
short-term unsecured debt ratings by S&P or Moody's set forth opposite such
Obligor's name in Schedule 4 to the Receivables Purchase Agreement.
REVOLVING PERIOD: The period commencing on the Effective Date of this Agreement
and ending on the day prior to the Purchase Termination Date.
S&P: Standard & Poor's, a Division of The McGraw-Hill Companies Inc. and any
successor thereto.
SALE ASSIGNMENT: The assignment entered into between the Originator and the
Seller pursuant to the Receivables Sale Agreement.
SELLER: Sunbeam Asset Diversification, Inc.
SELLER'S SHARE: As of any date, the ratio (determined by the Administrative
Agent) of the Capital Investment under this Agreement to the aggregate of the
Capital Investment under this Agreement and the aggregate capital investments
made by the Purchaser under all Other Receivables Purchase Agreements as of such
date; PROVIDED, HOWEVER, that for the purposes of making the allocations
specified in Section 10.3(c), the Seller's Share shall be equal to the ratio
(determined by the Administrative Agent) of the Purchase Limit to the aggregate
of the Purchase Limit and the purchase limits under all Other Receivables
Purchase Agreements.
SERVICER: The Originator and its permitted successors and assigns from time to
time hereunder.
SERVICING FEE: A fee payable by the Seller to the Servicer or Successor Servicer
on each Settlement Date equal to (a) the sum of the Accrued Daily Servicing Fees
for each Collection Period during the related Settlement Period, MINUS (b) any
amounts owing by the Servicer (as Originator) to the Purchaser pursuant to
Section 2.10.
SERVICING FEE RATE: 1.0%.
SERVICING RECORDS: All documents, books, records and other information
(including, without limitation, computer programs, tapes, disks, punch cards,
data processing software and related property and rights) prepared and
maintained by the Servicer with respect to the Pool Receivables and the
Obligors.
SETTLEMENT DATE: The fifth Business Day following the end of each Settlement
Period, or more frequently at the option of the Purchaser and the Administrative
Agent.
SETTLEMENT PERIOD: In the case of the initial Settlement Period, the period
beginning with the Effective Date to and including the last day of the calendar
month in which such Effective Date occurs; with respect to the final Settlement
Period, the period ending on the Purchase Termination Date and beginning with
the first day of the calendar month in which the Purchase Termination Date
occurs; and with respect to all other Settlement Periods, each calendar month.
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SUBSIDIARY: As to any Person, any corporation or other entity of which
securities or other ownership interests having ordinary voting power to elect a
majority of the Board of Directors or other Persons performing similar functions
are at the time directly or indirectly owned by such Person.
SUCCESSOR SERVICER: Has the meaning specified in Section 6.8.
TAX or TAXES: All taxes, charges, fees, levies or other assessment, including,
without limitation, income, gross receipts, profits, withholding, excise,
property, sales, use, occupation and franchise taxes (including, in each such
case, any interest, penalties or additions attributable to or imposed on or with
respect to any such taxes, charges, fees or other assessments) imposed by the
United States, any state or political subdivision thereof, any foreign
government or any other jurisdiction or taxing authority.
TERMINATION EVENT: Has the meaning specified in Section 7.1.
TIER I OBLIGOR: Any Obligor listed on Schedule 4 to the Receivables Purchase
Agreement as a "Tier I Obligor."
TIER II OBLIGOR: Any Obligor listed on Schedule 4 to the Receivables Purchase
Agreement as a "Tier II Obligor."
UCC: For any jurisdiction, the Uniform Commercial Code as from time to time in
effect in such jurisdiction.
YIELD SUBACCOUNT: The Yield Subaccount of the Collateral Account.
YIELD RESERVE: As defined in Exhibit A.
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ATTACHMENT TO EXHIBIT 10S FILED BY SUNBEAM CORPORATION
The following Annexes and Exhibits are not filed herewith but will be provided
to the Commission upon request.
ANNEX II - CONDITIONS TO EFFECTIVENESS
ANNEX III - CONDITIONS TO EACH PURCHASE
ANNEX IV - SELLER REPORTING REQUIREMENTS
ANNEX V - SERVICER REPORTING REQUIREMENTS
EXHIBIT A - THE RESERVES
EXHIBIT B - FORM OF NOTICE OF DISBURSEMENTS
EXHIBIT C - MONTHLY REPORT
EXHIBIT D - REQUEST NOTICE
EXHIBIT E - FORM OF PURCHASE NOTIFICATION
EXHIBIT F - OFFICER'S CERTIFICATE FOR SUNBEAM ASSET DIVERSIFICATION, INC.
EXHIBIT G - OFFICER'S CERTIFICATE FOR SUNBEAM PRODUCTS, INC.
EXHIBIT H - FORM OF OPINION OF COUNSEL OF SELLER AND ORIGINATOR
SCHEDULE 1 - ADDITIONAL ELIGIBLE RECEIVABLES CRITERIA
SCHEDULE 2 - ORIGINATOR AND SELLER LOCATIONS AND ORIGINATOR NAMES
SCHEDULE 3 - ADDRESSES FOR NOTICES
SCHEDULE 4 - DESIGNATED OBLIGORS
EXHIBIT 10.t
================================================================================
AGREEMENT AND PLAN OF MERGER
among
SUNBEAM CORPORATION
LASER ACQUISITION CORP.
CLN HOLDINGS INC.
and
COLEMAN (PARENT) HOLDINGS INC.
Dated as of
February 27, 1998
================================================================================
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
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<S> <C> <C>
ARTICLE I
DEFINITIONS AND TERMS
Section 1.1. Certain Definitions.............................................................................1
Section 1.2 Other Terms.....................................................................................7
ARTICLE II
THE HOLDINGS MERGER
Section 2.1 The Holdings Merger.............................................................................7
Section 2.2 Closing.........................................................................................7
Section 2.3 Effective Time of the Holdings Merger...........................................................7
Section 2.4 Certificate of Incorporation....................................................................7
Section 2.5 By-Laws.........................................................................................7
Section 2.6 Directors.......................................................................................8
Section 2.7 Officers........................................................................................8
Section 2.8 Holdings Merger Election........................................................................8
ARTICLE III
CONVERSION OF SHARES
Section 3.1 Effect on Capital Stock.........................................................................8
Section 3.2 Exchange of Certificates........................................................................9
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF HOLDINGS AND PARENT HOLDINGS
Section 4.1 Organization and Qualification..................................................................9
Section 4.2 Capitalization..................................................................................9
Section 4.3 Authority Relative to this Agreement and the Registration Rights Agreement.....................10
Section 4.4 No Business Activities of Holdings and Worldwide...............................................10
Section 4.5 Consents and Approvals; No Violations..........................................................11
Section 4.6 No Litigation..................................................................................11
Section 4.7 SEC Reports....................................................................................11
Section 4.8 Acquisition of Shares for Investment...........................................................12
Section 4.9 Taxes..........................................................................................12
Section 4.10 Affiliate Agreements...........................................................................13
<PAGE>
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Section 4.11 Brokers........................................................................................13
Section 4.12 LYONs Escrow Fund..............................................................................14
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF LASER
Section 5.1 Laser Merger Sub...............................................................................14
Section 5.2 Authority Relative to this Agreement...........................................................14
Section 5.3 Consents and Approvals; No Violations..........................................................15
Section 5.4 Acquisition of Shares for Investment...........................................................15
ARTICLE VI
COVENANTS
Section 6.1 Conduct of Business............................................................................15
Section 6.2 Reasonable Best Efforts........................................................................17
Section 6.3 Consents.......................................................................................17
Section 6.4 HSR Notification...............................................................................18
Section 6.5 LYONs Refund...................................................................................18
Section 6.6 Listing Application............................................................................18
Section 6.7 Access to Information; Confidentiality.........................................................18
Section 6.8 Advice of Changes..............................................................................19
Section 6.9 Affiliate Agreements; Intercompany Accounts....................................................19
Section 6.10 Registration Rights Agreement..................................................................19
ARTICLE VII
ADDITIONAL AGREEMENTS
Section 7.1 Sales of Laser Shares..........................................................................19
Section 7.2 Restrictive Legend.............................................................................20
ARTICLE VIII
CONDITIONS TO CONSUMMATION OF THE HOLDINGS MERGER
Section 8.1 Conditions to Each Party's Obligation to Effect the Holdings Merger............................20
Section 8.2 Conditions to Obligation of Holdings to Effect the Holdings Merger.............................21
Section 8.3 Conditions to Obligation of Laser to Effect the Holdings Merger................................22
ARTICLE IX
TAX MATTERS
Section 9.1 Taxes..........................................................................................22
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Section 9.2 Tax Returns....................................................................................24
Section 9.3 Tax Claims.....................................................................................25
Section 9.4 Assistance and Cooperation.....................................................................26
Section 9.5 Adjustment to Merger Consideration.............................................................27
Section 9.6 Survival of Obligations........................................................................27
Section 9.7 Reorganization.................................................................................27
Section 9.8 Tax Sharing Agreements.........................................................................27
Section 9.9 Information....................................................................................27
ARTICLE X
INDEMNIFICATION; SURVIVAL
Section 10.1 Parent Holdings' Agreement to Indemnify........................................................27
Section 10.2 Conditions of Indemnification With Respect to Third-Party Claims...............................28
Section 10.3 Survival of Representations; Covenants.........................................................29
ARTICLE XI
TERMINATION
Section 11.1 Termination....................................................................................29
Section 11.2 Effect of Termination..........................................................................30
ARTICLE XII
MISCELLANEOUS
Section 12.1 Notices........................................................................................30
Section 12.2 Amendment......................................................................................31
Section 12.3 Extension; Waiver..............................................................................31
Section 12.4 Assignment.....................................................................................31
Section 12.5 Entire Agreement...............................................................................31
Section 12.6 Parties in Interest............................................................................31
Section 12.7 Expenses.......................................................................................31
Section 12.8 Governing Law..................................................................................32
Section 12.9 Counterparts...................................................................................32
Section 12.10 Headings.......................................................................................32
Section 12.11 Further Assurances.............................................................................32
Section 12.12 Specific Performance...........................................................................32
Section 12.13 Certain Terms..................................................................................32
Section 12.14 Interpretation.................................................................................32
</TABLE>
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<PAGE>
AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER (this "AGREEMENT"), dated as of
February 27, 1998, among Sunbeam Corporation, a Delaware corporation ("LASER"),
Laser Acquisition Corp., a Delaware corporation and a wholly owned subsidiary of
Laser ("LASER MERGER SUB"), Coleman (Parent) Holdings Inc., a Delaware
corporation ("PARENT HOLDINGS"), and CLN Holdings Inc. ("HOLDINGS"), a Delaware
corporation and a wholly owned subsidiary of Parent Holdings.
WHEREAS, the Boards of Directors of Laser, Laser Merger Sub,
Parent Holdings and Holdings deem it advisable and in the best interests of
their respective stockholders that Laser Merger Sub merge with and into Holdings
(the "HOLDINGS MERGER"), and such Boards of Directors have approved the Holdings
Merger upon the terms and conditions set forth herein;
WHEREAS, Parent Holdings, as the sole stockholder of Holdings,
and Laser, as the sole stockholder of Laser Merger Sub, have approved this
Agreement and the transactions contemplated hereby;
WHEREAS, at the Closing (as hereinafter defined), Laser and
Parent Holdings shall enter into a registration rights agreement (the
"REGISTRATION RIGHTS AGREEMENT") relating to the registration of the Laser
Shares (as hereinafter defined) issuable to Parent Holdings in the Holdings
Merger, in the form of Exhibit A hereto;
WHEREAS, for United States federal income tax purposes, it is
intended that the Holdings Merger provided for herein shall qualify as a
reorganization within the meaning of Section 368(a) of the Internal Revenue Code
of 1986, as amended (the "CODE"), and that this Agreement shall constitute a
plan of reorganization; and
WHEREAS, Laser, Laser Merger Sub and Holdings desire to make
certain representations, warranties, covenants and agreements in connection with
the Holdings Merger and also to prescribe certain conditions to the Holdings
Merger.
NOW, THEREFORE, in consideration of the foregoing and the
respective representations, warranties, covenants and agreements set forth
herein, the parties hereto agree as follows:
ARTICLE I
DEFINITIONS AND TERMS
Section 1.1. CERTAIN DEFINITIONS. As used in this Agreement,
the following terms shall have the meanings set forth or as referenced below:
"1998 NOTES" shall have the meaning set forth in Section
4.4(a) hereof.
<PAGE>
"AFFILIATE" shall mean, as to any Person (as hereinafter
defined), any other Person which, directly or indirectly, is in control of, is
controlled by, or is under common control with, such Person. The term "CONTROL"
(including, with correlative meanings, the terms "CONTROLLED BY" and "UNDER
COMMON CONTROL WITH"), as applied to any Person, means the possession, direct or
indirect, of the power to direct or cause the direction of the management and
policies of such Person, whether through the ownership of voting securities or
other ownership interest, by contract or otherwise.
"AFFILIATE AGREEMENTS" shall have the meaning set forth in
Section 4.10 hereof.
"AGREEMENT" shall mean this Agreement, as the same may be
amended or supplemented from time to time in accordance with the terms hereof.
"BUSINESS DAY" shall mean any day other than a Saturday, a
Sunday or a day on which banks in the City of New York are authorized or
obligated by law or executive order to close.
"CASH PAYMENT" shall have the meaning set forth in Section
3.1(a) hereof.
"CERTIFICATE OF INCORPORATION" shall have the meaning set
forth in Section 2.4 hereof.
"CERTIFICATE OF MERGER" shall have the meaning set forth in
Section 2.3 hereof.
"CLOSING" shall mean the closing of the transactions
contemplated by this Agreement, as provided for in Section 2.2 hereof.
"CLOSING DATE" shall have the meaning set forth in Section
2.2 hereof.
"CODE" shall have the meaning set forth in the recitals
hereof.
"COMPANY" shall mean The Coleman Company, Inc., a Delaware
corporation.
"COMPANY COMMON STOCK" shall mean the common stock, par value
$.01 per share, of the Company.
"COMPANY MERGER" shall mean the consummation of the merger
contemplated by the Company Merger Agreement.
"COMPANY MERGER AGREEMENT" shall mean the Agreement and Plan
of Merger among Laser, Merger Sub, and the Company, dated as of the date hereof.
"COMPETITION LAWS" shall mean foreign statutes, rules,
regulations, orders, decrees, administrative and judicial doctrines, and other
foreign laws that are designed or intended to prohibit, restrict or regulate
actions having the purpose or effect of monopolization, lessening of competition
or restraint of trade.
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"CONFIDENTIALITY AGREEMENTS" shall have the meaning set forth
in Section 6.7 hereof.
"CONSENTS" shall mean any consent, approval, waiver,
authorization or permit of, or to make any filing with or notification to, any
Governmental Entity or third party.
"CONTRACT" shall mean any note, bond, mortgage, indenture,
license, contract, or other agreement or other instrument or obligation.
"CREDIT SUISSE FIRST BOSTON" shall mean Credit Suisse First
Boston Corporation, the Company's financial advisor.
"DAMAGES" shall have the meaning set forth in Section 10.1(a)
hereof.
"DGCL" shall mean the General Corporation Law of the State of
Delaware.
"EXCHANGE ACT" shall mean the Securities Exchange Act of
1934, as amended.
"FILED HOLDINGS SEC REPORTS" shall have the meaning set forth
in Section 4.7(b) hereof.
"FILED WORLDWIDE SEC REPORTS" shall have the meaning set
forth in Section 4.7(b).
"GAAP" shall mean United States generally accepted accounting
principles and practices in effect from time to time, consistently applied.
"GOVERNMENTAL ENTITY" shall mean any court, arbitral
tribunal, administrative agency or commission or other governmental or
regulatory authority or agency.
"HOLDINGS" shall have the meaning set forth in the recitals
hereof.
"HOLDINGS COMMON STOCK" shall mean the common stock, par
value $1.00, of Holdings.
"HOLDINGS DISCLOSURE SCHEDULE" shall mean the disclosure
schedule being delivered by Holdings concurrently with the execution of this
Agreement.
"HOLDINGS EFFECTIVE TIME" shall have the meaning set forth in
Section 2.3 hereof.
"HOLDINGS MATERIAL ADVERSE EFFECT" shall mean a material
adverse effect on the business, results of operation or financial condition of
Holdings and its subsidiaries, taken as a whole.
"HOLDINGS MERGER" shall have the meaning set forth in the
recitals hereof.
"HOLDINGS SEC REPORTS" shall have the meaning set forth in
Section 4.7(a) hereof.
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"HOLDINGS SHARES" shall have the meaning set forth in Section
4.2(a).
"HSR ACT" shall mean the Hart-Scott-Rodino Antitrust
Improvements Act of 1976, as amended.
"INDEBTEDNESS" of any Person at any date shall include (a)
all indebtedness of such Person for borrowed money or for the deferred purchase
price of property or services (other than current trade liabilities incurred in
the ordinary course of business and payable in accordance with customary
practices), (b) any other indebtedness of such Person that is evidenced by a
note, bond, debenture or similar instrument, (c) all obligations of such Person
in respect of acceptances issued or created for the account of such Person, (d)
all liabilities secured by any Lien (as hereinafter defined) on any property
owned by such Person even though such Person has not assumed or otherwise become
liable for the payment thereof, and (e) all direct or indirect guarantees of any
of the foregoing for the benefit of another Person.
"INDEMNIFYING PARTY" shall have the meaning set forth in
Section 9.2(c) hereof.
"INDENTURE" shall mean the Indenture between Holdings, as
successor to Coleman Escrow Corp., and First Trust National Association dated
May 20, 1997 relating to the Notes.
"IRS" shall mean the Internal Revenue Service of the United
States.
"LASER" shall have the meaning set forth in the recitals
hereof.
"LASER COMMON STOCK" shall mean the common stock, par value
$.01 per share, of Laser.
"LASER DESIGNEES" shall have the meaning set forth in Section
8.3(d) hereof.
"LASER GROUP" shall have the meaning set forth in Section
10.1(a) hereof.
"LASER MATERIAL ADVERSE EFFECT" shall mean a material adverse
effect on the business, results of operation or financial condition of Laser and
its subsidiaries, taken as a whole.
"LASER MERGER SUB" shall have the meaning set forth in the
recitals hereof.
"LASER MERGER SUB COMMON STOCK" shall mean common stock, par
value $.01 per share, of Laser Merger Sub.
"LASER SHARES" shall have the meaning set forth in the first
clause of Section 3.1 hereof.
"LAWS" shall mean any federal, state, local or foreign law,
statute, ordinance, rule, regulation, order, judgment or decree, administrative
order or decree, administrative or judicial decision, and any other executive or
legislative proclamation.
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<PAGE>
"LIENS" shall mean any lien, security interest, mortgage,
pledge, charge or similar encumbrance.
"LYONS" shall mean the Liquid Yield Option(TM) Notes due 2013
of Worldwide.
"LYONS ESCROW FUND" shall mean the funds held in the escrow
account established in connection with the redemption and exchange of the LYONs.
"MAFCO DEMAND NOTE" shall mean the demand note issued by an
Affiliate of Parent Holdings, and held by Worldwide on the date hereof, in
connection with the Tax Sharing Arrangement among certain Affiliates of Parent
Holdings.
"MERGER CONSIDERATION" shall have the meaning set forth in
Section 3.1(a)(i) hereof.
"MORGAN STANLEY" shall mean Morgan Stanley & Co.
Incorporated, Laser's financial advisor.
"NOTES" shall mean the Senior Secured First Priority Discount
Notes due 2001, Senior Secured Second Priority Discount Notes due 2001, Senior
Secured First Priority Discount Exchange Notes due 2001, and Senior Secured
Second Priority Discount Exchange Notes due 2001 of Holdings, as successor to
Coleman Escrow Corp.
"NYSE" shall mean the New York Stock Exchange, Inc.
"PARENT HOLDINGS" shall have the meaning set forth in the
recitals hereof.
"PERSON" shall mean an individual, a corporation, a
partnership, an association, a trust or other entity or organization.
"PRE-CLOSING PERIOD" shall mean any taxable year or period
that ends on or before the Closing Date and, with respect to any Straddle
Period, the portion of such Straddle Period deemed to end on and include the
Closing Date.
"POST-CLOSING PERIOD" shall mean any taxable year or period
that begins after the Closing Date and, with respect to any Straddle Period, the
portion of such Straddle Period deemed to begin after the Closing Date.
"REGISTRATION RIGHTS AGREEMENT" shall have the meaning set
forth in the recitals hereof.
"SEC" shall mean the Securities and Exchange Commission.
"SECURITIES ACT" shall mean the Securities Act of 1933, as
amended.
"STRADDLE PERIOD" shall mean any taxable year or period
beginning before and ending after the Closing Date.
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"SUBSIDIARY" shall mean, with respect to any party, any
corporation or other organization, whether incorporated or unincorporated, of
which (i) such party or any other subsidiary of such party is a general partner
or (ii) at least 50% of the securities or other interests having by their terms
ordinary voting power to elect a majority of the Board of Directors or others
performing similar functions with respect to such corporation or other
organization or at least 50% of the value of the outstanding equity is directly
or indirectly owned or controlled by such party or by any one or more of its
subsidiaries, or by such party and one or more of its subsidiaries.
"SURVIVING CORPORATION" shall have the meaning set forth in
Section 2.1 hereof.
"TAX" (and, with correlative meaning, "TAXES" and "TAXABLE")
shall mean:
(i) any federal, state, local or foreign net
income, gross income, receipts, windfall profit, severance, property,
production, sales, use, license, excise, franchise, employment,
payroll, withholding, alternative or add-on minimum, ad valorem,
transfer, stamp, or environmental tax, or any other tax, custom, duty,
governmental fee or other like assessment or charge of any kind
whatsoever, together with any interest or penalty, addition to tax or
additional amount imposed by any Governmental Entity; and
(ii) any liability for the payment of amounts with
respect to payments of a type described in clause (i) as a result of
being a member of an affiliated, consolidated, combined or unitary
group, or as a result of any obligation under any Tax Sharing
Arrangement or Tax indemnity arrangement.
"TAX CLAIM" shall have the meaning set forth in Section
9.3(b) hereof.
"TAX PROCEEDING" shall have the meaning set forth in Section
9.3(a) hereof.
"TAX RETURN" shall mean any return, report or statement
required to be filed with respect to any Tax (including any attachments
thereto), including, without limitation, any information return, claim for
refund, amended return or declaration of estimated Tax.
"TAX SHARING ARRANGEMENT" shall mean any written or unwritten
agreement or arrangement for the allocation or payment of Tax liabilities or
payment for Tax benefits with respect to a consolidated, combined or unitary Tax
Return.
"TERMINATION DATE" shall have the meaning set forth in
Section 11.1(b) hereof.
"THIRD-PARTY CLAIMS" shall have the meaning set forth in
Section 10.2 hereof.
"TRANSFER" shall have the meaning set forth in Section 7.1
hereof.
"TREASURY REGULATIONS" shall mean the regulations promulgated
by the Treasury Department with respect to the Code.
"WORLDWIDE" shall mean Coleman Worldwide Corporation, a
Delaware corporation and a wholly owned subsidiary of Holdings.
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"WORLDWIDE COMMON STOCK" shall mean the common stock, par
value $1.00 per share, of Worldwide.
"WORLDWIDE SEC REPORTS" shall have the meaning set forth in
Section 4.7(b) hereof.
"WORLDWIDE SHARES" shall have the meaning set forth in
Section 4.2(b).
Section 1.2. OTHER TERMS. Other terms may be defined
elsewhere in the text of this Agreement and, unless otherwise indicated, shall
have such meaning throughout this Agreement.
ARTICLE II
THE HOLDINGS MERGER
Section 2.1. THE HOLDINGS MERGER. Upon the terms and subject
to the conditions set forth herein, and in accordance with the DGCL, at the
Holdings Effective Time (as defined in Section 2.3 hereof), Laser Merger Sub
shall be merged with and into Holdings. Following the Holdings Effective Time,
Holdings shall continue as the surviving corporation (the "SURVIVING
CORPORATION"), and the separate corporate existence of Laser Merger Sub shall
cease. The Holdings Merger shall have the effects set forth in Section 259 of
the DGCL.
Section 2.2. CLOSING. The closing of the Holdings Merger (the
"CLOSING") will take place at 10:00 a.m. on a date to be specified by the
parties (the "CLOSING DATE"), which (subject to satisfaction or waiver of the
conditions set forth in Article VIII) shall be no later than the third NYSE
trading day after satisfaction or waiver of the conditions set forth in Section
8.1, at the offices of Skadden, Arps, Slate, Meagher & Flom LLP, 919 Third
Avenue, New York, New York 10022, unless another time, date or place is agreed
to in writing by the parties hereto.
Section 2.3. EFFECTIVE TIME OF THE HOLDINGS MERGER. The
Holdings Merger shall become effective on the date and at the time at which a
properly executed certificate of merger (the "CERTIFICATE OF MERGER") is duly
filed with the Secretary of State of the State of Delaware. The Certificate of
Merger shall be filed as soon as practicable on or after the Closing Date. When
used in this Agreement, the term "HOLDINGS EFFECTIVE TIME" shall mean the date
and time on which the Certificate of Merger is so filed.
Section 2.4. CERTIFICATE OF INCORPORATION. From and after the
Holdings Effective Time, the certificate of incorporation of Holdings as in
effect at the Holdings Effective Time (the "CERTIFICATE OF INCORPORATION") shall
be the certificate of incorporation of the Surviving Corporation until amended
as provided by the DGCL and the Certificate of Incorporation.
Section 2.5. BY-LAWS. From and after the Holdings Effective
Time, the by-laws of Laser Merger Sub as in effect at the Holdings Effective
Time shall be the by-laws of the
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Surviving Corporation until amended as provided by the DGCL, the Certificate of
Incorporation of the Surviving Corporation and the terms thereof.
Section 2.6. DIRECTORS. The directors of Laser Merger Sub at
the Holdings Effective Time shall be the initial directors of the Surviving
Corporation and shall hold office from the Holdings Effective Time until their
respective successors are duly elected or appointed and qualify in the manner
provided in the Certificate of Incorporation and by-laws of the Surviving
Corporation or as otherwise provided by Law.
Section 2.7. OFFICERS. The officers of Laser Merger Sub at
the Holdings Effective Time shall be the initial officers of the Surviving
Corporation and shall hold office from the Holdings Effective Time until their
respective successors are duly elected or appointed and qualify in the manner
provided in the Certificate of Incorporation and by-laws of the Surviving
Corporation, or as otherwise provided by Law.
Section 2.8. HOLDINGS MERGER ELECTION. Notwithstanding the
foregoing, at any time prior to the Holdings Effective Time, Holdings may elect,
in its sole discretion, upon notice to Laser, to effectuate the Holdings Merger
such that Holdings will be merged with and into Laser Merger Sub, with Laser
Merger Sub as the "SURVIVING CORPORATION" for all purposes hereunder. In such
event, the parties hereto shall execute an appropriate amendment to this
Agreement to reflect the foregoing.
ARTICLE III
CONVERSION OF SHARES
Section 3.1. EFFECT ON CAPITAL STOCK. At the Holdings
Effective Time, by virtue of the Holdings Merger and without any action on the
part of any holder thereof:
(a) Conversion of Holdings Common Stock.
(i) The Holdings Shares shall be converted into the
right to receive an aggregate of (A) 14,099,749 fully paid and
nonassessable shares of Laser Common Stock (the "LASER SHARES") and (B)
$159,956,756 in cash, without interest thereon (the "CASH PAYMENT" and,
together with the Laser Shares, the "MERGER CONSIDERATION").
(ii) If, prior to the Holdings Effective Time,
Laser shall (A) pay a dividend in, subdivide, combine into a smaller
number of shares or issue by reclassification of its shares, any shares
of Laser Common Stock, the number of Laser Shares to be issued pursuant
to Section 3.1(a)(i) hereof shall be adjusted appropriately or (B) pay
an extraordinary dividend (other than regular quarterly dividend
payments, consistent with past practice), whether in cash or property,
the amount of the Cash Payment shall be adjusted appropriately, such
that the aggregate amount of cash, or if a dividend shall have been
paid in other property, cash and other property, shall be equal to that
which would have been received had the dividend been paid following the
Holdings Effective Time at
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a time when the Laser Shares were already issued to and the Cash
Payment made to Parent Holdings.
(iii) The shares of Holdings Common Stock converted
in accordance with paragraph (i) of this Section 3.1(a) shall no longer
be outstanding and shall automatically be cancelled and retired and
shall cease to exist, and Parent Holdings, as the holder thereof, shall
cease to have any rights with respect thereto, except the right to
receive the Merger Consideration.
(b) CONVERSION OF LASER MERGER SUB COMMON STOCK. Each share
of Laser Merger Sub Common Stock issued and outstanding immediately prior to the
Holdings Effective Time shall be converted into and become one fully paid and
nonassessable share of common stock, par value $1.00 per share, of the Surviving
Corporation.
(i) EXCHANGE OF CERTIFICATES. At the Closing,
Parent Holdings shall surrender certificates representing the Holdings
Shares, and Laser shall deliver or cause to be delivered to Parent
Holdings a duly executed stock certificate or stock certificates
representing the Laser Shares, and the Cash Payment, in immediately
available funds by wire transfer to an account specified in writing by
Parent Holdings at least one day prior to the Closing Date. In
connection with the delivery by Laser of the Laser Shares, Laser shall
utilize all shares of Laser Common Stock held by Laser as treasury
shares before issuing any authorized but unissued shares of Laser
Common Stock.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF HOLDINGS AND PARENT HOLDINGS
Holdings and Parent Holdings hereby represent and warrant to
Laser as follows:
Section 4.1. ORGANIZATION AND QUALIFICATION.
(a) Each of Holdings and Worldwide is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Delaware and has the corporate power to carry on its business as it is now being
conducted.
Section 4.2. CAPITALIZATION.
(a) The authorized capital stock of Holdings consists of
1,000 shares of Holdings Common Stock (the "HOLDINGS SHARES"), all of which are
issued and outstanding and beneficially owned by Parent Holdings. All of the
issued and outstanding shares of Holdings Common Stock are validly issued, fully
paid and nonassessable and free of preemptive rights. Except as set forth above,
there are no other shares of capital stock of Holdings issued or outstanding nor
any options, warrants, subscriptions, calls, rights, convertible securities or
other agreements or commitments obligating Holdings to issue, transfer, sell,
redeem, repurchase or otherwise acquire any shares of its capital stock or
securities.
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(b) The authorized capital stock of Worldwide consists of
1,000 shares of Worldwide Common Stock (the "WORLDWIDE SHARES"), all of which
are issued and outstanding and beneficially owned by Holdings, free and clear of
all Liens, other than the pledge in connection with the Notes. All of the issued
and outstanding shares of Worldwide Common Stock are validly issued, fully paid
and nonassessable and free of preemptive rights. Except as set forth above,
there are no other shares of capital stock of Worldwide issued or outstanding
nor any options, warrants, subscriptions, calls, rights, convertible securities
or other agreements or commitments obligating Worldwide to issue, transfer,
sell, redeem, repurchase or otherwise acquire any shares of its capital stock or
securities.
Section 4.3. AUTHORITY RELATIVE TO THIS AGREEMENT AND THE
REGISTRATION RIGHTS AGREEMENT. Each of Holdings and Parent Holdings has the
requisite corporate power and authority to execute and deliver this Agreement
and, if a party thereto, the Registration Rights Agreement, to perform its
obligations hereunder and, if a party thereto, thereunder and to consummate the
transactions contemplated hereby and, if a party thereto, thereby. The
execution, delivery and performance of this Agreement and the Registration
Rights Agreement, and the consummation of the transactions contemplated hereby
and thereby, have been duly authorized by all necessary corporate action on the
part of Holdings and Parent Holdings, and no other corporate action on the part
of Holdings or Parent Holdings (including on the part of their respective
stockholders) is required to authorize the execution, delivery and performance
hereof and thereof and the consummation of the transactions contemplated hereby
and thereby. This Agreement has been duly executed and delivered by each of
Parent Holdings and Holdings and, assuming that it constitutes a valid and
binding agreement of Laser and Laser Sub, constitutes the valid and binding
obligation of Parent Holdings and Holdings enforceable against Parent Holdings
and Holdings in accordance with its terms, except that such enforcement may be
subject to any bankruptcy, insolvency, reorganization, moratorium or other laws
now or hereafter in effect relating to or limiting creditors' rights generally
and the remedy of specific performance and injunctive and other forms of
equitable relief may be subject to equitable defenses and to the discretion of
the court before which any proceedings therefor may be brought. Prior to the
Holdings Effective Time, the Registration Rights Agreement will have been duly
executed and delivered by Parent Holdings and, assuming that it constitutes the
valid and binding agreement of Laser, will constitute the valid and binding
obligation of Parent Holdings enforceable against Parent Holdings in accordance
with its terms, except that such enforcement may be subject to any bankruptcy,
insolvency, reorganization, moratorium or other laws now or hereafter in effect
relating to or limiting creditors' rights generally and the remedy of specific
performance and injunctive and other forms of equitable relief may be subject to
equitable defenses and to the discretion of the court before which any
proceedings therefor may be brought.
Section 4.4. NO BUSINESS ACTIVITIES OF HOLDINGS AND
WORLDWIDE.
(a) Since its formation, Holdings has engaged in no business
activities or operations, other than in connection with holding the Worldwide
Shares and the stock of its predecessor corporation and in connection with the
Senior Secured Discount Notes due 1998 of Holdings and the Series B Senior
Secured Discount Notes due 1998 of Holdings (collectively, the "1998 NOTES") and
the Notes. Holdings has no material assets other than Worldwide Common
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Stock, and has no liabilities other than under the Notes and other de minimis
liabilities. Worldwide is the beneficial owner of 44,067,520 shares of Company
Common Stock, free and clear of all Liens, other than the pledge pursuant to the
LYONs and the Notes.
(b) Since its formation, Worldwide has engaged in no business
activities or operations, other than in connection with holding shares of
Company Common Stock and in connection with the 1998 Notes, the Notes and the
LYONs. Worldwide has no material assets other than the Company Common Stock
(other than, as of the date hereof, the Mafco Demand Note and the LYONs Escrow
Fund), and has no liabilities other than under the LYONs, the Notes and other de
minimis liabilities.
Section 4.5. CONSENTS AND APPROVALS; NO VIOLATIONS. Except
for applicable requirements of the HSR Act, the Securities Act, the Exchange
Act, Competition Laws and state securities or blue sky Laws, no filing with, and
no permit, authorization, consent or approval of, any Governmental Entity is
necessary for the consummation by Parent Holdings or Holdings of the
transactions contemplated by this Agreement, except for such filings, permits,
authorizations, consents or approvals the failure of which to be made or
obtained would not individually or in the aggregate (i) have a Holdings Material
Adverse Effect or (ii) delay in any material respect or prevent the consummation
of any of the transactions contemplated by this Agreement. Except as set forth
on Section 4.5 of the Holdings Disclosure Schedule, neither the execution and
delivery of this Agreement by Parent Holdings or Holdings, nor the consummation
by Parent Holdings or Holdings of the transactions contemplated hereby, nor
compliance by Parent Holdings or Holdings with any of the provisions hereof,
will (a) conflict with or result in any breach of any provisions of the
certificate of incorporation or by-laws of Parent Holdings, Holdings or
Worldwide; (b) result in a violation or breach of, or constitute (with or
without due notice or lapse of time or both) a default (or give rise to any
right of termination, cancellation or acceleration) under, any of the terms,
conditions or provisions of any Contract or of any license, franchise, permit,
concession, certificate of authority, order, approval, application or
registration of, from or with any Governmental Entity to which Parent Holdings,
Holdings or Worldwide is a party or by which any of them or any of their
properties or assets may be bound; or (c) violate any order, writ, injunction,
decree, statute, rule or regulation applicable to Holdings, Parent Holdings or
Worldwide or any of their properties or assets, except in the case of clauses
(b) and (c) for violations, breaches or defaults which would not individually or
in the aggregate have a Holdings Material Adverse Effect.
Section 4.6. NO LITIGATION. As of the date hereof, there is
no suit, action, proceeding or investigation pending against or affecting
Holdings or Worldwide.
Section 4.7. SEC REPORTS.
(a) Holdings has filed all reports, forms, registrations,
schedules, statements and other documents required to be filed by it with the
SEC since January 1, 1997 (the "HOLDINGS SEC REPORTS"). As of their respective
dates, the Holdings SEC Reports complied in all material respects with the
requirements of the Securities Act or the Exchange Act, as the case may be, and
the applicable rules and regulations promulgated thereunder. Except to the
extent that informa-
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tion contained in any Filed Holdings SEC Report has been revised, amended or
superseded by a later Filed Holdings SEC Report, none of the Filed Holdings SEC
Reports, when filed, contained any untrue statement of a material fact or
omitted to state any material fact required to be stated therein or necessary to
make the statements therein, in light of the circumstances under which they were
made, not misleading, except that no representation or warranty is made herein
with respect to any information relating to the Company and its subsidiaries.
For purposes of this Agreement, the Holdings SEC Reports filed and publicly
available prior to the date of this Agreement (as revised, amended or superseded
by the Holdings SEC Reports filed and publicly available prior to the date of
this Agreement) are hereinafter referred to as the "FILED HOLDINGS SEC REPORTS."
(b) Worldwide has filed all reports, forms, registrations,
schedules, statements and other documents required to be filed by it with the
SEC since January 1, 1997 (the "WORLDWIDE SEC REPORTS"). As of their respective
dates, the Worldwide SEC Reports complied in all material respects with the
requirements of the Securities Act or the Exchange Act, as the case may be, and
the applicable rules and regulations promulgated thereunder. Except to the
extent that information contained in any Filed Worldwide SEC Report has been
revised, amended or superseded by a later Filed Worldwide SEC Report, none of
the Filed Worldwide SEC Reports, when filed, contained any untrue statement of a
material fact or omitted to state any material fact required to be stated
therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading, except that no
representation or warranty is made herein with respect to any information
relating to the Company and its subsidiaries. For purposes of this Agreement,
the Worldwide SEC Reports filed and publicly available prior to the date of this
Agreement (as amended, revised or superseded by the Worldwide SEC Reports filed
and publicly available prior to the date of this Agreement) are hereinafter
referred to as the "FILED WORLDWIDE SEC REPORTS."
Section 4.8. ACQUISITION OF SHARES FOR INVESTMENT. Parent
Holdings is not acquiring the Laser Shares with any present intention of
distributing or selling any of such Laser Shares in violation of federal or
state securities laws.
Section 4.9. TAXES.
(a) Except as would not have a Holdings Material Adverse
Effect or as set forth on Section 4.9 of the Holdings Disclosure Schedule:
(i) Each of Holdings and Worldwide (A) has filed
(or there has been filed on its behalf) with the appropriate
Governmental Entities all Tax Returns required to be filed by it, and
all such Tax Returns are true, correct and complete and (B) has paid
all Taxes due by it;
(ii) There are no outstanding waivers in writing or
comparable consents regarding the application of any statute of
limitations in respect of Taxes of Holdings or Worldwide;
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(iii) There is no action, suit, investigation,
audit, claim or assessment pending or proposed in writing or threatened
in writing with respect to Taxes of Holdings or Worldwide and to the
best of Holdings' knowledge, no basis exists therefor;
(iv) There are no Liens for Taxes upon the assets
of Holdings or Worldwide except Liens relating to current Taxes not yet
due;
(v) All Taxes which Holdings or Worldwide are
required by law to withhold or to collect for payment have been duly
withheld and collected, and have been paid or accrued, reserved against
and entered on the books of Holdings in accordance with GAAP; and
(vi) No power of attorney which is currently in
force has been granted by or with respect to Holdings or Worldwide with
respect to any matter relating to Taxes.
(b) Except as would not have a Holdings Material Adverse
Effect, Holdings and its subsidiaries have previously delivered or made
available to Laser (and its representatives) complete and accurate copies of:
(i) all audit reports, letter rulings, technical
advice memoranda relating to United States federal, state, local and
foreign Taxes due from or with respect to Holdings or its subsidiaries;
(ii) United States federal Tax Returns (to the
extent that such Tax Returns relate to Holdings and its subsidiaries),
and those state, local or foreign Tax Returns filed by (or on behalf
of) Holdings or any of its subsidiaries (to the extent that such Tax
Returns relate to Holdings and its subsidiaries) (including, in each
case, workpapers related to such Tax Returns);
(iii) any closing agreements entered into by
Holdings or any of its subsidiaries with any taxing authority, in each
case existing on the date hereof; and
(iv) any Tax Sharing Arrangements and Tax indemnity
arrangements to which Holdings or any of its subsidiaries was a party
at any time prior to the Closing Date. Holdings and its subsidiaries
will deliver or make available to Laser (and its representatives) all
similar materials for all matters arising after the date hereof.
Section 4.10. AFFILIATE AGREEMENTS. Section 4.10 of the
Holdings Disclosure Schedule sets forth a true and complete list of all
agreements, Contracts, arrangements, payables, obligations and understandings
between Holdings or any of its subsidiaries, on the one hand, and Parent
Holdings or any of its Affiliates (other than Holdings or its subsidiaries), on
the other hand (the "AFFILIATE AGREEMENTS").
Section 4.11. BROKERS. No broker, investment banker or other
person, other than Credit Suisse First Boston, the Company's financial advisor,
the fees and expenses of which
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will be paid by the Company (as reflected in an agreement between Credit Suisse
First Boston and the Company, a copy of which has been furnished to Laser), is
entitled to any broker's, finder's or other similar fee or commission in
connection with the transactions contemplated by this Agreement based upon
arrangements made by or on behalf of the Company or any of its Affiliates.
Section 4.12. LYONS ESCROW FUND. The LYONs Escrow Fund is
sufficient to fund the redemption, exchange or other retirement in full of the
LYONs and related expenses.
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF LASER
Laser hereby makes the same representations and warranties to
Parent Holdings and Holdings as the representations and warranties made by Laser
to the Company in the Company Merger Agreement, and also represents and warrants
to Parent Holdings and Holdings as follows:
Section 5.1. LASER MERGER SUB. Laser Merger Sub is a
corporation duly organized, validly existing and in good standing under the Laws
of the State of Delaware. Laser Merger Sub is a newly incorporated company
formed solely for purposes of consummating the transactions contemplated by this
Agreement and has engaged in no activity other than as provided in, or
contemplated by, this Agreement. The authorized capital stock of Laser Merger
Sub consists of 1,000 shares of Laser Merger Sub Common Stock, all of which are
validly issued, fully paid and nonassessable and free of preemptive rights and
are owned by Laser. Except as set forth above there are no shares of capital
stock of Laser Merger Sub issued or outstanding or any options, warrants,
subscription, calls, rights, convertible securities or other agreements or
commitments obligating Laser Merger Sub to issue, transfer, sell, redeem,
repurchase or otherwise acquire any shares of its capital stock or securities.
Section 5.2. AUTHORITY RELATIVE TO THIS AGREEMENT. Each of
Laser and Laser Merger Sub has the corporate power and authority to execute and
deliver this Agreement and, if a party thereto, the Registration Rights
Agreement, to perform its obligations hereunder and, if a party thereto,
thereunder and to consummate the transactions contemplated hereby and, if a
party thereto, thereby. The execution, delivery and performance of this
Agreement and the Registration Rights Agreement, and the consummation of the
transactions contemplated hereby, thereby and by the Company Merger Agreement,
have been duly authorized by all necessary corporate action on the part of Laser
and Laser Merger Sub and no other corporate action on the part of Laser or Laser
Merger Sub (including on the part of their respective stockholders) is required
to authorize the execution, delivery and performance hereof or thereof and the
consummation of the transactions contemplated hereby and thereby. This Agreement
has been duly executed and delivered by Laser and Laser Merger Sub and
constitutes the valid and binding obligation of Laser and Laser Merger Sub,
assuming it is the valid and binding obligation of Parent Holdings and Holdings,
enforceable against Laser and Laser Merger Sub in accordance with its terms,
except
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that such enforcement may be subject to any bankruptcy, insolvency,
reorganization, moratorium or similar laws now or hereafter in effect relating
to creditors' rights generally and other forms of equitable relief may be
subject to equitable defenses and the discretion of the court before which any
proceedings therefore may be brought. Prior to the Holdings Effective Time, the
Registration Rights Agreement will have been duly executed and delivered by
Laser and, assuming that it constitutes the valid and binding agreement of
Parent Holdings, will constitute the valid and binding obligation of Laser
enforceable against Laser in accordance with its terms, except that such
enforcement may be subject to any bankruptcy, insolvency, reorganization,
moratorium or other laws now or hereafter in effect relating to or limiting
creditors' rights generally and the remedy of specific performance and
injunctive and other forms of equitable relief may be subject to equitable
defenses and to the discretion of the court before which any proceedings
therefor may be brought.
Section 5.3. CONSENTS AND APPROVALS; NO VIOLATIONS. Except
for applicable requirements of the HSR Act, the Securities Act, the Exchange
Act, Competition Laws and state securities or blue sky Laws, no filing with, and
no permit, authorization, consent or approval of, any governmental or regulatory
authority is necessary for the consummation by Laser and Laser Merger Sub of the
transactions contemplated by this Agreement, except for such filings, permits,
authorizations, consents or approvals the failure of which to be made or
obtained would not (i) individually or in the aggregate have a Laser Material
Adverse Effect or (ii) delay in any material respect or prevent the consummation
of any of the transactions contemplated by this Agreement. Neither the execution
and delivery of this Agreement by Laser and Laser Merger Sub nor the
consummation by Laser and Laser Merger Sub of the transactions contemplated
hereby, nor compliance by Laser and Laser Merger Sub with any of the provisions
hereof, will (a) conflict with or result in any breach of any provisions of the
certificate of incorporation or by-laws of Laser or Laser Merger Sub; (b) result
in a violation or breach of, or constitute (with or without due notice or lapse
of time or both) a default (or give rise to any right of termination,
cancellation or acceleration) under, any of the terms, conditions or provisions
of any Contract or of any license, franchise, permit, concession, certificate of
authority, order, approval, application or registration of, from or with any
Governmental Entity to which Laser or Laser Merger Sub is a party or by which
either of them or any of their properties or assets may be bound; or (c) violate
any order, writ, injunction, decree, statute, rule or regulation applicable to
Laser, Laser Merger Sub or any of their properties or assets, except, in the
case of clauses (b) and (c), for violations, breaches or defaults which would
not individually or in the aggregate have a Laser Material Adverse Effect.
Section 5.4. ACQUISITION OF SHARES FOR INVESTMENT. Laser is
acquiring the Holdings Shares for its own account for investment purposes only
and not with a view toward or for a sale in connection with, any distribution
thereof, or with any present intention of distributing or selling any of such in
violation of federal or state securities laws.
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ARTICLE VI
COVENANTS
Section 6.1. CONDUCT OF BUSINESS. Except as expressly
permitted by this Agreement or with the prior written consent of Laser, during
the period from the date of this Agreement to the Holdings Effective Time,
Holdings shall and shall cause Worldwide to conduct its business only in the
ordinary course consistent with past practice, except that Holdings and
Worldwide shall be permitted (but not required) to (i) effect the merger of
Worldwide with Holdings, and (ii) take all action necessary in connection with
the redemption or exchange of the LYONs and payment of any amounts thereunder
and distribution to Parent Holdings from the LYONs Escrow Fund of any excess
thereof. Without limiting the generality of the foregoing, and except as
otherwise expressly permitted by this Agreement, during the period from the date
of this Agreement through the Holdings Effective Time, Holdings shall not and
shall cause Worldwide not to, without the prior written consent of Laser:
(a) declare, set aside or pay any dividend or other
distribution (whether in cash, securities or property or any combination
thereof) in respect of any class or series of its capital stock, other than in
respect of the LYONs Escrow Fund or the Mafco Demand Note;
(b) settle or compromise any Tax liability or agree to any
adjustment of any Tax attribute or make any election with respect to its Taxes
other than in the ordinary course of business;
(c) amend its certificate of incorporation or by-laws;
(d) acquire by merging or consolidating with, or by
purchasing a substantial portion of the assets or securities of, or by any other
manner, any corporation, partnership or other entity;
(e) create, incur, assume or guarantee any Indebtedness;
(f) except as otherwise required by Law or GAAP, change any
of the accounting or Tax principles, practices or methods used by Holdings or
Worldwide or fail to maintain the accounts, books and records of Holdings or
Worldwide in the usual, regular and ordinary manner on a basis consistently
applied;
(g) make any payments, loans, advances or other distributions
to, or enter into any transaction, agreement or arrangement with, any of its
Affiliates, officers, directors, or stockholders or it or its Affiliates or any
associates or family members of any of the foregoing, or make any changes in or
modify any of the Affiliate Agreements, other than in the ordinary course of
business consistent with past practice or as required by the Affiliate
Agreements, other than in respect of the LYONs Escrow Fund or the Mafco Demand
Note;
(h) adjust, split, combine, subdivide or reclassify any
shares of its capital stock;
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(i) issue, sell, deliver, transfer, repurchase, redeem,
acquire or pledge or authorize or propose the issuance, sale, delivery,
transfer, repurchase, redemption, acquisition or pledge of shares of capital
stock of any class or series, or any securities (other than the LYONs)
convertible into capital stock of any class or series, or grant or enter into
any rights, warrants, options, agreements or commitments with respect to the
issuance of such capital stock or convertible securities;
(j) take any action that would make any representation or
warranty of Parent Holdings or Holdings contained in this Agreement untrue or
incorrect in any material respect and which could reasonably be expected to
prevent the satisfaction of any condition to closing set forth in Article VIII
hereof or otherwise prevent or materially delay the consummation of the
transactions contemplated by this Agreement; or
(k) enter into any agreement or commitment to take any of the
foregoing actions.
Section 6.2. REASONABLE BEST EFFORTS.
(a) Upon the terms and subject to the conditions of this
Agreement, each of the parties hereto agrees to, and Holdings agrees to cause
Worldwide and the Company and its subsidiaries to, use reasonable best efforts
to take, or cause to be taken, all actions, and to do, or cause to be done, all
things necessary, proper or advisable under applicable Laws to consummate and
make effective the transactions contemplated by this Agreement and the Company
Merger Agreement, as applicable, as promptly as practicable (including
satisfaction, but not waiver, of the conditions set forth in Article VIII hereof
and Article VIII of the Company Merger Agreement).
(b) Laser shall perform all of its obligations under the
Company Merger Agreement in accordance with their terms.
Section 6.3. CONSENTS.
(a) Without limiting the generality of Section 6.2(a) hereof,
each of the parties hereto shall, and Holdings shall and shall cause Worldwide
and the Company and its subsidiaries to, use reasonable best efforts to obtain
all Consents of all Governmental Entities and, to the extent that the failure to
obtain such Consents would have a Holdings Material Adverse Effect or a Laser
Material Adverse Effect, as applicable, all third parties necessary in
connection with the consummation of the transactions contemplated by this
Agreement and the Company Merger Agreement prior to the Holdings Effective Time.
Notwithstanding the foregoing, none of the parties hereto nor Worldwide nor the
Company or any of its subsidiaries shall have any obligation to pay any fee to
any third party (other than filing or similar fees payable to Governmental
Entities) for the purpose of obtaining any Consent or any costs and expenses of
any third party resulting from the process of obtaining such Consents. Each of
the parties hereto shall make or cause to be made all filings and submissions
under laws and regulations applicable to it as may be required for the
consummation of the transactions contemplated by this Agreement.
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(b) Notwithstanding the foregoing, nothing in this Agreement
shall be deemed to require any party hereto to enter into any agreement with any
Governmental Entity which requires, or to consent to any order, decree or
judgment which requires, such party to hold, separate or divest, or to restrict
the dominion or control of such party or any of its Affiliates over, any of the
assets, properties or businesses of such party or its Affiliates in existence on
the date hereof.
Section 6.4. HSR NOTIFICATION. As soon as reasonably
practicable, Laser and Parent Holdings shall make, or cause to be made, all
filings and submissions under the HSR Act and any other applicable Competition
Laws as may be reasonably required to be made in connection with this Agreement
and the transactions contemplated hereby. Subject to Section 6.7 hereof, Parent
Holdings will furnish to Laser and Laser will furnish to Parent Holdings, such
information and assistance as the other may reasonably request in connection
with the preparation of any such filings or submissions. Subject to Section 6.7
hereof, Parent Holdings will provide Laser, and Laser will provide Parent
Holdings, with copies of all correspondence, filings or communications (or
memoranda setting forth the substance thereof) between such party or any of its
representatives, on the one hand, and any Governmental Entity or authority or
members of their respective staffs, on the other hand, with respect to this
Agreement and the transactions contemplated hereby. Parent Holdings and Laser
shall consult with one another with respect to any such correspondence, filings
or communications and shall engage in any discussions with any Governmental
Entity on a joint basis.
Section 6.5. LYONS REFUND. Promptly following redemption,
exchange or other retirement in full of the LYONs, Laser shall cause to be paid
to Parent Holdings all amounts remaining in the LYONs Escrow Fund by wire
transfer of immediately available funds to an account(s) designated in writing
by Parent Holdings. Until the making of such payment, Laser shall cause Holdings
and Worldwide to comply with all of their obligations under the Indenture
relating to the LYONs, the Indenture and the related Escrow Agreement, shall not
take any action to amend such indenture or agreement in any manner adverse to
Parent Holdings and shall use reasonable best efforts to take action to cause
the redemption or retirement in full of the LYONs as promptly as practicable.
Promptly following the Holdings Effective Time, at the request of Parent
Holdings, Laser shall cause Holdings and Worldwide to give the escrow agent
under such Escrow Agreement irrevocable written notice of the assignment of all
right, title and interest in and to any such amounts to and for the benefit of
Parent Holdings, on which notice Parent Holdings may rely. Following the
redemption or retirement in full of the LYONs, the Mafco Demand Note shall be
canceled automatically without the further action of any Person, and shall be of
no further force or effect whatsoever, and, until the time of such cancellation,
no demand or request for payment of any kind shall be made with respect to the
Mafco Demand Note.
Section 6.6. LISTING APPLICATION. Laser shall prepare and
submit to the NYSE a listing application covering the Laser Shares to be issued
in connection with the Holdings Merger, and shall use its reasonable best
efforts to obtain as promptly as practicable approval for the listing of such
Laser Shares, subject to official notice of issuance.
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Section 6.7. ACCESS TO INFORMATION; CONFIDENTIALITY. Holdings
and Laser shall each afford, and Holdings shall cause Worldwide, the Company and
each of its subsidiaries to afford, to the other and to the other's financial
advisors, legal counsel, accountants consultants and other representatives full
access at all reasonable times throughout the period prior to the Holdings
Effective Time to all of its books, records, properties, plants and personnel
(provided that all such access shall be on reasonable advance notice and shall
not disrupt normal business operations) and, during such period, each shall
furnish promptly to the other (a) a copy of each report, schedule and other
document filed or received by it pursuant to the requirements of federal or
state securities laws, and (b) all other information as such other party may
reasonably request, provided that no investigation pursuant to this Section 6.7
shall affect any representations or warranties made herein or the conditions to
the obligations of the respective parties to consummate the Holdings Merger.
Each party and their respective affiliates, representatives and agents shall
hold in confidence all nonpublic information in accordance with the terms of the
Confidentiality Agreements between Laser and the Company dated February 4, 1998
and February 23, 1998 (the "CONFIDENTIALITY AGREEMENTS").
Section 6.8. ADVICE OF CHANGES. Upon obtaining knowledge of
any such occurrence, Holdings or Laser shall promptly advise the other party
orally and in writing of (i) any representation or warranty made by it contained
in this Agreement that is qualified as to materiality becoming untrue or
inaccurate in any respect or any such representation or warranty that is not so
qualified becoming untrue or inaccurate in any material respect, (ii) the
failure by it to comply with or satisfy in any material respect any covenant,
condition or agreement to be complied with or satisfied by it under this
Agreement or (iii) any change or event (x) having, or which, insofar as can
reasonably be foreseen, would have, in the case of Laser, a Laser Material
Adverse Effect and, in the case of Holdings, a Holdings Material Adverse Effect,
(y) having, or which, insofar as can reasonably be foreseen, would have, the
effect set forth in clause (i) above or (z) which has resulted, or which,
insofar as can reasonably be foreseen, would result, in any of the conditions
set forth in Article VIII not being satisfied; PROVIDED, HOWEVER, that no such
notification shall affect the representations, warranties, covenants or
agreements of the parties or the conditions to the obligations of the parties
under this Agreement.
Section 6.9. AFFILIATE AGREEMENTS; INTERCOMPANY ACCOUNTS.
Parent Holdings and Holdings shall cause all intercompany accounts to be
settled, and all Affiliate Agreements to be treated, as set forth in Section
4.10 of the Holdings Disclosure Schedule.
Section 6.10. REGISTRATION RIGHTS AGREEMENT. Immediately
prior to the Holdings Effective Time, Parent Holdings and Laser shall execute
and deliver the Registration Rights Agreement.
ARTICLE VII
ADDITIONAL AGREEMENTS
Section 7.1. SALES OF LASER SHARES. Parent Holdings agrees
not to, directly or indirectly, sell, transfer, pledge, assign or otherwise
dispose of or otherwise transfer (other than,
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in any such case, in connection with a pledge to secure BONA FIDE indebtedness
or other obligations) (collectively, "TRANSFER"), any Laser Shares received
pursuant to the terms hereof as consideration for the Holdings Merger, other
than to one of its Affiliates who agrees in writing to be bound by the terms of
this Section 7.1, for a period of nine (9) months from and after the Holdings
Effective Time, except that Parent Holdings may Transfer (A) from and after the
date that is three (3) months following the Holdings Effective Time, twenty-five
percent (25%) of the total number of the Laser Shares, and (B) from and after
the date that is six (6) months following the Holdings Effective Time, an
additional twenty-five percent (25%) of the total number of the Laser Shares
(such that a total of fifty percent (50%) of the total number of the Laser
Shares shall be Transferable from and after the date that is six (6) months
following the Holdings Effective Time).
Section 7.2. RESTRICTIVE LEGEND. Pursuant to Section 7.1
hereof, each certificate representing the Laser Shares received by Parent
Holdings shall be stamped or otherwise imprinted with the following legend:
THE SECURITIES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO THE
RESTRICTIONS ON TRANSFER CONTAINED IN THE AGREEMENT AND PLAN OF MERGER
DATED AS OF FEBRUARY 27, 1998 AMONG SUNBEAM CORPORATION, LASER
ACQUISITION CORP., CLN HOLDINGS INC., AND COLEMAN (PARENT) HOLDINGS
INC. AND MAY NOT BE OFFERED, SOLD, TRANSFERRED, PLEDGED, ASSIGNED, OR
OTHERWISE DISPOSED OF OR TRANSFERRED (OTHER THAN, IN ANY SUCH CASE, IN
CONNECTION WITH A PLEDGE TO SECURE BONA FIDE INDEBTEDNESS OR OTHER
OBLIGATIONS) ("TRANSFERRED") EXCEPT AS PERMITTED BY THE TERMS THEREOF.
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), OR THE
SECURITIES LAWS OF ANY STATE. THE SHARES REPRESENTED BY THIS
CERTIFICATE MAY NOT BE TRANSFERRED, AND THE COMPANY WILL NOT REGISTER
THE TRANSFER OF SUCH SECURITIES, EXCEPT (A) PURSUANT TO AN EFFECTIVE
REGISTRATION STATEMENT UNDER THE ACT, (B) PURSUANT TO RULE 144 UNDER
THE ACT, OR (C) UPON RECEIPT BY THE COMPANY OF AN OPINION OF COUNSEL,
REASONABLY SATISFACTORY TO THE COMPANY, THAT SUCH TRANSFER IS EXEMPT
FROM REGISTRATION UNDER THE ACT.
Upon request of Parent Holdings, Laser shall cause to be
issued certificates representing such Laser Shares as to which the restrictions
set forth herein are no longer applicable without such legend.
