OFFERING CIRCULAR
Offer to Exchange Common Stock and 11% Senior Secured Subordinated
Notes due 2011 for All Outstanding Zero Coupon Convertible Senior
Subordinated Debentures due 2018
of
SUNBEAM CORPORATION
-------------------------------------------------------------------
THE EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M., NEW YORK CITY TIME,
ON AUGUST 7, 2000, UNLESS EXTENDED OR EARLIER TERMINATED.
-------------------------------------------------------------------
SUNBEAM CORPORATION, A DELAWARE CORPORATION ("SUNBEAM"), HEREBY
OFFERS (THE "EXCHANGE OFFER"), UPON THE TERMS AND CONDITIONS SET FORTH IN
THIS OFFERING CIRCULAR, AND IN THE ACCOMPANYING LETTER OF TRANSMITTAL, TO
EXCHANGE $173.00 PRINCIPAL AMOUNT AT MATURITY ($149.06 PRINCIPAL AMOUNT AT
ISSUANCE) OF SUNBEAM'S 11% SENIOR SECURED SUBORDINATED NOTES DUE 2011
("SECURED NOTES") AND 17 SHARES OF COMMON STOCK, PAR VALUE $.01 PER SHARE,
OF SUNBEAM ("SUNBEAM COMMON STOCK") FOR EACH $1,000 PRINCIPAL AMOUNT AT
MATURITY OF SUNBEAM'S CURRENTLY OUTSTANDING ZERO COUPON CONVERTIBLE SENIOR
SUBORDINATED DEBENTURES DUE 2018 (CUSIP NOS. 867071 AD4; 867071 AA0 AND
867071 AB8) (THE "ZERO DEBENTURES"). AS OF THE DATE OF THIS OFFERING
CIRCULAR, THE ACCRETED VALUE OF THE ZERO DEBENTURES WAS 41.71152% OF FACE
VALUE. SUBJECT TO THE TERMS AND CONDITIONS OF THE EXCHANGE OFFER, SUNBEAM
WILL ISSUE SECURED NOTES AND SHARES OF SUNBEAM COMMON STOCK IN EXCHANGE FOR
ALL ZERO DEBENTURES THAT ARE PROPERLY TENDERED AND NOT WITHDRAWN PRIOR TO
THE EXPIRATION OF THE EXCHANGE OFFER. THE EXCHANGE OFFER IS NOT CONDITIONED
UPON THE EXCHANGE OF A MINIMUM PRINCIPAL AMOUNT AT MATURITY OF ZERO
DEBENTURES. FOR A MORE DETAILED DESCRIPTION OF THE SECURED NOTES AND
SUNBEAM COMMON STOCK WE ARE PROPOSING TO ISSUE IN THE EXCHANGE OFFER,
PLEASE SEE THE SECTIONS OF THIS OFFERING CIRCULAR CAPTIONED "DESCRIPTION OF
SECURED NOTES" AND "DESCRIPTION OF CAPITAL STOCK." THE EXCHANGE OFFER IS
OPEN TO ALL HOLDERS OF THE ZERO DEBENTURES AND IS SUBJECT TO CUSTOMARY
CONDITIONS. SUBJECT TO APPLICABLE SECURITIES LAWS AND THE TERMS SET FORTH
IN THIS OFFERING CIRCULAR, WE RESERVE THE RIGHT TO WAIVE ANY AND ALL
CONDITIONS TO THE EXCHANGE OFFER, TO EXTEND THE EXCHANGE OFFER, TO
TERMINATE THE EXCHANGE OFFER FOR ANY REASON OR NO REASON AND OTHERWISE TO
AMEND THE EXCHANGE OFFER, IN ANY RESPECT.
-----------------------
IMPORTANT
Any Zero Debenture holder desiring to tender all or any portion of
such holder's Zero Debentures should either (i) complete and sign the
enclosed Letter of Transmittal (or a facsimile thereof) in accordance with
the instructions in the Letter of Transmittal, have such holder's signature
thereon guaranteed (if required by Instruction 1 to the Letter of
Transmittal), mail or deliver the Letter of Transmittal (or a facsimile
thereof) and any other required documents to American Stock Transfer &
Trust Company (the "Exchange Agent") and either deliver the certificates
for such Zero Debentures along with the Letter of Transmittal to the
Exchange Agent or tender such Zero Debentures pursuant to the procedures
for book-entry transfer set forth in the section of this Offering Circular
captioned "The Exchange Offer - Procedures for Tendering Zero Debentures"
or (ii) request such holder's broker, dealer, commercial bank, trust
company or other nominee to effect the transaction for such holder. Any
holder whose Zero Debentures are registered in the name of a broker,
dealer, commercial bank, trust company or other nominee must contact such
broker, dealer, commercial bank, trust company or other nominee to tender
such Zero Debentures.
ANY ZERO DEBENTURE HOLDER WHO DESIRES TO TENDER ZERO DEBENTURES BUT
(I) WHOSE CERTIFICATES EVIDENCING SUCH ZERO DEBENTURES ARE NOT IMMEDIATELY
AVAILABLE, (II) CANNOT COMPLY WITH THE PROCEDURES FOR BOOK-ENTRY TRANSFER
DESCRIBED IN THIS OFFERING CIRCULAR ON A TIMELY BASIS OR (III) CANNOT
DELIVER ALL REQUIRED DOCUMENTS TO THE EXCHANGE AGENT PRIOR TO THE
EXPIRATION OF THE EXCHANGE OFFER, MAY TENDER SUCH ZERO DEBENTURES BY
FOLLOWING THE PROCEDURES FOR GUARANTEED DELIVERY SET FORTH IN THE SECTION
OF THIS OFFERING CIRCULAR CAPTIONED "THE EXCHANGE OFFER - GUARANTEED
DELIVERY PROCEDURES."
--------------------------------------------------------------------------
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR DETERMINED IF
THIS OFFERING CIRCULAR IS TRUTHFUL OR COMPLETE.
ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
--------------------------------------------------------------------------
<TABLE>
<S> <C>
The Exchange Agent for the Exchange Offer is: The Information Agent for the Exchange Offer is:
AMERICAN STOCK TRANSFER & TRUST COMPANY MACKENZIE PARTNERS, INC.
</TABLE>
-----------------------
SEE "RISK FACTORS" BEGINNING ON PAGE 19 FOR A DISCUSSION OF RISKS
YOU SHOULD CONSIDER BEFORE TENDERING YOUR ZERO DEBENTURES.
-----------------------
The date of this Offering Circular is July 11, 2000.
THE EXCHANGE OFFER IS BEING MADE IN RELIANCE UPON AN EXEMPTION FROM
REGISTRATION PROVIDED BY SECTION 3(A)(9) OF THE SECURITIES ACT OF 1933, AS
AMENDED (THE "SECURITIES ACT"), AND SIMILAR EXEMPTIONS FROM REGISTRATION
PROVIDED BY CERTAIN STATE SECURITIES LAWS.
-----------------------
NO DEALER, SALESMAN OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS WITH RESPECT TO THE MATTERS
DESCRIBED IN THIS OFFERING CIRCULAR, OTHER THAN THOSE CONTAINED IN THIS
OFFERING CIRCULAR (INCLUDING THE DOCUMENTS INCORPORATED HEREIN BY
REFERENCE). IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATION MAY NOT BE
RELIED UPON AS HAVING BEEN AUTHORIZED BY SUNBEAM.
-----------------------
THIS OFFERING CIRCULAR DOES NOT CONSTITUTE AN OFFER TO SELL OR A
SOLICITATION OF AN OFFER TO BUY ANY OF THE SECURED NOTES OR SHARES OF
SUNBEAM COMMON STOCK TO ANY PERSON IN ANY JURISDICTION WHERE IT IS UNLAWFUL
TO MAKE SUCH AN OFFER OR SOLICITATION. INVESTORS SHOULD BE AWARE THAT THEY
MAY BE REQUIRED TO BEAR THE FINANCIAL RISKS OF THEIR INVESTMENT FOR AN
INDEFINITE PERIOD OF TIME.
-----------------------
THIS OFFERING CIRCULAR IS SUBMITTED ON A CONFIDENTIAL BASIS TO THE HOLDERS
OF OUR OUTSTANDING ZERO DEBENTURES FOR INFORMATIONAL USE SOLELY IN
CONNECTION WITH THEIR CONSIDERATION OF THE EXCHANGE OFFER DESCRIBED HEREIN.
ITS USE FOR ANY OTHER PURPOSE IS NOT AUTHORIZED. IT MAY NOT BE COPIED OR
REPRODUCED IN WHOLE OR IN PART NOR MAY IT BE DISTRIBUTED OR ANY OF ITS
CONTENTS BE DISCLOSED TO ANYONE OTHER THAN THE PROSPECTIVE INVESTORS TO
WHOM IT IS SUBMITTED.
-----------------------
THIS OFFERING CIRCULAR SUMMARIZES VARIOUS DOCUMENTS AND OTHER INFORMATION.
THOSE SUMMARIES ARE QUALIFIED IN THEIR ENTIRETY BY REFERENCE TO THE
DOCUMENTS AND INFORMATION TO WHICH THEY RELATE. IN MAKING AN INVESTMENT
DECISION, INVESTORS MUST RELY ON THEIR OWN EXAMINATION OF SUNBEAM AND THE
TERMS OF THE EXCHANGE OFFER, INCLUDING THE MERITS AND RISKS INVOLVED. THE
INFORMATION CONTAINED IN THIS OFFERING CIRCULAR IS AS OF THE DATE HEREOF
AND NEITHER THE DELIVERY OF THIS OFFERING CIRCULAR NOR THE OFFERING, SALE
OR DELIVERY OF ANY SECURED NOTES OR SHARES OF SUNBEAM COMMON STOCK SHALL
CREATE ANY IMPLICATION THAT THE INFORMATION CONTAINED HEREIN IS CORRECT AT
ANY TIME AFTER THE DATE HEREOF. NO REPRESENTATION IS MADE TO ANY OFFEREE OR
PURCHASER OF THE SECURED NOTES AND SUNBEAM COMMON STOCK REGARDING THE
LEGALITY OF AN INVESTMENT IN THOSE SECURITIES BY THE OFFEREE OR PURCHASER
UNDER ANY APPLICABLE LEGAL INVESTMENT OR SIMILAR LAWS OR REGULATIONS. THE
CONTENTS OF THIS OFFERING CIRCULAR ARE NOT TO BE CONSTRUED AS LEGAL,
BUSINESS OR TAX ADVICE. EACH PROSPECTIVE INVESTOR SHOULD CONSULT ITS OWN
ATTORNEY, BUSINESS ADVISOR AND TAX ADVISOR AS TO LEGAL, BUSINESS OR TAX
ADVICE WITH RESPECT TO AN INVESTMENT IN THE SECURED NOTES AND SUNBEAM
COMMON STOCK.
-----------------------
ALL INQUIRIES RELATING TO THIS OFFERING CIRCULAR AND THE TRANSACTIONS
CONTEMPLATED HEREBY SHOULD BE DIRECTED TO MACKENZIE PARTNERS, INC., THE
INFORMATION AGENT FOR THE EXCHANGE OFFER, AT THE TELEPHONE NUMBER OR ONE OF
THE ADDRESSES LISTED ON THE BACK COVER PAGE OF THIS OFFERING CIRCULAR.
PROSPECTIVE INVESTORS MAY ALSO OBTAIN ADDITIONAL INFORMATION FROM SUNBEAM
WHICH THEY MAY REASONABLY REQUIRE TO VERIFY THE INFORMATION CONTAINED
HEREIN. QUESTIONS REGARDING THE PROCEDURES FOR TENDERING IN THE EXCHANGE
OFFER AND REQUESTS FOR ASSISTANCE IN TENDERING YOUR ZERO DEBENTURES SHOULD
BE DIRECTED TO THE EXCHANGE AGENT AT ONE OF THE TELEPHONE NUMBERS AND
ADDRESSES LISTED ON THE BACK COVER PAGE OF THIS OFFERING CIRCULAR. REQUESTS
FOR ADDITIONAL COPIES OF THIS OFFERING CIRCULAR, SUNBEAM'S FIRST QUARTER
2000 QUARTERLY REPORT ON FORM 10-Q, SUNBEAM'S 1999 ANNUAL REPORT ON FORM
10-K, SUNBEAM'S 2000 ANNUAL MEETING PROXY STATEMENT, OR THE ENCLOSED
LETTERS OF TRANSMITTAL AND NOTICES OF GUARANTEED DELIVERY MAY BE DIRECTED
TO EITHER THE EXCHANGE AGENT OR THE INFORMATION AGENT AT THE RESPECTIVE
TELEPHONE NUMBERS AND ADDRESSES LISTED ON THE BACK COVER PAGE OF THIS
OFFERING CIRCULAR.
-----------------------
TABLE OF CONTENTS
PAGE
Summary Term Sheet...........................................................1
Summary Description of the Common Stock and Secured Notes...................10
Summary Historical and Pro Forma Financial Information......................14
Risk Factors................................................................19
Use of Proceeds.............................................................31
Capitalization..............................................................31
Ratio of Earnings to Fixed Charges..........................................33
The Exchange Offer..........................................................34
Certain United States Federal Income Tax Considerations.....................44
Unaudited Pro Forma Condensed Consolidated Financial Statements.............48
Selected Historical Financial Data..........................................57
Description of Secured Notes................................................59
Description of Other Indebtedness...........................................92
Description of Capital Stock................................................98
Incorporation of Documents by Reference.....................................99
Cautionary Statements......................................................100
Where You Can Find More Information........................................100
SUMMARY TERM SHEET
Through this Offering Circular and the enclosed letter of
transmittal, Sunbeam Corporation is offering to exchange Senior Secured
Subordinated Notes due 2011, which we refer to in this Offering Circular as
the secured notes, and shares of Sunbeam common stock for all of Sunbeam's
outstanding Zero Coupon Convertible Senior Subordinated Debentures due
2018, which we refer to in this Offering Circular as the zero debentures.
The following are some of the questions that you may have as a holder of
the zero debentures and answers to those questions. The following summary
highlights selected information from this Offering Circular and may not
contain all the information that you will need to make a decision regarding
whether or not to tender your zero debentures in the exchange offer and
accept the secured notes and shares of our common stock that we propose to
give you. This Offering Circular includes specific terms of the exchange
offer, including a description of the secured notes and common stock we are
proposing to give you, as well as information regarding our business and
some financial data. We encourage you to read carefully this Offering
Circular and the documents to which we refer you in their entirety,
including the discussion of risks and uncertainties affecting our business
included in the section of this Offering Circular captioned "Risk Factors"
beginning on page 19.
WHO IS MAKING THE EXCHANGE OFFER?
The exchange offer is being made by Sunbeam Corporation. Sunbeam is a
leading manufacturer and marketer of consumer products sold under the
Sunbeam(R), Oster(R), Coleman(R), First Alert(R), Mr. Coffee(R) and other
brand names. Our primary business is the manufacture, marketing and
distribution of durable household and outdoor consumer products through
mass merchandisers, home centers and other channels in the United States
and internationally. We also sell our products to commercial end users such
as hotels and other institutions. Our products enjoy a long-standing
reputation for quality, and a majority of our sales are from products which
hold the number one or two market share in their respective product
categories.
Sunbeam's principal executive offices are located at 2381 Executive
Center Drive, Boca Raton, Florida 33431. Our main phone number is (561)
912-4100. For further information concerning Sunbeam, please see the
section of this Offering Circular captioned "Where You Can Find More
Information."
WHAT CLASS OF SECURITIES IS SOUGHT IN THE EXCHANGE OFFER?
We are offering to acquire all of our currently outstanding Zero
Coupon Convertible Senior Subordinated Debentures due 2018 in exchange for
newly issued Senior Secured Subordinated Notes due 2011 and shares of our
common stock. As of the date of this Offering Circular, $2,014 million
aggregate principal amount at maturity of zero debentures was outstanding.
For more information regarding the terms of the exchange offer, please see
the section of this Offering Circular captioned "The Exchange Offer."
WHAT SECURITIES ARE YOU OFFERING TO ISSUE IN EXCHANGE FOR MY ZERO DEBENTURES?
We are offering to issue $173.00 principal amount at maturity of
secured notes ($149.06 principal amount at issuance) and 17 shares of our
common stock in exchange for each $1,000 principal amount at maturity of
zero debentures that are properly tendered and not withdrawn in the
exchange offer. If 100% of the outstanding zero debentures are exchanged in
the exchange offer, Sunbeam will issue $348.4 million aggregate principal
amount at maturity of secured notes ($300.2 million principal amount at
issuance) and 34,238,000 shares of our common stock. The projected
principal amount at maturity of the secured notes to be issued in the
exchange offer reflects accretion of original issue discount in respect of
85% and 70% of the aggregate interest payable by Sunbeam under the secured
notes during years one and two following issuance, respectively, and
assumes no prior optional redemptions. On July 7, 2000, the closing price
per share of our common stock on the New York Stock Exchange was $3.125.
The secured notes will be partially cash pay until June 15, 2002,
fully cash pay thereafter and mature on June 15, 2011. The secured notes
will be senior in right of payment to all of our subordinated debt,
including any zero debentures that remain outstanding after the exchange
offer. For more information regarding the secured notes and common stock we
propose to give you, please see the sections of this Offering Circular
captioned "Description of Secured Notes" and "Description of Capital
Stock."
We will not issue fractional shares of Sunbeam common stock in the
exchange offer. Instead, any fractional share to which you would otherwise
be entitled will be rounded up or down to the nearest whole number of
shares. We will not issue "fractional" secured notes in the exchange offer
(secured notes will be issued in denominations of $1,000 principal amount
at maturity and whole number multiples of $1,000 principal amount at
maturity). Instead, any tendering holder of zero debentures who would
otherwise be entitled to receive a fractional secured note will receive, at
our election, cash (without interest) or shares of our common stock
(rounded up or down to the nearest whole number of shares) having a value
equal to the principal amount at issuance of the fractional secured note.
In the event that we elect to issue shares of our common stock in
satisfaction of fractional secured notes, the number of shares you receive
will be based on the average closing price of our common stock for the ten
trading days immediately preceding the date of issuance.
WHY IS SUNBEAM MAKING THE EXCHANGE OFFER?
Our Board of Directors believes that two of the major problems we
face are our large debt burden and the uncertainty surrounding our ability
to satisfy our obligations under the zero debentures, including our
obligation to redeem the zero debentures at your request in March 2003 for
cash or, at our option, common stock. Given our current financial condition
and the restrictions of our senior credit agreement, it is unlikely that we
would be able to satisfy these obligations with cash. Redemption by issuing
stock would, at today's stock price, result in massive dilution and
uncertainty with respect to the control and governance of Sunbeam. For more
information regarding the right of zero debenture holders to cause us to
redeem their zero debentures, please see the section of this Offering
Circular captioned "Description Other Indebtedness - Zero Debentures."
Our Board also believes that these two major problems are depressing
our stock price, which, in addition to other problems, is a disincentive to
our management because a large amount of their compensation is in the form
of equity. Our Board further believes that current management is doing an
excellent job in turning around our businesses, and it is essential to the
success of the turnaround to retain current management and reward them with
equity upside for excellent performance.
We are making the exchange offer in an effort to eliminate, or at
least reduce, these problems. The exchange offer, if all zero debenture
holders were to accept it, would reduce our debt by approximately $516
million, increase our shareholders' equity by approximately $521 million
and eliminate the uncertainty about whether we will be able to meet our
obligations under the zero debentures. Our Board believes that this should:
o improve our stock price performance and thereby increase the
effective returns on the package of securities provided to the
zero debenture holders in the exchange offer,
o increase management's incentives,
o enhance our ability to continue to obtain financing for working
capital, new product development, capital expenditures and other
needs,
o enhance our competitive position, and
o improve our ability to adjust in a timely fashion to changing
market conditions.
We hope that zero debenture holders will find the exchange offer
attractive. The zero debentures are not listed on any national securities
exchange or authorized to be quoted in any inter-dealer quotation system of
any national securities association. Although we understand that certain
institutions and securities dealers provide quotations for and engage in
transactions in the zero debentures, the market for the zero debentures
does not seem to be very active or liquid. We believe that the secured
notes and common stock we are offering for the zero debentures should be
more actively traded, and therefore more liquid, than the zero debentures.
We also believe that the package of secured notes and common stock being
offered should have a market value higher than the prices at which the zero
debentures have recently been quoted between certain institutions and
securities dealers. Nevertheless, there can be no assurance that the
secured notes or common stock will be actively traded and liquid or at what
prices they may trade after the exchange offer.
WHAT DOES THE COMPANY'S BOARD OF DIRECTORS THINK OF THE EXCHANGE OFFER?
While our Board believes that the exchange offer is in Sunbeam's best
interests, Sunbeam is not making any recommendation regarding whether you
should tender your zero debentures in the exchange offer and, accordingly,
you must make your own determination as to whether to tender your zero
debentures for exchange and accept the secured notes and common stock we
propose to give you. We urge you to read carefully this document and the
other documents to which we refer you in their entirety, including the
discussion of risks and uncertainties affecting our business set forth in
the section of this Offering Circular captioned "Risk Factors," and make
your own decision.
WHAT SIGNIFICANT DEVELOPMENTS SURROUNDED THE CHANGE IN SUNBEAM MANAGEMENT
IN JUNE 1998?
In June 1998, the Sunbeam Board changed Sunbeam's top management.
Significant developments surrounding the management change included the
following:
o Acquisition of slightly less than 80% of The Coleman Company,
Inc. in March 1998.
o Acquisitions of Signature Brands USA Inc. and First Alert, Inc.
in April 1998.
o Substantial borrowing, including the issuance of the zero
debentures, to finance those acquisitions and refinance debt,
which produced a large debt burden and high leverage.
o Worsening financial performance in 1998 following announcement of
record high results for 1997 (initially reported 1997 results
were reduced as a result of Sunbeam's subsequent restatement of
its 1997 fiscal year financial statements).
o Public questioning of the accuracy of Sunbeam's 1997 financial
statements.
o A substantial decrease in the market price of Sunbeam's common
stock, which had reached a peak in March 1998.
o The filing of major lawsuits against Sunbeam and its former
management alleging violations of federal and state securities
laws.
o Commencement of an SEC investigation of Sunbeam.
o Initiation by the New York Stock Exchange of a review of
Sunbeam's continued eligibility for listing.
WHAT SIGNIFICANT STEPS HAVE BEEN TAKEN BY SUNBEAM'S CURRENT MANAGEMENT?
Current Sunbeam management has taken a number of significant steps to
correct the problems of the past, including the following:
o Restatement of Sunbeam's 1996, 1997 and first quarter 1998
financial statements.
o A change in Sunbeam's auditors and continued progress in
resolution of significant accounting issues.
o Continuing defense of the securities law claims against Sunbeam.
o Cooperation with the SEC in its investigation.
o Continued listing of the Sunbeam common stock on the New York
Stock Exchange.
o Significant improvement in financial performance between the
twelve-month period ended December 31, 1998 and the twelve-month
period ended March 31, 2000, as reflected in the following
statistics:
o Revenues increased 31% from $1,836.9 million to $2,413.1
million;
o Gross profit increased 1011% from $55.0 million to $611.5
million;
o Adjusted earnings before income taxes, depreciation and
amortization, which we refer to in this Offering Circular as
Adjusted EBITDA, increased $341.5 million from $(189.2)
million to $152.3 million (Adjusted EBITDA excludes
significant and unusual items amounting to $368.7 million in
the 1998 period and $112.4 million in the twelve months
ended March 31, 2000, as described more fully in our First
Quarter 2000 Quarterly Report on Form 10-Q and 1999 Annual
Report on Form 10-K); and
o Working capital decreased by $146.4 million as a result of
Sunbeam's cash management efforts, particularly related to
accounts payable.
o Acquisition of the remaining approximately 20% of Coleman not
already owned by Sunbeam in January 2000.
o The ongoing development through Sunbeam's Thalia subsidiary of
Home Linking TechnologyTM, or HLTTM, which is designed to allow
household products to communicate with each other.
o The sale of Sunbeam's Eastpak business and the use of
substantially all of the net cash proceeds from that sale to
repay indebtedness under Sunbeam's senior credit agreement and
pay related fees.
o Successful negotiations of amendments to and waivers under
Sunbeam's senior credit agreement, the latest of which expires
April 10, 2001.
WHAT RISKS SHOULD I CONSIDER IN DECIDING WHETHER OR NOT TO TENDER MY ZERO
DEBENTURES?
In deciding whether to exchange your zero debentures for secured
notes and shares of our common stock, you should consider carefully the
discussion of risks and uncertainties affecting our business described in
the section of this Offering Circular captioned "Risk Factors" and the
section of our 1999 Annual Report on Form 10-K captioned "Significant 1998
Financial and Business Developments," which is incorporated herein by
reference. A copy of our 1999 Annual Report on Form 10-K is enclosed with
this Offering Circular.
WILL I GIVE UP ANY LEGAL RIGHTS BY TENDERING MY ZERO DEBENTURES?
Yes. By tendering your zero debentures in the exchange offer, you will
be deemed to have released and waived any and all claims you, your
successors and your assigns have or may have had against
o Sunbeam, its subsidiaries, its affiliates and its stockholders,
and
o the directors, officers, employees, attorneys, accountants,
advisors, agents and representatives, in each case whether
current or former, of Sunbeam, its subsidiaries, its affiliates
and its stockholders,
arising from, related to, or in connection with, your acquisition or
ownership of the zero debentures, whether those claims arise under federal
or state securities laws or otherwise. For more information regarding the
release of these legal claims, please see the section of this Offering
Circular captioned "The Exchange Offer - Release of Legal Claims by
Tendering Zero Debenture Holders."
IS SUNBEAM PRESENTLY ABLE TO ISSUE THE SECURED NOTES AND COMMON STOCK?
Yes. The consideration we are proposing to give you in the exchange
offer consists of newly issued secured notes and newly issued shares of our
common stock. The exchange offer is being extended to you in reliance on
the exemption from registration provided by Section 3(a)(9) of the
Securities Act and has not been registered with the SEC. As a result, we
are not required to have an effective registration statement on file with
the SEC to register the issuance of the secured notes and common stock in
the exchange offer and, accordingly, the issuance of these securities need
not be delayed pending SEC review of a registration statement filing. In
addition, because the 34,238,000 common shares we propose to issue in the
exchange offer represent the maximum number of shares that may be issued
under the NYSE rules without stockholder approval, we are not required to
obtain stockholder approval in order to complete the exchange offer.
Although these shares represent in excess of 20% of our currently
outstanding common stock (approximately 32%) and such an issuance would
ordinarily require stockholder approval, the NYSE agreed with our position
that the shares already listed for issuance upon conversion of the zero
debentures should not be counted for purposes of the 20% test. Accordingly,
provided that none of the events described in the section of this Offering
Circular captioned "The Exchange Offer - Conditions to the Exchange Offer"
has occurred, Sunbeam expects to be able to issue the exchange offer
consideration immediately following the expiration of the exchange offer.
For more information regarding the timing of the issuance of secured notes
and common stock in the exchange offer, please see the section of this
Offering Circular captioned "The Exchange Offer - Acceptance of Zero
Debentures for Exchange; Delivery of Common Stock and Secured Notes."
WILL THE SECURED NOTES AND COMMON STOCK BE LISTED FOR TRADING?
The secured notes are not listed for trading on any national
securities exchange or authorized to be quoted in any inter-dealer
quotation system of any national securities association and we do not
intend to apply for either listing or quotation. Our common stock is listed
for trading on the New York Stock Exchange under the symbol "SOC." For more
information regarding the trading markets for the secured notes and common
stock we propose to give you, please see the sections of this Offering
Circular captioned "Risk Factors - You may not be able to sell the secured
notes when you want and, if you do, you may not be able to receive the
price you want" and "- You may not be able to sell the common stock when
you want and, if you do, you may not be able to receive the price you want"
and the section of our 1999 Annual Report on Form 10-K captioned "Market
for Registrant's Common Equity and Related Shareholder Matters."