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ARTICLE VIII
CONDITIONS TO CONSUMMATION OF THE HOLDINGS MERGER
Section 8.1. CONDITIONS TO EACH PARTY'S OBLIGATION TO EFFECT
THE HOLDINGS MERGER. The respective obligations of each party to effect the
Holdings Merger shall be subject to the satisfaction or waiver, to the extent
permitted by Law, at or prior to the Holdings Effective Time of the following
conditions:
(a) Any waiting period applicable to the consummation of the
Holdings Merger under the HSR Act shall have expired or been terminated.
(b) All of the Laser Shares shall have been previously
approved for listing on the NYSE, subject only to official notice of issuance,
if required.
(c) No preliminary or permanent injunction or other order by
any federal or state court in the United States of competent jurisdiction which
prohibits the consummation of this Agreement or the Holdings Merger shall have
been issued and remain in effect.
(d) All authorizations, consents, orders, declarations or
approvals of, or filings with, or terminations or expirations of waiting periods
imposed by, any Governmental Entity, which the failure to obtain, make or occur
would have the effect of making this Agreement or the Holdings Merger Agreement
or any of the transactions contemplated hereby illegal.
Section 8.2. CONDITIONS TO OBLIGATION OF HOLDINGS TO EFFECT
THE HOLDINGS MERGER. The obligation of Holdings to effect the Holdings Merger
shall be subject to the satisfaction by Laser or waiver by Holdings or Parent
Holdings, to the extent permitted by Law, at or prior to the Holdings Effective
Time of the following additional conditions:
(a) The representations and warranties of Laser in this
Agreement and the Company Merger Agreement that are qualified as to materiality
shall be true and correct, and the representations and warranties of Laser in
this Agreement and the Company Merger Agreement that are not so qualified shall
be true and correct in all material respects, in each case as of the date
hereof, and, except to the extent such representations and warranties refer to a
specific date, as of the Closing Date as though made on the Closing Date;
PROVIDED, however, that this condition shall be deemed satisfied unless the
failure or failures of such representations and warranties to be so true and
correct (disregarding for this purpose all qualifications in such
representations and warranties relating to materiality or knowledge), in the
aggregate, would have a Laser Material Adverse Effect.
(b) Laser shall have performed in all material respects all
obligations required to be performed by it under this Agreement or under the
Company Merger Agreement at or prior to the Closing Date.
(c) Except as disclosed in the Filed Laser SEC Reports, since
the date of the most recent audited financial statements included in the Filed
Laser SEC Reports, there shall not
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have been any event, change or development which individually or in the
aggregate has had or reasonably would be expected to have a Laser Material
Adverse Effect or would impair the ability of Laser to consummate the
transactions contemplated by this Agreement or to satisfy its obligations
hereunder.
(d) The Registration Rights Agreement shall have been duly
executed and delivered by each of the parties thereto.
Section 8.3. CONDITIONS TO OBLIGATION OF LASER TO EFFECT THE
HOLDINGS MERGER. The obligation of Laser to effect the Holdings Merger shall be
subject to the satisfaction by Holdings and Parent Holdings or waiver by Laser,
to the extent permitted by Law, at or prior to the Holdings Effective Time of
the following additional conditions, unless:
(a) The representations and warranties of Holdings and Parent
Holdings in this Agreement and the representations of the Company in the Company
Merger Agreement that are qualified as to materiality shall be true and correct,
and the representations and warranties of Holdings and Parent Holdings in this
Agreement and the representations of the Company in the Company Merger Agreement
shall be true and correct in all material respects, in each case as of the date
hereof, and, except to the extent such representations and warranties refer to a
specific date, as of the Closing Date as though made at and as of the Closing
Date; PROVIDED, HOWEVER, that this condition shall be deemed satisfied unless
the failure or failures of such representations and warranties to be so true and
correct (disregarding for this purpose all qualifications in such
representations and warranties relating to materiality or knowledge), in the
aggregate, would have a Holdings Material Adverse Effect or Company Material
Adverse Effect (as defined in the Company Merger Agreement), as the case may be.
(b) Parent Holdings and Holdings shall have performed in all
material respects all obligations required to be performed by them under this
Agreement at or prior to the Closing Date.
(c) The Company shall have performed in all material respects
those obligations required to be performed by it under the Company Merger
Agreement on or prior to the Closing Date.
(d) Up to six (6) individuals designated by Laser (the "LASER
DESIGNEES") shall have been duly elected members of the Board of Directors of
the Company and all other members of such Board shall have resigned, all
effective as of the later of (i) the Closing and (ii) the eleventh (11th) day
following the date on which the Section 14(f) Notice (as defined in the Company
Merger Agreement) shall have been filed with the SEC and mailed to all
stockholders of record of the Company in accordance with the Company Merger
Agreement.
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ARTICLE IX
TAX MATTERS
Section 9.1. TAXES.
(a) Parent Holdings shall indemnify and hold Laser and
Laser's subsidiaries and Affiliates harmless from and against the following:
(i) any liability for Taxes of any member of the
"affiliated group" (within the meaning of Section 1504(a) of the Code)
(except for the Company and its subsidiaries) of which Mafco Holdings
Inc. (or any predecessor or successor) is the common parent that arises
under the provisions of Treasury Regulation Section 1.1502-6(a) (or any
successor provision) or comparable provisions of foreign, state or
local law; and
(ii) except to the extent provided in Section
9.1(b)(iii), any liability for Taxes (other than Taxes that arise under
the provisions of Treasury Regulatory Section 1.1502-6(a) (or any
successor provision) or comparable provisions of foreign, state or
local law) imposed on Holdings or Worldwide or for which Holdings or
Worldwide may otherwise be liable for any Pre-Closing Period
(including, without limitation, any Taxes resulting from Holdings or
Worldwide ceasing to be a member of the "affiliated group" of which
Mafco Holdings Inc. (or any successor) is the common parent, any income
Taxes that arise in the Holdings Merger, and any Taxes imposed on
Holdings or Worldwide as a result of any transaction effected between
(and including) the date hereof and the Closing Date).
(b) Laser shall indemnify and hold Parent Holdings and its
Affiliates harmless from and against the following:
(i) Taxes imposed on Holdings or Worldwide for
any Post-Closing Period;
(ii) except to the extent provided in Section
9.1(a)(i), any liability for Taxes of the Company and any of its
subsidiaries; and
(iii) any liability for Taxes resulting from
transactions or actions taken by Holdings or Worldwide on the Closing
Date but after the Holdings Effective Time, except for transactions or
actions undertaken in the ordinary course of business.
(c) To the extent permitted by law or administrative
practice, (i) the taxable year of Holdings or Worldwide which includes the
Closing Date shall be treated as closing on (and including) the Closing Date and
(ii) all transactions not in the ordinary course of business occurring after the
Holdings Effective Time shall be reported on Laser's consolidated United States
federal income Tax Return to the extent permitted by Treasury Regulation Section
1.1502-76(b)(1)(ii)(B) and shall be similarly reported on other Tax Returns of
Laser or its Affiliates to
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the extent permitted by Law. For purposes of paragraphs (a) and (b)(i), where it
is necessary to apportion between Parent Holdings and Laser the Tax liability of
an entity for a Straddle Period (which is not treated under the immediately
preceding sentence as closing on the Closing Date), such liability shall be
apportioned between the period deemed to end at the close of the Closing Date
and the period deemed to begin at the beginning of the day following the Closing
Date on the basis of an interim closing of the books, except that Taxes (such as
real property Taxes) imposed on a periodic basis shall be allocated on a daily
basis.
(d) For purposes of Sections 9.1(a) and (b), whenever it is
necessary to allocate an item of income, gain, deduction, loss or credit to
either a taxable year or period that is not part of a Straddle Period and that
ends on or before the Closing Date or a taxable year or period that is not part
of a Straddle Period and that begins after the Closing Date, such allocation
shall be made consistent with the Law.
(e) Any real property transfer or gains Tax, sales Tax, use
Tax, stamp Tax, stock transfer Tax, or other similar Tax imposed on Holdings or
any of its subsidiaries arising out of or in connection with the transactions
contemplated by this Agreement shall be borne by the party primarily obligated
for such Tax under applicable Law, and each party shall indemnify the other
party for any such Tax for which it is so liable.
(f) (i) Except as set forth in Section 9.1(f)(iii), Laser
shall be entitled to any refund of Taxes or the benefit of the utilization of
any Tax attribute (including, without limitation, any net operating loss,
investment Tax credit, foreign Tax credit, or other credit or deduction) of (x)
the Company or any of its subsidiaries and (y) for a Post-Closing Period,
Holdings or Worldwide . If Parent Holdings or any of its Affiliates or
subsidiaries receives any refund of Tax to which Laser is entitled pursuant to
this Section 9.1(f)(i) or utilizes any Tax attribute to which Laser is entitled
pursuant to this Section 9.1(f)(i), Parent Holdings shall promptly notify Laser
and shall pay the amount of such refund or the benefit realized from such
utilization within five (5) days of the receipt of such refund or the
realization of such benefit.
(ii) Except as set forth in Section 9.1(f)(iii),
Parent Holdings shall be entitled to any refund of Taxes or the benefit
of the utilization of any Tax attribute of Holdings or Worldwide for a
Pre-Closing Period. If Laser or any of its Affiliates or subsidiaries
receives any refund of Tax to which Parent Holdings is entitled
pursuant to this Section 9.1(f)(ii) or utilizes any Tax attribute to
which Parent Holdings is entitled pursuant to this Section 9.1(f)(ii),
Laser shall promptly notify Parent Holdings and shall pay the amount of
such refund or the benefit realized from such utilization within five
(5) days of the receipt of such refund or the realization of such
benefit.
(iii) No payment shall be made in respect of a Tax
deduction, Tax credit or other Tax benefit pursuant to this Section
9.1(f) in duplication of payments previously made in respect of the
same Tax deduction, Tax credit or other Tax benefit.
(g) Any indemnity payment required under this Article IX as a
result of an adjustment shall be paid seven (7) days after a "determination"
within the meaning of Section 1313(a) of the Code. Any payment required to be
made under this Article IX by one party to the
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other party that is not made on or before the date specified in this Article IX
shall bear interest after such date at the rate specified in Code Section
6621(a)(2) for underpayments.
Section 9.2. TAX RETURNS. (a) Parent Holdings shall file or
cause to be filed when due (i) all Tax Returns that are required to be filed on
or before the Closing Date by or with respect to Holdings or any of its
subsidiaries and (ii) all consolidated, combined or unitary Tax Returns that are
required to be filed by or with respect to Parent Holdings or any entity that
will be its Affiliate after the Holdings Merger, on the one hand, and Holdings
or any of its subsidiaries, on the other hand, for taxable years or periods that
include or precede the Closing Date. Parent Holdings shall remit (or cause to be
remitted) any Taxes shown as due on such Tax Returns. In the case of Tax Returns
described in clause (ii) above, Laser shall pay Parent Holdings no later than
five (5) days prior to the due date (including extensions) of any such Tax
Return the Tax in connection with such Tax Return for which Laser is liable
pursuant to this Article IX (or Parent Holdings shall pay Laser on such date the
excess, if any, of any estimated Tax payments by the Company or any of its
subsidiaries, relating to the period covered by such Tax Return, over the Tax in
connection with such Tax Return for which Laser is liable pursuant to this
Article IX). Holdings and its subsidiaries shall cooperate in the preparation of
any Tax Returns for which Parent Holdings has filing responsibility hereunder.
Such cooperation shall include, but not be limited to, furnishing in a timely
manner return preparation packages in the form and of the quality provided prior
to the Holdings Merger. Such packages shall be prepared in good faith in a
manner consistent with past practice.
(b) Laser shall file or cause to be filed when due all other
Tax Returns that are required to be filed by or with respect to Holdings or any
of its subsidiaries. Laser shall remit (or cause to be remitted) any Taxes shown
as due on such Tax Returns. Parent Holdings shall pay Laser no later than five
(5) days prior to the due date (including extensions) of any such Tax Return the
Tax in connection with such Tax Return for which Parent Holdings is liable
pursuant to this Article IX.
(c) The party with filing responsibility under this Section
9.2 for a Tax Return shall, 20 days prior to the due date (including extensions)
of such Tax Return, present to the other party (the "INDEMNIFYING PARTY") for
the approval (which approval shall not be unreasonably withheld) of the
Indemnifying Party the portion, if any, of the Tax Return reflecting solely the
items and positions for which the Indemnifying Party is liable pursuant to this
Article IX.
(d) From and after the date hereof, Parent Holdings and each
of its Affiliates shall not amend any Tax Return with respect to Taxes for which
Laser or any of its Affiliates is liable pursuant to this Agreement, without the
written consent of Laser, which consent shall not be unreasonably withheld.
(e) From and after the date hereof, any payment (including
any estimated payment) in respect of Taxes pursuant to a Tax Sharing Arrangement
that includes Holdings or any of its subsidiaries shall be reduced by any
payment that would be owed by the other party pursuant to a Tax Sharing
Arrangement.
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Section 9.3. TAX CLAIMS.
(a) In the case of any Tax audit, examination or judicial or
administrative proceeding (a "TAX PROCEEDING") relating to a combined,
consolidated or unitary Tax Return that includes Mafco Holdings Inc. (or any
predecessor or successor thereto), Laser shall be entitled to control the
portion of the Tax Proceeding, if any, relating solely to items for which Laser
is liable pursuant to this Agreement, and Parent Holdings shall be entitled to
control every other portion of the Tax Proceeding; PROVIDED, HOWEVER, that
neither Parent Holdings nor any of its Affiliates shall settle or otherwise
dispose of any issue in any such Tax Proceeding that could materially affect the
Tax liability hereunder of Laser, without the prior written consent of Laser,
which consent shall not be unreasonably withheld. Parent Holdings shall be
entitled to control the Pre-Closing Period portion of a Tax Proceeding relating
to a Straddle Period Tax Return, or a Tax Return for a Pre-Closing Period ending
before the Closing Date, of Holdings or Worldwide; PROVIDED, HOWEVER, that
neither Parent Holdings nor any of its Affiliates shall settle or otherwise
dispose of any issue in any such Tax Proceeding that could materially affect the
Tax liability hereunder of Laser, without the prior written consent of Laser,
which consent shall not be unreasonably withheld.
(b) Parent Holdings or Laser, as the case may be, shall
promptly notify the other party in writing of any tax claim that could result in
liability of the other party under this Agreement (a "TAX Claim"). With respect
to any Tax Claim, the party controlling the Tax Proceeding with respect thereto
shall (i) not make any submission to any taxing authority without offering the
other party the opportunity to review it, (ii) keep the other party informed as
to the progress of such Tax Claim, (iii) provide the other party with any
information that it receives in connection with the Tax Proceeding, (iv) permit
the other party to participate (at its own expense) in all conferences, meetings
or proceedings with any taxing authority in which the indemnified Tax Claim is
or may be a subject, and (v) permit the other party to participate (at its own
expense) in all court appearances in which the indemnified Tax Claim is or may
be a subject. With respect to any Tax Claim, the party not controlling the Tax
Proceeding with respect thereto shall not take any action or make any
representations in connection with such Tax Claim with respect to issues
affecting the other party's indemnity hereunder. With respect to any Tax Claim
relating to a Pre-Closing Period for which Laser is or may be liable pursuant to
this Agreement, Parent Holdings or any of its Affiliates shall either file (or
cause to be filed) submissions at Laser's direction or appoint (or cause to be
appointed) Laser or its authorized representatives as additional authorized
representatives entitled to communicate fully with the Internal Revenue Service
or the appropriate state, local or foreign taxing authority with respect to such
Tax Claim.
(c) Nothing contained in this Section 9.3 shall be construed
as limiting any party's right to indemnification under Section 9.1.
Section 9.4. ASSISTANCE AND COOPERATION. After the Closing
Date, each of Parent Holdings and Laser shall (and shall cause their respective
Affiliates to):
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(a) timely sign and deliver such certificates or forms as may
be necessary or appropriate to establish an exemption from (or otherwise
reduce), or file Tax Returns or other reports with respect to, Taxes described
in Section 9.1(e) (relating to sales, transfer and similar Taxes);
(b) assist the other party in preparing any Tax Returns which
such other party is responsible for preparing and filing in accordance with
Section 9.2;
(c) cooperate fully in preparing for any audits of, or
disputes with taxing authorities regarding, any Tax Returns of Holdings and each
of its subsidiaries;
(d) make available to the other and to any taxing authority
as reasonably requested in connection with any Tax Return described in Section
9.4(b) or any proceeding described in Section 9.4(c), all information relating
to any Taxes or any Tax Returns of Holdings and each of its subsidiaries,
including, without limitation, records, returns, schedules, documents, work
papers or other relevant materials;
(e) provide timely notice to the other in writing of any Tax
audits or assessments of Holdings and each of its subsidiaries that are pending
or proposed in writing for taxable periods for which the other may have a
liability under this Article IX; and
(f) furnish the other with copies of all correspondence
received from any taxing authority in connection with any Tax audit or
information request with respect to any such taxable period.
Section 9.5. ADJUSTMENT TO MERGER CONSIDERATION. For all Tax
purposes, any payment by Laser or Parent Holdings under this Agreement will be
an adjustment to the Merger Consideration.
Section 9.6. SURVIVAL OF OBLIGATIONS. Notwithstanding
anything to the contrary in this Agreement, and notwithstanding Article X of
this Agreement, the obligations of the parties set forth in this Article IX
shall be unconditional and absolute and shall remain in effect until 90 days
after the expiration of the applicable statute of limitations.
Section 9.7. REORGANIZATION. Laser shall not, and shall not
permit any of its subsidiaries or Affiliates to, take any action that could
prevent the Holdings Merger from qualifying as a reorganization within the
meaning of Section 368(a) of the Code. Laser and Parent Holdings shall treat,
and shall cause their respective Affiliates to treat, the Holdings Merger as a
reorganization for all Tax and reporting purposes.
Section 9.8. TAX SHARING AGREEMENTS. All rights and
obligations of Parent Holdings (and the entities that will be its Affiliates
after the Holdings Effective Time) pursuant to any of the Tax Sharing
Arrangements or any Tax indemnity arrangements involving Holdings or any of its
subsidiaries will terminate on the Closing Date.
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<PAGE>
Section 9.9. INFORMATION. Notwithstanding any other provision
of this Agreement or the Company Merger Agreement, neither Laser nor any of its
Affiliates nor any other Person shall have any right to receive or obtain any
information relating to Taxes of Parent Holdings or any of its Affiliates other
than information relating solely to Holdings or any of its subsidiaries.
ARTICLE X
INDEMNIFICATION; SURVIVAL
Section 10.1. PARENT HOLDINGS' AGREEMENT TO INDEMNIFY.
(a) Subject to the terms and conditions of this Article X,
from and after the Closing Date, Parent Holdings shall indemnify, defend and
hold harmless Laser and its subsidiaries (including after the Closing Date, the
Company and its subsidiaries) and each of their respective successors and
permitted assigns, directors, officers, employees, representatives, agents,
Affiliates and associates (collectively, the "LASER Group") from and against any
and all losses, liabilities, expenses (including reasonable attorneys' fees),
claims and damages (collectively, "DAMAGES") asserted against, resulting to,
imposed upon or suffered by the Laser Group, or any one of them, arising out of
or related to any liability or obligation of Holdings or Worldwide existing on
or prior to the Closing Date other than any such liability or obligation (i)
arising in connection with the Notes, the LYONs and the 1998 Notes, (ii) which
is also a liability or obligation of the Company or its subsidiaries (on a joint
basis or otherwise), or (iii) which relates to the conduct, operations or
activities of the Company or its subsidiaries.
(b) If there are any conflicts between the provisions of this
Section 10.1 and Section 9.3 with respect to Tax Claims, the provisions of
Section 9.3 shall control.
(c) Any payment by Parent Holdings under Article IX or this
Section 10.1 will be an adjustment to the Merger Consideration.
(d) Anything in this Agreement to the contrary
notwithstanding, the liability of Parent Holdings to indemnify the Laser Group
pursuant to this Section 10.1 against any Damages sustained by reason of any
Laser Claim shall be limited to Laser Claims as to which the Laser Group has
given Parent Holdings written notice, setting forth in reasonable detail the
basis for such Laser Claim, on or prior to the fourth (4th) anniversary of the
Closing Date.
Section 10.2. CONDITIONS OF INDEMNIFICATION WITH RESPECT TO
THIRD-PARTY CLAIMS. The obligations and liabilities of Parent Holdings with
respect to Laser Claims for Damages which arise or result from claims made by
third parties ("THIRD-PARTY CLAIMS") shall be subject to the following
conditions:
(a) The Laser Group shall give Parent Holdings prompt notice
of any such Third-Party Claim, and Parent Holdings shall have the right to
undertake the defense thereof by representatives chosen by it; PROVIDED,
HOWEVER, that failure to provide prompt notice shall not
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<PAGE>
affect Parent Holdings' obligations hereunder except to the extent that Parent
Holdings is actually prejudiced by such failure;
(b) If Parent Holdings undertakes the defense of any such
Third-Party Claim, the Laser Group shall, to the best of its ability, assist
Parent Holdings, at the expense of Parent Holdings, in the defense of such
Third-Party Claim, and shall promptly send to Parent Holdings, at the expense of
Parent Holdings, copies of any documents received by the Laser Group which
relate to such Third-Party Claim;
(c) If Parent Holdings, within a reasonable time after notice
of any such Third-Party Claim, fails to defend the member(s) of the Laser Group
against which such Third-Party Claim has been asserted, the Laser Group shall
(upon further notice to Seller) have the right to undertake the defense,
compromise or settlement of such Third-Party Claim on behalf of and for the
account and risk of Parent Holdings, subject to the right of Parent Holdings to
assume the defense of such Third-Party Claim at any time prior to settlement,
compromise or final determination thereof; and
(d) Anything in this Article X to the contrary
notwithstanding, (i) if there is a reasonable probability that a Third-Party
Claim may materially and adversely affect the Laser Group other than as a result
of money damages or other money payments, the Laser Group shall have the right,
at its own cost and expense, to defend, compromise or settle such Third-Party
Claim, and shall by doing so release Parent Holdings from any liability to
provide indemnification with respect to such Third-Party Claim; and (ii) Parent
Holdings shall not, without the written consent of the Laser Group, settle or
compromise any Third-Party Claim or consent to the entry of any judgment which
does not include as an unconditional term thereof the giving by the claimant or
the plaintiff to the Laser Group a release from all liability with respect to
such Third-Party Claim.
Section 10.3. SURVIVAL OF REPRESENTATIONS; COVENANTS. The
representations and warranties in this Agreement shall terminate upon and not
survive the Closing Date. This Section 10.3 shall not limit any covenant or
agreement of the parties contained herein which by its terms contemplates
performance after the Holdings Effective Time.
ARTICLE XI
TERMINATION
Section 11.1. TERMINATION. This Agreement may be terminated
at any time prior to the Holdings Effective Time:
(a) by mutual written agreement of Laser and Holdings;
(b) by either Laser or Holdings if the Holdings Merger shall
not have been consummated on or before August 31, 1998 (the "TERMINATION DATE");
PROVIDED, HOWEVER, that the right to terminate this Agreement under this Section
11.1(b) shall not be available to any party
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<PAGE>
whose failure to fulfill any obligation under this Agreement has been the cause
of, or resulted in, the failure of the Closing to occur on or before the
Termination Date;
(c) by either Laser or Holdings if a court of competent
jurisdiction or governmental, regulatory or administrative agency or commission
shall have issued an order, decree or ruling or taken any other action (which
order, decree or ruling the parties shall use their reasonable best efforts to
lift), in each case permanently restraining, enjoining or otherwise prohibiting
the transactions contemplated by this Agreement, and such order, decree, ruling
or other action shall have become final and nonappealable;
(d) by either Laser or Holdings in the event of a breach by
the other party or any of its subsidiaries (including, in the case of Holdings,
the Company and its subsidiaries) of any representation, warranty, covenant or
other agreement contained in this Agreement or the Company Merger Agreement, as
applicable, which would give rise to the failure of a condition set forth in
Section 8.2(a) or Section 8.3(a) hereof or Section 8.1 thereof, as applicable,
and is not capable of being cured (provided that the terminating party is not
then in material breach of any representation, warranty, covenant or other
agreement contained in this Agreement).
Section 11.2. EFFECT OF TERMINATION. In the event of
termination of this Agreement as provided in Section 11.1 hereof, this Agreement
shall forthwith become void, provided that the last sentence of Section 6.7 and
Article XII shall continue, and there shall be no liability on the part of any
of the parties, nothing herein shall relieve any party from liability for any
willful breach hereof.
ARTICLE XII
MISCELLANEOUS
Section 12.1. NOTICES. All notices or other communications
hereunder shall be deemed to have been duly given and made if in writing and if
served by personal delivery upon the party for whom it is intended, if delivered
by registered or certified mail, return receipt requested, or by a national
courier service, or if sent by telecopier; PROVIDED that the telecopy is
promptly confirmed by telephone confirmation thereof, to the person at the
address set forth below, or such other address as may be designated in writing
hereafter, in the same manner, by such person:
If to Holdings:
CLN Holdings Inc.
5900 North Andrews Avenue, Suite #700-A
Fort Lauderdale, Florida 33309
Fax: (954) 772-3352
Attention: General Counsel
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<PAGE>
with copies to:
Wachtell, Lipton, Rosen & Katz
51 West 52nd Street
New York, New York 10019-6150
Fax: (212) 403-2000
Attention: Adam O. Emmerich, Esq.
If to Laser:
Sunbeam Corporation
1615 South Congress Avenue
Suite 200
Delray Beach, Florida 33445
Fax: (561) 243-2191
Attention: David Fannin, Esq.
with copies to:
Skadden, Arps, Slate, Meagher & Flom LLP
One Rodney Square
Wilmington, Delaware 19801
Fax: (302) 651-3001
Attention: Richard L. Easton, Esq.
Any such notification shall be deemed delivered (i) upon receipt, if delivered
personally, (ii) on the next business day, if sent by national courier service
for next business day delivery or (iii) the business day received, if sent by
telecopier.
Section 12.2. AMENDMENT. This Agreement may be amended by the
parties pursuant to a writing adopted by action taken by all of the parties at
any time before the Closing Date. This Agreement may not be amended except by an
instrument in writing signed by the Parties.
Section 12.3. EXTENSION; WAIVER. At any time before the
Closing Date, any party hereto may (a) extend the time for the performance of
any of the obligations or other acts of the other parties, (b) waive any
inaccuracies in the representations and warranties contained herein or in any
document delivered pursuant hereto and (c) waive compliance with any of the
agreements or conditions contained herein. Any agreement on the part of a party
to any such extension or waiver shall be valid only as against such party and
only if set forth in an instrument in writing signed by such party. The failure
of any party to this Agreement to assert any of its rights under this Agreement
or otherwise shall not constitute a waiver of such rights.
Section 12.4. ASSIGNMENT. No party to this Agreement may
assign any of its rights or obligations under this Agreement without the prior
written consent of the other party hereto.
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<PAGE>
Section 12.5. ENTIRE AGREEMENT. This Agreement (including all
Schedules and Exhibits hereto) contains the entire agreement among the parties
hereto with respect to the subject matter hereof and supersedes all prior
agreements and understandings, oral or written, with respect to such matters,
except for the Confidentiality Agreements which will remain in full force and
effect for the term provided for therein.
Section 12.6. PARTIES IN INTEREST. This Agreement shall inure
to the benefit of and be binding upon the parties hereto and their respective
successors and permitted assigns. Nothing in this Agreement, express or implied,
is intended to confer upon any Person other than Laser, Holdings, Worldwide,
their respective subsidiaries or their successors or permitted assigns, any
rights or remedies under or by reason of this Agreement.
Section 12.7. EXPENSES. Whether or not the transactions
contemplated by this Agreement are consummated, all costs and expenses incurred
in connection with this Agreement and the transactions contemplated hereby shall
be borne by the party incurring such expenses.
Section 12.8. GOVERNING LAW. This Agreement shall be governed
by the laws of the State of Delaware, its rules of conflict of laws
notwithstanding.
Section 12.9. COUNTERPARTS. This Agreement may be executed in
one or more counterparts, each of which shall be deemed an original, and all of
which shall constitute one and the same agreement.
Section 12.10. HEADINGS. The heading references herein and in
the table of contents hereto are for convenience purposes only, do not
constitute a part of this Agreement and shall not be deemed to limit or affect
any of the provisions hereof.
Section 12.11. FURTHER ASSURANCES. From time to time after
the Closing Date, at the request of the other party hereto and at the expense of
the party so requesting, Holdings and Laser shall execute and deliver to such
requesting party such documents and take such other action as such requesting
party may reasonably request in order to consummate the transactions
contemplated hereby.
Section 12.12. SPECIFIC PERFORMANCE. Each party hereto
acknowledges that money damages would be both incalculable and an insufficient
remedy for any breach of this Agreement by such party and that any such breach
would cause the other party hereto irreparable harm. Accordingly, each party
hereto also agrees that, in the event of any breach or threatened breach of the
provisions of this Agreement by such party, the other party hereto shall be
entitled to equitable relief without the requirement of posting a bond or other
security, including in the form of injunctions and orders for specific
performance.
Section 12.13. CERTAIN TERMS. As used herein: (i) the term
"material adverse effect" (including as used in any definition) with respect to
any Person, shall exclude any change, event, effect or circumstance (a) arising
in connection with the announcement or performance of the transactions
contemplated by this Agreement and the Company Merger Agreement and (b)
affecting in the United States economy generally or such Person's industries
generally; and (ii)
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<PAGE>
"to the knowledge of Holdings" shall mean to the actual knowledge of Paul E.
Shapiro, Jerry W. Levin and Steven R. Isko.
Section 12.14. INTERPRETATION. When a reference is made to
this Agreement to an Article or Section, such reference shall be to an Article
or Section of, this Agreement unless otherwise indicated. Whenever the words
"include", "includes" or "including" are used in this Agreement, they shall be
deemed to be followed by the words "without limitation". The words "hereof",
"herein" and "hereunder" and words of similar import when used in this Agreement
shall refer to this Agreement as a whole and not to any particular provision of
this Agreement. The phrase "made available" in this Agreement shall mean that
the information referred to has been made available if requested by the party to
whom such information is to be made available. All terms defined in this
Agreement shall have the defined meanings used in any certificate or other
document made or delivered pursuant hereto unless otherwise defined therein. The
definitions contained in this Agreement are applicable to the singular as well
as the plural forms of such terms and to the masculine as well as to the
feminine and neuter genders of such term. Any agreement, instrument or statute
defined or referred to herein or in any agreement or instrument that is referred
to herein means such agreement, instrument or statute as from time to time
amended, modified or supplemented, including (in the case of agreements or
instruments) by waiver or consent and (in the case of statutes) by succession of
comparable successor statutes and references to all attachments thereto and
instruments incorporated therein. References to a person are also to its
permitted successors and assigns and, in the case of an individual, to his heirs
and estate, as applicable.
[SIGNATURE PAGE FOLLOWS]
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<PAGE>
IN WITNESS WHEREOF, the parties have executed or caused this
Agreement to be executed as of the date first written above.
SUNBEAM CORPORATION
By: /s/ Russell Kersh
-------------------------------------------
Name: Russell Kersh
Title: Executive Vice President
LASER ACQUISITION CORP.
By: /s/ Russell Kersh
-------------------------------------------
Name: Russell Kersh
Title: Executive Vice President
CLN HOLDINGS INC.
By: /s/ Barry Schwartz
-------------------------------------------
Name: Barry Schwartz
Title: Executive Vice President
COLEMAN (PARENT) HOLDINGS INC.
By: /s/ Barry Schwartz
-------------------------------------------
Name: Barry Schwartz
Title: Executive Vice President
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Exhibit 10.u
================================================================================
AGREEMENT AND PLAN OF MERGER
among
SUNBEAM CORPORATION
CAMPER ACQUISITION CORP.
and
THE COLEMAN COMPANY, INC.
Dated as of
February 27, 1998
================================================================================
<PAGE>
TABLE OF CONTENTS
PAGE
ARTICLE I
DEFINITIONS
Section 1.1 Definitions.............................................. 1
ARTICLE II
THE COMPANY MERGER
Section 2.1. The Company Merger....................................... 7
Section 2.2 Closing.................................................. 7
Section 2.3 Company Effective Time of the Company Merger............. 7
Section 2.4 Certificate of Incorporation............................. 7
Section 2.5 By-Laws.................................................. 7
Section 2.6 Directors................................................ 8
Section 2.7 Officers................................................. 8
ARTICLE III
CONVERSION OF SHARES
Section 3.1. Effect on Capital Stock.................................. 8
Section 3.2 Exchange of Certificates Representing Shares............. 9
Section 3.3 Dividends; Transfer Taxes................................ 10
Section 3.4 No Fractional Shares..................................... 11
Section 3.5 Termination of Exchange Fund............................. 11
Section 3.6 Investment of Exchange Fund.............................. 11
Section 3.7 Closing of Company Transfer Books........................ 11
Section 3.8 Dissenting Shares........................................ 11
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
Section 4.1 Organization............................................. 12
Section 4.2 Capitalization........................................... 12
Section 4.3 Subsidiaries............................................. 13
Section 4.4 Authority Relative to this Agreement..................... 13
Section 4.5 Consents and Approvals; No Violations.................... 14
Section 4.6 Reports and Financial Statements......................... 14
Section 4.7 Absence of Certain Changes or Events..................... 15
Section 4.8 Litigation............................................... 16
Section 4.9 Information in Disclosure Documents and Registration
Statement................................................ 17
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<PAGE>
PAGE
Section 4.10 Taxes.................................................... 17
Section 4.11 Compliance with Applicable Law........................... 18
Section 4.12 Labor Matters............................................ 18
Section 4.13 ERISA Compliance......................................... 18
Section 4.14 Environmental Matters.................................... 20
Section 4.15 Intellectual Property.................................... 20
Section 4.16 Contracts................................................ 20
Section 4.17 Opinion of Financial Advisor............................. 21
Section 4.18 Takeover Statute......................................... 21
Section 4.19 Brokers.................................................. 21
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF LASER AND MERGER SUB
Section 5.1 Organization............................................. 21
Section 5.2 Capitalization........................................... 22
Section 5.3 Merger Sub............................................... 22
Section 5.4 Authority Relative to this Agreement..................... 22
Section 5.5 Consents and Approvals; No Violations.................... 23
Section 5.6 Reports and Financial Statements......................... 23
Section 5.7 Absence of Certain Changes or Events..................... 24
Section 5.8 Litigation............................................... 24
Section 5.9 Information in Disclosure Documents and Registration
Statement................................................ 24
Section 5.10 Taxes.................................................... 25
Section 5.11 Compliance with Applicable Law........................... 25
Section 5.12 Brokers.................................................. 25
ARTICLE VI
COVENANTS RELATING TO CONDUCT OF BUSINESS
Section 6.1 Conduct of Business by the Company....................... 26
Section 6.2 Other Actions............................................ 28
Section 6.3 Advice of Changes........................................ 28
Section 6.4 Conduct of Business of Merger Sub........................ 28
Section 6.5 The Section 14(f) Notice................................. 28
ARTICLE VII
ADDITIONAL AGREEMENTS
Section 7.1 Preparation of the Registration Statement, the
Information Statement, the Schedule 13E-3 and the
Section 14(f) Notice..................................... 29
Section 7.2 Access and Information; Confidentiality.................. 29
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<PAGE>
PAGE
Section 7.3 Comfort Letters.......................................... 29
Section 7.4 Listing Application...................................... 30
Section 7.5 Affiliates............................................... 30
Section 7.6 HSR Act; Competition Laws................................ 30
Section 7.7 Employee Matters......................................... 31
Section 7.8 Continuance of Existing Indemnification Rights........... 32
Section 7.9 Expenses................................................. 34
Section 7.10 Public Announcements..................................... 34
Section 7.11 Reasonable Best Efforts.................................. 34
ARTICLE VIII
CONDITIONS TO CONSUMMATION OF THE MERGER
Section 8.1 Conditions to Each Party's Obligation to Effect the
Company Merger........................................... 35
ARTICLE IX
TERMINATION, AMENDMENT AND WAIVER
Section 9.1 Termination.............................................. 35
Section 9.2 Effect of Termination.................................... 35
Section 9.3 Amendment................................................ 35
Section 9.4 Extension; Waiver........................................ 36
ARTICLE IX
GENERAL PROVISIONS
Section 10.1 No Survival of Representations and Warranties............ 36
Section 10.2 Notices.................................................. 36
Section 10.3 Descriptive Headings..................................... 37
Section 10.4 Entire Agreement; No Third-Party Beneficiary............. 37
Section 10.5 Interpretation........................................... 37
Section 10.6 Severability............................................. 38
Section 10.7 Assignment............................................... 38
Section 10.8 Disclosure Schedules..................................... 38
Section 10.6 Governing Law............................................ 38
Sectoin 10.10 Specific Performance..................................... 38
Section 10.11 Counterparts............................................. 39
Section 10.12 Certain Terms............................................ 39
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<PAGE>
AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER (this "AGREEMENT"), dated as of
February 27, 1998, among SUNBEAM CORPORATION, a Delaware corporation ("LASER"),
CAMPER ACQUISITION CORP. ("MERGER SUB"), a Delaware corporation and a wholly
owned subsidiary of Laser, and THE COLEMAN COMPANY, INC., a Delaware corporation
(the "COMPANY").
WHEREAS, the Boards of Directors of Laser, Merger Sub and the
Company deem it advisable and in the best interests of their respective
stockholders that Merger Sub merge with and into the Company (the "COMPANY
MERGER"), and such Boards of Directors have approved the Company Merger, upon
the terms and subject to the conditions set forth herein; and
WHEREAS, as a condition to the Company Merger, a newly formed,
wholly owned subsidiary of Laser will merge with and into CLN Holdings Inc.
("HOLDINGS") with Holdings continuing as the surviving corporation and a wholly
owned subsidiary of Laser (the "HOLDINGS MERGER") pursuant to an Agreement and
Plan of Merger (the "HOLDINGS MERGER AGREEMENT"), dated as of the date hereof,
among Laser, Laser Acquisition Corp., a Delaware corporation and a wholly owned
subsidiary of Laser, Coleman (Parent) Holdings Inc., a Delaware corporation
("PARENT HOLDINGS"), and Holdings; and
WHEREAS, the Board of Directors of the Company has approved
the Holdings Merger solely for purposes of rendering Section 203 of the DGCL
inapplicable to the transactions contemplated hereby; and
WHEREAS, Laser, Merger Sub and the Company desire to make
certain representations, warranties, covenants and agreements in connection with
the Company Merger and also to prescribe certain conditions to the Company
Merger.
NOW, THEREFORE, in consideration of the foregoing and the
respective representations, warranties, covenants and agreements set forth
herein, the parties hereto agree as follows:
ARTICLE I
DEFINITIONS
Section 1.1 DEFINITIONS. As used in this Agreement, the
following terms shall have the following meanings, the definitions to be
applicable to both the singular and plural forms of each term defined to the
extent that such forms of such terms are used in this Agreement.
"AFFILIATE" shall mean, as to any Person (as hereinafter
defined), any other Person which, directly or indirectly, is in control of, is
controlled by, or is under common control with, such Person. The term "control"
(including, with correlative meanings, the terms "controlled by"
<PAGE>
and "under common control with"), as applied to any Person, means the
possession, direct or indirect, of the power to direct or cause the direction of
the management and policies of such Person, whether through the ownership of
voting securities or other ownership interest, by contract or otherwise.
"AFFILIATE AGREEMENTS" shall mean any Contract, agreement or
understanding between the Company and any of its subsidiaries, on the one hand,
and Worldwide and any of its Affiliates (other than the Company and its
subsidiaries), on the other hand.
"CERTIFICATE OF INCORPORATION" shall have the meaning ascribed
to it in Section 2.4.
"CERTIFICATE OF MERGER" shall have the meaning ascribed to it
in Section 2.3.
"CLAIM" shall have the meaning ascribed to it in Section
7.8(a).
"CLOSING" shall have the meaning ascribed to it in Section
2.2.
"CLOSING DATE" shall have the meaning ascribed to it in
Section 2.2.
"CODE" means the Internal Revenue Code of 1986, as amended.
"COMMONLY CONTROLLED ENTITY" shall have the meaning ascribed
to it in Section 4.13(a).
"COMPANY BALANCE SHEET DATE" shall have the meaning ascribed
to it in Section 4.6(c).
"COMPANY BUSINESS PERSONNEL" shall have the meaning ascribed
to it in Section 4.12.
"COMPANY COMMON STOCK" shall mean the common stock, par value
$.01 per share, of the Company.
"COMPANY DISCLOSURE SCHEDULE" shall have the meaning ascribed
to it in the Introduction to Article IV.
"COMPANY EFFECTIVE TIME" shall have the meaning ascribed to it
in Section 2.3.
"COMPANY LICENSES" shall have the meaning ascribed to it in
Section 4.11.
"COMPANY MATERIAL ADVERSE EFFECT" shall have the meaning
ascribed to it in Section 4.1.
"COMPANY MERGER" shall have the meaning ascribed to it in the
Recitals.
"COMPANY PLANS" shall have the meaning ascribed to it in
Section 4.13(a).
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<PAGE>
"COMPANY PREFERRED STOCK" shall mean the preferred stock, par
value $.01 per share, of the Company.
"COMPANY RULE 145 AFFILIATES" shall have the meaning ascribed
to it in Section 7.5.
"COMPANY SEC REPORTS" shall have the meaning ascribed to it in
Section 4.6(a).
"COMPANY STOCK OPTION PLANS" shall mean The Coleman Company,
Inc. 1996 Stock Option Plan, The Coleman Company, Inc. 1993 Stock Option Plan
and The Coleman Company, Inc. 1992 Stock Option Plan.
"COMPETITION LAWS" shall mean foreign statutes, rules,
regulations, orders, decrees, administrative and judicial doctrines, and other
foreign Laws that are designed or intended to prohibit, restrict or regulate
actions having the purpose or effect of monopolization, lessening of competition
or restraint of trade.
"CONTRACT" shall mean any note, bond, mortgage, indenture,
license, contract, agreement or other instrument or obligation.
"CONVERSION NUMBER" shall have the meaning ascribed to it in
Section 3.1(a)(i).
"CREDIT SUISSE FIRST BOSTON" shall mean Credit Suisse First
Boston Corporation, the Company's financial advisor.
"DGCL" shall mean the General Corporation Law of the State of
Delaware.
"D&O INSURANCE" shall have the meaning ascribed to it in
Section 7.8(c).
"DISSENTING SHARES" shall have the meaning ascribed to it in
Section 3.8.
"EMPLOYEE STOCK OPTIONS" shall mean all employee and
non-employee director stock options issued pursuant to the Company Stock Option
Plans.
"ENVIRONMENTAL CLAIM" shall mean any claim, action,
investigation or written notice to the Company or any of its subsidiaries by any
person or entity alleging potential liability (including, without limitation,
potential liability for investigatory costs, cleanup costs, governmental
response costs, natural resource damages, personal injuries, or penalties)
arising out of, based on, or resulting from, (a) the presence, or release into
the environment, of any Hazardous Substance at any location, whether or not
owned or operated by the Company or any of its subsidiaries or (b) circumstances
forming the basis of any violation, or alleged violation of any applicable
Environmental Law.
"ENVIRONMENTAL LAWS" shall mean all federal, state, local and
foreign Laws and regulations, as in effect and as interpreted as of the date of
this Agreement, relating to pollution or protection of the environment,
including, without limitation, Laws and regulations relating to emissions,
discharges, releases or threatened releases of Hazardous Substances, or
otherwise
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<PAGE>
relating to the manufacture, processing, distribution, use, treatment, storage,
disposal, transport or handling of Hazardous Substances.
"ENVIRONMENTAL PERMITS" shall have the meaning ascribed to it
in Section 4.14(a).
"ERISA" shall mean the Employee Retirement Income Security Act
of 1974, as amended.
"EXCHANGE ACT" shall mean the Securities Exchange Act of 1934,
as amended.
"EXCHANGE AGENT" shall have the meaning ascribed to it in
Section 3.2(a).
"EXCHANGE FUND" shall have the meaning ascribed to it in
Section 3.2(a).
"FILED COMPANY SEC REPORTS" shall have the meaning ascribed to
it in Section 4.6(a).
"FILED LASER SEC REPORTS" shall have the meaning ascribed to
it in Section 5.6(a).
"GAAP" shall mean United States generally accepted accounting
principles and practices in effect from time to time, consistently applied.
"GOVERNMENTAL ENTITY" shall mean any court, arbitral tribunal,
administrative agency or commission or other governmental or regulatory
authority or agency.
"HAZARDOUS SUBSTANCE" shall mean all substances defined as
Oils, Pollutants or Contaminants in the National Oil and Hazardous Substances
Pollution Contingency Plan, 40 C.F.R. ss. 300.5, or defined as such by, or
regulated as such under, any Environmental Law, including any radon, asbestos
and oil and petroleum products, by-products and fractions.
"HOLDINGS" shall have the meaning ascribed to it in the
Recitals.
"HOLDINGS DISCLOSURE SCHEDULE" shall mean the Disclosure
Schedule being delivered by Holdings concurrently with the execution of the
Agreement and Plan of Merger relating to the Holdings Merger.
"HOLDINGS EFFECTIVE TIME" shall mean the date and time on
which the Holdings Merger is effected.
"HOLDINGS MERGER" shall have the meaning ascribed to it in the
Recitals.
"HSR ACT" shall mean the Hart-Scott-Rodino Antitrust
Improvements Act of 1976.
"INFORMATION STATEMENT" shall have the meaning ascribed to it
in Section 4.9.
"INDEMNIFIED PERSON" shall have the meaning ascribed to it in
Section 7.8(a).
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<PAGE>
"INTELLECTUAL PROPERTY" shall mean all domestic and foreign
patents, patent applications, written invention disclosures to be filed or
awaiting filing determinations, trademark and service mark applications,
registered trademarks, registered service marks, registered copyrights,
trademarks, service marks and trade names.
"LASER BALANCE SHEET DATE" shall have the meaning ascribed to
it in Section 5.6(c).
"LASER COMMON STOCK" shall mean the common stock, par value
$.01 per share, of Laser.
"LASER LICENSES" shall have the meaning ascribed to it in
Section 5.11.
"LASER MATERIAL ADVERSE EFFECT" shall have the meaning
ascribed to it in Section 5.1.
"LASER PREFERRED STOCK" shall mean the preferred stock, par
value $.01 per share, of Laser.
"LASER SEC REPORTS" shall have the meaning ascribed to it in
Section 5.6(a).
"LASER SHARES" shall mean the shares of Laser Common Stock to
be issued in the Company Merger.
"LASER STOCK OPTION PLANS" shall have the meaning ascribed to
it in Section 5.2.
"LASER STOCK OPTIONS" shall have the meaning ascribed to it in
Section 5.2.
"LAWS" shall mean any federal, state, local or foreign law,
statute, ordinance, rule, regulation, order, judgment or decree, administrative
order or decree, administrative or judicial decision, and any other executive or
legislative proclamation.
"LIENS" shall mean all pledges, claims, liens, charges,
encumbrances and security interests of any kind or nature whatsoever.
"LYONS" shall mean the Liquid Yield Option(TM) Notes due 2013
of Worldwide.
"MERGER SUB COMMON STOCK" shall mean the common stock, par
value $.01 per share, of Merger Sub.
"MORGAN STANLEY" shall mean Morgan Stanley & Co. Incorporated,
Laser's financial advisor.
"NYSE" shall mean the New York Stock Exchange, Inc.
"PBGC" shall mean the Pension Benefit Guaranty Corporation.
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"PENSION PLAN" shall have the meaning ascribed to it in
Section 4.13(a).
"PER SHARE MERGER CONSIDERATION" shall have the meaning
ascribed to it in Section 3.1(a)(i).
"PERSON" shall mean an individual, a corporation, a
partnership, an association, a trust or other entity or organization.
"PLANS" shall have the meaning ascribed to it in Section
7.7(e).
"PROPERTIES" shall have the meaning ascribed to it in Section
4.14(c).
"REGISTRATION STATEMENT" shall have the meaning ascribed to it
in Section 4.9.
"RELEASE" shall mean any release, spill, emission, discharge,
leaking, pumping, injection, deposit, disposal, dispersal, leaching or migration
into the indoor or outdoor environment (including, without limitation, ambient
air, surface water, groundwater and surface or subsurface strata) or into or out
of any property, including the movement of Hazardous Materials through or in the
air, soil, surface water, groundwater or property.
"SCHEDULE 13E-3" shall have the meaning ascribed to it in
Section 4.9.
"SECTION 14(F) NOTICE" shall have the meaning ascribed to it
in Section 4.9.
"SECURITIES ACT" shall mean the Securities Act of 1933, as
amended.
"SUBSIDIARY" shall mean, with respect to any party, any
corporation or other organization, whether incorporated or unincorporated, of
which (i) such party or any other subsidiary of such party is a general partner
or (ii) at least 50% of the securities or other interests having by their terms
ordinary voting power to elect a majority of the Board of Directors or others
performing similar functions with respect to such corporation or other
organization or at least 50% of the value of the outstanding equity is directly
or indirectly owned or controlled by such party or by any one or more of its
subsidiaries, or by such party and one or more of its subsidiaries.
"SURVIVING CORPORATION" shall have the meaning ascribed to it
in Section 2.1.
"TAX" (and, with correlative meaning, "TAXES" and "TAXABLE")
shall mean (i) any federal, state, local or foreign net income, gross income,
receipts, windfall profit, severance, property, production, sales, use, license,
excise, franchise, employment, payroll, withholding, alternative or add-on
minimum, ad valorem, transfer, stamp, or environmental tax, or any other tax,
custom, duty, governmental fee or other like assessment or charge of any kind
whatsoever, together with any interest or penalty, addition to tax or additional
amount imposed by any governmental authority; and (ii) any liability of Laser or
any Laser subsidiary or the Company or any of its subsidiaries, as applicable,
for the payment of amounts with respect to payments of a type described in
clause (i) as a result of being a member of an affiliated, consolidated,
combined or unitary group, or as a result of any obligation of Laser or any
Laser subsidiary or the Company
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or any of its subsidiaries, as the case may be, under any arrangement to share
liability for taxes or indemnify any other entity or person for taxes.
"TAX RETURN" shall mean any return, report or statement
required to be filed with respect to any Tax (including any attachments
thereto), including, without limitation, any information return, claim for
refund, amended return or declaration of estimated Tax.
"WELFARE PLAN" shall have the meaning ascribed to it in
Section 4.13(a).
"WORLDWIDE" shall mean Coleman Worldwide Corporation, a
Delaware corporation and a wholly owned subsidiary of Holdings.
ARTICLE II
THE COMPANY MERGER
Section 2.1 THE COMPANY MERGER. Upon the terms and subject to
the conditions set forth herein, and in accordance with the DGCL, at the Company
Effective Time, Merger Sub shall be merged with and into the Company. Following
the Company Effective Time, the Company shall continue as the surviving
corporation (the "SURVIVING CORPORATION"), and the separate corporate existence
of Merger Sub shall cease. The Company Merger shall have the effects set forth
in Section 259 of the DGCL.
Section 2.2 CLOSING. The closing of the Company Merger (the
"CLOSING") will take place at 10:00 a.m. on a date to be specified by the
parties (the "CLOSING DATE"), which shall be no later than the third NYSE
trading day after satisfaction or waiver of the conditions set forth in Section
8.1, at the offices of Skadden, Arps, Slate, Meagher & Flom LLP, 919 Third
Avenue, New York, New York 10022, unless another time, date or place is agreed
to in writing by the parties hereto.
Section 2.3 COMPANY EFFECTIVE TIME OF THE COMPANY MERGER. The
Company Merger shall become effective on the date and at the time at which a
properly executed certificate of merger (the "CERTIFICATE OF MERGER") is duly
filed with the Secretary of State of the State of Delaware. The Certificate of
Merger shall be filed as soon as practicable on or after the Closing Date. When
used in this Agreement, the term "COMPANY EFFECTIVE TIME" shall mean the date
and time on which the Certificate of Merger is so filed.
Section 2.4 CERTIFICATE OF INCORPORATION. From and after the
Company Effective Time, the certificate of incorporation of the Company as in
effect at the Company Effective Time (the "CERTIFICATE OF INCORPORATION") shall
be the certificate of incorporation of the Surviving Corporation until amended
as provided by Law and the Certificate of Incorporation.
Section 2.5 BY-LAWS. From and after the Company Effective
Time, the by-laws of Merger Sub as in effect at the Company Effective Time shall
be the by-laws of the Surviving Corporation until amended as provided by the
DGCL, the Certificate of Incorporation and the terms thereof.
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Section 2.6 DIRECTORS. The directors of Merger Sub at the
Company Effective Time shall be the initial directors of the Surviving
Corporation and shall hold office from the Company Effective Time until their
respective successors are duly elected or appointed and qualify in the manner
provided in the Certificate of Incorporation and by-laws of the Surviving
Corporation or as otherwise provided by the DGCL (it being understood that the
directors of the Company shall resign upon the later of (i) the Holdings
Effective Time and (ii) the eleventh (11th) day following the date on which the
Section 14(f) Notice shall have been filed with the SEC and mailed to all
stockholders of record of the Company in accordance herewith).
Section 2.7 OFFICERS. The officers of the Company at the
Company Effective Time shall be the initial officers of the Surviving
Corporation and shall hold office from the Company Effective Time until their
respective successors are duly elected or appointed and qualifies in the manner
provided in the Certificate of Incorporation and by-laws of the Surviving
Corporation, or as otherwise provided by Law.
ARTICLE III
CONVERSION OF SHARES
Section 3.1 EFFECT ON CAPITAL STOCK. At the Company Effective
Time, by virtue of the Company Merger and without any action on the part of any
holder thereof:
(a) CONVERSION OF COMPANY COMMON STOCK.
(i) Subject to Section 3.1(b) hereof, each share of
Company Common Stock issued and outstanding immediately prior to the
Company Effective Time (other than Dissenting Shares and Company Common
Stock to be cancelled in accordance with Section 3.1(c) hereof) shall
be converted into the right to receive (A) 0.5677 (the "CONVERSION
NUMBER") of a fully paid and nonassessable share of Laser Common Stock
and (B) $6.44 in cash, without interest thereon (the consideration
referred to in this Section 3.1(a) being sometimes referred to herein
as the "PER SHARE MERGER CONSIDERATION").
(ii) If, prior to the Company Effective Time, Laser
shall (A) pay a dividend in, subdivide, combine into a smaller number
of shares or issue by reclassification of its shares, any shares of
Laser Common Stock, the Conversion Number shall be adjusted
appropriately or (B) pay a dividend (other than regular quarterly
dividend payments, consistent with past practice), whether in cash or
property, the amount of the cash portion of the Per Share Merger
Consideration shall be appropriately adjusted such that the amount of
cash to be received with respect to each share of Company Common Stock,
or if a dividend shall have been paid in other property, cash and other
property to be received with respect to each share of Company Common
Stock, shall be equal to that which would have been received in the
aggregate with respect to each share of Company Common Stock (on a per
share equivalent basis) had the dividend been paid following the
Company Effective Time at a time when the Laser Shares to be
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issued pursuant hereto had been issued to the holders of the shares of
Company Common Stock.
(iii) Each of the shares of Company Common Stock
converted in accordance with paragraph (i) of this Section 3.1(a) shall
no longer be outstanding and shall automatically be cancelled and
retired and shall cease to exist, and each holder of a certificate
representing any such shares of Company Common Stock shall cease to
have any rights with respect thereto, except the right to receive the
Per Share Merger Consideration and cash in lieu of any fractional share
of Laser Common Stock (determined in accordance with Section 3.4
hereof), to be issued or paid in consideration therefor upon the
surrender of such certificate in accordance with Section 3.2 hereof,
without interest.
(b) COMPANY COMMON STOCK HELD BY WORLDWIDE OR HOLDINGS TO
REMAIN OUTSTANDING. Notwithstanding Section 3.1(a) hereof, at the Company
Effective Time all shares of Company Common Stock held by Worldwide or Holdings
shall remain outstanding and unchanged as a result of the Company Merger.
(c) CANCELLATION OF TREASURY STOCK AND COMPANY COMMON STOCK
HELD BY LASER AND COMPANY SUBSIDIARIES. Each share of Company Common Stock, if
any, held in the treasury of the Company, by any subsidiary of the Company, by
Laser or by any subsidiary of Laser (other than Worldwide or Holdings)
immediately prior to the Company Effective Time shall be cancelled and retired
and cease to exist.
(d) CANCELLATION OF MERGER SUB COMMON STOCK. Each share of
Merger Sub Common Stock issued and outstanding immediately prior to the Company
Effective Time shall be cancelled and retired and cease to exist.
Section 3.2 EXCHANGE OF CERTIFICATES REPRESENTING SHARES.
(a) As of the Company Effective Time, Laser shall deposit, or
shall cause to be deposited, with an exchange agent selected by Laser and
reasonably satisfactory to the Company (the "EXCHANGE AGENT"), for the benefit
of the holders of shares of Company Common Stock, for exchange in accordance
with this Article III: (i) certificates representing the number of Laser Shares
issuable in the Company Merger to be issued in respect of all shares of Company
Common Stock outstanding immediately prior to the Company Effective Time and
which are to be exchanged pursuant to the Company Merger (exclusive of shares to
remain outstanding pursuant to Section 3.1(b) hereof or to be canceled pursuant
to Section 3.1(c) hereof); and (ii) cash in an amount sufficient to make any
cash payment due under Sections 3.1(a)(i)(B) and 3.4 hereof (such cash and
certificates for Laser Shares being hereinafter referred to collectively as the
"EXCHANGE FUND").
(b) As soon as reasonably practicable after the Company
Effective Time, Laser shall cause the Exchange Agent to mail (or deliver to its
principal office) to each holder of record of a certificate or certificates
representing shares of Company Common Stock (i) a letter of transmittal which
shall specify that delivery shall be effected, and risk of loss and title to the
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certificates for shares of Company Common Stock shall pass, only upon delivery
of the certificates for such shares of Company Common Stock to the Exchange
Agent and which shall be in such form and have such other provisions, including
appropriate provisions with respect to back-up withholding, as Laser may
reasonably specify, and (ii) instructions for use in effecting the surrender of
the certificates for shares of Company Common Stock. Upon surrender of a
certificate for shares of Company Common Stock for cancellation to the Exchange
Agent, together with such letter of transmittal, duly executed and completed in
accordance with the instructions thereto, the holder thereof shall be entitled
to receive in exchange therefor that portion of the Exchange Fund which such
holder has the right to receive pursuant to the provisions of this Article III,
after giving effect to any required withholding Tax, and the certificate for
shares of Company Common Stock so surrendered shall forthwith be cancelled. No
interest will be paid or accrued on the cash portion of the Exchange Fund. In
the event of any transfer of ownership of shares of Company Common Stock which
has not been registered in the transfer records of the Company, certificates
representing the proper number of shares of Laser Common Stock, if any, and a
check in an amount equal to the proper amount of the cash component, if any, of
the Exchange Fund, will be issued to the transferee of the certificate
representing the transferred shares of Company Common Stock, only upon
presentation to the Exchange Agent of a certificate or certificates representing
such shares of Company Common Stock, accompanied by all documents required to
evidence and effect the prior transfer thereof and to evidence that any
applicable stock transfer Taxes associated with such transfer were paid.
Section 3.3 DIVIDENDS; TRANSFER TAXES. No dividends that are
declared on Laser Common Stock will be paid to persons entitled to receive
certificates representing shares of Laser Common Stock until such persons
surrender their certificates representing shares of Company Common Stock. Upon
such surrender, there shall be paid to the person in whose name the certificates
representing such shares of Laser Common Stock shall be issued, any dividends
which shall have become payable with respect to such shares of Laser Common
Stock between the Company Effective Time and the time of such surrender. In no
event shall the person entitled to receive such dividends be entitled to receive
interest on such dividends. If any certificates for any shares of Laser Common
Stock are to be issued in a name other than that in which the certificate
representing shares of Company Common Stock surrendered in exchange therefor is
registered, it shall be a condition of such exchange that the person requesting
such exchange shall pay to the Exchange Agent any transfer or other Taxes
required by reason of the issuance of certificates for such shares of Laser
Common Stock in a name other than that of the registered holder of the
certificate surrendered or shall establish to the satisfaction of the Exchange
Agent that such Tax has been paid or is not applicable. Notwithstanding the
foregoing, (i) neither the Exchange Agent nor any party hereto shall be liable
to a holder of shares of Company Common Stock for any shares of Laser Common
Stock or dividends thereon, any cash payments to be made pursuant to Section
3.1(a)(i)(B) hereof or, in accordance with Section 3.4 hereof, any cash in lieu
of fractional share interests, in each case, delivered to a public official
pursuant to applicable escheat Laws and (ii) any shares of Laser Common Stock
held by the Exchange Agent prior to surrender of certificates representing
shares of Company Common Stock shall not be deemed issued.
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Section 3.4 NO FRACTIONAL SHARES. No certificates or scrip
representing fractional shares of Laser Common Stock shall be issued upon the
surrender for exchange of certificates representing shares of Company Common
Stock pursuant to this Article III, and no dividend, stock split or other change
in the capital structure of Laser shall relate to any fractional security, and
such fractional interests shall not entitle the owner thereof to vote or to any
rights of a security holder. In lieu of any such fractional shares of Laser
Common Stock, each holder of shares of Company Common Stock who would otherwise
have been entitled to a fraction of a share of Laser Common Stock upon surrender
of stock certificates for exchange pursuant to this Article III will be paid
cash upon such surrender in an amount equal to the product of such fraction
multiplied by the closing sale price of one share of Laser Common Stock on the
NYSE on the day of the Company Effective Time, or, if shares of Laser Common
Stock are not so traded on such day, the closing sale price of one such share on
the next preceding day on which such share was traded on the NYSE. For purposes
of this Section 3.4, shares of Company Common Stock of any holder represented by
two or more certificates shall be aggregated, and in no event shall any holder
be paid an amount of cash pursuant to this Section 3.4 in respect of more than
one share of Laser Common Stock.
Section 3.5 TERMINATION OF EXCHANGE FUND. Any portion of the
Exchange Fund which remains undistributed to the holders of the Company Common
Stock for six (6) months after the Company Effective Time shall be delivered to
Laser, upon demand, and any holders of the Company Common Stock who have not
theretofore complied with this Article III shall thereafter look only to Laser
for payment of their claim for the shares of Laser Common Stock and cash and
dividends or other distributions, if any, pursuant to this Article III.
Section 3.6 INVESTMENT OF EXCHANGE FUND. Without prejudice to
the rights of any holder of Company Common Stock to receive the Per Share Merger
Consideration, the Exchange Agent shall invest any cash included in the Exchange
Fund, as directed by Laser, on a daily basis. Any interest and other income
resulting from such investments shall be paid to Laser.
Section 3.7 CLOSING OF COMPANY TRANSFER BOOKS. At the Company
Effective Time, the stock transfer books of the Company shall be closed and no
transfer of shares of Company Common Stock shall thereafter be made. If, after
the Company Effective Time, certificates representing shares of Company Common
Stock are presented to the Surviving Corporation, they shall be cancelled and
exchanged for the Per Share Merger Consideration applicable thereto.
Section 3.8 DISSENTING SHARES. Each outstanding share of
Company Common Stock as to which a written demand for appraisal is filed in
accordance with Section 262 of the DGCL and not withdrawn, and with respect to
which a consent is not given in favor of the Company Merger shall not be
converted into or represent a right to receive the Per Share Merger
Consideration unless and until the holder thereof shall have failed to perfect,
or shall have effectively withdrawn or lost, the right to appraisal of and
payment for each such share of Company Common Stock under Section 262, at which
time each such share shall be converted into the right to receive the Per Share
Merger Consideration. All such shares of Company
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Common Stock as to which such a written demand for appraisal is so filed and not
withdrawn and with respect to which a consent is not given in favor of the
Company Merger, except any such shares of Company Common Stock the holder of
which, prior to the Company Effective Time, shall have effectively withdrawn or
lost such right to appraisal and payment for such shares of Company Common Stock
under Section 262, are herein referred to as "DISSENTING SHARES." The Company
shall give Laser prompt notice upon receipt by the Company of any written
demands for appraisal rights, withdrawal of such demands, and any other written
communications delivered to the Company pursuant to Section 262, and the Company
shall give Laser the opportunity, to the extent permitted by Law, to participate
in all negotiations and proceedings with respect to such demands. Except with
the prior written consent of Laser, the Company shall not voluntarily make any
payment with respect to any demands for appraisal rights and shall not settle or
offer to settle any such demands. Each holder of Dissenting Shares who becomes
entitled, pursuant to the provisions of Section 262, to payment for such shares
of Dissenting Shares under the provisions of Section 262 shall receive payment
therefor from the Surviving Corporation and such shares of Company Common Stock
shall be cancelled thereafter.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
Except as otherwise disclosed to Laser in a schedule delivered
to Laser prior to the execution hereof (which schedule shall contain appropriate
references to identify the representations and warranties herein to which the
information in such schedule relates) (the "COMPANY DISCLOSURE SCHEDULE"), the
Company represents and warrants to Laser and Merger Sub as follows:
Section 4.1 ORGANIZATION. The Company is a corporation duly
organized, validly existing and in good standing under the Laws of the State of
Delaware and has the corporate power to carry on its business as it is now being
conducted. The Company is duly qualified as a foreign corporation to do
business, and is in good standing, in each jurisdiction where the character of
its properties owned or held under lease or the nature of its activities makes
such qualification necessary, except where the failure to be so qualified would
not individually or in the aggregate have a material adverse effect on the
business, results of operations or financial condition of the Company and its
subsidiaries, taken as a whole (a "COMPANY MATERIAL ADVERSE EFFECT").
Section 4.2 CAPITALIZATION. The authorized capital stock of
the Company consists of 80,000,000 shares of Company Common Stock and 20,000,000
shares of Company Preferred Stock. As of February 23, 1998, (i) 53,488,170
shares of Company Common Stock were issued and outstanding; (ii) 3,282,930
shares of Company Common Stock were issuable upon exercise of Employee Stock
Options to acquire 3,282,930 shares of Company Common Stock outstanding under
the Company Stock Option Plans (of which options to acquire 2,399,380 were
vested); and (iii) no shares of Company Preferred Stock were issued or
outstanding. As of such date, no shares of Company Common Stock were held as
treasury shares. All of the issued and outstanding shares of Company Common
Stock are validly issued,
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fully paid and nonassessable and free of preemptive rights. As of the date
hereof, except as set forth above, there are no shares of capital stock of the
Company issued or outstanding or any options, warrants, subscriptions, calls,
rights, convertible securities or other agreements or commitments obligating the
Company to issue, transfer, sell, redeem, repurchase or otherwise acquire any
shares of its capital stock or securities. There are no notes, bonds, debentures
or other indebtedness of the Company having the right to vote (or convertible
into or exchangeable for securities having the right to vote) on any matters
upon which stockholders of the Company may vote.
Section 4.3 SUBSIDIARIES. All the outstanding shares of
capital stock of, or other ownership interests in, each of the Company's
subsidiaries have been validly issued and are fully paid and nonassessable and
such shares (other than directors' qualifying shares and similar interests) are
owned directly or indirectly by the Company, free and clear of all Liens. Except
for the capital stock of the Company's subsidiaries and except as set forth in
Section 4.3 of the Company Disclosure Schedule, the Company does not own,
directly or indirectly, any capital stock or other ownership interest in any
corporation, partnership, limited liability company, joint venture or other
entity. Each of the Company's subsidiaries that is a corporation is a
corporation duly organized, validly existing and in good standing under the Laws
of its jurisdiction of incorporation. Each of the Company's subsidiaries that is
a partnership or a limited liability company is duly formed and validly existing
under the Laws of its jurisdiction of formation. Each of the Company's
subsidiaries has the corporate power or the partnership power, as the case may
be, to carry on its business as it is now being conducted or presently proposed
to be conducted. Each the Company's subsidiaries that is a corporation is duly
qualified as a foreign corporation to do business, and is in good standing, in
each jurisdiction where the character of its properties owned or held under
lease or the nature of its activities makes such qualification necessary, except
where the failure to be so qualified would not individually or in the aggregate
have a Company Material Adverse Effect. Each of the Company's subsidiaries that
is a partnership is duly qualified as a foreign partnership authorized to do
business, and is in good standing, in each jurisdiction where the character of
its properties owned or held under lease or the nature of its activities makes
such qualification necessary, except where the failure to be so qualified would
not individually or in the aggregate have a Company Material Adverse Effect.
Except as set forth in Section 4.2 hereof, there are no outstanding options,
warrants, subscriptions, calls, rights, convertible securities or other
agreements or commitments obligating the Company or any of its subsidiaries to
issue, transfer or sell any securities of any Company subsidiary. There are no
voting, stockholder or other agreements or understandings to which the Company
or any of the Company's subsidiaries is a party or is bound with respect to the
voting of the capital stock of the Company or any of the Company's subsidiaries.
Section 4.4 AUTHORITY RELATIVE TO THIS AGREEMENT. The Company
has the corporate power and authority to enter into this Agreement and to
perform its obligations hereunder and to consummate the transactions
contemplated hereby. The execution and delivery of this Agreement by the Company
and the consummation by the Company of the transactions contemplated hereby have
been duly authorized by the Board of Directors of the Company, and no other
corporate actions or proceedings on the part of the Company (including any
action on the part of its stockholders) are necessary to authorize this
Agreement or the transactions
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contemplated hereby. This Agreement has been duly executed and delivered by the
Company and, assuming the due authorization and valid execution and delivery by
Laser and Merger Sub, constitutes a valid and binding agreement of the Company,
enforceable against the Company in accordance with its terms, subject to
bankruptcy, insolvency, reorganization, moratorium or similar Laws now or
hereafter in effect relating to creditors' rights generally and to general
principles of equity.
Section 4.5 CONSENTS AND APPROVALS; NO VIOLATIONS. Except for
applicable requirements of the HSR Act, the Securities Act, the Exchange Act,
Competition Laws and state securities or blue sky Laws, and the filing and
recordation of the Certificate of Merger as required by the DGCL, no filing
with, and no permit, authorization, consent or approval of, any governmental or
regulatory authority is necessary for the consummation by the Company of the
transactions contemplated by this Agreement, except for such filings, permits,
authorizations, consents or approvals the failure of which to be made or
obtained would not individually or in the aggregate have a Company Material
Adverse Effect. Except as set forth in Section 4.5 of the Company Disclosure
Schedule, neither the execution and delivery of this Agreement by the Company,
nor the consummation by the Company of the transactions contemplated hereby, nor
compliance by the Company with any of the provisions hereof, will (a) conflict
with or result in any breach of any provisions of the certificate of
incorporation or by-laws of the Company or the certificate of incorporation or
by-laws of any of the Company's subsidiaries; (b) result in a violation or
breach of, or constitute (with or without due notice or lapse of time or both) a
default (or give rise to any right of termination, cancellation or acceleration)
under, any of the terms, conditions or provisions of any material (as defined
for purposes of Form 10-K) Contract to which the Company or any of the Company's
subsidiaries is a party or by which any of them or any of their properties or
assets may be bound; or (c) violate any order, writ, injunction, decree,
statute, rule or regulation applicable to the Company, any of the Company's
subsidiaries or any of their properties or assets, except in the case of clauses
(b) and (c) for violations, breaches or defaults which would not individually or
in the aggregate have a Company Material Adverse Effect.
Section 4.6 REPORTS AND FINANCIAL STATEMENTS.
(a) The Company has filed all reports, forms, registrations,
schedules, statements and other documents required to be filed by it with the
SEC since January 1, 1997 (the "COMPANY SEC REPORTS"). As of their respective
dates, the Company SEC Reports complied in all material respects with the
requirements of the Securities Act or the Exchange Act, as the case may be, and
the applicable rules and regulations promulgated thereunder. Except to the
extent that information contained in any Company SEC Report has been amended,
revised or superseded by a later Company SEC Report filed and publicly available
prior to the date of this Agreement (as amended, revised or superseded by a
later Company SEC Report filed and publicly available prior to the date of this
Agreement, the "FILED COMPANY SEC REPORTS"), none of the Filed Company SEC
Reports, when filed, contained any untrue statement of a material fact or
omitted to state any material fact required to be stated therein or necessary to
make the statements therein, in light of the circumstances under which they were
made, not misleading.
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(b) The consolidated financial statements of the Company
included in the Filed Company SEC Reports complied as to form in all material
respects with the applicable accounting requirements and the published rules and
regulations of the SEC with respect thereto have been prepared in accordance
with GAAP (except, in the case of the unaudited statements, as permitted by Form
10-Q of the SEC) applied on a consistent basis during the periods involved
(except as may be indicated therein or in the notes thereto) and fairly present
the consolidated financial position of the Company and its consolidated
subsidiaries as of the dates thereof and the consolidated results of their
operations and their consolidated cash flows for the periods then ended
(subject, in the case of the unaudited statements, to normal year-end audit
adjustments and to any other adjustments described therein).
(c) Except as set forth in the Filed Company SEC Reports and
except for liabilities and obligations incurred in the ordinary course of
business consistent with past practice since the date of the most recent
consolidated balance sheet included in the Filed Company SEC Reports (the
"COMPANY BALANCE SHEET DATE"), neither the Company nor any of its subsidiaries
has any material liabilities or obligations of any nature (whether accrued,
absolute, contingent or otherwise) required by GAAP to be recognized or
disclosed on a consolidated balance sheet of the Company and its consolidated
subsidiaries or in the notes thereto.
Section 4.7 ABSENCE OF CERTAIN CHANGES OR EVENTS. Except as
set forth in the Filed Company SEC Reports, since the Company Balance Sheet
Date, the business of the Company and its subsidiaries has been conducted only
in the ordinary course of business consistent with past practice, and there has
not been any event, change or development which individually or in the aggregate
has had or would reasonably be expected to have a Company Material Adverse
Effect or would impair or delay the ability of the Company to consummate the
transactions contemplated by, or to satisfy its obligations under, this
Agreement. Except as set forth in Section 4.7 of the Company Disclosure
Schedule, during the period from the Company Balance Sheet Date through the date
of this Agreement, neither the Company nor any of its subsidiaries has:
(i) declared, set aside or paid any distributions
(whether in cash, stock or property) with respect to its capital stock
or (y) split, combined, or reclassified any of its capital stock or
issued or authorized the issuance of any other securities in respect
of, in lieu of or in substitution for shares of its capital stock
(other than dividends or stock issuances by a wholly owned subsidiary
of the Company to the Company or another wholly owned subsidiary of the
Company);
(ii) issued, delivered, sold, pledged or otherwise
encumbered any shares of its capital stock, any other voting securities
or any securities convertible into, or any options, warrants or rights
to acquire, any such shares, voting securities or convertible
securities (other than the issuance of Company Common Stock upon the
exercise of Employee Stock Options in accordance with their terms and
issuances by a wholly owned subsidiary of the Company to the Company or
another wholly owned subsidiary of the Company);
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(iii) in the case of the Company, amended its
certificate of incorporation or by-laws;
(iv) acquired or agreed to acquire by merging or
consolidating with, or in purchasing a substantial portion of the
assets of, or in any other manner, any business or any corporation,
limited liability company, partnership, association or other business
organization or division thereof material to the Company;
(v) other than in the ordinary course of business,
(x) incurred any indebtedness or (y) made any loans, advances or
capital contributions to, or investments in, any other person (other
than the Company or a subsidiary of the Company), in any case in an
amount material to the Company;
(vi) other than in the ordinary course of business
or consistent with the Company's capital budgets heretofore disclosed
to Laser, made or agreed to make any capital expenditure or capital
expenditures;
(vii) other than in the ordinary course of business,
made any Tax election or settled or compromised any material income Tax
liability;
(viii) except in the ordinary course of business or
except as would not reasonably be expected to have a Company Material
Adverse Effect, entered into any Contracts or amended or terminated any
material Contract or agreement to which the Company or any of its
subsidiaries is a party or waived, released or assigned any material
rights or claims thereunder;
(ix) except as required by Law or contractual
obligation or in the ordinary course of business consistent with past
practice, (a) increased the compensation of any of its employees, (b)
entered into any Contract with any of its employees regarding his or
her employment, compensation or benefits, or (c) adopted any plan,
arrangement or policy which would become a Company Plan or amended any
Company Plan to the extent such adoption or amendment would create or
increase any material liability or obligation on the part of the
Company or its subsidiaries;
(x) entered into any transaction or Contract with,
or (except pursuant to the Affiliate Agreements) made any payment to,
any Affiliate of the Company (other than to the Company's subsidiaries
or its or their officers or directors in the ordinary course of
business consistent with past practice); or
(xi) agreed to do any of the foregoing.
Section 4.8 LITIGATION. Except as disclosed in the Filed
Company SEC Reports and as set forth in Section 4.8 of the Company Disclosure
Schedule, as of the date hereof, to the Company's knowledge there is no suit,
action, proceeding or investigation pending or, to the knowledge of the Company,
threatened against or affecting the Company or any of its subsidiaries that
individually or in the aggregate would reasonably be expected to (i) have a
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Company Material Adverse Effect (taking into account any reserve therefor as of
the Company Balance Sheet Date), or (ii) delay in any material respect or
prevent the consummation of any of the transactions contemplated by this
Agreement, nor is there any judgment, order, decree, statute, Law, ordinance,
rule or regulation of any Governmental Entity or arbitrator outstanding against
the Company or any of its subsidiaries having, or which would reasonably be
expected to have, any effect referred to in clause (i) or (ii) above.
Section 4.9 INFORMATION IN DISCLOSURE DOCUMENTS AND
REGISTRATION STATEMENT. None of the information to be supplied by the Company
for inclusion or incorporation by reference in the information statement to be
distributed in connection with the Company Merger (as amended or supplemented,
the "INFORMATION STATEMENT") or the related filing on Schedule 13E-3 (as amended
or supplemented, the "SCHEDULE 13E-3") or the notice to be provided to the
Company's stockholders pursuant to Section 14(f) of the Exchange Act (as amended
or supplemented, the "SECTION 14(F) NOTICE") or the registration statement on
Form S-4 under the Securities Act for the purpose of registering the shares of
Laser Common Stock to be issued in the Company Merger (as amended or
supplemented, the "REGISTRATION STATEMENT") will, in the case of the
Registration Statement, at the time it becomes effective and at the Company
Effective Time, contain any untrue statement of a material fact or omit to state
any material fact required to be stated therein or necessary to make the
statements therein not misleading, or, in the case of the Information Statement,
the Schedule 13E-3, the Section 14(f) Notice, at the time of the mailing thereof
and, in the case of the Information Statement, the Schedule 13E-3 at the Company
Effective Time, contain any untrue statement of a material fact or omit to state
any material fact required to be stated therein or necessary in order to make
the statements therein, in light of the circumstances under which they are made,
not misleading. The Information Statement, the Schedule 13E-3 and the Section
14(f) Notice will comply as to form in all material respects with the provisions
of the Exchange Act, and the rules and regulations promulgated thereunder.
Section 4.10 TAXES. Except as would not have a Company
Material Adverse Effect or as set forth in Section 4.10 of the Company
Disclosure Schedule:
(a) Each of the Company and each of its subsidiaries has (i)
filed (or there has been filed on its behalf) with the appropriate Governmental
Entities all Tax Returns required to be filed by it, and all such Tax Returns
are true, correct and complete and (ii) has paid all Taxes due by it;
(b) there is no action, suit, investigation, audit, claim or
assessment pending or proposed in writing or threatened in writing with respect
to Taxes of the Company or any of its subsidiaries and, to the best of the
Company's knowledge, no basis exists therefor;
(c) there are no Liens for Taxes upon the assets of the
Company or any of its subsidiaries except Liens relating to current Taxes not
yet due;
(d) the United States federal income Tax Returns which
include the Company and the Company's subsidiaries have been examined, and such
examinations have been completed, by the Internal Revenue Service (or the
applicable statutes of limitation for the
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assessment of federal income Taxes for such periods have expired) for all
periods through and including 1985.
Section 4.11 COMPLIANCE WITH APPLICABLE LAW. Except as
disclosed in the Filed Company SEC Reports, the Company and its subsidiaries
have received such certificates, permits, licenses, franchises, consents,
approvals, orders, authorizations and clearances from appropriate Governmental
Entities (the "COMPANY LICENSES") as are necessary to own or lease and operate
their respective properties and to conduct their respective businesses
substantially in the manner described in the Company SEC Reports and as
currently owned or leased and conducted, and all such Company Licenses are valid
and in full force and effect, except for any such certificates, permits,
licenses, franchises, consents, approvals, orders, authorizations and clearances
which the failure to have or to be in full force and effect would not reasonably
be expected to have, individually or in the aggregate, a Company Material
Adverse Effect. Except as disclosed in Filed Company SEC Reports, the Company
and the Company's subsidiaries are in compliance with their respective
obligations under the Company Licenses, with only such exceptions as,
individually or in the aggregate, would not reasonably be expected to have a
Company Material Adverse Effect. Except as disclosed in the Filed Company SEC
Reports, the Company and its subsidiaries are in compliance with all judgments,
orders, decrees, statutes, Laws, ordinances, rules and regulations of any
Governmental Entity applicable to them, except for such noncompliance which
individually or in the aggregate would not have a Company Material Adverse
Effect.
Section 4.12 LABOR MATTERS. Except as disclosed in the Filed
Company SEC Reports, neither the Company nor any of the Company's subsidiaries
has any labor contracts, collective bargaining agreements or material employment
or consulting agreements with any persons employed by or otherwise performing
services primarily for the Company or any of the Company's subsidiaries (the
"COMPANY BUSINESS PERSONNEL") or any representative of any Company Business
Personnel. Except as set forth in the Filed Company SEC Reports, neither the
Company nor any of its subsidiaries has engaged in any unfair labor practice
with respect to Company Business Personnel, and there is no unfair labor
practice complaint pending against the Company or any of its subsidiaries with
respect to Company Business Personnel which, in either such case, would
reasonably be expected to have, individually or in the aggregate, a Company
Material Adverse Effect. Except as set forth in the Filed Company SEC Reports,
there is no material labor strike, dispute, slowdown or stoppage pending or, to
the knowledge of the Company, threatened against the Company or any of its
subsidiaries, and neither the Company nor any of its subsidiaries has
experienced any material primary work stoppage or other material labor
difficulty involving its employees during the last three (3) years.
Section 4.13 ERISA COMPLIANCE.
(a) The Company has delivered to Laser or will deliver to
Laser prior to the Company Effective Time each "employee pension benefit plan"
(as defined in Section 3(2) of ERISA) (a "PENSION PLAN"), each "employee welfare
benefit plan" (as defined in Section 3(1) of ERISA) (a "WELFARE PLAN"), each
material bonus, stock option, stock purchase, stock ownership, stock bonus,
restricted stock, deferred compensation plan or arrangement and each other
material
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employee fringe benefit plan or arrangement maintained, contributed to or
required to be maintained or contributed to by the Company or any of its
subsidiaries or any other person or entity that, together with the Company, is
or was treated as a single employer under Section 414(b), (c), (m) or (o) of the
Code (each, a "COMMONLY CONTROLLED ENTITY") which is currently in effect for the
benefit of any current or former directors, officers, employees or independent
contractors of the Company or any of its subsidiaries (collectively, the
"COMPANY PLANS"). The Company has delivered to Laser or will deliver to Laser
prior to the Company Effective Time true, complete and correct copies of (x) the
two most recent annual reports on Form 5500 filed with the Internal Revenue
Service with respect to each Company Plan (if any such report was required), (y)
the most recent summary plan description for each Company Plan for which such
summary plan description is required and (z) each currently effective trust
agreement, insurance or group annuity contract and each other material funding
or financing arrangement relating to any Company Plan.
(b) No Commonly Controlled Entity has incurred any liability
under Title IV of ERISA, other than for contributions not yet due to a defined
benefit pension plan subject to Title IV of ERISA and other than for the payment
of premiums to the PBGC not yet due, and no condition exists that presents a
material risk of incurring any such liability, which liability, to the extent
currently due, has not been fully paid as of the date hereof and would
individually or in the aggregate be reasonably likely to result in a Company
Material Adverse Effect.
(c) Except as set forth in Company SEC reports or in Section
4.13 of the Company Disclosure Schedule, neither the Company nor any of its
subsidiaries has any obligation to provide any welfare benefits to employees or
former employees following termination of employment except (i) for benefits the
cost of which is borne entirely by the employee or former employee, (ii) as
required under Section 4980 of the Code or other applicable law or (iii)
obligations to provide such benefits to Company employees employed in non-U.S.
jurisdictions.
(d) No Commonly Controlled Entity has engaged in a transaction
described in Section 4069 of ERISA that could subject the Company or any of its
subsidiaries or Laser to liability at any time after the date hereof, which
liability would be reasonably likely to result in a Company Material Adverse
Effect.
(e) No Commonly Controlled Entity has withdrawn from any
multiemployer plan where such withdrawal has resulted in any actual or potential
"withdrawal liability" (as defined in Section 4201 of ERISA) that has not been
fully paid, which liability would be reasonably likely to result in a Company
Material Adverse Effect.
(f) Except as set forth in Section 4.13 of the Company
Disclosure Schedule or as specifically provided in this Agreement, the
transactions contemplated by this Agreement will not, either alone or in
connection with another event, cause there to be paid or become payable any
additional benefits or any acceleration of the time of payment or vesting of any
benefits under any Company Plan or under any employment, severance, termination
or compensation agreement to which the Company is a party as of the Company
Effective Time.
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Section 4.14 ENVIRONMENTAL MATTERS.
(a) Except as disclosed in the Filed Company SEC Reports, the
Company and its subsidiaries are in compliance with all applicable Environmental
Laws, which compliance includes the possession of permits and governmental
authorizations required under applicable Environmental Laws ("ENVIRONMENTAL
PERMITS") and compliance with the terms and conditions thereof, except where
such non-compliance would not result in a Company Material Adverse Effect.
(b) Except as disclosed in the Filed Company SEC Reports,
there are no Environmental Claims pending or, to the knowledge of the Company,
threatened against the Company or any of its subsidiaries that would reasonably
be expected to result in a Company Material Adverse Effect.
(c) Except as disclosed in the Filed Company SEC Reports, the
properties presently or to the knowledge of the Company formerly owned, leased
or operated by the Company or its subsidiaries (including groundwater under the
properties) (the "PROPERTIES") do not contain any Hazardous Substance other than
as permitted under applicable Environmental Law; PROVIDED, HOWEVER, that with
respect to Properties formerly owned, leased or operated by the Company or its
subsidiaries, such representation is limited to the period prior to the
disposition of such Properties by the Company or its subsidiaries.
(d) Except as disclosed in the Filed Company SEC Reports, to
the knowledge of the Company, no Hazardous Substance has been disposed of or
transported from any of the Properties during the time any such Property was
owned, leased or operated by the Company or any of its subsidiaries, other than
as permitted under applicable Environmental Law and in effect at the time of
such disposal or transportation.
(e) Except as disclosed in the Filed Company SEC Reports, to
the knowledge of the Company, the Company and its subsidiaries have not become
obligated, whether by operation of Law or through contractual agreement, to
indemnify any other person or otherwise to assume liability for any claim
brought pursuant to any Environmental Law which could reasonably be expected to
have a Company Material Adverse Effect.
Section 4.15 INTELLECTUAL PROPERTY. The Company has
previously delivered to Laser a list, which, to the knowledge of the Company, is
true and correct as of the date hereof in all material respects, of all material
issued patents and registered trademarks of the Company. Except as set forth in
Section 4.15 of the Company Disclosure Schedule, the Company and its
subsidiaries own or have sufficient rights to use all material Intellectual
Property used in connection with the business of the Company and its
subsidiaries as currently conducted. As used in this Section 4.15, the term
"material," when applied to Intellectual Property, means that such Intellectual
Property is used in a significant manner to conduct the business of the Company
and its subsidiaries as it is currently conducted.
Section 4.16 CONTRACTS. Except as set forth in Section 4.16
of the Company Disclosure Schedule, neither the Company nor any of its
subsidiaries is a party to or bound by
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any material Contract, other than (i) the Affiliate Agreements listed in Section
4.10 of the Holdings Disclosure Schedule, (ii) any Contract filed or
incorporated by reference as an exhibit to any Filed Company SEC Report or (iii)
any Contract (other than the Affiliate Agreements listed in Section 4.10 of the
Holdings Disclosure Schedule) entered into in the ordinary course of business
consistent with past practice.
Section 4.17 OPINION OF FINANCIAL ADVISOR. The Board of
Directors of the Company has received the opinion of Credit Suisse First Boston,
dated the date hereof to the effect that the Per Share Merger Consideration is
fair to the holders of shares of Company Common Stock (other than Worldwide)
from a financial point of view.
Section 4.18 TAKEOVER STATUTE. The Board of Directors of the
Company has approved the Holdings Merger solely for the purpose of rendering
inapplicable, and such approval is sufficient to render inapplicable, to the
Company Merger and the other transactions contemplated by this Agreement the
provisions of Section 203 of the DGCL. To the best of the Company's knowledge,
no other state takeover statute or similar statute or regulation applies or
purports to apply to the Company Merger, this Agreement or any of the
transactions contemplated hereby, and no provision of the certificate of
incorporation or by-laws of the Company or certificates of incorporation or
by-laws (or comparable organizational documents) of any subsidiary of the
Company would, directly or indirectly, restrict or impair the ability of Laser
to vote, or otherwise to exercise the rights of a stockholder with respect to,
shares of capital stock of the Company or any of its subsidiaries that may be
acquired or controlled by Laser.
Section 4.19 BROKERS. No broker, investment banker or other
person, other than Credit Suisse First Boston, the fees and expenses of which
will be paid by the Company (as reflected in an agreement between Credit Suisse
First Boston and the Company, a copy of which has been furnished to Laser), is
entitled to any broker's, finder's or other similar fee or commission in
connection with the transactions contemplated by this Agreement based upon
arrangements made by or on behalf of the Company.
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF LASER AND MERGER SUB
Laser and Merger Sub represent and warrant to the Company as
follows:
Section 5.1 ORGANIZATION. Laser is a corporation duly
organized, validly existing and in good standing under the Laws of the State of
Delaware and has the corporate power to carry on its business as it is now being
conducted. Laser is duly qualified as a foreign corporation to do business, and
is in good standing, in each jurisdiction where the character of its properties
owned or held under lease or the nature of its activities makes such
qualification necessary, except where the failure to be so qualified would not
individually or in the aggregate have a material adverse effect on the business,
results of operations or financial condition of Laser and its subsidiaries,
taken as a whole (a "LASER MATERIAL ADVERSE EFFECT").
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Section 5.2 CAPITALIZATION. The authorized capital stock of
Laser consists of 200,000,000 shares of Laser Common Stock, and 2,000,000 shares
of Laser Preferred Stock. As of February 23, 1998, (i) 85,988,627 shares of
Laser Common Stock were issued and outstanding; (ii) 16,129,197 shares of Laser
Common Stock were issuable upon exercise of employee and non-employee stock
options (the "LASER STOCK OPTIONS") outstanding under all stock option plans of
Laser (the "LASER STOCK OPTION PLANS") or granted pursuant to employment
agreements; and (iii) no shares of Laser Preferred Stock were issued and
outstanding. As of such date, 4,568,959 shares of Laser Common Stock were held
as treasury shares. All of the issued and outstanding shares of Laser Common
Stock are validly issued, fully paid and nonassessable and free of preemptive
rights. All of the shares of Laser Common Stock issuable as consideration in the
Company Merger at the Company Effective Time in accordance with this Agreement
will be, when so issued, duly authorized, validly issued, fully paid and
nonassessable and free of preemptive rights. As of such date, except as set
forth above, there are no shares of capital stock of Laser issued or outstanding
or, as of such date or as of the date hereof, except as set forth above, any
options, warrants, subscriptions, calls, rights, convertible securities or other
agreements or commitments obligating Laser to issue, transfer, sell, redeem,
repurchase or otherwise acquire any shares of its capital stock or securities,
or the capital stock or securities of Laser. There are no notes, bonds,
debentures or other indebtedness of Laser having the right to vote (or
convertible into or exchangeable for securities having the right to vote) on any
matters upon which stockholders of Laser may vote.
Section 5.3 MERGER SUB. Merger Sub is a corporation duly
organized, validly existing and in good standing under the Laws of the State of
Delaware. Merger Sub is a newly incorporated company formed solely for purposes
of consummating the transactions contemplated by this Agreement and has engaged
in no activity other than as provided in, or contemplated by, this Agreement.
The authorized capital stock of Merger Sub consists of 1,000 shares of Merger
Sub Common Stock, all of which are validly issued, fully paid and nonassessable
and are owned by Laser. Except as set forth above there are no shares of capital
stock of Merger Sub issued or outstanding or any options, warrants,
subscription, calls, rights, convertible securities or other agreements or
commitments obligating Merger Sub to issue, transfer, sell, redeem, repurchase
or otherwise acquire any shares of its capital stock or securities.
Section 5.4 AUTHORITY RELATIVE TO THIS AGREEMENT. Each of
Laser and Merger Sub has the corporate power and authority to enter into this
Agreement and to perform its obligations hereunder and to consummate the
transactions contemplated hereby. The execution and delivery of this Agreement
by Laser and Merger Sub and the consummation by Laser and Merger Sub of the
transactions contemplated hereby have been duly authorized by the Boards of
Directors of Laser and Merger Sub, and no other corporate action or proceedings
on the part of Laser or Merger Sub (including any action on the part of its
stockholders) is necessary to authorize this Agreement or the transactions
contemplated hereby. This Agreement has been duly executed and delivered by
Laser and Merger Sub and, assuming it is a valid and binding obligation of the
Company, constitutes a valid and binding agreement of Laser and Merger Sub,
enforceable against Laser and Merger Sub in accordance with its terms, except
that such enforcement may be subject to any bankruptcy, insolvency,
reorganization, moratorium or similar Laws now or hereafter in effect relating
to creditors' rights generally and other forms of
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equitable relief may be subject to equitable defenses and the discretion of the
court before which any proceedings therefor may be brought.
Section 5.5 CONSENTS AND APPROVALS; NO VIOLATIONS. Except for
applicable requirements of the HSR Act, the Securities Act, the Exchange Act,
Competition Laws, and state securities or blue sky Laws, and the filing of the
Certificate of Merger in such form as required by, and executed in accordance
with the relevant provisions of, the DGCL, no filing with, and no permit,
authorization, consent or approval of, any governmental or regulatory authority
is necessary for the consummation by Laser or Merger Sub of the transactions
contemplated by this Agreement, except for such filings, permits,
authorizations, consents or approvals the failure of which to be made or
obtained would not (i) individually or in the aggregate have a Laser Material
Adverse Effect or (ii) delay in any material respect or prevent the consummation
of any of the transactions contemplated by this Agreement. Neither the execution
and delivery of this Agreement by Laser or Merger Sub nor the consummation by
Laser or Merger Sub of the transactions contemplated hereby, nor compliance by
Laser with any of the provisions hereof, will (a) conflict with or result in any
breach of any provisions of the certificate of incorporation or by-laws of Laser
or Merger Sub; (b) result in a violation or breach of, or constitute (with or
without due notice or lapse of time or both) a default (or give rise to any
right of termination, cancellation or acceleration) under, any of the terms,
conditions or provisions of any material (as defined for purposes of Form 10-K)
Contract to which Laser, Merger Sub or any of their subsidiaries is a party or
by which any of them or any of their properties or assets may be bound; or (c)
violate any order, writ, injunction, decree, statute, rule or regulation
applicable to Laser, Merger Sub, any of their subsidiaries or any of their
properties or assets, except, in the case of clauses (b) and (c), for
violations, breaches or defaults which would not individually or in the
aggregate have a Laser Material Adverse Effect.
Section 5.6 REPORTS AND FINANCIAL STATEMENTS.
(a) Laser has filed all reports, forms, registrations,
schedules, statements and other documents required to be filed by it with the
SEC since January 1, 1997 (the "LASER SEC REPORTS"). As of their respective
dates, the Laser SEC Reports complied in all material respects with the
requirements of the Securities Act or the Exchange Act, as the case may be, and
the applicable rules and regulations promulgated thereunder. Except to the
extent that information contained in any Laser SEC Report has been amended,
revised or superseded by a later Laser SEC Report filed and publicly available
prior to the date of this Agreement (as amended, revised or superseded by a
later filed Laser SEC Report to the date of this Agreement, the "FILED LASER SEC
REPORTS"), none of the Filed Laser SEC Reports, when filed, contained any untrue
statement of a material fact or omitted to state any material fact required to
be stated therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading.
(b) The consolidated financial statements of Laser included
in the Filed Laser SEC Reports complied as to form in all material respects with
the applicable accounting requirements and the published rules and regulations
of the SEC with respect thereto, have been prepared in accordance with GAAP
(except, in the case of the unaudited statements, as permitted
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by Form 10-Q of the SEC) applied on a consistent basis during the periods
involved (except as may be indicated therein or in the notes thereto) and fairly
present the consolidated financial position of Laser and its consolidated
subsidiaries as of the dates thereof and the consolidated results of their
operations and their consolidated cash flows for the periods then ended
(subject, in the case of the unaudited statements, to normal year-end audit
adjustments and to any other adjustments described therein).
(c) Except as set forth in the Filed Laser SEC Reports and
except for liabilities and obligations incurred in the ordinary course of
business consistent with past practice since the date of the most recent
consolidated balance sheet included in the Filed Laser SEC Reports (the "LASER
BALANCE SHEET DATE"), neither Laser nor any of the Laser subsidiaries has any
material liabilities or obligations of any nature (whether accrued, absolute,
contingent or otherwise) required by GAAP to be recognized or disclosed on a
consolidated balance sheet of Laser and its consolidated subsidiaries or in the
notes thereto.
Section 5.7 ABSENCE OF CERTAIN CHANGES OR EVENTS. Except as
set forth in the Filed Laser SEC Reports, since the Laser Balance Sheet Date,
the business of Laser and its subsidiaries has been conducted only in the
ordinary course of business consistent with past practice, and there has not
been any event, change or development which individually or in the aggregate has
had or would reasonably be expected to have a Laser Material Adverse Effect or
would impair or delay the ability of Laser to consummate the transactions
contemplated by, or to satisfy its obligations under, this Agreement.
Section 5.8 LITIGATION. Except as disclosed in the Filed
Laser SEC Reports, there is no suit, action, proceeding or investigation pending
or, to the knowledge of Laser, threatened against or affecting Laser or any of
its subsidiaries that individually or in the aggregate would reasonably be
expected to (i) have a Laser Material Adverse Effect (taking into account any
reserve therefor as of the most recent balance sheet included in the Filed Laser
SEC Reports) or (ii) delay in any material respect or prevent the consummation
of any of the transactions contemplated by this Agreement, nor is there any
judgment, order, decree, statute, Law, ordinance, rule or regulation of any
Governmental Entity or arbitrator outstanding against Laser or any of its
subsidiaries having, or which would reasonably be expected to have, any effect
referred to in clause (i) or (ii) above.
Section 5.9 INFORMATION IN DISCLOSURE DOCUMENTS AND
REGISTRATION STATEMENT. None of the information to be supplied by Laser for
inclusion or incorporation by reference in (a) the Registration Statement or (b)
the Information Statement, the Schedule 13E-3 or the Section 14(f) Notice will,
in the case of the Registration Statement, at the time it becomes effective and
at the Company Effective Time contain any untrue statement of a material fact or
omit to state any material fact required to be stated therein or necessary to
make the statements therein not misleading, or, in the case of the Information
Statement, the Schedule 13E-3 and the Section 14(f) Notice, at the time of the
mailing thereof and, in the case of the Information Statement and the Schedule
13E-3, at the Company Effective Time, contain any untrue statement of a material
fact or omit to state any material fact required to be stated therein or
necessary in order to make the statements therein, in light of the circumstances
under which they are made, not misleading.
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The Registration Statement will comply as to form in all material respects with
the provisions of the Securities Act and the rules and regulations promulgated
thereunder. The Schedule 13E-3 will comply as to form in all material respects
with the provisions of the Exchange Act and the rules and regulations
promulgated thereunder.
Section 5.10 TAXES.
(a) Laser and its subsidiaries have filed (or there have been
filed on their behalf) with the appropriate governmental authorities all
material Tax Returns required to be filed by them and such Tax Returns are true,
correct and complete in all material respects and disclose all Taxes required to
be paid by them for the periods covered thereby; and
(b) all material Taxes (whether or not shown on any Tax
Return) owed by Laser and its subsidiaries and required to be paid on or before
the Closing Date have been (or will be) timely paid or, in the case of Taxes
which Laser or any of its subsidiaries is presently contesting in good faith, an
adequate reserve has been established for such Taxes in accordance with GAAP.
Section 5.11 COMPLIANCE WITH APPLICABLE LAW. Except as
disclosed in the Filed Laser SEC Reports, Laser and its subsidiaries have
received such certificates, permits, licenses, franchises, consents, approvals,
orders, authorizations and clearances from appropriate Governmental Entities
(the "LASER LICENSES") as are necessary to own or lease and operate their
respective properties and to conduct their respective businesses substantially
in the manner described in the Laser SEC Reports and as currently owned or
leased and conducted, and all such Laser Licenses are valid and in full force
and effect, except for any such certificates, permits, licenses, franchises,
consents, approvals, orders, authorizations and clearances which the failure to
have or to be in full force and effect would not reasonably be expected to have,
individually or in the aggregate, a Laser Material Adverse Effect. Except as
disclosed in the Filed Laser SEC Reports, Laser and its subsidiaries are in
compliance in all material respects with their respective obligations under the
Laser Licenses, with only such exceptions as, individually or in the aggregate,
would not reasonably be expected to have a Laser Material Adverse Effect. Except
as disclosed in the Filed Laser SEC Reports, Laser and its subsidiaries are in
compliance with all judgments, orders, decrees, statutes, Laws, ordinances,
rules and regulations of any Governmental Entity applicable to them, except for
such noncompliance which individually or in the aggregate would not have a Laser
Material Adverse Effect.
Section 5.12 BROKERS. No broker, investment banker or other
person, other than Morgan Stanley, the fees and expenses of which will be paid
by Laser (as reflected in an agreement between Morgan Stanley and Laser) is
entitled to any broker's, finder's or other similar fee or commission in
connection with the transactions contemplated by this Agreement based upon
arrangements made by or on behalf of Laser.
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ARTICLE VI
COVENANTS RELATING TO CONDUCT OF BUSINESS
Section 6.1 CONDUCT OF BUSINESS BY THE COMPANY. During the
period from the date of this Agreement to the Holdings Effective Time, except as
expressly permitted by this Agreement or with the prior written consent of Laser
or as set forth in Section 6.1 of the Company Disclosure Schedule, the Company
shall, and shall cause its subsidiaries to, carry on the business of the Company
and its subsidiaries in the usual, regular and ordinary course in substantially
the same manner as heretofore conducted and in compliance in all material
respects with all applicable Laws and regulations and, to the extent consistent
therewith, use all reasonable efforts to preserve intact the current business
organizations of the Company and its subsidiaries, and to preserve its
relationships with those persons having business dealings with the Company and
its subsidiaries to the end that the goodwill and ongoing businesses of the
Company and its subsidiaries shall be unimpaired at the Holdings Effective Time.
Without limiting the generality of the foregoing, during the period from the
date of this Agreement to the Holdings Effective Time, the Company agrees as to
itself and its subsidiaries that, except as expressly permitted by this
Agreement or with the prior written consent of Laser or as set forth in Section
6.1 of the Company Disclosure Schedule:
(i) Neither the Company nor any of its subsidiaries
shall (x) declare, set aside or pay any distributions (whether in cash,
stock or property) with respect to its capital stock or (y) split,
combine, or reclassify any of its capital stock or issue or authorize
the issuance of any other securities in respect of, in lieu of or in
substitution for shares of its capital stock (other than dividends or
stock issuances by a wholly owned subsidiary of the Company to the
Company or another wholly owned subsidiary of the Company);
(ii) Neither the Company nor any of its subsidiaries
shall issue, deliver, sell, pledge or otherwise encumber any shares of
its capital stock, any other voting securities or any securities
convertible into, or any options, warrants or rights to acquire, any
such shares, voting securities or convertible securities (other than
the issuance of Company Common Stock upon the exercise of Employee
Stock Options in accordance with their terms and issuances by a wholly
owned subsidiary of the Company to the Company or another wholly owned
subsidiary of the Company);
(iii) The Company shall not amend its certificate of
incorporation or by-laws;
(iv) Other than as would not be material to the
Company, the Company and its subsidiaries shall not acquire or agree to
acquire (x) by merging or consolidating with, or by purchasing a
substantial portion of the assets of, or in any other manner, any
business or any corporation, limited liability company, partnership,
joint venture, association or other business organization or division
thereof or (y) any assets that individually or in the aggregate are
material to the Company and its subsidiaries;
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(v) Other than as would not be material to the
Company, the Company and its subsidiaries shall not sell, lease,
license or otherwise encumber or subject to any Lien or otherwise
dispose of any of the properties or assets of the Company and its
subsidiaries, other than in the ordinary course of business consistent
with past practice or pursuant to existing contractual obligations, if
any, set forth in Section 6.1 of the Company Disclosure Schedule;
(vi) Other than in the ordinary course of business
or as would not be material to the Company, the Company and its
subsidiaries shall not (x) incur any indebtedness or (y) make any
loans, advances or capital contributions to, or investments in, any
other person (other than the Company or a subsidiary of the Company),
other than to officers and employees of the Company and its
subsidiaries for travel, business or relocation expenses in the
ordinary course of business;
(vii) Other than in the ordinary course of business
or consistent with the Company's 1998 capital budget;
(viii) Other than in the ordinary course of
business, the Company and its subsidiaries shall not make any material
Tax election or settle or compromise any material income Tax liability;
(ix) Except in the ordinary course of business or
except as would not reasonably be expected to have a Company Material
Adverse Effect, the Company and its subsidiaries (i) shall not enter
into any Contracts and (ii) shall not modify, amend or terminate any
material Contract or agreement to which the Company or any of its
subsidiaries is, or as of the Company Effective Time will be, a party
or waive, release or assign any material rights or claims thereunder;
(x) Except as required by Law or previously existing
contractual arrangements, in the ordinary course of business consistent
with past practice or as disclosed or otherwise provided in this
Agreement, the Company will not, nor will it permit any of its
subsidiaries to, (a) increase the compensation of any of its employees,
(b) enter into any Contract with any of its employees regarding his or
her employment, compensation or benefits, or (c) adopt any plan,
arrangement or policy which would become a Company Plan or amend any
Company Plan to the extent such adoption or amendment would create or
materially increase any material liability or obligation on the part of
the Company or its subsidiaries;
(xi) The Company and its subsidiaries shall not make
any change to their accounting methods, principles or practices, except
as may be required by GAAP or Regulation S-X promulgated by the SEC or
by Law;
(xii) The Company shall not, and shall not permit
any of its subsidiaries to, create, incur, suffer to exist or assume
any material Lien on any of their assets, except as would not have a
Company Material Adverse Effect or materially impair the
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Company's conduct of the business and operations of the Company and its
subsidiaries, as presently conducted;
(xiii) The Company shall not, and shall not permit
any of its subsidiaries to enter into any transaction or contract with,
or (except pursuant to the Affiliate Agreements) make any payment to,
any Affiliate of the Company (other than the Company's subsidiaries or
its or their officers or directors in the ordinary course of business
consistent with past practice); and
(xiv) The Company and its subsidiaries shall not
authorize, or commit or agree to take, any of the foregoing actions.
Section 6.2 OTHER ACTIONS. During the period from the date
hereof to the Holdings Effective Time, the Company and Laser shall not, and
shall not permit any of their respective subsidiaries to, take any action that
would, or that could reasonably be expected to, result in (i) any of the
representations and warranties of such party set forth in this Agreement that
are qualified as to materiality becoming untrue, (ii) any of such
representations and warranties that are not so qualified becoming untrue in any
material respect or (iii) any of the conditions to the Company Merger set forth
in Article VIII hereof not being satisfied.
Section 6.3 ADVICE OF CHANGES. Upon obtaining knowledge of
any such occurrence, the Company and Laser shall promptly advise the other party
orally and in writing of (i) any representation or warranty made by it contained
in this Agreement that is qualified as to materiality becoming untrue or
inaccurate in any respect or any such representation or warranty that is not so
qualified becoming untrue or inaccurate in any material respect, (ii) the
failure by it to comply with or satisfy in any material respect any covenant,
condition or agreement to be complied with or satisfied by it under this
Agreement or (iii) any change or event (x) having, or which, insofar as can
reasonably be foreseen, would have, in the case of Laser, a Laser Material
Adverse Effect and, in the case of the Company, a Company Material Adverse
Effect, (y) having, or which, insofar as can reasonably be foreseen, would have,
the effect set forth in clause (i) above or (z) which has resulted, or which,
insofar as can reasonably be foreseen, would result, in any of the conditions
set forth in Article VIII hereof not being satisfied; PROVIDED, HOWEVER, that no
such notification shall affect the representations, warranties, covenants or
agreements of the parties or the conditions to the obligations of the parties
under this Agreement.
Section 6.4 CONDUCT OF BUSINESS OF MERGER SUB. From the date
hereof to the Company Effective Time, Merger Sub shall not (i) engage in any
activities of any nature, (ii) acquire any assets, or (iii) incur any
indebtedness or assume any liabilities or obligations, in each case, except as
provided in or contemplated by this Agreement.
Section 6.5 SECTION 14(F) NOTICE. Promptly after the date
hereof, Laser shall provide to the Company in writing the information with
respect to the Laser Designees (as defined in the Holdings Merger Agreement)
required by Section 14(f) of the Exchange Act and Rule 14f-1 of the SEC.
Promptly after its receipt of such information, the Company shall file with the
SEC and mail to all stockholders of record of the Company the Section 14(f)
Notice.
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ARTICLE VII
ADDITIONAL AGREEMENTS
Section 7.1 PREPARATION OF THE REGISTRATION STATEMENT, THE
INFORMATION STATEMENT, THE SCHEDULE 13E-3 AND THE SECTION 14(F) NOTICE. As soon
as reasonably practicable following the date of this Agreement, Laser and the
Company shall prepare and file with the SEC the Information Statement and Laser
shall prepare and file with the SEC the Registration Statement, in which the
Information Statement will be included as a prospectus (including the financial
statements and pro forma financial information required to be set forth
therein), and the Schedule 13E-3 and the Section 14(f) Notice. Laser shall use
all reasonable best efforts to have the Registration Statement declared
effective under the Securities Act and the Schedule 13E-3 and the Section 14(f)
Notice cleared by the SEC and mailed as promptly as practicable after such
filing. The Company will use all reasonable best efforts to cause the
Information Statement and the Schedule 13E-3 and the Section 14(f) Notice to be
mailed to the Company's stockholders as promptly as practicable after it has
been cleared by the SEC. Each of Laser and the Company shall also take any
action (other than qualifying to do business in any jurisdiction in which it is
not now so qualified or to file a general consent to service of process)
required to be taken under any applicable state securities Laws in connection
with the issuance of Laser Common Stock in connection with the Company Merger
and the Holdings Merger. The Company shall furnish all information concerning
the Company, its subsidiaries and the holders of the Company Common Stock and
Laser shall furnish all information concerning Laser and its subsidiaries, in
each case, as may be reasonably requested in connection with any such action.
Section 7.2 ACCESS AND INFORMATION; CONFIDENTIALITY. The
Company and Laser shall each afford to the other and to the other's financial
advisors, legal counsel, accountants, consultants and other representatives full
access at all reasonable times throughout the period prior to the Company
Effective Time to all of its books, records, properties, plants and personnel
(provided that all such access shall be on reasonable advance notice and shall
not disrupt normal business operations) and, during such period, each shall
furnish promptly to the other (a) a copy of each report, schedule and other
document filed or received by it pursuant to the requirements of federal or
state securities Laws, and (b) all other information as such other party may
reasonably request, provided that no investigation pursuant to this Section 7.2
shall affect any representations or warranties made herein or the conditions to
the obligations of the respective parties to consummate the Company Merger. Each
party and their respective affiliates, representatives and agents shall hold in
confidence all nonpublic information in accordance with the terms of the
Confidentiality Agreements between Laser and the Company dated February 4, 1998
and February 23, 1998.
Section 7.3 COMFORT LETTERS.
(a) The Company shall use its reasonable best efforts to
cause to be delivered to Laser "comfort" letters of Ernst & Young, LLP, the
Company's independent public accountants, dated the date on which the
Registration Statement shall become effective and as of the date on which the
Information Statement is mailed to the Company's stockholders, and addressed to
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Laser and the Company, in form and substance reasonably satisfactory to Laser
and as is reasonably customary in scope and substance for letters delivered by
independent public accountants in connection with transactions such as those
contemplated by this Agreement.
(b) Laser shall use its reasonable best efforts to cause to
be delivered to the Company "comfort" letters of Arthur Andersen, LLP, Laser's
independent public accountants, dated the date on which the Registration
Statement shall become effective and as of the date on which the Information
Statement is mailed to the Company's stockholders, and addressed to the Company
and Laser, in form and substance reasonably satisfactory to the Company and as
is reasonably customary in scope and substance for letters delivered by
independent public accountants in connection with transactions such as those
contemplated by this Agreement.
Section 7.4 LISTING APPLICATION. Laser shall prepare and
submit to the NYSE a listing application covering the Laser Shares to be issued
in connection with the Company Merger, and shall use its reasonable best efforts
to obtain, prior to the Company Effective Time, approval for the listing of such
Laser Shares, subject to official notice of issuance.
Section 7.5 AFFILIATES. Prior to the Company Effective Time,
the Company shall cause to be prepared and delivered to Laser a list (reasonably
satisfactory to counsel for Laser) identifying each person who, at the time the
Information Statement is mailed to the Company's stockholders, may be deemed to
be an "affiliate" of the Company, as such term is used in paragraphs (c) and (d)
of Rule 145 under the Securities Act (the "COMPANY RULE 145 AFFILIATES"). The
Company shall use its reasonable best efforts to cause such person who is
identified as a Company Rule 145 Affiliate in such list to deliver to Laser on
or prior to the Company Effective Time a written agreement, in customary form,
that such Company Rule 145 Affiliate will not (i) sell, pledge, transfer or
otherwise dispose of, or in any other way reduce such Company Rule 145
Affiliate's risk relative to, any Laser Shares issued to such Company Rule 145
Affiliate in connection with the Company Merger, except pursuant to an effective
registration statement or in compliance with such Rule 145 or another exemption
from the registration requirements of the Securities Act or (ii) sell or in any
other way reduce such Rule 145 Affiliate's risk relative to any Laser Shares
received in the Company Merger (within the meaning of Section 201.01 of the
SEC's Financial Reporting Release No. 1) during the period commencing thirty
(30) days prior to the Company Effective Time and ending at such time as the
financial results (including combined sales and net income) covering at least
thirty (30) days of post-Merger operations have been published, except as
permitted by Staff Accounting Bulletin No. 76 issued by the SEC.
Section 7.6 HSR ACT; COMPETITION LAWS. As soon as reasonably
practicable, the Company, Laser and Merger Sub shall make or cause to be made
all filings and submissions under the HSR Act (if applicable) and any other
applicable Competition Laws as may be reasonably required to be made in
connection with this Agreement and the transactions contemplated hereby. Subject
to Section 7.2 hereof, the Company will furnish to Laser and Laser will furnish
to the Company, such information and assistance as the other may reasonably
request in connection with the preparation of any such filings or submissions.
Subject to Section 7.2 hereof, the Company will provide Laser, and Laser will
provide the Company, with copies of
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all correspondence, filings or communications (or memoranda setting forth the
substance thereof) between such party or any of its representatives, on the one
hand, and any governmental agency or authority or members of their respective
staffs, on the other hand, with respect to this Agreement and the transactions
contemplated hereby. The Company and Laser shall consult with one another with
respect to any such correspondence, filings or communications and shall engage
in discussions with any Governmental Entity on a joint basis.
Section 7.7 EMPLOYEE MATTERS.
(a) From and after the Holdings Effective Time, Laser shall
honor, and shall cause the Company to honor, all employment, severance,
termination, consulting and retirement agreements to which the Company is a
party as of the Holdings Effective Time; PROVIDED, HOWEVER, that (i) neither
Laser nor the Company shall have any responsibility for the Company's
obligations under that certain employment agreement entered into as of October
1, 1997, between the Company and Jerry W. Levin (except for the incentive
payment provided for in section 3.2(b) thereof (relating to the divestiture of
Coleman Safety & Security Products, Inc.), which shall be the responsibility of
the Company and paid in accordance with the terms of section 3.2(b) thereof),
and (ii) neither Laser nor the Company shall have any responsibility for the
Company's obligations under that certain employment agreement entered into as of
July 1, 1997, between the Company and Paul E. Shapiro. Except as provided in the
first sentence of Section 7.7(b) or the proviso to this sentence, from and after
the Holdings Effective Time, Laser will cause the Company to allow Company
employees to participate in Laser employee benefit plans on substantially the
same basis as similarly situated Laser employees; PROVIDED, HOWEVER, that Laser
will cause the Company to continue the Company Plans for at least six (6) months
following the Holdings Effective Time. Laser will or will cause the Company to
give Company employees full credit for purposes of eligibility and vesting of
benefits and benefit accrual for service with the Company and its affiliates
prior to the Holdings Effective Time under each Laser employee benefit plan;
PROVIDED, HOWEVER, that no such crediting of service results in duplication of
benefits. With respect to any welfare benefit plans maintained for the benefit
of Company employees from and after the Holdings Effective Time, Laser shall (i)
cause there to be waived any pre-existing condition limitations and (ii) give
effect, in determining any deductible and maximum out-of-pocket limitations, to
claims incurred and amounts paid by, and amounts reimbursed to, such employees
with respect to similar plans maintained by the Company for such employee's
benefit immediately prior to the Holdings Effective Time. Laser acknowledges
that, for the purposes of certain of such Company Plans and certain of such
other employment, severance, termination, consulting and retirement agreements
to which the Company is currently a party, the consummation of the Holdings
Merger will constitute a "change in control" of the Company (as such term is
defined in such plans and agreements). Laser agrees to cause the Company, after
the Holdings Effective Time, to pay all amounts provided under such Company
Plans and agreements as a result of a change in control of the Company in
accordance with their respective terms and to honor, and to cause the Company to
honor, all rights, privileges and modifications to or with respect to any such
Company Plans or agreements which become effective as a result of such change in
control.
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(b) Laser shall cause the Company to continue the Company's
Executive Annual Incentive Policy for the remainder of 1998, and participants
therein shall not be eligible for participation in an analogous Laser incentive
plan in respect of 1998. Laser shall honor, and shall cause the Company to
honor, the Company's Executive Severance Policy without any amendment adverse to
participants. Laser shall provide severance benefits for employees of the
Company, who are not participants in Company's Executive Severance Policy and
who do not have employment agreements with the Company, under the Laser
severance policy on the same basis as similarly situated Laser employees
provided that severance benefits shall be no less than those set forth on
Schedule 7.7(b).
(c) Effective as of the ninety-first (91st) day following the
Holdings Effective Time, the participants in the Executive Severance Policy set
forth on Schedule 7.7(c) may voluntarily terminate their employment, which
termination will be deemed to be for "Good Reason" under the Executive Severance
Policy as a result of the consummation of the Holdings Merger.
(d) Laser and the Company agree to take all necessary action
to provide that, effective as of the Holdings Effective Time, all outstanding
Employee Stock Options shall be vested and exercisable as of the Holdings
Effective Time, and between the Holdings Effective Time and the Company
Effective Time, Laser shall cause the Company to maintain a broker-dealer
cashless exercise procedure for the exercise of Employee Stock Options. Laser
and the Company agree to take all other actions necessary to provide for the
cancellation, effective at the Company Effective Time, of each outstanding
Employee Stock Option and, in settlement therefor, a payment to the holder of
the Employee Stock Option in cash by Laser or the Company at the Company
Effective Time equal to the product of (i) the total number of shares of Company
Common Stock subject to such Employee Stock Option, and (ii) the excess of
$27.50 over the exercise price per share of Company Common Stock subject to such
Employee Stock Option, less any applicable withholding taxes.