WHAT WILL BE THE FEDERAL INCOME TAX CONSEQUENCES TO ME OF THE EXCHANGE OFFER?
In general, if you exchange zero debentures for common stock and
secured notes in the exchange offer, you will not recognize gain or loss
for U.S. federal income tax purposes, subject to the discussion set forth
in the section of this Offering Circular captioned "Certain United States
Federal Income Tax Considerations." For more information regarding the tax
consequences to you of the exchange offer, please see the section of this
Offering Circular captioned "Certain United States Federal Income Tax
Considerations."
THE TAX CONSEQUENCES TO YOU OF THE EXCHANGE OFFER WILL DEPEND ON YOUR
INDIVIDUAL SITUATION. YOU SHOULD CONSULT YOUR OWN TAX ADVISOR FOR A FULL
UNDERSTANDING OF THESE TAX CONSEQUENCES.
IS SUNBEAM'S FINANCIAL CONDITION RELEVANT TO MY DECISION TO TENDER IN THE
EXCHANGE OFFER?
The consideration we are offering to give you in the exchange offer
consists of a mixture of secured notes and common stock. Although the
secured notes will be senior to the zero debentures, they will be
subordinated to all indebtedness under our senior credit agreement and any
replacement credit agreements, and effectively subordinated to all
liabilities of our subsidiaries, and these obligations are significant. In
addition, the completion of the exchange offer will have an effect on our
debt service obligations and other related commitments. As a result,
detailed historical financial information concerning Sunbeam has been
incorporated by reference in this Offering Circular. We have also provided
unaudited pro forma condensed consolidated financial statements, which
reflect the projected impact on Sunbeam's financial condition of the
exchange offer and certain other transactions, and selected consolidated
financial information concerning Sunbeam in the sections of this Offering
Circular captioned "Unaudited Pro Forma Condensed Consolidated Financial
Statements" and "Selected Historical Financial Data."
WILL SUNBEAM RECEIVE ANY CASH PROCEEDS FROM THE EXCHANGE OFFER?
No. We will not receive any cash proceeds from the exchange offer.
WHAT ARE THE CONDITIONS TO THE EXCHANGE OFFER?
THE EXCHANGE OFFER IS NOT CONDITIONED UPON THE EXCHANGE OF A MINIMUM
PRINCIPAL AMOUNT AT MATURITY OF ZERO DEBENTURES. THE EXCHANGE OFFER IS,
HOWEVER, SUBJECT TO A NUMBER OF CUSTOMARY CONDITIONS, WHICH WE MAY WAIVE.
If any of these conditions are not satisfied, we will not be obligated to
accept any properly tendered zero debentures for exchange. In addition, we
may decide to terminate the exchange offer for any reason or no reason and
not accept for exchange any tendered zero debentures. For more information
regarding the conditions to the exchange offer, please see the section of
this Offering Circular captioned "The Exchange Offer - Conditions to the
Exchange Offer."
HOW LONG DO I HAVE TO DECIDE WHETHER TO TENDER IN THE EXCHANGE OFFER?
You will have until 5:00 p.m., New York City time, on August 7, 2000
to decide whether to tender your zero debentures in the exchange offer. If
you cannot deliver the zero debenture certificates and other documents
required to make a valid tender by that time, you may be able to use a
guaranteed delivery procedure, which is described later in this Offering
Circular. For more information regarding the time period for tendering your
zero debentures, please see the section of this Offering Circular captioned
"The Exchange Offer - Terms of the Exchange Offer; Period for Tendering
Zero Debentures."
CAN THE EXCHANGE OFFER BE EXTENDED AND UNDER WHAT CIRCUMSTANCES?
We can elect to extend the exchange offer in our sole discretion, and
we expressly reserve the right to do so. During any extension of the
exchange offer, all zero debentures previously tendered and not withdrawn
will remain subject to the exchange offer and we may accept them for
exchange. For more information regarding our right to extend the exchange
offer, please see the section of this Offering Circular captioned "The
Exchange Offer - Terms of the Exchange Offer; Period for Tendering Zero
Debentures."
HOW WILL I BE NOTIFIED IF THE EXCHANGE OFFER IS EXTENDED?
If we extend the exchange offer, we will issue a press release or
another form of public announcement no later than 9:00 a.m., New York City
time, on the next business day after the previously scheduled expiration of
the exchange offer. For more information regarding notification of exchange
offer extensions, please see the section of this Offering Circular
captioned "The Exchange Offer - Terms of the Exchange Offer; Period for
Tendering Zero Debentures."
HOW DO I TENDER MY ZERO DEBENTURES?
To tender your zero debentures, you must deliver the certificates
representing your zero debentures, together with a completed letter of
transmittal and any other documents required by the letter of transmittal,
to American Stock Transfer & Trust Company, the exchange agent for the
exchange offer, not later than the time the exchange offer expires. If your
zero debentures are held in street name - that is, through a broker, dealer
or other nominee - the zero debentures can be tendered by your nominee
through The Depository Trust Company. If you cannot provide the exchange
agent with all required documents prior to the expiration of the exchange
offer, you may obtain additional time to do so by submitting a Notice of
Guaranteed Delivery to the exchange agent, which must be certified by a
broker, bank or other fiduciary that is a member of the Securities Transfer
Agent Medallion Program or another eligible institution guarantee. You must
also guarantee that these items will be received by the exchange agent
within three New York Stock Exchange trading days. However, for your tender
to be valid, the exchange agent must receive the missing items within that
three trading-day period. For more information regarding the procedures for
tendering your zero debentures, please see the section of this Offering
Circular captioned "The Exchange Offer - Procedures for Tendering Zero
Debentures."
UNTIL WHEN CAN I WITHDRAW PREVIOUSLY TENDERED ZERO DEBENTURES?
You can withdraw previously tendered zero debentures at any time
until the exchange offer has expired and, if we have not agreed to accept
your zero debentures for exchange by September 5, 2000, you can withdraw
them at any time after that date until we do accept your zero debentures
for exchange. For more information regarding your right to withdraw
tendered zero debentures, please see the section of this Offering Circular
captioned "The Exchange Offer - Withdrawal of Tenders."
HOW DO I WITHDRAW PREVIOUSLY TENDERED ZERO DEBENTURES?
To withdraw previously tendered zero debentures, you must deliver a
written notice of withdrawal, or a facsimile of one, to the exchange agent,
with all information required by the notice of withdrawal completed, while
you still have the right to withdraw the zero debentures. For more
information regarding the procedures for withdrawing tendered zero
debentures, please see the section of this Offering Circular captioned "The
Exchange Offer - Withdrawal of Tenders."
WHEN WILL I RECEIVE THE SECURED NOTES AND COMMON STOCK IN EXCHANGE FOR MY
ZERO DEBENTURES?
Subject to the satisfaction or waiver of all conditions to the
exchange offer, and assuming we have not previously elected to terminate
the exchange offer for any reason or no reason, in our sole discretion, we
will accept for exchange all zero debentures that are properly tendered and
not withdrawn prior to the expiration of the exchange offer at 5:00 p.m.,
New York City time, on August 7, 2000. Promptly following this date,
secured notes and shares of common stock will be delivered in exchange for
all zero debentures that are properly tendered and not withdrawn. For more
information regarding our obligation to issue the secured notes and common
stock in exchange for tendered zero debentures, please see the section of
this Offering Circular captioned "The Exchange Offer - Acceptance of Zero
Debentures for Exchange; Delivery of Common Stock and Secured Notes."
WHAT HAPPENS IF MY ZERO DEBENTURES ARE NOT ACCEPTED FOR EXCHANGE?
If we decide for any reason not to accept any zero debentures for
exchange, we will return the zero debentures to the registered holder at
our expense promptly after the expiration or termination of the exchange
offer. In the case of zero debentures tendered by book-entry transfer into
the exchange agent's account at DTC, as described above, DTC will credit
any withdrawn or unaccepted zero debentures to the tendering holder's
account at DTC. For more information regarding the withdrawal of tendered
zero debentures, please see the sections of this Offering Circular
captioned "The Exchange Offer - Terms of the Exchange Offer; Period for
Tendering Zero Debentures" and "- Withdrawal of Tenders."
WHOM CAN I TALK TO IF I HAVE QUESTIONS ABOUT THE EXCHANGE OFFER?
If you have questions regarding the information in this Offering
Circular or the exchange offer generally, please contact MacKenzie
Partners, Inc., the information agent for the exchange offer. If you have
questions regarding the procedures for tendering in the exchange offer or
require assistance in tendering your zero debentures, please contact
American Stock Transfer & Trust Co., the exchange agent for the exchange
offer. If you would like additional copies of this Offering Circular, our
First Quarter 2000 Quarterly Report on Form 10-Q, our 1999 Annual Report on
Form 10-K or our 2000 Annual Meeting Proxy Statement, copies of which are
enclosed with this Offering Circular, please contact either MacKenzie
Partners, Inc. or American Stock Transfer & Trust Co.
You can call MacKenzie Partners, Inc. collect at (212) 929-5500 or
toll-free at (800) 322-2885. You can call American Stock Transfer & Trust
Co. at (718) 921-8200. You can also write to MacKenzie Partners, Inc. or
American Stock Transfer & Trust Co. at one of the addresses listed on the
back cover page of this Offering Circular.
You can also contact Sunbeam by writing to us at the following
address:
Sunbeam Corporation
2381 Executive Center Drive
Boca Raton, Florida 33431
Attention: Corporate Secretary
Phone number: (561) 912-4100
If you would like more general information about Sunbeam, please visit our
website at http://www.sunbeam.com. For more information regarding Sunbeam,
please see the section of this Offering Circular captioned "Where You Can
Find More Information."
SUMMARY DESCRIPTION OF THE COMMON STOCK AND SECURED NOTES
The following summary highlights selected information about the terms
of the common stock and secured notes we propose to give you. For a more
detailed description of the secured notes and common stock, please refer to
the sections of this Offering Circular captioned "Description of Secured
Notes" and "Description of Capital Stock."
<TABLE>
<CAPTION>
-------------------------------------------------------------------------------
COMMON STOCK
-------------------------------------------------------------------------------
<S> <C>
ISSUER.......................Sunbeam Corporation
EQUITY SECURITIES OFFERED....Up to an aggregate of 34,238,000 newly issued,
fully paid and nonassessable shares of common
stock, par value $.01 per share, of Sunbeam
Corporation.
LISTING......................We have applied for listing on the New York Stock
Exchange of the shares of Sunbeam common stock to
be issued in the exchange offer. It is a condition
to the completion of the exchange offer that
these shares be approved for listing, subject to
official notice of issuance.
DIVIDENDS....................We stopped paying dividends on our common stock
after the first quarter of 1998 and we have no
present intention to pay any dividends for the
foreseeable future. In addition, our senior
credit agreement currently prohibits us from
paying cash dividends.
REGISTRATION.................The exchange offer is being extended to you in
reliance on the exemption from registration
provided by Section 3(a)(9) of the Securities
Act and has not been registered with the SEC.
The common stock you receive in the exchange
offer should be freely tradeable, except by
persons who are considered affiliates of
Sunbeam, as that term is defined in the
Securities Act, or persons who hold zero
debentures that were previously held by an
affiliate of Sunbeam.
-------------------------------------------------------------------------------
SECURED NOTES
-------------------------------------------------------------------------------
ISSUER.......................Sunbeam Corporation
DEBT SECURITIES OFFERED......Up to $300,207,352 aggregate principal amount at
issuance of 11% Senior Secured Subordinated Notes
due 2011.
PRINCIPAL AMOUNT AT
MATURITY.....................Up to $348,422,000 (reflects accretion of original
issue discount in respect of 85% and 70% of the
aggregate interest payable by Sunbeam under the
secured notes during years one and two following
issuance, respectively, and assumes no prior
optional redemptions).
MATURITY DATE................June 15, 2011.
INTEREST.....................Interest on the secured notes will accrue at the
rate of 11% per annum and will be payable
semiannually on June 15th and December 15th of
each year, commencing on December 15, 2000.
o With respect to the first two interest
payment dates, 15% of the interest payable
on the secured notes will be paid in cash,
to be distributed pro rata to the holders of
the secured notes, with the remainder to
be an accretion of original issue
discount.
o With respect to the third and fourth
interest payment dates, 30% of the
interest payable on the secured notes
will be paid in cash, to be distributed
pro rata to the holders of the secured
notes, with the remainder to be an
accretion of original issue discount.
o Thereafter, all interest payable on the
secured notes will be paid entirely in
cash.
ORIGINAL ISSUE DISCOUNT......The secured notes will be issued with
"original issue discount" for United States
Federal income tax purposes. Consequently,
holders will be required to include amounts in
gross income for United States Federal income
tax purposes in advance of the receipt of cash
attributable to the secured notes. See
"Certain United States Federal Income Tax
Considerations."
SECURITY.....................Our obligations under the secured notes will be
secured by a second-priority lien on the capital
stock of our two significant directly owned
subsidiaries, Laser Acquisition Corp. and Sunbeam
Americas Holdings, Ltd. This capital stock is,
however, subject to a first-priority lien in favor
of the lenders under our senior credit agreement.
This means that, in the event the first-priority lien
holders were to sell or foreclose on the collateral
securing their claims against Sunbeam, the holders of
the secured notes would be entitled to receive any
proceeds from the liquidation or sale of the collateral
in excess of the amounts owed by Sunbeam to the
first-priority lien holders. For more information
regarding the terms of the security for the secured
notes, see the section of this Offering Circular
captioned "Description of the Secured Notes -
Second-Priority Security Interest."
RANKING; SUBORDINATION.......The secured notes will be senior to the zero
debentures and, to the extent of the value of the
collateral for the secured notes, senior to all of our
outstanding unsecured indebtedness, including trade
payables. The secured notes will be subordinated to all
indebtedness under our senior credit agreement and any
replacement credit facilities, and effectively
subordinated to all liabilities of our subsidiaries.
At March 31, 2000, we had approximately $1,621
million of indebtedness outstanding that
ranked senior to the zero debentures and will
rank senior to the secured notes, and our
subsidiaries had approximately $828 million of
liabilities, excluding intercompany
liabilities, that effectively ranked senior to
the zero debentures and will effectively rank
senior to the secured notes. Furthermore,
Sunbeam's material domestic subsidiaries have
each guaranteed Sunbeam's obligations under
the senior credit agreement and pledged their
assets to secure those guarantees. Any zero
debentures not tendered in the exchange offer
will rank junior to the secured notes.
LISTING......................The secured notes are not listed for trading
on any national securities exchange or
authorized to be quoted in any inter-dealer
quotation system of any national securities
association and we do not intend to apply for
either listing or quotation.
OPTIONAL REDEMPTION..........Prior to June 15, 2003, if permitted by our
senior credit agreement, we may on one or more
occasions redeem up to 35% of the aggregate principal
amount of secured notes then outstanding at a
redemption price equal to 111% of the aggregate
accreted value of the secured notes redeemed, plus
accrued and unpaid interest. These redemptions can only
be financed with the proceeds of certain sales of our
capital stock.
Subsequent to June 15, 2005, if permitted by
our senior credit agreement, we may redeem
some or all of the secured notes at an initial
redemption price equal to 105.5% of the
aggregate accreted value of the secured notes
redeemed, plus accrued and unpaid interest.
The redemption price will continue to decline
as the maturity date of the secured notes
approaches.
The terms of our senior credit agreement
currently would not permit us to exercise
these optional redemption rights.
For more details regarding optional redemption
of the secured notes, see the section of this
Offering Circular captioned "Description of
Secured Notes - Optional Redemption."
CHANGE OF CONTROL............In the event of a change of control of Sunbeam, we
will be required to make an offer to purchase all
outstanding secured notes at a purchase price
equal to 101% of the aggregate accreted value
of all secured notes outstanding on the date
of purchase, plus accrued and unpaid interest.
We may not have sufficient funds available at
the time of any change of control to make any
required debt repayment - including
repurchases of the secured notes - and the
terms of our senior credit agreement would not
currently permit us to make these payments.
For additional information regarding what
events would constitute a change of control,
see the section of this Offering Circular
captioned "Description of Secured Notes -
Repurchase at the Option of Holders - Change
of Control."
COVENANTS....................In general, so long as a particular
transaction is permitted under the terms of
our senior credit agreement, or any agreement
entered into in connection with a refinancing
of or amendment or waiver under our senior
credit agreement, and indebtedness remains
outstanding under our senior credit agreement,
including pursuant to any amendment or waiver
thereunder or any such refinancing agreement,
then the terms of the secured notes will also
permit the transaction. The terms of the
secured notes will, however, restrict our
ability, among other things, to:
o utilize the proceeds of certain sales of our
assets; and
o engage in certain transactions resulting in a
change of control of Sunbeam.
These limitations are subject to a number of
important qualifications and exceptions. For
further information regarding the restrictions
imposed on us by the terms of the secured
notes, see the sections of this Offering
Circular captioned "Description of Secured
Notes - Repurchase at the Option of Holders"
and "- Merger and Consolidation."
REGISTRATION.................The exchange offer is being extended to you in
reliance on the exemption from registration
provided by Section 3(a)(9) of the Securities
Act and has not been registered with the SEC.
The secured notes you receive in the exchange
offer should be freely tradeable, except by
persons who are considered affiliates of
Sunbeam, as that term is defined in the
Securities Act, or persons who hold zero
debentures that were previously held by an
affiliate of Sunbeam.
</TABLE>
SUMMARY HISTORICAL AND PRO FORMA FINANCIAL INFORMATION
The following summary historical financial information is derived
from our audited consolidated financial statements and unaudited condensed
consolidated financial statements which are incorporated by reference in
this Offering Circular. The following summary pro forma financial
information is derived from our unaudited pro forma condensed consolidated
financial statements included in the section of this Offering Circular
captioned "Unaudited Pro Forma Condensed Consolidated Financial
Statements."
The following unaudited pro forma condensed consolidated financial
information was prepared to give effect to the following "Pro Forma
Transactions":
o the exchange of all of the outstanding zero debentures for $348.4
million principal amount at maturity of secured notes ($300.2 million
principal amount at issuance) and 34.2 million shares of our common
stock;
o the issuance to the lenders under our senior credit agreement of 4.5
million shares of our common stock as payment for their risk adjustment
fee; and
o the January 6, 2000 completion of the Coleman merger and resulting
acquisition of the Coleman common stock held by the former Coleman
public stockholders for approximately $44 million in common stock, $14
million in warrants and $88 million in cash, including expenses.
The unaudited pro forma condensed consolidated balance sheet data as
of March 31, 2000 gives pro forma effect to the proposed exchange offer and
the issuance of 4.5 million shares of our common stock to the lenders under
our senior credit agreement as if they had occurred on March 31, 2000. The
unaudited condensed consolidated statement of operations data for the year
ended December 31, 1999 and the three months ended March 31, 2000 gives
effect to the Pro Forma Transactions as if they had occurred on January 1,
1999, the beginning of Sunbeam's 1999 fiscal year. No pro forma adjustments
are presented for the completion of the Coleman merger for the period as of
and ended March 31, 2000 since the transaction occurred at the beginning of
such period. Also, pro forma net losses are from continuing operations and
do not include extraordinary items.
The unaudited pro forma condensed consolidated financial information
does not include pro forma adjustments relating to the sale of our Eastpak
business because the effects of that transaction are not significant.
The pro forma adjustments are based upon available information and
certain assumptions that Sunbeam believes are reasonable under the
circumstances.
The summary unaudited pro forma financial information is not
necessarily indicative of what our results would have been if the Pro Forma
Transactions actually had occurred as of the dates indicated or of what our
future operating results will be.
This summary financial information should be read in conjunction with
the unaudited condensed consolidated financial statements of Sunbeam set
forth in our First Quarter 2000 Quarterly Report on Form 10-Q, the audited
consolidated financial statements of Sunbeam set forth in our 1999 Annual
Report on Form 10-K and the sections of our First Quarter 2000 Quarterly
Report on Form 10-Q and 1999 Annual Report on Form 10-K, in each case,
captioned "Management's Discussion and Analysis of Financial Condition and
Results of Operations," each of which is incorporated herein by reference,
and the section of this Offering Circular captioned "Unaudited Pro Forma
Condensed Consolidated Financial Statements." Copies of our First Quarter
2000 Quarterly Report on Form 10-Q and 1999 Annual Report on Form 10-K are
enclosed with this Offering Circular.
While reviewing the historical and pro forma financial information,
please note the following:
o For the fiscal year ended December 31, 1999 we incurred an asset
impairment charge of $52.0 million, fixed asset and inventory charges
of $15.0 million, and $27.3 million in charges related to Year 2000
and systems initiatives expenses. Results for the fiscal year also
include $26.2 million of other significant and unusual charges.
o We accounted for the March 30, 1998 acquisition of a controlling
interest in Coleman, the January 6, 2000 acquisition of the remaining
interest in Coleman and the April 6, 1998 acquisitions of First Alert
and Signature Brands under the purchase method of accounting.
Accordingly, our consolidated financial statements include the
financial position and results of operations of each of the acquired
companies from the respective dates of acquisition.
o For the fiscal year ended December 31, 1998 we took an extraordinary
charge of $122.4 million related to the early extinguishments of debt
and took other charges of:
o $70.0 million related to issuance of the warrants;
o $62.5 million related to the write-off of goodwill;
o $39.4 million related to fixed asset impairments;
o $34.4 million related to compensation expense for the employment
agreements with our former Chairman and Chief Executive Officer
and two other former senior officers of Sunbeam;
o $95.8 million related to the write-downs of inventory;
o $28.1 million related to purchase accounting adjustments;
o $20.4 million of restatement related expenses;
o $10.0 million related to Year 2000 and systems initiatives
expenses; and
o $8.1 million of other significant and unusual charges.
o For the fiscal year ended December 28, 1997, we reversed $28.0 million
of pre-tax liabilities no longer required and $13.3 million of tax
liabilities no longer required.
o For the fiscal year ended December 29, 1996, we took restructuring,
asset impairment and other charges of $239.2 million before taxes.
o For the three months ended March 31, 1999, we took $8.1 million
in charges related to Year 2000 and systems initiatives expenses.
In computing the ratio of earnings to fixed charges:
o earnings represent income from continuing operations before income
taxes and fixed charges (exclusive of interest capitalized); and
o fixed charges consist of interest expense, capitalized interest and
the estimated interest portion of rental expense.
For the fiscal year ended December 29, 1996, December 31, 1998, December
31, 1999 and the three months ended March 31, 1999 and March 31, 2000,
historical earnings were insufficient to cover fixed charges by $262.2
million, $797.1 million, $294.5 million, $57.9 million and $57.9 million,
respectively. For the fiscal year ended December 31, 1999 and the three
months ended March 31, 2000, on a pro forma basis, earnings were
insufficient to cover fixed charges by $306.0 million and $57.5 million,
respectively.
<TABLE>
<CAPTION>
FISCAL YEARS ENDED
(IN THOUSANDS)
---------------------------------------------------------------------
DECEMBER 31, DECEMBER 29, DECEMBER 28, DECEMBER 31, DECEMBER 31,
1995 1996 1997 1998 1999
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA
Net sales............................................. $1,016.9 $ 984.2 $ 1,073.1 $ 1,836.9 $ 2,398.0
Cost of goods sold.................................... 809.1 896.9 831.0 1,781.9 1,793.4
Selling, general and administrative expense........... 137.5 221.7 152.6 725.0 701.2
Restructuring, and asset impairment (benefit) -- 110.1 (14.6) -- --
charges.............................................
--------- --------- ---------- ----------- -----------
Operating earnings (loss)............................. $ 70.3 $ (244.5) $ 104.1 $ (670.0) $ (96.6)
========= ========= ========== =========== ===========
Earnings (loss) from continuing operations before
extraordinary charge.............................. $ 37.6 $ (170.2) $ 52.3 $ (775.5) $ (299.5)
Earnings from discontinued operations,
net of taxes ..................................... 12.9 0.8 -- -- --
Loss on sale of discontinued operations,
net of taxes ..................................... -- (39.1) (14.0) -- --
Extraordinary charge from early extinguishments of
debt.............................................. -- -- -- (122.4) --
--------- --------- ---------- ----------- -----------
Net earnings (loss) .................................. $ 50.5 $ (208.5) $ 38.3 $ (897.9) $ (299.5)
========= ========= ========== =========== ===========
PER SHARE DATA:
Weighted average common shares outstanding:
Basic........................................... 81.6 82.9 84.9 97.1 100.7
Diluted......................................... 82.8 82.9 87.5 97.1 100.7
Earnings (loss) per share from continuing
operations before extraordinary charge:
Basic........................................... $ 0.46 $ (2.05) $ 0.62 $ (7.99) $ (2.97)
Diluted ........................................ 0.45 (2.05) 0.60 (7.99) (2.97)
Net earnings (loss) per share:
Basic........................................... 0.62 (2.51) 0.45 (9.25) (2.97)
Diluted......................................... 0.61 (2.51) 0.44 (9.25) (2.97)
Cash dividends declared per share..................... 0.04 0.04 0.04 0.01 --
OTHER DATA:
Ratio of earnings to fixed charges.................... 4.7x -- 7.2x -- --
EBITDA(1)............................................. $ 114.2 $ (200.8) $ 143.8 $ (557.9) $ 39.0
Adjusted EBITDA(2).................................... 114.2 38.4 171.8 (189.2) 151.7
Depreciation and Amortization......................... 44.2 47.4 39.8 107.9 132.0
Capital Expenditures.................................. 140.1 75.3 60.5 53.7 90.2
BALANCE SHEET DATA (AT PERIOD END):
Working capital....................................... $ 411.7 $ 359.9 $ 369.1 $ 488.5 $ 311.7
Total assets.......................................... 1,158.7 1,059.4 1,058.9 3,405.5 3,132.3
Long-term debt, less current portion.................. 161.6 201.1 194.6 2,142.4 2,164.0
Shareholders' equity (deficiency)..................... 601.0 415.0 472.1 260.4 (59.3)
<CAPTION>
THREE MONTHS ENDED
(IN THOUSANDS)
------------ ---------------------------------------------------
DECEMBER 31, MARCH 31,
1999 MARCH 31, MARCH 31, 2000
PRO FORMA 1999 2000 PRO FORMA
--------- ---- ---- ---------
<S> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA
Net sales.............................................$ 2,398.0 $ 523.9 $ 539.1 $ 539.1
Cost of goods sold.................................... 1,794.9 397.5 405.8 405.8
Selling, general and administrative expense........... 703.8 141.2 135.8 135.8
Restructuring, and asset impairment (benefit)
charges............................................. -- -- -- --
----------- --------- -------------- ----------
Operating earnings (loss).............................$ (100.7) $ (14.8) $ (2.5) $ (2.5)
=========== ========= ============== ==========
Earnings (loss) from continuing operations before
extraordinary charge..............................$ (296.6) $ (60.7) $ (59.4) $ (59.0)
Earnings from discontinued operations,
net of taxes ..................................... -- -- -- --
Loss on sale of discontinued operations,
net of taxes ..................................... -- -- -- --
Extraordinary charge from early extinguishments of
debt.............................................. -- -- -- --
----------- --------- -------------- ----------
Net earnings (loss) ..................................$ (296.6) $ (60.7) $ (59.4) $ (59.0)
=========== ========= ============== ==========
PER SHARE DATA:
Weighted average common shares outstanding:
Basic........................................... 146.2 100.7 107.1 145.8
Diluted......................................... 146.2 100.7 107.1 145.8
Earnings (loss) per share from continuing
operations before extraordinary charge:
Basic...........................................$ (2.03) $ (0.60) $ (0.55) $ (0.40)
Diluted ........................................ (2.03) (0.60) (0.55) (0.40)
Net earnings (loss) per share:
Basic........................................... (2.03) (0.60) (0.55) (0.40)
Diluted......................................... (2.03) (0.60) (0.55) (0.40)
Cash dividends declared per share..................... -- -- -- --
OTHER DATA:
Ratio of earnings to fixed charges.................... -- -- -- --
EBITDA(1).............................................$ 39.0 $ 17.7 $ 27.3 $ 27.3
Adjusted EBITDA(2).................................... 151.7 25.8 27.3 27.3
Depreciation and Amortization......................... 136.1 32.4 32.5 32.5
Capital Expenditures.................................. 90.2 17.1 16.1 16.1
BALANCE SHEET DATA (AT PERIOD END):
Working capital.......................................$ 322.8 $ 504.0 $ 342.1 $ 342.1
Total assets.......................................... 3,218.4 3,399.1 3,239.9 3,238.7
Long-term debt, less current portion.................. 1,741.5 2,208.0 2,308.6 1,792.4
Shareholders' equity (deficiency)..................... 508.9 190.2 (68.1) 452.6
</TABLE>
(1) EBITDA represents earnings from continuing operations before
interest and financing charges, income taxes, depreciation and
amortization and minority interest. We have included information
concerning EBITDA (which is not a measure of financial performance
under generally accepted accounting principles) because we believe
that it is used by certain investors as one measure of financial
performance. EBITDA should not be construed as an alternative to
operating income (as determined in accordance with generally
accepted accounting principles) or as a measure of liquidity.