(e) Laser agrees that, at or prior to the Holdings Effective
Time, Holdings may cause the Company to (i) assume sponsorship of the pension,
retirement, savings, retiree health care and life insurance and other plans
maintained by New Coleman Holdings, Inc. that are reflected in footnotes 7 and
12 to the 1996 financial statements included in the Company's 1996 Annual Report
on SEC Form 10-K (as such plans may have been changed in the ordinary course of
business since December 31, 1996) (the "PLANS"), and (ii) assume the liabilities
and obligations of New Coleman Holdings, Inc. under the Plans to the extent
reflected in such footnotes (as such liabilities and obligations may have
changed in the ordinary course of business since December 31, 1996). The
documents used to effect such assumption shall be in form and substance
reasonably satisfactory to Parent Holdings and Laser.
Section 7.8 CONTINUANCE OF EXISTING INDEMNIFICATION RIGHTS.
(a) For six (6) years after the Company Effective Time (and
during the period following the Holdings Effective Time but prior to the Company
Effective Time), Laser shall, or shall cause the Surviving Corporation to,
indemnify, defend and hold harmless any person who is
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now, or has been at any time prior to the date hereof, or who becomes prior to
the Company Effective Time, a director or officer of the Company (an
"INDEMNIFIED PERSON") against all losses, claims, damages, liabilities, costs
and expenses (including attorneys' fees and expenses), judgments, fines, losses
and amounts paid in settlement in connection with any actual or threatened
action, suit, claim, proceeding or investigation (each, a "CLAIM") to the extent
that any such Claim is based on, or arises out of: (i) the fact that such
Indemnified Person is or was a director or officer of the Company or is or was
serving at the request of the Company as a director, officer, employee or agent
of another corporation, partnership, joint venture, trust or other enterprise;
or (ii) this Agreement or the Holdings Merger Agreement or any of the
transactions contemplated hereby or thereby, in each case to the extent that any
such Claim pertains to any matter or fact arising, existing or occurring prior
to or at the Company Effective Time, regardless of whether such Claim is
asserted or claimed prior to, at or after the Company Effective Time, to the
full extent permitted under the DGCL, the Company's certificate of incorporation
or by-laws or any indemnification agreement in effect at the date hereof,
including provisions relating to advancement of expenses incurred in the defense
of any such Claim; PROVIDED, HOWEVER, that neither Laser nor the Surviving
Corporation shall be required to indemnify any Indemnified Person in connection
with any proceeding (or portion thereof) involving any Claim initiated by such
Indemnified Person against the Company unless the initiation of such proceeding
(or portion thereof) was authorized by the Board of Directors of the Company or
unless such proceeding is brought by an Indemnified Person to enforce rights
under this Section 7.8; and PROVIDED FURTHER that in the event any Claim is
asserted or made within such period, all such rights, liabilities and
limitations in respect of any such Claim shall continue until disposition
thereof. Without limiting the generality of the preceding sentence, in the event
any Indemnified Person becomes involved in any Claim after the Company Effective
Time, Laser shall, or shall cause the Surviving Corporation to, periodically
advance to such Indemnified Person its legal and other expenses (including the
cost of any investigation and preparation incurred in connection therewith),
subject to the providing by such Indemnified Person of an undertaking to
reimburse all amounts so advanced in the event of a final non-appealable
determination by a court of competent jurisdiction that such Indemnified Person
is not entitled thereto.
(b) Laser and the Company agree that all rights to
indemnification, and all limitations with respect thereto, existing in favor of
any Indemnified Person, as provided in the Company's certificate of
incorporation or by-laws and any indemnification agreement in effect at the date
hereof, shall survive the Holdings Merger and the Company Merger and shall
continue in full force and effect, without any amendment thereto, for a period
of six (6) years from the Company Effective Time (and during the period
following the Holdings Effective Time but prior to the Company Effective Time)
to the extent such rights and limitations are consistent with the DGCL;
PROVIDED, HOWEVER, that in the event any Claim is asserted or made within such
period, all such rights, liabilities and limitations in respect of any such
Claim shall continue until disposition thereof; PROVIDED FURTHER that any
determination required to be made with respect to whether an Indemnified
Person's conduct complies with the standards set forth under the DGCL, the
Company's certificate of incorporation or by-laws or any such agreement, as the
case may be, shall be made by independent legal counsel selected by such
Indemnified Person and reasonably
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acceptable to Laser; and PROVIDED FURTHER that nothing in this Section 7.8 shall
impair any rights or obligations of any current or former director or officer of
the Company.
(c) Laser or the Surviving Corporation shall use reasonable
best efforts to obtain a liability insurance policy ("D&O INSURANCE") for the
benefit of the Company's existing and former directors and officers commencing
at the Holdings Effective Time and for a period of not less than six (6) years
after the Company Effective Time providing substantially similar coverage in
amounts and on terms no less advantageous than that currently provided to such
existing and former directors and officers; PROVIDED FURTHER that neither Laser
nor the Surviving Corporation shall be required to pay an annual premium for D&O
Insurance in excess of 200% of the last annual premium paid prior to the date
hereof, but in such case shall purchase as much coverage as possible for such
amount.
(d) The provisions of this Section 7.8 are intended to be for
the benefit of, and shall be enforceable by, each Indemnified Person, his or her
heirs and his or her personal representatives.
Section 7.9 EXPENSES. Whether or not the Company Merger is
consummated, all costs and expenses incurred in connection with this Agreement
and the transactions contemplated hereby shall be paid by the party incurring
such expenses.
Section 7.10 PUBLIC ANNOUNCEMENTS. Laser and the Company
shall consult with each other before issuing their respective initial press
releases to be issued with respect to the transactions contemplated by this
Agreement and the Holdings Merger.
Section 7.11 REASONABLE BEST EFFORTS. Upon the terms and
subject to the conditions set forth in this Agreement, each of the parties
hereto agrees to use its reasonable best efforts to take, or cause to be taken,
all actions, and to do, or cause to be done, and to assist and cooperate with
the other parties in doing, all things necessary, proper or advisable, to
consummate and make effective, in the most expeditious manner practicable, the
Company Merger and the other transactions contemplated by this Agreement,
including, but not limited to: (i) the obtaining of all necessary actions or
nonactions, waivers, consents and approvals from all Governmental Entities and
the making of all necessary registrations and filings with, and the taking of
all other reasonable steps as may be necessary to obtain an approval or waiver
from, or to avoid an action or proceeding by, any Governmental Entity (including
those in connection with the HSR Act, if applicable); (ii) the obtaining of all
necessary consents, approvals or waivers from persons other than Governmental
Entities; (iii) the defending of any lawsuits or other legal proceedings,
whether judicial or administrative, challenging this Agreement or the
consummation of the transactions contemplated hereby, including seeking to have
any stay or temporary restraining order entered by any court or other
Governmental Entity vacated or reversed; and (iv) the execution and delivery of
any additional instruments necessary to consummate the transactions contemplated
by this Agreement. Notwithstanding the foregoing, nothing in this Agreement
shall be deemed to require any party hereto to enter into any agreement with any
Governmental Entity or to consent to any order, decree or judgment requiring
such party to hold, separate or divest, or to restrict the dominion or control
of such
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party or any of its Affiliates over, any of the assets, properties or businesses
of such party or its Affiliates in existence on the date hereof.
ARTICLE VIII
CONDITIONS TO CONSUMMATION OF THE MERGER
Section 8.1 CONDITIONS TO EACH PARTY'S OBLIGATION TO EFFECT
THE COMPANY MERGER. The respective obligations of each party to effect the
Company Merger shall be subject to the satisfaction or waiver, to the extent
permitted by Law, at or prior to the Company Effective Time of the following
conditions:
(a) The Registration Statement shall have become effective in
accordance with the provisions of the Securities Act and no stop order
suspending the effectiveness of the Registration Statement shall be in effect
and no proceeding for such purpose shall be pending before or threatened by the
SEC; and all applicable time periods required under the Securities Act and the
Exchange Act following the mailing of the Information Statement to the Company's
stockholders shall have lapsed.
(b) The Laser Shares shall have been approved for listing on
the NYSE, subject to official notice of issuance.
(c) No preliminary or permanent injunction or other order by
any federal or state court in the United States of competent jurisdiction which
prohibits the consummation of the Company Merger shall have been issued and
remain in effect.
(d) The Holdings Merger shall have been consummated in
accordance with its terms and the applicable provisions of the DGCL.
ARTICLE IX
TERMINATION, AMENDMENT AND WAIVER
Section 9.1 TERMINATION. This Agreement shall terminate
automatically upon the termination of the Holdings Merger Agreement in
accordance with its terms.
Section 9.2 EFFECT OF TERMINATION. In the event of
termination of this Agreement as provided in Section 9.1 hereof, this Agreement
shall forthwith become void and there shall be no liability on the part of any
of the parties; PROVIDED that the provisions of Sections 7.2 and 7.9 and of this
Article IX shall continue and that nothing herein shall relieve any party from
liability for any willful breach hereof.
Section 9.3 AMENDMENT. This Agreement may be amended by the
parties pursuant to a writing adopted by action taken by all of the parties at
any time prior to (but not
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following) the consummation of the Holdings Merger. This Agreement may not be
amended except by an instrument in writing signed by all the parties hereto.
Section 9.4 EXTENSION; WAIVER. At any time prior to (but not
following) the consummation of the Holdings Merger any party hereto may (a)
extend the time for the performance of any of the obligations or other acts of
the other parties, (b) waive any inaccuracies in the representations and
warranties contained herein or in any document delivered pursuant hereto and (c)
waive compliance with any of the agreements or conditions contained herein. Any
agreement on the part of a party to any such extension or waiver shall be valid
only as against such party and only if set forth in an instrument in writing
signed by such party. The failure of any party to this Agreement to assert any
of its rights under this Agreement or otherwise shall not constitute a waiver of
such rights.
ARTICLE X
GENERAL PROVISIONS
Section 10.1 NO SURVIVAL OF REPRESENTATIONS AND WARRANTIES. No
representations or warranties contained herein shall survive beyond the Company
Effective Time. This Section 10.1 shall not limit any covenant or agreement of
the parties which by its terms contemplates performance after the Company
Effective Time.
Section 10.2 NOTICES. All notices or other communications
hereunder shall be deemed to have been duly given and made if in writing and if
served by personal delivery upon the party for whom it is intended, if delivered
by registered or certified mail, return receipt requested, or by a national
courier service, or if sent by telecopier; PROVIDED that the telecopy is
promptly confirmed by telephone confirmation thereof, to the person at the
address set forth below, or such other address as may be designated in writing
hereafter, in the same manner, by such person:
(a) If to Laser, to:
Sunbeam Corporation
1615 South Congress Avenue
Suite 200
Delray Beach, Florida 33445
Facsimile: (561) 243-2191
Attention: David C. Fannin, Esq.
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<PAGE>
with a copy to:
Skadden, Arps, Slate, Meagher
& Flom LLP
One Rodney Square
Wilmington, Delaware 19801
Facsimile: (302) 651-3001
Attention: Richard L. Easton, Esq.
(b) If to the Company, to:
CLN Holdings Inc.
5900 North Andrews Avenue, Suite #700-A
Fort Lauderdale, Florida 33309
Facsimile: (954) 772-3352
Attention: General Counsel
with a copy to:
Wachtell, Lipton, Rosen & Katz
51 West 52nd Street
New York, New York 10019
Facsimile: (212) 403-2000
Attention: Adam O. Emmerich, Esq.
Any such notification shall be deemed delivered (i) upon receipt, if delivered
personally, (ii) on the next business day, if sent by national courier service
for next business day delivery or (iii) the business day received, if sent by
telecopier.
Section 10.3 DESCRIPTIVE HEADINGS. The headings contained in
this Agreement are for reference purposes only and shall not affect in any way
the meaning or interpretation of this Agreement.
Section 10.4 ENTIRE AGREEMENT; NO THIRD-PARTY BENEFICIARY.
This Agreement (including the Exhibits, Disclosure Schedules and other documents
and instruments referred to herein) (a) constitutes the entire agreement and
supersedes all other prior agreements and understandings, both written and oral,
among the parties or any of them, with respect to the subject matter hereof; (b)
except for the provisions of Sections 7.7(c) and 7.8 hereof, is not intended to
confer upon any other person any rights or remedies hereunder.
Section 10.5 INTERPRETATION. When a reference is made in this
Agreement to an Article, Section or Annex, such reference shall be to an Article
or Section of, or an Annex to, this Agreement unless otherwise indicated.
Whenever the words "include", "includes" or "including" are used in this
Agreement, they shall be deemed to be followed by the words "without
limitation". The words "hereof", "herein" and "hereunder" and words of similar
import when used in this Agreement shall refer to this Agreement as a whole and
not to any particular
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<PAGE>
provision of this Agreement. The phrase "made available" in this Agreement shall
mean that the information referred to has been made available if requested by
the party to whom such information is to be made available. All terms defined in
this Agreement shall have the defined meanings used in any certificate or other
document made or delivered pursuant hereto unless otherwise defined therein. The
definitions contained in this Agreement are applicable to the singular as well
as the plural forms of such terms and to the masculine as well as to the
feminine and neuter genders of such term. Any agreement, instrument or statute
defined or referred to herein or in any agreement or instrument that is referred
to herein means such agreement, instrument or statute as from time to time
amended, modified or supplemented, including (in the case of agreements or
instruments) by waiver or consent and (in the case of statutes) by succession of
comparable successor statutes and references to all attachments thereto and
instruments incorporated therein. References to a person are also to its
permitted successors and assigns and, in the case of an individual, to his heirs
and estate, as applicable.
Section 10.6 SEVERABILITY. If any provision of this Agreement
or the application thereof to any person or circumstance is determined by a
court of competent jurisdiction to be invalid, void or unenforceable, the
remaining provisions hereof, or the application of such provision to persons or
circumstances other than those as to which it has been held invalid or
unenforceable, shall remain in full force and effect and shall in no way be
affected, impaired or invalidated thereby. Upon any such determination, the
parties shall negotiate in good faith in an effort to agree upon a suitable and
equitable substitute provision to effect original intent of the parties.
Section 10.7 ASSIGNMENT. Neither this Agreement nor any of
the rights, interests or obligations under this Agreement shall be assigned, in
whole or in part, by operation of Law or otherwise by any of the parties without
the prior written consent of the other parties. Any assignment in violation of
the preceding sentence shall be void. Subject to the preceding sentence, this
Agreement will be binding upon, inure to the benefit of, and be enforceable by,
the parties and their respective successors and assigns.
Section 10.8 DISCLOSURE SCHEDULES. Matters reflected on the
Company Disclosure Schedule are not necessarily limited to matters required by
this Agreement to be reflected therein and the inclusion of such matters shall
not be deemed an admission that such matters were required to be reflected on
the Company Disclosure Schedule. Such additional matters are set forth for
informational purposes only and do not necessarily include other matters of a
similar nature. Capitalized terms used in the Company Disclosure Schedule but
not otherwise defined therein shall have the respective meanings assigned to
such terms in this Agreement.
Section 10.9 GOVERNING LAW. This Agreement shall be governed
by and construed in accordance with the Laws of the State of Delaware without
giving effect to the provisions thereof relating to conflicts of Law.
Section 10.10 SPECIFIC PERFORMANCE. The parties hereto agree
that irreparable damage would occur in the event any of the provisions of this
Agreement were not performed in
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accordance with the terms hereof and that the parties shall be entitled to
specific performance of the terms hereof, in addition to any other remedy at Law
or equity.
Section 10.11 COUNTERPARTS. This Agreement may be executed in
two or more counterparts, each of which shall be deemed to be an original but
all of which shall constitute one and the same agreement.
Section 10.12 CERTAIN TERMS. As used herein, (i) the term
"material adverse effect" (including as used in any definition), with respect to
any Person, shall exclude any change, event, effect or circumstance (a) arising
in connection with the announcement or performance of the transactions
contemplated by this Agreement or the Holdings Merger Agreement and (b)
affecting the United States economy generally or such Person's industries
generally; and (ii) "to the knowledge of the Company" shall mean to the actual
knowledge of Paul E. Shapiro, Jerry W. Levin and Steven R. Isko.
[SIGNATURE PAGE FOLLOWS]
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<PAGE>
IN WITNESS WHEREOF, each of the parties hereto has caused this
Agreement to be executed on its behalf by its officers thereunto duly
authorized, all as of the date first above written.
SUNBEAM CORPORATION
By: /s/ Russell Kersh
-----------------
Name: Russell Kersh
Title: Executive Vice President
CAMPER ACQUISITION CORP.
By: /s/ Russell Kersh
----------------
Name: Russell Kersh
Title: Executive Vice President
THE COLEMAN COMPANY, INC.
By: /s/ Paul Shapiro
----------------
Name: Paul Shapiro
Title: Executive Vice President
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EXHIBIT 10.v
AGREEMENT AND PLAN OF MERGER
between
SUNBEAM CORPORATION
JAVA ACQUISITION CORP.
and
SIGNATURE BRANDS USA, INC.
Dated as of February 28, 1998
<PAGE>
TABLE OF CONTENTS
ARTICLE I - THE OFFER
1.1 THE OFFER...................................................3
1.1.1 GENERAL............................................3
1.1.2 SECURITIES LAW COMPLIANCE..........................3
1.1.3 TERMINATION OF THE OFFER...........................3
1.2 ACTION BY THE COMPANY.......................................4
1.2.1 APPROVAL AND RECOMMENDATION OF THE BOARD...........4
1.2.2 SECURITIES LAW COMPLIANCE..........................4
1.2.3 STOCKHOLDER LISTS..................................4
1.2.4 DIRECTORS..........................................5
ARTICLE II - THE MERGER.......................................................5
2.1. THE MERGER..................................................7
2.2. CLOSING.....................................................7
2.3. EFFECTIVE TIME OF THE MERGER................................7
2.4. EFFECTS OF THE MERGER.......................................7
2.5. CERTIFICATE OF INCORPORATION; BY-LAWS.......................7
2.6. DIRECTORS...................................................7
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2.7. OFFICERS....................................................8
ARTICLE III - EFFECT OF THE MERGER ON THE CAPITAL STOCK OF THE
CONSTITUENT CORPORATIONS......................................................8
3.1. EFFECT ON CAPITAL STOCK.....................................8
3.2. STOCK PLANS.................................................8
3.3. EXCHANGE OF CERTIFICATES....................................9
ARTICLE IV - REPRESENTATIONS AND WARRANTIES OF THE COMPANY...................11
4.1 ORGANIZATION, STANDING AND CORPORATE POWER.................12
4.2 SUBSIDIARIES...............................................13
4.3 CAPITAL STRUCTURE..........................................13
4.4 AUTHORITY; NONCONTRAVENTION................................13
4.5 SEC DOCUMENTS; UNDISCLOSED LIABILITIES.....................15
4.6 INFORMATION SUPPLIED.......................................16
4.7 ABSENCE OF CERTAIN CHANGES OR EVENTS.......................17
4.8 LITIGATION; LABOR MATTERS; COMPLIANCE WITH LAWS............17
4.9 EMPLOYEE BENEFIT PLANS.....................................17
4.10 TAXES......................................................19
4.11 ENVIRONMENTAL MATTERS......................................21
4.12 MATERIAL CONTRACTS.........................................22
4.13 BROKERS....................................................24
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4.14 OPINION OF FINANCIAL ADVISOR...............................25
4.15 BOARD RECOMMENDATION.......................................25
4.16 REQUIRED COMPANY VOTE......................................25
4.17 STATE TAKEOVER STATUTES....................................25
4.18. INTELLECTUAL PROPERTY......................................25
4.19. TITLE TO PROPERTIES........................................26
4.20. PRODUCTS LIABILITY.........................................26
4.21 SOLE REPRESENTATIONS.......................................27
ARTICLE V -REPRESENTATIONS AND WARRANTIES OF BUYER
AND MERGER CO................................................................27
5.1 ORGANIZATION, STANDING AND CORPORATE POWER.................27
5.2 AUTHORITY; NONCONTRAVENTION................................28
5.3 BROKERS....................................................28
5.4 OFFER DOCUMENTS AND SCHEDULE 14D-9.........................29
5.5 INFORMATION SUPPLIED.......................................29
5.6 SOLE REPRESENTATIONS.......................................29
ARTICLE VI - COVENANTS RELATING TO CONDUCT OF BUSINESS PRIOR TO
MERGER.......................................................................29
6.1 CONDUCT OF BUSINESS OF THE COMPANY.........................29
6.2 CHANGES IN EMPLOYMENT ARRANGEMENTS.........................29
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6.3 SEVERANCE..................................................32
6.4 WARN.......................................................33
ARTICLE VII - ADDITIONAL AGREEMENTS..........................................33
7.1. PREPARATION OF PROXY STATEMENT: STOCKHOLDER MEETING .......33
7.2. ACCESS TO INFORMATION, CONFIDENTIALITY.....................33
7.3. ADDITIONAL UNDERTAKINGS....................................34
7.4 INDEMNIFICATION............................................35
7.5 PUBLIC ANNOUNCEMENTS.......................................36
7.6 NO SOLICITATION............................................36
7.7 RESIGNATION OF DIRECTORS...................................37
7.8 EMPLOYEE BENEFITS..........................................39
7.9 NOTIFICATION OF CERTAIN MATTERS...........................39
7.10 STATE TAKEOVER LAWS........................................40
ARTICLE VIII - CONDITIONS PRECEDENT..........................................40
8.1 CONDITIONS TO EACH PARTY'S OBLIGATION......................40
8.2 CONDITION TO BUYER'S AND MERGER CO.'S OBLIGATION...........41
ARTICLE IX - TERMINATION, AMENDMENT AND WAIVER...............................41
9.1 TERMINATION................................................41
9.2 EFFECT OF TERMINATION......................................42
9.3 AMENDMENT..................................................42
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9.4 EXTENSION; WAIVER..........................................42
9.5 PROCEDURE FOR TERMINATION, AMENDMENT, EXTENSION OR WAIVER..43
ARTICLE X - PROVISIONS.......................................................43
10.1 NONSURVIVAL OF REPRESENTATIONS AND WARRANTIES..............43
10.3 NOTICES....................................................45
10.4 DEFINITIONS................................................46
10.5 INTERPRETATION.............................................47
10.6 COUNTERPARTS...............................................47
10.7 ENTIRE AGREEMENT; NO THIRD-PARTY BENEFICIARIES.............47
10.8 GOVERNING LAW..............................................48
10.9 ASSIGNMENT.................................................48
10.10 ENFORCEMENT................................................48
Annex I............................................................I-1
vi
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AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT AND PLAN OF MERGER is entered into as of this 28th day
of February, 1998 by and between Sunbeam Corporation, a Delaware corporation
(the "Buyer"), Java Acquisition Corp., a Delaware corporation and wholly-owned
subsidiary of Buyer or other wholly owned subsidiary of Buyer as contemplated
hereby ("MergerCo"), and Signature Brands USA, Inc., a Delaware corporation (the
"Company").
WHEREAS, the respective Boards of Directors of the Company, the Buyer
and MergerCo have determined that the merger of MergerCo with and into the
Company (the "Merger"), upon the terms and subject to the conditions set forth
in this Agreement, would be advisable and in the best interests of their
respective companies and stockholders, and such Boards of Directors have
approved such Merger, pursuant to which each share of common stock, par value
$.01 per share, of the Company ("Company Common Stock") issued and outstanding
immediately prior to the Effective Time of the Merger (as defined in Section
1.3) will be converted into the right to receive cash, other than (a) shares of
Company Common Stock owned, directly or indirectly, by the Company or any
subsidiary (as defined in Section 10.4) of the Company, the Buyer or MergerCo
and (b) Dissenting Shares (as defined in Section 3. l(d));
WHEREAS, subject to the terms and conditions of this Agreement and in
furtherance of the Merger, the Buyer will make, or will cause MergerCo to make,
a tender offer (the "Offer") to acquire any and all shares of Company Common
Stock;
WHEREAS, concurrently with the execution and delivery of this
Agreement, certain stockholders of the Company have entered into a Stock
Purchase Agreement (the "Stock Purchase Agreement") with Buyer pursuant to
which, subject to the terms and conditions specified therein, Buyer is willing
to purchase and such stockholders are willing to sell certain Shares owned by
such stockholders;
WHEREAS, approval of this Agreement requires the vote of a majority in
number of the issued and outstanding shares of Company Common Stock for the
approval thereof (the "Company Stockholder Approval"); and
WHEREAS, Buyer, MergerCo and the Company desire to make certain
representations, warranties, covenants and agreements in connection with the
Offer and the Merger and also to prescribe various terms of and conditions to
the Offer and the Merger;
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NOW, THEREFORE, in consideration of the representations, warranties,
covenants and agreements contained in this Agreement, the parties agree as
follows:
ARTICLE I
THE OFFER
1.1 THE OFFER.
1.1.1 GENERAL. Provided that this Agreement shall not have
been terminated in accordance with Article IX, the Buyer shall commence, or
shall cause MergerCo to commence, the Offer to acquire any and all shares of
Company Common Stock for a cash price per share equal to the Merger
Consideration (as defined in Section 3.1(c), (the "Offer Price")), as promptly
as reasonably practicable after the date hereof, but in no event later than five
(5) business days after the initial public announcement of Offeror's intention
to commence the Offer. For purposes of this Article I, the party which makes the
Offer, whether the Buyer or MergerCo, shall be referred to as the "Offeror."
Offeror may not accept any shares of Company Common Stock tendered for purchase
in response to the Offer unless it accepts all such shares that are properly
tendered in accordance with the terms thereof. Acceptance by Offeror of shares
of Company Common Stock for payment pursuant to the Offer shall be irrevocable.
The Offer shall be subject: (i) to the condition that there shall be validly
tendered in accordance with the terms of the Offer prior to the expiration date
of the Offer and not withdrawn a number of shares of Company Common Stock which,
together with the shares of Company Common Stock then owned by the Buyer and
MergerCo, represents at least 51% of the total number of outstanding shares of
the Company Common Stock, assuming the exercise of all outstanding options,
rights and convertible securities (if any) and the issuance of all shares of
Company Common Stock that the Company is then obligated to issue (such total
number of outstanding or issuable shares of Company Common Stock being
hereinafter referred to as the "Fully Diluted Shares") (the "Minimum Condition")
and (ii) to the other conditions set forth in Annex I attached hereto
(collectively, the "Offer Conditions"). The Buyer and MergerCo expressly reserve
the right to waive any of the conditions to the Offer, including but not limited
to, the satisfaction of the Minimum Condition. The initial expiration date of
the Offer shall be twenty (20) business days after commencement. Buyer and
MergerCo agree that if all of the Offer Conditions are not satisfied on such
initial expiration date of the Offer then, provided that the Offeror determines,
in its reasonable discretion that all such Conditions are reasonably capable of
being satisfied and subject to SEC rules with respect to extension of time
periods, Offeror shall extend the Offer, without consent of the Company, from
time to time until such Conditions are satisfied or waived; provided, that
Offeror shall not be required to extend the Offer beyond April 30, 1998, unless
any necessary approvals under the HSR Act (as defined herein) shall not have
been received by such date, in which case Offeror shall not be required to
extend the Offer beyond the earlier of (i) ten (10) days following receipt of
such approvals and (ii) June 30, 1998. Buyer and MergerCo
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<PAGE>
agree that upon the expiration date of the Offer, as the same may be extended in
accordance with the immediately preceding sentence, if the Offer Conditions have
been satisfied, Offeror shall accept the shares of Company Common Stock properly
tendered for purchase. Without the prior written consent of the Company, no
change may be made by Offeror which reduces the maximum number of shares of
Company Common Stock to be purchased in the Offer or which reduces the Offer
Price or changes the form of consideration or changes the Offer Conditions. The
Offer Price shall, subject to reduction for applicable withholding of taxes, be
net to the seller in cash, payable upon the terms and subject to the conditions
of the Offer. Subject to the terms and conditions of the Offer, Offeror shall
pay, as promptly as practicable after expiration of the Offer, for all shares of
Company Common Stock validly tendered and not withdrawn. At or prior to the
expiration of the Offer, Offeror will take all steps necessary to provide its
paying agent any funds necessary to make the payments contemplated by the Offer.
Upon the execution of this Agreement, the Merger Consideration shall be the
amount set forth in Section 3.1(c) payable without interest thereon, and such
initial Merger Consideration shall be adjusted only in accordance with the
following provisions. The Merger Consideration payable in connection with the
Offer shall automatically be adjusted appropriately for any stock dividend,
split or any conversion or reclassification in respect of the Company Common
Stock occurring after the date hereof and prior to the date of consummation of
the Offer, which shall occur only in accordance with the terms of this
Agreement. Buyer and MergerCo shall have the right to increase the Merger
Consideration in effect hereunder at any time, in which case the consideration
payable with respect to the Offer shall also be so increased.
1.1.2 SECURITIES LAW COMPLIANCE. On the date of commencement
of the Offer, Offeror shall file with the SEC a Tender Offer Statement on
Schedule 14D-1 (together with all amendments and supplements thereto, the
"Schedule 14D-1") with respect to the Offer. The Schedule 14D-1 shall contain or
shall incorporate by reference an offer to purchase (the "Offer to Purchase")
and forms of the related letter of transmittal and any related summary
advertisement (the Schedule 14D-1, the Offer to Purchase and such other
documents, together with all supplements and amendments thereto, being referred
to herein collectively as the "Offer Documents"). Offeror and the Company agree
to promptly correct any information provided by either of them for use in the
Offer Documents which shall have become false or misleading, and Offeror further
agrees to take all steps necessary to cause the Schedule 14D-1 as so corrected
to be filed with the SEC and the other Offer Documents as so corrected to be
disseminated to holders of shares of the Company Common Stock, in each case as
and to the extent required by applicable federal securities laws. Offeror agrees
to provide the Company with a written copy of any comments it or its counsel may
receive from time to time from the SEC or its staff with respect to the Schedule
14D-1 promptly after receipt of such comments.
1.1.3 TERMINATION OF THE OFFER. Offeror shall not, without the
prior written consent of the Company, (i) terminate the Offer, except in
accordance with the terms of Annex I attached hereto, or (ii) extend the
Expiration Date, except as specifically provided herein, and in
3
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no event to a date later than April 30, 1998 or, if any necessary approvals
under the HSR Act shall not have been received by such date, in no event to a
date later than the earlier of (i) ten (10) days following receipt of such
approvals and (ii) June 30, 1998.
1.2 ACTION BY THE COMPANY.
1.2.1 APPROVAL AND RECOMMENDATION OF THE BOARD. The Company
hereby approves of and consents to the making of the Offer and represents that
(a) the Board of Directors of the Company, at a meeting duly called and held on
February 28, 1998 has (i) determined that the Merger and the Offer, taken
together, are fair to, and in the best interests of, the Company and the holders
of the Company Common Stock, (ii) advised, authorized and approved this
Agreement and approved the Merger and the other transactions contemplated hereby
(including but not limited to the Offer), (iii) recommended that the
stockholders of the Company accept the Offer and authorize and approve this
Agreement and the transactions contemplated hereby, and (iv) agreed to recommend
that holders of Company Common Stock tender their shares of Company Common Stock
pursuant to the Offer, and (b) Donaldson, Lufkin & Jenrette Securities
Corporation has delivered to the Board an oral opinion on February 28, 1998
which will be confirmed promptly in writing, to the effect that, as of such
date, the consideration to be received by the holders of shares of Company
Common Stock pursuant to the Offer and the Merger, taken together, is fair to
the holders of shares of Company Common Stock from a financial point of view.
Subject to the provisions of Section 7.6 hereof and the other provisions of this
Agreement, the Company hereby consents to the inclusion in the Offer Documents
prepared in connection with the Offer of the recommendation of the Board of
Directors of the Company described in the immediately preceding sentence.
1.2.2 SECURITIES LAW COMPLIANCE. On the date of commencement
of the Offer, the Company shall file with the SEC a Solicitation/Recommendation
Statement on Schedule 14D-9 (together with all amendments and supplements
thereto, the "Schedule 14D-9") containing, subject to the provisions of Section
6.6 hereof and the other provisions of this Agreement, the recommendation of the
Board of Directors of the Company described in Section 1.2.1 and shall mail the
Schedule 14D-9 to the stockholders of the Company. The Schedule 14D-9 will not
contain any untrue statement of a material fact or omit to state any material
fact required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they were made, not
misleading. The Company and Offeror agree to correct promptly any information
provided by any of them for use in the Schedule 14D-9 which shall have become
false or misleading, and the Company further agrees to take all steps necessary
to cause the Schedule 14D-9 as so corrected to be filed with the SEC and
disseminated to holders of shares of the Company Common Stock, in each case as
and to the extent required by applicable federal securities laws. Buyer and its
counsel shall be given a reasonable opportunity to review and comment upon the
Schedule 14D-9 and all amendments and supplements thereto prior to their filing
with the SEC or dissemination to stockholders of the
4
<PAGE>
Company. The Company agrees to provide Offeror with a written copy of any
comments it or its counsel may receive from time to time from the SEC or its
staff with respect to the Schedule 14D-9, promptly after receipt of such
comments.
1.2.3 STOCKHOLDER LISTS. In connection with the Offer and the
Merger, the Company shall furnish Offeror with mailing labels containing the
names and addresses of all record holders of shares of Company Common Stock and
with security position listings of shares of Company Common Stock held in stock
depositories, each as of a recent date, and of those persons becoming record
holders subsequent to such date. The Company shall furnish Offeror with all such
additional information (including, but not limited to, updated lists of holders
of shares of Company Common Stock and their addresses, mailing labels and lists
of security positions) and such other assistance as Offeror or its agents may
reasonably request in communicating the Offer to the record and beneficial
owners of shares of the Company Common Stock. Subject to the requirements of
applicable law, and except for such steps as are necessary to disseminate the
Offer Documents and any other documents necessary to consummate the Offer or the
Merger, Offeror shall hold in confidence the information contained in such
labels, listings and files, shall use such information only in connection with
the Offer and the Merger, and, if this Agreement shall be terminated in
accordance with Section 9.1, shall deliver to the Company all copies of such
information then in its or any of its affiliate's possession.
1.2.4 DIRECTORS.
(a) Effective upon the acceptance for payment by Offeror of
shares pursuant to the Offer such that Buyer or MergerCo shall own at least a
majority of the Fully Diluted Shares, the Offeror shall be entitled to designate
the number of Directors, rounded up to the next whole number, on the Company's
Board of Directors that equals the product of (i) the total number of directors
on the Company's Board of Directors (giving effect to the election of any
additional directors pursuant to this Section) and (ii) the percentage that the
number of shares of Company Common Stock owned by Offeror (including shares of
Company Common Stock accepted for payment) bears to the total number of Shares
of Company Common Stock outstanding, and the Company shall take all action
necessary to cause Offeror's designees to be elected or appointed to the
Company's Board of Directors, including, without limitation, increasing the
number of directors, and seeking and accepting resignations of incumbent
directors. At such times, the Company will use its best efforts to cause
individuals designated by Offeror to constitute the same percentage as such
individuals represent on the Company's Board of Directors of (x) each committee
of the Board (other than any committee of the Board established to take action
under this Agreement), (y) each board of directors of each Subsidiary of the
Company and (z) each committee of each such board. provided; however, that in
the event that Offeror's designees are elected to the Board of Directors of the
Company, until the Effective Time, such Board of Directors shall have at least
two directors who are directors of the Company on the date of this Agreement and
who are not officers of the Company or any of its subsidiaries
5
<PAGE>
(the "Independent Directors") and; provided further that, in such event, if the
number of Independent Directors shall be reduced below two for any reason
whatsoever, the remaining Independent Director shall designate a person to fill
such vacancy who shall be deemed to be an Independent Director for purposes of
this Agreement or, if no Independent Directors then remain, the other directors
of the Company on the date hereof shall designate two persons to fill such
vacancies who shall not be officers or affiliates of the Company or any of its
Subsidiaries, or officers or affiliates of Buyer or any of its subsidiaries, and
such persons shall be deemed to be Independent Directors for purposes of this
Agreement. Notwithstanding anything in this Agreement to the contrary, the
affirmative vote of the majority of the Independent Directors shall be required
to (i) amend or otherwise modify the Certificate of Incorporation of the
Company, (ii) approve any amendment, modification or waiver by the Company of
any provisions of this Agreement or (iii) approve any other action by the
Company that materially adversely affects the interests of the stockholders of
the Company (other than Buyer or MergerCo) with respect to the transactions
contemplated hereby, including without limitation, any actions which would
constitute a breach by the Company of its representations, warranties or
covenants contained herein. The provisions of this Section 1.2.4(a) are in
addition to and shall not limit any rights which the Buyer, MergerCo or any of
their affiliates may have as a holder or beneficial owner of shares as a matter
of law with respect to the election of directors or otherwise.
(b) The Company's obligations to appoint designees to the
Board of Directors shall be subject to Section 14(f) of the Exchange Act and
Rule 14f-1 promulgated thereunder. Subject to applicable law, the Company shall
promptly take all action requested by Offeror necessary to effect any such
election, including mailing to its stockholders the information statement
containing the information required by Section 14(f) of the Exchange Act and
Rule 14f-1 promulgated thereunder, and the Company agrees to make such mailing
with the mailing of the Schedule 14D-9 (provided that Offeror shall have
provided to the Company on a timely basis all information required to be
included in the Information Statement with respect to Offeror's designees). In
connection with the foregoing, the Company will promptly, at the option of
Offeror, either increase the size of the Company's Board of Directors and/or
obtain the resignation of such number of its current directors as is necessary
to enable Offeror's designees to be elected or appointed to, and to constitute a
majority of the Company's Board of Directors as provided above. Offeror will
supply to the Company in writing and be solely responsible for any information
with respect to itself and its nominees, officers, directors and affiliates
required by Section 14(f) and Rule 14f-1.
ARTICLE II
THE MERGER
2.1. THE MERGER. Upon the terms and subject to the conditions set forth
in this Agreement, and in accordance with the relevant state statute, MergerCo
or such wholly owned
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subsidiary of MergerCo shall be merged with and into the Company at the
Effective Time of the Merger (as hereafter defined). Upon the Effective Time of
the Merger, the separate existence of MergerCo or such wholly owned subsidiary
of MergerCo shall cease, and the Company shall continue as the surviving
corporation (the "Surviving Corporation") and shall continue under the name
Signature Brands USA, Inc. In the event that a wholly owned Subsidiary of
MergerCo rather than MergerCo is merged with and into the Company, references
herein to MergerCo with respect to the Merger shall be deemed to be references
to such wholly owned Subsidiary of MergerCo.
2.2. CLOSING. Unless this Agreement shall have been terminated and the
transactions herein contemplated shall have been abandoned pursuant to Section
9.1 and subject to the satisfaction or waiver of the conditions set forth in
Article VIII, the closing of the Merger (the "Closing") will take place at 10:00
a.m. on the second business day after satisfaction or waiver of the conditions
set forth in Article VIII (the "Closing Date"), at the offices of Hutchins,
Wheeler & Dittmar, A Professional Corporation, unless another date, time or
place is agreed to in writing by the parties hereto.
2.3. EFFECTIVE TIME OF THE MERGER. On the Closing Date, the Surviving
Corporation shall file a certificate of merger or, if applicable, MergerCo shall
file a certificate of ownership and merger (the "Certificate of Merger")
executed in accordance with the Delaware General Corporation Law ("DGCL") with
the Delaware Secretary of State and the Merger shall become effective at such
time as the Certificate of Merger is duly filed with the Secretary of State of
the State of Delaware or at such other time as is specified in the Certificate
of Merger as MergerCo and the Company shall agree should be specified in the
Certificate of Merger (the time the Merger becomes effective being the
"Effective Time of the Merger").
2.4. EFFECTS OF THE MERGER. The Merger shall have the effects set forth
in the DGCL
2.5. CERTIFICATE OF INCORPORATION; BY-LAWS. (a) The Certificate of
Incorporation of MergerCo, as in effect immediately prior to the Effective Time
of the Merger, shall become the Certificate of Incorporation of the Surviving
Corporation except that it shall be amended to change the name of the Surviving
Corporation to Signature Brands USA, Inc. and, as so amended, until thereafter
further amended as provided therein and under the DGCL, it shall be the
Certificate of Incorporation of the Surviving Corporation following the Merger.
(b) The By-laws of MergerCo as in effect at the Effective Time of the
Merger shall be the By-laws of the Company following the Merger until thereafter
changed or amended as provided therein or by applicable law.
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2.6. DIRECTORS. The directors of MergerCo at the Effective Time of the
Merger shall be the directors of the Company following the Merger, until the
earlier of their resignation or removal or until their respective successors are
duly elected and qualified, as the case may be.
2.7. OFFICERS. The officers of the Company at the Effective Time of the
Merger shall be the officers of the Company following the Merger, until the
earlier of their resignation or removal or until their respective successors are
duly elected and qualified, as the case may be.
ARTICLE III
EFFECT OF THE MERGER ON THE CAPITAL STOCK OF THE
CONSTITUENT CORPORATIONS
3.1. EFFECT ON CAPITAL STOCK. As of the Effective Time of the Merger,
by virtue of the Merger and without any action on the part of the holder of any
shares of Company Common Stock or any shares of capital stock of MergerCo:
(a) COMMON STOCK OF MERGERCO. Each share of common stock of MergerCo
issued and outstanding immediately prior to the Effective Time of the Merger
shall be converted into one share of the common stock, par value $.01 per share,
of the Company.
(b) CANCELLATION OF TREASURY STOCK. Each share of Company Common Stock
that is owned by the Company or by any wholly owned subsidiary of the Company
shall automatically be canceled and retired and shall cease to exist, and no
cash or other consideration shall be delivered or deliverable in exchange
therefor.
(c) CONVERSION OF COMPANY COMMON STOCK. Except as otherwise provided
herein and subject to Section 3.3, each issued and outstanding share of Company
Common Stock, other than shares owned by Buyer, MergerCo or any other direct or
indirect subsidiary of Buyer, the Company or any wholly owned Subsidiary of the
Company (collectively, the "Excluded Shares"), and other than Dissenting Shares
and treasury stock, shall be converted into the right to receive in cash from
the Company following the Merger an amount equal to $8.25 (the "Merger
Consideration"), without interest, upon surrender of the certificates formerly
representing such shares pursuant to Section 3.3. The term "Merger
Consideration" shall mean the per share amount in reference to the consideration
designated on a per share basis, and otherwise shall refer to the aggregate
consideration represented by the per share amount multiplied by the total number
of shares of Company Common Stock then outstanding.
(d) DISSENTING SHARES. Shares of Company Common Stock issued and
outstanding immediately prior to the Effective Time of the Merger held by a
holder who has the right to demand payment for and an appraisal of such shares
in accordance with the DGCL (or any
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successor provision) ("Dissenting Shares") shall not be converted into the right
to receive Merger Consideration unless such holder fails to perfect or otherwise
withdraws, forfeits or loses such holder's right to such payment or appraisal,
if any. If, after the Effective Time of the Merger, such holder fails to perfect
or withdraws, forfeits or loses any such right to appraisal, each share of such
holder shall be treated as a share that had been converted as of the Effective
Time of the Merger into the right to receive Merger Consideration in accordance
with this Section 3.1. The Company shall give prompt notice to MergerCo of any
demands received by the Company for appraisal of shares of Company Common Stock,
and MergerCo shall have the right to participate in and, at MergerCo's
reasonable discretion, to direct all communications, negotiations and
proceedings with respect to such demands. The Company shall not, except with the
prior written consent of MergerCo, make any payment with respect to, or settle
or offer to settle, any such demands.
(e) CANCELLATION AND RETIREMENT OF EXCLUDED SHARES. Each Excluded Share
issued and outstanding immediately prior to the Effective Time shall, by virtue
of the Merger and without any action on the part of the holder thereof, cease to
be outstanding, shall be canceled and retired without payment of any
consideration therefor and shall cease to exist.
(f) CANCELLATION AND RETIREMENT OF COMPANY COMMON STOCK. As of the
Effective Time of the Merger, all shares of Company Common Stock (other than
shares referred to in Section 3.1(b)) issued and outstanding immediately prior
to the Effective Time of the Merger, shall no longer be outstanding and shall
automatically be canceled and retired and shall cease to exist, and each holder
of a certificate representing any such shares of Company Common Stock shall, to
the extent such certificate represents such shares, cease to have any rights
with respect thereto, except the right to receive the Merger Consideration
applicable thereto, without interest, upon surrender of such certificate in
accordance with Section 3.3 or the right, if any, to receive payment from the
Surviving Corporation for the "fair value" of such shares as determined in
accordance with the provisions of Section 262 of the DGCL.
3.2. STOCK PLANS AND WARRANTS.
(a) As soon as practicable following the date of this Agreement, the
Board of Directors of the Company (or, if appropriate, any committee
administering the Stock Plans (as defined below)) shall adopt such resolutions
or take such other actions as may be required to effect the following:
(i) cause written notification of the Merger to be given to each holder
of a Company Stock Option (as defined below) by the Board of Directors as
provided in the Stock Plans to the effect that each such holder of a Company
Stock Option may exercise such Company Stock Option (whether or not such Company
Stock Option was
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exercisable immediately before such notification was given) no later than thirty
days from the date of such notification (the "Exercise Period"); and
(ii) adjust the terms of all outstanding employee stock options to
purchase shares of Company Common Stock ("Company Stock Options") granted under
the Company's Chief Executive Officer Stock Option Plan, 1997 Stock Option and
Incentive Plans, 1995 Stock Option and Incentive Plan and Second Amended and
Restated 1992 Stock Option Plan (the "Stock Option Plans") to provide that, at
the Effective Time of the Merger each Company Stock Option outstanding
immediately prior to the Effective Time of the Merger shall vest as a
consequence of the Merger and shall be canceled in exchange for a payment from
the Company after the Merger (subject to any applicable withholding taxes) equal
to the product of (1) the total number of shares of Company Common Stock subject
to such Company Stock Option and (2) the excess of the Merger Consideration over
the exercise price per share of Company Common Stock subject to such Company
Stock Option and applicable withholding taxes, payable in cash immediately
following the Effective Time of the Merger, except as otherwise set forth on
Exhibit 3.2(b)(ii); and
(iii) except as provided herein or as otherwise agreed to by the
parties, the Stock Option Plan and any other plan, program or arrangement
providing for the issuance or grant of any other interest in respect of the
capital stock of the Company or any subsidiary shall terminate as of the
Effective Time of the Merger, and the Company shall ensure that, following the
Effective Time of the Merger, no holder of a Company Stock Option nor any
participant in any Stock Option Plan shall have any right thereunder to acquire
equity securities of the Company following the Merger.
(b) Each outstanding Warrant (each a "Warrant") governed by that
certain Warrant Agreement, dated as of August 17, 1994, by and between the
Company and American Bank National Association, as Warrant Agent (the "Warrant
Agreement"), shall at the Effective Time automatically without any further
action of the Company or the holders thereof be converted into the right to
receive an amount equal to the difference between the Merger Consideration and
the Exercise Price (as defined in the Warrant Agreement) in accordance with the
terms of the Warrant Agreement.
(c) The Company hereby represents and warrants that upon taking of the
actions specified above, immediately following the Effective Time of the Merger,
and after giving effect to the payments described in this Section 3.2, no holder
of a Company Stock Option nor any participant in any Stock Option Plan nor the
holder of any warrant to purchase Company Common Stock shall have the right
thereunder to acquire equity securities of the Company, or any other benefit,
after the Merger.
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3.3. EXCHANGE OF CERTIFICATES.
(a) EXCHANGE AGENT. Prior to the Effective Time of the Merger, Buyer
shall designate a bank or trust company to act as agent for the holders of
Company Common Stock in connection with the Merger (the "Exchange Agent") (who
shall be reasonably acceptable to the Company) to receive the funds to which
holders of the shares of Company Common Stock are entitled to pursuant to this
Article III. Buyer shall, from time to time, make available to the Exchange
Agent funds in amounts and at times necessary for the payment of the Merger
Consideration as provided herein. Promptly after the Effective Time, the
Exchange Agent shall mail to each record holder, as of the Effective Time, of an
outstanding certificate or certificates which immediately prior to the Effective
Time represented shares of Company Common Stock (the "Certificates"), a letter
of transmittal and instructions for use in effecting the surrender of the
Certificates for payment therefor (or such other documents as may reasonably be
required in connection with such surrender) in customary form to be agreed by
MergerCo and the Company prior thereto.
(b) EXCHANGE PROCEDURES. (i) After the Effective Time of the Merger,
each holder of an outstanding Certificate or Certificates shall, upon surrender
to the Exchange Agent of such Certificate or Certificates and acceptance thereof
by the Exchange Agent, be entitled to receive the amount of cash into which such
Certificate or Certificates surrendered shall have been converted pursuant to
this Agreement.
(i) After the Effective Time of the Merger, there shall be no further
transfer on the records of the Company or its transfer agent of Certificates,
and if Certificates are presented to the Company for transfer, they shall be
canceled against delivery of cash. If Merger Consideration is to be remitted to
a name other than that in which the Certificate surrendered for exchange is
registered, it shall be a condition of such exchange that the Certificate so
surrendered shall be properly endorsed, with signature guaranteed, or otherwise
in proper form for transfer and that the person requesting such exchange shall
pay to the Company or its transfer agent any transfer or other taxes required or
establish to the satisfaction of the Company or its transfer agent that such tax
has been paid or is not applicable. Until surrendered as contemplated by this
Section 3.3(b), each Certificate shall be deemed at any time after the Effective
Time of the Merger to represent only the right to receive upon such surrender
the Merger Consideration applicable thereto as contemplated by Section 3.1. From
and after the Effective Time, the holders of Certificates evidencing ownership
of the shares outstanding immediately prior to the Effective Time shall cease to
have any rights with respect to such shares, except as otherwise provided for
herein or by applicable law. No interest will be paid or will accrue on any cash
payable as Merger Consideration or in lieu of any fractional shares of Company
Common Stock. The right of any stockholder to
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receive the Merger Consideration shall be subject to reduction to reflect any
applicable withholding obligation for Taxes.
(ii) In the event that any Certificate shall have been lost, stolen or
destroyed, upon the making of an affidavit of that fact by the person claiming
such Certificate to be lost, stolen or destroyed and, if required by Buyer, the
posting by such person of a bond in such amount as Buyer may direct as indemnity
against any claim that may be made against it with respect to such Certificate,
or the provision of other reasonable assurances requested by Buyer, the Exchange
Agent will issue in exchange for such lost, stolen or destroyed Certificate the
Merger Consideration deliverable in respect thereof pursuant to this Agreement.
(c) NO FURTHER OWNERSHIP RIGHTS IN COMPANY COMMON STOCK EXCHANGED FOR
CASH. The Merger Consideration paid upon the surrender for exchange of
Certificates in accordance with the terms of this Article II shall be deemed to
have been issued and paid in full satisfaction of all rights pertaining to such
shares.
(d) TERMINATION OF EXCHANGE FUND. Any portion of the Merger
Consideration deposited with the Exchange Agent pursuant to this Section 3.3
(the "Exchange Fund") which remains undistributed to the holders of the
Certificates for six months after the Effective Time of the Merger shall be
delivered to the Company, upon demand, and any holders of shares of Company
Common Stock prior to the Merger who have not theretofore complied with this
Article II shall thereafter look only to the Company and only as general
creditors thereof for payment of their claim for cash, if any, to which such
holders may be entitled.
(e) NO LIABILITY. None of Buyer, MergerCo, the Company or the Exchange
Agent shall be liable to any person in respect of any Merger Consideration from
the Exchange Fund delivered to a public official pursuant to any applicable
abandoned property, escheat or similar law.
(f) INVESTMENT OF EXCHANGE FUND. The Exchange Agent shall invest any
cash included in the Exchange Fund, as directed by the Buyer, on a daily basis.
Any interest and other income resulting from such investments shall be paid to
the Buyer.
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ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company hereby represents and warrants to Buyer and MergerCo as
follows:
4.1 ORGANIZATION, STANDING AND CORPORATE POWER. Each of the Company and
each of its Subsidiaries (as defined in Section 4.2) is duly organized, validly
existing and in good standing under the laws of the jurisdiction in which it is
incorporated and has the requisite corporate power and authority to carry on its
business as now being conducted. Each of the Company and each of its
Subsidiaries is duly qualified or licensed to do business and is in good
standing in each jurisdiction in which the nature of its business or the
ownership or leasing of its properties makes such qualification or licensing
necessary, other than in such jurisdictions where the failure to be so qualified
or licensed (individually or in the aggregate) would not have a Material Adverse
Effect (as defined in Section 10.4) with respect to the Company. Attached as
Section 4.1 of the schedule (the "Disclosure Schedule") delivered to MergerCo by
the Company at the time of execution of this Agreement are complete and correct
copies of the Amended and Restated Certificate of Incorporation, as amended, and
bylaws, as amended, of the Company. The Company has delivered to MergerCo
complete and correct copies of the articles or certificates of incorporation and
by-laws (or other comparable organizational documents) of each of its
Subsidiaries, in each case as amended to the date of this Agreement.
4.2 SUBSIDIARIES. The only direct or indirect subsidiaries of the
Company are those listed in Section 4.2 of the Disclosure Schedule (the
"Subsidiaries"). All the outstanding shares of capital stock of each such
Subsidiary have been validly issued and are fully paid and nonassessable and are
owned (of record and beneficially) by the Company, by another wholly owned
Subsidiary of the Company or by the Company and another such wholly owned
Subsidiary, free and clear of all pledges, claims, liens, charges, encumbrances
and security interests of any kind or nature whatsoever (collectively, "Liens").
Except for the ownership interests set forth in Section 4.2 of the Disclosure
Schedule, the Company does not own, directly or indirectly, any capital stock or
other ownership interest in any corporation, partnership, business association,
joint venture or other entity.
4.3 CAPITAL STRUCTURE. The authorized capital stock of the Company
consists of 20,000,000 shares of Company Common Stock, par value $.01 per share.
Subject to any Permitted Changes (as defined in Section 6.1(d)) there were, as
of the close of business on January 16, 1998: (i) 9,174,261 shares of Company
Common Stock issued and outstanding; (ii) no shares of Company Common Stock are
held in the treasury of the Company; (iii) 1,634,853 shares of Company Common
Stock are reserved for issuance
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upon exercise of outstanding Company Stock Options (of which options 190,500
shares will be cancelled prior to the consummation of the Offer); and (iv)
767,200 shares of Company Common Stock issuable upon exercise of outstanding
Warrants (the "Warrants"). Section 4.3 of the Disclosure Schedule sets forth the
exercise price for the outstanding Company Stock Options and the Warrants.
Except as set forth above or in Section 3.3 of the Disclosure Schedule, no
shares of capital stock or other equity securities of the Company are issued,
reserved for issuance or outstanding. All outstanding shares of capital stock of
the Company are, and all shares which may be issued pursuant to the Stock Option
Plan including any increases pursuant to existing contractual obligations will
be, when issued, duly authorized, validly issued, fully paid and nonassessable
and not subject to preemptive rights. Except as set forth on Section 4.3 of the
Disclosure Schedule, there are no outstanding bonds, debentures, notes or other
indebtedness or other securities of the Company having the right to vote (or
convertible into, or exchangeable for, securities having the right to vote) on
any matters on which stockholders of the Company may vote. Except as set forth
above, there are no outstanding securities, options, warrants, calls, rights,
commitments, agreements, arrangements or undertakings of any kind to which the
Company or any of its Subsidiaries is a party or by which any of them is bound
obligating the Company or any of its Subsidiaries to issue, deliver or sell, or
cause to be issued, delivered or sold, additional shares of capital stock or
other equity or voting securities of the Company or of any of its Subsidiaries
or obligating the Company or any of its Subsidiaries to issue, grant, extend or
enter into any such security, option, warrant, call, right, commitment,
agreement, arrangement or undertaking. Other than as disclosed in the most
recent balance sheet of the Company included in the SEC Documents (as defined
below) or as set forth in Section 4.3 of the Disclosure Schedule, no
indebtedness for borrowed money of the Company or its Subsidiaries contains any
restriction upon the incurrence of indebtedness for borrowed money by the
Company or any of its Subsidiaries or restricts the ability of the Company or
any of its Subsidiaries to grant any Liens on its properties or assets. Other
than the Company Stock Options and other than as disclosed in Section 4.3 of the
Disclosure Schedule, (i) there are no outstanding contractual obligations,
commitments, understandings or arrangements of the Company or any of its
Subsidiaries to repurchase, redeem or otherwise acquire or make any payment in
respect of any shares of capital stock of the Company or any of its Subsidiaries
and (ii) to the knowledge of the Company, there are no irrevocable proxies with
respect to shares of capital stock of the Company or any subsidiary of the
Company. Section 4.3 of the Disclosure Schedule sets forth the record and, to
the knowledge of the Company, beneficial ownership of, and voting power in
respect of, the capital stock of the Company held by the Company's directors,
officers and stockholders owning five percent (5%) or more of the Company's
outstanding common stock. Except as set forth on Section 4.3 of the Disclosure
Schedule, there are no agreements or arrangements pursuant to which the Company
is or could be required to register shares of Company Common Stock or other
securities under
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the Securities Act of 1933, as amended (the "Securities Act") or other
agreements or arrangements with or among any security holders of the Company
with respect to securities of the Company.
4.4 AUTHORITY; NONCONTRAVENTION. The Company has the requisite
corporate and other power and authority to enter into this Agreement and,
subject to the Company Stockholder Approval with respect to the consummation of
the Merger, to consummate the transactions contemplated hereby. The Offer, the
execution and delivery of this Agreement by the Company and the consummation by
the Company of the transactions contemplated hereby and thereby have been duly
authorized by the Company's Board of Directors, which constitutes all necessary
corporate action on the part of the Company, subject, in the case of the Merger,
to the Company Stockholder Approval. This Agreement has been duly executed and
delivered by the Company and constitutes a valid and binding obligation of the
Company, enforceable against the Company in accordance with its terms. Except
for the Company's credit facility and except as disclosed in Section 4.4 of the
Disclosure Schedule, the execution and delivery of this Agreement does not, and
the consummation of the transactions contemplated by the Offer and this
Agreement and compliance with the provisions hereof will not, conflict with, or
result in (a) any breach or violation of, or default (with or without notice or
lapse of time, or both) under, or right of termination, cancellation,
acceleration or "put", with respect to any obligation or (b) the loss of a
benefit or other right or (c) the creation of any Lien upon any of the
properties or assets of the Company or any of its Subsidiaries under, (i) the
Certificate of Incorporation, as amended, or By-laws, as amended, of the Company
or the comparable organizational documents of any of its Subsidiaries, (ii) any
loan or credit agreement, note, note purchase agreement, bond, mortgage,
indenture, lease or other agreement, instrument, permit, concession, franchise
or license applicable to the Company or any of its Subsidiaries or their
respective properties or assets or (iii) subject to the governmental filings and
other matters referred to in the following sentence, any judgment, order,
decree, statute, law, ordinance, rule, regulation or arbitration award
applicable to the Company or any of its Subsidiaries or their respective
properties or assets, other than, in the case of clauses (ii) and (iii), any
such conflicts, breaches, violations, defaults, rights, losses or Liens that
individually or in the aggregate would not have a Material Adverse Effect with
respect to the Company or would not prevent, hinder or materially delay the
ability of the Company and/or MergerCo to consummate the transactions
contemplated by this Agreement if not cured or waived by the Closing Date. No
consent, approval, order or authorization of, or registration, declaration or
filing with, or notice to, any Federal, state or local government or any court,
administrative agency or commission or other governmental authority or agency,
domestic or foreign (a "Governmental Entity"), or any other person under any
material agreement, indenture or other instrument to which the Company or any
Subsidiary is a party or to which any of its properties is subject, is required
by or with respect to the Company or any of its
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Subsidiaries in connection with the execution and delivery of this Agreement by
the Company or the consummation by the Company of the transactions contemplated
hereby, except for (i) the filing of a pre-merger notification and report form
by the Company under the Hart-Scott-Rodino Antitrust Improvements Act of 1976,
as amended (the "HSR Act"), (ii) the filing with the SEC of (x) a proxy
statement relating to the Company Stockholder Approval (such proxy statement as
amended or supplemented from time to time, the "Proxy Statement"), and (y) such
reports under the Exchange Act as may be required in connection with the Offer
and this Agreement and the transactions contemplated by this Agreement, (iii)
the filing of the Certificate of Merger with the Secretary of the State of
Delaware and appropriate documents with the relevant authorities of other states
in which the Company is qualified to do business and (iv) such other consents,
approvals, orders, authorizations, registrations, declarations, filings or
notices as are set forth in Section 4.4 of the Disclosure Schedule.
4.5 SEC DOCUMENTS; UNDISCLOSED LIABILITIES. Except as disclosed on
Schedule 4.5 of the Disclosure Schedule, the Company has timely filed all
required reports, schedules, forms, statements and other documents with the
Securities and Exchange Commission ("SEC") since January 1, 1996 (collectively,
and in each case including all exhibits and schedules thereto and documents
incorporated by reference therein, as amended, the "SEC Documents"). As of their
respective dates, the SEC Documents complied in all material respects with the
requirements of the Securities Act, or the Exchange Act, as the case may be, and
the rules and regulations of the SEC promulgated thereunder applicable to such
SEC Documents, and none of the SEC Documents (including any and all financial
statements included therein) as of such dates contained any untrue statement of
a material fact or omitted to state a material fact required to be stated
therein or necessary in order to make the statements therein, in the light of
the circumstances under which they were made, not misleading. The consolidated
financial statements of the Company included in all SEC Documents (the "SEC
Financial Statements") comply as to form in all material respects with
applicable accounting requirements and the published rules and regulations of
the SEC with respect thereto, have been prepared in accordance with generally
accepted accounting principles (except, in the case of unaudited consolidated
quarterly statements, as permitted by Form 10-Q of the SEC) applied on a
consistent basis during the periods involved (except as may be indicated in the
notes thereto) and fairly present the consolidated financial position of the
Company and its consolidated Subsidiaries as of the dates thereof and the
consolidated results of their operations, stockholders' equity, and cash flows
for the periods then ended (subject, in the case of unaudited quarterly
statements, to normal year-end audit adjustments, none of which, individually or
in the aggregate is material). Except as set forth in Schedule 4.5 of the
Disclosure Schedule and except as set forth in the SEC Documents filed and
publicly available prior to the date of this Agreement, and except for
liabilities and obligations incurred in the ordinary course of business
consistent
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with past practice since the date of the most recent consolidated balance sheet
included in the SEC Documents filed and publicly available prior to the date of
this Agreement (the "Balance Sheet"), neither the Company nor any of its
subsidiaries has any liabilities or obligations of any nature (whether accrued,
absolute, contingent or otherwise) required by generally accepted accounting
principles to be set forth on a consolidated balance sheet of the Company and
its consolidated subsidiaries or in the notes thereto.
4.6 INFORMATION SUPPLIED. None of the information supplied or to be
supplied by the Company for inclusion or incorporation by reference in the Proxy
Statement will, at the date it is first mailed to the Company's stockholders or
at the time of the Stockholders Meeting, contain any untrue statement of a
material fact or omit to state any material fact required to be stated therein
or necessary in order to make the statements therein, in the light of the
circumstances under which they are made, not misleading, except that no
representation or warranty is made by the Company with respect to the
information supplied by MergerCo or any affiliate of MergerCo in writing
specifically for inclusion in the Proxy Statement. The Proxy Statement will
comply as to form in all material respects with the requirements of the Exchange
Act and the rules and regulations promulgated thereunder. Neither the Schedule
14D-9 nor any information supplied by the Company for inclusion in the Offer
Documents will, at the respective times the Schedule 14D-9, the Offer Documents
or any amendments or supplements thereto are filed with the SEC or are first
published, sent or given to stockholders of the Company, contain any untrue
statement of a material fact or omit to state a material fact required to be
stated therein or necessary to make the statements contained therein, in the
light of the circumstances under which they were made, not misleading (except to
the extent information contained therein is based upon information supplied
solely by the Buyer or MergerCo). The Schedule 14D-9 shall comply in all
material respects with the requirements of the Exchange Act and the rules and
regulations promulgated thereunder.
4.7 ABSENCE OF CERTAIN CHANGES OR EVENTS. Except as disclosed in the
SEC Documents or on Section 4.7 of the Disclosure Schedule, since the date of
the Balance Sheet, the Company has conducted its business only in the ordinary
course consistent with past practice, and there is not and has not been: (i) any
Material Adverse Change with respect to the Company; (ii) any event which, if it
had taken place following the execution of this Agreement, would not have been
permitted by Section 6.1 without the prior consent of MergerCo; or (iii) any
condition, event or occurrence which would reasonably be expected to prevent,
hinder or materially delay the ability of the Company to consummate the
transactions contemplated by this Agreement.
4.8 LITIGATION; LABOR MATTERS; COMPLIANCE WITH LAWS. (a) Except as
disclosed in the SEC Documents filed and publicly available prior to the date of
this Agreement, there is (i) no suit, action or proceeding or investigation
pending and, (ii) to the
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knowledge of the Company, no suit, action or proceeding or investigation
threatened against or affecting the Company or any of its Subsidiaries that,
individually or in the aggregate, would reasonably be expected to have a
Material Adverse Effect with respect to the Company or (iii) prevent, hinder or
materially delay the ability of the Company to consummate the transactions
contemplated by this Agreement nor is there any judgment, decree, injunction,
rule or order of any Governmental Entity or arbitrator outstanding against the
Company or any of its Subsidiaries having, or which in the future could have,
any such effect.
(b) Except as disclosed in Section 4.8 of the Disclosure Schedule, (i)
neither the Company nor any of its Subsidiaries is a party to, or bound by, any
collective bargaining agreement, contract or other agreement or understanding
with a labor union or labor organization; (ii) neither the Company nor any of
its Subsidiaries is the subject of any proceeding asserting that it or any
subsidiary has committed an unfair labor practice or seeking to compel it to
bargain with any labor organization as to wages or conditions of employment;
(iii) there is no strike, work stoppage or other labor dispute involving it or
any of its Subsidiaries pending or, to its knowledge, threatened, nor has there
been in the three year period prior to the date of this Agreement and, to the
knowledge of the Company, there are no current union organizing activities among
the Employees of the Company or any of its Subsidiaries which are reasonably
likely to result in a Material Adverse Effect; (iv) there is no grievance
arising out of any collective bargaining agreement or other grievance procedure
against the Company or any of its subsidiaries, except such grievances that have
not and will not prevent the Company from carrying on its business substantially
as now conducted or might reasonably be expected to result in a Material Adverse
Effect; (v) no charges with respect to or relating to the Company or any of its
subsidiaries are pending before the Equal Employment Opportunity Commission or
any other agency responsible for the prevention of unlawful employment
practices, except such charges that have not and will not prevent the Company
from carrying on its business substantially as now conducted or might reasonably
be expected to result in a Material Adverse Effect; (vi) neither of the Company
or any of its subsidiaries has received notice of the intent of any Federal,
state, local or foreign agency responsible for the enforcement of labor or
employment laws to conduct an investigation which is reasonably likely to result
in a Material Adverse Effect; and (vii) the Company is not liable for any
severance pay or other payments to any employee or former employee, or any other
person, arising from the termination of employment, or other change in the legal
relationship with such person, under any benefit or severance policy, practice,
agreement, plan, or program of the Company, nor will the Company have any
liability which exists or arises, or may be deemed to exist or arise, under any
applicable law or otherwise, as a result of or in connection with the
transactions contemplated hereunder or as a result of the termination by the
Company of any persons employed by the Company or any of its Subsidiaries on or
prior to the Effective Time of the Merger.
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(c) The ownership of the assets of and the conduct of the business of
the Company and each of its Subsidiaries have not been in violation of, and
comply with all statutes, laws, regulations, ordinances, rules, judgments,
orders, decrees or arbitration awards applicable thereto, except for violations
or failures so to comply, if any, that, individually or in the aggregate, would
not reasonably be expected to have a Material Adverse Effect with respect to the
Company.
(d) Each of the Company and its Subsidiaries has in effect all material
Federal, state, local and foreign governmental approvals, authorizations,
certificates, filings, franchise, licenses, notices, permits and rights,
including all authorizations under Environmental Laws ("Permits"), necessary for
it to own, lease or operate its properties and assets and to carry on its
business substantially as now conducted, and there is no actions pending to
revoke any such Permit and there has occurred no default or violation under any
such Permit which is reasonably likely to have a Material Adverse Effect.
4.9 EMPLOYEE BENEFIT PLANS. With respect to the employee benefit plans
(as that phrase is defined in section 3(3) of the Employee Retirement Income
Security Act of 1974, as amended ("ERISA")) and any other benefit or
compensation plan, program, or arrangement (including, but not limited to, each
deferred compensation and each bonus or other incentive compensation, stock
purchase, stock option and other equity compensation plan, program, agreement or
arrangement; each severance or termination pay, and each employment, termination
or severance agreement) maintained for the benefit of any current or former
employee, officer, or director of the Company or any ERISA Affiliate (as defined
below) ("Benefit Plans"), except as set forth in Section 4.9 of the Disclosure
Schedule:
(i) none of the Benefit Plans is a "multiemployer plan" within the
meaning of ERISA nor has the Company ever maintained or contributed to such a
Plan;
(ii) No Benefit Plan provides medical, surgical, hospitalization,
death or similar benefits (whether or not insured) for employees or former
employees of the Company or any other Subsidiary for periods extending beyond
their retirement or other termination of service, other than (i) coverage
mandated by applicable law, (ii) death benefits under any "pension plan," or
(iii) benefits the full cost of which is borne by the current or former employee
(or his beneficiary).
(iii) none of the Benefit Plans or any other agreement with any
employee of the Company or its Subsidiaries provides for payment of a benefit,
the increase of a benefit amount, the payment of a contingent benefit, or the
acceleration of the payment or vesting of a benefit by reason of the execution
of this Agreement or the consummation of the transactions contemplated by this
Agreement;
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(iv) each Benefit Plan intended to be qualified under section 401 (a)
of the Internal Revenue Code of 1986, as amended ("Code" has received a
favorable determination letter from the Internal Revenue Service that it is so
qualified and nothing has occurred since the date of such letter that could
reasonably be expected to result in the revocation of such determination letter;
(v) each Benefit Plan has been operated in all material respects in
accordance with its terms and the requirements of all applicable law.
(vi) No liability under Title IV or section 302 of ERISA has been
incurred by the Company or any ERISA Affiliate that has not been satisfied in
full, and no condition exists that presents a material risk to the Company or
any ERISA Affiliate of incurring any such liability, other than liability for
premiums due the Pension Benefit Guaranty Corporation ("PBGC") (which premiums
have been paid when due). Insofar as the representation made in this section
4.9(v) applies to Sections 4064, 4069 or 4204 of Title IV of ERISA, it is made
with respect to any employee benefit plan, program, agreement or arrangement
subject to Title IV of ERISA to which the Company or any ERISA Affiliate made,
or was required to make, contributions during the five (5)-year period ending on
the last day of the most recent plan year ended prior to the Effective Plan.
(vii) the Company has provided to Buyer or MergerCo (x) true and
complete copies of all Benefit Plans, (y) the most recent annual actuarial
valuation, if any, prepared for each Benefit Plan, and (z) the most recent
annual report (Form 5500), if any, required under ERISA with respect to each
Benefit Plan;
(viii) no payment that is owed or may become due to any director,
officer, employee, or agent of the Company will be non-deductible to the Company
or subject to tax under I.R.C. ss.280G or ss.4999, respectively, nor will the
Company be required to "gross up"or otherwise compensate any such person because
of the imposition of any excise tax on a payment to such person;
(ix) as of the date hereof, subject to the requirements of Section 412
of the Code or Section 302 of ERISA, no Pension Plan has incurred an accumulated
funding deficiency (as defined in Section 302 of ERISA and Section 412 of the
Code) nor has any sponsor of such a Pension Plan obtained a funding waiver (as
such terms are defined in such applicable sections and any regulations
thereunder) with respect thereto;
(x) neither the Company nor any ERISA Affiliates has engaged in, and
neither the Company nor any Affiliate knows of any other person who or which has
engaged in, any "prohibited transaction" (within the meaning of Section 406 of
ERISA or
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Section 4975 of the Code, excluding any transactions which are exempt
under Section 408 of ERISA or Section 4975 of the Code) with respect to any
Benefit Plan, which could reasonably be expected to subject the Company or any
Subsidiary or Buyer or MergerCo to any material liability;
(xi) no reportable event (as defined in ERISA and the regulations
thereunder, but excluding any such event for which the thirty (30) day notice
requirement has been waived) has occurred or is continuing with respect to any
Benefit Plan;
(xii) there are no actions, suits or claims pending (other than
routine claims for benefits) or, to the knowledge of the Company, any actions,
suits or claims (other than routine claims for benefits) which can reasonably be
expected to be asserted, against the Company with respect to any Benefit Plan or
other plan or arrangement, or against any such Benefit Plan or other plan or the
assets thereof;
(xiii) the Company and each ERISA Affiliate is, and at all relevant
times, has been in material compliance with the provisions of COBRA (as defined
below); and
(xiv) except as specifically set forth herein, the Company has not
taken any action or made any statement, promise or representation to, or
agreement with, any of its employees, officers or directors that after the
Closing, Buyer will continue or establish any Benefit Plan or other plan or
arrangement or provide any particular benefits or compensation to employees. To
the knowledge of the Company, the PBGC has not instituted proceedings to
terminate any Benefit Plan subject to Section 302 or Title IV of ERISA or
Section 412 of the Code (each, a "Title IV Plan") and no condition exists that
presents a material risk that such proceedings will be instituted.
For purposes of this Agreement, "ERISA Affiliate" shall mean any
corporation, trade or business which controls, is controlled by, or is under
common control with, the Company within the meaning of Sections 414(b), 414(c),
414(m) or 414(o) of the Code or Section 4001(a)(14) of ERISA and "COBRA" shall
mean Part 6 of Subtitle B of Title I of ERISA and Section 4980B(f) of the Code.
Schedule 4.9 of the Disclosure Schedule sets forth a complete and
accurate list of all Benefit Plans currently in effect.
4.10 TAXES. Except as disclosed in Section 4.10 of the Disclosure
Schedule, the Company and each of its Subsidiaries, and any consolidated,
combined, unitary or aggregate group for Tax purposes of which the Company or
any of its Subsidiaries is or has been a member (a "Consolidated Group") has
timely filed (or has had timely filed on
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its behalf) all Tax Returns required to be filed by it (except for certain Tax
Returns, each of which is immaterial in amount and scope, involving aggregate
liability for Taxes of no more than $100,000, which may not have been timely
filed) and all such Tax Returns are true, correct and complete in all material
respects, has paid (or has had paid on its behalf) all Taxes shown thereon to be
due and has provided adequate reserves in its financial statements, in
accordance with generally accepted accounting principles, for any Taxes that
have not been paid, whether or not shown as being due on any Tax Returns. Except
as disclosed in Section 4.10 of the Disclosure Schedule, (i) no claim for unpaid
Taxes has become a lien against the assets of the Company or any of its
Subsidiaries or is being asserted against the Company or any of its
Subsidiaries; (ii) no audit of any Tax Return that includes the Company or any
of its Subsidiaries is being conducted by a Tax authority; (iii) no extension or
waiver of the statute of limitations on the assessment of any Taxes or with
respect to any Tax Return has been granted by the Company or any of its
Subsidiaries and is currently in effect and (iv) there is no arrangement with
respect to sharing or allocating Taxes that will require any payment by the
Company or any of its Subsidiaries after the date of this Agreement. As used in
this Agreement, "Taxes" shall mean (a) all taxes of any kind, including, without
limitation, those on or measured by or referred to as income, gross receipts,
sales, use, ad valorem, franchise, profits, license, withholding, back-up
withholding, payroll, employment, excise, severance, stamp, occupation, premium,
value added, property or windfall profits taxes, customs, duties or similar
fees, assessments or charges of any kind whatsoever, together with any interest
and any penalties, additions to tax or additional amounts imposed by any
Governmental Entity, domestic or foreign (b) any liability for the payment of
any amount of the type described in (a) as a result of being a member of an
affiliated, consolidated, combined or unitary group, and (c) any liability for
the payment of any amounts as a result of being a party to any tax sharing
agreement or as a result of an express or implied obligation to indemnify
another person with respect to the payment of any amounts of the type described
in clause (a) or (b). As used in this Agreement, "Tax Return" shall mean any
return, report or statement required to be filed with any Governmental Entity
with respect to Taxes. Except as set forth on Schedule 4.10, there are no
written or, to its knowledge, oral proposed assessments of Taxes against the
Company or any of its Subsidiaries or written or, to its knowledge, oral
proposed adjustments to any Tax Return filed, pending against the Company or any
of its Subsidiaries, or written or, to its knowledge, oral proposed adjustments
to the manner in which any Tax of the Company or any of its Subsidiaries is
determined.
4.11 ENVIRONMENTAL MATTERS. Except as disclosed in Section 4.11 of the
Disclosure Schedule, and except for items of non-compliance which could not,
individually or in the aggregate, reasonably be expected to have a Material
Adverse Effect with respect to the Company:
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(a) The Company and its Subsidiaries hold and formerly held, and are,
and have been, in material compliance with, all Environmental Permits, and the
Company and its Subsidiaries are, and have been, in material compliance with all
applicable Environmental Laws;
(b) None of the Company or its Subsidiaries has received any
Environmental Claim, and none of the Company or its Subsidiaries is aware, after
diligent inquiry, of any threatened Environmental Claim or of any circumstances,
conditions or events that could reasonably be expected to give rise to a
material Environmental Claim, against the Company or any of its Subsidiaries
and, to the knowledge of the Company, as of the date of this Agreement, there
are no circumstances or conditions that may prevent or interfere with compliance
by the Company or its subsidiaries in the future with Environmental Laws
(or Environmental Permits issued thereunder) in effect as of the date of this
Agreement, except such circumstances or conditions that have not and are not
reasonably likely to result in a Material Adverse Effect;
(c) There are no Hazardous Materials present at any facility currently
owned, leased or operated by the Company or any of its Subsidiaries that could
reasonably be expected to give rise to liability of the Company or any of its
Subsidiaries under any Environmental Laws which liability could reasonably be
expected to have a Material Adverse Effect on the Company;
(d) No modification, revocation, reissuance, alteration, transfer, or
amendment of the Environmental Permits, or any review by, or approval of, any
third party of the Environmental Permits is required in connection with the
execution or delivery of this Agreement or the consummation of the transactions
contemplated hereby or the continuation of the business of the Company or its
Subsidiaries following such consummation;
(e) Hazardous Materials have not been generated, transported, treated,
stored, disposed of, released or threatened to be released at, on, from or under
any of the properties or facilities currently or previously owned or leased by
the Company or any of its Subsidiaries, in violation of or in a manner or to a
location that could give rise to liability under any Environmental Laws which
liability could reasonably be expected to have Material Adverse Effect on the
Company;
(f) The Company and its Subsidiaries have not assumed, contractually or
by operation of law, any liabilities or obligations under any Environmental Laws
except, in the case of those assumed by operation of law, those assumed which in
and of themselves (and irrespective of any contribution or indemnification
rights) could not reasonably be expected to have a Material Adverse Effect on
the Company.
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(g) For purposes of this Agreement, the following terms shall have the
following meanings:
"ENVIRONMENTAL CLAIM" means any written or oral notice, claim, demand,
action, complaint, proceeding, request for information or other communication by
any person alleging liability or potential liability (including without
limitation liability or potential liability for investigatory costs, cleanup
costs, governmental response costs, natural resource damages, property damage,
personal injury, fines or penalties) arising out of, relating to, based on or
resulting from (i) the presence, discharge, emission, release or threatened
release of any Hazardous Materials at any location, whether or not owned, leased
or operated by the Company or any of its Subsidiaries or (ii) circumstances
forming the basis of any violation or alleged violation of any Environmental Law
or Environmental Permit or (iii) otherwise relating to obligations or
liabilities under any Environmental Laws
"ENVIRONMENTAL PERMITS" means all permits, licenses, registrations and
other governmental authorizations required for the Company and its Subsidiaries
and the operations of the Company's and its Subsidiaries', facilities and
otherwise to conduct its business under Environmental Laws.
"ENVIRONMENTAL LAWS" means all applicable domestic and foreign federal,
state and local statutes, rules, regulations, ordinances, orders, decrees and
common law relating in any manner to contamination, pollution or protection of
human health or the environment, including without limitation the Comprehensive
Environmental Response, Compensation and Liability Act, the Solid Waste Disposal
Act, the Clean Air Act, the Clean Water Act, the Toxic Substances Control Act,
the Occupational Safety and Health Act, the Emergency Planning and
Community-Right-to-Know Act, the Safe Drinking Water Act, all as amended, and
similar state and local laws.
"HAZARDOUS MATERIALS" means all hazardous or toxic substances, wastes,
materials or chemicals, petroleum (including crude oil or any fraction thereof)
and petroleum products, asbestos and asbestos-containing materials, pollutants,
contaminants and all other materials, substances and forces, including but not
limited to electromagnetic fields, regulated pursuant to, or that could form the
basis of liability under, any Environmental Law.
4.12 MATERIAL CONTRACTS. The Company has provided or made available to
MergerCo true and complete copies of all written contracts, agreements
(including, but not limited to, distribution agreements and licensing
agreements), commitments, arrangements, leases (including with respect to
personal property), policies and other instruments to which it or any of its
Subsidiaries is a party or by which it or any such
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Subsidiary is bound which is or was required to be filed as an exhibit to the
SEC Documents ("Material Contracts"). Except as set forth in Section 4.12 of the
Disclosure Schedule, neither the Company nor any of its Subsidiaries is, or has
received any notice or has any knowledge that any other party is, in breach or
default in any material respect under any such Material Contract; and there has
not occurred any event that with the lapse of time or the giving of notice or
both would constitute a material breach or default. Except as set forth on
Section 4.12 of the Disclosure Schedule, all Material Contracts are valid and
subsisting and in full force and effect in accordance with their terms, and the
Company has duly performed its obligations thereunder in all material respects
to the extent such obligations have occurred.
4.13 BROKERS. No broker, investment banker, financial advisor or other
person, other than Donaldson, Lufkin & Jenrette Securities Corporation, the fees
and expenses of which will be paid by the Company (pursuant to a fee agreement,
a copy of which has been provided to MergerCo), is entitled to any broker's,
finder's, financial advisor's or other similar fee or commission in connection
with the transactions contemplated by this Agreement based upon arrangements
made by or on behalf of the Company.
4.14 OPINION OF FINANCIAL ADVISOR. The Company has received the opinion
of Donaldson, Lufkin & Jenrette Securities Corporation dated the date hereof, to
the effect that the consideration to be received in the Offer and the Merger by
the Company's stockholders (other than any consideration paid with respect to
Dissenting Shares is fair to the holders of Company Common Stock from a
financial point of view, a signed copy of which opinion has been delivered to
MergerCo.
4.15 BOARD RECOMMENDATION. The Board of Directors of the Company, at a
meeting duly called and held, has (a) determined that the Offer, this Agreement
and the transactions contemplated hereby, taken together, are advisable and in
the best interests of the Company and the stockholders of the Company, and (b)
resolved to recommend that the holders of the shares of Company Common Stock
tender their shares of Company Common Stock in the Offer, approve the Offer,
this Agreement and the transactions contemplated herein, including the Merger.
4.16 REQUIRED COMPANY VOTE. The Company Stockholder Approval, being the
affirmative vote of a majority in number of the shares of the Company Common
Stock, is the only vote of the holders of any class or series of the Company's
securities necessary to approve this Agreement, the Merger and the other
transactions contemplated hereby.
4.17 STATE TAKEOVER STATUTES. No state takeover statute or similar
statute or regulation of the State of Delaware (and, to the knowledge of the
Company after due inquiry, of any other state or jurisdiction) applies or
purports to apply to the Company or
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any of its Subsidiaries, or to this Agreement, the Offer, the Merger, or any of
the other transactions contemplated hereby, except any such statutes or
regulations which are no longer applicable in any respect upon the execution of
this Agreement. Neither the Company nor any of its Subsidiaries has any rights
plan, preferred stock or similar arrangement which have any of the
aforementioned consequences in respect of the transactions contemplated hereby.
4.18. INTELLECTUAL PROPERTY. Section 4.18 of the Disclosure Schedule
sets forth a true and complete list of all patents, trademarks (registered or
unregistered), trade names, service marks and copyrights and applications
therefor owned, used or filed by or licensed to the Company and its Subsidiaries
and which are material to the Company and its Subsidiaries taken as a whole
(collectively, "Intellectual Property Rights"). The Intellectual Property Rights
are sufficient to allow each of the Company and each of its Subsidiaries to
conduct, and continue to conduct, its business as currently conducted in all
material respects. To the knowledge of the Company, each of the Company and each
of its Subsidiaries owns or has sufficient unrestricted right to use the
Intellectual Property Rights in order to allow it to conduct its business as
currently conducted in all material respects, and the consummation of the
transactions contemplated hereby will not alter or impair such ability in any
respect. Each copyright registration, patent and registered trademark and
application therefor listed on Section 4.18 of the Disclosure Schedule is in
proper form, not disclaimed in whole and has been duly maintained including the
submission of all necessary filings in accordance with the legal and
administrative requirements of the appropriate jurisdictions except with respect
to use requirements as to trademarks and except for any such failure to be in
proper form, any such disclaimer or such failure to be duly maintained which is
not reasonably likely to result in a Material Adverse Effect. To the knowledge
of the Company, there are no pending oppositions, cancellations, invalidity
proceedings, interferences or re-examination proceedings with respect to the
Intellectual Property Rights which are reasonably likely to result in a Material
Adverse Effect. To the knowledge of the Company, neither the Company nor any of
its Subsidiaries has received any written notice from any other Person
pertaining to or challenging the right of the company or any of its Subsidiaries
to use any of the Intellectual Property Rights which is reasonably likely to
result in a Material Adverse Effect. Except as identified in Section 4.18 of the
Disclosure Schedules, no claims are pending by any Person with respect to the
ownership, validity, enforceability or use of any such Intellectual Property
Rights challenging or questioning the validity or effectiveness of any of the
foregoing which are reasonably likely to result in a Material Adverse Effect.
Neither the Company nor any of its Subsidiaries has made any claim of a
violation or infringement by others of its rights to or in connection with the
Intellectual Property Rights.
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4.19. TITLE TO PROPERTIES. Each of the Company and each of its
Subsidiaries has sufficiently good and valid title to, or an adequate leasehold
interest in, its material tangible properties and assets (including real
property) in order to allow it to conduct, and continue to conduct, its business
as currently conducted in all material respects. Except as set forth in Section
4.19 of the Disclosure Schedule, such material tangible properties and assets
(including real property) are free of Liens which would impair such ability in
any material respect and, to the knowledge of the Company, the consummation of
the transactions contemplated by this Agreement will not alter or impair such
ability in any material respect.
4.20. PRODUCTS LIABILITY. Except as set forth in Section 4.20 of the
Disclosure Schedule, there is no pending or, to the knowledge of the Company,
threatened claim, action, suit, inquiry, proceeding or investigation by any
individual or Governmental Entity in which a Product is alleged to have a Defect
and which is reasonably likely to result in a Material Adverse Effect; nor, to
the knowledge of the Company, is there any valid basis for any such claim,
cation, suit, inquiry, proceeding, or investigation. As used in this
Section 4.20, the term "Product" shall mean any product designed, manufactured,
shipped, sold, marketed, distributed and/or otherwise introduced into the stream
of commerce by or on behalf of the Company or any of its Subsidiaries,
including, without limitation, any product sold in the United States by the
Company or any of its Subsidiaries as the distributor, agent, or pursuant to any
other contractual relationship with a non-U.S. manufacturer; and the term
"Defect" shall mean a defect or impurity of any kind, whether in design,
manufacture, processing, or otherwise, including, without limitation, any
dangerous propensity associated with any reasonably foreseeable use of a
Product, or the failure to warn of the existence of any defect, impurity, or
dangerous propensity.
4.21 SOLE REPRESENTATIONS. The representations and warranties contained
in this Agreement are the sole representations and warranties which the Company
is making in connection with the transactions contemplated herein.
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF BUYER
AND MERGERCO
Each of Buyer and MergerCo hereby, jointly and severally, represents
and warrants to the Company as follows:
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5.1 ORGANIZATION, STANDING AND CORPORATE POWER. Each of Buyer and
MergerCo are corporations duly organized, validly incorporated and in good
standing in the State of Delaware, and each has the requisite corporate power
and authority to carry on its business as now being conducted. Each of Buyer and
MergerCo has delivered to the Company complete and correct copies of its
certificate of incorporation (or other organizational documents) and by-laws.
5.2 AUTHORITY; NONCONTRAVENTION. Each of Buyer and MergerCo has all
requisite corporate power and authority to enter into this Agreement and to
consummate the transactions contemplated by this Agreement. The execution and
delivery of this Agreement by each of Buyer and MergerCo and the consummation by
each of Buyer and MergerCo of the transactions contemplated by this Agreement
have been duly authorized by all necessary corporate action on the part of each
of Buyer and MergerCo. This Agreement has been duly executed and delivered by
and constitutes a valid and binding obligation of each of Buyer and MergerCo.
Except as disclosed on Section 5.2 of the Disclosure Schedule, the execution and
delivery of this Agreement does not, and the consummation of the transactions
contemplated by this Agreement and compliance with the provisions of this
Agreement will not, conflict with, or result in (a) any breach or violation of,
or default (with or without notice or lapse of time, or both) under, or give
rise to a right of termination, cancellation or acceleration or "put" with
respect to any obligation or (b) the loss of a benefit, or other right or the
creation of any Lien upon any of the properties or assets of either Buyer or
MergerCo under, (i) the certificate of incorporation or by-laws of either Buyer
or MergerCo, (ii) any loan or credit agreement, note, bond, mortgage, indenture,
lease or other agreement, instrument, permit, concession, franchise or license
applicable to either Buyer or MergerCo or its properties or assets or (iii)
subject to the governmental filings and other matters referred to in the
following sentence, any judgment, order, decree, statute, law, ordinance, rule,
regulation or arbitration award applicable to either Buyer or MergerCo or its
properties or assets, other than, in the case of clauses (ii) and (iii), any
such conflicts, breaches, violations, defaults, rights, losses or Liens that
individually or in the aggregate would not have a Material Adverse Effect with
respect to either Buyer or either Buyer or MergerCo or could not prevent, hinder
or materially delay the ability of MergerCo to consummate the transactions
contemplated by this Agreement. No consent, approval, order or authorization of,
or registration, declaration or filing with, or notice to, any Governmental
Entity or any other person under any agreement, indenture or other instrument to
which Buyer or MergerCo is a party or to which any of its properties is subject,
is required by or with respect to either Buyer or MergerCo in connection with
the execution and delivery of this Agreement by either Buyer or MergerCo or the
consummation by Buyer and MergerCo of any of the transactions contemplated by
this Agreement, except for (i) the filing of a pre-merger notification and
report form under the HSR Act, and (ii) the filing with the SEC of (y) the Offer
Documents and (z) such reports under the Exchange Act as
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may be required in connection with this Agreement and the transactions
contemplated hereby.
5.3 BROKERS. No broker, investment banker, financial advisor or other
person, other than Morgan Stanley & Co. Incorporated, the fees and expenses of
which will be paid by Buyer or MergerCo, is entitled to any broker's, finder's,
financial advisor's or other similar fee or commission in connection with the
transactions contemplated by this Agreement based upon arrangements made by or
an behalf of MergerCo to its affiliates.
5.4 OFFER DOCUMENTS AND SCHEDULE 14D-9. The Offer Documents will not,
at the time the Offer Documents or any amendments or supplements thereto are
filed with the SEC or are first published, sent or given to stockholders of the
Company, contain any untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary to make the statements
contained therein, in the light of the circumstances under which they were made,
not misleading (except to the extent information contained therein is based upon
information supplied solely by the Company). The Offer Documents shall comply in
all material respects with the requirements of the Exchange Act and the rules
and regulations promulgated thereunder.
5.5 INFORMATION SUPPLIED. None of the information supplied or to be
supplied by Buyer or MergerCo or its affiliates in writing specifically for
inclusion or incorporation by reference in the Proxy Statement will, at the time
the Proxy Statement is first mailed to the Company's stockholders or at the time
of the Stockholders Meeting, contain any untrue statement of a material fact or
omit to state any material fact required to be stated therein or necessary to
make the statements therein not misleading.
5.6 SOLE REPRESENTATIONS. The representations and warranties contained
in this Agreement are the sole representations and warranties which Buyer or
MergerCo are making in connection with the transactions contemplated herein.
ARTICLE VI
COVENANTS RELATING TO CONDUCT OF BUSINESS PRIOR TO
MERGER
6.1 CONDUCT OF BUSINESS OF THE COMPANY. During the period from the date
of this Agreement to the Effective Time of the Merger (except as otherwise
specifically required by the terms of this Agreement), the Company shall, and
shall cause its Subsidiaries to, act and carry on their respective businesses in
the usual, regular and ordinary course of business consistent with past practice
and use its and their respective reasonable best efforts to preserve intact
their current business organizations, keep
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available the services of their current officers and employees and preserve
their relationships with customers, suppliers, licensors, licensees,
advertisers, distributors and others having business dealings with them and to
preserve goodwill. Without limiting the generality of the foregoing, during the
period from the date of this Agreement to the Effective Time of the Merger, the
Company shall not, and shall not permit any of its Subsidiaries to, without the
prior written consent of MergerCo:
(a) declare, set aside or pay any dividends on, or make any other
distributions in respect of, any of its capital stock, other than dividends and
distributions by a direct or indirect wholly owned subsidiary of the Company to
its parent in accordance with applicable law;
(b) split, combine or reclassify any of its capital stock or issue or
authorize the issuance of any other securities in respect of, in lieu of or in
substitution for shares of its capital stock;
(c) purchase, redeem or otherwise acquire any shares of capital stock
of the Company or any of its Subsidiaries or any other securities thereof or any
rights, warrants or options to acquire any such shares or other securities,
except for the cash-out of Company Stock Options (as provided in Section 3.2.3);
in full or partial payment of the exercise price payable by such holder upon
exercise of Company Stock Options outstanding on the date of this Agreement;
(d) authorize for issuance, issue, deliver, sell, pledge or otherwise
encumber any shares of its capital stock or the capital stock of any of its
Subsidiaries, any other voting securities or any securities convertible into, or
any rights, warrants or options to acquire, any such shares, voting securities
or convertible securities or any other securities or equity equivalents
(including without limitation stock appreciation rights) (other than the
issuance of Company Common Stock upon the exercise of Company Stock Options
outstanding on the date of this Agreement and in accordance with their present
terms (such issuances, together with the acquisitions of shares of Company
Common Stock permitted under clause (c) above, being referred to herein as
"Permitted Changes"));
(e) in the case of the Company or any subsidiary, amend its
certificates or articles of incorporation, by-laws or other comparable charter
or organizational documents;
(f) acquire or agree to acquire by merging or consolidating with, or by
purchasing a substantial portion of the stock or assets of, or by any other
manner, any business or any corporation, partnership, joint venture, association
or other business organization;
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(g) other than as specifically permitted by Section 6.1 of the
Disclosure Schedule, sell, lease, license, mortgage or otherwise encumber or
subject to any Lien or otherwise dispose of any of its properties or assets
other than any such properties or assets the value of which do not exceed two
million individually and ten million in the aggregate, except sales of inventory
in the ordinary course of business consistent with past practice;
(h) incur any indebtedness for borrowed money or guarantee any such
indebtedness of another person, issue or sell any debt securities or warrants or
other rights to acquire any debt securities of the Company or any of its
Subsidiaries, guarantee any debt securities of another person, enter into any
"keep well" or other agreement to maintain any financial statement condition of
another person or enter into any arrangement having the economic effect of any
of the foregoing, except for short-term borrowings and for lease obligations, in
each case incurred in the ordinary course of business consistent with past
practice;
(i) make any loans, advances or capital contributions to, or
investments in, any other person, other than to the Company or any direct or
indirect wholly owned subsidiary of the Company and other than loans to
employees in the ordinary course of business not to exceed $25,000 in any one
case or $500,000 in the aggregate;
(j) pay, discharge or satisfy any claims (including claims of
stockholders), liabilities or obligations (absolute, accrued, asserted or
unasserted, contingent or otherwise), except for the payment, discharge or
satisfaction, (a) of liabilities or obligations in the ordinary course of
business consistent with past practice or in accordance with their terms as in
effect on the date hereof or (b) claims settled or compromised to the extent
permitted by Section 6. 1 (n), or waive, release, grant, or transfer any rights
of material value or modify or change in any material respect any existing
license, lease, Permit, contract or other document, other than in the ordinary
course of business consistent with past practice;
(k) adopt a plan of merger, consolidation, restructuring,
recapitalization or reorganization or complete a partial liquidation or
resolutions providing for or authorizing such a liquidation or a dissolution,
(1) enter into any new collective bargaining agreement;
(m) change any material accounting principle used by it;
(n) settle or compromise any litigation (whether or not commenced prior
to the date of this Agreement) other than settlements or compromises of
litigation where the
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amount paid (after giving effect to insurance proceeds actually received) in
settlement or compromise is not material to the Company;
(o) neither the Company nor any of its subsidiaries shall make any new
capital expenditure or expenditures, other than capital expenditures not to
exceed, in the aggregate, the amounts provided for capital expenditures in the
capital budget of the company provided to Buyer;
(p) neither the Company nor any of its subsidiaries shall, except in
the ordinary course of business and except as otherwise permitted by this
Agreement, modify, amend or terminate any contract or agreement set forth in the
SEC Documents filed and publicly available prior to the date of this Agreement
to which the company or any Subsidiary is a party or waive, release or assign
any material rights or claims;
(q) neither the Company nor any of its subsidiaries shall: (i) enter
into any employment agreement with any officer, director or key employee of the
Company or any of its subsidiaries; or (ii) hire or agree to hire any new or
additional key employees or officers.
(r) neither the Company nor any of its subsidiaries shall make any Tax
election or settle or compromise any material Tax liability;
(s) neither the Company nor any of its subsidiaries will voluntarily
take, or voluntarily agree to commit to take, any action that would make any
representation or warranty of the Company contained herein inaccurate in any
respect at, or as of any time prior to, the Effective Time; or
(t) authorize any of, or commit or agree to take any of, the foregoing
actions.
6.2 CHANGES IN EMPLOYMENT ARRANGEMENTS. Except as set forth in Section
6.2 of the Disclosure Schedule, neither the Company nor any of its Subsidiaries
shall adopt or amend (except as may be required by law) any bonus, profit
sharing, compensation, stock option, pension, retirement, deferred compensation,
employment or other employee benefit plan, agreement, trust, fund or other
arrangement (including any Company Plan) for the benefit or welfare of any
employee, director or former director or employee, or increase the compensation
or fringe benefits of any director, employee or former director or employee or
pay any benefit not required by any existing plan, arrangement or agreement
(other than increases for employees other than officers and directors) in the
ordinary course of business consistent with past practice.
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6.3 SEVERANCE. Neither the Company nor any of its Subsidiaries shall
grant any new or modified severance or termination arrangement or increase or
accelerate any benefits payable under its severance or termination pay policies
in effect on the date hereof.
6.4 WARN. Neither the Company nor any of its Subsidiaries shall
effectuate a "plant closing" or "mass layoff", as those terms are defined in the
Worker Adjustment and Retraining Notification Act of 1988 or similar state law
("WARN") affecting in whole or in part any site of employment, facility,
operating unit or employee of the Company or any subsidiary, without the prior
written consent of MergerCo or its affiliates in advance and without complying
with the notice requirements and other provisions of WARN.
ARTICLE VII
ADDITIONAL AGREEMENTS
7.1. PREPARATION OF PROXY STATEMENT: STOCKHOLDER MEETING.
(a) As promptly as practicable after Buyer or MergerCo first purchases
Shares pursuant to the Offer, and if required by applicable law, the Company
shall prepare and file with the SEC a preliminary proxy or information statement
in accordance with the Exchange Act relating to the Merger and this Agreement
and use its best efforts (x) to obtain and furnish the information required to
be included by the Exchange Act and the SEC in the Proxy Statement and, after
consultation with Buyer, to respond promptly to any comments made by the SEC
with respect to the preliminary proxy or information statement and cause a
definitive proxy or information statement, including any amendment or supplement
thereto to be mailed to its stockholders, provided that no amendment or
supplement to the Proxy Statement or information statement will be made by the
Company without consultation with Buyer and its counsel. If, at any time prior
to the Stockholders Meeting, any event, with respect to the Company, its
Subsidiaries, directors, officers, and/or the Merger or the other transactions
contemplated hereby, shall occur, which is required to be described in the Proxy
Statement, the Company shall so describe such event and, to the extent required
by applicable law, shall cause it to be disseminated to the Company's
stockholders.
(b) The Company will immediately notify MergerCo and its affiliates of
(i) the receipt of any comments from the SEC regarding the Proxy Statement and
(ii) the approval of the Proxy Statement by the SEC. MergerCo shall be given a
reasonable opportunity to review and comment on all filings with the SEC and all
mailings to the Company's stockholders in connection with the Merger prior to
the filing or mailing
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thereof, and the Company shall use its best efforts to reflect all such
reasonable comments.
(c) The Company will, as promptly as practicable following the
expiration of the Offer and in consultation with MergerCo, duly call, give
notice of, convene and hold a meeting of its stockholders (the "Stockholders
Meeting") for the purpose of approving this Agreement and the transactions
contemplated by this Agreement. The Company will, through its Board of
Directors, recommend to its stockholders approval of the foregoing matters and
seek to obtain all votes and approvals thereof by the stockholders, as set forth
in Section 4.15; PROVIDED, HOWEVER; that the obligations contained herein shall
be subject to the provisions of Section 7.6 of this Agreement. Subject to the
foregoing, such recommendation, together with a copy of the opinion referred to
in Section 4.14 shall be included in the Proxy Statement. The Company will use
its best efforts to hold such meetings as soon as practicable after the date
hereof. Notwithstanding the foregoing, if MergerCo shall acquire at least 90% of
the outstanding Company Common Stock pursuant to the Offer, MergerCo may, in its
sole discretion, and in lieu of completing the Merger in accordance with this
Agreement, cause the Company to be merged into Merger Co, or MergerCo into the
Company, in either case without a Stockholders Meeting and in accordance with
the Delaware law; provided, however, that in such event, the rights of
stockholders of the Company under this Agreement (including, without limitation,
the right to receive the Merger Consideration) shall not be adversely affected
thereby (other than the right to receive the Proxy Statement, attend the
Stockholders Meeting and vote on the Merger, which shall no longer be
applicable).
(d) The Company will cause its transfer agent to make stock transfer
records relating to the Company available to the extent reasonably necessary to
effectuate the intent of this Agreement.
7.2. ACCESS TO INFORMATION, CONFIDENTIALITY.
(a) The Company shall, and shall cause its Subsidiaries, officers,
employees, counsel, financial advisors and other representatives to, afford to
MergerCo and its representatives reasonable access during normal business hours,
in a manner initially coordinated with the chief executive officer or chief
financial officer of the Company, and thereafter coordinated with those persons
designated by the chief executive officer, during the period prior to the
Effective Time of the Merger to its properties, books, contracts, commitments,
personnel and records (including, without limitation, to the extent available,
the work papers of the Company's independent public accountants) and, during
such period, the Company shall, and shall cause its Subsidiaries, officers,
employees and representatives to, furnish promptly to MergerCo (i) a copy of
each report, schedule, registration statement and other document filed by it
during such period
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pursuant to the requirements of Federal or state securities laws and (ii) all
other information concerning its business, properties, financial condition,
operations and personnel as MergerCo may from time to time reasonably request.
Except as required by law, each of the Company and MergerCo will hold, and will
cause its respective directors, officers, employees, accountants, counsel,
financial advisors and other representatives and affiliates to hold, any
nonpublic information in confidence to the extent required by and in accordance
with that certain Confidentiality Agreement, dated February 17, 1998 by or on
behalf of the Company and Buyer, the other terms of which Confidentiality
Agreement are hereby terminated.
7.3. ADDITIONAL UNDERTAKINGS.
(a) Upon the terms and subject to the conditions set forth in this
Agreement, each of the parties agrees to use its reasonable best efforts to
take, or cause to be taken, all actions, and to do, or cause to be done, and to
assist and cooperate with the other parties in doing, all things necessary,
proper or advisable to consummate and make effective, in the most expeditious
manner practicable, the Offer, the Merger and the other transactions
contemplated by this Agreement. The Buyer, MergerCo and the Company will use
their reasonable best efforts and cooperate with one another (i) in promptly
determining whether any filings are required to be made or consents, approvals,
waivers, licenses, Permits or authorizations are required to be obtained (or,
which if not obtained, would result in a breach or violation, or an event of
default, termination or acceleration of any agreement or any put right under any
agreement) under any applicable law or regulation or from any governmental
authorities or third parties, including parties to loan agreements or other debt
instruments, in connection with the transactions contemplated by this Agreement,
including the Offer, the Merger and (ii) in promptly making any such filings, in
furnishing information required in connection therewith and in timely seeking to
obtain any such consents, approvals, permits or authorizations. Notwithstanding
the foregoing, or any other covenant herein contained, in connection with the
receipt of any necessary approvals under the HSR Act, neither the Company nor
any of its Subsidiaries shall be entitled to divest or hold separate or
otherwise take or commit to take any action that limits its freedom of action
with respect to, or its ability to retain, the Company or any of its
Subsidiaries or any material portions thereof or any of the businesses, product
lines, properties or assets of the Company or any of its Subsidiaries, without
Buyer's prior written consent.
(b) The Company and Buyer shall make, subject to the condition that the
transactions contemplated herein actually occur, any undertakings (including
undertakings to make divestitures, provided, in any case, that such divestitures
need not themselves be effective or made until after the transactions
contemplated hereby actually occur) required in order to comply with the
antitrust requirements or laws of any
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governmental entity, including the HSR Act, in connection with the transactions
contemplated by this Agreement.
7.4 INDEMNIFICATION. For six years after the Effective Time of the
Merger, the Company and the Buyer shall indemnify all present and former
directors or officers of the Company and its Subsidiaries ("Indemnified
Parties") against any costs or expenses (including reasonable attorneys' fees),
judgments, fines, losses, claims, damages or liabilities (collectively, "Costs")
incurred in connection with any claim, action, suit, proceeding or
investigation, whether civil, criminal, administrative or investigative, arising
out of or pertaining to matters existing or occurring at or prior to the
Effective Time of the Merger, whether asserted or claimed prior to, at or after
the Effective Time of the Merger, to the fullest extent as would have been
permitted in their respective articles of organization or by-laws consistent
with applicable law, to the extent such Costs have not been paid for by
insurance and shall, in connection with defending against any action for which
indemnification is available hereunder, reimburse such Indemnified Parties from
time to time upon receipt of sufficient supporting documentation, for any
reasonable costs and expenses reasonably incurred by such Indemnified Parties;
provided that such reimbursement shall be conditioned upon such Indemnified
Parties' agreement promptly to return such amounts to the Company if a court of
competent jurisdiction shall ultimately determine that indemnification of such
Indemnified Parties is prohibited by applicable law. The Company will maintain
for a period of not less than six years from the Effective Time of the Merger,
the Company's current directors' and officers, insurance and indemnification
policy (or a policy providing substantially similar coverage) to the extent that
it provides coverage for events occurring prior to the Effective Time of the
Merger (the "D&O Insurance") for all persons who are directors and officers of
the Company on the date of this Agreement; provided that the Company shall not
be required to spend as an annual premium for such D&O Insurance an amount in
excess of 200% of the annual premium paid for directors' and officers' insurance
in effect prior to the date of this Agreement; and provided further that the
Company shall nevertheless be obligated to provide such coverage as may be
obtained for such amount. The provisions of this Section are intended for the
benefit of, and shall be enforceable by, each Indemnified Party and his or her
heirs and representatives.
7.5 PUBLIC ANNOUNCEMENTS. Neither MergerCo or the Buyer, on the one
hand, nor the Company, on the other hand, will issue any press release or public
statement with respect to the transactions contemplated by this Agreement,
including the Offer and the Merger, without the other party's prior consent,
except as may be required by applicable law, court process or by obligations
pursuant to any listing agreement with NASDAQ, and in any event MergerCo and the
Company will consult with each other before issuing, and provide each other the
opportunity to review and comment upon, any such press release or other public
statements with respect to such transactions. The parties agree that
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the initial press release or releases to be issued with respect to the
transactions contemplated by this Agreement shall be mutually agreed upon prior
to the issuance thereof.
7.6 NO SOLICITATION.
(a) From and after the date hereof until the termination of this
Agreement, neither the Company or any of its Subsidiaries, nor any of their
respective officers, directors, employees, representatives, agents or affiliates
(including, without limitation, any investment banker, attorney or accountant
retained by the Company or any of its Subsidiaries) will directly or indirectly
initiate, solicit or knowingly encourage (including by way of furnishing
non-public information or assistance), or take any other action to facilitate
knowingly, any inquiries or the making of any proposal that constitutes, or may
reasonably be expected to lead to any Transaction Proposal (as defined below),
or enter into or maintain or continue discussions or negotiate with any person
or entity in furtherance of such inquiries or to obtain a Transaction Proposal
or agree to or endorse any Transaction Proposal or authorize or permit any of
its officers, directors or employees or any of its Subsidiaries or any
investment banker, financial advisor, attorney, accountant or other
representative retained by it or any of its Subsidiaries to take any such
action, PROVIDED, HOWEVER, that nothing contained in this Agreement shall
prohibit the Board of Directors of the Company which, for purposes of this
Section 7.6, shall include any Special Committee thereof from, prior to the
acceptance for payment of Company Common Stock pursuant to the Offer (i)
furnishing information to or entering into discussions or negotiations with, any
person or entity that makes an unsolicited written, bona fide Transaction
Proposal and in respect of which such person or entity has all of the necessary
funds or commitments therefor if, and only to the extent that: (A) the Board of
Directors of the Company, after consultation with their financial advisors and
after receipt of advice from independent outside legal counsel (who may be the
Company's regularly engaged independent outside legal counsel) determines in
good faith that such action is necessary for the Board of Directors of the
Company to comply with its fiduciary duties to stockholders under applicable
law, (B) prior to taking such action the Company receives from such person or
entity an executed confidentiality agreement containing terms and
provisions substantially similar to those contained in the Confidentiality
Agreement described in Section 7.2, (ii) failing to make or withdrawing or
modifying its recommendation referred to in Section 4.15 if there exists a
Transaction Proposal and the Board of Directors of the Company, after
consultation with its financial advisors and after receipt of advice from
independent outside legal counsel (who may be the Company's regularly engaged
outside independent counsel), determines in good faith that such action is
necessary for the Board of Directors of the Company to comply with its fiduciary
duties to stockholders under applicable law in connection with such Transaction
Proposal or (iii) making to the Company's stockholders any recommendation
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and related filing with the SEC as required by Rule 14e-2 and 14d-9 under the
Exchange Act, with respect to any tender offer, or taking any other legally
required action with respect to such tender offer (including, without
limitation, the making of public disclosures as may be necessary or reasonably
advisable under applicable securities laws) if the Board of Directors of the
Company, after consultation with their financial advisors and receipt of advice
from independent outside legal counsel (who may be the Company's regularly
engaged independent counsel), determines in good faith that such action is
necessary for the Board of Directors of the Company to comply with its fiduciary
duties to stockholders under applicable law; and Section 7.6(b) and 7.6(c) are
fully complied with by the Board of Directors of the Company. In the event of an
exercise of the Company's or it's Board of Director's rights under clauses (i),
(ii) or (iii) above and subject to compliance with this Section 7.6,
notwithstanding anything contained in this Agreement to the contrary, such
exercise of rights shall not constitute a breach of this Agreement by the
Company. For purposes of this Agreement, "Transaction Proposal" shall mean any
of the following (other than the transactions between the Company and MergerCo
contemplated by the Offer and this Agreement) involving the Company or any of
its Subsidiaries: (i) any merger, consolidation, share exchange,
recapitalization, business combination, or other similar transaction; (ii) any
sale, lease, exchange, mortgage, pledge, transfer or other disposition of 20% or
more of the assets of the Company and its Subsidiaries, taken as a whole, in a
single transaction or series of transactions; (iii) any tender offer or exchange
offer for, or the acquisition (or right to acquire) of "beneficial ownership" by
any person, "group" or entity (as such terms are defined under Section 13 (d) of
the Exchange Act), of 20% or more of the outstanding shares of capital stock of
the Company or the filing of a registration statement under the Securities Act
in connection therewith; (iv) any public announcement of a proposal, plan or
intention to do any of the foregoing or any agreement to engage in any of the
foregoing or recapitalization, liquidation, dissolution or similar transaction
involving the Company or any of its subsidiaries or (vi) any other transaction
the consummation of which would reasonably be expected to impede, interfere
with, prevent or materially delay the Offer or the Merger or which would
reasonably be expected to dilute materially the benefits to Buyer of the
transactions contemplated hereby.
(b) Prior to the Board of Directors withdrawing or modifying its
approval or recommendation of the Offer, this Agreement or the Merger, approving
or recommending a Transaction Proposal, or entering into an agreement with
respect to a Transaction Proposal, the Board of Directors shall provide Buyer
with a written notice (a "Notice of Takeover Proposal") advising Buyer that the
Board of Directors has received a Takeover Proposal, specifying the material
terms and conditions of such Transaction Proposal (unless prohibited from doing
so by the terms thereof) and identifying the person making such transaction
Proposal (unless prohibited from doing so by the terms thereof), and neither the
Company nor any subsidiary shall enter into an agreement with respect to a
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Transaction Proposal until midnight three business days after the day on which
the Notice of Takeover Proposal was given to Buyer. In addition, if the Company
proposes to enter into an agreement with respect to any Transaction Proposal, it
shall concurrently with entering into such agreement pay, or cause to be paid,
to Buyer the expenses and fees and the Termination Fee (as provided in and
defined in Section 10.2)
7.7 RESIGNATION OF DIRECTORS. Prior to the Effective Time of the
Merger, the Company shall deliver to MergerCo evidence satisfactory to MergerCo
of the resignation of all directors of the Company, effective at the Effective
Time of the Merger.
7.8 EMPLOYEE BENEFITS. Buyer agrees that, for a period of twelve (12)
months following the Effective Time, the Surviving Corporation shall maintain
employee benefits plans and arrangements (directly or in conjunction with Buyer)
which, in the aggregate, will provide a level of benefits to continuing
employees of the Company and its Subsidiaries substantially comparable in the
aggregate to those provided under the Buyer's benefit plans as in effect
immediately prior to the Effective Time (other than discretionary benefits);
provided, however, that Buyer may cause modifications to be made to such benefit
plans and arrangements to the extent necessary to comply with applicable Law or
to reflect widespread adjustments in benefits (or costs thereof) provided to
employees under compensation and benefit plans of Buyer and its subsidiaries,
and no specific compensation and benefit plans need be provided. For purposes of
determining eligibility and vesting with respect to all Benefit Plans set forth
on Schedule 4.9 of the Disclosure Schedule (except with respect to any defined
benefit plans), Buyer shall use the employee's hire date with the Company or
such other date as has been previously determined by the Company for credit for
prior employment with any ERISA Affiliate of the Company. Benefit plans which
provide medical, dental, or life insurance benefits after the Effective Time to
any individual who is an active or former employee of the Company or any of its
Subsidiaries as of the Effective Time or a dependent of such an employee shall,
with respect to such individuals, waive any waiting periods, any pre-existing
conditions, and any actively-at-work exclusions to the extent so waived under
present policy and shall provide that any expenses incurred on or before the
Effective Time by such individuals shall be taken into account under such plans
for purposes of satisfying applicable deductible, coinsurance, and maximum
out-of-pocket provisions to the extent taken into account under present policy.
Nothing in this Section 7.8 shall prohibit the Company or the Surviving
Corporation from terminating the employment of any employee at any time with or
without cause (subject to, and in accordance with the terms of any existing
employment agreements), or shall be construed or applied to restrict the ability
of the Buyer or Surviving Corporation and its Subsidiaries to establish such
types and levels of compensation and benefits as they determine to be
appropriate. Buyer agrees to cause the Surviving Corporation (or the applicable
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Subsidiary employer) to honor the existing employment agreements that are set
forth on Schedule 7.8 of the Disclosure Schedule.
7.9 NOTIFICATION OF CERTAIN MATTERS. The Company shall give prompt
notice to Buyer and MergerCo and Buyer and MergerCo shall give prompt notice to
the Company of: (i) the occurrence or non-occurrence of any event, the
occurrence or non-occurrence of which does or would be likely to cause (A) any
representation or warranty contained in this Agreement to be untrue or
inaccurate in any material respect, or (B) any covenant, condition or agreement
contained in this Agreement not to be complied with or satisfied; and (ii) any
failure of the Company on the one hand, or Buyer or MergerCo on the other hand,
to comply with or satisfy any covenant, condition or agreement to be complied
with or satisfied by it hereunder; provided, however, that the delivery of any
notice pursuant to this Section 7.9 shall not limit or otherwise affect the
remedies available hereunder to the party receiving such notice.
7.10 STATE TAKEOVER LAWS. If any "fair price" or "control share
acquisition" statute or other similar statute or regulation shall become
applicable to the transactions contemplated by the Stock Purchase Agreement or
this Agreement, including the Offer or the Merger, the Company and Buyer, and
their respective Boards of Directors shall use their reasonable best efforts to
grant such approvals and to take such other actions as are necessary so that the
transactions contemplated hereby may be consummated as promptly as practicable
on the terms contemplated hereby and shall otherwise use their reasonable best
efforts to eliminate the effects of any such statute or regulation on the
transactions contemplated hereby.
ARTICLE VIII
CONDITIONS PRECEDENT
8.1 CONDITIONS TO EACH PARTY'S OBLIGATION. The respective obligation of
each party to effect the Merger is subject to the satisfaction or waiver on or
prior to the Closing Date of the following conditions:
(a) COMPANY STOCKHOLDER APPROVAL. The Company Stockholder Approval
shall have been obtained if required by applicable law.
(b) HSR ACT. The waiting period (and any extension thereof) applicable
to the Merger under the HSR Act shall have been terminated or shall have
expired.
(c) NO INJUNCTIONS OR RESTRAINTS. No temporary restraining order,
preliminary or permanent injunction or other order issued by any Governmental
Entity or other legal
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restraint or prohibition shall be in effect preventing or prohibiting the
acceptance for payment of, or payment for, shares of Common Stock pursuant to
the Offer, or the consummation of the Merger; provided, however, that the
parties hereto shall, subject to the last sentence of Section 7.3 (a) hereof,
use their best efforts to have any such injunction, order, restraint or
prohibition vacated.
(d) STATUTES; CONSENTS. No statute, rule, order, decree or regulation
shall have been enacted or promulgated by any Governmental Entity of competent
jurisdiction which prohibits the consummation of the Merger.
8.2 CONDITION TO BUYER'S AND MERGER CO.'S OBLIGATION. The obligation of
Buyer and Merger Co. to effect the Merger is subject to Buyer or Merger Co.
having purchased shares of Company Common Stock in the Offer.