EBITDA as measured by us may not be comparable to similarly titled
measures reported by other companies.
(2) Adjusted EBITDA represents EBITDA as adjusted for the impact of
the following significant and unusual items for the period
indicated:
o Fiscal year ended December 29, 1996: Adjusted EBITDA excludes
special charges of $239.2 million relating to restructuring,
asset impairment and other charges.
o Fiscal year ended December 28, 1997: Adjusted EBITDA excludes
the reversal of $28.0 million of pre-tax liabilities no longer
required.
o Fiscal year ended December 31, 1998: Adjusted EBITDA excludes
charges of $70.0 million related to the issuance of warrants,
$62.5 million related to the write-off of goodwill, $39.4
million related to fixed asset impairments, $34.4 million of
compensation expense and severance recorded in connection with
employment agreements with Sunbeam's former Chairman and Chief
Executive Officer and two other former senior officers, $95.8
million related to excess and obsolete inventory, $28.1 million
related to purchase accounting adjustments, $20.4 million of
restatement related expenses, $10.0 million related to Year 2000
and systems initiatives expenses and $8.1 million of other
significant and unusual charges.
o Fiscal year ended December 31, 1999: Adjusted EBITDA excludes an
asset impairment charge of $52.0 million, fixed asset and
inventory charges of $7.2 million, and $27.3 million in charges
related to Year 2000 and systems initiatives expenses. Results
for the year also include $26.2 million of other significant and
unusual charges.
o Three months ended March 31, 1999: Adjusted EBITDA excludes $8.1
million in charges related to Year 2000 and systems initiatives
expenses.
RISK FACTORS
You should consider carefully the risk factors set forth below, as
well as the other information appearing in this Offering Circular and the
documents to which we refer you, before deciding whether or not to exchange
your zero debentures in the exchange offer for secured notes and shares of
our common stock.
RISKS TO ZERO DEBENTURE HOLDERS WHO EXCHANGE THEIR ZERO DEBENTURES
o ALTHOUGH THE SECURED NOTES WILL BE SENIOR TO THE ZERO DEBENTURES, THE
SECURED NOTES WILL BE SUBORDINATED TO ALL SENIOR DEBT OF SUNBEAM
The secured notes will be senior to the zero debentures and, to the
extent of the value of the collateral for the secured notes, senior to all
of our outstanding unsecured indebtedness, including trade payables.
However, the secured notes will be subordinated to all indebtedness under
our senior credit agreement and any replacement credit agreements, and
effectively subordinated to all liabilities of our subsidiaries. At March
31, 2000, we had approximately $1,621 million of indebtedness outstanding
that ranked senior to the zero debentures and will rank senior to the
secured notes, and our subsidiaries had approximately $828 million of
liabilities, excluding intercompany liabilities, that effectively ranked
senior to the zero debentures and will effectively rank senior to the
secured notes.
o YOU MAY NOT BE ABLE TO SELL THE SECURED NOTES WHEN YOU WANT AND, IF
YOU DO, YOU MAY NOT BE ABLE TO RECEIVE THE PRICE YOU WANT
As the exchange offer will be the first issuance of the secured
notes, there has previously been no trading market for the secured notes
you will receive in the exchange offer. The secured notes are not listed
for trading on any national securities exchange or authorized to be quoted
in any inter-dealer quotation system of any national securities association
and we do not intend to apply for either listing or quotation. We do not
know the extent to which investor interest will lead to the development of
a trading market for the secured notes or how liquid any such market might
be. Moreover, the liquidity of any market for the secured notes will also
depend upon the number of holders of the secured notes, our financial
performance, the market for similar securities and the interest of
securities dealers in making a market in the secured notes. We cannot
assure you that an active trading market for the secured notes will develop
or, if it does, at what prices the secured notes may trade. Therefore, you
may not be able to sell the secured notes when you want and, if you do, you
may not be able to receive the price you want.
o IT IS UNLIKELY THAT YOU WOULD RECEIVE PAYMENT IN FULL BY FORECLOSING
ON THE COLLATERAL IN THE EVENT OF A DEFAULT ON THE SECURED NOTES
Our obligations under the secured notes will be secured by a
second-priority lien on the capital stock of our two significant directly
owned subsidiaries. We believe that the collateral for the secured notes is
sufficient to ensure their seniority with respect to the zero debentures
and will provide significant value to the holders of the secured notes. The
capital stock pledged as collateral for the secured notes is, however,
subject to a first-priority lien in favor of the lenders under our senior
credit agreement. This means that, if the first-priority lien holders were
to sell or foreclose on the collateral securing their claims against
Sunbeam, the holders of the secured notes would only be entitled to receive
proceeds from the liquidation or sale of the collateral in excess of the
amounts owed by Sunbeam to the first-priority lien holders. Sunbeam's
obligations to its first-priority lien holders are significant, however,
and there may be no remaining proceeds available for payment to the holders
of the secured notes once Sunbeam's obligations to its first-priority lien
holders are discharged in full. Moreover, we have not obtained or
performed a valuation of our two direct wholly owned subsidiaries or the
capital stock pledged as security for the secured notes.
o YOU MAY NOT BE ABLE TO SELL THE COMMON STOCK WHEN YOU WANT AND, IF YOU
DO, YOU MAY NOT BE ABLE TO RECEIVE THE PRICE YOU WANT
Although our common stock has been actively traded on the New York
Stock Exchange, we cannot assure you that an active trading market for the
common stock will continue or, if it does, at what prices the common stock
may trade. Although the exchange offer will reduce our debt and increase
our equity, it will increase significantly the number of shares of our
common stock outstanding, and could result in a decline in the market price
of our common stock, particularly if you and other exchanging zero
debenture holders seek to sell the common stock received in the exchange
offer. Therefore, you may not be able to sell the common stock when you
want and, if you do, you may not be able to receive the price you want.
Under the terms of the exchange offer, we are proposing to issue up to an
aggregate of 34,238,000 shares of our common stock to the holders of the
zero debentures. In addition, in the future we may be obligated to issue to
the lenders under our senior credit agreement up to 4.5 million shares of
our common stock, subject to adjustment under some circumstances. At July
6, 2000, there were issued and outstanding 107,558,065 shares of Sunbeam
common stock. Therefore, assuming 100% participation in the exchange offer
and the issuance to Sunbeam's senior lenders of the maximum number of our
common shares, the consummation of the exchange offer will result in the
issuance of an additional 38,738,000 shares of Sunbeam common stock, or a
36% increase in the number of currently outstanding Sunbeam common
shares. Sunbeam cannot predict the extent to which this dilution will
negatively affect the trading price of the Sunbeam common stock or the
liquidity of the market for Sunbeam common stock.
o HOLDERS OF OUR COMMON STOCK, INCLUDING HOLDERS WHO RECEIVE OUR COMMON
STOCK IN THE EXCHANGE OFFER, MAY BE SUBJECT TO GREATER RISKS THAN THE
RISKS TO WHICH HOLDERS OF THE ZERO DEBENTURES ARE SUBJECT
Notwithstanding the fact that the zero debentures are convertible at
the option of the holder into shares of our common stock, in the event that
we were to seek bankruptcy protection in the future, it is likely that the
holders of our outstanding debt securities, including the holders of zero
debentures that were not previously converted into shares of our common
stock, would be treated in a more favorable manner than the holders of our
outstanding equity securities. Therefore, if a major restructuring of
Sunbeam's debt and equity becomes necessary, the zero debenture holders
could receive value greater than the value (if any) received by holders of
our common stock. This result may be required by law because any claims of
the zero debenture holders would be given priority over the claims of our
equity holders. Moreover, it is possible that the claims of the zero
debenture holders would be converted into the right to receive equity in
Sunbeam, in which case, our existing stockholders, including any
stockholders who receive our common stock in the exchange offer, could
receive little or no value. Nevertheless, the secured notes we propose to
give you in the exchange offer will rank senior to the zero debentures. As
a result, in the event that we were to seek bankruptcy protection in the
future, it is likely that the holders of the secured notes would be treated
in a more favorable manner than the holders of the zero debentures.
o IF YOU HAVE CLAIMS AGAINST SUNBEAM RESULTING FROM YOUR ACQUISITION OR
OWNERSHIP OF ZERO DEBENTURES, YOU WILL GIVE UP THOSE CLAIMS IF YOU
EXCHANGE YOUR ZERO DEBENTURES
By tendering your zero debentures in the exchange offer, you will be
deemed to have released and waived any and all claims you, your successors
and your assigns have or may have had against
o Sunbeam, its subsidiaries, its affiliates and its stockholders,
and
o the directors, officers, employees, attorneys, accountants,
advisors, agents and representatives, in each case whether
current or former, of Sunbeam, its subsidiaries, its affiliates
and its stockholders,
arising from, related to, or in connection with, your acquisition or
ownership of the zero debentures, whether those claims arise under federal
or state securities laws or otherwise. Since it is not possible to estimate
the likelihood of your success in pursuing these legal claims or the
magnitude of any recovery to which you ultimately might be entitled, it is
possible that the consideration you receive in the exchange offer will have
a value less than the value of the legal claims you are relinquishing.
Moreover, holders who do not tender their zero debentures for exchange and
former holders who have already sold their zero debentures will continue to
have the right to prosecute their claims against Sunbeam. Sunbeam is
vigorously defending the claims of certain debenture holders in pending
litigation. Nevertheless, these claims, if successful, may result in one or
more material judgments against Sunbeam, the payment of which could impair
our ability to meet our obligations under the secured notes as well as our
other debt obligations.
o OUR DEBT COVENANTS CURRENTLY DO NOT ALLOW US TO PAY CASH DIVIDENDS ON
OUR COMMON STOCK
Our senior credit agreement currently prohibits us from paying cash
dividends on our common stock. Accordingly, we cannot assure you that we
will be able to pay dividends on our common stock. In any event, currently
we do not intend to pay dividends on our common stock. We discontinued
paying dividends beginning in the second quarter of 1998. See the section
of our 1999 Annual Report on Form 10-K captioned "Market for Registrant's
Common Equity and Related Shareholder Matters," which is incorporated
herein by reference, for information concerning the history of our dividend
payments. A copy our 1999 Annual Report on Form 10-K is enclosed with this
Offering Circular.
o THE SECURED NOTES DO NOT PROVIDE YOU WITH ANY PROTECTION IN THE EVENT
OF HIGHLY LEVERAGED OR OTHER TRANSACTIONS THAT COULD ADVERSELY AFFECT
THE HOLDERS OF THE SECURED NOTES
The holders of the secured notes will have the right to require us to
redeem the secured notes in the event of a transaction which results in a
change in control of Sunbeam, as that term is defined in the indenture for
the secured notes. However, this does not cover many events that could
adversely affect our financial condition or operating results. Neither this
redemption requirement nor any other indenture provision will necessarily
protect holders of the secured notes in the event of highly leveraged or
other transactions that could adversely affect secured note holders.
Nevertheless, if you elect not to tender your zero debentures in the
exchange offer, you will continue to be subject to this risk as a holder of
the zero debentures.
RISKS TO ZERO DEBENTURE HOLDERS WHO DO NOT EXCHANGE THEIR ZERO DEBENTURES
o BECAUSE THE SECURED NOTES WILL BE SENIOR TO THE ZERO DEBENTURES IN
RIGHT OF PAYMENT, HOLDERS OF THE ZERO DEBENTURES WHO FAIL TO TENDER
THEIR ZERO DEBENTURES IN THE EXCHANGE OFFER MAY BE SUBORDINATED TO A
GREATER AMOUNT OF SENIOR INDEBTEDNESS, INCLUDING THE SECURED NOTES,
THAN TODAY
The zero debentures will continue to be subordinated to all of our
senior indebtedness which, following the completion of the exchange offer,
will include the full outstanding principal amount of the secured notes. At
March 31, 2000, we had approximately $1,621 million of indebtedness
outstanding that ranked senior to the zero debentures and will rank senior
to the secured notes, and our subsidiaries had approximately $828 million
of liabilities, excluding intercompany liabilities, that effectively ranked
senior to the zero debentures and will effectively rank senior to the
secured notes. We will issue up to $348.4 million aggregate principal
amount at maturity of the secured notes in the exchange offer ($300.2 million
principal amount at issuance), all of which will be senior in right of
payment to the zero debentures. (The projected principal amount at maturity
of the secured notes to be issued in the exchange offer reflects accretion
of original issue discount in respect of 85% and 70% of the aggregate
interest payable by Sunbeam under the secured notes during years one and
two following issuance, respectively, and assumes no prior optional
redemptions.) Therefore, by failing to tender your zero debentures in the
exchange offer, you may be exposed to a greater risk of nonpayment because
your claims will be subordinated to those of the holders of the secured
notes.
o THE LIQUIDITY OF ANY TRADING MARKET THAT CURRENTLY EXISTS FOR THE ZERO
DEBENTURES MAY BE ADVERSELY AFFECTED BY THE EXCHANGE OFFER AND HOLDERS
OF ZERO DEBENTURES WHO FAIL TO TENDER IN THE EXCHANGE OFFER MAY FIND
IT MORE DIFFICULT TO SELL THEIR ZERO DEBENTURES
There is currently a limited trading market for the zero debentures.
To the extent that zero debentures are tendered and accepted for exchange
in the exchange offer, the trading market for the remaining zero debentures
will be even more limited or may cease altogether. A debt security with a
smaller outstanding aggregate principal amount or "float" may command a
lower price than would a comparable debt security with a larger float.
Therefore, the market price for the unexchanged zero debentures may be
adversely affected to the extent that the principal amount of zero
debentures tendered in the exchange offer reduces the float. The reduced
float may also tend to make the trading prices of the zero debentures more
volatile.
o UNDER THE TERMS OF THE SECURED NOTES, SUNBEAM WILL BE REQUIRED TO MAKE
SEMI-ANNUAL CASH INTEREST PAYMENTS, WHICH WILL PLACE A GREATER BURDEN
ON SUNBEAM'S CASH FLOWS AND LIQUIDITY AND MAY ADVERSELY AFFECT THE
ABILITY OF THE ZERO DEBENTURE HOLDERS TO RECEIVE PAYMENTS
Unlike the zero debentures, the secured notes will entitle the
holders thereof to receive semi-annual cash interest payments. Interest on
the secured notes will accrue at the rate of 11% per annum and will be
payable semiannually. On the first two interest payment dates following
issuance, we will pay 15% of the interest payable on the secured notes in
cash. On the third and fourth interest payment dates following issuance, we
will pay 30% of the interest payable on the secured notes in cash.
Thereafter, all interest payable on the secured notes will be paid entirely
in cash. We have experienced significant liquidity problems since 1998 and
the payment of cash interest will place an additional burden on our
available cash flows. This additional burden on available cash flows may
place us at a competitive disadvantage and may make it more difficult for
us to respond to changing economic conditions, as well as making it more
difficult to meet our eventual repurchase obligations under the zero
debentures.
o IF ANY OF THE ZERO DEBENTURES REMAIN OUTSTANDING AFTER THE EXCHANGE
OFFER, WE MAY NOT BE ABLE TO MEET OUR REPURCHASE/REDEMPTION
OBLIGATIONS UNDER THE ZERO DEBENTURES WHEN THEY ACCRUE, WHICH COULD
TRIGGER DEFAULTS UNDER OUR SENIOR CREDIT AGREEMENT THAT WOULD LIKELY
PREVENT US FROM MAKING PAYMENTS ON THE ZERO DEBENTURES
On March 25, 2003, March 25, 2008, and March 25, 2013, the terms of
the zero debentures require us to purchase any outstanding zero debentures
at the option of the zero debenture holders. In addition, if a "Fundamental
Change" occurs, as defined in the indenture under which the zero debentures
were issued, you will have the right to require us to redeem your zero
debentures for cash. We cannot assure you that we will have sufficient
funds to redeem the zero debentures and the terms of our senior credit
agreement currently prohibit us from repurchasing or redeeming zero
debentures for cash.
With respect to the repurchases at your option on March 25, 2003,
March 25, 2008, and March 25, 2013, described above, we have the option of
paying in shares of our common stock. However, depending on the number of
shares we would have to issue, NYSE rules may require us to obtain
stockholder approval to do so, and we cannot assure you that our
stockholders would give the necessary approval.
Our failure to repurchase or redeem the zero debentures when required
to do so would result in our defaulting on the zero debentures and would
likely constitute a default under our senior credit agreement. It may also
constitute a default under our other indebtedness outstanding at the time.
If defaults under our senior credit agreement and other senior indebtedness
are triggered, the subordination provisions of the senior debt would likely
prevent us from making payments to the holders of the zero debentures.
RISKS INHERENT IN OWNING SECURITIES OF SUNBEAM
o WE HAD SIGNIFICANT LOSSES AND OUR OPERATIONS CONSUMED SIGNIFICANT
AMOUNTS OF CASH IN 1998, 1999 AND THE FIRST QUARTER OF 2000 AND WE
CANNOT ASSURE YOU THAT WE WILL BE ABLE TO GENERATE PROFITS OR POSITIVE
CASH FLOW FROM OPERATIONS IN THE FUTURE
For the fiscal years ended December 31, 1998 and 1999 and the fiscal
quarter ended March 31, 2000, we had consolidated net losses of
approximately $897.9 million, $299.5 million and $59.4 million,
respectively, and net cash used in operations of $190.4 million, $4.3
million and $58.6 million, respectively. We cannot assure you that we will
be able to generate profits or positive cash flow from operations in the
future. For further discussion, see the sections of our First Quarter 2000
Quarterly Report on Form 10-Q and 1999 Annual Report on Form 10-K, in each
case, captioned "Management's Discussion and Analysis of Financial
Condition and Results of Operations," each of which is incorporated herein
by reference. Copies of our First Quarter 2000 Quarterly Report on Form
10-Q and 1999 Annual Report on Form 10-K are enclosed with this Offering
Circular.
o WE ARE HIGHLY LEVERAGED WHICH IMPAIRS OUR ABILITY TO OBTAIN FINANCING
AND LIMITS CASH FLOW AVAILABLE FOR OUR OPERATIONS AND MAY LIMIT OUR
COMPETITIVENESS IN THE MARKET PLACE
We are highly leveraged. Much of our indebtedness was incurred to
finance three corporate acquisitions in 1998. At March 31, 2000, our
consolidated indebtedness was approximately $2,450 million and our
shareholders' deficiency was approximately $68 million, including
approximately $1,795 million of goodwill and other intangible assets. If
required, we may incur additional indebtedness under our senior credit
agreement or, subject to restrictions in our senior credit agreement,
through other borrowings. The indenture governing the zero debentures does
not limit our ability to incur additional indebtedness. You should
carefully read the unaudited condensed consolidated financial statements of
Sunbeam set forth in our First Quarter 2000 Quarterly Report on Form 10-Q
and the audited consolidated financial statements of Sunbeam set forth in
our 1999 Annual Report on Form 10-K, which are incorporated herein by
reference. Copies of our First Quarter 2000 Quarterly Report on Form 10-Q
and 1999 Annual Report on Form 10-K are enclosed with this Offering
Circular.
Our high leverage has important consequences. For example:
o we are more vulnerable to interest rate fluctuations because
indebtedness under our senior credit agreement is, and our other
debt may be, at variable interest rates;
o our ability to obtain additional financing for working capital,
capital expenditures, acquisitions or general corporate purposes
is and may continue to be impaired;
o all or a substantial portion of our cash flow from operations
must be dedicated to the payment of principal and interest on our
indebtedness, and, as a result, cash available for our operations
and other purposes will be limited;
o we are substantially more leveraged than most of our competitors,
which may place us at a competitive disadvantage;
o we may be less able to adjust rapidly to changing market
conditions; and
o our results of operations could be adversely affected,
particularly in the event of a downturn in general economic
conditions or our business.
o OUR SENIOR CREDIT AGREEMENT CONTAINS COVENANTS WHICH WE MAY NOT BE
ABLE TO SATISFY AND DEFAULT PROVISIONS WE MAY NOT BE ABLE TO AVOID,
AND IF WE CANNOT, THE LENDERS UNDER THAT AGREEMENT COULD DEMAND
IMMEDIATE REPAYMENT
As of March 31, 2000, we had incurred about $1.572 billion in
borrowings and had availability to borrow approximately an additional $48
million under our senior credit agreement. The remaining $80 million of the
$1.7 billion senior credit agreement was committed for outstanding letters
of credit. Our senior credit agreement contains covenants which require us
to meet financial tests and ratios relating to our future performance which
we may not be able to satisfy. If we cannot satisfy these tests and ratios
we would be in default. An event of default would give the senior lenders
the right to demand immediate repayment - a demand we might not be able to
meet. Since all of our other outstanding indebtedness is, and when issued
the secured notes will be, subordinated in right of payment to the
indebtedness under our senior credit agreement, in the event we were not
able to meet the senior lenders' demand for repayment, the senior lenders
could prevent any payments on our other indebtedness from being made until
after the indebtedness under our senior credit agreement is paid in full.
After those payments are made, any remaining assets may not be sufficient
to pay amounts due on any or all of our other debt then outstanding.
o INDEBTEDNESS UNDER OUR SENIOR CREDIT AGREEMENT COULD BECOME DUE ON
APRIL 10, 2001 IF WE DO NOT SUCCESSFULLY OBTAIN A FURTHER WAIVER FROM
THE SENIOR LENDERS, RENEGOTIATE THE TERMS OF THE SENIOR CREDIT
AGREEMENT OR REFINANCE SUCH DEBT BY THEN AND THERE CAN BE NO ASSURANCE
THAT WE WOULD BE ABLE TO REPAY THE SENIOR LENDERS ON THAT DATE; IF WE
CANNOT MEET THE SENIOR LENDERS' DEMAND FOR REPAYMENT, THE SENIOR
LENDERS COULD PREVENT ANY PAYMENTS ON OUR OTHER INDEBTEDNESS FROM
BEING MADE UNTIL THE DEBT UNDER OUR SENIOR CREDIT AGREEMENT IS REPAID
IN FULL
In 1998, we were in violation of some of the covenants of our senior
credit agreement, but the senior lenders waived these violations first
until December 31, 1998, then until April 10, 1999, then until April 15,
1999, then until April 10, 2000 and now until April 10, 2001. However, if
we do not get another waiver or refinance the debt under our senior credit
agreement by April 10, 2001, the senior lenders would have the right to
demand immediate repayment - a demand which we might not be able to meet.
If we cannot meet the senior lenders' demand for immediate repayment, the
senior lenders could prevent any payments on our other indebtedness,
including the secured notes, from being made until the indebtedness under
our senior credit agreement is repaid in full. Although any such nonpayment
by Sunbeam would likely entitle the holders of the secured notes to declare
an event of default under the secured notes, the remedies available to the
secured note holders under these circumstances would probably be limited.
o WE MAY NOT BE ABLE TO SERVICE OUR LARGE DEBT BURDEN WHICH MAY FORCE US
TO RESTRUCTURE OR REFINANCE OUR DEBT, INCLUDING THE ZERO DEBENTURES
AND, WHEN ISSUED, THE SECURED NOTES
To meet our debt service requirements, we must be able to
successfully implement our business strategy and integrate into our
operations the three companies we acquired in 1998. In addition, our future
financial and operating performance will affect our ability to repay or to
refinance our indebtedness. Our future financial and operating performance
is subject to prevailing economic and competitive conditions and to
financial, business and other factors which may be beyond our control.
We cannot assure you that our operating cash flow and capital
resources will be sufficient to meet our debt service requirements. For the
fiscal quarter ended March 31, 2000 and the fiscal year ended December 31,
1999, our earnings were insufficient to cover our fixed charges by
approximately $57.9 million and $294.5 million, respectively. If we do not
have enough cash flow and capital resources to meet our debt service
obligations, we may be forced to reduce or delay capital expenditures, sell
assets, or seek to obtain additional equity capital. We also might be
forced to refinance or restructure our debt, including the zero debentures
and, when issued, the secured notes.
o MAJOR LAWSUITS HAVE BEEN BROUGHT AGAINST US, INCLUDING NUMEROUS
LAWSUITS UNDER FEDERAL AND STATE SECURITIES LAWS, AND THE SEC IS
CONDUCTING A FORMAL INVESTIGATION OF US; WE CANNOT PREDICT THE OUTCOME
OF THESE LAWSUITS OR THE SEC INVESTIGATION, BUT IF WE WERE TO LOSE
THESE SECURITIES LAWSUITS, THE RESULTING JUDGMENTS WOULD LIKELY HAVE A
MATERIAL ADVERSE EFFECT ON OUR COMPANY
Litigation. Beginning in April 1998 many lawsuits alleging claims
arising under Delaware law, Texas law and federal and state securities laws
have been filed against us and some of our former directors and officers,
some of our current directors and our former auditor in various federal and
state courts. Many of these suits relate to our financial performance from
the second quarter of 1997 through the second quarter of 1998. Many
plaintiffs are claiming that our prior management misrepresented and
omitted material information in our public filings and in their statements
concerning our historical and expected future results of operations for the
purpose of artificially inflating the market price of our common stock.
Currently we cannot predict the outcome of these suits, evaluate the
likelihood of our success in any particular case, or evaluate the range of
potential loss. If we were to lose these suits, judgments would likely have
a material adverse effect on our financial position, results of operations
and cash flow.
Some of our insurers are attempting to have the directors' and
officers' liability policies we have with them voided or canceled or have
advised us that they do not intend to provide coverage with respect to
these lawsuits. Although we have reached a settlement with one of these
insurers, failure by us to obtain insurance recoveries from our other
liability insurers following an adverse judgment against us or any persons
we are obligated to indemnify in any of the lawsuits discussed above could
have a material adverse effect on our financial position, results of
operations and cash flow.
SEC Investigation. In July 1998, the SEC commenced a formal
investigation of us after informing us in the previous month of an informal
investigation. We have provided numerous documents to the SEC staff and
continue to cooperate with the SEC staff. We have, however, declined to
provide the SEC with material that we believe is subject to the
attorney-client privilege and the work product immunity. We cannot predict
how long this investigation will last or its outcome. In addition, we
cannot at this time determine what actions, if any, the SEC might take
against us or what effect any action might have on us.
Product-Related Liabilities. As a consumer goods manufacturer and
distributor, we face the constant risks of product liability and related
lawsuits involving claims for substantial money damages, product recall
actions and higher than anticipated rates of warranty returns or other
returns of goods. These claims could result in liabilities that could have
a material adverse effect on our financial position and results of
operations. Some of the product lines we acquired in the 1998 acquisitions
have increased our exposure to product liability and related claims.
For more information about lawsuits we are involved in, the SEC
investigation and other contingent liabilities, see the section of our 1999
Annual Report on Form 10-K captioned "Item 3. Legal Proceedings -
Litigation" and the section of our First Quarter 2000 Quarterly Report on
Form 10-Q captioned "Part II - Other Information - Item 1. Litigation,"
each of which is incorporated herein by reference. Copies of our First
Quarter 2000 Quarterly Report on Form 10-Q and 1999 Annual Report on Form
10-K are enclosed with this Offering Circular.
o OUR 1998 ACQUISITIONS HAVE INCREASED THE SIZE OF THE OPERATIONS WE
HAVE TO MANAGE AND OUR FAILURE TO MANAGE OUR OPERATIONS EFFECTIVELY
WOULD LIKELY CAUSE US TO HAVE POOR OPERATING RESULTS
Our 1998 acquisitions of Coleman, First Alert and Signature Brands
have resulted in a substantial increase in the size of our operations. As a
result we must effectively use our employees and our management,
operational, and financial resources to manage our expanded operations. A
failure on our part to successfully integrate and effectively manage our
expanded operations would likely cause us to have poor operating results.
In addition, the acquisitions have increased our exposure to product
liability claims due to the nature of some of the products produced by the
acquired companies.
o OUR INTERNATIONAL OPERATIONS EXPOSE US TO UNCERTAINTIES AND RISKS FROM
ABROAD WHICH COULD NEGATIVELY AFFECT OUR OPERATIONS AND SALES
We currently have sales in countries where economic growth has slowed
or where economies have been unstable or hyperinflationary in recent years.
The economies of other foreign countries important to Sunbeam's operations
could also suffer slower economic growth or instability in the future.
The following are among the risks that could negatively affect our
operations and sales in foreign markets:
o new restrictions on access to markets;
o currency devaluation;
o new tariffs;
o adverse changes in monetary and/or tax policies;
o inflation;
o governmental instability; and
o changes in foreign laws and regulations.
Should any of these risks occur, it could impair our ability to
export our products and result in a loss of sales and profits from our
international operations.
o THE NATURE OF OUR BUSINESSES REQUIRES US TO SUCCESSFULLY DEVELOP NEW
AND INNOVATIVE PRODUCTS ON A CONSISTENT BASIS IN ORDER TO REGAIN
PROFITABILITY AND INCREASE REVENUES AND WE MAY NOT BE ABLE TO DO SO
We must develop new and innovative products to regain profitability
and increase revenues. In the past we have experienced difficulties in
developing and introducing quality new products on a timely basis. We may
not be able to meet our schedules for future product development. Failure
to develop and manufacture successful new products could have a material
adverse effect on our future financial performance.
o OUR BUSINESSES ARE SENSITIVE TO THE STRENGTH OF THE U.S. RETAIL MARKET
AND ANY WEAKNESS IN THIS MARKET COULD ADVERSELY AFFECT OUR FINANCIAL
RESULTS
The strength of the retail economy in the United States has a
significant impact on our performance. Weakness in consumer confidence and
poor financial performance by retail outlets, in particular the financial
weakness or bankruptcy of mass merchants, may adversely impact our future
financial results.
o WE OPERATE IN A HIGHLY COMPETITIVE MARKET AND OUR INABILITY TO COMPETE
EFFECTIVELY COULD CAUSE US TO LOSE MARKET SHARE AND ADVERSELY AFFECT
OUR FINANCIAL RESULTS
We operate in a highly competitive environment. We have numerous
domestic and foreign competitors, and many of them are financially strong
and capable of competing effectively with us. Competitors may take actions
to match our new product introductions and other initiatives. Some
competitors may be willing to reduce prices and accept lower profit margins
to compete with us. As a result of this competition, we could lose market
share and sales and suffer losses, which could have a material adverse
effect on our future financial performance.
Our future success will significantly depend upon our ability to
remain competitive in the areas of price, quality, marketing, product
development, manufacturing, distribution, order processing and customer
service. We cannot assure you that we will be able to compete effectively
in all these areas in the future.
o OUR SALES ARE HIGHLY DEPENDENT ON PURCHASES FROM SEVERAL LARGE
RETAILERS AND ANY SIGNIFICANT DECLINE IN THESE PURCHASES OR PRESSURE
FROM THESE RETAILERS TO REDUCE PRICES COULD HAVE A NEGATIVE EFFECT ON
OUR FUTURE FINANCIAL PERFORMANCE; WE HAVE NO LONG-TERM SUPPLY
CONTRACTS WITH ANY OF OUR CUSTOMERS
Due to the consolidation of the U.S. retail industry, our customer
base has become relatively concentrated. Wal-Mart Stores, Inc., our largest
single customer, accounted for 19% of our net sales in 1999, and our five
largest customers combined accounted for 35% of our 1999 net sales.
We have no long-term supply contracts with any of our customers. As a
result, we must receive a continuous flow of new orders from our large,
high-volume retailing customers. We have responded to the challenges of our
markets by pursuing strategic relationships with large, high-volume
merchandisers. However, we cannot assure you that we can continue to
successfully meet the needs of our customers. In addition, failure to
obtain anticipated orders or delays or cancellations of orders or
significant pressure to reduce prices from key customers could have a
material adverse effect on our future financial performance.
o RAW MATERIALS AND COMPONENTS ARE CRITICAL INPUTS FOR OUR PRODUCTS AND
PRICE HIKES OR PROBLEMS WITH THEIR SUPPLY COULD ADVERSELY AFFECT US
Raw materials and components constitute a significant portion of the
cost of our goods. Factors which are largely beyond our control, such as
movements in commodity prices for the specific materials we require, may
affect the future cost of such raw materials and components. In addition,
any inability of our suppliers to timely deliver raw materials and
components or any unanticipated change in our suppliers could be disruptive
and costly to us.
A significant failure by us to contain raw material or component
costs could have a material adverse effect on our future financial
performance. In addition, delays or cancellations by suppliers could
adversely affect results.
o OUR OPERATIONS ARE DEPENDENT UPON THIRD-PARTY SUPPLIERS AND SERVICE
PROVIDERS WHOSE FAILURE TO PERFORM ADEQUATELY COULD DISRUPT OUR
BUSINESS OPERATIONS
We currently manufacture many of our products, but we source many of
our parts and products from third parties. Our ability to select reliable
vendors who provide timely deliveries of quality parts and products will
impact our success in meeting customer demand for timely delivery of
quality products. Any inability of our suppliers to timely deliver quality
parts and products or any unanticipated change in suppliers or pricing of
products could be disruptive and costly to us.
We have entered into various arrangements with third parties for the
provision of back-office administrative services that we used to perform
internally. We now outsource accounts payable, collection of accounts
receivable, customer service and some necessary computer systems servicing,
among other things. If any of these third-party service providers failed to
perform adequately, our normal business operations could be disrupted.
Among other things, this could hurt our sales, collections, customer
service, cash flow and profitability.
o WE ARE SUBJECT TO SEVERAL PRODUCTION-RELATED RISKS WHICH COULD
JEOPARDIZE OUR ABILITY TO REALIZE ANTICIPATED SALES AND PROFITS
To realize sales and operating profits at anticipated levels we must
manufacture, source and deliver in a timely manner products of high
quality. Among others, the following factors can have a negative effect on
our ability to do these things:
o labor difficulties;
o scheduling and transportation difficulties;
o management dislocation;
o substandard product quality, which can result in higher warranty,
product liability and product recall costs;
o delays in development of quality new products;
o changes in laws and regulations (domestic and international),
including changes in tax rates, accounting standards,
environmental laws and occupational health and safety laws; and
o changes in the availability and cost of labor.
o THE EFFECTS OF OUR PRIOR MANAGEMENT'S OUTSOURCING OF CRITICAL
OPERATING TASKS AND SALES POLICIES MAY CONTINUE TO CAUSE US
SUBSTANTIAL DIFFICULTY
Our prior management substantially reduced the number of our
employees and hired third parties to perform many critical operating tasks
for us, including the handling of accounts payable, computer support,
customer service and collection of accounts receivable. We are currently
evaluating the effectiveness of outsourcing these activities and are hiring
personnel to perform some of these tasks in-house once again. We may
experience disruption in critical services and other difficulties while we
implement necessary staff increases and changes in prior management's
outsourcing policy.
Prior management increased sales of products in some prior periods by
providing retailers with substantial price discounts or attractive payment
terms to induce them to purchase more products than they needed at the
time. We believe this caused many of our customers to build up inventory in
our products which reduced our sales and profitability through 1999.
o WEATHER CONDITIONS CAN HURT SALES OF MANY OF OUR PRODUCTS
Weather conditions may negatively impact sales of many of our
products. For instance, we may not sell as many portable generators as
anticipated if there are fewer natural disasters such as hurricanes and ice
storms; mild winter weather may negatively impact sales of electric
blankets, some health products and smoke detectors; and the late arrival of
summer weather may negatively impact sales of outdoor camping equipment and
grills.
o ALTHOUGH OUR OPERATIONS DID NOT EXPERIENCE ANY MATERIAL DISRUPTION AS
A RESULT OF THE YEAR 2000 PROBLEM, WE REMAIN VULNERABLE TO AS YET
UNFORESEEN OR UNDETECTED YEAR 2000 PROBLEMS IN OUR SYSTEMS AND THOSE
OF OUR SUPPLIERS AND CUSTOMERS WHICH COULD POTENTIALLY DISRUPT OUR
OPERATIONS AND MAY REQUIRE UNANTICIPATED REMEDIAL EXPENSES
As yet unidentified Year 2000 problems could have a material adverse
impact on us. In addition, the occurrence of as yet unidentified Year 2000
problems at our third-party suppliers and customers could have a material
adverse impact on us. Year 2000 system failures could affect routine but
critical operations such as:
o forecasting;
o purchasing;
o production;
o order processing;
o inventory control;
o shipping; and
o billing and collections.
In addition, system failures could affect our security, payroll operations
and employee safety. Third parties who fail to adequately address their own
Year 2000 issues could also expose us to potential risks.
For more details regarding our efforts to address Year 2000 readiness
and potential exposure, see the sections of our First Quarter 2000
Quarterly Report on Form 10-Q and 1999 Annual Report on Form 10-K, in each
case, captioned "Management's Discussion and Analysis of Financial
Condition and Results of Operations - Year 2000 Disclosure" and "- The
Costs to Address Sunbeam's Year 2000 Issues," each of which is incorporated
herein by reference. Copies of our First Quarter 2000 Quarterly Report on
Form 10-Q and 1999 Annual Report on Form 10-K are enclosed with this
Offering Circular.
o WE RELY ON OUR KEY PERSONNEL AND THE LOSS OF ONE OR MORE OF THOSE
PERSONNEL COULD HAVE A MATERIAL ADVERSE EFFECT ON OUR BUSINESS,
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Our operations and prospects depend in large part on the performance
of our senior management team. There can be no assurance that we would be
able to find qualified replacements for any of these individuals if their
services were no longer available. The loss of the services of one or more
members of our senior management team could have a material adverse effect
on our business, financial condition and results of operations. For further
information regarding our senior management team, see the section of our
2000 Annual Meeting Proxy Statement captioned "Management," which is
incorporated herein by reference. A copy of our 2000 Annual Meeting Proxy
Statement is enclosed with this Offering Circular.
o NEGATIVE DEVELOPMENTS SINCE MARCH 1998 HAVE CAUSED OUR COMMON STOCK
PRICE TO DROP SIGNIFICANTLY, AND THE RISKS DESCRIBED IN THIS "RISK
FACTORS" SECTION MAY CAUSE FURTHER DECLINES IN OUR STOCK PRICE
The price of our common stock has dropped significantly since March
1998. We believe this was the result of many of the negative developments
described in the section of our 1999 Annual Report on Form 10-K captioned
"Significant 1998 Financial and Business Developments." On March 18, 1998,
the last trading day prior to former management's announcement of lower
than expected net sales for the first quarter of 1998, the last reported
sale price of our common stock was $50.63 per share. On July 7, 2000, the
last reported sale price of our common stock was $3.125 per share. We cannot
assure you that the market price of our common stock will not experience
further declines as a result of the risks and uncertainties described in
this "Risk Factors" section or otherwise. See the section of our 1999
Annual Report on Form 10-K captioned "Market for Registrant's Common Equity
and Related Shareholder Matters," which is incorporated herein by
reference, for details of our common stock's recent trading prices. A copy
of our 1999 Annual Report on Form 10-K is enclosed with this Offering
Circular.
USE OF PROCEEDS
We will not receive any cash proceeds from the exchange offer. All
zero debentures that are properly tendered and not withdrawn in the
exchange offer will be retired and cancelled. Accordingly, the issuance of
secured notes and shares of our common stock in the exchange offer will not
result in any cash proceeds to us.
CAPITALIZATION
The following table sets forth the capitalization of Sunbeam as of
March 31, 2000 on a historical and pro forma basis. This table should be
read in conjunction with the unaudited condensed consolidated financial
statements of Sunbeam set forth in our First Quarter 2000 Quarterly Report
on Form 10-Q, the audited consolidated financial statements of Sunbeam set
forth in our 1999 Annual Report on Form 10-K and the sections of our First
Quarter 2000 Quarterly Report on Form 10-Q and 1999 Annual Report on Form
10-K, in each case, captioned "Management's Discussion and Analysis of
Financial Condition and Results of Operations," each of which is
incorporated herein by reference, and the section of this Offering Circular
captioned "Unaudited Pro Forma Condensed Consolidated Financial
Statements." Copies of our First Quarter 2000 Quarterly Report on Form 10-Q
and 1999 Annual Report on Form 10-K are enclosed with this Offering
Circular.
<TABLE>
<CAPTION>
AS OF MARCH 31, 2000
--------------------
(IN MILLIONS, EXCEPT PER SHARE DATA)
PRO FORMA
FOR THE
HISTORICAL EXCHANGE OFFER (A)
---------- --------------
<S> <C> <C>
Short-term debt and current portion of
long-term debt.................................. $ 141.3 $ 141.3
---------- ----------
Long-term debt, net of current portion:
Senior credit agreement:
Revolving credit facility........... 276.5 288.7
Tranche A term loan................. 702.5 702.5
Tranche B term loan................. 492.6 492.6
Secured notes............................. - 300.2
Zero debentures........................... 828.6 -
Other..................................... 8.4 8.4
---------- --------------
Total long-term debt............................ 2,308.6 1,792.4
========== ==============
Shareholders' equity (deficiency):
Preferred stock (2,000,000 shares
authorized, none outstanding)............. - -
Common stock (107,422,500 and
146,160,500 issued and outstanding,
respectively)............................. 1.1 1.5
Additional paid-in capital ...............
1,179.6 1,303.2
Accumulated deficit....................... (1,168.9) (772.2)
Accumulated other comprehensive loss...... (79.9) (79.9)
---------- --------------
Total shareholders' (deficiency) equity... (68.1) 452.6
----------- --------------
Total capitalization...................... $ 2,381.8 $ 2,386.3
=========== ===============
</TABLE>
-----------------
(a) Reflects the pro forma adjustments described in the Notes to the
Unaudited Pro Forma Condensed Consolidated Financial Statements.
RATIO OF EARNINGS TO FIXED CHARGES
The following table sets forth Sunbeam's ratio of earnings to fixed
charges on a historical basis for each of the five fiscal years ended
December 31, 1995 through December 31, 1999 and the fiscal quarter ended
March 31, 2000.
<TABLE>
<CAPTION>
THREE
FISCAL YEAR ENDED MONTHS ENDED
DECEMBER 31, DECEMBER 29, DECEMBER 28, DECEMBER 31, DECEMBER 31, MARCH 31, MARCH 31,
1995 1996 1997 1998 1999 1999 2000
---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C>
Ratio of earnings
to fixed charges...... 4.7x -- 7.2x -- -- -- --
</TABLE>
For purposes of determining the ratio of earnings to fixed charges,
earnings represent income or loss from continuing operations before income
taxes and fixed charges, exclusive of interest capitalized, and fixed
charges consist of interest expense, capitalized interest and the estimated
interest portion of rental expense.
For the year ended December 29, 1996, earnings were insufficient to
cover fixed charges by $262.2 million. For the year ended December 31,
1998, earnings were insufficient to cover fixed charges by $797.1. For the
year ended December 31, 1999, earnings were insufficient to cover fixed
charges by $294.5 million or $306.0 million on a pro forma basis. For the
fiscal quarters ended March 31, 1999 and 2000, earnings were insufficient
to cover fixed charges by $57.9 million and $57.9 million, respectively.
On a pro forma basis, earnings were insufficient to cover fixed charges
by $57.5 million for the fiscal quarter ended March 31, 2000.
The calculation of the pro forma ratio of earnings to fixed charges
gives effect to: (1) our January 6, 2000 completion of the Coleman merger
and resulting acquisition of the Coleman common stock held by the former
Coleman public stockholders for cash, shares of our common stock and
warrants; (2) the exchange of all of the outstanding zero debentures for
secured notes and shares of our common stock in the exchange offer; and (3)
the issuance to the lenders under our senior credit agreement of 4.5
million shares of our common stock, in each case, as if they had occurred
at the beginning of the respective period presented.
The foregoing information should be read in conjunction with the
Unaudited Pro Forma Condensed Consolidated Financial Statements found
elsewhere in this Offering Circular.
THE EXCHANGE OFFER
GENERAL
On March 25, 1998, we completed the original offering of $2,014
million aggregate principal amount at maturity of the zero debentures. The
offering was made pursuant to Rule 144A under the Securities Act and was
not registered under the Securities Act. The zero debentures were issued
under an indenture, dated as of March 25, 1998, between Sunbeam and The
Bank of New York, as trustee. We sold the zero debentures to Morgan Stanley
& Co. Incorporated under a Purchase Agreement, dated March 25, 1998,
between Morgan Stanley and Sunbeam. When we sold the zero debentures to
Morgan Stanley, we also signed a Registration Rights Agreement in which we
agreed to file with the SEC, at our own expense, a registration statement
to cover resales of the zero debentures and the shares of common stock
issuable upon conversion of the zero debentures. We did not file this
registration statement until February 4, 1999, 225 days after the deadline
contained in the Registration Rights Agreement. The registration statement
was declared effective by the SEC on November 8, 1999.
The exchange offer is being extended to you in reliance on the
exemption from registration provided by Section 3(a)(9) of the Securities
Act and has not been registered with the SEC. The secured notes and common
stock you receive in the exchange offer should be freely tradeable, except
by persons who are considered affiliates of Sunbeam, as that term is
defined in the Securities Act, or persons who hold zero debentures that
were previously held by an affiliate of Sunbeam.
TERMS OF THE EXCHANGE OFFER; PERIOD FOR TENDERING ZERO DEBENTURES
This Offering Circular and the enclosed letter of transmittal
constitute an offer to exchange a combination of 17 shares of our common
stock and $173.00 principal amount at maturity of secured notes ($149.06
principal amount at issuance) for each $1,000 principal amount at maturity
of outstanding zero debentures, subject to the terms and conditions
described in this Offering Circular. This exchange offer is being extended
to all holders of the zero debentures. As of the date of this Offering
Circular, $2,014 million aggregate principal amount at maturity of the zero
debentures are outstanding. This Offering Circular and the enclosed letter
of transmittal are first being sent on or about July 11, 2000, to all
holders of zero debentures known to us. Subject to the conditions listed
below, and assuming we have not previously elected to terminate the
exchange offer for any reason or no reason, in our sole discretion, we will
accept for exchange all zero debentures which are properly tendered on or
prior to the expiration of the exchange offer and not withdrawn as
permitted below. See "- Conditions to the Exchange Offer." The exchange
offer will expire at 5:00 p.m., New York City time, on August 7, 2000. In
our sole discretion, we may extend the period of time during which the
exchange offer is open. Our obligation to accept zero debentures for
exchange in the exchange offer is subject to the conditions listed below
under the caption "- Conditions to the Exchange Offer." The form and terms
of the secured notes are described in this Offering Circular in the section
captioned "Description of Secured Notes."
We expressly reserve the right, at any time and from time to time, to
extend the period of time during which the exchange offer is open, and
thereby delay acceptance for exchange of any zero debentures. If we elect
to extend the period of time during which the exchange offer is open, we
will give you oral or written notice of the extension and delay, as
described below. During any extension of the exchange offer, all zero
debentures previously tendered and not withdrawn will remain subject to the
exchange offer and may be accepted for exchange by us. We will return to
the registered holder, at our expense, any zero debentures not accepted for
exchange as promptly as practicable after the expiration or termination of
the exchange offer. In the case of an extension, we will issue a press
release or other public announcement no later than 9:00 a.m., New York City
time, on the next business day after the previously scheduled expiration of
the exchange offer.
We expressly reserve the right to amend or terminate the exchange
offer, and not to accept for exchange any zero debentures not previously
accepted for exchange if any of the events described below under the
caption "- Conditions to the Exchange Offer" should occur or for any other
reason within our sole and absolute discretion. We will give you oral or
written notice of any amendment, termination or non-acceptance as promptly
as practicable.
Following completion of the exchange offer, we may, in our sole
discretion, seek to acquire zero debentures not tendered in the exchange
offer by means of open market purchases, privately negotiated acquisitions,
redemptions or otherwise, or commence one or more additional exchange
offers to those zero debenture holders who did not exchange their zero
debentures for the combination of our common stock and secured notes.
RELEASE OF LEGAL CLAIMS BY TENDERING ZERO DEBENTURE HOLDERS
By tendering your zero debentures in the exchange offer, you will be
deemed to have released and waived any and all claims or causes of action
of any kind whatsoever, whether known or unknown, that, directly or
indirectly, arise out of, are based upon or are in any manner connected
with your or your successors' and assigns' ownership or acquisition of the
zero debentures, including any related transaction, event, circumstance,
action, failure to act or occurrence of any sort or type, whether known or
unknown, including without limitation any approval or acceptance given or
denied, which occurred, existed, was taken, permitted or begun prior to the
date of such release, in each case, that you, your successors and your
assigns have or may have had against (i) Sunbeam, its subsidiaries, its
affiliates and its stockholders, and (ii) the directors, officers,
employees, attorneys, accountants, advisors, agents and representatives, in
each case whether current or former, of Sunbeam, its subsidiaries, its
affiliates and its stockholders, whether those claims arise under federal
or state securities laws or otherwise.
CONDITIONS TO THE EXCHANGE OFFER
THE EXCHANGE OFFER IS NOT CONDITIONED UPON THE EXCHANGE OF A MINIMUM
PRINCIPAL AMOUNT AT MATURITY OF ZERO DEBENTURES.
Notwithstanding any other provision of the exchange offer, we will
not be required to accept any zero debentures for exchange or to issue any
common stock or secured notes in exchange for zero debentures, and we may
terminate or amend the exchange offer if, at any time before the acceptance
of the zero debentures for exchange or the exchange of common stock and
secured notes for zero debentures, any of the following events occurs:
o the exchange offer is determined to violate any applicable law or
any applicable interpretation of the staff of the SEC;
o the New York Stock Exchange has not approved for listing, subject
to official notice of issuance, the shares of Sunbeam common
stock to be issued in the exchange offer;
o an action or proceeding is pending or threatened in any court or
by any governmental agency or third party that might materially
impair our ability to proceed with the exchange offer;
o any material adverse development occurs in any existing legal
action or proceeding involving Sunbeam;
o we do not receive any governmental approval we deem necessary for
the completion of the exchange offer; or
o the indenture for the secured notes has not been qualified under
the Trust Indenture Act of 1939.
These conditions are for our benefit only and we may assert them
regardless of the circumstances giving rise to any condition. We may also
waive any condition in whole or in part at any time in our sole discretion.
Our failure at any time to exercise any of the foregoing rights will not
constitute a waiver of that right and each right is an ongoing right that
we may assert at any time. Moreover, we are free to terminate the exchange
offer for any reason, in our sole and absolute discretion, and not accept
any tendered zero debentures for exchange.
In addition, we will not accept any zero debentures for exchange or
issue any common stock or secured notes in exchange for zero debentures, if
at the time a stop order is threatened or in effect which relates to the
qualification of the indenture for the secured notes under the Trust
Indenture Act of 1939.
PROCEDURES FOR TENDERING ZERO DEBENTURES
Zero debentures tendered in the exchange offer must be in
denominations of $1,000 principal amount at maturity and whole-number
multiples of $1,000.
When you tender your zero debentures, and we accept the zero
debentures for exchange, this will constitute a binding agreement between
you and Sunbeam, subject to the terms and conditions set forth in this
Offering Circular and the enclosed letter of transmittal. Unless you comply
with the procedures described below under the caption "- Guaranteed
Delivery Procedures," you must do one of the following on or prior to the
expiration of the exchange offer to participate in the exchange offer:
o if you hold zero debentures in certificated form, tender your
zero debentures by sending the certificates for your zero
debentures, in proper form for transfer, a properly completed
and duly executed letter of transmittal, with any required
signature guarantees, and all other documents required by the
letter of transmittal, to American Stock Transfer & Trust
Company, as exchange agent, at one of the addresses listed
below under the caption "- Exchange Agent"; or
o if you hold zero debentures in "street name," tender your zero
debentures by using the book-entry procedures described below
under the caption "- Book-Entry Transfer" and transmitting a
properly completed and duly executed letter of transmittal,
with any required signature guarantees, or an agent's message
instead of the letter of transmittal, to the exchange agent.
In order for a book-entry transfer to constitute a valid tender of
your zero debentures in the exchange offer, the exchange agent must receive
a confirmation of book-entry transfer of your zero debentures into its
account at The Depository Trust Company prior to the expiration of the
exchange offer. The term "agent's message" means a message, transmitted by
DTC and received by the exchange agent and forming a part of the book-entry
confirmation, which states that DTC has received an express
acknowledgment from you that you have received and have agreed to be bound
by the letter of transmittal. If you use this procedure, we may enforce the
letter of transmittal against you.
THE METHOD OF DELIVERY OF CERTIFICATES FOR ZERO DEBENTURES, LETTERS
OF TRANSMITTAL, AGENT'S MESSAGES AND ALL OTHER REQUIRED DOCUMENTS IS AT
YOUR ELECTION. IF YOU DELIVER YOUR ZERO DEBENTURES BY MAIL, WE RECOMMEND
REGISTERED MAIL, PROPERLY INSURED, WITH RETURN RECEIPT REQUESTED. IN ALL
CASES, YOU SHOULD ALLOW SUFFICIENT TIME TO ASSURE TIMELY DELIVERY. PLEASE
SEND ALL CERTIFICATES FOR ZERO DEBENTURES, LETTERS OF TRANSMITTAL AND
AGENT'S MESSAGES TO AMERICAN STOCK TRANSFER & TRUST COMPANY, THE EXCHANGE
AGENT FOR THE EXCHANGE OFFER, AT ONE OF THE ADDRESSES SET FORTH ON THE BACK
COVER PAGE OF THIS OFFERING CIRCULAR. PLEASE DO NOT SEND THESE MATERIALS TO
US.
Signatures on a letter of transmittal or a notice of withdrawal, as
the case may be, must be guaranteed unless you are either:
o a registered zero debenture holder and have not completed the box
entitled "Special Issuance Instructions" or "Special Delivery
Instructions" on the letter of transmittal or
o you are exchanging zero debentures for the account of an eligible
guarantor institution.
An eligible guarantor institution means:
o Banks, as defined in Section 3(a) of the Federal Deposit
Insurance Act;
o Brokers, dealers, municipal securities dealers, municipal
securities brokers, government securities dealers and government
securities brokers, as defined in the Securities Exchange Act of
1934, as amended;
o Credit unions, as defined in Section 19B(1)(A) of the Federal
Reserve Act;
o National securities exchanges, registered securities associations
and clearing agencies, as these terms are defined in the Exchange
Act; and
o Savings associations, as defined in Section 3(b) of the Federal
Deposit Insurance Act.