ARTICLE IX
TERMINATION, AMENDMENT AND WAIVER
9.1 TERMINATION. This Agreement may be terminated and abandoned at any
time prior to the Effective Time of the Merger, whether before or after approval
of matters presented in connection with the Merger by the stockholders of the
Company:
(a) by mutual written consent of Buyer and the Company; or
(b) by either Buyer or the Company, if any Governmental Entity shall
have issued an order, decree or ruling or taken any other action permanently
enjoining, restraining or otherwise prohibiting or if there shall be in effect
any other legal restraint or prohibition preventing or prohibiting the
acceptance for payment of, or payment for, shares of Company Common Stock
pursuant to the Offer or the consummation of the Merger and such order, decree,
ruling or other action shall have become final and nonappealable (other than due
to the failure of the party seeking to terminate this Agreement to perform its
obligations under this Agreement required to be performed at or prior to the
Effective Time of the Merger); or
(c) by the Company, if Offeror shall not have (i) commenced the Offer
within five (5) business days after the initial public announcement of Buyer's
intention to commence the Offer, or (ii) accepted for payment any shares of
Company Common Stock pursuant to the Offer (other than due to the failure of the
Company to perform its obligations under this Agreement) on or prior to April
30, 1998, or, if any necessary
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approvals required under the HSR Act shall not have been obtained by April 30,
1998, on or prior to the earlier of (A) ten (10) days after receipt of all
necessary approvals under the HSR Act or (B) July 15, 1998; or
(d) by the Company, upon its execution, prior to Buyer's or MergerCo's
purchase of shares of Company Common Stock pursuant to the Offer, of a binding
agreement with a third party with respect to a Transaction Proposal, provided
that it has complied with all provisions of this Agreement, including the notice
provisions herein, and that it pays the Termination Fee as provided by and
defined in Section 10.2;
(e) by Buyer in the event of a material breach or failure to perform in
any material respect by the Company of any representation, warranty, covenant or
other agreement contained in this Agreement which cannot be or has not been
cured within 10 days after the giving of written notice to the Company; or
(f) by the Company, in the event of a material breach or failure to
perform in any material respect by MergerCo or Buyer of any representation,
warranty, covenant or other agreement contained in this Agreement which cannot
be or has not been cured within 10 days after the giving of written notice to
MergerCo or Buyer.
(g) by Buyer, if Offeror terminates the Offer in accordance with the
terms of Annex I.
9.2 EFFECT OF TERMINATION. In the event of termination of this
Agreement by either the Company or MergerCo as provided in Section 9.1, this
Agreement shall forthwith become void and have no effect, without any liability
or obligation on the part of MergerCo or the Company, other than the provisions
of Section 4.13, Section 5.5, the last sentence of Section 7.2, this Section
9.2, Section 10.2 and Section 10.7. Nothing contained in this Section shall
relieve any party for any breach of the representations, warranties, covenants
or agreements set forth in this Agreement.
9.3 AMENDMENT. This Agreement may be amended by the parties at any time
before or after any required approval of matters presented in connection with
the Merger by the stockholders of the Company; provided, however, that after any
such approval, there shall be made no amendment that by law requires further
approval by such stockholders without the further approval of such stockholders.
This Agreement may not be amended except by an instrument in writing signed on
behalf of each of the parties.
9.4 EXTENSION; WAIVER. At any time prior to the Effective Time of the
Merger, the parties may (a) extend the time for the performance of any of the
obligations or other acts of the other parties, (b) waive any inaccuracies in
the representations and warranties
42
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contained in this Agreement or in any document delivered pursuant to this
Agreement or (c) subject to the proviso of Section 9.3, waive compliance with
any of the agreements or conditions contained in this Agreement. Any agreement
on the part of a party to any such extension or waiver shall be valid only if
set forth in an instrument in writing signed on behalf of such party. The
failure of any party to this Agreement to assert any of its rights under this
Agreement or otherwise shall not constitute a waiver of such rights.
9.5 PROCEDURE FOR TERMINATION, AMENDMENT, EXTENSION OR WAIVER. A
termination of this Agreement pursuant to Section 9.1, an amendment of this
Agreement pursuant to Section 9.3 or an extension or waiver pursuant to Section
9.4 shall, in order to be effective, require in the case of MergerCo or the
Company, action by its Board of Directors or the duly authorized designee of its
Board of Directors.
ARTICLE X
GENERAL PROVISIONS
10.1 NONSURVIVAL OF REPRESENTATIONS AND WARRANTIES. None of the
representations and warranties in this Agreement or in any instrument delivered
pursuant to this Agreement shall survive the Effective Time of the Merger and
all such representations and warranties will be extinguished on consummation of
the Merger and none of the Company, Buyer and MergerCo, nor any officer,
director or employee or shareholder thereof shall be under any liability
whatsoever with respect to any such representation or warranty after such time.
This Section 10.1 shall not limit any covenant or agreement of the parties which
by its terms contemplates performance after the Effective Time of the Merger.
10.2 FEES AND EXPENSES.
(a) In addition to any other amounts which may be payable or become
payable pursuant to any other paragraph of this Section 10.2, the Company shall,
simultaneously with the termination of this Agreement in any of the
circumstances described in Section 10.2(b), reimburse MergerCo for all
out-of-pocket expenses and fees, in an aggregate amount not to exceed $1,500,000
(including, without limitation, fees payable to all banks, investment banking
firms and other financial institutions, and their respective agents and counsel,
and all fees of counsel, accountants, financial printers, experts and
consultants to MergerCo and its affiliates), whether incurred prior to, on or
after the date hereof, in connection with the Merger and the consummation of all
transactions contemplated by this Agreement, and the financing thereof.
(b) If any person (other than MergerCo or any of its affiliates) shall
have made, proposed, communicated or disclosed a Transaction Proposal in a
manner which is or
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otherwise becomes public and this Agreement is terminated pursuant to any of the
following provisions:
(i) by the Company pursuant to Section 9.1 (d);
(ii) by Buyer pursuant to Section 9.1 (e), other than as a result
of a breach of the representation in clause (i) of Section 4.7 and other
than as a result of facts or circumstances occurring after the date of this
Agreement and not as a result of any action or inaction by the Company or
any of its Subsidiaries in violation of this Agreement;
(iii) by Buyer pursuant to Section 9.1(g), if Offeror has
terminated the Offer as a result of the occurrence of any of the events set
forth in subparagraph (c) of Annex I, other than a breach of the
representation in clause (i) of Section 4.7 and other than as a result of
facts or circumstances occurring after the date of this Agreement and not as
a result of any action or inaction by the Company or any of its Subsidiaries
in violation of this Agreement or subparagraphs (d) or (e) of Annex I;
then the Company shall, simultaneously with such termination of this
Agreement, pay MergerCo a fee of $5,000,000 in cash, which amount shall be
payable in same day funds (the "Termination Fee") .
In addition, (i) if any Person (other than Merger Co. or any of its
affiliates) shall have made, proposed, communicated or disclosed a Transaction
Proposal and the Minimum Condition is not met in the Offer; or (ii) if prior to
any termination of this Agreement, any person or "group" (as defined in Section
13(d)(3) of the Exchange Act) (other than Buyer or any of its affiliates)
purchases or otherwise acquires, directly or indirectly, beneficial ownership of
10% or more of the outstanding voting securities of the Company, and, if at any
time prior to 12 months following the termination of this Agreement any such
person or "group" consummates a transaction that would otherwise constitute a
Transaction Proposal, there shall be paid to Buyer immediately prior to the
consummation of such transaction the Termination Fee. In no event shall the
Company be required to pay more than one Termination Fee pursuant to this
Section 10.2(b).
(c) Except as provided otherwise in paragraph (a) above, all costs and
expenses incurred in connection with this Agreement, and the transactions
contemplated hereby shall be paid by the party incurring such expenses,, except
that the Company shall pay all costs and expenses (i) in connection with
printing and mailing the Proxy Statement, as well as all SEC filing fees
relating to the transactions contemplated herein and (ii) of obtaining any
consents of any third party.
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10.3 NOTICES. All notices, requests, claims, demands and other
communications under this Agreement shall be in writing and shall be deemed
given if delivered personally or sent by overnight courier) to the parties at
the following addresses (or at such other address for a party as shall be
specified by like notice):
(a) if to MergerCo or Buyer, to
Sunbeam Corporation
1615 South Congress Avenue
Suite 200
Delray Beach, FL 33445
Telecopier: (561) 243-2218
Attn: General Counsel
with a copy to:
Skadden, Arps, Slate, Meagher & Flom
919 Third Avenue
New York, NY 10022-3897
Telecopier: (212) 735-2000
Attn: Blaine V. Fogg, Esq.
(b) if to the Company, to
Signature Brands, Inc.
7005 Cochran Road
Glenwillow, OH 44139-4312
Telecopier: (440) 542-4059
Attn: Chief Executive Officer
with copies to:
Hutchins, Wheeler & Dittmar
101 Federal Street
Boston, MA 02110
Telecopier: (617) 951-1295
Attn: James Westra, Esq.
10.4 DEFINITIONS. For purposes of this Agreement:
45
<PAGE>
(a) an "affiliate" of any person means another person that
directly or indirectly, through one or more intermediaries, controls, is
controlled by, or is under common control with, such first person;
(b) a "business day" means any day, other than Saturday,
Sunday or a federal holiday, and shall consist of the time period from 12:01
a.m. through 12:00 midnight Eastern time. In computing any time period under
Section 14(d)(5) or Section 14(d)(6) of the Exchange Act or under Regulation 14D
or Regulation 14E, the date of the event which begins the running of such time
period shall be included except that if such event occurs on other than a
business day such period shall begin to run on and shall include the first
business day thereafter;
(c) "knowledge", with respect to the Company means the actual
knowledge of any one or more of the following officers and employees of the
Company and its Subsidiaries: Meeta Vyas and Steven M. Billick.
(d) "Material Adverse Change" or "Material Adverse Effect"
means, when used in connection with the Company, any change or effect that
either individually or in the aggregate with all other such changes or effects
is materially adverse to the business, financial condition, or results of
operations of the Company and its Subsidiaries taken as a whole and the terms
"material" and "materially" shall have correlative meanings; provided, however,
that no Material Adverse Change or Material Adverse Effect shall be deemed to
have occurred as a result solely of general economic conditions affecting
generally the industry in which the Company competes and general market
conditions in the United States.
(e) "person" means an individual, corporation, partnership,
joint venture, association, trust, unincorporated organization or other entity;
and
(f) a "subsidiary" of any person means another person, an
amount of the voting securities, other voting ownership or voting partnership
interests of which is sufficient to elect at least a majority of its Board of
Directors (or other governing body) or, if there are no such voting interests,
50% or more of the equity interests of which is owned directly or indirectly by
such first person or any entity, in which the Company or any of its Subsidiaries
is a general partner.
10.5 INTERPRETATION. When a reference is made in this Agreement to a
Section, Exhibit or Schedule, such reference shall be to a section of, or an
Exhibit or Schedule to, this Agreement unless otherwise indicated. The table of
contents and headings contained in this Agreement are for reference purposes
only and shall not affect in any way the meaning or interpretation of this
Agreement. Whenever the words "include", "includes" or "including" are used in
this Agreement, they shall be deemed to be followed by the words -without
limitation".
46
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10.6 COUNTERPARTS. This Agreement may be executed in one or more
counterparts, all of which shall be considered one and the same agreement and
shall become effective when one or more counterparts have been signed by each of
the parties and delivered to the other parties.
10.7 ENTIRE AGREEMENT; NO THIRD-PARTY BENEFICIARIES. This Agreement and
the other agreements referred to herein constitute the entire agreement, and
supersede all prior agreements and understandings, both written and oral, among
the parties with respect to the subject matter of this Agreement. This
Agreement, other than Section 7.4, is not intended to confer upon any Person
other than the parties any rights or remedies.
10.8 GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED
IN ACCORDANCE WITH, THE LAWS OF THE STATE OF DELAWARE, REGARDLESS OF THE LAWS
THAT MIGHT OTHERWISE GOVERN UNDER APPLICABLE PRINCIPLES OF CONFLICTS OF LAWS.
10.9 ASSIGNMENT. Neither this Agreement nor any of the rights,
interests or obligations under this Agreement shall be assigned, in whole or in
part, by operation of law or otherwise by any of the parties without the prior
written consent of the other parties; provided, however, that Buyer or MergerCo
may, without the Company's prior written consent, assign its rights under this
Agreement to any financial institution that requires such assignment in
connection with such financial institution's agreement to provide financing to
either Buyer or MergerCo Subject to the preceding sentence, this Agreement will
be binding upon, inure to the benefit of, and be enforceable by, the parties and
their respective successors and assigns.
10.10 ENFORCEMENT. The parties agree that irreparable damage would
occur in the event that any of the provisions of this Agreement were not
performed in accordance with their specific terms or were otherwise breached. It
is accordingly agreed that the parties shall be entitled to an injunction or
injunctions to prevent breaches of this Agreement and to enforce specifically
the terms and provisions of this Agreement.
[Remainder of Page Intentionally Left Blank]
47
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IN WITNESS WHEREOF, Buyer, MergerCo and the Company have caused this
Agreement to be signed by their respective officers thereunto duly authorized,
all as of the date first written above.
SUNBEAM CORPORATION
By: /s/ David C. Fannin
--------------------------------
Name: David C. Fannin
Title: Executive Vice President & General Counsel
SIGNATURE BRANDS USA, INC.
By: /s/ Meda R. Vyas
--------------------------------
Name: Meda R. Vyas
Title: Vice Chairman and Chief Executive Officer
JAVA ACQUISITION CORP.
By: /s/ David C. Fannin
--------------------------------
Name: David C. Fannin
Title: Executive Vice President & General Counsel
48
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ANNEX I
CONDITIONS OF THE OFFER
Notwithstanding any other provision of the Offer or this Agreement, and
subject to any applicable rules and regulations of the SEC, including Rule
14e-1(c) relating to MergerCo's obligation to pay for or return tendered shares
after termination of the Offer, Buyer and MergerCo shall not be required to
accept for payment or pay for any shares of Company Common Stock tendered
pursuant to the Offer and may delay acceptance for payment or payment or may
terminate the Offer, if (i) less than 51% of the Fully Diluted Shares of Company
Common Stock has been tendered pursuant to the Offer by the expiration of the
Offer and not withdrawn (the "Minimum Condition"); (ii) any applicable waiting
period under the HSR Act has not expired or terminated; or (iii) at any time
after the date of this Agreement, and before acceptance for payment of any
shares of Company Common Stock, any of the following events shall occur and be
continuing:
(a) there shall be instituted or pending by any Governmental Entity any
suit, action or proceeding (i) challenging the acquisition by Buyer or
MergerCo of any shares of Company Common Stock under the Offer, or
seeking to restrain or prohibit the making or consummation of the Offer
or the Merger, (ii) seeking to prohibit or materially limit the
ownership or operation by the Company, Buyer or any of Buyer's
subsidiaries of a material portion of the business or assets of the
Company or Buyer and its subsidiaries, taken as a whole, or to compel
the Company or Buyer to dispose of or hold separate any material portion
of the business or assets of the Company or Buyer and its subsidiaries,
taken as a whole, in each case as a result of the Offer or the Merger or
(iii) seeking to impose material limitations on the ability of Buyer or
MergerCo to acquire or hold, or exercise full rights of ownership of,
any shares of Company Common Stock to be accepted for payment pursuant
to the Offer including, without limitation, the right to vote such
shares of Company Common Stock on all matters properly presented to the
stockholders of the Company or (iv) seeking to prohibit Buyer or any of
its subsidiaries from effectively controlling in any material respect
any material portion of the business or operations of the Company;
(b) there shall be any statute, rule, regulation, judgment, order or
injunction enacted, entered, enforced, promulgated or deemed applicable
to the Offer or the Merger, by any Governmental Entity or court, other
than the application to the Offer or the Merger of applicable waiting
periods under the HSR Act, that would result in any of the consequences
referred to in clauses (i) through (iv) of paragraph (a) above;
49
<PAGE>
(c) any of the representations and warranties of the Company contained
in the Agreement shall not be true and correct at and as of the date of
consummation of the Offer (except to the extent such representations and
warranties speak to an earlier date), as if made at and as of the date
of consummation of the Offer, in each case except as contemplated or
permitted by this Agreement and except, in the case of any such breach
when such breach would not have, individually or in the aggregate, a
Material Adverse Effect with respect to the Company or materially affect
the ability of the Company to consummate the Merger or the Offeror to
accept for payment or pay for shares of Company Common Stock pursuant to
the Offer;
(d) the Company shall have failed to perform the obligations required to
be performed by it under the Agreement at or prior to the date of
expiration of the Offer, including but not limited to its obligations
pursuant to Section 7.6 hereof, except for such failures to perform as
have not had or would not individually or in the aggregate, have a
Material Adverse Effect with respect to the Company or materially
adversely affect the ability of the Company to consummate the Merger or
the Offeror to accept for payment or pay for shares of Company Common
Stock pursuant to the Offer;
(e) the Board of Directors of the Company or any committee thereof shall
have (i) withdrawn, modified or amended in any respect adverse to Buyer
or MergerCo its approval or recommendation of the Offer or the Merger,
(ii) recommended or approved any Transaction Proposal from a person
other than Buyer, MergerCo or any of their respective affiliates, (iii)
failed to publicly announce, within ten (10) business days after the
occurrence of a Transaction Proposal, its opposition to such Transaction
Proposal, or amended, modified or withdrawn its opposition to any
Transaction Proposal in any manner adverse to Buyer or MergerCo or
failed to promptly reaffirm its recommendation of the Offer or the
Merger at the Buyer's request, or (iv) resolved to do any of the
foregoing;
(f) the Agreement shall have been terminated in accordance with its
terms; or
(g) (i) it shall have been publicly disclosed that any person, entity or
"group" (as defined in Section 13(d)(3) of the Exchange Act), shall have
acquired beneficial ownership (determined pursuant to Rule 13d-3 promulgated
under the Exchange Act) of more than 15% of any class or series of capital stock
of the Company (including the Shares), through the acquisition of stock, the
formation of a group or otherwise, other than Buyer or an affiliate or any
person or group existing which on the date of the Agreement beneficially owned
more than 15% of any class or series of capital stock of the Company or (ii) the
Company shall have entered into a definitive agreement or agreement in principle
with any person with respect to a Transaction Proposal or similar business
combination with the Company or any subsidiary,
I-2
<PAGE>
which in the reasonable judgment of Buyer or MergerCo in any such case, and
regardless of the circumstances giving rise to such condition, makes it
inadvisable to proceed with the Offer and/or with such acceptance for payment.
The foregoing conditions are for the sole benefit of the Buyer
and MergerCo and may be waived by Buyer or MergerCo, in whole or in part at any
time and from time to time in the reasonable discretion of Buyer or MergerCo.
I-3
EXHIBIT 10.w
STOCK PURCHASE AGREEMENT
STOCK PURCHASE AGREEMENT, dated as of February 28, 1998 (the
"Agreement"), among JAVA ACQUISITION CORP., a Delaware corporation (the
"Purchaser"), and each person or entity named in Schedule A to this Agreement
(the "Sellers").
WHEREAS, the Purchaser, Sunbeam Corporation, a Delaware
corporation of which the Purchaser is a wholly owned subsidiary ("Parent"), and
Signature Brands USA, Inc., a Delaware corporation (the "Company"), are entering
into an Agreement and Plan of Merger (the "Merger Agreement") simultaneously
with the entry into this Agreement, which provides, among other things, that the
Purchaser, upon the terms and subject to the conditions thereof, make a cash
tender offer (the "Offer") for all issued and outstanding shares of common
stock, par value $.01 per share, of the Company (the "Shares") at a price of
$8.25 per share, and following consummation of the Offer the Purchaser will
merge with and into the Company with the Company as the surviving corporation
(the "Merger") and each then outstanding Share (other than Shares held by (i)
the Parent or any of its wholly owned subsidiaries, (ii) the Company or any of
its wholly owned subsidiaries or (iii) any holder who perfects dissenters'
rights under Delaware law) would be converted into the right to receive $8.25 in
cash, or any higher price paid per Share in the Offer; and
WHEREAS, each of the Sellers wishes to sell to the Purchaser,
and the Purchaser wishes to purchase from each of the Sellers, upon the terms
and subject to the conditions hereinafter set forth, the number of Shares (the
"Seller's Shares") set forth in Schedule A hereto opposite the name of each of
the Sellers.
NOW, THEREFORE, the parties hereto agree as follows:
<PAGE>
SELLERS' REPRESENTATIONS. Each of the Sellers severally
represents and warrants to the Purchaser (a) that such Seller has the power and
authority (or the capacity if an individual) to execute and deliver this
Agreement, (b) that, if a corporation, partnership or other entity, this
Agreement has been duly authorized by all requisite action on the part of the
Seller, (c) that the Seller has duly executed and delivered this Agreement and
this Agreement is a valid and binding agreement, enforceable against such Seller
in accordance with its terms, (d) that neither the execution of this Agreement
nor the consummation by such Seller of the transactions contemplated hereby will
constitute a violation of, or conflict with, or default under, any contract,
commitment, agreement, understanding, arrangement or restriction of any kind to
which such Seller is a party or by which such Seller is bound and, if the Seller
is a corporation, partnership or other entity, the organizational documents
thereof, (e) that on the date hereof such Seller has, and at any Closing (as
defined below) hereunder such Seller will have (without exception), good and
valid title to such Seller's Shares, free and clear of all claims, liens,
charges, encumbrances and security interests, restricting such Seller's ability
to enter into this Agreement or perform its obligations hereunder, (f) that
there are no options or rights to purchase or acquire, or agreements relating to
any such rights with respect to, any of such Seller's Shares except pursuant to
this Agreement, (g) that the transfer of such Seller's Shares to the Purchaser
hereunder will vest in the Purchaser good and valid title to such Shares, free
and clear of all claims, liens, charges, encumbrances, security interests or
restrictions on voting and (h) that the number of Shares set forth in Schedule A
hereto opposite the name of such Seller constitutes all of the Shares owned
beneficially or of record by such Seller (other than, in the case of the Sellers
listed on Schedule A other than ML-Lee Acquisition Fund, L.P., Thomas H. Lee
Equity Partners, L.P. and State Street
<PAGE>
Bank and Trust Company, not individually but as trustee of the 1989 Thomas H.
Lee Nominee Trust (collectively, the "Major Sellers"), for differences therefrom
which are not material).
PURCHASER'S REPRESENTATIONS. The Purchaser represents and
warrants to each of the Sellers that (a) the Purchaser has duly authorized,
executed and delivered this Agreement and this Agreement is a valid and binding
agreement, enforceable against the Purchaser in accordance with its terms and
(b) the Purchaser will acquire the Shares for its own account and not with a
view to or for sale in connection with any distribution thereof, and the
Purchaser will not sell or otherwise dispose of the Shares except in compliance
with, or pursuant to an exemption from registration under, the Securities Act of
1933, as amended, and the rules and regulations thereunder.
AGREEMENT TO SELL. At the Closing provided for in Section 4 of
this Agreement and subject to the conditions in Section 5 of this Agreement,
each of the Sellers will sell, transfer and deliver such Seller's Shares to the
Purchaser (duly endorsed for transfer in blank or accompanied by stock transfer
powers duly executed in blank, with all necessary stock transfer tax stamps
affixed and cancelled) and the Purchaser will purchase such Seller's Shares and
deliver to such Seller a certified or official bank check or checks payable to
or upon the order of such Seller in immediately available funds, at a price per
Share equal to $8.25 such higher per Share price as the Purchaser may have paid
pursuant to the Offer. Each Seller will, upon request of the Purchaser, promptly
execute and deliver all additional documents reasonably deemed by the Purchaser
to be necessary, appropriate or desirable to effect, complete and evidence the
sale, assignment and transfer of such Seller's Shares pursuant to this
Agreement.
CLOSING. The closing (the "Closing") of the purchase and
<PAGE>
sale hereunder shall take place at the office of Skadden, Arps, Slate, Meagher &
Flom LLP, 919 Third Avenue, New York, New York 10022, or such other place as the
parties may mutually agree, on the earlier to occur of (i) the first business
day after the purchase of Shares by the Purchaser pursuant to the Offer or (ii)
if the Offer has otherwise terminated or expired, such date (which shall be at
least one business day following the date of notice) as the Purchaser may
specify in writing to the Sellers. Payment for the Shares shall be in
immediately available funds. Any Seller may tender such Seller's Shares pursuant
to the Offer, provided, however, that until such time as such Shares are
accepted for payment pursuant to the Offer, such Shares shall continue to be
governed by this Agreement. If a Seller's Shares are tendered and accepted for
payment pursuant to the Offer, the payment for such Seller's Shares pursuant to
the Offer shall constitute the Closing of the purchase and sale of such Shares
hereunder.
CONDITIONS TO CLOSING. (a) The obligations of the Purchaser
and each of the Sellers under this Agreement shall be subject to the
satisfaction at the Closing of each of the following conditions:
Neither the Purchaser nor such Seller shall
be subject to any order, decree or injunction of a court of competent
jurisdiction which prevents or delays the consummation of the
transactions contemplated by this Agreement and such Closing shall not
be prohibited by any rule, regulation, ruling or law.
The applicable waiting period with respect
to such Closing under the Hart-Scott-Rodino Antitrust Improvements Act
of 1976, as amended (the "HSR Act"), shall have expired or been
terminated.
The representations and warranties of such
Seller (in the case of the Purchaser) or the Purchaser (in the
<PAGE>
case of each Seller) shall be true and correct in all material respects
and such Seller (in the case of the Purchaser) or the Purchaser (in the
case of each Seller) shall have complied in all material respects with
its covenants hereunder.
CHANGES IN SHARES. In the event of any change in the number of
Shares outstanding by recapitalization, declaration of a stock split or
combination or payment of a stock dividend or the like, the number of Shares to
be transferred to the Purchaser and the per Share payments to be made to the
Sellers shall be appropriately adjusted. Each Seller's Shares shall include all
Shares acquired after the date hereof by such Seller and all dividends or
distributions in respect of the Seller's Shares.
SELLER'S COVENANTS. Except as provided for herein, each Seller
agrees not to:
sell, transfer, pledge, assign or otherwise dispose
of, or enter into any contract, option or other arrangement or understanding
with respect to the sale, transfer, pledge, assignment or other disposition of
such Seller's Shares;
grant any proxies, deposit of such Seller's Shares
into a voting trust or enter into a voting agreement with respect to any of such
Shares;
solicit, encourage, participate in or initiate
discussions or negotiations with, or provide information to, any person, other
than Parent or any affiliate of Parent, concerning any merger, sale of assets,
sale of shares of capital stock or similar transactions involving the Company or
any subsidiary or division of the Company; provided nothing herein shall be
deemed to limit or restrict in any respect the ability of Directors of the
Company who are Sellers or may be affiliated with Sellers from exercising the
fiduciary duties in accordance
<PAGE>
with Section 7.6 of the Merger Agreement; or
take any action which would make any representation
or warranty of such Seller herein untrue or incorrect.
SELLER'S ACTIONS. Each Major Seller hereby agrees that at any
meeting of the stockholders of the Company however called, it shall (a) vote
such Seller's Shares in favor of the Merger or any other transaction
contemplated by the Merger Agreement, (b) vote such Seller's Shares against any
action or agreement that would result in a breach in any material respect of any
covenant, representation or warranty or any other obligation of the Company
under the Merger Agreement and (c) vote such Seller's Shares against any action
or agreement that would impede, interfere with or discourage the Offer or the
Merger, including, but not limited to: (i) any extraordinary corporate
transaction, such as a merger, reorganization or liquidation involving the
Company or any of its subsidiaries, (ii) a sale or transfer of a material amount
of assets of the Company or any of its subsidiaries, (iii) any change in the
management or Board of Directors of the Company (other than as contemplated by
the Merger Agreement), (iv) any change in the present capitalization or dividend
policy of the Company or (v) any other material change in the Company's
corporate structure or business. Each Major Seller hereby grants the Purchaser
as irrevocable proxy and irrevocably appoints the Purchaser or its designees,
with full power of substitution, its attorney and proxy to vote all such
Seller's Shares in respect of any of the matters set forth in clauses (a)
through (c) of this Section and in the manner specified in such clauses,
provided, however, that such proxy shall not apply to the matters set forth in
clause (c)(iii) of this Section until any waiting period applicable thereto
under the HSR Act shall have expired or been terminated. Such Seller
acknowledges and agrees that this proxy is coupled with an interest,
constitutes, among other things, an
<PAGE>
inducement for Parent and the Purchaser to enter into the Merger Agreement, is
irrevocable and shall not be terminated by operation of law or otherwise upon
the occurrence of any event (other than the termination of this Agreement) and
that no subsequent proxies will be given (and if given will not be effective).
Any such proxy shall terminate upon the termination of this Agreement.
LEGEND. As soon as practicable after the execution of this
Agreement, each Seller shall surrender the certificates representing such
Seller's Shares to the Purchaser so that the following legend may be placed on
such certificates:
"The shares of capital stock represented by this certificate
are subject to a Stock Purchase Agreement, dated as of February 28,
1998, between [the Purchaser] and [the Seller]."
SPECIFIC ENFORCEMENT. The parties hereto acknowledge that
damages would be an inadequate remedy for a breach of this Agreement and that
the obligations of the parties hereto shall be specifically enforceable, in
addition to any other remedy which may be available at law or in equity.
BROKERAGE FEES. Each Seller and the Purchaser, in connection
with the transaction contemplated herein, severally and not jointly agrees to
indemnify and hold the other harmless from and against any and all claims,
liabilities or obligations with respect to any brokerage fees, commissions or
finders' fees asserted by any person on the basis of any act or statement
alleged to have been made by such party or its affiliate (other than, in the
case of the Sellers, an affiliate which is also a Seller).
EXPENSES. Each party hereto shall pay its own expenses
incurred in connection with this Agreement.
SURVIVAL. Notwithstanding anything contained in Section 14(g)
hereof to the contrary, none of the representations, warranties and
<PAGE>
agreements made by each of the Sellers and by the Purchaser in this Agreement
shall survive the Closing hereunder and any investigation at any time made by or
on behalf of any party hereto.
MISCELLANEOUS.
AMENDMENT, ETC. This Agreement may not be modified,
altered or supplemented except upon the execution and delivery of a written
agreement executed by the parties hereto.
ASSIGNMENT. No party to this Agreement may assign any
of its rights or obligations under this Agreement without the prior consent of
the other parties except that the rights and obligations of the Purchaser may be
assigned by the Purchaser to Parent or any of its other wholly owned
subsidiaries but no such transfer shall relieve the Purchaser of its obligations
hereunder if such transferee does not perform such obligations.
BINDING EFFECT. This Agreement will be binding upon,
inure to the benefit of and be enforceable by each Seller and such Seller's
respective heirs, beneficiaries, executors, representatives and permitted
assigns.
NOTICES. All notices, claims, requests, demands and
other communications hereunder will be in writing and will be deemed to have
been duly given upon receipt as follows:
(a) If to the Purchaser, to:
c/o Sunbeam Corporation
1615 South Congress Avenue
Delray Beach, Florida 33445
Attention: General Counsel
with a copy to:
Skadden, Arps, Slate, Meagher & Flom LLP
919 Third Avenue
New York, New York 10022
Attention: Blaine V. Fogg, Esq.
(b) If to the Seller, to such Seller at the address set
forth under his name in Schedule A;
with a copy to:
Hutchins, Wheeler & Dittmar
101 Federal Street
Boston, Massachusetts 02110
Attention: James Westra, Esq.
or to such other address as the person to whom notice is to be given may have
previously furnished to the others in writing in the manner set forth above.
COUNTERPARTS. This Agreement may be executed in two
or more counterparts, each of which will be deemed to be an original but all of
which together will constitute one and the same instrument.
GOVERNING LAW. This Agreement shall be governed by
and construed in accordance with the laws of the State of Delaware, regardless
of the laws that might otherwise govern under applicable Delaware principles of
conflicts of law.
TERMINATION. Except for Sections 9, 11, 13 and 15
hereof, this Agreement shall terminate on the earliest of (i) the purchase of
Shares pursuant to the Offer, (ii) the termination of the Merger Agreement in
accordance with its terms and (iii) 12 months from the date hereof.
SALE OF SHARES. In the event that within 12 months following
the expiration of the Offer, a Seller shall sell, transfer or otherwise commit
to dispose any or all of such Shares to any party other than the Parent or an
affiliate of the Parent (a "Sale") and realize a Profit (as defined below) from
such Sale, then such Seller shall pay to the Parent an amount equal to the
Profit. Such amount shall be paid to the Parent promptly following the receipt
of proceeds by such Seller from such Sale. The term "Profit" shall mean the
<PAGE>
excess, if any, of (a) the aggregate consideration received by such Seller in
connection with the Sale over (b) the number of Shares sold, transferred or
disposed of by such Seller in connection with the Sale multiplied by the Offer
Price.
<PAGE>
IN WITNESS WHEREOF, this Agreement has been duly executed and
delivered by each Seller and a duly authorized officer of the Purchaser on the
day and year first written above.
JAVA ACQUISITION CORP.
By________________________
THOMAS H. LEE EQUITY PARTNERS, L.P.
By_________________________
Its General Partner
By_________________________
ML-LEE ACQUISITION FUND, L.P.
By_________________________
Its General Partner
By_________________________
STATE STREET BANK AND TRUST COMPANY,
not individually but as Trustee of
the 1989 THOMAS H. LEE NOMINEE TRUST
By________________________
<PAGE>
--------------------------
JOHN W. CHILDS
--------------------------
DAVID V. HARKINS
--------------------------
THOMAS R. SHEPHERD
--------------------------
THOMAS R. SHEPHERD MONEY PURCH.
--------------------------
GLENN H. HUTCHINS
--------------------------
SCOTT A. SCHOEN
--------------------------
C. HUNTER BOLL
--------------------------
STEVEN G. SEGAL
--------------------------
ANTHONY J. DINOVI
--------------------------
THOMAS M. HAGERTY
--------------------------
JOSEPH I. INCANDELA
--------------------------
WARREN C. SMITH, JR.
--------------------------
TINA B. SMITH
--------------------------
GLENN A. HOPKINS
--------------------------
ADAM L. SUTTIN
<PAGE>
--------------------------
SETH W. LAWRY
--------------------------
WENDY L. MASLER
--------------------------
TODD M. ABBRECHT
--------------------------
CHARLES A. BRIZLUS
<PAGE>
SCHEDULE A
NUMBER OF SHARES
NAME AND ADDRESS OF COMMON STOCK
OF SELLER OF THE COMPANY
---------------- ----------------
Thomas H. Lee Equity Partners, L.P. 1,818,203
ML-Lee Acquisition Fund, L.P. 1,563,053
State Street Bank and Trust Company
Not Individually but as Trustee of the
1989 Thomas H. Lee Nominee Trust 1,025,566
John W. Childs 148,458
David V. Harkins 44,481
Thomas R. Shepherd 44,607
Thomas R. Shepherd Money Purch. 19,611
Glenn H. Hutchins 31,750
Scott A. Schoen 19,136
C. Hunter Boll 19,136
Steven G. Segal 5,783
Anthony J. Dinovi 6,298
Thomas M. Hagerty 6,798
Joseph I. Incandela 1,398
Warren C. Smith, Jr. 5,814
Tina B. Smith 3,876
Glenn A. Hopkins 3,876
Adam L. Suttin 2,438
Seth W. Lawry 4,476
<PAGE>
Wendy L. Masler 500
Todd M. Abbrecht 231
Charles A. Brizius 311
EXHIBIT 10.x
--------------------------------------------------
AGREEMENT AND PLAN OF MERGER
by and among
SUNBEAM CORPORATION
SENTINEL ACQUISITION CORP.
and
FIRST ALERT, INC.
dated as of
February 28, 1998
--------------------------------------------------
<PAGE>
TABLE OF CONTENTS
ARTICLE I
THE OFFER AND MERGER
Section 1.1 The Offer..............................................1
Section 1.2 Company Actions........................................3
Section 1.3 SEC Documents..........................................4
Section 1.4 Directors..............................................5
Section 1.5 The Merger.............................................7
Section 1.6 Effective Time.........................................8
Section 1.7 Closing................................................8
Section 1.8 Stockholders' Meeting..................................8
ARTICLE II
CONVERSION OF SECURITIES
Section 2.1 Conversion of Capital Stock...........................10
Section 2.2 Exchange of Certificates..............................11
Section 2.3 Dissenters' Rights....................................12
Section 2.4 Transfer of Shares After the
Effective Time..........................13
Section 2.5 Company Stock Plans...................................13
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
Section 3.1 Representations and Warranties of
the Company.............................14
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF
PARENT AND THE PURCHASER
Section 4.1 Representations and Warranties of
Parent and the Purchaser................31
ARTICLE V
COVENANTS
Section 5.1 Interim Operations of the
Company.................................33
Section 5.2 Access; Confidentiality...............................38
Section 5.3 Reasonable Efforts; Notification......................38
i
<PAGE>
PAGE
----
Section 5.4 No Solicitation.......................................40
Section 5.5 Publicity.............................................42
Section 5.6 Transfer Taxes........................................42
Section 5.7 State Takeover Laws...................................42
Section 5.8 Indemnification and Insurance.........................42
ARTICLE VI
CONDITIONS
Section 6.1 Conditions to Each Party's Obligation
to Effect the Merger....................45
ARTICLE VII
TERMINATION
Section 7.1 Termination...........................................46
Section 7.2 Effect of Termination.................................48
ARTICLE VIII
MISCELLANEOUS
Section 8.1 Fees and Expenses.....................................48
Section 8.2 Amendment and Modification............................49
Section 8.3 Nonsurvival of Representations and
Warranties..............................49
Section 8.4 Notices...............................................50
Section 8.5 Interpretation........................................50
Section 8.6 Counterparts..........................................51
Section 8.7 Entire Agreement; No Third Party
Beneficiaries; Rights of Ownership......51
Section 8.8 Severability..........................................51
Section 8.9 Governing Law.........................................51
Section 8.10 Assignment...........................................51
SECTION 8.11 Enforcement..........................................52
SECTION 8.12 Extension; Waiver....................................52
SECTION 8.13 Procedure for Termination,
Amendment, Extension or Waiver..........52
SECTION 8.14 Certain Undertakings of Parent.......................53
SECTION 8.15 Company Disclosure Schedule..........................53
SECTION 8.16 Definitions..........................................53
Annex A Certain Conditions of the Offer
ii
<PAGE>
AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER, dated as of February 28, 1998,
by and among SUNBEAM CORPORATION, a Delaware corporation ("Parent"), SENTINEL
ACQUISITION CORP., a Delaware corporation and a wholly-owned Subsid iary of
Parent (the "Purchaser"), and FIRST ALERT, INC., a Delaware corporation (the
"Company").
WHEREAS, the respective Boards of Directors of Parent, the
Purchaser and the Company have unanimously determined that it is fair to and in
the best interests of their respective stockholders for Parent to acquire the
Company pursuant to a Merger (as defined below) in which Purchaser (or a
wholly-owned Subsidiary thereof) shall be merged with and into the Company upon
the terms and subject to the conditions set forth in this Agree ment;
WHEREAS, in furtherance thereof, Parent pro poses that the
Purchaser make an offer to purchase for cash the outstanding Shares (as defined
below) at a price of $5.25 per Share, net to the seller;
WHEREAS, concurrently with the execution and delivery of this
Agreement, certain stockholders of the Company have entered into a Stock Sale
Agreement (the "Stock Sale Agreement") with Parent pursuant to which, subject to
the terms and conditions specified therein, such stockholders are willing to pay
to Purchaser the proceeds upon the sale of certain Shares owned by such
stockholders after the date of this Agreement;
NOW, THEREFORE, in consideration of the forego ing and the
covenants and agreements set forth herein, the parties hereto agree as follows:
ARTICLE I
THE OFFER AND MERGER
Section 1.1 THE OFFER. Subject to this Agree ment not having
been terminated in accordance with the provisions of Section 7.1 hereof, as
promptly as practi cable (but in no event later than five business days after
the public announcement of the execution hereof), the Purchaser shall commence
(within the meaning of Rule 14d-2 under the Securities Exchange Act of 1934, as
<PAGE>
amended (the "Exchange Act")) a tender offer (the "Of fer") for all of the
outstanding shares of Common Stock, par value $.01 per share (the "Shares"), of
the Company at a price of $5.25 per Share, net to the seller in cash (such
price, or such higher price per Share as may be paid in the Offer, being
referred to herein as the "Offer Price"), subject to the conditions set forth in
Annex A hereto.
The obligations of the Purchaser to commence the Offer and to
accept for payment and to pay for any Shares validly tendered on or prior to the
expiration of the Offer and not withdrawn shall be subject only to the
conditions set forth in Annex A hereto. The Offer shall be made by means of an
offer to purchase (the "Offer to Purchase") containing the terms set forth in
this Agree ment and the conditions set forth in Annex A hereto.
The Purchaser shall not decrease the Offer Price or decrease
the number of Shares sought or amend any other condition of the Offer in any
manner adverse to the holders of the Shares (other than with respect to
insignificant changes or amendments and subject to the penultimate sentence of
this Section 1.1) or impose additional conditions without the written consent of
the Company, PROVIDED, HOWEVER, that if on the initial sched uled expiration
date of the Offer, which shall be 20 business days after the date the Offer is
commenced, all conditions to the Offer shall not have been satisfied or waived,
the Purchaser may, from time to time, in its sole discretion, extend the
expiration date PROVIDED, HOWEVER, that the expiration date of the Offer may not
be extended beyond June 1, 1998. In addition, the Offer Price may be increased,
and the Offer may be extended to the extent required by law in connection with
such increase in each case without the consent of the Company. The Purchaser
shall, on the terms and subject to the prior satisfaction or waiver of the
conditions of the Offer, accept for payment and pay for Shares validly tendered
as promptly as practicable; provided, however, that if, immediately prior to the
initial expiration date of the Offer, the Shares validly tendered and not
withdrawn pursuant to the Offer equal less than 90% of the outstanding Shares,
the Purchaser may extend the Offer for a period not to exceed ten business days,
notwithstanding that all conditions to the Offer are satisfied as of such
expiration date of the Offer. The Purchaser agrees that if all conditions set
2
<PAGE>
forth in Annex A are not satisfied on the initial expira tion date of the Offer,
the Purchaser shall extend (and re-extend) the Offer through April 30, 1998 to
provide time to satisfy such conditions.
Section 1.2 COMPANY ACTIONS.
(a) The Company hereby approves of and consents to the
Offer and represents that the Board of Directors, at a meeting duly called and
held, has (i) unanimously determined that each of the Agreement, the Offer and
the Merger (as defined in Section 1.5) are fair to and in the best interests of
the stockholders of the Company, (ii) unanimously approved the Stock Sale Agree
ment, the Offer, the acquisition of Shares pursuant to the Offer and the Merger
for purposes of Section 203 of the DGCL (the "Section 203 Approval"), (iii)
received the opinions of Salomon Smith Barney and NationsBanc Montgom ery
Securities, financial advisors to the Company, to the effect that the Offer
Price to be received by holders of Shares pursuant to the Offer and the Merger
is fair to the stockholders of the Company from a financial point of view, (iv)
approved this Agreement and the transactions contemplated hereby, including the
Offer and the Merger (collectively, the "Transactions") and (v) resolved to
recommend that the stockholders of the Company accept the Offer, tender their
Shares thereunder to the Purchaser and approve and adopt this Agreement and the
Merger. The Company has been advised by each of its directors and by each
executive officer who as of the date hereof is actually aware (to the knowledge
of the Company) of the Transactions contemplated hereby that each such Person
either intends to tender pursuant to the Offer all Shares owned by such Person
or vote all Shares owned by such Person in favor of the Merger.
(b) In connection with the Offer, the Company will
promptly furnish or cause to be furnished to the Purchaser mailing labels,
security position listings and any available listing or computer file containing
the names and addresses of all holders of record of the Shares as of a recent
date, and shall furnish the Pur chaser with such additional information
(including, but not limited to, updated lists of holders of the Shares and their
addresses, mailing labels and lists of security positions) and assistance as the
Purchaser or its agents may reasonably request in communicating the Offer to the
3
<PAGE>
record and beneficial holders of the Shares. Subject to the requirements of
applicable Law, and except for such steps as are necessary to disseminate the
Offer Documents and any other documents necessary to consummate the Merger,
Purchaser and its affiliates and associates shall hold in confidence the
information contained in any such labels, listings and files, will use such
information only in connection with the Offer and the Merger, and, if this
Agreement shall be terminated, will deliver to the Company all copies of such
information in their posses sion.
Section 1.3 SEC DOCUMENTS.
(a) As soon as practicable on the date the Offer is
commenced, Parent and the Purchaser shall file with the United States Securities
and Exchange Commission (the "SEC") a Tender Offer Statement on Sched ule 14D-1
in accordance with the Exchange Act with re spect to the Offer (together with
all amendments and supplements thereto and including the exhibits thereto, the
"Schedule 14D-1" and the Schedule 14D-1 together with all amendments,
supplements and exhibits thereto, includ ing the Offer to Purchase, being
collectively the "Offer Documents"). Concurrently with the commencement of the
Offer, the Company shall file with the SEC a Solicita tion/Recommendation
Statement on Schedule 14D-9 in accor dance with the Exchange Act (together with
all amendments and supplements thereto and including the exhibits thereto, the
"Schedule 14D-9"), which shall, subject to the fiduciary duty of the Board under
applicable law, contain the recommendation referred to in clause (iv) of Section
1.2(a) hereof.
(b) Parent and the Purchaser will take all steps necessary
to ensure that the Offer Documents, and the Company will take all steps
necessary to ensure that the Schedule 14D-9, will comply in all material
respects with the provisions of applicable Federal and state securities Laws
and, on the date filed with the SEC and on the date first published, sent or
given to the Company's stockholders, shall not contain any untrue statement of a
material fact or omit to state any material fact required to be stated therein
or necessary in order to make the statements therein, in light of the
circumstances under which they were made, not misleading, except that Parent and
the Purchaser make no representa-
4
<PAGE>
tion with respect to information furnished by the Company for inclusion in the
Offer Documents and the Company makes no representation with respect to
information furnished by Parent or the Purchaser for inclusion in the Schedule
14D-9. The information supplied in writing by the Company for inclusion in the
Offer Documents and by Parent or the Purchaser for inclusion in the Schedule
14D-9 will not contain any untrue statement of a material fact or omit to state
any material fact required to be stated therein or necessary in order to make
the statements therein, in light of the circumstances under which they were
made, not misleading. Each of Parent and the Purchaser will take all steps
necessary to cause the Offer Documents, and the Company will take all steps
necessary to cause the Schedule 14D-9, to be filed with the SEC and to be
disseminated to holders of the Shares, in each case as and to the extent
required by applicable Federal and state securities Laws. Each of Parent and the
Purchaser, on the one hand, and the Company, on the other hand, will promptly
correct any information provided by it for use in the Offer Documents and the
Schedule 14D-9 if and to the extent that it shall have become false and
misleading in any material respect and the Purchaser will take all steps
necessary to cause the Offer Documents, and the Company will take all steps
necessary to cause the Schedule 14D-9, as so corrected to be filed with the SEC
and to be disseminated to holders of the Shares, in each case as and to the
extent required by applicable Federal and state securities Laws. Parent and its
counsel shall be given a reasonable opportunity to review and comment upon the
Schedule 14D-9 and all amendments and supplements thereto prior to their filing
with the SEC or dissemination to stockholders of the Company. The Company agrees
to provide in writing Parent and its counsel with any comments the Company or
its counsel may receive from the SEC or its staff with respect to the Schedule
14D-9 promptly after the receipt of such comments and shall provide Parent and
its counsel an opportunity to participate, including by way of discussions with
the SEC or its staff, in the response of the Company to such comments.
Section 1.4 DIRECTORS.
(a) Promptly upon the purchase of and payment for any
Shares by Parent or any of its Subsidiaries pursuant to the Offer, Parent shall
be entitled to
5
<PAGE>
designate such number of directors, rounded up to the next whole number, on the
Board of Directors such that the percentage of its designees on the Board shall
equal the percentage of the outstanding Shares beneficially owned by Parent and
its affiliates. In furtherance thereof, the Company shall, upon request of the
Purchaser, use its best efforts promptly to cause Parent's designees to be so
elected to the Company's Board, and in furtherance thereof, to the extent
necessary, increase the size of the Board of Directors. At such time, the
Company shall also cause Persons designated by Parent to constitute at least the
same percentage (rounded up to the next whole number) as is on the Company's
Board of Directors of (i) each committee of the Company's Board of Directors,
and (ii) each committee (or similar body) of the Board of Directors.
Notwithstanding the provisions of this Section 1.4, the parties hereto shall use
their respective reasonable best efforts to ensure that at least two of the
members of the Board shall, at all times prior to the Effective Time (as defined
in Section 1.6 hereof) be, Continuing Directors (as defined below). For purposes
hereof, the term "Continuing Director" shall mean (i) any member of the Board as
of the date hereof, (ii) any member of the Board who is unaffiliated with, and
not a designee or nominee of Parent or Purchaser, or (iii) any successor of a
Continuing Director who is (A) unaffiliated with, and not a designee or nominee,
of Parent or Purchaser, and (B) recommended to succeed a Continuing Director by
a majority of the Continuing Directors then on the Board, and in each case under
clause (iii), who is not an employee of the Company. The Company shall promptly
take all actions required pursuant to Section 14(f) of the Exchange Act and Rule
14f-1 promulgated thereunder in order to fulfill its obligations under this
Section 1.4(a), including mailing to stockholders the information required by
such Section 14(f) and Rule 14f-1 (or, at Parent's request, furnishing such
information to Parent for inclusion in the Offer Documents initially filed with
the SEC and distributed to the stockholders of the Company) as is necessary to
enable Parent's designees to be elected to the Company's Board of Directors.
Parent or the Purchaser will supply the Company any information with respect to
either of them and their nominees, officers, directors and affiliates required
by such Section 14(f) and Rule 14f-1. The provisions of this Section 1.4(a) are
in addition to and shall not limit any rights which the Purchaser, Parent or
6
<PAGE>
any of their affiliates may have as a holder or beneficial owner of Shares as a
matter of law with respect to the election of directors or otherwise.
(b) From and after the time, if any, that Parent's
designees constitute a majority of the Company's Board of Directors, any
amendment or modification of this Agreement, any amendment to the Certificate of
Incorporation or Bylaws inconsistent with this Agreement, any termination of
this Agreement by the Company, any extension of time for performance of any of
the obligations of Parent or the Purchaser hereunder, any waiver of any
condition to the Company's obligations hereunder or any of the Company's rights
hereunder or other action by the Company hereunder may be effected only by the
action of a majority of the Continuing Directors of the Company, which action
shall be deemed to constitute the action of any committee specifically
designated by the Board of Directors to approve the actions and Transactions
contemplated hereby and the full Board of Directors.
Section 1.5 THE MERGER. Subject to the terms and conditions of
this Agreement, at the Effective Time (as defined in Section 1.6 hereof), the
Company and the Purchaser shall consummate a merger (the "Merger") pursuant to
which (a) the Purchaser (or a wholly-owned Subsidiary thereof) shall be merged
with and into the Company and the separate corporate existence of the Purchaser
(or a wholly-owned Subsidiary thereof) shall thereupon cease and (b) the Company
shall be the surviving corporation in the Merger (sometimes hereinafter referred
to as the "Surviving Corporation") and shall continue to be governed by the Laws
of the State of Delaware. In the event a wholly-owned Subsidiary of the
Purchaser rather than the Purchaser is merged with and into the Company in the
Merger, references herein to the Purchaser with respect to the Merger shall be
deemed to be references to such wholly-owned Subsidiary of the Purchaser.
Pursuant to the Merger, (x) the Restated Certificate of
Incorporation of the Company (the Certificate of Incorporation"), as in effect
immediately prior to the Effective Time, shall be the initial certificate of
incorporation of the Surviving Corporation and (y) the by-laws of the Company
(the "By-laws"), as in effect immediately prior to the Effective Time, shall be
the initial By-laws of the Surviving Corporation, each until
7
<PAGE>
thereafter changed or amended as provided therein or by applicable law. The
Merger shall have the effects specified in the Delaware General Corporation Law
(the "DGCL").
The directors and officers of the Purchaser at the Effective
Time shall be the initial directors and officers, respectively, of the Surviving
Corporation, in each case until their respective successors are duly elected and
qualified.
Section 1.6 EFFECTIVE TIME. Parent, the Purchaser and the
Company will cause a certificate of merger, or, if applicable, a certificate of
ownership and merger (as applicable, the "Certificate of Merger"), to be
executed and filed on the date of the Closing (as defined in Section 1.7) (or on
such other date as Parent and the Company may agree) with the Secretary of State
of Delaware (the "Secretary of State") as provided in the DGCL. The Merger shall
become effective on the date on which the Certificate of Merger has been duly
filed with the Secretary of State or such time as is agreed upon by the parties
and specified in the Certificate of Merger, and such time is hereinafter
referred to as the "Effective Time."
Section 1.7 CLOSING. The closing of the Merger (the "Closing")
shall take place at 10:00 a.m., local time, on a date to be specified by the
parties, which shall be no later than the second business day after satisfaction
or waiver of all of the conditions set forth in Article VI hereof and, in the
event that Purchaser determines to extend the Offer for up to ten business days
as provided for in Section 1.1 hereof, no later than the second business day
after the earlier of the completion of such ten business day period or 90% of
the outstanding Shares have been validly tendered and not withdrawn pursuant to
the Offer (the "Closing Date"), at the offices of Skadden, Arps, Slate, Meagher
& Flom LLP, New York, New York, unless another date or place is agreed to in
writing by the parties hereto.
Section 1.8 STOCKHOLDERS' MEETING.
(a) If required by applicable law in order to consummate
the Merger, the Company, acting
8
<PAGE>
through its Board of Directors, shall, in accordance with applicable law:
(i) duly call, give notice of, convene and hold a
special meeting of its stockholders (the "Special Meeting") as promptly
as practicable following the acceptance for payment and purchase of
Shares by the Purchaser pursuant to the Offer for the purpose of
considering and taking action upon the approval of the Merger and the
adoption of this Agreement;
(ii) prepare and file with the SEC a preliminary proxy
or information statement in accordance with the Exchange Act relating
to the Merger and this Agreement and use its best efforts (x) to obtain
and furnish the information required to be included by the Exchange Act
and the SEC in the Proxy Statement (as hereinafter defined) and, after
consultation with Parent, to respond promptly to any comments made by
the SEC with respect to the preliminary proxy or information statement
and cause a definitive proxy or information statement, including any
amendment or supplement thereto (the "Proxy Statement") to be mailed to
its stockholders, provided that no amendment or supplement to the Proxy
Statement will be made by the Company without consultation with Parent
and its counsel and (y) to obtain the necessary approvals of the Merger
and this Agreement by its stockholders; and
(iii) include in the Proxy Statement the
recommendation of the Board that stockholders of the Company vote in
favor of the approval of the Merger and the adoption of this Agreement.
(b) Parent shall vote, or cause to be voted, all of the
Shares then owned by it, the Purchaser or any of its other Subsidiaries and
affiliates in favor of the approval of the Merger and the adoption of this
Agreement.
9
<PAGE>
ARTICLE II
CONVERSION OF SECURITIES
Section 2.1 CONVERSION OF CAPITAL STOCK. As of the Effective
Time, by virtue of the Merger and without any action on the part of the holders
of any Shares or any shares of capital stock of the Purchaser:
(a) PURCHASER CAPITAL STOCK. Each issued and outstanding
share of capital stock of the Purchaser shall be converted into and become one
fully paid and nonassessable share of common stock of the Surviving Corporation.
(b) CANCELLATION OF TREASURY STOCK AND PURCHASER-OWNED
STOCK. All Shares that are owned by the Company or any Subsidiary of the Company
and any Shares owned by Parent, the Purchaser or any Subsidiary of Parent or the
Purchaser shall be cancelled and retired and shall cease to exist and no
consideration shall be delivered in exchange therefor.
(c) EXCHANGE OF SHARES. Each issued and outstanding Share
(other than Shares to be cancelled in accordance with Section 2.1(b) and any
Shares which are held by stockholders exercising appraisal rights pursuant to
Section 262 of the DGCL ("Dissenting Stockholders")) shall be converted into the
right to receive the Offer Price in cash, payable to the holder thereof, without
interest (the "Merger Consideration"), upon surrender of the certificate
formerly representing such Share in the manner provided in Section 2.2. All such
Shares, when so converted, shall no longer be outstanding and shall
automatically be cancelled and retired and shall cease to exist, and each holder
of a certificate representing any such Shares shall cease to have any rights
with respect thereto, except the right to receive the Merger Consideration
therefor upon the surrender of such certificate in accordance with Section 2.2,
without interest, or the right, if any, to receive payment from the Surviving
Corporation of the "fair value" of such Shares as determined in accordance with
Section 262 of the DGCL.
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Section 2.2 EXCHANGE OF CERTIFICATES.
(a) PAYING AGENT. Prior to the Effective Time, Parent
shall designate a bank or trust company to act as agent for the holders of the
Shares in connection with the Merger (the "Paying Agent") to receive the funds
to which holders of the Shares shall become entitled pursuant to Section 2.1(c).
Parent shall, from time to time, make available to the Paying Agent funds in
amounts and at times necessary for the payment of the Merger Consideration as
provided herein. All interest earned on such funds shall be paid to Parent.
(b) EXCHANGE PROCEDURES. As soon as reasonably practicable
after the Effective Time, the Paying Agent shall mail to each holder of record
of a certificate or certificates, which immediately prior to the Effective Time
represented outstanding Shares (the "Certificates"), whose Shares were converted
pursuant to Section 2.1 into the right to receive the Merger Consideration (i) a
letter of transmittal (which shall specify that delivery shall be effected, and
risk of loss and title to the Certificates shall pass, only upon delivery of the
Certificates to the Paying Agent and shall be in such form and have such other
provisions as Parent and the Company may reasonably specify) and (ii)
instructions for use in effecting the surrender of the Certificates in exchange
for payment of the Merger Consideration. Upon surrender of a Certificate for
cancellation to the Paying Agent or to such other agent or agents as may be
appointed by Parent, together with such letter of transmittal, duly executed,
the holder of such Certificate shall be entitled to receive in exchange therefor
the Merger Consideration for each Share formerly represented by such Certificate
and the Certificate so surrendered shall forthwith be cancelled. If payment of
the Merger Consideration is to be made to a Person other than the Person in
whose name the surrendered Certificate is registered, it shall be a condition of
payment that the Certificate so surrendered shall be properly endorsed or shall
be otherwise in proper form for transfer and that the Person requesting such
payment shall have paid any transfer and other taxes required by reason of the
payment of the Merger Consideration to a Person other than the registered holder
of the Certificate surrendered or shall have established to the satisfaction of
the Surviving Corporation that such tax either has been paid
or is not appli-
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cable. Until surrendered as contemplated by this Section 2.2, each Certificate
shall be deemed at any time after the Effective Time to represent only the right
to receive the Merger Consideration in cash as contemplated by this Section 2.2.
The right of any stockholder to receive the Merger Consideration shall be
subject to and reduced by any applicable withholding obligation.
(c) TRANSFER BOOKS; NO FURTHER OWNERSHIP RIGHTS IN THE
SHARES. At the Effective Time, the stock transfer books of the Company shall be
closed and thereafter there shall be no further registration of transfers of the
Shares on the records of the Company. From and after the Effective Time, the
holders of Certificates evidencing ownership of the Shares outstanding
immediately prior to the Effective Time shall cease to have any rights with
respect to such Shares, except as otherwise provided for herein or by applicable
law. If, after the Effective Time, Certificates are presented to the Surviving
Corporation for any reason, they shall be cancelled and exchanged as provided in
this Article II.
(d) TERMINATION OF FUND; NO LIABILITY. At any time
following six months after the Effective Time, the Surviving Corporation shall
be entitled to require the Paying Agent to deliver to it any funds (including
any interest received with respect thereto) which had been made available to the
Paying Agent and which have not been disbursed to holders of Certificates, and
thereafter such holders shall be entitled to look to the Surviving Corporation
(subject to abandoned property, escheat or other similar Laws) only as general
creditors thereof with respect to the Merger Consideration payable upon due
surrender of their Certificates, without any interest thereon. Notwithstanding
the foregoing, none of Parent, the Surviving Corporation or the Paying Agent
shall be liable to any holder of a Certificate for Merger Consideration
delivered to a public official pursuant to any applicable abandoned property,
escheat or similar law.