If signatures on a letter of transmittal or a notice of withdrawal are
required to be guaranteed, the guarantor must be an eligible guarantor
institution. If you plan to sign the letter of transmittal but you are not
the registered holder of the zero debentures - which term, for this
purpose, includes any participant in DTC's system whose name appears on a
security position listing as the owner of the zero debentures - you must
have the zero debentures signed by the registered holder of the zero
debentures and that signature must be guaranteed by an eligible guarantor
institution. You may also send a separate instrument of transfer or
exchange signed by the registered holder and guaranteed by an eligible
guarantor institution, but that instrument must be in a form satisfactory
to us in our sole discretion. In addition, if a person or persons other
than the registered holder or holders of zero debentures signs the letter
of transmittal, certificates for the zero debentures must be endorsed or
accompanied by appropriate bond powers, in either case signed exactly as
the name or names of the registered holder or holders that appear on the
certificates for zero debentures.
All questions as to the validity, form, eligibility - including time
of receipt - and acceptance of zero debentures tendered for exchange will
be determined by us in our sole discretion. Our determination will be final
and binding. We reserve the absolute right to reject any and all tenders of
zero debentures improperly tendered or to not accept any zero debentures,
the acceptance of which might be unlawful as determined by us or our
counsel. We also reserve the absolute right to waive any defects or
irregularities or conditions of the exchange offer as to any zero
debentures either before or after the expiration of the exchange offer -
including the right to waive the ineligibility of any holder who seeks to
tender zero debentures in the exchange offer. Our interpretation of the
terms and conditions of the exchange offer as to any particular zero
debentures either before or after the expiration of the exchange offer -
including the terms and conditions of the letter of transmittal and the
accompanying instructions - will be final and binding. Unless waived, any
defects or irregularities in connection with tenders of zero debentures for
exchange must be cured within a reasonable period of time, as determined by
us. Neither we, the exchange agent nor any other person has any duty to
give notification of any defect or irregularity with respect to any tender
of zero debentures for exchange, nor will we have any liability for failure
to give this notification.
If you are a trustee, executor, administrator, guardian,
attorney-in-fact, officer of a corporation, or act in a similar fiduciary
or representative capacity, and wish to sign the letter of transmittal or
any certificates for zero debentures or bond powers, you must indicate your
status when signing. If you are acting in any of these capacities, you must
submit proper evidence satisfactory to us of your authority to so act
unless we waive this requirement.
ACCEPTANCE OF ZERO DEBENTURES FOR EXCHANGE; DELIVERY OF COMMON STOCK AND
SECURED NOTES
Upon satisfaction or waiver of all of the conditions to the exchange
offer, and assuming we have not previously elected to terminate the
exchange offer for any reason or no reason, in our sole discretion, we will
accept, promptly after the expiration of the exchange offer, all zero
debentures properly tendered and not withdrawn and will issue the shares of
common stock and secured notes promptly after acceptance of the zero
debentures. For purposes of the exchange offer, we will be deemed to have
accepted properly tendered zero debentures for exchange when, as and if we
have given oral or written notice of acceptance to the exchange agent, with
written confirmation of any oral notice to be given promptly after any oral
notice.
For each $1,000 principal amount at maturity of zero debentures
accepted for exchange in the exchange offer, the tendering holder will
receive 17 shares of our common stock and $173.00 principal amount at
maturity of secured notes ($149.06 principal amount at issuance).
In all cases, the issuance of shares of our common stock and secured
notes in exchange for zero debentures will be made only after the exchange
agent timely receives either certificates for all physically tendered zero
debentures, in proper form for transfer, or a book-entry confirmation of
transfer of the zero debentures into the exchange agent's account at DTC,
as the case may be, a properly completed and duly executed letter of
transmittal, with any required signature guarantees, and all other required
documents or, in the case of a book-entry confirmation, a properly
completed and duly executed letter of transmittal, with any required
signature guarantees, or an agent's message instead of the letter of
transmittal. If for any reason we do not accept any tendered zero
debentures or if zero debentures are submitted for a greater principal
amount than the holder desires to exchange, we will return the unaccepted
or non-exchanged zero debentures without expense to the registered
tendering holder. In the case of zero debentures tendered by book-entry
transfer into the exchange agent's account at DTC by using the book-entry
procedures described below, the unaccepted or non-exchanged zero debentures
will be credited to an account maintained by the tendering holder with DTC.
Any zero debentures to be returned to the holder will be returned as
promptly as practicable after the expiration or termination of the exchange
offer.
Sunbeam will not issue fractional shares of Sunbeam common stock in
the exchange offer. Instead of receiving a fractional share of Sunbeam
common stock, each zero debenture holder who would otherwise be entitled to
a fractional share will receive a number of whole shares determined by
rounding up or down to the nearest whole number. Similarly, secured notes
to be issued in the exchange offer will be issued only in denominations of
$1,000 principal amount at maturity and integral multiples thereof. Any
tendering zero debenture holder who otherwise would be entitled to receive
a secured note with a principal amount at maturity that is less than $1,000
or that is not an integral multiple of $1,000, will instead receive, at
Sunbeam's election, cash (without interest) or shares of Sunbeam common
stock (rounded up or down to the nearest whole number of shares), in each
case, having a value equal to the principal amount at issuance of such
"fractional" secured note. In the event that Sunbeam elects to issue shares
of its common stock in satisfaction of fractional secured notes, the number
of shares you receive will be based on the average closing price of our
common stock, as reported on the NYSE Composite Transactions Tape, for the
ten trading days immediately preceding the date of issuance.
BOOK-ENTRY TRANSFER
Within two business days after the date of this Offering Circular,
the exchange agent will establish an account at DTC for the zero debentures
tendered in the exchange offer. Once established, any financial institution
that is a participant in DTC's system may make book-entry delivery of zero
debentures by causing DTC to transfer the zero debentures into the exchange
agent's account at DTC in accordance with DTC's procedures for transfer.
Although delivery of the zero debentures may be effected through book-entry
transfer at DTC, the letter of transmittal or facsimile of the letter of
transmittal, with any required signature guarantees, or an agent's message
instead of the letter of transmittal, and any other required documents,
must be transmitted to and received by the exchange agent on or prior to
the expiration of the exchange offer at one of the addresses listed below
under the caption "- Exchange Agent." In addition, the exchange agent must
receive book-entry confirmation of transfer of the zero debentures into the
exchange agent's account of DTC prior to the expiration of the exchange
offer. If you cannot comply with these procedures, you may be able to use
the guaranteed delivery procedures described below.
GUARANTEED DELIVERY PROCEDURES
If you are a registered holder of the zero debentures and wish to tender
your zero debentures, but
o the certificates for the zero debentures are not immediately
available,
o time will not permit your certificates for the zero debentures or
other required documents to reach the exchange agent before the
expiration of the exchange offer or
o the procedure for book-entry transfer cannot be completed before
the expiration of the exchange offer,
you may effect a tender of your zero debentures if:
o the tender is made through an eligible guarantor institution;
o prior to the expiration of the exchange offer, the exchange agent
receives from an eligible guarantor institution a properly
completed and duly executed notice of guaranteed delivery,
substantially in the form we have provided, setting forth your
name and address, and the amount of zero debentures you are
tendering and stating that the tender is being made by notice of
guaranteed delivery; these documents may be sent by overnight
courier, registered or certified mail or facsimile transmission;
o you guarantee that within three NYSE trading days after the date
of execution of the notice of guaranteed delivery, the
certificates for all physically tendered zero debentures, in
proper form for transfer, or a book-entry confirmation of
transfer of the zero debentures into the exchange agent's account
at DTC, including the agent's message that forms a part of the
book-entry confirmation, as the case may be, a properly completed
and duly executed letter of transmittal, with any required
signature guarantees, and any other documents required by the
letter of transmittal, will be deposited by the eligible
guarantor institution with the exchange agent; and
o the exchange agent receives the certificates for all physically
tendered zero debentures, in proper form for transfer, or a
book-entry confirmation of transfer of the zero debentures into
the exchange agent's account at DTC, as the case may be, a
properly completed and duly executed letter of transmittal, with
any required signature guarantees, and all other required
documents or, in the case of a book-entry confirmation, a
properly completed and duly executed letter of transmittal, with
any required signature guarantees, or an agent's message instead
of the letter of transmittal, in each case, within three NYSE
trading days after the date of execution of the notice of
guaranteed delivery.
WITHDRAWAL OF TENDERS
YOU MAY WITHDRAW TENDERS OF ZERO DEBENTURES AT ANY TIME PRIOR TO THE
EXPIRATION OF THE EXCHANGE OFFER AND, UNLESS YOUR TENDERED ZERO DEBENTURES
HAVE PREVIOUSLY BEEN ACCEPTED FOR EXCHANGE AND YOU HAVE RECEIVED THE
SECURED NOTES AND SHARES OF COMMON STOCK ISSUABLE IN EXCHANGE THEREFOR, YOU
MAY ALSO WITHDRAW PREVIOUSLY TENDERED ZERO DEBENTURES AT ANY TIME AFTER
SEPTEMBER 5, 2000.
For a withdrawal to be effective, a written notice of withdrawal must
be received by the exchange agent prior to the expiration of the exchange
offer at one of the addresses listed below under the caption "- Exchange
Agent." Any notice of withdrawal must specify the name of the person who
tendered the zero debentures to be withdrawn, identify the zero debentures
to be withdrawn, including the principal amount of the zero debentures,
and, where certificates for zero debentures have been transmitted, specify
the name in which the zero debentures are registered, if different from
that of the withdrawing holder. If certificates for zero debentures have
been delivered or otherwise identified to the exchange agent, then, prior
to the release of the certificates, the withdrawing holder must also submit
the serial numbers of the particular certificates to be withdrawn and a
signed notice of withdrawal with signatures guaranteed by an eligible
guarantor institution unless the holder is an eligible guarantor
institution. If zero debentures have been tendered using the procedure for
book-entry transfer described above, any notice of withdrawal must specify
the name and number of the account at DTC to be credited with the withdrawn
zero debentures and otherwise comply with the procedures of the book-entry
transfer facility. All questions as to the validity, form and eligibility -
including time of receipt - of these notices will be determined by us. Our
determination will be final and binding.
Any zero debentures properly withdrawn will be deemed not to have
been validly tendered for exchange for purposes of the exchange offer. Any
zero debentures which have been tendered for exchange but which are not
exchanged for any reason will be returned to the registered holder without
cost to that holder as soon as practicable after withdrawal, non-acceptance
of tender or termination of the exchange offer. In the case of zero
debentures tendered by book-entry transfer into the exchange agent's
account at DTC by using the book-entry transfer procedures described above,
any withdrawn or unaccepted zero debentures will be credited to the
tendering holder's account at DTC. Properly withdrawn zero debentures may
be retendered at any time on or prior to the expiration of the exchange
offer by following one of the procedures described above under "-
Procedures for Tendering Zero Debentures."
EXCHANGE AGENT
We have appointed American Stock Transfer & Trust Company as the
exchange agent for the exchange offer. All completed letters of transmittal
and agent's messages should be directed to the exchange agent at one of the
addresses set forth below. All questions regarding the procedures for
tendering in the exchange offer and requests for assistance in tendering
your zero debentures should also be directed to the exchange agent at one
of the following telephone numbers and addresses:
Delivery To: American Stock Transfer & Trust Company, Exchange Agent
<TABLE>
<S> <C> <C>
By Regular or Certified Mail: By Facsimile: By Overnight Courier or Hand:
(Eligible Guarantor Institutions Only)
American Stock Transfer American Stock Transfer
& Trust Company (718) 234-5001 & Trust Company
40 Wall Street 40 Wall Street
46th Floor To Confirm by Telephone 46th Floor
New York, NY 10005 or for Information Call: New York, NY 10005
Attention: Joe Wolf Attention: Joe Wolf
(718) 921-8200
</TABLE>
DELIVERY OF A LETTER OF TRANSMITTAL OR AGENT'S MESSAGE TO AN ADDRESS
OTHER THAN THE ADDRESS LISTED ABOVE OR TRANSMISSION OF INSTRUCTIONS BY
FACSIMILE OTHER THAN AS SET FORTH ABOVE IS NOT VALID DELIVERY OF THE LETTER
OF TRANSMITTAL OR AGENT'S MESSAGE.
Requests for additional copies of this Offering Circular, Sunbeam's
First Quarter 2000 Quarterly Report on Form 10-Q, Sunbeam's 1999 Annual
Report on Form 10-K, Sunbeam's 2000 Annual Meeting Proxy Statement, the
enclosed Letter of Transmittal or the enclosed Notice of Guaranteed
Delivery may be directed to either the Exchange Agent at one of the
telephone numbers and addresses listed above or to the Information Agent at
one of telephone numbers and addresses listed on the back cover page of
this Offering Circular.
FINANCIAL ADVISOR
Donaldson, Lufkin & Jenrette Securities Corporation is providing
financial advisory services to Sunbeam in connection with the exchange
offer. We will pay DLJ reasonable and customary compensation for their
services as financial advisor. In addition, we will reimburse DLJ for
reasonable out-of-pocket expenses incurred in connection with the exchange
offer and will indemnify DLJ against liabilities and expenses in connection
with the exchange offer, including liabilities under the United States
federal securities laws.
EXPENSES
We expect that we will have to pay about $6.5 million in expenses
relating to the exchange offer. We expect to obtain the cash required to
pay our expenses through cash flow from operations and/or borrowings under
our senior credit agreement. We have made no decision with respect to the
repayment or refinancing of indebtedness incurred or that may be incurred
under the senior credit agreement and we may repay such indebtedness out of
our internally generated funds or from proceeds of a subsequent financing.
Any decisions with respect to such repayment or refinancing will be made
based on a review from time to time of the advisability of particular
transactions, as well as on prevailing interest rates and financial and
economic conditions. There can be no assurance we will be able to make such
payment.
RECOMMENDATION
SUNBEAM IS NOT MAKING ANY RECOMMENDATION REGARDING WHETHER YOU SHOULD
TENDER YOUR ZERO DEBENTURES IN THE EXCHANGE OFFER AND, ACCORDINGLY, YOU
MUST MAKE YOUR OWN DETERMINATION AS TO WHETHER TO TENDER YOUR ZERO
DEBENTURES FOR EXCHANGE AND ACCEPT THE SECURED NOTES AND COMMON STOCK WE
PROPOSE TO GIVE YOU.
SOLICITATION
The principal solicitation is being made by mail by the exchange
agent. We will pay the exchange agent customary fees for its services,
reimburse the exchange agent for its reasonable out-of-pocket expenses
incurred in connection with the provision of these services and pay other
expenses, including fees and expenses of the trustee under the indenture,
filing fees, blue sky fees and printing and distribution expenses. We will
not make any payment to brokers, dealers or others soliciting acceptances
of the exchange offer. We will, however, reimburse reasonable expenses
incurred by brokers and dealers in forwarding this Offering Circular and
the other exchange offer materials to the holders of the zero debentures.
Additional solicitation may be made by telephone, facsimile or in
person by officers and regular employees of Sunbeam and its affiliates and
by persons so engaged by the exchange agent.
TRANSFER TAXES
You will not be obligated to pay any transfer taxes in connection
with the tender of zero debentures in the exchange offer unless you
instruct us to register your shares of common stock or secured notes in the
name of, or request that zero debentures not tendered or not accepted in
the exchange offer be returned to, a person other than the registered
tendering holder. In those cases, you will be responsible for the payment
of any applicable transfer tax.
AGREEMENTS RELATING TO SUNBEAM SECURITIES
SENIOR CREDIT AGREEMENT AMENDMENT. In consideration of their
agreement to consent to the April 14, 2000 amendment to the senior credit
agreement, and to grant a waiver allowing the incurrence of the
indebtedness represented by the secured notes and permitting the grant of
the second-priority lien on the collateral for the secured notes, Sunbeam
has agreed to issue to the lenders under its senior credit agreement a risk
adjustment fee of up to 4.5 million shares of Sunbeam common stock. The
amount of the payment to Sunbeam's senior lenders will vary depending on
the extent to which zero debenture holders participate in the exchange
offer. The minimum fee payable to the senior lenders will be 2.5 million
common shares. This minimum fee will be increased on a straight-line basis
(to a maximum of 4.5 million common shares) for each $1,000 principal
amount at issuance of secured notes issued in the exchange offer in excess
of $162.5 million. In the event that Sunbeam cannot issue a sufficient
number of common shares to satisfy the risk adjustment fee without first
obtaining stockholder approval, Sunbeam will pay the remaining fee in
shares of preferred stock. The preferred stock will be issued upon such
terms and subject to such rights and preferences as to represent
substantially the same economic interest in Sunbeam as the common shares
that would have been issued, but for the stockholder approval
requirement. Sunbeam has agreed to use its best efforts to obtain
stockholder approval for the issuance of the common shares, if necessary,
as soon as is reasonably practicable following the completion of the
exchange offer, and to exchange any preferred stock issued to the senior
lenders for common shares once stockholder approval for the issuance has
been obtained. The common shares and preferred shares, if any, issuable to
the senior lenders will be subject to customary registration rights.
SENIOR CREDIT AGREEMENT. Pursuant to the terms of Sunbeam's senior
credit agreement, as amended to date, Sunbeam is currently prohibited from
paying cash dividends on its common stock as well as taking certain other
actions relating to the Sunbeam common stock. For further information
regarding the terms of Sunbeam's senior credit agreement, see the section
of this Offering Circular captioned "Description of Other Indebtedness -
Senior Credit Agreement."
ZERO DEBENTURE INDENTURE. Pursuant to the indenture, dated as of
March 25, 1998, between Sunbeam, as issuer, and The Bank of New York, as
trustee, relating to the zero debentures, Sunbeam has granted to the
holders of the zero debentures certain rights relating to the Sunbeam
common stock. In particular, the zero debentures are convertible into
shares of Sunbeam common stock at the conversion prices set forth in the
indenture and, under certain circumstances, Sunbeam may be required to
redeem the zero debentures for cash or shares of Sunbeam common stock. For
further information regarding the terms of the zero debentures and the
indenture pursuant to which the zero debentures were issued, see the
section of this Offering Circular captioned "Description of Other
Indebtedness - Zero Debentures."
MACANDREWS & FORBES WARRANT. On August 24, 1998, Sunbeam issued to
Coleman (Parent) Holdings Inc., the MacAndrews & Forbes subsidiary from
which Sunbeam acquired a controlling interest in Coleman, a warrant which
entitles the holder to purchase up to 23 million shares of Sunbeam common
stock at an exercise price of $7 per share, subject to anti-dilution
adjustments. This warrant was issued under the terms of a settlement
agreement, dated August 12, 1998, by and between Sunbeam and Coleman
(Parent) Holdings Inc. The warrant has a term of five years. The common
shares issuable upon exercise of the warrant are subject to customary
registration rights. For more information regarding this warrant and the
terms of the settlement agreement pursuant to which it was issued, see the
section of our 1999 Annual Report on Form 10-K captioned "Significant 1998
Financial and Business Developments - Settlement of Coleman-Related
Claims."
COLEMAN STOCKHOLDER WARRANTS. Pursuant to a Warrant Agreement, dated
as of January 3, 2000, between Sunbeam, as issuer, and American Stock
Transfer & Trust Company, as warrant agent, Sunbeam issued additional
warrants to purchase up to 4.98 million shares of Sunbeam common stock at
an exercise price of $7 per share, subject to anti-dilution adjustments.
The warrants, which were issued pursuant to the terms of a settlement of
litigation relating to the Coleman merger, were issued to the Coleman
public stockholders and plaintiffs' counsel upon completion of the Coleman
merger. For more information regarding these warrants and the terms of the
settlement agreement pursuant to which they were issued, see the section of
our 1999 Annual Report on Form 10-K captioned "Significant 1998 Financial
and Business Developments - Settlement of Coleman-Related Claims."
EMPLOYEE COMPENSATION ARRANGEMENTS. Sunbeam sponsors certain
equity-based compensation plans, including stock option and restricted
stock plans, and is party to employment agreements and stock option
agreements with certain of its employees. These plans and agreements
provide for the grant of options to purchase shares of Sunbeam common stock
and the issuance of restricted shares of Sunbeam common stock, among other
things. For further information regarding the terms of these plans and
agreements, see the sections of Sunbeam's 2000 Annual Meeting Proxy
Statement captioned "Executive Compensation," "Employment Contracts and
Termination of Employment and Change in Control Arrangements," "Proposal 2
- Approval of Stock Option Grant to Jerry W. Levin," "Proposal 3 -
Approval of Stock Option Grant to Paul E. Shapiro," "Proposal 4 - Approval
of Stock Option Grant to Bobby G. Jenkins," "Proposal 5 - Approval of the
Amendment to the Sunbeam Corporation Management Incentive Plan," "Proposal
6 - Approval of the Sunbeam Corporation Key Executive Long Term Incentive
Program," and "Proposal 7 - Approval of the Sunbeam Corporation 2000 Stock
Option Plan," each of which is incorporated herein by reference. A copy of
our 2000 Annual Meeting Proxy Statement is enclosed with this Offering
Circular. All of the Proposals referenced above were approved by Sunbeam's
stockholders at our June 27, 2000 Annual Meeting of Stockholders.
Except as described in this Offering Circular, or in documents
incorporated herein by reference, there are no contracts, arrangements,
understandings or relationships in connection with the exchange offer
between Sunbeam or any of its directors or executive officers and any
person with respect to the zero debentures or the secured notes and shares
of our common stock to be issued in the exchange offer.
CERTAIN UNITED STATES FEDERAL INCOME TAX CONSIDERATIONS
The following is a general discussion of certain anticipated U.S.
Federal income tax consequences to holders whose zero debentures are
tendered and accepted in the exchange offer. Because the law with respect
to certain U.S. Federal income tax consequences of the exchange of zero
debentures for New Securities (as defined below) is uncertain and no ruling
has been or will be requested from the Internal Revenue Service (the "IRS")
on any tax matter concerning the exchange of zero debentures for New
Securities, no assurances can be given that the IRS or a court considering
these issues would agree with the positions or conclusions discussed below.
This summary is based on laws, regulations, rulings and decisions now
in effect, all of which are subject to change, possibly with retroactive
effect. This summary does not discuss all aspects of U.S. Federal income
taxation that may be relevant to a particular investor or to certain types
of investors that may be subject to special tax rules (such as banks,
tax-exempt entities, insurance companies, S Corporations, dealers in
securities or currencies, certain traders in securities, persons that will
hold New Securities as a position in a "straddle" or conversion
transaction, or as part of a "synthetic security" or other integrated
financial transaction, and persons that have a "functional currency" other
than the U.S. dollar). The discussion is limited to exchanging holders who
are citizens or residents of the United States or are domestic corporations
or that otherwise are subject to U.S. Federal income taxation on a net
income basis with respect to the zero debentures, and who have held the
zero debentures as "capital assets" within the meaning of section 1221 of
the Internal Revenue Code (the "Code").
HOLDERS ARE URGED TO CONSULT THEIR TAX ADVISORS AS TO THE
CONSEQUENCES TO THEM OF THE EXCHANGE OFFER, INCLUDING THE APPLICABILITY AND
EFFECT OF FEDERAL, STATE, LOCAL AND FOREIGN INCOME AND OTHER TAX LAWS.
FEDERAL INCOME TAX CONSEQUENCES TO HOLDERS WHO EXCHANGE ZERO DEBENTURES FOR
SECURED NOTES AND SUNBEAM COMMON STOCK
GENERAL. The exchange of zero debentures for secured notes and
Sunbeam common stock (collectively, the "New Securities") will qualify as a
recapitalization under Section 368(a)(1)(E) of the Code with the result
that, except as discussed below, (i) no gain or loss will be recognized by
an exchanging holder, (ii) the New Securities will have an initial tax
basis in the hands of the exchanging holder equal to the tax basis of the
zero debentures exchanged therefor (allocated between the secured notes and
the shares of Sunbeam common stock in accordance with their respective fair
market values), and (iii) the New Securities will have a holding period
that includes the period during which the exchanging holder held the zero
debentures.
ORIGINAL ISSUE DISCOUNT-SECURED NOTES. It is expected that the
secured notes will be treated as issued with original issue discount within
the meaning of the Code. For U.S. federal income tax purposes, the excess
of the stated redemption price at maturity of the secured notes over their
"issue price" constitute original issue discount. A holder (whether or not
such holder is a cash or accrual basis taxpayer) will be required to
include original issue discount in gross income as it accrues, in
accordance with a constant yield to maturity method over the period the
secured note is held (in addition to the inclusion of any qualified stated
interest, as defined below). The stated redemption price at maturity of a
secured note generally will equal the sum of the principal amount of such
secured note and all payments required to be made thereunder, other than
payments of "qualified stated interest" (defined generally as stated
interest that is unconditionally payable at least annually at a single
fixed rate that appropriately takes into account the length of intervals
between payments). Because Sunbeam will pay only 15% of the interest
payable on the secured notes with respect to the first and second interest
payment dates, only 15% of the stated interest will constitute "qualified
stated interest."
The "issue price" of a debt instrument and security issued together
as a unit (an "investment unit") is first determined as if the investment
unit itself was a debt instrument, and then such issue price is allocated
between the debt instrument and the property rights (in this case, the
secured note and the shares of Sunbeam common stock), based on their
relative fair market values. Sunbeam will provide exchanging holders with
its allocation of the issue price of the investment unit. Sunbeam's
allocation is binding upon a holder unless such holder discloses on its tax
return, for the year in which it acquired the unit, its determination of an
allocation different from that of Sunbeam.
If a substantial amount of the secured notes are traded on an
"established market" within the meaning of the Treasury regulations at any
time during the 60-day period ending 30 days after the issue date of the
secured notes, then the issue price of the secured notes will equal the
trading price of the secured notes on the issue date. If the secured notes
are not treated as so traded and the zero debentures are traded on an
"established market" within the meaning of the Treasury regulations at any
time during the 60-day period ending 30 days after the issue date of the
secured notes, then the issue price of the secured notes will equal the
trading price of the zero debentures on the issue date. A material
additional amount of original issue discount may be created with respect to
the secured notes if the trading price of the zero debentures or the
secured notes at the time of the exchange is materially less than the
principal amount of the secured notes. If neither the zero debentures nor
the secured notes are so traded, the issue price of the secured notes will
be their principal amount. While certain of the zero debentures are, and
certain of the secured notes may be, eligible for trading on the PORTAL
system and bonds traded with sufficient volume and frequency on this system
should be treated as traded on an "established market" for these purposes,
it is not expected that either a substantial amount of the zero debentures
or the secured notes will be traded during the relevant period.
Nevertheless, no assurance can be given that zero debentures or secured
notes will or will not be so traded within the relevant period. After the
exchange is consummated, Sunbeam will determine whether or not the zero
debentures or secured notes have been traded for these purposes and the
amount, if any, of additional original issue discount created with respect
to the secured notes and will inform the holders accordingly. Sunbeam will
make the appropriate information return as required by the Treasury
regulations.
MARKET DISCOUNT. Market discount rules will apply to any secured
notes or shares of Sunbeam common stock received by an exchanging holder
who acquired its zero debentures subsequent to their original issuance at a
price lower (by more than a de minimis amount) than the revised issue price
of such zero debentures. Holders exchanging market discount zero debentures
for secured notes and shares of Sunbeam common stock should consult their
own tax advisors with respect to the allocation of market discount between
the secured notes and the shares of Sunbeam common stock. A secured note
that is exchanged for a zero debenture with market discount will continue
to accrue market discount over its term.
Holders exchanging market discount zero debentures pursuant to the
exchange offer will not recognize any gain or loss upon the exchange with
respect to accrued market discount. Any gain recognized by the holder on
the disposition of New Securities received in exchange for a zero debenture
having market discount will be treated as ordinary income to the extent of
the market discount that accrued while held by such holder. A holder of a
debt instrument acquired at market discount may elect to include market
discount in gross income as such market discount accrues, either on a
straight-line basis or a constant interest rate basis. This current
inclusion election, once made, applies to all market discount obligations
acquired by the holder on or after the first day of the first taxable year
to which such election applies and is revocable only with the consent of
the IRS. Unless the holder elects to include market discount in income on a
current basis, as described above, the holder could be required to defer
the deduction of a portion of the interest paid on any indebtedness
incurred or maintained to purchase or carry market discount zero
debentures. President Clinton's budget proposal for fiscal year 2001
contains a provision that would require holders that use an accrual method
of accounting to include market discount in income on a constant-yield
basis as it accrues. Such a provision would be effective for debt
instruments acquired on or after the date of enactment.
ACQUISITION PREMIUM. If the tax basis of a holder in a secured note
exceeds the issue price of such secured note but is not more than the
principal amount of such secured note, the full daily portions of original
issue discount will still be reported for each holder of such secured note
for information reporting purposes, but the exchanging holder will reduce
each daily portion of original issue discount includible in the holder's
gross income by a constant fraction calculated so as to cause the full
amount of such excess to be amortized over the life of such secured note.
SALE OR EXCHANGE OF SECURED NOTES. In general, subject to the rules
discussed above under "Market Discount," the sale, exchange or redemption
of the secured notes will result in capital gain or loss equal to the
difference between the amount realized and the exchanging holder's tax
basis in the secured notes immediately before such sale, exchange or
redemption (which will reflect any original issue discount and market
discount previously included in income).
SALE OR EXCHANGE OF THE SHARES OF SUNBEAM COMMON STOCK. In general,
subject to the rules discussed above under "Market Discount," and except in
certain circumstances in the case of a redemption where a holder's
percentage stock interest is not meaningfully reduced, the sale, exchange
or redemption of the shares of Sunbeam common stock will result in capital
gain or loss equal to the difference between the amount realized and the
exchanging holder's tax basis in the shares of Sunbeam common stock
immediately before such sale, exchange or redemption.
TAX CONSEQUENCES TO SUNBEAM
DISCHARGE OF INDEBTEDNESS INCOME. Sunbeam will realize income from
discharge of indebtedness as a result of the exchange of the zero
debentures for the New Securities. It is anticipated that Sunbeam's net
operating losses will be sufficient to offset any discharge of indebtedness
income. Nevertheless, Sunbeam will have U.S. Federal income tax liability
and possibly state income tax liability to the extent of any alternative
minimum tax, the amount of which will depend on Sunbeam's overall tax
position for the tax year that includes the date of the exchange and the
amount of zero debentures exchanged.
INTEREST DEDUCTIONS. Interest payments and original issue discount
with respect to the secured notes should generally be deductible by Sunbeam
in arriving at income subject to tax.
OWNERSHIP CHANGE. Based upon available records of stock ownership,
Sunbeam believes that an "ownership change" for purposes of statutory
provisions that would otherwise limit the use of net operating losses and
net unrealized built-in losses has not occurred in the past and is not
likely to occur as a result of the exchange. No assurance can be given that
an ownership change that may limit the use of net operating loss carryovers
and other tax attributes and net unrealized built-in losses will not occur
in the future.
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
The following unaudited pro forma condensed consolidated financial
statements were prepared to give effect to the following "Pro Forma
Transactions":
o The exchange of all of the outstanding zero debentures for $348.4
million principal amount at maturity of secured notes ($300.2 million
principal amount at issuance) and 34.2 million shares of our common
stock;
o The issuance to the lenders under our senior credit agreement of 4.5
million shares of our common stock as payment for their risk
adjustment fee; and
o The January 6, 2000 completion of the Coleman merger and resulting
acquisition of the Coleman common stock held by the former Coleman
public stockholders for approximately $44 million in common stock, $14
million in warrants, and $88 million in cash, including expenses.
The unaudited pro forma condensed consolidated balance sheet as of
March 31, 2000 gives pro forma effect to the proposed exchange offer and
the issuance of 4.5 million shares of our common stock to the lenders under
our senior credit agreement as if they had occurred on March 31, 2000. The
unaudited condensed consolidated statements of operations for the year
ended December 31, 1999 and the three months ended March 31, 2000 give
effect to the Pro Forma Transactions as if they had occurred on January 1,
1999, the beginning of Sunbeam's 1999 fiscal year. No pro forma adjustments
are presented for the completion of the Coleman merger for the period as of
and ended March 31, 2000 since the transaction occurred at the beginning of
such period. Also, pro forma net losses are from continuing operations and
do not include extraordinary items.
The unaudited pro forma condensed consolidated financial statements
do not include pro forma adjustments relating to the sale of Sunbeam's
Eastpak business because the effects of that transaction are not
significant.
The pro forma adjustments are based upon available information and
certain assumptions that Sunbeam believes are reasonable under the
circumstances.
The unaudited pro forma condensed consolidated financial statements
are not necessarily indicative of what our results would have been if the
Pro Forma Transactions actually had occurred as of the date indicated or of
what our future operating results will be.
The unaudited pro forma condensed consolidated financial statements
should be read in conjunction with the unaudited condensed consolidated
financial statements of Sunbeam set forth in our First Quarter 2000
Quarterly Report on Form 10-Q, the audited consolidated financial
statements of Sunbeam set forth in our 1999 Annual Report on Form 10-K and
the sections of our First Quarter 2000 Quarterly Report on Form 10-Q and
1999 Annual Report on Form 10-K, in each case, captioned "Management's
Discussion and Analysis of Financial Condition and Results of Operations,"
each of which is incorporated herein by reference. Copies of our First
Quarter 2000 Report on Form 10-Q and 1999 Annual Report on Form 10-K are
enclosed with this Offering Circular.
<TABLE>
<CAPTION>
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
As of March 31, 2000
(In thousands, except share data)
Historical Pro Forma
Sunbeam Adjustments Pro Forma
------- ----------- ---------
<S> <C> <C> <C>
ASSETS
Current assets
Cash and cash equivalents $ 23,098 $ $ 23,098
Receivables, net 361,130 361,130
Inventories 539,544 539,544
Prepaid expenses, deferred income taxes
and other current assets 68,205 68,205
---------- ----------- -----------
Total current assets 991,977 991,977
Property, plant and equipment, net 452,603 452,603
Trademarks, tradenames, goodwill and
other, net 1,795,360 (20,422)(c) 1,794,113
4,550 (b)
14,625 (b)
---------- ----------- -----------
$3,239,940 $ (1,247) $3,238,693
========== =========== ===========
LIABILITIES AND SHAREHOLDERS' (DEFICIENCY) EQUITY
Current liabilities:
Short-term debt and current portion
of long-term debt 141,325 $ $ 141,325
Accounts payable 217,940 217,940
Other current liabilities 290,606 290,606
---------- ----------- -----------
Total current liabilities 649,871 649,871
Long-term debt, less current portion 2,308,592 (828,600)(c) 1,792,440
300,207 (c)
6,500 (b)
5,741 (c)
Other long-term liabilities 237,224 237,224
Deferred income taxes 111,235 (5,741)(c) 105,494
Minority interest 1,105 1,105
Shareholders' equity (deficiency):
Common stock (107,422,500
historical and 146,160,500
pro forma, issued and
outstanding) 1,074 342 (c) 1,461
45 (b)
Additional paid-in capita1 1,179,630 110,932 (c) 1,303,192
(1,950)(b)
14,580 (b)
Accumulated deficit (1,168,916) 396,697 (c) (772,219)
Accumulated other comprehensive loss (79,875) (79,875)
---------- ----------- -----------
Total shareholders'
(deficiency) equity (68,087) 520,646 452,559
---------- ----------- -----------
$3,239,940 $ (1,247) $3,238,693
========== =========== ===========
Book value per common share $ (0.63) $ $ 3.10
========== =========== ===========
See Notes to Unaudited Pro Forma Condensed Consolidated Financial Statements.
</TABLE>
<TABLE>
<CAPTION>
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
For the Year Ended December 31, 1999
(In thousands, except per share data)
Pro Forma Pro Forma
Adjustments Adjustments
Historical Coleman Exchange
Sunbeam Merger Offer Pro Forma
---------- ------------ ------------ ---------
<S> <C> <C> <C> <C>
Net sales $ 2,397,979 $ $ $ 2,397,979
Cost of goods sold 1,793,360 1,460(e) 1,794,820
Amortization of goodwill and
identifiable intangibles 49,797 2,538(e) 52,335
Selling, general and
administrative expense 651,426 48(e) 651,474
----------- ------------ ----------- ------------
Operating loss (96,604) (4,046) (100,650)
Interest expense 200,181 7,886(e) (1,197)(a) 207,587
717 (b)
Other expense, net (3,599) (3,599)
------------ ------------ ---------- -----------
Loss from continuing
operations before income
taxes, minority interest
and extraordinary charge (293,186) (11,932) 480 (304,638)
Income tax benefit (8,824) - (8,824)
Minority interest 15,157 (14,353)(e) - 804
----------- --------- -------- ----------
(Loss) earnings from
continuing operations
before extraordinary gain $ (299,519) $ 2,421 $ 480 $(296,618)
=========== ========== ========= ==========
Loss per share:
Loss from continuing
operations before
extraordinary gain $ (2.97) $ (2.03)
============ ===========
Weighted average common
shares outstanding 100,744 6,676(e) 38,738(d) 146,158
============ ========== ========= ===========
Ratio of earnings to
fixed charges - (f) - (f)
========= ===========
See Notes to Unaudited Pro Forma Condensed Consolidated Financial Statements.
</TABLE>
<TABLE>
<CAPTION>
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
For the Three Months Ended March 31, 2000
(In thousands, except per share data)
Historical Pro Forma
Sunbeam Adjustments Pro Forma
<S> <C> <C> <C>
Net sales $ 539,053 $ $ 539,053
Cost of goods sold 405,764 405,764
Amortization of goodwill and identifiable intangibles 13,383 13,383
Selling, general and administrative expense 122,450 122,450
---------- ----------- -----------
Operating loss (2,544) (2,544)
Interest expense 52,487 (555)(a) 52,102
170 (b)
Other expense, net 2,611 2,611
--------- --------- ---------
(Loss) earnings from continuing operations before
income taxes, minority interest and extraordinary
charge (57,642) 385 (57,257)
Income tax provision 1,667 1,667
Minority interest 91 91
---------- --------- ----------
(Loss) earnings from continuing operations
before extraordinary charge $ (59,400) $ 385 $ (59,015)
========== ========= ===========
Loss per share:
Loss from continuing operations before
extraordinary charge $ (0.55) $ (0.40)
=========== =========
Weighted average common shares outstanding 107,056 38,738(d) 145,794
=========== ======== =========
Ratio of earnings to fixed charges - (f) - (f)
========== ==========
See Notes to Unaudited Pro Forma Condensed Consolidated Financial Statements.
</TABLE>
NOTES TO UNAUDITED PRO FORMA CONDENSED
CONSOLIDATED FINANCIAL STATEMENTS
As of March 31, 2000 and for the Year Ended December 31,
1999 and the Three Months ended March 31, 2000
(In thousands, except percentages, share data and as noted)
(a) Represents the adjustment to interest expense associated with the
borrowings to consummate the exchange offer, net of the reduction
associated with satisfying the zero debentures. This adjustment to
interest expense is derived as follows:
<TABLE>
<CAPTION>
Year ended Three months ended
December 31, 1999 March 31, 2000
----------------- --------------
<S> <C> <C>
Interest expense for secured no
(including amortization of original
issue discount of $4.1 million and
$1.0 million, respectively, and an
11.0% interest rate) $ 37,092 $ 9,270
Interest expense related to revolver
borrowings to fund transaction
costs and Alternative Minimum
Tax ("AMT") payments (1) 1,096 282
Less: Historical interest expense
related to the zero debentures (39,385) (10,107)
----------- ----------
Net adjustment to interest expense $ (1,197) $ (555)
=========== ==========
</TABLE>
(1) This additional interest expense results from borrowings under
Sunbeam's revolving credit facility to fund the transaction costs of
$6.5 million and AMT tax payments of $5.741 million arising from the
gain on the transaction. (See Note (d) below.) The incremental interest
was calculated using the average interest rates for the periods, 8.95%
for the year ended December 31, 1999 and 9.22% for the three months
ended March 31, 2000. The effect on operations of a 1/8% variance in
interest would be approximately $15 thousand for the year ended
December 31, 1999 and $4 thousand for the three months ended March 31,
2000, respectively. (See Note (b) below.)
(b) Reflects incremental interest expense as a result of the amortization
of transaction costs related to the exchange offer.
Transaction costs resulting from the exchange offer are expected to
result in additional borrowings under Sunbeam's revolving credit
facility in the amount of $6.5 million and are summarized as follows:
Balance Sheet Classification
---------------------------------------------
Additional Deferred
Total Paid-in Capital Financing Costs
---------------------------------------------
Advisory fees $ 5,000 $ 1,500 $ 3,500
Legal expenses 1,000 300 700
Accounting fees and other 500 150 350
---------------------------------------------
Total $ 6,500 $ 1,950 $ 4,550
=============================================
The allocation of transaction costs between Additional Paid-in Capital and
Deferred Financing Costs is based upon the estimated respective market
values of the common stock and secured notes at the date of issuance.
The pro forma adjustment to interest expense relating to deferred financing
costs is derived as follows:
<TABLE>
<CAPTION>
Year ended Three months ended
December 31, 1999 March 31, 2000
----------------- --------------
<S> <C> <C>
Amortization of deferred financing costs
associated with the secured notes
(straight-line amortization over the
11-year term of the secured notes) $ 414 $ 103
Amortization of fee payable to senior lenders(1) 1,003 251
Less: Historical amortization of deferred
financing costs related to the zero debentures (700) (184)
--------------- --------------
Net adjustment to interest expense $ 717 $ 170
=============== ==============
</TABLE>
(1) In consideration of their agreement to consent to the April 14,
2000 amendment to Sunbeam's senior credit agreement, and to grant a
waiver allowing the incurrence of the indebtedness represented by the
secured notes and permitting the grant of the second-priority lien on
the collateral for the secured notes, Sunbeam has agreed to issue to
the lenders under its senior credit agreement a risk adjustment fee
of up to 4.5 million shares of Sunbeam common stock. The amount of
the payment to Sunbeam's senior lenders will vary depending on the
extent to which zero debenture holders participate in the exchange
offer. The minimum fee payable to the senior lenders will be 2.5
million common shares. This minimum fee will be increased on a
straight-line basis (to a maximum of 4.5 million common shares) for
each $1,000 principal amount at issuance of secured notes issued in
the exchange offer in excess of $162.5 million. In the event that
Sunbeam cannot issue a sufficient number of common shares to satisfy
the risk adjustment fee without first obtaining stockholder approval,
Sunbeam will pay the remaining fee in shares of preferred stock. The
preferred stock will be issued upon such terms and subject to such
rights and preferences as to represent substantially the same
economic interest in Sunbeam as the common shares that would have
been issued, but for the stockholder approval requirement. This fee
is valued at $14.625 million ($45 thousand in common stock and
$14,580 thousand allocated to additional paid-in capital) based upon
the assumed value of the common stock at the date of issue of $3.25
per share, and will be amortized on a straight-line basis to interest
expense over the remaining term of the senior credit agreement
(approximately 6.5 years, through September 30, 2006).
(c) Reflects the new debt issued in connection with the exchange offer,
removal of the carrying value of the zero debentures, including the
remaining carrying value of the deferred financing costs associated
with the zero debentures, allocation of the fair value of the 34.2
million shares of common stock issued to par value ($342 thousand)
and additional paid-in capital ($110,932 thousand) and the resulting
extraordinary gain which is reflected as an increase to equity as
detailed below:
Value of secured notes and common stock issued:
Number of shares of common stock issued 34,238
Estimated market price on date of offer $ 3.25
------------
Value of common stock $ 111,274
Secured notes, principal at maturity $ 348,422
Original issue discount (48,215)
-------------
Value of secured notes 300,207
----------
Total value of debt and equity
issued: 411,481
Net book value of debt exchanged
Book value of zero debentures
at March 31, 2000 $ 828,600
Less: Unamortized deferred
financing costs (20,422)
----------
Net book value of zero debentures
at March 31, 2000 808,178
----------
Extraordinary gain $ 396,697
==========
Fractional shares of Sunbeam common stock will not be issued in the
exchange offer. Rather, any fractional share to which a holder of
zero debentures would otherwise be entitled will be rounded up or
down to the nearest whole number of shares. "Fractional" secured
notes will not be issued in the exchange offer (secured notes will be
issued in denominations of $1,000 principal amount at maturity and
whole number multiples of $1,000 principal amount at maturity).
Instead, any tendering holder of zero debentures who would otherwise
be entitled to receive a fractional secured note will receive, at
Sunbeam's election, cash (without interest) or shares of Sunbeam
common stock (rounded up or down to the nearest whole number of
shares) having a value equal to the principal amount at issuance of
the fractional secured note. In the event that Sunbeam elects to
issue shares of common stock in satisfaction of fractional secured
notes, the number of shares a holder of zero debentures receives will
be based on the average closing price of the Sunbeam common stock for
the ten trading days immediately preceding the date of issuance.
The exchange offer will create a current tax liability of $5.741 million
for AMT. The effective AMT tax rate is approximately 2% as Sunbeam
has AMT net operating loss carryovers that reduce the statutory rate
of 20%. The payment of AMT taxes will result in additional borrowings
under the senior credit agreement of approximately $5.741 million.
(d) Represents the increase in the weighted average shares of Sunbeam
common stock outstanding relating to the approximately 34.2 million
shares of Sunbeam common stock to be issued in connection with the
exchange offer and the 4.5 million shares to be issued to the senior
lenders as a fee for their consent and approval of certain amendments
and waivers under the senior credit agreement.
(e) Represents the pro forma effects associated with completing the
Coleman merger and acquiring the remaining Coleman shares
outstanding. The Coleman merger was completed in January 2000. The
total consideration was comprised of the following:
Cash $ 88,540
Sunbeam common stock 43,788
Sunbeam warrants 13,621
----------
$ 145,949
==========
The portion of the consideration consisting of 6.676 million shares of
Sunbeam common stock was valued at $6.75 per share, the closing price
of Sunbeam's common stock on October 21, 1998, the date Sunbeam
announced the terms of a memorandum of understanding to settle
certain claims brought by Coleman stockholders challenging the
Coleman merger. The warrants to purchase approximately 4.98 million
shares of Sunbeam common stock at $7 per share are valued at $3.04
per share, the same value ascribed to the warrant issued to a
subsidiary of MacAndrews & Forbes Holdings, Inc. in August 1998 based
on a valuation performed by an independent consultant. The pro forma
allocation of the consideration is based on independent appraisals
prepared in connection with the Coleman acquisition. Allocation of
the total consideration and its effect on the pro forma condensed
consolidated financial statements are as follows:
<TABLE>
<CAPTION>
Year Ended December 31, 1999
Pro Forma Effect on:
-------------------------------------------------------------------
Amortization Selling,
of Goodwill General
Cost of and and
Goods Identifiables Administrative
Life Allocation Sold Intangibles Expense
---- ---------- ------- ------------- --------------
<S> <C> <C> <C> <C> <C>
Inventories - $ 4,280
Property, plant and
equipment 7.9 years 11,587 $ 1,460 $ 48
Trademarks 40 years 69,980 $ 1,750
Assembled workforce 8 years 3,220 403
Patents 8 years 1,400 175
Minority interest - 65,825
Deferred income taxes - (18,823)
Postretirement
benefit liability - 100
Goodwill 40 years 8,380 210
---------------------------------------------------------
$ 145,949 $ 1,460 $ 2,538 $ 48
=========================================================
</TABLE>
No pro forma adjustments are presented for the period ended March 31,
2000 since the transaction occurred at the beginning of the period.
In deriving the above pro forma adjustments, Sunbeam assumed that the
fair values used in connection with the acquisition of the initial
79% interest in Coleman were reasonable approximations of the
appropriate fair values to be used in connection with the second half
of this step acquisition. Accordingly, the purchase price amounts
allocated above to inventories, property, plant and equipment,
trademarks, assembled workforce and patents reflect 21% of the fair
values used in the acquisition of the initial 79% interest of
Coleman.
The pro forma adjustment to deferred income taxes represents the
recording in purchase accounting of the deferred income tax effects
of the temporary differences which result from the allocation of
$90.5 million of the consideration to tangible and identifiable
intangible assets. The deferred income taxes have been established
based on an estimated federal, state and foreign income tax rate of
approximately 22%.
The pro forma adjustments also reflect:
* additional interest expense of $7.886 million for the year ended
December 31, 1999 on the $88.5 million portion of the consideration
which was funded from Sunbeam's term and revolving credit
facilities at an average interest rate of 8.91% (the rate in
effect at December 31, 1999). The effect on operations of a 1/8%
variance in interest rates on these borrowings would be
approximately $110 thousand per year.
* the elimination of the minority interest in the loss on Coleman in
the pro forma statement of operations of $14.353 million.
* inclusion of the 6.676 million shares of Sunbeam common stock issued
in connection with the Coleman merger in the weighted average
common shares outstanding. The warrants that were issued in
connection with the Coleman merger have not been included, as they
would be anti-dilutive.
(f) In computing the ratio of earnings to fixed charges: (a) earnings
represents income (loss) from continuing operations before income
taxes and fixed charges, exclusive of capitalized interest; and (b)
fixed charges consist of interest expense, capitalized interest and
the estimated interest portion of rental expense. For the fiscal year
ended December 31, 1999 and the three months ended March 31, 2000,
historical earnings were insufficient to cover fixed charges by
$294.5 million and $57.9 million, respectively. For the fiscal year
ended December 31, 1999 and the three months ended March 31, 2000, on
a pro forma basis, earnings were insufficient to cover fixed charges
by $306.0 million and $57.5 million, respectively.
SELECTED HISTORICAL FINANCIAL DATA
The following is a summary of certain financial information relating
to Sunbeam. This summary should be read in conjunction with the unaudited
condensed consolidated financial statements of Sunbeam and the related
notes set forth in our First Quarter 2000 Quarterly Report on Form 10-Q and
the audited consolidated financial statements of Sunbeam and the related
notes set forth in our 1999 Annual Report on Form 10-K, each of which is
incorporated herein by reference. Copies of our First Quarter 2000
Quarterly Report on Form 10-Q and 1999 Annual Report on Form 10-K are
enclosed with this Offering Circular. All amounts in the table are
expressed in millions, except per share data.
<TABLE>
<CAPTION>
FISCAL YEARS ENDED
-------------------------------------------------------------------
DECEMBER 31, DECEMBER 29, DECEMBER 28, DECEMBER 31,
1995 1996 (1) 1997 (2) 1998 (3)(4)
-------------- ---------------- ------------- --------------
STATEMENT OF OPERATIONS DATA
<S> <C> <C> <C> <C>
Net sales............................................... $ 1,016.9 $ 984.2 $ 1,073.1 $ 1,836.9
Cost of goods sold...................................... 809.1 896.9 831.0 1,781.9
Selling, general and administrative expense............. 137.5 221.7 152.6 725.0
Restructuring, and asset impairment (benefit) charges... -- 110.1 (14.6) --
-------------- ---------------- ------------- -------------
Operating earnings (loss)............................... $ 70.3 $ (244.5) $ 104.1 $ (670.0)
============== ================ ============= =============
Earnings (loss) from continuing operations before
extraordinary charge................................ $ 37.6 $ (170.2) $ 52.3 $ (775.5)
Earnings from discontinued operations,
net of taxes (7).................................... 12.9 0.8 -- --
Loss on sale of discontinued operations,
net of taxes (7).................................... -- (39.1) (14.0) --
Extraordinary charge from early extinguishments of
debt................................................ -- -- -- (122.4)
-------------- ---------------- ------------- -------------
Net earnings (loss) .................................... $ 50.5 $ (208.5) $ 38.3 $ (897.9)
============== ================ ============= =============
Ratio of earnings to fixed charges (8).................. 4.7x -- 7.2 x --
PER SHARE DATA:
Weighted average common shares outstanding:
Basic............................................. 81.6 82.9 84.9 97.1
Diluted........................................... 82.8 82.9 87.5 97.1
Earnings (loss) per share from continuing operations
before extraordinary charge:
Basic............................................. $ 0.46 $ (2.05) $ 0.62 $ (7.99)
Diluted .......................................... 0.45 (2.05) 0.60 (7.99)
Net earnings (loss) per share:
Basic............................................. 0.62 (2.51) 0.45 (9.25)
Diluted........................................... 0.61 (2.51) 0.44 (9.25)
Cash dividends declared per share....................... 0.04 0.04 0.04 0.01
BALANCE SHEET DATA (AT PERIOD END):
Working capital......................................... $ 411.7 $ 359.9 $ 369.1 $ 488.5
Total assets............................................ 1,158.7 1,059.4 1,058.9 3,405.5
Long-term debt, less current portion.................... 161.6 201.1 194.6 2,142.4
Shareholders' equity (deficiency)....................... 601.0 415.0 472.1 260.4
</TABLE>
<TABLE>
<CAPTION>
[TABLE CONTINUED]
THREE MONTHS ENDED
---------------- --------------------------------
DECEMBER 31, MARCH 31, MARCH 31,
1999 (5) 1999 (6) 2000
-------------- ---------------- -------------
STATEMENT OF OPERATIONS DATA
<S> <C> <C> <C>
Net sales............................................... $ 2,398.0 $ 523.9 $ 539.1
Cost of goods sold...................................... 1,793.4 397.5 405.8
Selling, general and administrative expense............. 701.2 141.2 135.8
Restructuring, and asset impairment (benefit) charges... -- -- --
-------------- ---------------- -----------
Operating earnings (loss)............................... $ (96.6) $ (14.8) $ (2.5)
============== --============== ===========
Earnings (loss) from continuing operations before
extraordinary charge................................ $ (299.5) $ (60.7) $ (59.4)
Earnings from discontinued operations,
net of taxes (7).................................... -- -- --
Loss on sale of discontinued operations,
net of taxes (7).................................... -- -- --
Extraordinary charge from early extinguishments of
debt................................................ -- -- --
-------------- ---------------- -----------
Net earnings (loss) .................................... $ (299.5) $ (60.7) $ (59.4)
============== --============== ===========
Ratio of earnings to fixed charges (8).................. -- -- --
PER SHARE DATA:
Weighted average common shares outstanding:
Basic............................................. 100.7 100.7 107.1
Diluted........................................... 100.7 100.7 107.1
Earnings (loss) per share from continuing operations
before extraordinary charge:
Basic............................................. $ (2.97) $ (0.60) $ (0.55)
Diluted .......................................... (2.97) (0.60) (0.55)
Net earnings (loss) per share:
Basic............................................. (2.97) (0.60) (0.55)
Diluted........................................... (2.97) (0.60) (0.55)
Cash dividends declared per share....................... -- -- --
BALANCE SHEET DATA (AT PERIOD END):
Working capital......................................... $ 311.7 $ 504.0 $ 342.1
Total assets............................................ 3,132.3 3,399.1 3,239.9
Long-term debt, less current portion.................... 2,164.0 2,208.0 2,308.6
Shareholders' equity (deficiency)....................... (59.3) 190.2 (68.1)
</TABLE>
-------------------------
(1) Includes special charges of $239.2 million before taxes. See Notes 12
and 13 of the Notes to Sunbeam's Consolidated Financial Statements set
forth in Sunbeam's 1999 Annual Report on Form 10-K, which is
incorporated herein by reference.
(2) Includes the reversal of $28.0 million pre-tax liabilities no longer
required and of $13.3 million tax liabilities no longer required.
(3) On March 30, 1998, Sunbeam acquired approximately 81% of the then
outstanding shares of common stock of Coleman. On April 6, 1998,
Sunbeam completed the cash acquisitions of First Alert and Signature
Brands. The acquisitions were accounted for under the purchase method
of accounting and, accordingly, the financial position and results of
operations of each acquired entity is included from the applicable
date of acquisition in the Consolidated Financial Statements of
Sunbeam set forth in Sunbeam's 1999 Annual Report on Form 10-K, which
is incorporated herein by reference.