Section 2.3 DISSENTERS' RIGHTS. Notwithstanding anything in
this Agreement to the contrary, if any Dissenting Stockholder shall demand to be
paid the "fair value" of such holder's Shares, as provided in Section 262 of the
DGCL, such Shares shall not be converted into or be exchangeable for the right
to receive the Merger
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Consideration except as provided in this Section 2.3 and the Company shall give
the Parent notice thereof and the Parent shall have the right to participate in
all negotiations and proceedings with respect to any such demands. Neither the
Company nor the Surviving Corporation shall, except with the prior written
consent of the Parent, voluntarily make any payment with respect to, or settle
or offer to settle, any such demand for payment. If any Dissenting Stockholder
shall fail to perfect or shall have effectively withdrawn or lost the right to
dissent, the Shares held by such Dissenting Stockholder shall thereupon be
treated as though such Shares had been converted into the Merger Consideration
pursuant to Section 2.1.
Section 2.4 TRANSFER OF SHARES AFTER THE EFFECTIVE TIME. No
transfer of Shares shall be made on the stock transfer books of the Surviving
Corporation at or after the Effective Time.
Section 2.5 COMPANY STOCK PLANS. Immediately prior to the
Effective Time, each then outstanding option to purchase shares (in each case,
an Option), whether or not then exercisable, shall be cancelled by the Company
and in consideration of such cancellation and except to the extent that Parent
or the Purchaser and the holder of any such Option otherwise agree, the Company
(or, at Parent's option, the Purchaser) shall pay to such holders of Options an
amount in respect thereof equal to the product of (A) the excess, if any, of the
Offer Price over the exercise price of each such Option and (B) the number of
Shares previously subject to the Option immediately prior to its cancellation
(such payment to be net of withholding taxes and without interest). If required,
the Company shall cause the Company's employees and directors to consent to the
transactions contemplated by this Section 2.5, no later than the Effective Time.
(b) All stock option or other equity based plans
maintained with respect to the Shares ("Option Plans") shall terminate as of the
Effective Time and the provisions in any other Benefit Plan providing for the
issuance, transfer or grant of any capital stock
of the Company or any interest in respect of any capital stock of the Company
shall be deleted as of the Effective Time, and the Company shall use its best
efforts to ensure that following the Effective Time no holder of an
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Option or any participant in any Option Plan shall have any right thereunder to
acquire any capital stock of the Company, Parent or the Surviving Corporation.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
Section 3.1 REPRESENTATIONS AND WARRANTIES OF THE COMPANY. The
Company represents and warrants to Parent and the Purchaser as follows:
(a) ORGANIZATION, STANDING AND CORPORATE POWER. Each of
the Company and each of its Subsidiaries is a corporation duly organized,
validly existing and in good standing under the Laws of the jurisdiction in
which it is organized and has the requisite corporate power and authority to
carry on its business as now being conducted. Each of the Company and its
Subsidiaries is duly qualified as a foreign corporation or licensed to do
business and is in good standing in each jurisdiction in which the nature of its
business or the ownership or leasing of its properties makes such qualification
or licensing necessary, other than in such jurisdictions where the failure to be
so qualified or licensed (individually or in the aggregate) would not have a
Material Adverse Effect on the Company. The Company has made available to Parent
complete and correct copies of the Certificate of Incorporation of the Company
and By-laws of the Company, in each case as amended to the date of this
Agreement, and has delivered the certificates of incorporation and by-laws or
other organizational documents of its Subsidiaries, in each case as amended to
the date of this Agreement, other than Subsidiaries which are incorporated in a
jurisdiction other than a State of the United States. The respective
certificates of incorporation and by-laws or other organizational documents of
the Subsidiaries of the Company do not contain any provision limiting or
otherwise restricting the ability of the Company to control such Subsidiaries.
(b) SUBSIDIARIES. The list of Subsidiaries of the Company
filed by the Company with its
most recent Report on Form 10-K is a true and accurate list of all the
Subsidiaries of the Company which are required to be set forth therein. All the
outstanding shares of capital stock of each Subsidiary are owned by the Company
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or by another wholly owned Subsidiary of the Company, free and clear of all
Liens, except as set forth in Schedule 3.1(b) of the Company Disclosure
Schedule. There are no other companies in which the Company has a direct or
indirect ownership interest.
(c) CAPITAL STRUCTURE. The authorized capital stock of the
Company consists of 30,000,000 Shares and 1,000,000 shares of preferred stock,
par value $.01 per share (the Preferred Shares"). As of the date hereof, (i)
24,335,112 Shares and no Preferred Shares were issued and outstanding and (ii)
1,929,698 shares were reserved for issuance upon exercise of outstanding
Options. Except as set forth above, as of the date of this Agreement: (i) no
shares of capital stock or other voting securities of the Company are issued,
reserved for issuance or outstanding; (ii) there were no stock appreciation
rights, restricted stock grant or contingent stock grants and there are no other
outstanding contractual rights to which the Company is a party the value of
which is based on the value of Shares; (iii) all outstanding shares of capital
stock of the Company are, and all shares which may be issued will be, when
issued, duly authorized, validly issued, fully paid and nonassessable and not
subject to preemptive rights; and (iv) there are no bonds, debentures, notes or
other indebtedness of the Company having the right to vote (or convertible into,
or exchangeable for, securities having the right to vote) on any matters on
which stockholders of the Company may vote. Except as set forth above, as of the
date of this Agreement, there are no outstanding securities, options, warrants,
calls, rights, commitments, agreements, arrangements or undertakings of any kind
to which the Company or any of its Subsidiaries is a party or by which any of
them is bound obligating the Company or any of its Subsidiaries to issue,
deliver or sell, or cause to be issued, delivered or sold, additional shares of
capital stock or other voting securities of the Company or of any of its
Subsidiaries or obligating the Company or any of its Subsidiaries to issue,
grant, extend or enter into any such security, option, warrant, call, right,
commitment, agreement, arrangement or undertaking. There are not any outstanding
contractual obligations of the Company or any of its Subsidiaries to repurchase,
redeem or otherwise acquire any shares of capital stock of the Company or any of
its Subsidiaries.
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(d) AUTHORITY; NONCONTRAVENTION; COMPANY ACTION. The
Company has the requisite corporate power and authority to enter into this
Agreement and, subject to approval of this Agreement by the holders of a
majority of the outstanding Shares, to consummate the Merger contemplated by
this Agreement. The execution and delivery of this Agreement by the Company and
the consummation by the Company of the Transactions contemplated by this
Agreement have been duly authorized by all necessary corporate action on the
part of the Company, subject, in the case of the Merger, to approval of this
Agreement by the holders of a majority of the outstanding Shares. This Agreement
has been duly executed and delivered by the Company and, assuming this Agreement
constitutes the valid and binding obligation of Parent and the Purchaser,
constitutes the valid and binding obligation of the Company, enforceable against
the Company in accordance with its terms, except that (i) such enforcement may
be subject to bankruptcy, insolvency, reorganization, moratorium or other
similar Laws now or hereafter in effect relating to creditors' rights generally
and (ii) the remedy of specific performance and injunctive relief may be subject
to equitable defenses and to the discretion of the court before which any
proceeding therefor may be brought. Except as set forth in Schedule 3.1(d) of
the Company Disclosure Schedule, the execution and delivery of this Agreement do
not, and the consummation of the Transactions contemplated by this Agreement
(including the changes in the composition of the Board of Directors of the
Company) and compliance with the provisions of this Agreement will not, conflict
with, or result in any violation of, or default (with or without notice or lapse
of time, or both) under, or give rise to a right of termination, cancellation or
acceleration of any obligation or to loss of a material benefit under, or result
in the creation of any lien or other encumbrance upon any of the properties or
assets of the Company or any of its Subsidiaries under, (i) the Certificate of
Incorporation, as amended, or By-laws of the Company or the comparable charter
or organizational documents of any of its Subsidiaries, (ii) any loan or credit
agreement note, bond, mortgage, indenture, lease or other agreement, instrument,
permit, concession, franchise or license applicable to the Company or any of its
Subsidiaries or their respective properties or assets (including all agreements
described pursuant to Section 3.1(t)) or (iii) any judgment, order, decree,
statute, law, ordinance, rule or
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regulation applicable to the Company or any of its Subsidiaries or their
respective properties or assets, other than, in the case of clauses (ii) or
(iii), any such conflicts, violations, defaults, rights or Liens that
individually or in the aggregate would not (x) impair in any material respect
the ability of the Company to perform its obligations under this Agreement, (y)
prevent or impede, in any material respect, the consummation of any of the
Transactions contemplated by this Agreement or (z) impair, prevent or impede
materially the conduct of the Company's business substantially as now conducted.
No consent, approval, order or authorization of, or registration, declaration or
filing with, any Federal, state or local government or any court, administrative
or regulatory agency or commission or other governmental authority or agency,
domestic or foreign (a "Governmental Entity") or any other party, is required by
the Company or any of its Subsidiaries in connection with the execution and
delivery of this Agreement by the Company or the consummation by the Company of
the Transactions contemplated by this Agreement, except for (i) if required, the
filing of a premerger notification and report form by the Company under the
Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the "HSR
Act"), (ii) the filing with the SEC of (x) the Schedule 14D-9, (y) a Proxy
Statement and (z) such reports under Section 13(a) of the Exchange Act as may be
required in connection with this Agreement and the Transactions contemplated by
this Agreement, (iii) the filing of the Certificate of Merger with the Secretary
of State and appropriate documents with the relevant authorities of other states
in which the Company is qualified to do business, (iv) as may be required by any
applicable state securities or "blue sky" Laws, and (v) such other consents,
approvals, orders, authorizations, registrations, declarations and filings the
failure of which to be obtained or made would not, individually or in the
aggregate, (x) impair, in any material respect, the ability of the Company to
perform its obligations under this Agreement, (y) prevent or significantly delay
the consummation of the Transactions contemplated by this Agreement or (z)
impair, prevent or impede materially the conduct of the Company's business
substantially as now conducted.
(e) SEC DOCUMENTS; FINANCIAL STATEMENTS. The Company has
filed all reports, proxy statements, forms, and other documents required to be
filed with the
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SEC under the Securities Act and the Exchange Act since December 31, 1995 (the
"SEC Documents"). As of their respective dates, (i) the SEC Documents complied
in all material respects with the requirements of the Securities Act of 1933
(the "Securities Act"), or the Exchange Act, as the case may be, and the rules
and regulations of the SEC promulgated thereunder applicable to such SEC
Documents, and (ii) none of the SEC Documents contained any untrue statement of
a material fact or omitted to state a material fact required to be stated
therein or necessary in order to make the statements therein, in light of the
circumstances under which they were made, not misleading. The financial
statements of the Company included in the SEC Documents are true and complete
and comply as to form in all material respects with applicable accounting
requirements and the published rules and regulations of the SEC with respect
thereto, have been prepared in accordance with generally accepted accounting
principles applied on a consistent basis during the periods involved (except as
may be indicated in the notes thereto) and fairly present the consolidated
financial position of the Company and its consolidated Subsidiaries as of the
dates thereof and the consolidated results of their operations and cash flows
for the periods then ended (subject, in the case of unaudited statements, to
normal year-end audit adjustments). Except as set forth in Schedule 3.1(e) of
the Company Disclosure Schedule and except as set forth in the SEC Documents
filed and publicly available prior to the date of this Agreement, and except for
liabilities and obligations incurred in the ordinary course of business
consistent with past practice since the date of the most recent consolidated
balance sheet included in the SEC Documents filed and publicly available prior
to the date of this Agreement, neither the Company nor any of its Subsidiaries
has any liabilities or obligations of any nature (whether accrued, absolute,
contingent or otherwise) required by generally accepted accounting principles to
be set forth on a consolidated balance sheet of the Company and its consolidated
Subsidiaries or in the notes thereto.
(f) INFORMATION SUPPLIED. None of the information supplied
or to be supplied by the Company expressly for inclusion or incorporation by
reference in (i) the Offer Documents or (ii) the Proxy Statement, will, and in
the case of the Offer Documents, at the time the Offer Documents are filed with
the SEC and first
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published, sent or given to the Company's stockholders, or, in the case of the
Proxy Statement, on the date the Proxy Statement is first mailed to the
Company's stockholders and at the time of the meeting of the Company's
stockholders held to vote on approval and adoption of this Agreement, contain
any untrue statement of a material fact or omit to state any material fact
required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they are made, not false or
misleading. The Proxy Statement will comply as to form in all material respects
with the Exchange Act and the rules and regulations thereunder, except that no
representation or warranty is made by the Company with respect to statements
made or incorporated by reference therein based on information supplied by
Parent or the Purchaser for inclusion or incorporation by reference therein.
(g) ABSENCE OF CERTAIN CHANGES OR EVENTS. Except as set
forth in SEC Documents or Schedule 3.1(g) of the Company Disclosure Schedule,
since September 28, 1997, the Company and its Subsidiaries have conducted their
respective businesses only in the ordinary course, and (i) there has not been
any Material Adverse Change in the Company and (ii) neither the Company nor any
of its Subsidiaries has taken any of the actions contemplated by Section 5.1.
(h) LITIGATION. Except as set forth in SEC documents or
Schedules 3.1(h) and 3.1(x) of the Company Disclosure Schedule or to the extent
reserved for as reflected on the Company's financial statements for the year
ended December 31, 1996, there are (i) no suits, actions or proceedings pending
or, to the knowledge of the Company, threatened against the Company or any of
its Subsidiaries that, individually or in the aggregate, would reasonably be
expected to have a Material Adverse
Effect, (ii) no complaints, lawsuits, charges or other proceedings pending or,
to the knowledge of the Company, threatened in any forum by or on behalf of any
present or former employee of the Company or any of its Subsidiaries, any
applicant for employment or classes of the foregoing alleging breach of any
express or implied contract of employment, any law or regulation governing
employment or the termination thereof or other discriminatory, wrongful or
tortious conduct in connection with the employment relationship that,
individually or in the
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aggregate, would reasonably be expected to have a Material Adverse Effect, (iii)
no judgments, decrees, injunctions or orders of any Governmental Entity or
arbitrator outstanding against the Company that, individually or in the
aggregate, could reasonably be expected to have a Material Adverse Effect on the
Company; and (iv) none of the Intellectual Property is subject to any order,
writ, judgment, injunction, decree, determination or award that has, or would
reasonably be expected to have a Material Adverse Effect on the Company.
(i) ABSENCE OF CHANGES IN BENEFIT PLANS; SEC DISCLOSURE.
Except as disclosed in Schedule 3.1(i) of the Company Disclosure Schedule, there
has not been any adoption or amendment by the Company or any of its Subsidiaries
or any ERISA Affiliate (as defined in Section 3.1(j) hereof) of any Benefit Plan
(as defined in Section 3.1(j) hereof) since September 28, 1997. Except as
disclosed in Schedule 3.1(i) of the Company Disclosure Schedule, neither the
Company nor any of its Subsidiaries has any formal plan or commitment to create
any additional Benefit Plan or modify or change any existing Benefit Plan that
would affect any employee or terminated employee of the Company or a Subsidiary
of the Company. All employment, consulting, severance, termination, change in
control or indemnification agreements, arrangements or understandings between
the Company or any of its Subsidiaries and any current or former officer or
director of the Company or any of its Subsidiaries which are required to be
disclosed in the SEC Documents have been disclosed therein.
(j) EMPLOYEE BENEFITS; ERISA. Schedule 3.1(j) of the
Company Disclosure Schedule contains a true and complete list of each material
bonus, deferred compensation, incentive compensation, stock
purchase, stock option, severance or termination pay, health insurance,
supplemental unemployment benefits, profit-sharing, pension, or retirement plan,
program, agreement or arrangement, and each other employee benefit plan,
program, agreement or arrangement, other than a non-material fringe benefit
plan, sponsored, maintained or contributed to or required to be contributed to
(at any time during the past six years) by the Company or any of its
Subsidiaries or by any trade or business, whether or not incorporated (an "ERISA
Affiliate"), that is a member of a "controlled group" within the meaning of
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section 4001 of the Employee Retirement Income Security Act of 1974, as amended,
and the rules and regulations promulgated thereunder ("ERISA") of which the
Company or a Subsidiary is a member or which is under "common control" within
the meaning of Section 4001 of ERISA, with the Company or a Subsidiary, for the
benefit of any employee or terminated employee of the Company, its Subsidiaries
or any ERISA Affiliate, whether formal or informal (the "Benefit Plans").
(ii) With respect to each Benefit Plan, the Company has
delivered a true and complete copy thereof (including all amendments thereto),
as well as true and complete copies of the two most recent annual reports, if
required under ERISA, with respect thereto; the two most recent actuarial
reports, if required under ERISA, with respect thereto; the two most recent
reports prepared with respect thereto in accordance with Statement of Financial
Accounting Standards No. 87, Employer's Accounting for Pensions; the most recent
Summary Plan Description, together with each Summary of Material Modifications,
if required under ERISA with respect thereto; if the Benefit Plan is funded
through a trust or any third party funding vehicle, the trust or other funding
agreement (including all amendments thereto) and the latest financial statements
thereof; and the most recent determination letter received from the Internal
Revenue Service with respect to each Benefit Plan that is intended to be
qualified under section 401 of the Internal Revenue Code of 1986, as from time
to time amended (the "Code").
(iii) No liability to the Pension Benefit Guaranty
Corporation ("PBGC") under Title IV of ERISA has been incurred by the Company,
its Subsidiaries or any ERISA Affiliate since the effective date of ERISA that
has not been satisfied in full, and no condition exists that presents a material
risk to the Company, its Subsidiaries or any ERISA Affiliate of incurring a
liability under such Title, other than liability for premiums due the PBGC
(which premiums have been paid when due). Each Benefit Plan has been operated
and administered in all material respects in accordance with its terms and
applicable law, including but not limited to ERISA and the Code.
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(iv) The PBGC has not instituted proceedings to terminate
any Benefit Plan and no condition exists that presents a material risk that such
proceedings will be instituted.
(v) With respect to each Benefit Plan that is subject to
Section 302 of the Code or Title IV of ERISA, the present value of accrued
benefits under such plan, based upon the actuarial assumptions used for funding
purposes in the most recent actuarial report prepared by such plan's actuary
with respect to such plan did not exceed, as of its latest valuation date, the
then current value of the assets of such plan allocable to such accrued
benefits.
(vi) Neither the Company, nor any Subsidiary of the
Company, nor any trust created thereunder, nor any trustee or administrator
thereof has engaged in a transaction in connection with which the Company or any
Subsidiary of the Company, any such trust, or any trustee or administrator
thereof, or any party dealing with any Benefit Plan or any such trust could be
subject to either a civil penalty assessed pursuant to section 409 or 502(i) of
ERISA or a tax imposed pursuant to section 4975 or 4976 of the Code.
(vii) No Benefit Plan is a "multiemployer pension plan,"
as such term is defined in section 3(37) of ERISA.
(viii) Each Benefit Plan which is intended to be
"qualified" within the meaning of section 401(a) of the Code is so qualified and
the trusts maintained thereunder are exempt from taxation under section 501(a)
of the Code and, to the knowledge of the Company, no event has occurred to cause
the loss of such qualified or exempt status.
(ix) No Benefit Plan provides health, death or medical
benefits (whether or not insured) with respect to current or former employees of
the Company or its Subsidiaries beyond their retirement or other termination of
service (other than (a) coverage mandated by applicable law or (b) benefits the
full cost of which is borne by the current or former employee (or his
beneficiary).
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(x) Except as set forth in Section 3.1(j) of the Company
Disclosure Schedule, the consummation of the Transactions contemplated by this
Agreement, alone, will not (a) entitle any current or former employee or officer
of the Company or any Subsidiary to severance pay, unemployment compensation or
any other payment, (b) accelerate the time of payment or vesting, or increase
the amount of compensation due any such employee or officer, (c) result in any
prohibited transaction described in section 406 of ERISA or section 4975 of the
Code for which an exemption is not available, or (d) require the Company or any
ERISA Affiliate to fund or make any payments to any trust or other funding
vehicle in respect of any Benefit Plan.
(xi) There are no pending, threatened or, to the knowledge
of the Company, anticipated claims by or on behalf of any Benefit Plan, by any
employee or beneficiary covered under any such Benefit Plan, or otherwise
involving any such Benefit Plan (other than routine claims for benefits).
(xii) No Benefit Plan of the Company or its Subsidiaries
or other arrangement authorizes grants of either stock appreciation rights or
restricted stock of the Company and there are no outstanding stock appreciation
rights or restricted stock of the Company.
(xiii) Except as set forth in Schedule 3.1(j) of the
Company Disclosure Schedule, no material Benefit Plan is not subject to ERISA
pursuant to Section 4(b)(4) of ERISA.
(k) TAXES. Each of the Company and each of its
Subsidiaries has timely filed (or has had timely filed on its behalf) all Tax
Returns required to be filed by it, and all such Tax Returns are true, complete
and correct in all material respects. Each of the Company and each of its
Subsidiaries has paid (or has had paid on its behalf) all Taxes (whether or not
shown as due on such Tax Returns), or the most recent financial statements
contained in the SEC Documents reflect adequate reserves in accordance with
generally accepted accounting principles for all Taxes not yet paid.
(ii) Except as set forth in Schedule 3.1(k) of the Company
Disclosure Schedule, (A) no defi-
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ciencies for any Taxes have been threatened, proposed, asserted or assessed
against the Company or any of its Subsidiaries, (B) no governmental authority is
conducting an audit with respect to Taxes or any Tax Return of the Company or
any of its Subsidiaries, (C) no extension or waiver of the statute of
limitations with respect to Taxes or any Tax Return has been granted by the
Company or any of its Subsidiaries, which remains in effect, (D) none of the
Company or any of its Subsidiaries is a party to any arrangement to allocate,
share or indemnify another party for Taxes, and (E) there are no liens for
material Taxes upon the assets of the Company or any of its Subsidiaries, except
for liens for Taxes not yet due.
(iii) As used in this Agreement, "Taxes" shall include (A)
any Federal, state, local or foreign net income, gross income, receipts,
windfall profit, severance, property, production, sales, use, license, excise,
franchise, employment, payroll, withholding, alternative or add-on minimum, ad
valorem, transfer, stamp or environmental tax, or any other tax, custom, duty,
governmental fee or other like assessment or charge of any kind whatsoever,
together with any interest or penalty, addition to tax or additional amount
imposed by any governmental authority, and (B) any liability for the payment of
amounts with respect to payments of a type described in clause (A) as a result
of being a member of an affiliated, consolidated, combined or unitary group, or
as a result of any obligation under a Tax sharing arrangement or a Tax indemnity
arrangement. As used in this Agreement, "Tax Returns" shall mean all returns,
reports, or statements required to be filed with respect to any Tax (including
any attachments thereto), including, without limitation, any information return,
claim for refund, amended return or declaration of estimated Tax.
(l) NO EXCESS PARACHUTE PAYMENTS. Except as set forth in
Section 3.1(l) of the Company Disclosure Schedule, no amounts payable as a
result of the Transactions contemplated by this Agreement under the Benefit
Plans or any other plans or arrangements will constitute a "parachute payment"
to a "disqualified individual" as those terms are defined in section 280G of the
Code, without regard to whether such payment is reasonable
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compensation for personal services performed or to be performed in the future.
(m) COMPLIANCE WITH APPLICABLE LAWS. Except as set forth
in Schedule 3.1(m) of the Company Disclosure Schedule, to the knowledge of the
Company, the Company and each of its Subsidiaries have complied and are
presently complying in all material respects with all applicable laws (whether
statutory or otherwise), rules, regulations, orders, ordinances, judgments or
decrees of all governmental authorities (Federal, state, local or otherwise)
(collectively, "Laws"), including, but not limited to, the Federal Occupational
Safety and Health Act, the Federal Consumer Product Safety Act, the rules and
regulations of the Nuclear Regulatory Commission, and all Laws relating to the
safe conduct of business and environmental protection and conservation, the
Civil Rights Act of 1964 and Executive Order 11246 concerning equal employment
opportunity obligations of Federal contractors and any applicable health,
sanitation, fire, safety, labor, zoning and building Laws and ordinances, and
neither the Company nor any of its Subsidiaries has received notification of any
asserted present or past failure to so comply, except such non-compliance that
has not and will not prevent the Company from carrying on its business
substantially as now conducted or might reasonably be expected to result in a
Material Adverse Effect.
(ii) Each of the Company and its Subsidiaries has in
effect all material Federal, state, local and foreign governmental approvals,
authorizations, certificates, filings, franchises, licenses, notices, permits
and rights, including all authorizations under Environmental Laws ("Permits"),
necessary for it to own, lease or operate its properties and assets and to carry
on its business substantially as now conducted, there are no appeals nor any
other actions pending to revoke any such Permits, and there has occurred no
material default or violation under any such Permits.
(iii) To the knowledge of the Company, each of the Company
and its Subsidiaries is, and has been, and each of the Company's former
Subsidiaries, while a Subsidiary of the Company, was in compliance in all
material respects with all applicable Environmental Laws, except such
non-compliance that has not and will
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not prevent the Company from carrying on its business substantially as now
conducted or might reasonably be expected to result in a Material Adverse
Effect. To the knowledge of the Company, as of the date of this Agreement, there
are no circumstances or conditions that would be reasonably likely to prevent or
interfere with compliance by the Company or its Subsidiaries in the future with
Environmental Laws (or Permits issued thereunder) in effect as of the date of
this Agreement, except such circumstances or conditions that have not and will
not prevent the Company from carrying on its business substantially as now
conducted or might reasonably be expected to result in a Material Adverse
Effect.
(iv) Except as set forth on Schedule 3.1(m)(iv) of the
Company Disclosure Schedule, neither the Company nor any Subsidiary of the
Company has received any written claim, demand, notice, complaint, court order,
administrative order or request for information from any Governmental Entity or
private party, alleging violation of, or asserting any noncompliance with or
liability under or potential liability under, any Environmental Laws, except for
matters which are no longer threatened or pending and for which the Company or
its Subsidiaries are not subject to further requirements pursuant to an
administrative or court order, judgment, or a settlement agreement.
(v) To the knowledge of the Company, during the period of
ownership or operation by the Company and its Subsidiaries of any of their
respective current or previously owned or leased properties, there have been no
Releases of Hazardous Material in, on, under or affecting such properties and
none of the Company or its Subsidiaries have disposed of any Hazardous Material
or any other substance in a manner that has led, or could reasonably be
anticipated to lead to a Release except in each case for those which
individually or in the aggregate are not reasonably likely to have a Material
Adverse Effect. Prior to the period of ownership or operation by the Company and
its Subsidiaries of any of their respective current or previously owned or
leased properties, to the knowledge of the Company, no Hazardous Material was
generated, treated, stored, disposed of, used, handled or manufactured at, or
transported shipped or disposed of from, such current or previously owned or
leased properties, and there were no Releases of Hazardous Material
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in, on, under or affecting any such property, except in each case for those
which individually or in the aggregate would not be reasonably likely to have a
Material Adverse Effect.
(vi) Except for leases entered into in the ordinary course
of business, as to which no notice of a claim for indemnity or reimbursement has
been received by the Company, and except as set forth on Schedule 3.1(m)(vii) of
the Company Disclosure Schedule, to the knowledge of the Company, neither the
Company nor any of its Subsidiaries has entered into any agreement that may
require it to pay to, reimburse, guarantee, pledge, defend, indemnify, or hold
harmless any Person for or against any Environmental Liabilities and Costs.
(vii) Neither the Company nor any of its Subsidiaries has
treated, stored or disposed of "hazardous waste", as that term is defined in the
Resource Conservation and Recovery Act, 42 U.S.C. ss. 6901 ET SEQ., analogous
state Laws, or the regulations promulgated thereunder, such that the Company or
any of its Subsidiaries would be required to obtain a permit under said Laws for
such treatment, storage or disposal and the failure to obtain such permit would
have a Material Adverse Effect.
(n) The Section 203 Approval is valid and in full force
and effect. Section 203 of the DGCL will not apply to the Stock Sale Agreement,
the Offer, the acquisition of Shares pursuant to the Offer or the Merger. No
other state takeover statute or similar statute or regulation applies or
purports to apply to the Offer, the Merger or the other Transactions
contemplated hereby.
(o) VOTING REQUIREMENTS. The affirmative vote of the
holders of a majority of all the Shares entitled to vote approving this
Agreement is the only vote of the holders of any class or series of the
Company's capital stock necessary to approve this Agreement and the Transactions
contemplated by this Agreement.
(p) BROKERS. No broker, investment banker, financial
advisor or other Person, other than Salomon Smith Barney and NationsBanc
Montgomery Securities, the fees and expenses of which will be paid by the
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Company, is entitled to any broker's, finder's, financial advisor's or other
similar fee or commission in connection with the Transactions contemplated by
this Agreement based upon arrangements made by or on behalf of the Company. The
Company has provided Parent true and correct copies of all agreements between
the Company and each of Salomon Smith Barney and NationsBanc Montgomery
Securities, including, without limitations, any fee arrangements.
(q) OPINION OF FINANCIAL ADVISOR. The Company has received
an opinions of Salomon Smith Barney and NationsBanc Montgomery Securities, to
the effect that, as of the date of this Agreement, the consideration to be
received in the Offer and the Merger by the Company's stockholders is fair to
the Company's stockholders from a financial point of view, and a complete and
correct signed copy of such opinion has been, or promptly upon receipt thereof
will be, delivered to Parent. Company has been authorized by Salomon Smith
Barney and NationsBanc Montgomery Securities to permit the inclusion of such
opinion in its entirety in the Offer Documents and the Schedule 14D-9 and the
Proxy Statement, so long as such inclusion is in form and substance reasonably
satisfactory to Salomon Smith Barney, NationsBanc Montgomery Securities and
their respective counsel.
(r) INTELLECTUAL PROPERTY. Except as set forth on Schedule
3.1(r) of the Company Disclosure Schedule, the Company and/or its Subsidiaries
owns, or is licensed or otherwise possesses legally enforceable rights to use
all patents, trademarks (registered or unregistered), trade names, service marks
and copyrights and applications therefor (collectively, "Intellectual Property
Rights") that are used in the business of the Company and its Subsidiaries as
currently conducted except as would not have a Material Adverse Effect. Each of
the Company and each of its Subsidiaries owns or has sufficient unrestricted
right to use the Intellectual Property Rights in order to allow it to conduct,
and continue to conduct, its business as currently conducted in all material
respects, and the consummation of the Transactions contemplated hereby will not
alter or impair such ability in any respect. To the knowledge of the Company,
there are no pending oppositions, cancellations, invalidity proceedings,
interferences or re-examination proceedings with respect to the Intellectual
Property
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Rights that are reasonably likely to have a Material Adverse Effect. Neither the
Company nor any of its Subsidiaries has received any written notice from any
other Person pertaining to or challenging the right of the Company or any of its
Subsidiaries to use any of the Intellectual Property Rights. Except as set forth
in Section 3.1(r) of the Company Disclosure Schedule, neither the Company nor
any of its Subsidiaries has made any claim of a violation or infringement by
others of its rights to or in connection with the Intellectual Property Rights
which is still pending.
(s) TITLE TO PROPERTIES. Each of the Company and each of
its Subsidiaries has sufficiently good and valid title to, or an adequate
leasehold interest in, its material properties and assets (including the real
property) in order to allow it to conduct, and continue to conduct, its business
as currently conducted in all material respects.
(t) CONTRACTS; DEBT INSTRUMENTS. Except as set forth in
the SEC Documents or Schedule 3.1(t) of the Company Disclosure Schedule, there
are no (i) agreements of the Company or any of its Subsidiaries containing an
unexpired covenant not to compete or similar restriction applying to the Company
or any of its Subsidiaries, (ii) interest rate, currency or commodity hedging,
swap or similar derivative transactions to which the Company is a party or (iii)
other contracts or amendments thereto that would be required to be filed as an
exhibit to a Form 10-K filed by the Company with the SEC as of the date of this
Agreement. Except to the extent set forth in the SEC Documents or Schedule
3.1(t) of the Company Disclosure Schedule, to the knowledge of the Company,
there are no existing defaults (or circumstances or events that, with the giving
of notice or lapse of time or both would become defaults) of the Company or any
of its Subsidiaries (or, to the knowledge of the Company, any other party
thereto) under any of the agreements set forth in Schedule 3.1(t) of the Company
Disclosure Schedule.
(u) LABOR RELATIONS. Except to the extent set forth in the
SEC Documents or Schedule 3.1(u) of the Company Disclosure Schedule, (i) to the
knowledge of the Company, the Company and each of its Subsidiaries is, and has
at all times been, in material compliance
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with all applicable Laws respecting employment and employment practices, terms
and conditions of employment, wages, hours of work and occupational safety and
health, and are not engaged in any unfair labor practices as defined in the
National Labor Relations Act or other applicable law, ordinance or regulation,
except where the failure to comply would not be reasonably likely to cause a
Material Adverse Effect on the Company; (ii) there is no labor strike, slowdown,
stoppage or lockout actually pending, or to the knowledge of the Company
threatened against or affecting the Company or any of its Subsidiaries; (iii)
the Company or any of its Subsidiaries is not a party to or bound by any
collective bargaining or similar agreement with any labor organization. There
are no employment contracts or severance agreements with any employees of the
Company or any of its Subsidiaries, except as set forth in the SEC Documents or
in Schedule 3.1(j) of the Company Disclosure Schedule.
(v) PRODUCTS LIABILITY. As used in this subsection 3.1(v),
the term "Product" shall mean any product designed, manufactured, shipped, sold,
marketed, distributed and/or otherwise introduced into the stream of commerce by
or on behalf of the Company or any of its Subsidiaries, including, without
limitation, any product sold in the United States by the Company or any of its
Subsidiaries as the distributor, agent, or pursuant to any other contractual
relationship with a non-U.S. manufacturer; and the term "Defect" shall mean a
defect or impurity of any kind, whether in design, manufacture, processing, or
otherwise, including, without limitation, any dangerous propensity associated
with any reasonably foreseeable use of a Product, or the failure to warn of the
existence of any defect, impurity, or dangerous propensity. Except as set forth
in Schedule 3.1(v) of the Company Disclosure Schedule, (i) as of the date of
this Agreement, there is no claim, action, suit or proceeding pending before any
Governmental Entity in which a Product is alleged to have a Defect; (ii) nor, to
the knowledge of the Company and its Subsidiaries, as of the date of this
Agreement, is any such claim, action, suit or proceeding threatened or is there
any valid basis for any such claim, action, suit or inquiry, proceeding; (iii)
nor, to the knowledge of the Company and its Subsidiaries, would any such claim,
action, suit or proceeding referred to in clause (i) or (ii) of this Section
3.1(v), if adversely determined, have, individually or in
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the aggregate, a Material Adverse Effect on the Company or any of its
Subsidiaries.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF
PARENT AND THE PURCHASER
Section 4.1 REPRESENTATIONS AND WARRANTIES OF PARENT AND THE
PURCHASER. Parent and the Purchaser represent and warrant to the Company as
follows:
(a) ORGANIZATION, STANDING AND CORPORATE POWER. Each of
Parent and the Purchaser is a corporation duly organized, validly existing and
in good standing under the Laws of the jurisdiction in which each is
incorporated and has the requisite corporate power and authority to carry on its
business as now being conducted. Each of Parent and the Purchaser is duly
qualified or licensed to do business and is in good standing in each
jurisdiction in which the nature of its business or the ownership or leasing of
its properties makes such qualification or licensing necessary, other than in
such jurisdictions where the failure to be so qualified or licensed
(individually or in the aggregate) would not have a Material Adverse Effect on
Parent.
(b) AUTHORITY; NONCONTRAVENTION. Parent and the Purchaser
have the requisite corporate power and authority to enter into this Agreement
and to consummate the Transactions contemplated by this Agreement. The execution
and delivery of this Agreement by Parent and the Purchaser and the consummation
by Parent and the Purchaser of the Transactions contemplated by this Agreement
have been duly authorized by all necessary corporate action on the part of
Parent and the Purchaser, as applicable. This Agreement has been duly executed
and delivered by Parent and the Purchaser and, assuming this Agreement
constitutes the valid and binding obligation of the Company, constitutes a valid
and binding obligation of each such party, enforceable against each such party
in accordance with its terms, except that (i) such enforcement may be subject to
bankruptcy, insolvency, reorganization, moratorium or other similar Laws now or
hereafter in effect relating to creditors' rights generally and (ii) the remedy
of specific performance and
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injunctive relief may be subject to equitable defenses and to the discretion of
the court before which any proceeding therefor may be brought. The execution and
delivery of this Agreement do not, and the consummation of the Transactions
contemplated by this Agreement will not, conflict with, or result in any
violation of, or default (with or without notice or lapse of time, or both)
under, or give rise to a right of termination, cancellation or acceleration of
any obligation or to loss of a material benefit under, or result in the creation
of any lien upon any of the properties or assets of Parent under, (i) the
certificate of incorporation or by-laws of Parent or the Purchaser, (ii) any
judgment, order, decree, statute, law, ordinance, rule or regulation applicable
to Parent or the Purchaser or their respective properties or assets, other than,
in the case of clause (ii), any such conflicts, violations, defaults, rights or
Liens that individually or in the aggregate would not (x) impair in any material
respect the ability of Parent and the Purchaser to perform their respective
obligations under this Agreement or (y) prevent or impede the consummation of
any of the Transactions contemplated by this Agreement. No consent, approval,
order or authorization of, or registration, declaration or filing with, any
Governmental Entity is required by Parent or the Purchaser in connection with
the execution and delivery of this Agreement or the consummation by Parent or
the Purchaser, as the case may be, of any of the Transactions contemplated by
this Agreement, except for (i) if required, the filing of a premerger
notification and report form under the HSR Act, (ii) the filing with the SEC of
(x) the Offer Documents and (y) such reports under the Exchange Act as may be
required in connection with this Agreement and the Transactions contemplated by
this Agreement, (iii) the filing of the Certificate of Merger with the Secretary
of State and appropriate documents with the relevant authorities of other states
in which the Company is qualified to do business, (iv) as may be required by an
applicable state securities or "blue sky" Laws, and (v) such other consents,
approvals, orders, authorizations, registrations, declarations and filings the
failure of which to be obtained or made would not, individually or in the
aggregate, (x) impair, in any material respect, the ability of Parent to perform
its obligations under this Agreement or (y) prevent or significantly delay the
consummation of the Transactions contemplated by this Agreement.
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(c) INFORMATION SUPPLIED. None of the information supplied
or to be supplied by Parent or the Purchaser expressly for inclusion or
incorporation by reference in the Offer Documents, the Schedule 14D-1, the
Schedule 14D-9 or the Proxy Statement will, in the case of the Offer Documents,
the Schedule 14D-1 or the Schedule 14D-9, at the time they are filed with the
SEC and first published, sent or given to the Company's stockholders or, in the
case of the Proxy Statement, on the date the Proxy Statement is first mailed to
the Company's stockholders and at the time of the meeting of the Company's
stockholders held to vote on approval and adoption of this Agreement, contain
any untrue statement of a material fact or omit to state any material fact
required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they are made, not
misleading.
(d) INTERIM OPERATIONS OF THE PURCHASER. The Purchaser was
formed solely for the purpose of engaging in the Transactions contemplated
hereby and has not engaged in any business activities or conducted any
operations other than in connection with the Transactions contemplated hereby.
(e) FINANCING. Prior to the expiration of the Offer,
Purchaser will have all funds necessary for the purchase of the Shares pursuant
to the Offer. Prior to the Effective Time, Purchaser will have all funds
necessary to consummate the Merger and to consummate all other transactions
contemplated hereunder.
(f) BROKERS. No broker, investment banker, financial
advisor or other Person, other than Morgan Stanley & Co. Incorporated, the fees
and expenses of which will be paid by the Parent, is entitled to any broker's,
finder's, financial advisor's or other similar fee or commission in connection
with the Transactions contemplated by this Agreement based upon arrangements
made by or on behalf of the Parent or the Purchaser.
ARTICLE V
COVENANTS
Section 5.1 (a) INTERIM OPERATIONS OF THE COMPANY. Until the
acquisition of the Shares pursuant
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to the Offer, except as specifically contemplated by this Agreement, the Company
shall and shall cause its Subsidiaries to carry on their respective businesses
in the ordinary course and use all reasonable best efforts consistent with good
business judgment to preserve intact their current business organizations, keep
available the services of their current officers and key employees and preserve
their relationships consistent with past practice with desirable customers,
suppliers, licensors, licensees, distributors and others having business
dealings with them to the end that their goodwill and ongoing businesses shall
be unimpaired in all material respects at the Effective Time. Without limiting
the generality of the foregoing, the Company covenants and agrees that, except
(i) as expressly contemplated by this Agreement, (ii) as set forth in Section
5.1 of the Company Disclosure Schedule or (iii) as agreed in writing by Parent,
after the date hereof and prior to the Effective Date:
(i) neither the Company nor any of its Subsidiaries shall,
directly or indirectly, amend its Certificate of Incorporation or By-laws or
similar organizational documents;
(ii) neither the Company nor any of its Subsidiaries
shall: (i)(A) declare, set aside or pay any dividend or other distribution
payable in cash, stock or property with respect to the Company's capital stock
or that of its Subsidiaries, except that a wholly-owned Subsidiary of the
Company may declare and pay a dividend or make advances to its parent or the
Company or (B) redeem, purchase or otherwise acquire directly or indirectly any
of the Company's capital stock or that of its Subsidiaries; (ii) issue, sell,
pledge, dispose of or encumber any additional shares of, or securities
convertible into or exchangeable for, or options, warrants, calls, commitments
or rights of any kind to acquire, any shares of capital stock of any class of
the Company or its Subsidiaries, other than Shares issued upon the exercise of
Options outstanding on the date hereof in accordance with the Option Plans as in
effect on the date hereof; or (iii) split, combine or reclassify the outstanding
capital stock of the Company or of any of the Subsidiaries of the Company;
(iii) except as permitted by this Agreement, neither the
Company nor any of its Subsidiaries
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shall acquire or agree to acquire (A) by merging or consolidating with, or by
purchasing a substantial portion of the assets of, or by any other manner, any
business or any corporation, partnership, joint venture, association or other
business organization or division thereof (including entities which are
Subsidiaries of the Company or any of the Company's Subsidiaries) or (B) any
assets, including real estate, except (x) purchases in the ordinary course of
business consistent with past practice or (y) expenditures consistent with the
Company's current capital budget previously provided to Parent (the "Capital
Budget");
(iv) neither the Company nor any of its Subsidiaries shall
make any new capital expenditure or expenditures, other than capital
expenditures not to exceed, in the aggregate, the amounts provided for capital
expenditures in the Capital Budget;
(v) neither the Company nor any of its Subsidiaries shall,
except in the ordinary course of business and except as otherwise permitted by
this Agreement, amend or terminate any material contract or agreement set forth
in the SEC Documents to which the Company or any Subsidiary is a party where
such amendment or termination would have a Material Adverse Affect, or waive,
release or assign any material rights or claims;
(vi) neither the Company nor any of its Subsidiaries shall
transfer, lease, license, sell, mortgage, pledge, dispose of, or encumber any
property or assets other than in the ordinary course of business and consistent
with past practice;
(vii) neither the Company nor any of its Subsidiaries
shall: (i) enter into any employment or severance agreement with or, except in
accordance with the existing written policies of the Company, grant any
severance or termination pay to any officer, director or key employee of the
Company or any its Subsidiaries; or (ii) hire or agree to hire any new or
additional key employees or officers;
(viii) neither the Company nor any of its Subsidiaries
shall, except as required to comply with applicable law or expressly provided in
this Agreement, (A) adopt, enter into, terminate or amend any Benefit
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Plan or other arrangement for the current or future benefit or welfare of any
director, officer or current or former employee, except to the extent necessary
to coordinate any such Benefit Plans with the terms of this Agreement, (B)
increase in any manner the compensation or fringe benefits of, or pay any bonus
to, any director, officer or employee (except for normal increases or bonuses in
the ordinary course of business consistent with past practice to employees other
than directors, officers or senior management personnel and that, in the
aggregate, do not result in a significant increase in benefits or compensation
expense to the Company and its Subsidiaries relative to the level in effect
prior to such action (but in no event shall the aggregate amount of all such
increases exceed 3% of the aggregate annualized compensation expense of the
Company and its Subsidiaries reported in the most recent audited financial
statements of the Company included in the SEC Documents)), (C) pay any benefit
not provided for under any Benefit Plan, (D) grant any awards under any bonus,
incentive, performance or other compensation plan or arrangement or Benefit Plan
(including the grant of stock options, stock appreciation rights, stock based or
stock related awards, performance units or restricted stock, or the removal of
existing restrictions in any Benefit Plans or agreements or awards made
thereunder) or (E) take any action to fund or in any other way secure the
payment of compensation or benefits under any employee plan, agreement, contract
or arrangement or Benefit Plan;
(ix) neither the Company nor any of its Subsidiaries
shall: (i) incur or assume any long-term debt, or except in the ordinary course
of business, incur or assume any short-term indebtedness in amounts not
consistent with past practice; (ii) incur or modify any material indebtedness or
other liability except as set forth in Schedule 5.1 of the Company Disclosure
Schedule; (iii) assume, guarantee, endorse or otherwise become liable or
responsible (whether directly, contingently or otherwise) for the obligations of
any other Person, except in the ordinary course of business and consistent with
past practice; (iv) make any loans, advances or capital contributions to, or
investments in, any other Person (other than to wholly owned Subsidiaries of the
Company or customary loans or advances to employees in accordance with past
practice); (v) settle any claims other than in the ordinary course of business,
in accor-
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dance with past practice, and without admission of liability; or (vi) enter into
any material commitment or transaction;
(x) neither the Company nor any of its Subsidiaries shall
change any of the accounting methods used by it unless required by GAAP;
(xi) neither the Company nor any of its Subsidiaries shall
make any Tax election or settle or compromise any material Tax liability;
(xii) neither the Company nor any of its Subsidiaries
shall pay, discharge or satisfy any claims, liabilities or obligations
(absolute, accrued, asserted or unasserted, contingent or otherwise), other than
the payment, discharge or satisfaction of any such claims, liabilities or
obligations, in the ordinary course of business and consistent with past
practice, of claims, liabilities or obligations reflected or reserved against
in, or contemplated by, the consolidated financial statements (or the notes
thereto) of the Company and its consolidated subsidiaries; or, except in the
ordinary course of business consistent with past practice, waive the benefits
of, or agree to modify in any manner, any confidentiality, standstill or similar
agreement to which the Company or any of its Subsidiaries is a party; and
(xiii) neither the Company nor any of its Subsidiaries
will enter into an agreement, contract, commitment or arrangement to do any of
the foregoing, or to authorize, recommend, propose or announce an intention to
do any of the foregoing.
(b) OTHER ACTIONS. The Company shall not, and shall not
permit any of its Subsidiaries to, take any action that would result in (i) any
of its representations and warranties set forth in this Agreement that are
qualified as to materiality becoming untrue, (ii) any of such representations
and warranties that are not so qualified becoming untrue in any material respect
or (iii) any of the conditions to the Offer set forth in Annex A not being
satisfied (subject to the Company's right to take action specifically permitted
by Section 5.4).
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Section 5.2 ACCESS; CONFIDENTIALITY. Upon reasonable notice,
the Company shall (and shall cause each of its Subsidiaries to) afford to the
officers, employees, accountants, counsel, financing sources and other
representatives of Parent, access, during normal business hours during the
period prior to the Effective Time, to all its properties, books, contracts,
commitments and records, and, during such period, the Company shall (and shall
cause each of its Subsidiaries to) furnish promptly to the Parent (a) a copy of
each report, schedule, registration statement and other document filed or
received by it during such period pursuant to the requirements of Federal or
state securities Laws and (b) all other information concerning its business,
properties and personnel as Parent may reasonably request. Except as otherwise
agreed to by the Company, unless and until Parent and the Purchaser shall have
purchased at least a majority of the outstanding Shares pursuant to the Offer,
Parent will be bound by the terms of a confidentiality agreement with the
principal stockholders of the Company, dated February 16, 1998 (the
"Confidentiality Agreement").
Section 5.3 REASONABLE EFFORTS; NOTIFICATION. Upon the terms
and subject to the conditions set forth in this Agreement, each of the parties
agrees to use all reasonable efforts to take, or cause to be taken, all actions,
and to do, or cause to be done, and to assist and cooperate with the other
parties in doing, all things necessary, proper or advisable to consummate and
make effective, in the most expeditious manner practicable, the Offer and the
Merger, and the other Transactions contemplated by this Agreement, including (i)
the obtaining of all necessary actions or nonactions, waivers, consents and
approvals from any Governmental Entity and the making of all necessary
registrations and filings (including filings with any Governmental Entity, if
any) and the taking of all reasonable steps as may be necessary to obtain an
approval or waiver from, or to avoid an action or proceeding by, any
Governmental Entity, (ii) the obtaining of all necessary consents, approvals or
waivers from third parties, (iii) the defending of any lawsuits or other legal
proceedings, whether judicial or administrative, challenging this Agreement or
the consummation of any of the Transactions contemplated by this Agreement,
including seeking to have any stay or temporary restraining order entered by any
court or other
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Governmental Entity vacated or reversed, and (iv) the execution and delivery of
any additional instruments necessary to consummate the Transactions contemplated
by, and to fully carry out the purposes of, this Agreement; PROVIDED, HOWEVER,
that in connection with any filing or submission or other action required to be
made or taken by any Party to effect the Merger and all other Transactions
contemplated hereby, the Company shall not without the prior written consent of
Parent commit to any divestiture transaction and Parent shall not be required to
divest or hold separate or otherwise take or commence to take any action that,
in the reasonable discretion of Parent, limits its freedom of action with
respect to, or its ability to retain, the Company or any of its affiliates or
any material portion of the assets of the Company. In connection with and
without limiting the foregoing, the Company and its Board of Directors shall (i)
take all action necessary to ensure that no state takeover statute or similar
statute or regulation is or becomes applicable to the Offer, the Merger, this
Agreement or any of the other Transactions contemplated by this Agreement and
(ii) if any state takeover statute or similar statute or regulation becomes
applicable to the Offer, the Merger or this Agreement or any other transaction
contemplated by this Agreement, take all action necessary to ensure that the
Offer, the Merger and the other Transactions contemplated by this Agreement may
be consummated as promptly as practicable on the terms contemplated by this
Agreement and otherwise to minimize the effect of such statute or regulation on
the Offer, the Merger, this Agreement and the other Transactions contemplated by
this Agreement.
(b) Each of the Company, Parent and Purchaser shall give
prompt notice to the other of (i) any of their representations or warranties
contained in this Agreement becoming untrue or inaccurate in any respect
(including in the case of representations or warranties receiving knowledge of
any fact, event or circumstance which may cause any representation qualified as
to the knowledge to be or become untrue or inaccurate in any respect) or (ii)
the failure by them to comply with or satisfy in any material respect any
covenant, condition or agreement to be complied with or satisfied by them under
this Agreement; PROVIDED, HOWEVER, that no such notification shall affect the
representations, warranties, covenants or agreements of the parties or the
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conditions to the obligations of the parties under this Agreement.
Section 5.4 NO SOLICITATION. The Company shall not, nor shall
it permit any of its Subsidiaries to, nor shall it authorize (and shall use its
best efforts not to permit) any officer, director or employee of, or any
investment banker, attorney or other advisor or representative of, the Company
or any of its Subsidiaries to, (i) solicit or initiate, or knowingly encourage
the submission of, any Takeover Proposal or (ii) participate in any discussions
or negotiations regarding, or furnish to any Person any information with respect
to, or take any other action to knowingly facilitate the making of any proposal
that constitutes, or may reasonably be expected to lead to, any Takeover
Proposal; PROVIDED, HOWEVER, that, prior to the acceptance for payment of Shares
pursuant to the Offer, if in the reasonable determination of the Board of
Directors, after receiving advice from outside legal counsel to the Company,
such failure to act would be inconsistent with its fiduciary duties to the
Company's stockholders under applicable law, the Company may, in response to an
unsolicited Takeover Proposal, and subject to compliance with Section 5.4(c),
(A) furnish information with respect to the Company to any Person pursuant to a
confidentiality agreement with terms and conditions similar to the
Confidentiality Agreement and (B) participate in negotiations regarding such
Takeover Proposal. For purposes of this Agreement, "Takeover Proposal" means (i)
any bona fide proposal or offer from any Person relating to any direct or
indirect acquisition or purchase of all or a substantial part of the assets of
the Company or any of its Subsidiaries or of any class of equity securities of
the Company or any of its Subsidiaries or any tender offer or exchange offer
that if consummated would result in any Person beneficially owning shares of any
class of equity securities of the Company or any of its Subsidiaries, or any
merger, consolidation, business combination, sale of substantially all of the
assets, recapitalization, liquidation, dissolution or similar transaction
involving the Company or any of its Subsidiaries other than the Transactions
contemplated by this Agreement, or any other transaction the consummation of
which would reasonably be expected to impede, interfere with, prevent or
materially delay the Offer or the Merger or which would reasonably be expected
to dilute materially the benefits to Parent
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of the Transactions contemplated hereby which (ii) the Company's Board of
Directors reasonably determines in good faith (based on advice of its financial
advisors) is more favorable to all of the Company's stockholders from a
financial point of view than the Offer and the Merger (taking into account any
improvements to the Offer and the Merger proposed in writing by Parent).
(b) Except as set forth in this Section 5.4(b), neither
the Board of Directors of the Company nor any committee thereof shall (i)
withdraw or modify, or propose to withdraw or modify, in a manner adverse to
Parent or the Purchaser, the approval or recommendation by the Board of
Directors or any such committee of the Offer, this Agreement or the Merger, (ii)
approve or recommend, or propose to approve or recommend, any Takeover Proposal
or (iii) enter into any agreement with respect to any Takeover Proposal.
Notwithstanding the foregoing, in the event that prior to the time of acceptance
by the Purchaser for payment of Shares in the Offer if in the reasonable
determination of the Board of Directors, and after receiving advice from outside
legal counsel to the Company, failure to do so would be inconsistent with its
fiduciary duties to the Company's stockholders under applicable law, the Board
of Directors may (subject to the terms of this and the following sentences)
withdraw or modify its approval or recommendation of the Offer, this Agreement
or the Merger, approve or recommend a Takeover Proposal, or enter into an
agreement with respect to a Takeover Proposal, in each case at any time
following delivery by the Company to Parent of written notice (a "Notice of
Takeover Proposal") advising Parent that the Board of Directors has received a
Takeover Proposal, and specifying the material terms and conditions of such
Takeover Proposal and identifying the Person making such Takeover Proposal
unless the Takeover Proposal by its terms prohibits disclosure.
(c) In addition to the obligations of the Company set
forth in paragraph (b) (i) the Company shall advise Parent of any request for
information, and the material terms and conditions of such request and the
identity of the Person making any such Takeover Proposal if allowed by the
Takeover Proposal or inquiry, and (ii) the Company will keep Parent fully
informed of the status and details (including amendments or proposed amendments)
of any such request or inquiry.
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Section 5.5 PUBLICITY. The initial press release with respect
to the execution of this Agreement shall be a joint press release acceptable to
Parent and the Company. Thereafter, so long as this Agreement is in effect,
neither the Company, Parent nor any of their respective affiliates shall issue
or cause the publication of any press release or other announcement with respect
to the Merger, this Agreement or the other Transactions contemplated hereby
without the prior consultation of the other party.
Section 5.6 TRANSFER TAXES. All liability for transfer or
other similar Taxes arising out of or related to the Offer and the Merger or the
consummation of any other transaction contemplated by this Agreement, and due to
the property owned by the Company or any of its Subsidiaries or affiliates
("Transfer Taxes") shall be borne by the Company, and the Company shall file or
cause to be filed all Tax Returns relating to such Transfer Taxes which are due,
and, to the extent appropriate or required by law, the stockholders of the
Company shall cooperate with respect to the filing of such Tax Returns.
Section 5.7 STATE TAKEOVER LAWS. Notwithstanding any other
provision in this Agreement, in no event shall the Section 203 Approval be
withdrawn, revoked or modified by the Board of Directors of the Company. If any
state takeover statute other than Section 203 of the DGCL becomes or is deemed
to become applicable to the Stock Sale Agreement, the Offer, the acquisition of
Shares pursuant to the Offer or the Merger, the Company shall take all action
necessary to render such statute inapplicable to all of the foregoing.
Section 5.8 INDEMNIFICATION AND INSURANCE.
(a) The Certificate of Incorporation and By-Laws of the
Surviving Corporation shall contain the provisions with respect to
indemnification and exculpation set forth in the Certificate of Incorporation
and By-Laws of the Company, which provisions shall not be amended, repealed or
otherwise modified for a period of six years from the Effective Time in any
manner that would adversely affect the rights thereunder of individuals who at
the Effective Time were directors, officers, employees or agents of the Company,
unless such modification is required by law.
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(b) The Company shall, to the fullest extent permitted
under applicable law or under the Company's Certificate of Incorporation or
By-Laws and regardless of whether the Merger becomes effective, indemnify and
hold harmless, and, after the Effective Time, the Surviving Corporation shall,
to the fullest extent permitted under applicable law or under the Surviving
Corporation's Certificate of Incorporation or By-Laws, indemnify and hold
harmless, each present and former director, officer or employee of the Company
or any of its Subsidiaries (collectively, the "Indemnified Parties") against any
costs or expenses (including attorneys' fees), judgments, fines, losses, claims,
damages and liabilities incurred in connection with, and amounts paid in
settlement of, any claim, action, suit, proceeding or investigation, whether
civil, criminal, administrative or investigative and wherever asserted, bought
or filed, (x) arising out of or pertaining to the transactions contemplated by
this Agreement or (y) otherwise with respect to any acts or omissions or alleged
acts or omissions occurring at or prior to the Effective Time, to the same
extent as provided in the respective Certificate of Incorporation or By-Laws of
the Company or the Subsidiaries as in effect on the date hereof, in each case
for a period of six years after the date hereof. In the event of any such claim,
action, suit, proceeding or investigation (whether arising before or after the
Effective Time), (i) any counsel retained by the Indemnified Parties for any
period after the Effective Time must be reasonably satisfactory to the Surviving
Corporation, (ii) after the Effective Time, the Surviving Corporation shall pay
the reasonable fees and expenses of such counsel, promptly after statements
therefor are received, and (iii) the Surviving Corporation will cooperate in the
defense of any such matter; PROVIDED, HOWEVER, that the Surviving Corporation
shall not be liable for any settlement effected without its written consent
(which consent shall not be unreasonably withheld or delayed); and PROVIDED,
FURTHER, that, in the event that any claim or claims for indemnification are
asserted or made within such six-year period, all rights to indemnification in
respect of any such claim or claims shall continue until the disposition of any
and all such claims. The Indemnified Parties as a group may retain only one law
firm to represent them with respect to any single action unless there is, under
applicable standards of professional conduct, a conflict on any significant
issue between the
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positions of any two or more Indemnified Parties. The indemnity agreements of
Parent and the Surviving Corporation in this Section 5.8(b) shall extend, on the
same terms to, and shall inure to the benefit of and shall be enforceable by,
each person or entity who controls, or in the past controlled, any present or
former director, officer or employee of the Company or any of its Subsidiaries.
(c) For a period of six years after the Effective Time,
Parent shall cause the Surviving Corporation to maintain in effect, if
available, directors' and officers' liability insurance covering those persons
who are currently covered by the Company's directors' and officers' liability
insurance policy (a copy of which has been made available to Parent) on terms
(including the amounts of coverage and the amounts of deductibles, if any) that
are comparable to the terms now applicable to directors and officers of Parent,
or, if more favorable to the Company's directors and officers, the terms now
applicable to them under the Company's current policies; PROVIDED, HOWEVER, that
in no event shall Parent or the Surviving Corporation be required to expend in
excess of 200% of the annual premium currently paid by the Company for such
coverage; and PROVIDED FURTHER, that if the premium for such coverage exceeds
such amount, Parent or the Surviving Corporation shall purchase a policy with
the greatest coverage available for such 200% of the annual premium.
(d) From and after the Effective Time, Parent shall
guarantee the obligations of the Surviving Corporation under this Section 5.8.
(e) This Section shall survive the consummation of the
Merger at the Effective Time, is intended to benefit the Company, the Surviving
Corporation and the Indemnified Parties, shall be binding on all successors and
assigns of the Surviving Corporation and shall be enforceable by the Indemnified
Parties. In the event that Parent or Surviving Corporation or any of their
successors or assigns (i) consolidates or merges into any other person or entity
and shall not be the continuing or surviving corporation or entity in such
consolidation or merger or (ii) transfers all or substantially all of its
properties and assets to any person or entity, then and in such case, proper
provisions shall be
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made so that the successors and assigns of Parent or the Surviving Corporation
(as the case may be) assume the obligations of Parent and the Surviving
Corporation set forth in this Section.
ARTICLE VI
CONDITIONS
Section 6.1 CONDITIONS TO EACH PARTY'S OBLIGATION TO EFFECT
THE MERGER. The respective obligation of each party to effect the Merger shall
be subject to the satisfaction on or prior to the Closing Date of each of the
following conditions, any and all of which may be waived in whole or in part by
the Company, Parent or the Purchaser, as the case may be, to the extent
permitted by applicable law:
(a) PRIOR PERFORMANCE. Each party shall have performed in all
material respects its respective obligations under this Agreement required to be
performed by it prior to the Effective Time;
(b) REPRESENTATIONS AND WARRANTIES. All representations and
warranties contained in this Agreement shall have been true and correct in all
material respects at the time made and shall be true and correct in all material
respects as of the Effective Time as though made on and as of such date;
(c) STOCKHOLDER APPROVAL. This Agreement shall have been
approved and adopted by the requisite vote of the stockholders of the Company,
if required by applicable law and the Certificate of Incorporation, in order to
consummate the Merger;
(d) STATUTES; CONSENTS. No statute, rule, order, decree or
regulation shall have been enacted or promulgated by any government or any
governmental agency or authority of competent jurisdiction which prohibits the
consummation of the Merger;
(e) INJUNCTIONS. There shall be no order or injunction of a
court or other governmental authority of competent jurisdiction in effect
precluding, restraining, enjoining or prohibiting consummation of the Merger;
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(f) PURCHASE OF SHARES IN OFFER. Parent, Purchaser or their
affiliates shall have purchased Shares pursuant to the Offer; and
(g) OPTION PLAN. The employees and the directors of the
Company shall have consented to the transactions contemplated in Section 2.5.
ARTICLE VII
TERMINATION
Section 7.1 TERMINATION. This Agreement may be terminated and
the Merger contemplated herein may be abandoned at any time prior to the
Effective Time, whether before or after approval of matters presented in
connection with the Merger by the stockholders of the Company:
(a) By the mutual written consent of ent and the Company;
PROVIDED, HOWEVER, that if Parent shall have a majority of the directors
pursuant to Section 1.4, such consent of the Company may only be given if
approved by the Continuing Directors.
(b) By either of Parent or the Company:
(i) if the Offer shall have expired without any Shares being
purchased therein by June 1, 1998; PROVIDED, HOWEVER, that the right to
terminate this Agreement under this Section 7.1(b)(i) shall not be
available to any party whose failure to fulfill any obligation under
this Agreement has been the cause of, or resulted in, the failure of
Parent or the Purchaser, as the case may be, to purchase the Shares
pursuant to the Offer on or prior to such date; or
(ii) if any Governmental Entity shall have issued an order,
decree or ruling or taken any other action (which order, decree, ruling
or other action the parties hereto shall use their reasonable efforts
to lift), in each case permanently restraining, enjoining or otherwise
prohibiting the Transactions contemplated by this Agreement and such
order,
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decree, ruling or other action shall have become final and
non-appealable.
(c) By the Board of Directors of the Company:
(i) if the Company has approved a Takeover Proposal in
accordance with Section 5.4(b), provided the Company has complied with
all provisions thereof, including the notice provisions therein, and
that it makes simultaneous payment of the Expenses and the Termination
Fee; or
(ii) if, prior to the purchase of the Shares pursuant to the
Offer, Parent or the Purchaser breaches or fails in any material
respect to perform or comply with any of its covenants and agreements
contained herein or breaches its representations and warranties in any
material respect; or
(iii) if Parent or the Purchaser shall have terminated the
Offer or the Offer expires without Parent or the Purchaser, as the case
may be, purchasing any Shares pursuant thereto; provided that the
Company may not terminate this Agreement pursuant to this Section
7.1(c)(iii) if the Company is in material breach of this Agreement; or
(iv) if Parent, the Purchaser or any of their affiliates shall
have failed to commence the Offer on or prior to five business days
following the date of the initial public announcement of the Offer;
provided, that the Company may not terminate this Agreement pursuant to
this Section 7.1(c)(iv) if the Company is in material breach of this
Agreement.
(d) By Parent or the Purchaser:
(i) if prior to the purchase of the Shares pursuant to the
Offer, the Board of Directors of the Company shall have withdrawn, or
modified or changed in a manner adverse to Parent or the Purchaser its
approval or recommendation of the Offer, this Agreement or the Merger
or shall have approved
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a Takeover Proposal in accordance with Section 5.4(b); or
(ii) if Parent or the Purchaser shall have terminated the
Offer without Parent or the Purchaser purchasing any Shares thereunder,
PROVIDED that Parent or the Purchaser may not terminate this Agreement
pursuant to this Section 7.1(d)(ii) if Parent or the Purchaser is in
material breach of this Agreement; or
(iii) if, due to an occurrence that if occurring after the
commencement of the Offer would result in a failure to satisfy any of
the conditions set forth in Annex A hereto, Parent, the Purchaser, or
any of their affiliates shall have failed to commence the Offer on or
prior to five business days following the date of the initial public
announcement of the Offer.
Section 7.2 EFFECT OF TERMINATION. In the event of termination
of this Agreement by either the Company or Parent or Purchaser as provided in
Section 7.1, this Agreement shall forthwith become void and have no effect,
without any liability or obligation on the part of Parent, the Purchaser or the
Company, other than the provisions of Section 3.1(p), 4.1(f), the last sentence
of Section 5.2, this Section 7.2 and Article VIII and except to the extent that
such termination results from the wilful and material breach by a party of any
of its representations, warranties, covenants or agreements set forth in this
Agreement.
ARTICLE VIII
MISCELLANEOUS
Section 8.1 FEES AND EXPENSES. (a)Except as provided below,
all fees and expenses incurred in connection with the Offer, the Merger, this
Agreement and the Transactions contemplated hereby shall be paid by the party
incurring such fees or expenses, whether or not the Offer or the Merger is
consummated.
(b) The Company shall pay, or cause to be paid, in same day
funds to Parent the amount of
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$3,750,000 (the "Termination Fee") upon demand if (i) Parent or the Purchaser
terminates this Agreement under Section 7.1(d)(i), (ii) the Company terminates
this Agreement pursuant to Section 7.1(c)(i) or (iii) prior to any termination
of this Agreement, a Takeover Proposal shall have been made and within nine
months after the termination of this Agreement a transaction constituting a
Takeover Proposal is consummated or the Company enters into an agreement with
respect to, or approves or recommends a Takeover Proposal (whether or not
related to a Takeover Proposal made prior to any termination of this Agreement),
PROVIDED, that no payment shall be made if this Agreement has been terminated
pursuant to Section 7.1(b)(i), 7.1(c)(ii), 7.1(c)(iii) or 7.1(c)(iv) hereof and;
provided, further, that if a Takeover Proposal (whether or not related to a
Takeover Proposal made prior to any termination of the Agreement) is made at a
lower price per share than the Offer Price, than the Company shall only pay in
same day funds to the Purchaser the amount of Parent's and Purchaser's
documented expenses (not to exceed $500,000) in connection with this Agreement
and the transactions contemplated thereby.
Section 8.2 AMENDMENT AND MODIFICATION. Subject to applicable
law, this Agreement may be amended, modified and supplemented in any and all
respects, whether before or after any vote of the stockholders of the Company
contemplated hereby, by written agreement of the parties hereto (which in the
case of the Company shall include approvals as contemplated in Section 1.4(b)),
at any time prior to the Closing Date with respect to any of the terms contained
herein; PROVIDED, HOWEVER, that after the approval of this Agreement by the
stockholders of the Company, no such amendment, modification or supplement shall
reduce the amount or change the form of the Merger Consideration or otherwise
adversely affect the rights of stockholders.
Section 8.3 NONSURVIVAL OF REPRESENTATIONS AND WARRANTIES.
None of the representations and warranties in this Agreement or in any schedule,
instrument or other document delivered pursuant to this Agreement shall survive
the Effective Time. This Section 8.3 shall not limit any covenant or agreement
of the parties which by its terms contemplates performance after the Effective
Date of the Merger.
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Section 8.4 NOTICES. All notices and other communications
hereunder shall be in writing and shall be deemed given upon receipt, and shall
be given to the parties at the following addresses (or at such other address for
a party as shall be specified by like notice):
(a) if to Parent or the Purchaser, to:
Sunbeam Corporation
1615 South Congress Avenue
Suite 200
Delray Beach, FL 33445
Attention: General Counsel
with a copy to:
Skadden, Arps, Slate, Meagher & Flom LLP
919 Third Avenue
New York, NY 10022
Attention: Blaine V. Fogg, Esq.
(b) if to the Company, to:
First Alert, Inc.
3901 Liberty Street Road
Aurora, Illinois 60504
Attention: General Counsel
with a copy to:
Ropes & Gray
One International Place
Boston, MA 02110
Attention: David C. Chapin, Esq.
Section 8.5 INTERPRETATION. When a reference is made in this
Agreement to Sections, such reference shall be to a Section of this Agreement
unless otherwise indicated. Whenever the words "include", "includes" or
"including" are used in this Agreement they shall be deemed to be followed by
the words "without limitation". As used in this Agreement, the term
"affiliate(s)" shall have the meaning set forth in Rule l2b-2 of the Exchange
Act.
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Section 8.6 COUNTERPARTS. This Agreement may be executed in
two or more counterparts, all of which shall be considered one and the same
agreement and shall become effective when two or more counterparts have been
signed by each of the parties and delivered to the other parties.
Section 8.7 ENTIRE AGREEMENT; NO THIRD PARTY BENEFICIARIES;
RIGHTS OF OWNERSHIP. This Agreement and the Confidentiality Agreement (including
the documents and the instruments referred to herein and therein): (a)
constitute the entire agreement and supersedes all prior agreements and
understandings, both written and oral, among the parties with respect to the
subject matter hereof, and (b) except as provided in Section 5.6 and Section 5.8
is not intended to confer upon any Person other than the parties hereto any
rights or remedies hereunder.
Section 8.8 SEVERABILITY. If any term, provision, covenant or
restriction of this Agreement is held by a court of competent jurisdiction or
other authority to be invalid, void, unenforceable or against its regulatory
policy, the remainder of the terms, provisions, covenants and restrictions of
this Agreement shall remain in full force and effect and shall in no way be
affected, impaired or invalidated unless the economic or legal substance of the
Transactions is affected in an adverse way to any party.
Section 8.9 GOVERNING LAW. This Agreement shall be governed by
and construed in accordance with the Laws of the State of Delaware without
giving effect to the principles of conflicts of law thereof.
Section 8.10 ASSIGNMENT. Neither this Agreement nor any of the
rights, interests or obligations hereunder shall be assigned by any of the
parties hereto (whether by operation of law or otherwise) without the prior
written consent of the other parties, except that the Purchaser may assign, in
its sole discretion, any or all of its rights, interests and obligations
hereunder to Parent or to any direct or indirect wholly owned Subsidiary of
Parent. Subject to the preceding sentence, this Agreement will be binding upon,
inure to the benefit of and be enforceable by the parties and their respective
successors and assigns.
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SECTION 8.11 ENFORCEMENT. The parties agree that irreparable
damage would occur in the event that any of the provisions of this Agreement
were not performed in accordance with their specific terms or were otherwise
breached. It is accordingly agreed that the parties shall be entitled to an
injunction or injunctions to prevent breaches of this Agreement and to enforce
specifically the terms and provisions of this Agreement in any court of the
United States located in the State of Delaware or in Delaware state court, this
being in addition to any other remedy to which they are entitled at law or in
equity. In addition, each of the parties hereto (a) consents to submit itself to
the personal jurisdiction of any Federal court located in the State of Delaware
or any Delaware state court in the event any dispute arises out of this
Agreement or any of the Transactions contemplated by this Agreement, (b) agrees
that it will not attempt to deny or defeat such personal jurisdiction by motion
or other request for leave from any such court and (c) agrees that it will not
bring any action relating to this Agreement or any of the Transactions
contemplated by this Agreement in any court other than a Federal or state court
sitting in the State of Delaware.
SECTION 8.12 EXTENSION; WAIVER. At any time prior to the
Effective Time, the parties may (a) extend the time for the performance of any
of the obligations or other acts of the other parties, (b) waive any
inaccuracies in the representations and warranties of the other parties
contained in this Agreement or in any document delivered pursuant to this
Agreement or (c) subject to the proviso of Section 8.2, waive compliance by the
other parties with any of the agreements or conditions contained in this
Agreement. Any agreement on the part of a party to any such extension or waiver
shall be valid only if set forth in an instrument in writing signed on behalf of
such party. The failure of any party to this Agreement to assert any of its
rights under this Agreement or otherwise shall not constitute a waiver of those
rights.
SECTION 8.13 PROCEDURE FOR TERMINATION, AMENDMENT, EXTENSION
OR WAIVER. A termination of this Agreement pursuant to Section 7.1, an amendment
of this Agreement pursuant to Section 8.2 or an extension or waiver pursuant to
Section 8.12 shall, in order to be effective, require in the case of Parent, the
Purchaser or the Company, action by its Board of Directors or the duly
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authorized designee of its Board of Directors; PROVIDED, HOWEVER, that in the
event that Purchaser's designees are appointed or elected to the Board of
Directors of the Company as provided in Section 1.4, after the acceptance for
payment of Shares pursuant to the Offer and prior to the Effective Time, except
as otherwise contemplated by this Agreement the affirmative vote of a majority
of the Continuing Directors of the Company shall be required by the Company to
amend this Agreement by the Company.
SECTION 8.14 CERTAIN UNDERTAKINGS OF PARENT. Parent shall
perform, or cause to be performed, any obligation of Purchaser under this
Agreement which shall have been breached by Purchaser.
SECTION 8.15 COMPANY DISCLOSURE SCHEDULE. Notwithstanding
anything to the contrary contained herein, and without regard to the execution
of this Agreement by the parties hereto, this Agreement shall not be effective
and have no force and effect unless (i) within 12 hours of its execution by the
parties hereto, the definitive Company Disclosure Schedule is delivered by the
Company to Parent and (ii) Parent, within 12 hours after such delivery, delivers
written notice to the Company that it is satisfied with the matters contained
therein. Anything which is disclosed in one section of the Company Disclosure
Schedule shall be deemed disclosed for other sections thereof, as long as such
disclosure is reasonably apparent to a reader of the entire Company Disclosure
Schedule.
SECTION 8.16 DEFINITIONS. For purposes of this Agreement:
"Benefit Plans" has the meaning assigned thereto in Section 3.1(j).
"By-laws" means the by-laws of has the meaning assigned thereto in Section 1.5.
"Certificate of Incorporation" has the meaning assigned thereto in Section 1.5.
"Certificate of Merger" has the meaning assigned thereto in Section 1.6.
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"Certificates" has the meaning assigned thereto in Section 2.2.
"Closing" has the meaning assigned thereto in Section 1.7.
"Closing Date" has the meaning assigned thereto in Section 1.7.
"Code" means the Internal Revenue Code of 1986.
"Company" means First Alert, Inc.
"Continuing Director" has the meaning assigned thereto in Section 1.4.
"Defect" has the meaning assigned thereto in Section 3.1(v).
"DGCL" means the Delaware General Corporation Law.
"Dissenting Stockholders" has the meaning assigned thereto in Section 2.1(c).
"Effective Time" has the meaning assigned thereto in Section 1.6.
"ERISA" means the Employee Retirement Income Security Act of 1974, as amended,
and the rules and regulations promulgated thereunder.
"Environmental Laws" means all foreign, Federal, state and local Laws,
regulations, rules and ordinances relating to pollution or protection of the
environment, including, without limitation, Laws relating to Releases or
threatened Releases of Hazardous Materials into the indoor or outdoor
environment (including, without limitation, ambient air, surface water,
groundwater, land, surface and subsurface strata) or otherwise relating to the
manufacture, processing, distribution, use, treatment, storage, Release,
transport or handling of Hazardous Materials, and all Laws and regulations with
regard to recordkeeping, notification, disclosure and reporting requirements
respecting Hazardous Materials, and all Laws relating to endangered or
threatened species of fish, wildlife and plants and the management or use of
natural resources.
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"Environmental Liabilities and Costs" means all liabilities, obligations,
responsibilities, obligations to conduct cleanup, losses, damages, deficiencies,
punitive damages, consequential damages, treble damages, costs and expenses
(including, without limitation, all reasonable fees, disbursements and expenses
of counsel, expert and consulting fees and costs of investigations and
feasibility studies and responding to government requests for information or
documents), fines, penalties, restitution and monetary sanctions, interest,
direct or indirect, known or unknown, absolute or contingent, past, present or
future, resulting from any claim or demand, by any Person or entity, whether
based in contract, tort, implied or express warranty, strict liability, joint
and several liability, criminal or civil statute, including any Environmental
Law, or arising from environmental, health or safety conditions, or the Release
or threatened Release of Hazardous Materials into the environment.
"ERISA Affiliate" has the meaning assigned thereto in Section 3.1(j).
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"Financing Agreement" means the Financing and Security Agreement among First
Alert, Inc., BRK Brands, Inc., BRK Brands Europa LTD. and NationsBank, N.A.
dated May 14, 1997.
"Governmental Entity" has the meaning assigned thereto in Section 3.1(d).
"Hazardous Materials" means all substances defined as hazardous substances in
the National Oil and Hazardous Substances Pollution Contingency Plan, 40 C.F.R.
ss. 300.5, or substances defined as hazardous substances, hazardous materials,
toxic substances, hazardous wastes, pollutants or contaminants, under any
Environmental Law, or substances regulated under any Environmental Law,
including, but not limited to, petroleum (including crude oil or any fraction
thereof), asbestos, and polychlorinated biphenyls.
"HSR Act" means the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as
amended.
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"Indemnified Parties" has the meaning assigned thereto in Section 5.8(b).
"Intellectual Property Rights" has the meaning assigned thereto in Section
3.1(r).
"Laws" has the meaning assigned thereto in Section 3.1(m).
"Lien" means any conditional sale agreement, default of title, easement,
encroachment, encumbrance, hypothecation, infringement, lien, mortgage, pledge,
reservation, restriction, security interest, title retention or other security
arrangement, or any adverse right or interest, charge or claim of any nature
whatsoever of, on, or with respect to any asset, property or property interest;
PROVIDED, HOWEVER, that the term "Lien" shall not include
(i) liens for water and sewer charges and current Taxes not yet due and
payable or being contested in good faith;
(ii) mechanics', carriers', workers', repairers', materialmens',
warehousemens' and other similar liens arising or incurred in the ordinary
course of business; or
(iii) all liens approved in writing by the other party hereto.
"Material Adverse Change" or "Material Adverse Effect" means, when used in
connection with the Company or Parent, any change or effect (or any development
that, insofar as can reasonably be foreseen, is likely to result in any change
or effect) that is materially adverse to the business, properties, assets,
financial condition or results of operations of such party and its Subsidiaries
taken as a whole, other than any such changes or effects (i) set forth or
contemplated by the Company Disclosure Schedule (but not any supplement or
amendment thereto); or (ii) set forth or described in the SEC Documents.
"Merger" has the meaning assigned thereto in Section 1.5.
"Merger Consideration" has the meaning assigned thereto
in Section 2.1.
"Minimum Condition" has the meaning assigned thereto in
Annex A.
56
<PAGE>
"Notice of Takeover Proposal" has the meaning assigned
thereto in Section 5.4(b).
"Offer" has the meaning assigned thereto in Section 1.1.
"Offer Documents" has the meaning assigned thereto in
Section 1.3.
"Offer Price" has the meaning assigned thereto in Section
1.1.
"Offer to Purchase" has the meaning assigned thereto in
Section 1.1.
"Option Plans" has the meaning assigned thereto in
Section 2.5(b).
"Option" has the meaning assigned thereto in Section 2.5.
"Parent" means Sunbeam Corporation.
"Paying Agent" has the meaning assigned thereto in
Section 2.2(a).
"PBGC" means the Pension Benefit Guaranty Corporation.
"Permits" has the meaning assigned thereto in Section
3.1(m)(ii).
"Person" means an individual, corporation, partnership, joint venture,
association, trust, unincorporated organization or other entity.
"Product" has the meaning assigned thereto in Section
3.1(v).
"Proxy Statement" has the meaning assigned thereto in
Section 1.8.
"Purchaser" means Sentinel Acquisition, Inc.
"Release" means any release, spill, emission, discharge, leaking, pumping,
injection, deposit, disposal, discharge, dispersal, leaching or migration into
the indoor or outdoor environment (including, without limitation, ambient air,
surface water, groundwater, and surface or subsurface strata) or into or out of
any property, in-
57
<PAGE>
cluding the movement of Hazardous Materials through or in the air, soil, surface
water, groundwater or property.
"Schedule 14D-1" has the meaning assigned thereto in Section 1.3.
"Schedule 14D-9" has the meaning assigned thereto in Section 1.3.
"SEC" means the United States Securities and Exchange Commission.
"SEC Documents" has the meaning assigned thereto in Section 3.1(e).
"Secretary of State" means the Secretary of State of Delaware.
"Securities Act" means the Securities Act of 1933, as amended.
"Shares" has the meaning assigned thereto in Section 1.1.
"Special Meeting" has the meaning assigned thereto in Section 1.8.
a "Subsidiary" of any Person means any corporation, partnership, joint venture
or other entity in which such Person (i) owns, directly or indirectly, 50% or
more of the outstanding voting securities or equity interests, (ii) is entitled
to elect at least a majority of the Board of Directors or similar governing
body, or (iii) is a general partner.
"Surviving Corporation" means First Alert, Inc. after the Merger.
"Takeover Proposal" has the meaning assigned thereto in Section 5.4(a).
"Tax Returns" has the meaning assigned thereto in Section 3.1(k)(iv).
"Taxes" has the meaning assigned thereto in Section 3.1(k)(iv).
58
<PAGE>
"Termination Fee" has the meaning assigned thereto in Section 8.1(b).
"Transactions" has the meaning assigned thereto in Section 1.2(a).
"Transfer Taxes" has the meaning assigned thereto in Section 5.6.
59
<PAGE>
IN WITNESS WHEREOF, Parent, the Purchaser and the Company have
caused this Agreement to be signed by their respective officers thereunto duly
authorized as of the date first written above.
SUNBEAM CORPORATION
By:/s/ David C. Fannin
-------------------
Name: David C. Fannin
Title: Executive Vice President &
General Counsel
SENTINEL ACQUISITION CORP.
By:/S/ David C. Fannin
-------------------
Name: David C. Fannin
Title: Executive Vice President &
General Counsel
FIRST ALERT, INC.
By:/s/ B. Joseph Messner
---------------------
Name: B. Joseph Messner
Title: President and Chief Executive
Officer
<PAGE>
ANNEX A
CERTAIN CONDITIONS OF THE OFFER. Notwithstanding any other
provisions of the Offer, and in addition to (and not in limitation of) the
Purchaser's rights to extend and amend the Offer at any time in its sole
discretion (subject to the provisions of the Merger Agreement), the Purchaser
shall not be required to accept for payment or, subject to any applicable rules
and regulations of the SEC, including Rule 14e-1(c) under the Exchange Act
(relating to the Purchaser's obligation to pay for or return tendered Shares
promptly after termination or withdrawal of the Offer), pay for, and may delay
the acceptance for payment of or, subject to the restriction referred to above,
the payment for, any tendered Shares, and may terminate or amend the Offer as to
any Shares not then paid for, if (i) there shall not have been validly tendered
and not withdrawn prior to the expiration of the Offer such number of Shares
which, when added to the Shares, if any, beneficially owned by Parent, would
constitute at least 50.1% of the Shares outstanding on a fully diluted basis
(the "Minimum Condition"), (ii) any applicable waiting period under the HSR Act
has not expired or terminated, or (iii) at any time on or after the date of the
Merger Agreement and before the time of payment for any such Shares, any of the
following events shall occur and be continuing:
(a) there shall have been any action taken, or any statute, rule, regulation,
judgment, order or injunction promulgated, entered, enforced, enacted, issued or
deemed applicable to the Offer or the Merger by any domestic or foreign Federal
or state governmental regulatory or administrative agency or authority or court
or legislative body or commission which directly or indirectly (l) prohibits, or
imposes any material limitations on, Parent's or the Purchaser's ownership or
operation (or that of any of their respective Subsidiaries or affiliates) of all
or a material portion of their or the Company's businesses or assets, or compels
Parent or the Purchaser or their respective Subsidiaries and affiliates to
dispose of or hold separate any material portion of the business or assets of
the Company or Parent and their respective Subsidiaries, in each case taken as a
whole, (2) prohibits, or makes illegal, the acceptance for payment, payment for
or purchase of Shares or the consummation of the Offer, the Merger or the other
transactions
A-1
<PAGE>
contemplated by the Merger Agreement, (3) results in the delay in or restricts
the ability of the Purchaser, or renders the Purchaser unable, to accept for
payment, pay for or purchase some or all of the Shares, (4) imposes material
limitations on the ability of the Purchaser or Parent effectively to exercise
full rights of ownership of the Shares, including, without limitation, the right
to vote the Shares purchased by it on all matters properly presented to the
Company's stockholders, or (5) otherwise materially adversely affects the
consolidated financial condition, businesses or results of operations of the
Company and its Subsidiaries, taken as a whole;
(b) there shall have occurred (1) any general suspension of
trading in, or limitation on prices for, securities on the New York Stock
Exchange or in the NASDAQ National Market System, (2) a declaration of a banking
moratorium or any suspension of payments in respect of banks in the United
States (whether or not mandatory), (3) a commencement of a war, armed
hostilities or other international or national calamity directly or indirectly
involving the United States, (4) any material limitation (whether or not
mandatory) by any foreign or United States governmental authority on the
extension of credit by banks or other financial institutions, (5) a change in
general financial bank or capital market conditions which has a material adverse
effect the ability of financial institutions in the United States to extend
credit or syndicate loans, or (6) in the case of any of the foregoing existing
at the time of the commencement of the Offer, a material acceleration or
worsening thereof;
(c) (1) the representations and warranties of e Company set
forth in the Merger Agreement shall not be true and correct in any material
respect as of the date of the Merger Agreement and as of consummation of the
Offer as though made on or as of such date (unless made as of a certain date),
(2) the Company shall have failed to comply with its covenants and agreements
under the Merger Agreement in all material respects or (3) there shall have
occurred any events or changes which have had or which are reasonably likely to
have a Material Adverse Effect on the Company and its Subsidiaries taken as a
whole;
A-2
<PAGE>
(d) the Company's Board of Directors shall have withdrawn, or
modified or changed in a manner adverse to Parent or the Purchaser (including by
amendment of the Schedule 14D-9) its recommendation of the Offer, the Merger
Agreement, or the Merger, or recommended another proposal or offer, or the Board
of Directors of the Company, upon request of the Purchaser, shall fail to
reaffirm such approval or recommendation or shall have resolved to do any of the
foregoing;
(e) the Merger Agreement shall have terminated in accordance
with its terms; or
(f) the Company shall not have obtained a waiver to the
provision in its Financing Agreement that an event of default shall occur and
exist thereunder as a result of the purchase of the Shares in a number equal to
or greater than the Minimum Condition pursuant to the Offer.
which in the sole judgment of Parent or the Purchaser, in any such case, and
regardless of the circumstances (including any action or inaction by Parent or
the Purchaser) giving rise to such condition makes it inadvisable to proceed
with the Offer and/or with such acceptance for payment of or payments for
Shares.
The foregoing conditions are for the sole benefit of Parent
and the Purchaser may be waived by Parent or the Purchaser, in whole or in part
at any time and from time to time in the sole discretion of Parent or the
Purchaser. The failure by Parent or the Purchaser at any time to exercise any of
the foregoing rights shall not be deemed a waiver of any such right and each
such right shall be deemed an ongoing right which may be asserted at any time
and from time to time.
A-3
EXHIBIT 10.y
STOCK SALE AGREEMENT
STOCK SALE AGREEMENT, dated as of February 28, 1998 (the
"Agreement"), among Sunbeam Corporation, a Delaware corporation (the "Parent"),
and each person or entity named in Schedule A to this Agreement (the
"Stockholders"). Capitalized terms used herein and not otherwise defined shall
have the meanings ascribed to them in the Merger Agreement (as defined below).
WHEREAS, the Parent, Sentinel Acquisition Corp., a Delaware
corporation and a wholly owned subsidiary of Parent (the "Purchaser"), and First
Alert, Inc., a Delaware corporation (the "Company"), are entering into an
Agreement and Plan of Merger (the "Merger Agreement") simultaneously with the
entry into this Agreement, which provides, among other things, that the
Purchaser, upon the terms and subject to the conditions thereof, make a cash
tender offer (the "Offer") for all issued and outstanding shares of common
stock, par value $.01 per share, of the Company (the "Shares") at a price of
$5.25 per share, and following consummation of the Offer the Purchaser will
merge with and into the Company with the Company as the surviving corporation
(the "Merger") and each then outstanding Share (other than Shares held by (i)
the Parent or any of its wholly owned subsidiaries, (ii) the Company or any of
its wholly owned subsidiaries or (iii) any holder who perfects dissenters'
rights under Delaware law) would be converted into the right to receive $5.25 in
cash, or any higher price paid per Share in the Offer; and
WHEREAS, the Parent has required, as a condition to its
entering into the Merger Agreement and commencing the Offer, that each of the
Stockholders enter into, and each of the Stockholders have agreed to enter into,
this Agreement.
NOW, THEREFORE, the parties hereto agree as follows:
STOCKHOLDERS' REPRESENTATIONS. Each of the
Stockholders severally represents and warrants to the Parent (a) that such
Stockholder has the power and authority (or the capacity if an individual) to
execute and deliver this Agreement, (b) that, if a corporation, partnership or
other entity, this Agreement has been duly authorized by all requisite action on
the part of the Stockholder, (c) that the Stockholder has duly executed and
delivered this Agreement and this Agreement is a valid and binding agreement,
enforceable against such Stockholder in accordance with its terms, (d) that
neither the execution of this Agreement nor the consummation by such Stockholder
of the transactions contemplated hereby will constitute a violation of, or
conflict with, or default under, any contract, commitment, agreement,
understanding, arrangement or restriction of any kind to which such Stockholder
is a party or by
<PAGE>
which such Stockholder is bound and, if the Stockholder is a corporation,
partnership or other entity, the organizational documents thereof, (e) that on
the date hereof such Stockholder has good and valid title to the number of
Shares set forth opposite such Stockholder's name on Schedule A hereto (the
"Stockholder's Shares"), free and clear of all claims, liens, charges,
encumbrances and security interests, without any restrictions on the voting
rights of such Stockholder's Shares, (f) that there are no options or rights to
purchase or acquire, or agreements relating to, any of such Stockholder's Shares
except pursuant to this Agreement, and (g) that the number of Shares set forth
in Schedule A hereto opposite the name of such Stockholder constitutes all of
the Shares owned beneficially or of record by such Stockholder.
PARENT'S REPRESENTATIONS. The Parent represents and
warrants to each of the Stockholders that the Parent has duly authorized,
executed and delivered this Agreement and this Agreement is a valid and binding
agreement, enforceable against the Parent in accordance with its terms.
SALE OF SHARES. In the event that within 9 months
following the date hereof and the Parent shall be entitled to the Termination
Fee pursuant to Section 8.1(b) of the Merger Agreement, the Stockholder shall
sell, transfer or otherwise commit to dispose any or all of such Shares to any
party other than the Parent or an affiliate of the Parent (a "Sale") and realize
a Profit (as defined below) from such Sale, then the Stockholder shall pay to
the Parent an amount equal to the Profit. Such amount shall be paid to the
Parent promptly following the receipt of proceeds by the Stockholder or its
affiliates from such Sale. The term "Profit" shall mean the excess, if any, of
(a) the aggregate consideration received by the Stock holder or its affiliates
in connection with the Sale over (b) the number of Shares sold, transferred or
disposed of in connection with the Sale multiplied by the Offer Price.
CHANGES IN SHARES. In the event of a stock dividend
or distribution, or any change in the Company's Common Stock by reason of any
stock dividend, split-up, recapitalization, combination, exchange of shares or
the like, the term "Shares" shall refer to and include the Shares as well as all
such stock dividends and distributions and any shares into which or for which
any or all of the Shares may be changed or exchanged. Each Stockholder's Shares
shall include all Shares acquired after the date hereof by such Stockholder and
all dividends or distributions in respect of the Stockholder's Shares.
LEGEND. As soon as practicable after the execution of
this Agreement, each Stockholder shall surrender the certificates representing
such Stockholder's Shares to the Parent so that the following legend may be
placed on such certificates:
"The shares of capital stock represented by this certificate
<PAGE>
are subject to a Stock Sale Agreement, dated as of February 28, 1998,
between Sunbeam Corporation and [the Stockholder]."
SPECIFIC ENFORCEMENT. The parties hereto acknowledge
that damages would be an inadequate remedy for a breach of this Agreement and
that the obligations of the parties hereto shall be specifically enforceable, in
addition to any other remedy which may be available at law or in equity.
BROKERAGE FEES. Each of the Stockholders and the
Parent, in connection with the transaction contemplated herein, severally agree
to indemnify and hold the other harmless from and against any and all claims,
liabilities or obligations with respect to any brokerage fees, commissions or
finders' fees asserted by any person on the basis of any act or statement
alleged to have been made by such party or its affiliate.
EXPENSES. Each party hereto shall pay its own
expenses incurred in connection with this Agreement.
SURVIVAL. Notwithstanding anything contained herein
to the contrary, all representations, warranties and agreements made by each of
the Stock holders in this Agreement shall survive the termination of this
Agreement and any investigation at any time made by or on behalf of any party
hereto.
STOP TRANSFER. Each of the Stockholders shall not
request that the Company register the transfer (book-entry or otherwise) of any
certificate or uncertificated interest representing any of the Shares, unless
such transfer is made in compliance with this Agreement.
FURTHER ASSURANCES. From time to time, at the other
party's request and without further consideration, each party hereto shall
execute and deliver such additional documents and take all such further lawful
action as may be necessary or desirable to consummate and make effective, in the
most expeditious manner practicable, the transactions contemplated by this
Agreement.
MISCELLANEOUS.
AMENDMENT, ETC. This Agreement may not be
modified, altered or supplemented except upon the execution and delivery of a
written agreement executed by the parties hereto.
ASSIGNMENT. No party to this Agreement may
assign any of its rights or obligations under this Agreement without the prior
consent of the other parties except that the rights and obligations of the
Parent may be assigned by the Parent to Purchaser or any of its other wholly
owned
<PAGE>
subsidiaries but no such transfer shall relieve the Parent of its obligations
hereunder if such transferee does not perform such obligations.
BINDING EFFECT. This Agreement and the
obligations hereunder shall attach to the Shares and shall be binding upon any
person or entity to which legal or beneficial ownership of such Shares shall
pass, whether by operation of law or otherwise. Notwithstanding any transfer of
Shares, the transferor shall remain liable for the performance of all
obligations under this Agreement of the transferor.
NOTICES. All notices, claims, requests,
demands and other communications hereunder will be in writing and will be deemed
to have been duly given upon receipt as follows:
(a) If to the Parent, to:
Sunbeam Corporation
1615 South Congress Avenue
Suite 200
Delray Beach, FL 33445
Attention: General Counsel
with a copy to:
Skadden, Arps, Slate, Meagher & Flom LLP
919 Third Avenue
New York, New York 10022
Attention: Blaine V. Fogg, Esq.
(b) If to the Stockholder, to such Stock holder at the
address set forth under his name in Schedule A.
or to such other address as the person to whom notice is to be given may have
previously furnished to the others in writing in the manner set forth above.
COUNTERPARTS. This Agreement may be executed
in two or more counterparts, each of which will be deemed to be an original but
all of which together will constitute one and the same instrument.
GOVERNING LAW. This Agreement shall be
governed by and construed in accordance with the laws of the State of Delaware,
regardless of the laws that might otherwise govern under applicable Delaware
principles of conflicts of law.
<PAGE>
TERMINATION. Except for Sections 7, 8 and 9
hereof, this Agreement shall terminate on the earlier of (i) the purchase of
each Stockholder's Shares pursuant to the Offer or through the Merger and (ii)
three years from the date hereof.
REMEDIES CUMULATIVE. All rights, powers and
remedies provided under this Agreement or otherwise available in respect hereof
at law or in equity shall be cumulative and not alternative, and the exercise of
any thereof by any party shall not preclude the simultaneous or later exercise
of any other such right, power or remedy by such party.
NO WAIVER. The failure of any party hereto
to exercise any right, power or remedy provided under this Agreement or
otherwise available in respect hereof at law or in equity, or to insist upon
compliance by any other party hereto with its obligations hereunder, and any
custom or practice of the parties at variance with the terms hereof, shall not
constitute a waiver by such party of its right to exercise any such or other
right, power or remedy or to demand such compliance.
<PAGE>
IN WITNESS WHEREOF, this Agreement has been duly executed and
delivered by each Stockholder and a duly authorized officer of the Parent on the
day and year first written above.
SUNBEAM CORPORATION
By:_________________________
THOMAS H. LEE EQUITY PARTNERS, L.P.
By: ________________________
Its General Partner
By_________________________
ML-LEE ACQUISITION FUND II, L.P.
By:_________________________
Its General Partner
By_________________________
ML-LEE ACQUISITION FUND (RETIREMENT
ACCOUNTS) II, L.P.
By:_________________________
Its General Partner
By_________________________
<PAGE>
STATE STREET BANK AND TRUST COMPANY,
not individually but as Trustee of
the 1989 THOMAS H. LEE NOMINEE TRUST
By__________________________
<PAGE>
------------------------------------
John W. Childs
------------------------------------
David W. Harkins
------------------------------------
Thomas R. Shepherd
------------------------------------
Thomas R. Shepherd - IRA
------------------------------------
Glenn H. Hutchins
------------------------------------
Scott A. Schoen
------------------------------------
C. Hunter Boll
------------------------------------
Steven G. Segal
------------------------------------
Anthony J. Dinovi
------------------------------------
Thomas M. Hagerty
------------------------------------
Joseph I. Incandela
------------------------------------
Warren C. Smith
------------------------------------
Glenn A. Hopkins
------------------------------------
Charles W. Robins
<PAGE>
SZL Trust
By__________________________________
------------------------------------
Adam L. Suttin
------------------------------------
Wendy L. Masler
------------------------------------
Andrew D. Flaster
SGS Family Limited Partnership
By__________________________________
Its General Partner
By_________________________
<PAGE>
SCHEDULE A
NUMBER OF SHARES
NAME AND ADDRESS OF COMMON STOCK
OF STOCKHOLDER OF THE COMPANY
---------------- ----------------
Thomas H. Lee Equity Partners, L.P. 8,324,492
ML-Lee Acquisition Fund II, L.P. 2,058,474
ML-Lee Acquisition Fund (Retirement
Accounts) II, L.P. 2,281,524
State Street Bank and Trust Company
Not Individually but as Trustee of the
1989 Thomas H. Lee Nominee Trust 985,706
John W. Childs 159,178
David V. Harkins 118,518
Thomas R. Shepherd 44,446
Thomas R. Shepherd - IRA 44,446
Glenn H. Hutchins 88,888
Scott A. Schoen 87,034
C. Hunter Boll 62,000
Steven G. Segal 35,550
Anthony J. Dinovi 35,550
Thomas M. Hagerty 35,550
Joseph I. Incandela 15,500
Warren C. Smith, Jr. 11,160
Glenn A. Hopkins 6,200
Charles W. Robins 6,200
<PAGE>
SZL Trust 6,200
Adam L. Suttin 6,200
Wendy L. Masler 1,240
Andrew D. Flaster 1,550
SGS Family Limited Partnership 6,200
Exhibit 21.
<TABLE>
<CAPTION>
SUNBEAM CORPORATION AND SUBSIDIARIES
SUBSIDIARIES OF THE REGISTRANT
Company Name Jurisdiction of Incorporation Doing Business As
<S> <C> <C>
Sunbeam Americas Delaware
Holdings, Ltd.
GH II, Inc. Delaware
Sunbeam Products, Inc. Delaware Sunbeam Consumer Products
Worldwide
OP II, Inc. Florida
DDG I, Inc. Delaware
</TABLE>
EXHIBIT 23
CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
As independent certified public accountants, we hereby consent to the
incorporation of our report included in the Form 10-K, into the Company's
previously filed Registration Statement File No. 33-61610, 33-87950 and
333-21413.
Fort Lauderdale, Florida,
March 5, 1998.
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
SUNBEAM CORPORATION FINANCIAL STATEMENTS FOR THE PERIOD ENDED DECEMBER 28, 1997
AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-28-1997
<PERIOD-START> DEC-30-1996
<PERIOD-END> DEC-28-1997
<CASH> 52,378
<SECURITIES> 0
<RECEIVABLES> 313,013
<ALLOWANCES> 17,463
<INVENTORY> 256,180
<CURRENT-ASSETS> 658,005
<PP&E> 345,671
<DEPRECIATION> 104,774
<TOTAL-ASSETS> 1,120,284
<CURRENT-LIABILITIES> 198,099
<BONDS> 194,580
0
0
<COMMON> 900
<OTHER-SE> 531,037
<TOTAL-LIABILITY-AND-EQUITY> 1,120,284
<SALES> 1,168,182
<TOTAL-REVENUES> 1,168,182
<CGS> 837,683
<TOTAL-COSTS> 837,683
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 11,381
<INCOME-PRETAX> 189,280
<INCOME-TAX> 66,152
<INCOME-CONTINUING> 123,128
<DISCONTINUED> (13,713)
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 109,415
<EPS-PRIMARY> 1.29
<EPS-DILUTED> 1.25
</TABLE>
SUNBEAM /REGISTERED TRADEMARK/
FOR IMMEDIATE RELEASE:
SUNBEAM COMPLETES RECORD YEAR
FOR SALES, EARNINGS & GLOBAL EXPANSION
DELRAY BEACH, FLORIDA JANUARY 28, 1998 - Sunbeam Corporation (NYSE:SOC) today an
nounced record sales and earnings for its fourth quarter and full year 1997.
Sales for the quarter were $338 million, reflecting a 30.6% increase over the
prior year period on a comparable basis (excluding discontinued businesses and
divested product lines). Before the 1996 special charges taken by the Company to
restructure and reposition Sunbeam, earnings per share (diluted) from continuing
operations of $0.47 were $0.50 ahead of the loss of $0.03 reported in the fourth
quar ter last year. Including these charges earnings per share (diluted) rose
$2.76 above the reported $2.29 loss reported in 1996. On a year to date basis,
revenue of $1.168 billion was 22.4% above 1996 on a comparable basis and
earnings per share (diluted) from continuing operations of $1.41 was $1.51 above
the loss of $0.10 reported in 1996, excluding special charges. For the full year
of 1997, earnings per share (diluted) rose $3.78 from the loss of $2.37 reported
in 1996.
1997 Highlights -- During 1997, the Company completed its restructuring program
and initiated a growth strategy that has generated consistent quarterly double
digit sales growth throughout the year. The company exited all its non-core
businesses in 1997, closed 18 factories, 43 warehouses and 5 headquarters,
reduced employment by approximately 50% (half of which reflects reductions
related to the disposition of non-core businesses) and substantially reduced its
SKU offerings as part of its restructuring program. Concurrent with the
restructuring program, the Company also implemented a three year growth plan to
strengthen the Sunbeam(R) and Oster(R) brand names and expand distribution
globally. Albert J. Dunlap, Sunbeam's Chairman and Chief Executive Officer, said
"I am very proud of the dramatic turnaround that we have achieved at Sunbeam in
such a short period of time as we continue to execute against our three year
growth plans. Our continu ous sales increases of 13%, 17%, 28% and 31% in the
four quarters of 1997, for an overall sales increase of 22% for the year, are a
clear indication that our strategy is working."
The Company's three year strategy to achieve $1 billion in revenue growth, which
it embarked upon in 1997, was fueled by the addition of 25 international
distribution/license agreements, the introduction of 35 new U.S. products and 54
new international products along with the contribu tion from 22 factory outlet
stores. "We experienced sales growth in all major channels of distri bution, in
all regions of the world and in each of our five global businesses, and we
gained market share in all of our key product categories, reversing a three year
downward trend, " said Mr. Dunlap. Sales to the Company's top 10 retailers were
up 15% and 22% in the latest quarter and
<PAGE>
full year, respectively. International sales which are projected to contribute
40% of the Company's three year growth goal, were up 42%, and 34% for the
quarter and full year, respectively. Leading the sales growth internationally
was the Asia/Pacific region, up 425%, and the Latin American region, up 32%.
"The primary catalyst for this growth has been our ability to improve customer
service levels and introduce innovative and differentiated new products at an
accelerated pace. As part of the restructuring we implemented a new product
development process that has enabled us to reduce new product development time
from over 2 years to approximately 6 months," said Mr. Dunlap.
"Equally as important as our strong top line growth was the remarkable
improvement in operating margins, year over year, and the continuous margin
expansion we delivered through-out the year. We set a three year goal to have
20% operating margins, and we were essentially at that level in the 3rd and 4th
quarters this year," said Mr. Dunlap. The Company's operating margins of 20% in
the 4th quarter and 17% for the full year reflect the numerous initiatives
associated with the restructuring program. "I am pleased with the pace of
improvements in our financial performance and expect continued margin
enhancement in 1998," Mr. Dunlap said.
1998 Goals -- The Company announced its goals for 1998, which anticipate
increases in sales and margins at rates above those experienced in 1997. Mr.
Dunlap, commenting on the Company's 1998 revenue goals, said, "We have
established sales growth goals that should exceed the impres sive results
reported in 1997. In 1998 we will continue our global expansion with the
addition of 30 new global products, a dozen more international
distribution/license agreements and 10 more outlet stores. We expect to double
our media advertising spending to stimulate increased consumer pull for our
products and introduce new in-store merchandising programs to assist our retail
partners in the promotion and support of our aggressive growth goals." The
Company expects to introduce new products in 1998 that will strengthen its
global product lines, and market positions, by focusing on technological
innovation that satisfies chronic consumer needs.
Commenting on the effect of the economic situation in Asia on the Company's
international growth plans, Mr. Dunlap stated, "Sunbeam has an advantage in that
we started from a very low base. Unlike other companies which have exported
heavily to Asia for years, we still have an ex cellent opportunity to build our
business rapidly in that region of the world. Our plans are to ini tially sell
our most highly differentiated products in Asia, like our electric blankets,
blenders, wa ter and air purifiers, hair clippers and ToastLogic(R) products.
Many of the products we will sell there can be sourced from Asian OEM
manufacturers, providing flexibility to enhance our growth opportunities in the
Asia/Pacific region."
Mr. Dunlap said, "I am confident that we have the right initiatives in place to
achieve our goals and further expand operating margins in 1998." The Company
plans to increase the amount of out-sourcing in 1998 to help support its sales
growth objectives for the Asia/Pacific region and to allow for added capacity
without adding bricks and mortar to its existing 8 factories. "Currently our
make/buy composition is around 70/30 and I have set a goal for the Company to
source around 50% of its products and components by the end of 1998," said Mr.
Dunlap.
<PAGE>
Mr. Dunlap added, "I have always believed that a merger or acquisition unleashes
a quantum leap in creating shareholder value, and I am very eager to make this
strategic move in the first half of 1998. We continue to work towards finalizing
our plans for merging with, or acquiring, one or more companies that will
provide added value to all shareholders. We also remain open to a sale of the
Company if that would produce greater value for our shareholders."
Sunbeam Corporation is a leading consumer products company that designs,
manufactures and markets, nationally and internationally, a diverse portfolio of
brand name products. The Com pany's Sunbeam(R) and Oster(R) brands have been
household names for generations, both domesti cally and abroad, and the Company
is a market leader in many of its product categories.
CAUTIONARY STATEMENT: Statements contained in this press release, including
statements relating to the Company's expectations regarding anticipated
performance in the future, are all "forward looking statements" as such term is
defined in the Private Securities Litigation Reform Act of 1995. Actual results
could differ materially from the Company's statements regarding its
expectations, goals or projected results, due to various factors, including
those set forth in the Company's Cautionary Statements contained in its Form
10-K, filed with the Securities and Ex change Commission on March 31, 1997. The
Company will update its Cautionary Statement in its form 10-K, anticipated to be
filed in March 1998.
****************************************
Contact: Rich Goudis
Sunbeam Corporation
Vice President Investor Relations
(561)243-2142
<PAGE>
SUNBEAM CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOW
(IN MILLIONS)
YEAR ENDED
-----------------------------
DECEMBER 28, DECEMBER 29,
1997 1996
------------ ------------
OPERATING ACTIVITIES
Net earnings $109.4 ($228.3)
Depreciation and amortization 38.6 47.4
Deferred income taxes 57.8 (77.8)
Loss on sale of discontinued 13.7 32.4
operations, net of taxes
Restructuring, impairment and other costs - 154.9
Other non-cash special charges - 128.8
Changes in working capital and other,
including restructuring spending (227.6) (43.3)
------------ ------------
(8.1) 14.1
INVESTING ACTIVITIES
Capital expenditures (58.3) (75.3)
Proceeds from sale of divested operations
and other assets 91.0 -
Other - (0.9)
------------ ------------
32.7 (76.2)
FINANCING ACTIVITIES
Net borrowings under revolving 5.0 30.0
credit facility
Issuance of long-term debt - 11.5
Payment of debt obligations (11.8) (1.8)
Proceeds from exercise of stock options 26.6 4.7
Sale of treasury stock - 4.6
Other (3.5) (3.7)
------------ ------------
16.3 45.3
------------ ------------
Net increase (decrease) in cash and
cash equivalents 40.9 (16.8)
Cash and cash equivalents, beginning
of period 11.5 28.3
------------ ------------
Cash and cash equivalents, end of period $52.4 $11.5
============ ============
<PAGE>
<TABLE>
<CAPTION>
SUNBEAM CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(in millions, except EPS)
YEAR ENDED THREE MONTHS ENDED
--------------------------- ---------------------------
DECEMBER 28, DECEMBER 29, DECEMBER 28, DECEMBER 29,
1997 1996 1997 1996
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Net sales $1,168.2 $984.2 $338.1 $268.9
Cost of goods sold 837.7 900.6(a) 238.7 309.3(a)
------------ ------------ ------------ ------------
Gross profit (deficit) 330.5 83.6 99.4 (40.4)
% of sales 28.3% 8.5% 29.4% -15.0%
Selling, general & administrative expense 131.1 214.0(b) 32.7 94.(b)
Restructuring, impairment and other costs - 154.9 - 154.9
------------ ------------ ------------ ------------
Operating earnings (loss) 199.4 (285.3) 66.7 (289.4)
% of sales 17.1% -29.0% 19.7% -107.6%
Interest expense and other, net 10.2 17.3 4.1 4.0
------------ ------------ ------------ ------------
Earnings (loss) from continuing operations
before income taxes 189.2 (302.6) 62.6 (293.4)
Income taxes (benefit) 66.1 (105.9) 20.9 (103.0)
------------ ------------ ------------ ------------
EARNINGS (LOSS) FROM CONTINUING OPERATIONS 123.1 (196.7) 41.7 (190.4)
Earnings (loss) from discontinued operations,
net of tax (13.7) (32.4) - (32.4)
------------ ------------ ------------ ------------
Loss on sale of discontinued operations, net (13.7) (32.4) - (32.4)
Net earnings (loss) $109.4 ($228.3) $41.7 ($234.7)
============ ============ ============ ============
EARNINGS (LOSS) PER SHARE FROM CONTINUING
OPERATIONS:
BASIC $1.45 ($2.37) $0.49 ($2.29)
DILUTED $1.41 ($2.37) $0.47 ($2.29)
============ ============ ============ ============
Earnings (loss) per share:
Basic $1.29 ($2.75) $0.49 ($2.83)
Diluted $1.25 ($2.75) $0.47 ($2.83)
============ ============ ============ ============
Average number of common shares outstanding:
Basic 84.9 82.9 85.5 83.0
Diluted 87.5 82.9 88.4 83.0
</TABLE>
(a) Includes special charges of $92.3
(b) Includes special charges of $42.5
<PAGE>
SUNBEAM CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(in millions)
December 28, December 29,
1997 1996
------------ ------------
ASSETS
Current assets:
Cash and cash equivalents $52.4 $11.5
Receivables, net 295.5 213.4
Inventories 256.2 162.3
Net assets of discontinued operations and other assets
held for sale - 102.
Deferred income taxes 36.7 93.7
Prepaid expenses and other current assets 17.2 40.4
------------ ------------
Total current assets 658.0 624.1
Property, plant and equipment, net 240.9 220.1
Trademarks and trade names, net 194.4 200.3
Other assets 27.0 28.2
------------ ------------
$1,120.3 $1,072.7
============ ============
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable 105.6 107.3
Restructuring accrual 10.9 63.8
Other current liabilities 81.6 100.4
------------ ------------
Total current liabilities 198.1 271.5
Long-term debt 194.6 201.1
Deferred income taxes 54.6 52.3
Non-operating and other long-term liabilitie 141.1 152.5
Shareholders' equity 531.9 395.3
------------ ------------
$1,120.3 $1,072.7
============ ============
[SUNBEAM LOGO]/registered trademark/
FOR IMMEDIATE RELEASE:
SUNBEAM ACQUIRES THREE PUBLICLY TRADED CONSUMER PRODUCTS COMPANIES:
COLEMAN, SIGNATURE BRANDS AND FIRST ALERT
*****AL DUNLAP SIGNS NEW THREE YEAR CONTRACT*****
DELRAY BEACH, FL, MARCH 2, 1998 - Sunbeam Corporation (NYSE: SOC) initiated an
aggressive expansion strategy today with the announcement of the acquisitions of
three separate market leading durable consumer product companies. These
transactions will enhance shareholder value by nearly tripling the Company's
annual revenues, expanding its geographic presence, complementing its existing
product lines and leveraging operational synergies. The three transactions will
total approximately $2.5 billion and will be meaningfully accretive to Sunbeam's
earnings within twelve months. The transactions are subject to regulatory
approvals and other customary conditions and are expected to close within the
next two months.
The Coleman Company, Inc. (NYSE: CLN), with 1997 revenues of $1.1 billion is the
global leader in outdoor recreation and hardware products with powerful brands
such as Coleman/registered trademark/, Powermate/registered trademark/, Camping
Gaz/registered trademark/ and Eastpak/registered trademark/. The Company, based
in Wichita, KS, operates 17 manufacturing facilities and employs approximately
6,000 people around the world. The transaction is valued at approximately $2.0
billion, consisting of approximately $815 million in Sunbeam stock and the
balance in debt financing. Shareholders of The Coleman Company, Inc. will
receive $6.44 in cash and 0.5677 shares of Sunbeam stock for each share of
Coleman stock.
Signature Brands USA, Inc. (NASDAQ: SIGB), with 1997 revenues of $279 million,
is the North American leader in coffee makers marketed under the Mr.
Coffee/registered trademark/ brand name and is a leader in consumer health
products marketed under the Health o meter/registered trademark/ brand. The
Company, based in Glenwillow, OH, operates two manufacturing facilities and
employs approximately 1,000 people. The transaction is valued at approximately
$250 million consisting of a cash tender offer of $8.25 per SIGB share and the
assumption of existing debt.
First Alert, Inc. (NASDAQ: ALRT) with 1997 revenues of $187 million, is the
worldwide leader in residential safety equipment, including smoke and carbon
monoxide detectors. The Company, which is based in Aurora, IL, operates two
manufacturing facilities and employs approximately 2,100 people. The transaction
is valued at approximately $175 million consisting of a cash tender offer of
$5.25 per ALRT share and the assumption of existing debt.
Albert J. Dunlap, Sunbeam's chairman and chief executive officer stated, "The
successful turnaround of Sunbeam, including the dramatic improvement of the
underlying business, has provided us with a solid platform for profitable
growth. These three separate transactions
<PAGE>
-more-
Sunbeam
March 2, 1998
Page Two of Three
represent the next phase of our plan to create value for Sunbeam's shareholders.
We looked at various alternatives to increase shareholder value. Ultimately we
decided there is phenomenal value to be created in assuming the leadership role
in consolidating the industries in which we compete. These acquisitions enable
us to accelerate our growth rate by expanding our geographic presence, entering
new product lines and leveraging the strength of dominant brand names such as
Coleman/registered trademark/, Camping Gaz/registered trademark/,
Eastpak/registered trademark/, First Alert/registered trademark/, Mr.
Coffee/registered trademark/, and Health o meter/registered trademark/, along
with Sunbeam/registered trademark/, Oster/registered trademark/ and
Grillmaster."
Mr. Dunlap added, "Our strategy is to become the global leader in the durable
consumer products industry through continued internal growth augmented by
further strategic acquisitions of high quality consumer brands. Our proven track
record coupled with our financial strength will enable us to successfully
execute this strategy."
The Company anticipates initial synergies of approximately $150 million which
will result in a substantial EPS accretion in 1999. A one time charge is
expected in 1998 in order to restructure and consolidate these three companies
into Sunbeam.
Additionally, the Company announced that Chairman and Chief Executive Officer
Albert J. Dunlap, along with Executive Vice Presidents Russell A. Kersh and
David C. Fannin have all renewed their commitment to the Company by signing new
three year employment contracts. Mr. Kersh was named to the new position of vice
chairman of Sunbeam. Mr. Dunlap stated, "I am eager to continue to create
tremendous value for our shareholders by building the leading durable consumer
products company in the world. This new employment agreement will put to rest
any rumors that I would leave the Company."
"This is a fantastic situation for all Sunbeam shareholders giving them the
opportunity to participate in the wealth that Al Dunlap and his team are
building," said Ronald O. Perelman, who will become Sunbeam's second largest
shareholder after the transaction. "Coleman will thrive as part of Sunbeam's
unbeatable family of brands," added Mr. Perelman.
Michael Price, president and chief executive officer of Franklin Mutual Series
Fund, Sunbeam's largest shareholder, praised the transactions and new contracts.
"With the simultaneous acquisitions of these three publicly traded companies,
Sunbeam is launching into a bold new phase as the consolidator in its
industries," Mr. Price said. "Utilizing Al's unique ability to restructure and
reposition companies, the opportunities for operating synergies and incremental
sales growth is substantial. Al's renewed commitment indicates to me that the
best is yet to come for Sunbeam and its shareholders," Mr. Price added.
-more-
<PAGE>
Sunbeam
March 2, 1998
Page Three of Three
Morgan Stanley & Co. Incorporated acted as financial advisor to Sunbeam in all
three of the aforementioned transactions.
Sunbeam Corporation is a leading consumer products company that designs,
manufactures and markets, nationally and internationally, a diverse portfolio of
brand name products. The Company's Sunbeam/registered trademark/ and
Oster/registered trademark/ brands have been household names for generations,
both domestically and abroad, and the Company is a market leader in many of its
product categories.
CAUTIONARY STATEMENTS - Statements contained in this press release, including
statements relating to the Company's expectations regarding anticipated
performance in the future, are "forward looking statements," as such term is
defined in the Private Securities Litigation Reform Act of 1995. Actual results
could differ materially from the Company's statements in this release regarding
its expectations, goals, or projected results, due to various factors, including
those set forth in the Company's Cautionary Statements contained in its Form
10-K, filed with the Securities and Exchange Commission on March 31, 1997.
*********************
THE COMPANY WILL CONDUCT A CONFERENCE CALL ON MONDAY,
MARCH 2, 1998 AT 2:00 P.M. EST.
THE CALL IN NUMBER IS (312) 470-0142. .
PASSWORD: SUNBEAM
***************
Please contact:
Media: Investors:
Mari Hope Rich Goudis
Hill & Knowlton Sunbeam Corporation
212-885-0306 561-243-2142