(4) Includes charges of $70.0 million related to the issuance of warrants,
$62.5 million related to the write-off of goodwill, $122.4 million
related to the early extinguishments of debt, $39.4 million related to
fixed asset impairments, $34.4 million of compensation expense and
severance recorded in connection with employment agreements with
Sunbeam's former Chairman and Chief Executive Officer and two other
former senior officers, $95.8 million related to excess and obsolete
inventory reserves, $28.1 million related to purchase accounting
adjustments, $20.4 million of restatement related expenses, $10.0
million related to Year 2000 and systems initiatives expenses and $8.1
million of other significent and unusual charges. See Notes 2, 3, 8,
11 and 17 of Notes to Sunbeam's Consolidated Financial Statements set
forth in Sunbeam's 1999 Annual Report on Form 10-K, which is incorporated
herein by reference.
(5) Includes an asset impairment charge of $52.0 million, fixed asset and
inventory charges of $15.0 million, and $27.3 million in charges
related to Year 2000 and systems initiatives expenses. Results for the
year also include $26.2 million of other significant and unusual
charges. See the section of Sunbeam's 1999 Annual Report on Form 10-K
captioned "Management's Discussion and Analysis of Financial Condition
and Results of Operations - Significant and Unusual Charges," which is
incorporated herein by reference.
(6) Includes $8.1 million in charges related to Year 2000 and systems
initiatives expenses.
(7) Represents earnings from Sunbeam's furniture business, net of taxes,
and the estimated loss on disposal.
(8) In computing the ratio of earnings to fixed charges: (a) earnings
represent income (loss) from continuing operations before income taxes
and fixed charges, exclusive of capitalized interest; and (b) fixed
charges consist of interest expense, capitalized interest and the
estimated interest portion of rental expense. For the fiscal years
ended December 29, 1996, December 31, 1998 and December 31, 1999 and
the three months ended March 31, 1999 and March 31, 2000, historical
earnings were insufficient to cover fixed charges by $262.2 million,
$797.1 million, $294.5 million, $57.9 million and $57.9 million,
respectively. For the fiscal year ended December 31, 1999 and the
three months ended March 31, 2000, on a pro forma basis, earnings were
insufficient to cover fixed charges by $306.0 million and $57.5
million, respectively.
DESCRIPTION OF SECURED NOTES
GENERAL
The following summary describes the material terms applicable to the
11% Senior Secured Subordinated Notes due 2011 (the "Secured Notes") that
Sunbeam proposes to give you in the exchange offer, including the material
provisions of the indenture under which the Secured Notes will be issued
and the security documents governing the second-priority security interest
in the Collateral for the Secured Notes. The following summary does not
restate the indenture and the Second Lien security documents in their
entirety. Accordingly, we urge you to read the indenture and the Second
Lien security documents carefully in their entirety because they, and not
this summary, define your rights as a Holder of the Secured Notes. Copies
of the indenture and the Second Lien security documents are available on
request from Sunbeam. You can find the definitions of certain terms used in
this summary in the section of this Offering Circular captioned "- Certain
Definitions." In this summary, the term "Sunbeam" refers only to Sunbeam
Corporation and not to any of its Subsidiaries. Certain defined terms used
in this summary but not defined below under the caption "- Certain
Definitions" have the meanings assigned to them in the indenture.
Sunbeam will issue the Secured Notes under an indenture between
itself and The Bank of New York, as trustee, in a private transaction that
is not subject to the registration requirements of the Securities Act. The
terms of the Secured Notes include those stated in the indenture and those
made part of the indenture by reference to the Trust Indenture Act.
The registered Holder of a Secured Note will be treated as the owner
of the Secured Note for all purposes. Only registered Holders have rights
under the indenture.
For a comparison of the terms applicable to the Secured Notes and the
Zero Debentures, please see the section of this Offering Circular captioned
"- Comparison of Zero Debentures and Secured Notes."
BRIEF DESCRIPTION OF THE SECURED NOTES
The Secured Notes are general obligations of Sunbeam, secured by a
second-priority Lien that is junior and subordinated to the First Lien and
also subject to other Permitted Liens on the Collateral consisting of the
Pledged Subsidiary Stock, as described in the section of this Offering
Circular captioned "- Second-Priority Security Interest." The Secured Notes
are:
o junior in right of payment to all existing and future Senior Debt
of Sunbeam, including Sunbeam's Obligations under the Senior
Credit Agreement;
o senior in right of payment to any subordinated Debt of Sunbeam,
including the Zero Debentures, and, to the extent of the value of
the Collateral, senior to any outstanding unsecured Debt of
Sunbeam, including trade payables; and
o effectively subordinated in right of payment to all existing and
future Debt of the Subsidiaries.
Although we are currently subject to a number of restrictive covenants
under our Senior Credit Agreement, the Secured Notes do not contain any
financial covenants or restrictions on the payment of dividends, the
incurrence of indebtedness or the issuance or repurchase of securities of
Sunbeam. Except as described in the sections of this Offering Circular
captioned "- Repurchase at the Option of Holders - Change of Control" and
"- Asset Sales" and "- Merger and Consolidation," the indenture contains no
covenants or other provisions to protect Holders of the Secured Notes in
the event of a highly leveraged transaction, a Change of Control of Sunbeam
or any other transaction that may adversely affect Secured Note Holders.
PRINCIPAL, MATURITY AND INTEREST
The indenture provides for the issuance by Sunbeam of Secured Notes
with an unlimited maximum aggregate principal amount at maturity. Sunbeam
will initially issue Secured Notes in denominations of $1,000 and integral
multiples of $1,000. The Secured Notes will mature on June 15, 2011.
Interest on the Secured Notes will accrue at the rate of 11% per
annum and will be payable semi-annually in arrears on June 15th and
December 15th of each year (each, an "Interest Payment Date"), as follows:
o On December 15, 2000 and June 15, 2001, 15% of the aggregate
interest payable on the Secured Notes will be paid in cash, to
be distributed pro rata to the Holders, with the remaining
interest to be an accretion of original issue discount;
o On December 15, 2001 and June 15, 2002, 30% of the aggregate
interest payable on the Secured Notes will be paid in cash, to
be distributed pro rata to the Holders, with the remaining
interest to be an accretion of original issue discount; and
o After June 15, 2002, 100% of the aggregate interest payable
on the Secured Notes will be paid in cash.
Sunbeam will make each interest payment to the Holders of record on the
immediately preceding June 1st and December 1st.
Interest on the Secured Notes will accrue from the Issue Date or, if
interest has already been paid, from the date it was most recently paid.
Interest will be computed on the basis of a 360-day year comprised of
twelve 30-day months.
PAYING AGENT AND REGISTRAR FOR THE SECURED NOTES
The Trustee will initially act as paying agent and registrar for the
Secured Notes. Sunbeam may change the paying agent or registrar without
prior notice to the Holders, and Sunbeam or any of its Subsidiaries may act
as paying agent or registrar. Sunbeam will pay principal (and premium, if
any) and interest on the Secured Notes at the office of the paying agent,
initially the Trustee, in the Borough of Manhattan in the City of New York,
State of New York. In addition, in the event the Secured Notes do not
remain in book-entry form, interest may be paid, at Sunbeam's option, by
wire transfer or check mailed to the registered addresses of the Holders as
shown on the note register. The Secured Notes will be treated as a single
class of securities under the indenture.
TRANSFER AND EXCHANGE
A Holder may transfer or exchange Secured Notes in accordance with
the indenture. The registrar and the Trustee may require a Holder to
furnish appropriate endorsements and transfer documents in connection with
a transfer of Secured Notes. Holders will be required to pay all taxes due
on transfer. Sunbeam is not required to transfer or exchange any Secured
Note selected for redemption. Also, Sunbeam is not required to transfer or
exchange any Secured Note for a period of 15 days before a selection of
Secured Notes to be redeemed.
OPTIONAL REDEMPTION
At any time prior to June 15, 2003, Sunbeam may on any one or more
occasions redeem up to 35% of the aggregate principal amount of Secured
Notes issued under the indenture at a redemption price of 111% of the
aggregate accreted value of the Secured Notes redeemed, plus accrued and
unpaid interest to the redemption date, with the Net Cash Proceeds of one
or more Equity Offerings; provided that:
(1) at least 65% of the aggregate principal amount of the Secured
Notes originally issued under the indenture remain outstanding immediately
after the occurrence of such redemption (excluding Secured Notes held by
Sunbeam and its Subsidiaries); and
(2) the redemption occurs within 90 days of the date of the closing
of the Equity Offering.
Except pursuant to the preceding paragraph, the Secured Notes will
not be redeemable at Sunbeam's option prior to June 15, 2003.
After June 15, 2005, Sunbeam may redeem all or a part of the
Secured Notes upon not less than 45 nor more than 60 days' notice, at the
redemption prices (expressed as percentages of accreted value) set forth
below plus accrued and unpaid interest on the Secured Notes redeemed to the
applicable redemption date, if redeemed during the twelve-month period
beginning on June 15 of the years indicated below:
YEAR PERCENTAGE
2005......................................................... 105.500%
2006......................................................... 103.667%
2007......................................................... 101.833%
2008 and thereafter.......................................... 100.000%
The terms of the Senior Credit Agreement would not currently permit
Sunbeam to exercise its optional redemption rights with respect to the
Secured Notes.
MANDATORY REDEMPTION
Sunbeam is not required to make mandatory redemption or sinking fund
payments with respect to the Secured Notes.
SECOND-PRIORITY SECURITY INTEREST
All of the Obligations of Sunbeam under the Secured Notes and the
related indenture will be secured by a second-priority Lien that is junior
and subordinated to the First Lien and also subject to other Permitted
Liens on the Collateral consisting of the Pledged Subsidiary Stock.
Following such time as all Obligations under the Senior Credit
Agreement have been paid in full in cash or other payment satisfactory to
the Senior Lenders and all lending commitments thereunder have been
terminated, upon the occurrence of an Event of Default and the acceleration
of Sunbeam's obligation to repay the principal of, and accrued but unpaid
interest on, the Secured Notes, the Trustee for the Secured Notes may take
all actions it deems necessary or appropriate, including, but not limited
to, foreclosing upon the Collateral in accordance with the Second Lien
security documents and applicable law. Until such time as all Obligations
under the Senior Credit Agreement have been paid in full in cash or other
payment satisfactory to the Senior Lenders and all lending commitments
thereunder have been terminated, however, the right of the Trustee and/or
the Holders of the Secured Notes to foreclose on, or otherwise exercise any
rights and remedies in respect of, the Collateral is subject to the
complete standstill in favor of the Senior Lenders described below. Subject
to any applicable limitations contained in the Senior Credit Agreement, the
proceeds received from the sale of any Collateral that is the subject of a
foreclosure or collection suit will be applied first to pay the expenses of
such foreclosure or collection suit and amounts then payable to the Trustee
and thereafter to pay the principal of and interest on the Secured Notes.
Subject to the standstill in favor of the Senior Lenders, the Trustee has
the power to institute and maintain such suits and proceedings as it may
deem expedient to prevent impairment of, or to preserve or protect its and
the Holders' interest in, the Collateral.
Unless otherwise agreed by any refinancing lender, the junior lien
position of the Secured Notes and above-described standstill would remain
unchanged with regard to any refinancing of the Senior Credit Agreement and
the First Lien security documents. The Trustee and/or the Holders of the
Secured Notes may nevertheless assert any rights they may have to any
excess proceeds arising from any foreclosure or other such realization on
the Collateral by the First Lien Representative, by any Senior Lender or by
any Representative of the First Lien Representative or any Senior Lender.
There can be no assurance that the Trustee will be able to sell the
Collateral without substantial delays or compromises even after the
standstill has lapsed or that the proceeds obtained from any such sale will
be sufficient to pay all amounts owing to Holders of the Secured Notes. See
"Risk Factors - It is unlikely that you would receive payment in full by
foreclosing on the collateral in the event of a default on the secured
notes." Third parties that have Permitted Liens (including, without
limitation, the Senior Lenders) may have rights and remedies with respect
to the property subject to such Liens that, if exercised, could reduce the
amount of Pledged Subsidiary Stock constituting the Collateral. In
addition, the ability of the Holders to realize upon the Collateral may be
subject to certain bankruptcy law limitations in the event of a bankruptcy.
See "- Certain Bankruptcy Limitations."
The Collateral release provisions of the indenture will require the
release of Collateral from the Second Lien, under circumstances where the
First Lien has been released, as permitted under the Senior Credit
Agreement or by the First Lien Representative, and under certain other
circumstances, without requiring substitution of collateral of equal value.
See "- Possession, Use and Release of Collateral." As described under the
summary of the covenant "Repurchase at the Option of Holders - Asset
Sales," the Net Available Cash (if any) associated with certain Asset
Dispositions may, under specified circumstances and subject to any
applicable limitations contained in the Senior Credit Agreement, be
required to be utilized to make an offer to purchase Secured Notes.
POSSESSION AND USE OF COLLATERAL
Until such time as all Obligations under the Senior Credit Agreement
have been paid in full in cash or other payment satisfactory to the Senior
Lenders and all lending commitments thereunder have been terminated, the
First Lien Representative shall, subject to the terms and conditions of the
First Lien security documents, remain in possession and retain exclusive
control of the Collateral securing the Secured Notes, including the Net
Available Cash resulting from any sale, transfer or other disposition (a
"Transfer") of all or a portion of the Collateral or the proceeds of any
foreclosure action against the Collateral. Following such time as all
Obligations under the Senior Credit Agreement have been paid in full in
cash or other payment satisfactory to the Senior Lenders and all lending
commitments thereunder have been terminated, the Trustee shall, subject to
the terms and conditions of the Second Lien security documents, take
possession and control of the Collateral.
Notwithstanding the foregoing, except as otherwise provided under the
Senior Credit Agreement (until such time as all Obligations thereunder have
been paid in full in cash or other payment satisfactory to the Senior
Lenders and all lending commitments thereunder have been terminated) or
unless Sunbeam's obligation to pay the principal of, and accrued but unpaid
interest on, the Secured Notes shall have been accelerated, as provided
below under "- Defaults," Sunbeam shall be entitled to:
(1) receive and use all cash distributions in respect of the
Collateral consisting of the Pledged Subsidiary Stock for general corporate
purposes, including any cash distributions in respect of any Equity
Interest received in connection with any Transfer of Pledged Subsidiary
Stock;
(2) receive and use for general corporate purposes any cash interest
payments on any deferred payment of principal under any promissory note,
installment receivable or other arrangement received in connection with any
Transfer of Pledged Subsidiary Stock;
(3) vote the Pledged Subsidiary Stock, including any Equity Interest
received in connection with any Transfer of Pledged Subsidiary Stock; and
(4) give consents, approvals, waivers and ratifications in respect of
any Pledged Subsidiary Stock, including any Equity Interest received in
connection with any Transfer of Pledged Subsidiary Stock.
TRANSFER OF COLLATERAL; RELEASE OF SECOND LIEN
Until such time as all Obligations under the Senior Credit Agreement
have been paid in full in cash or other payment satisfactory to the Senior
Lenders and all lending commitments thereunder have been terminated,
Sunbeam shall be entitled to Transfer all or a portion of the Collateral
consisting of the Pledged Subsidiary Stock to the extent that any such
Transfer is permitted under the Senior Credit Agreement or approved by the
requisite percentage of Senior Lenders and provided the First Lien is to be
released as to the Collateral so Transferred. Notwithstanding the
foregoing, in the event that Sunbeam Transfers all or a portion of the
Collateral as provided above and receives in exchange therefor cash and/or
Equity Interests that are to become subject to the First Lien, then such
cash and/or Equity Interests shall also become subject to the Second Lien
in the same manner and to the same extent as the Pledged Subsidiary Stock.
Upon any Transfer of any of the Collateral as provided above (other than
any Transfer of the Collateral pursuant to a deferral, increase, renewal,
extension, replacement or refunding of, or amendment, modification or
supplement to, the Senior Credit Agreement), including the release of the
First Lien in connection therewith, any security interest in such
Collateral securing the repayment of the Secured Notes or securing the
performance of Sunbeam under the indenture shall automatically cease and
terminate, subject only to the provisions of the Senior Credit Agreement
and the indenture governing the use of proceeds (if any) received in
connection with any such Transfer. See "- Deposit; Use and Release of Trust
Moneys" and "- Repurchase at the Option of Holders - Asset Sales." Upon the
receipt of written notice from Sunbeam or the First Lien Representative of
a Transfer of any of the Collateral or a proposed Transfer of any of the
Collateral, which notice shall state that the Collateral subject to such
Transfer has been or will be released from the First Lien, the Trustee
shall be authorized and directed to execute and deliver to Sunbeam,
concurrently with the closing in the case of a proposed Transfer of such
Collateral, at Sunbeam's expense, such documents as Sunbeam or the First
Lien Representative shall reasonably request (which documents shall be prepared
by the Company or the First Lien Representative) to evidence such release of
the Second Lien with respect to the Collateral subject to such Transfer. In
the event that the First Lien is released as to a particular item or items
of Collateral in contemplation of a proposed Transfer thereof and, whether
as a result of Sunbeam's failure to Transfer such item or items of
Collateral or for any other reason, the First Lien is subsequently
reinstated as to such Collateral, then the Second Lien shall also be
reinstated in the same manner and to the same extent applicable prior to
such release. A release of Collateral in accordance with the procedures
described immediately above will not be deemed to impair the security under
the indenture in contravention of the provisions thereof, as contemplated
by Section 314(d) of the Trust Indenture Act.
Following such time as all Obligations under the Senior Credit
Agreement have been paid in full in cash or other payment satisfactory to
the Senior Lenders and all lending commitments thereunder have been
terminated, Sunbeam shall be entitled to Transfer all or a portion of the
Collateral consisting of the Pledged Subsidiary Stock upon compliance with
the condition that Sunbeam deliver to the Trustee a notice from Sunbeam
requesting the release of the Released Interests (as defined below), which
notice shall:
(1) describe the proposed items of Collateral to be released (the
"Released Interests"),
(2) state that the consideration to be received is at least equal to
the fair market value of the Released Interests,
(3) state that the Net Available Cash (if any) received from the
Transfer of such Released Interests shall be applied in accordance with
sections of the indenture described under "- Repurchase at the Option of
Holders - Asset Sales" and "- Deposit; Use and Release of Trust Moneys,"
and
(4) confirm that the sale or exchange of, or an agreement to sell or
exchange, such Released Interests, as the case may be, is a bona fide sale
or exchange.
Upon any Transfer of Collateral in compliance with the provisions described
above, the Trustee will release the Released Interests from the Second Lien
and the Second Lien security documents and reconvey the Released Interests
to Sunbeam or the purchaser, subject only to the provisions of the
indenture governing the use of proceeds (if any) received in connection
with any such Transfer. See "- Deposit; Use and Release of Trust Moneys"
and "- Repurchase at the Option of Holders - Asset Sales." A release of
Collateral in accordance with the procedures described immediately above
will not be deemed to impair the security under the indenture in
contravention of the provisions thereof, as contemplated by Section 314(d)
of the Trust Indenture Act.
DEPOSIT; USE AND RELEASE OF TRUST MONEYS
Until such time as all Obligations under the Senior Credit Agreement
have been paid in full in cash or other payment satisfactory to the Senior
Lenders and all lending commitments thereunder have been terminated, the
Net Available Cash (if any) associated with any Transfer of Collateral
shall be used to prepay, repay or repurchase Senior Debt in accordance with
the Senior Credit Agreement or as otherwise permitted by the requisite
percentage of Senior Lenders; provided, however, that to the extent that
all Obligations under the Senior Credit Agreement have been paid in full in
cash or other payment satisfactory to the Senior Lenders and all lending
commitments thereunder have been terminated, such Net Available Cash (if
any) shall be deposited into a securities account maintained by the Trustee
at its corporate trust offices or at any securities intermediary selected
by Sunbeam having a combined capital and surplus of at least $250 million
and having a long-term debt rating of at least "A3" by Moody's Investors
Service, Inc. and at least "A--" by Standard & Poor's Rating Group styled
the "Sunbeam Collateral Account" (such account being the "Collateral
Account") which shall be under the exclusive dominion and control of the
Trustee. All amounts on deposit in the Collateral Account shall be treated
as financial assets and cash funds on deposit in the Collateral Account may
be invested by the Trustee, at the direction of Sunbeam, in Temporary Cash
Investments. Sunbeam will not have the right to withdraw funds or assets
from the Collateral Account except in compliance with the terms of the
indenture and all assets credited to the Collateral Account shall be
subject to a Lien in favor of the Trustee and the Holders. Notwithstanding
the foregoing, at the direction of Sunbeam, as set forth in a notice to the
Trustee, the Trustee shall release any Net Available Cash on deposit in the
Collateral Account in order that Sunbeam may apply such Net Available Cash
in accordance with the provisions of the covenant described below under "-
Repurchase at the Option of Holders - Asset Sales." A release of Net
Available Cash from the Collateral Account in accordance with the
procedures described immediately above will not be deemed to impair the
security under the indenture in contravention of the provisions thereof, as
contemplated by Section 314(d) of the Trust Indenture Act.
CERTAIN BANKRUPTCY LIMITATIONS
Even after such time as all Obligations under the Senior Credit
Agreement have been paid in full in cash or other payment satisfactory to
the Senior Lenders, all lending commitments thereunder have been terminated
and the complete standstill in favor of the Senior Lenders with respect to
the Collateral has lapsed, in the event that Sunbeam's obligation to pay
the principal of, and accrued but unpaid interest on, the Secured Notes
shall have been accelerated, as provided below under "-Defaults," the right
of the Trustee to repossess and dispose of the Collateral would likely be
significantly impaired under applicable bankruptcy law if a bankruptcy
proceeding were to be commenced by or against Sunbeam or any Subsidiary
prior to the Trustee having repossessed and disposed of the Collateral.
Under applicable bankruptcy law, a secured creditor such as the Trustee is
prohibited from repossessing its security from a debtor in a bankruptcy
case, or from disposing of security repossessed from such debtor, without
bankruptcy court approval. Moreover, applicable bankruptcy law permits the
debtor to continue to retain and to use collateral even though the debtor
is in default under the applicable debt instruments, provided that the
secured creditor is given "adequate protection." The meaning of the term
"adequate protection" may vary according to the circumstances, but it is
intended generally to protect the value of the secured creditor's interest
in the collateral and may include cash payments or the granting of
additional security, if and at such times as the court in its discretion
determines, for any diminution in the value of the collateral as a result
of the stay of repossession or disposition or any use of the collateral by
the debtor during the pendency of the bankruptcy case. In view of the lack
of a precise definition of the term "adequate protection" and the broad
discretionary powers of a bankruptcy court, it is impossible to predict how
long payments under the Secured Notes could be delayed following
commencement of a bankruptcy case, whether or when the Trustee could
repossess or dispose of the Collateral or whether or to what extent Holders
of the Secured Notes would be compensated for any delay in payment or loss
of value of the Collateral through the requirement of "adequate
protection."
SUBORDINATION OF SECURED NOTES
The Debt evidenced by the Secured Notes is subordinated to the extent
provided in the indenture to the prior payment in full in cash or other
payment satisfactory to the holders of Senior Debt of all existing and
future Senior Debt. This subordination will not prevent the occurrence of
any Event of Default under the indenture.
Upon any distribution of assets of Sunbeam upon any dissolution,
winding up, voluntary or involuntary bankruptcy, insolvency, liquidation,
reorganization, receivership or similar proceeding relating to Sunbeam or
its property, an assignment for the benefit of creditors or any marshaling
of Sunbeam's assets or liabilities, the holders of Senior Debt will be
entitled to receive payment in full, in cash or other payment satisfactory
to the holders of Senior Debt, of all Obligations relating to the Senior
Debt. The above payment must be made in full before the Holders of Secured
Notes will be entitled to receive any payment of the principal amount at
maturity, issue price, accrued original issue discount, redemption price,
change of control payment, interest, if any, or any other payment in
respect of the Secured Notes. In addition, until all Obligations with
respect to Senior Debt are paid in full in cash or other payment
satisfactory to the holders of Senior Debt, any payment on the Secured
Notes to which the Holders of Secured Notes would otherwise be entitled
will be made to the holders of Senior Debt.
By reason of this subordination, in the event of Sunbeam's
dissolution, winding up, bankruptcy, insolvency, liquidation,
reorganization, receivership or any similar proceeding relating to Sunbeam
or its property, an assignment for the benefit of creditors or any
marshaling of Sunbeam's assets or liabilities, holders of Senior Debt and
other non-subordinated creditors of Sunbeam may receive more, ratably, than
the Holders of the Secured Notes.
In the event that the Secured Notes are declared due and payable
prior to their Stated Maturity by reason of the occurrence of an Event of
Default, then Sunbeam is obligated to notify promptly holders of Senior
Debt of the acceleration. Sunbeam may not pay monies owed on the Secured
Notes until 120 days have passed after the acceleration occurs and may
thereafter pay the Secured Notes only if the terms of the indenture
otherwise permit payment at that time.
Sunbeam also will not make any payment on the Secured Notes if:
(1) a default in any payment obligations on Senior Debt (a "Senior
Debt Payment Default") occurs and is continuing, without regard to any
applicable period of grace, whether at maturity or at a date fixed for
payment or by declaration or otherwise; or
(2) any other default occurs and is continuing on Designated Senior
Debt (a "Designated Senior Debt Default") that permits holders of the
Designated Senior Debt as to which the default relates to accelerate its
maturity and the Trustee receives a notice of the Designated Senior Debt
Default (a "Payment Blockage Notice") from Sunbeam or from a Representative
for any issue of Designated Senior Debt.
If the Trustee receives a Payment Blockage Notice pursuant to clause
(2) above, no new period of payment blockage may be commenced unless and
until 365 days have elapsed since the initial effectiveness of the
immediately prior Payment Blockage Notice. No Designated Senior Debt
Default that existed or was continuing on the date of delivery of any
Payment Blockage Notice to the Trustee will be, or will be made, the basis
for a subsequent Payment Blockage Notice unless the Designated Senior Debt
Default specified in such prior Payment Blockage Notice shall have been
cured or waived for a period of not less than 90 days. However, for
purposes of determining whether a new period of payment blockage can be
commenced, each of the following will constitute a new event of default
under the Senior Debt giving rise to a new period of payment blockage:
(1) any action of Sunbeam or any of its Subsidiaries occurring
subsequent to delivery of the Payment Blockage Notice with respect to such
Designated Senior Debt Default that would give rise to any event of default
under any provision of Senior Debt under which an event of default existed
or was continuing at the time of delivery of the Payment Blockage Notice
with respect to such Designated Senior Debt Default; and
(2) any breach of a financial covenant giving rise to a Senior Debt
Payment Default for a period ending subsequent to the date of delivery of
the Payment Blockage Notice with respect to such Designated Senior Debt
Default.
Notwithstanding that any period of payment blockage has expired or
been terminated, until such time as all Obligations under the Senior Credit
Agreement have been paid in full in cash or other payment satisfactory to
the Senior Lenders and all lending commitments thereunder have been
terminated, the right of the Trustee and/or the Holders of the Secured
Notes to foreclose on, or otherwise exercise any rights or remedies in
respect of, the Collateral will continue to be subject to a complete
standstill in favor of the Senior Lenders. See "- Second-Priority Security
Interest."
Unless the indenture otherwise prohibits the payment or distribution
at the time of such payment or distribution, payments on the Secured Notes
may and will be resumed:
(1) in case of a Senior Debt Payment Default, the earlier of the date
on which the Senior Debt Payment Default is cured or waived in accordance
with the terms of the governing instrument or ceases to exist; and
(2) in case of any Designated Senior Debt Default, the earlier of the
date on which such default is cured or waived in accordance with the terms
of the governing instrument or ceases to exist or 179 days after the date
on which the applicable Payment Blockage Notice is received by the Trustee
if the maturity of such Designated Senior Debt has not been accelerated.
Notwithstanding the foregoing, until such time as all Obligations
under the Senior Credit Agreement have been paid in full in cash or other
payment satisfactory to the Senior Lenders and all lending commitments
thereunder have been terminated, the right of the Trustee and/or the
Holders of the Secured Notes to foreclose on, or otherwise exercise any
rights or remedies with respect to, the Collateral is subject to a complete
standstill in favor of the Senior Lenders. See "- Second-Priority Security
Interest."
The Secured Notes are obligations exclusively of Sunbeam. Since the
operations of Sunbeam are conducted through its Subsidiaries, Sunbeam's
cash flow and the consequent ability to service debt, including the Secured
Notes, are dependent upon the earnings of its Subsidiaries and the
distribution of those earnings to, or upon loans or other payments of funds
by those Subsidiaries to, Sunbeam. The Subsidiaries are separate and
distinct legal entities and have no obligation, contingent or otherwise, to
pay any amount on the Secured Notes or to make any funds available for
payments on the Secured Notes, whether by dividends, loans or other
payments. In addition, the payment of dividends and making of loans and
advances to Sunbeam by its Subsidiaries are subject to statutory and
contractual restrictions, including those under Sunbeam's Senior Credit
Agreement, are contingent upon the earnings of those Subsidiaries and are
subject to various business considerations. Borrowings under the Senior
Credit Agreement are secured by a pledge of the Capital Stock of Sunbeam's
material Subsidiaries and by a security interest in substantially all of
the assets of Sunbeam and its material domestic Subsidiaries. In addition,
borrowings under the Senior Credit Agreement are guaranteed by a number of
Sunbeam's wholly owned material domestic Subsidiaries and these Subsidiary
Guarantees are secured by a security interest in substantially all of the
assets of such Subsidiaries.
Any right of Sunbeam to receive assets of any of its Subsidiaries
upon their liquidation or reorganization and the consequent right of the
Holders of the Secured Notes to participate in those assets will be
effectively subordinated to the claims of that Subsidiary's creditors,
including trade creditors, except to the extent that Sunbeam is itself
recognized as a creditor of such Subsidiary, in which case the claims of
Sunbeam would still be subordinate to any security interests in the assets
of that Subsidiary and any indebtedness of that Subsidiary senior to that
held by Sunbeam.
At March 31, 2000, Sunbeam had approximately $1.621 billion of Senior
Debt outstanding and Sunbeam's Subsidiaries had approximately $828 million
of indebtedness and other liabilities outstanding, excluding intercompany
liabilities, to which the Secured Notes would have been effectively
subordinated. The Secured Notes rank senior to the Zero Debentures and, to
the extent of the value of the collateral, senior to all outstanding
unsecured indebtedness and liabilities of Sunbeam, including trade
payables. Except for trade payables and the Zero Debentures, Sunbeam
currently does not have any outstanding indebtedness or liabilities that
would be junior to the Secured Notes.
In the event that the Trustee or any Holder of the Secured Notes
receives any payment or distribution of assets of Sunbeam of any kind in
contravention of any of the subordination provisions of the indenture,
whether in cash, property or securities, including by way of set-off or
otherwise, before all Senior Debt is paid in full in cash or other payment
satisfactory to the holders of Senior Debt, then such payment or
distribution will be held by the recipient in trust for the benefit of
holders of Senior Debt or their Representatives to the extent necessary to
make payment in full in cash or other payment satisfactory to the holders
of Senior Debt of all Senior Debt remaining unpaid, after giving effect to
any concurrent payment or distribution, or provision therefor, to or for
the holders of Senior Debt.
Sunbeam is obligated to pay reasonable compensation to the Trustee
and to indemnify the Trustee against losses, liabilities or expenses
incurred by it in connection with its duties relating to the Secured Notes.
The Trustee's claims for these payments will generally be senior to those
of Holders of the Secured Notes relating to all funds collected or held by
the Trustee.
REPURCHASE AT THE OPTION OF HOLDERS
CHANGE OF CONTROL. Upon the occurrence of a Change of Control, and
subject to any applicable limitations contained in the Senior Credit
Agreement, each Holder will have the right to require Sunbeam to repurchase
the Holder's Secured Notes at a purchase price in cash equal to 101% of the
aggregate accreted value of the Secured Notes repurchased plus accrued and
unpaid interest, if any, to the date of repurchase (subject to the right of
Holders of record on the relevant record date to receive interest due on
the relevant interest payment date).
The occurrence of any of the following events will constitute a
"Change of Control" under the indenture:
(1) Any "Person" (as that term is used in Sections 13(d) and 14(d) of
the Exchange Act) is or becomes the beneficial owner (as defined in Rules
13d-3 and 13d-5 under the Exchange Act), directly or indirectly, of more
than 50% of the total voting power of the Voting Stock of Sunbeam (other
than the occurrence of a transaction or event referred to in clause (3) of
this definition).
(2) During any period of two consecutive years, individuals who at
the beginning of such period constituted the Board of Directors of Sunbeam
(together with any new directors whose election by such Board of Directors
or whose nomination for election by the stockholders of Sunbeam was
approved by a majority of the directors of Sunbeam then still in office who
were either directors at the beginning of such period or whose election or
nomination for election was previously so approved), cease for any reason
to constitute a majority of the Board of Directors of Sunbeam then in
office.
(3) The occurrence of any transaction or event in connection with
which all or substantially all of the Capital Stock of Sunbeam shall be
exchanged for, converted into, acquired for or constitute solely the right
to receive consideration (whether by means of an exchange offer,
liquidation, tender offer, consolidation, merger, combination,
reclassification, recapitalization or otherwise) which is not all or
substantially all common stock of a company listed (or, upon consummation
of or immediately following such transaction or event, which will be
listed) on a United States national securities exchange or approved for
quotation in the NASDAQ National Market or any similar United States system
of automated dissemination of quotations of securities prices.
Within 30 days following any Change of Control, Sunbeam will mail a
notice to each Holder with a copy to the Trustee stating, among other
things:
(1) that a Change of Control has occurred and that such Holder has
the right to require Sunbeam to purchase such Holder's Secured Notes at a
purchase price in cash equal to 101% of the accreted value of the Secured
Notes repurchased plus accrued and unpaid interest (if any) to the date of
purchase (subject to the right of Holders of record on the relevant record
date to receive interest due on the relevant interest payment date);
(2) the material circumstances and facts regarding such Change of
Control (including, without limitation, information with respect to pro
forma historical income, cash flow and capitalization after giving effect
to such Change of Control);
(3) the repurchase date (which shall be no earlier than 30 days nor
later than 60 days from the date such notice is mailed); and
(4) the instructions, determined by Sunbeam consistent with the
indenture, that a Holder must follow in order to have its Secured Notes
repurchased.
Sunbeam will comply, to the extent applicable, with the requirements
of Section 14(e) of the Exchange Act and any other securities laws or
regulations in connection with the repurchase of Secured Notes pursuant to
the covenant described hereunder. To the extent that the provisions of any
securities laws or regulations conflict with the provisions of the covenant
described hereunder, Sunbeam will comply with the applicable securities
laws and regulations and will not be deemed to have breached its
obligations under the covenant described hereunder by virtue of such
conflict and compliance. Neither the Board of Directors nor the Trustee may
waive compliance by Sunbeam with its obligation to repurchase Secured Notes
upon a Change of Control.
Management has no present intention to engage in a transaction
involving a Change of Control, although it is possible that Sunbeam would
decide to do so in the future. The provisions of the indenture relating to
a Change of Control may not afford Holders protection in the event of a
highly leveraged transaction, reorganization, restructuring, merger or
similar transaction (including, in certain circumstances, a transaction
involving Sunbeam's management or its Affiliates) that may adversely affect
Holders, if such transaction does not constitute a Change of Control, as
defined above. Any such transaction will result in a Change of Control only
if it is the type of transaction specified by such definition.
The Senior Credit Agreement places restrictions on Sunbeam's ability
to purchase Secured Notes, and also provides that the occurrence of certain
change of control events with respect to Sunbeam constitutes a default
under the Senior Credit Agreement. In the event a Change of Control occurs
at a time when Sunbeam is prohibited from purchasing any Secured Notes,
Sunbeam could seek the consent of its lenders to the purchase of Secured
Notes or could attempt to refinance the borrowings that contain such
prohibition. If Sunbeam does not obtain such a consent or repay such
borrowings, Sunbeam will remain prohibited from purchasing any Secured
Notes. In such case, Sunbeam's failure to purchase tendered Secured Notes
would constitute an Event of Default under the indenture which would, in
turn, constitute a default under the Senior Credit Agreement.
The indenture relating to the Zero Debentures contains change of
control provisions similar to those contained in the indenture for the
Secured Notes. Future indebtedness of Sunbeam may contain prohibitions on
the occurrence of certain events that would constitute a Change of Control
or require such indebtedness to be repurchased upon a Change of Control.
Moreover, the exercise by the Holders of their rights to require Sunbeam to
repurchase the Secured Notes could cause a default under such indebtedness,
even if the Change of Control itself would not be a default under such
indebtedness, due to the financial effect of such repurchase on Sunbeam.
Finally, Sunbeam's ability to pay cash to the Holders of Secured Notes
following the occurrence of a Change of Control may be limited by Sunbeam's
then existing financial resources. There can be no assurance that
sufficient funds will be available when necessary to make any required
repurchases.
The Change of Control purchase feature of the Secured Notes may in
certain circumstances make more difficult or discourage a takeover of
Sunbeam and, thus, removal of incumbent management.
ASSET SALES. Until such time as all Obligations under the Senior
Credit Agreement have been paid in full in cash or other payment
satisfactory to the Senior Lenders and all lending commitments thereunder
have been terminated,, Sunbeam and/or any Restricted Subsidiary may make
Asset Dispositions as and to the extent permitted under the Senior Credit
Agreement or with the consent of the requisite percentage of Senior Lenders
and the Net Available Cash from any such Asset Disposition shall be
utilized (including the retention of any such proceeds by Sunbeam for
working capital or other purposes) in accordance with the Senior Credit
Agreement or as otherwise permitted, from time to time, by the requisite
percentage of Senior Lenders. Following such time as all Obligations under
the Senior Credit Agreement have been paid in full in cash or other payment
satisfactory to the Senior Lenders and all lending commitments thereunder
have been terminated, Sunbeam will not, and will not permit any Restricted
Subsidiary to, directly or indirectly, consummate any Asset Disposition
unless:
(1) Sunbeam or the Restricted Subsidiary receives consideration at
the time of such Asset Disposition at least equal to the fair market value,
as determined in good faith by the Board of Directors (including as to the
value of all noncash consideration), of the shares and assets subject to
such Asset Disposition and at least 75% of the consideration therefor
received by Sunbeam or such Restricted Subsidiary is in the form of cash or
cash equivalents; and
(2) an amount equal to 100% of the Net Available Cash from such Asset
Disposition is applied by Sunbeam (or such Restricted Subsidiary, as the
case may be):
(a) first, to the extent Sunbeam elects (or is required by the
terms of any Senior Debt), to prepay, repay or purchase such Senior
Debt or Senior Debt (other than any Redeemable Stock) of a Wholly
Owned Subsidiary (in each case, other than Debt owed to Sunbeam
or an Affiliate of Sunbeam) within 180 days from the later of the
date of such Asset Disposition or the receipt of such Net
Available Cash;
(b) second, to the extent of the balance of such Net Available
Cash after application in accordance with clause (a), at Sunbeam's
election, to the investment by Sunbeam, any Subsidiary or the
Restricted Subsidiary making such Asset Disposition in assets to
replace the assets that were the subject of such Asset Disposition or
an asset that (as determined by the Board of Directors) will be used
in the business of Sunbeam, any Subsidiary or the Restricted
Subsidiary making such Asset Disposition or in businesses reasonably
related thereto, in each case, within the later of one year from the
date of such Asset Disposition or the receipt of such Net Available
Cash;
(c) third, to the extent of the balance of such Net Available
Cash after application in accordance with clauses (a) and (b), to
make an offer to purchase Secured Notes (and any Senior Debt of
Sunbeam designated by Sunbeam) pursuant to and subject to the
conditions contained in the indenture; and
(d) fourth, to the extent of the balance of such Net Available
Cash after application in accordance with clauses (a), (b) and (c),
to the prepayment, repayment or purchase of Debt (other than any
Redeemable Stock) of Sunbeam or Debt of any Restricted Subsidiary (in
either case, other than Debt owed to Sunbeam or an Affiliate of
Sunbeam), in each case, within one year from the later of the receipt
of such Net Available Cash and the date the offer described in clause
(c) above is consummated;
provided, however, that in connection with any prepayment, repayment
or purchase of Debt pursuant to clause (a), (c) or (d) above, Sunbeam
shall cause the related loan commitment (if any) to be permanently
reduced in an amount equal to the principal amount so prepaid, repaid
or purchased.
Notwithstanding the foregoing provisions of this paragraph, Sunbeam and its
Restricted Subsidiaries shall not be required to apply any Net Available
Cash in accordance with this paragraph except to the extent that the
aggregate Net Available Cash from all Asset Dispositions which are not
applied in accordance with this paragraph exceeds $20 million. Pending
application of Net Available Cash pursuant to this paragraph, such Net
Available Cash shall be invested in Temporary Cash Investments or used to
reduce the amount of Debt outstanding under any revolving credit facility
to which Sunbeam may then be a party. Notwithstanding the foregoing, any
Net Available Cash associated with the Transfer of Collateral shall be held
in the Collateral Account, as provided above under "- Deposit; Use and
Release of Trust Moneys," until applied by Sunbeam in accordance with the
provisions described above.
For the purposes of this covenant, the following are deemed to be
cash or cash equivalents:
(x) the express assumption of Debt of Sunbeam or any Restricted
Subsidiary and the release of Sunbeam or such Restricted Subsidiary from
all liability on such Debt in connection with such Asset Disposition; and
(y) securities received by Sunbeam or any Restricted Subsidiary from
the transferee that are converted by Sunbeam or such Restricted Subsidiary
into cash within 90 days of the receipt of such securities.
The 75% limitation referred to in clause (1) of the preceding paragraph
shall not apply to any Asset Disposition in which the cash portion of the
consideration received therefor, determined in accordance with the previous
sentence, is equal to or greater than what the after-tax cash proceeds
would have been had such Asset Disposition complied with such 75%
limitation.
In the event of an Asset Disposition that requires the purchase of
the Secured Notes (and other Senior Debt) pursuant to clause (2)(c) above,
Sunbeam will be required to purchase Secured Notes tendered pursuant to an
offer by Sunbeam for the Secured Notes (and other Senior Debt) at a
purchase price of 100% of their accreted value (without premium) plus
accrued but unpaid interest (or, in respect of such other Senior Debt, such
price, if any, as may be provided for by the terms of such Senior Debt) in
accordance with the procedures (including prorating in the event of
oversubscription) set forth in the indenture. If the aggregate purchase
price of Secured Notes (and any other Senior Debt) tendered pursuant to
such offer is less than the Net Available Cash allotted to the purchase
thereof, Sunbeam will be required to apply the remaining Net Available Cash
in accordance with clause (2)(d) above. Sunbeam shall not be required to
make such an offer to purchase Secured Notes (and other Senior Debt)
pursuant to this covenant if the Net Available Cash available therefor is
less than $20 million (which lesser amount shall be carried forward for
purposes of determining whether such an offer is required with respect to
any subsequent Asset Disposition).
To the extent that any or all of the Net Available Cash of any
Foreign Asset Sale is prohibited or delayed by applicable local law from
being repatriated to the United States, the portion of such Net Available
Cash so affected shall not be required to be applied at the time provided
above, but may be retained by the applicable Restricted Subsidiary (and
invested in accordance with the last sentence of the first paragraph of
this covenant) so long, but only so long, as the applicable local law will
not permit repatriation to the United States. Sunbeam will agree to cause
the applicable Restricted Subsidiary to promptly take all actions required
by the applicable local law to permit such repatriation. Once such
repatriation of any of such affected Net Available Cash is permitted under
the applicable local law, such repatriation shall be immediately effected
and such repatriated Net Available Cash will be applied in the manner
described in this covenant.
Sunbeam shall comply, to the extent applicable, with the requirements
of Section 14(e) of the Exchange Act and any other securities laws or
regulations in connection with the repurchase of Secured Notes pursuant to
this covenant. To the extent that the provisions of any securities laws or
regulations conflict with the provisions of this covenant, Sunbeam shall
comply with the applicable securities laws and regulations and shall not be
deemed to have breached its obligations under this clause by virtue of such
conflict and compliance.
MERGER AND CONSOLIDATION
Until such time as all Obligations under the Senior Credit Agreement
have been paid in full in cash or other payment satisfactory to the Senior
Lenders and all lending commitments thereunder have been terminated, unless
permitted by the terms of the Senior Credit Agreement or approved by the
requisite percentage of Senior Lenders, Sunbeam will not consolidate with
or merge with or into, or convey, transfer or lease, in one transaction or
a series of related transactions, all or substantially all its assets to,
any Person. Following such time as all Obligations under the Senior Credit
Agreement have been paid in full in cash or other payment satisfactory to
the Senior Lenders and all lending commitments thereunder have been
terminated, Sunbeam will not consolidate with or merge with or into, or
convey, transfer or lease, in one transaction or a series of related
transactions, all or substantially all of its assets to, any Person,
unless:
(1) the Person (if other than Sunbeam) formed by such consolidation
or into which Sunbeam is merged or the Person which acquires by conveyance,
transfer or lease the properties and assets of Sunbeam substantially as an
entirety shall be a corporation, limited liability company, partnership or
trust organized and validly existing under the laws of the United States of
America or any State thereof or the District of Columbia, and shall
expressly assume by a supplemental indenture, executed and delivered to the
Trustee in form satisfactory to the Trustee, the due and punctual payment
of the principal amount, issue price, accrued original issue discount,
redemption price, change of control payment or interest, if any, on the
Secured Notes, according to their tenor, and the due and punctual
performance of all of the covenants and obligations of Sunbeam under the
Secured Notes and the indenture;
(2) immediately after giving effect to such transaction, no Default
shall have occurred and be continuing; and
(3) Sunbeam shall have delivered to the Trustee an Officers'
Certificate and an Opinion of Counsel, each stating that such
consolidation, merger, conveyance, transfer or lease and, if a supplemental
indenture is required in connection with such transaction, such
supplemental indenture, comply with the indenture and that all conditions
precedent provided for in the indenture relating to such transaction have
been satisfied.
The successor Person formed by such consolidation or into which
Sunbeam is merged or the successor Person to which such conveyance,
transfer or lease is made shall succeed to, and be substituted for, and may
exercise every right and power of, Sunbeam under the indenture with the
same effect as if such successor had been named as Sunbeam therein; and
thereafter, except in the case of a lease, Sunbeam shall be discharged from
all obligations and covenants under the indenture and the Secured Notes.
DEFAULTS
An "Event of Default" is defined in the indenture as:
(1) a default in any payment of interest on any Secured Note when the
same becomes due and payable, and such default continues for a period of 30
days;
(2) a default in the payment of the principal of any Secured Note
when the same becomes due and payable at its Stated Maturity, upon
redemption, upon declaration, upon required repurchase or otherwise;
(3) the failure by Sunbeam to comply with its obligations under
"- Merger and Consolidation;"
(4) the failure by Sunbeam to comply for 30 days after the notice
specified below with any of its obligations in the covenants described
above under "Repurchase at the Option of Holders - Change of Control" and
"- Asset Sales" (in each case, other than a failure to purchase Secured
Notes);
(5) the failure by Sunbeam to comply with any of its agreements in
the Secured Notes or the indenture (other than those referred to in (1),
(2), (3) or (4) above) and such failure continues for 60 days after the
notice specified below;
(6) a default under any mortgage, indenture or instrument under which
there may be issued or by which there may be secured or evidenced any Debt
for money borrowed by Sunbeam or any of its Restricted Subsidiaries (or the
payment of which is Guaranteed by Sunbeam or any of its Restricted
Subsidiaries) whether such Debt or Guarantee now exists, or is created
after the date of the indenture, which default:
(a) is caused by failure to pay principal of or premium, if
any, or interest on such Debt prior to the expiration of the grace
period provided in such Debt on the date of such default ("Payment
Default"); or
(b) results in the acceleration of such Debt prior to its Stated
Maturity
and, in each case, the principal amount of any such Debt, together with the
principal amount of any other such Debt under which there has been a
Payment Default or the maturity of which has been so accelerated,
aggregates $25 million or more;
(7) any final non-appealable judgment or decree not covered by
insurance, or as to which the insurance carrier has denied responsibility
for the payment of money, in each case, in excess of $50 million is
rendered against Sunbeam or any Significant Subsidiary and is not
discharged and there is a period of 60 days following such judgment during
which such judgment or decree is not discharged, waived or the execution
thereof stayed; or
(8) certain events of bankruptcy or insolvency of Sunbeam or any
Significant Subsidiary.
A Default under clause (4) or (5) is not an Event of Default until
the Trustee or the Holders of at least 25% in principal amount of the
Secured Notes notify Sunbeam of the Default and Sunbeam does not cure such
Default within the time specified after receipt of such notice.
If an Event of Default (other than certain events of bankruptcy,
insolvency or reorganization of Sunbeam) occurs and is continuing, the
Trustee or the Holders of at least 25% in principal amount of the
outstanding Secured Notes may declare the principal of and accrued but
unpaid interest on all the Secured Notes to be due and payable. Upon such a
declaration, subject to the subordination provisions described in the
section of this Offering Circular captioned "- Subordination," such
principal and interest shall be due and payable immediately. If an Event of
Default relating to certain events of bankruptcy, insolvency or
reorganization of Sunbeam or any Significant Subsidiary occurs and is
continuing, the principal of and interest on all the Secured Notes will
ipso facto become and be immediately due and payable without any
declaration or other act on the part of the Trustee or any Holders of the
Secured Notes. Under certain circumstances, the Holders of a majority in
principal amount of the outstanding Secured Notes may rescind any such
acceleration with respect to the Secured Notes and its consequences.
Subject to the provisions of the indenture relating to the duties of
the Trustee, in case an Event of Default occurs and is continuing, the
Trustee will be under no obligation to exercise any of the rights or powers
under the indenture at the request or direction of any of the Holders of
the Secured Notes unless such Holders have offered to the Trustee
reasonable indemnity or security against any loss, liability or expense.
Except to enforce the right to receive payment of principal, premium (if
any) or interest when due, no Holder of a Secured Note may pursue any
remedy with respect to the indenture or the Secured Notes unless:
(1) such Holder has previously given the Trustee notice that an Event
of Default is continuing;
(2) Holders of at least 25% in principal amount of the outstanding
Secured Notes have requested the Trustee to pursue the remedy;
(3) such Holders have offered the Trustee reasonable security or
indemnity against any loss, liability or expense;
(4) the Trustee has not complied with such request within 60 days
after the receipt thereof and the offer of security or indemnity; and
(5) the Holders of a majority in principal amount of the outstanding
Secured Notes have not given the Trustee a direction inconsistent with such
request within such 60-day period. Subject to certain restrictions, the
Holders of a majority in principal amount of the outstanding Secured Notes
are given the right to direct the time, method and place of conducting any
proceeding for any remedy available to the trustee or of exercising any
trust or power conferred on the Trustee.
The indenture provides that if a Default occurs and is continuing and
is known to the Trustee, the Trustee must mail to each Holder notice of the
Default within 90 days (or such shorter period as may be required by
applicable law) after it occurs. Except in the case of a Default in the
payment of principal of, premium (if any) or interest on any Secured Note,
the Trustee may withhold notice if and so long as a committee of its trust
officers determines that withholding notice is in the interest of the
Holders of the Secured Notes. In addition, Sunbeam is required to deliver
to the Trustee, within 120 days after the end of each fiscal year, a
certificate indicating whether the signers thereof know of any Default that
occurred during the previous year. Sunbeam also is required to deliver to
the Trustee, within 30 days after the occurrence thereof, written notice of
any event which would constitute certain Defaults, their status and what
action Sunbeam is taking or proposes to take in respect thereof.
Notwithstanding the foregoing, until such time as all Obligations
under the Senior Credit Agreement have been paid in full in cash or other
payment satisfactory to the Senior Lenders and all lending commitments
thereunder have been terminated, the right of the Trustee and/or the
Holders of the Secured Notes to foreclose on, or otherwise exercise any
rights or remedies with respect to, the Collateral is subject to a complete
standstill in favor of the Senior Lenders. See "- Second-Priority Security
Interest."
AMENDMENTS AND WAIVERS
Subject to certain exceptions, the indenture, the Secured Notes and
the Second Lien security documents may be amended or supplemented with the
consent of the Holders of a majority in principal amount of the Secured
Notes then outstanding and any past default or compliance with any
provisions may be waived with the consent of the Holders of a majority in
principal amount of the Secured Notes then outstanding. However, without
the consent of each Holder of an outstanding Secured Note, no amendment
may, among other things:
(1) reduce the principal amount of Secured Notes whose Holders must
consent to an amendment, supplement or waiver;
(2) reduce the rate of or extend the time for payment of interest,
including default interest, on any Secured Note or make any change to the
manner or rate of accrual of original issue discount or extend the time for
payment of original issue discount on any Secured Note;
(3) reduce the principal of or extend the Stated Maturity of any
Secured Note;
(4) reduce the premium payable upon the redemption of any Secured Note
or change the time at which any Secured Note may or shall be redeemed or
otherwise alter or waive any of the provisions of the indenture relating to
redemption of the Secured Notes, subject to certain exceptions;
(5) make any Secured Note payable in money other than that stated in
the Secured Note;
(6) impair the right of any Holder of the Secured Notes to receive
payment of principal of and interest on such Holder's Secured Notes on or
after the due dates therefor or to institute suit for the enforcement of
any payment on or with respect to such Holder's Secured Notes;
(7) waive a Default or Event of Default in the payment of principal of
or premium, if any, or interest on the Secured Notes (except a rescission
of acceleration of the Secured Notes by the Holders of at least a majority
in aggregate principal amount at maturity of the then outstanding Notes and
a waiver of the payment default that resulted from such acceleration);
(8) make any change in the subordination provisions of the indenture
that adversely affects the rights of any Holder in any material respect;
(9) make any change in the amendment provisions which requires each
Holder's consent or in the waiver provisions; or
(10) deprive any of the Holders of the benefit of the Second Lien
created by the Second Lien security documents except in accordance with the
terms of the Second Lien security documents.
Without the consent of any Holder of the Secured Notes, Sunbeam and
the Trustee (or any Representative of the Holders under the Second Lien
security documents) may amend or supplement the indenture, the Secured
Notes (including any notation or endorsement thereon) or the Second Lien
security documents to cure any ambiguity, omission, defect or
inconsistency, to provide for uncertificated Secured Notes in addition to
or in place of certificated Secured Notes (provided that the uncertificated
Secured Notes are issued in registered form for purposes of Section 163(f)
of the Code, or in a manner such that the uncertificated Secured Notes are
described in Section 163(f)(2)(B) of the Code), to provide for the
assumption by a successor corporation of the obligations of Sunbeam under
the indenture, to add Guarantees with respect to the Secured Notes, to add
to the covenants of Sunbeam and its Subsidiaries for the benefit of the
Holders or to surrender any right or power conferred upon Sunbeam, to make
any change that does not adversely affect the rights of any Holder or to
comply with any requirement of the Commission in connection with the
qualification of the indenture under the Trust Indenture Act.
No amendment to the indenture may make any change that adversely
affects the rights under the subordination provisions of the indenture of
any holder of Senior Debt then outstanding unless the requisite holders of
such Senior Debt consent to the terms of such change pursuant to the terms
of such Senior Debt.
The consent of the Holders is not necessary under the indenture to
approve the particular form of any proposed amendment. It is sufficient if
such consent approves the substance of the proposed amendment.
After an amendment under the indenture becomes effective, Sunbeam is
required to mail to Holders a notice briefly describing such amendment.
However, the failure to give such notice to all Holders, or any defect
therein, will not impair or affect the validity of the amendment.
DEFEASANCE
Sunbeam at any time may terminate all its obligations under the
Secured Notes and the indenture ("legal defeasance"), except for certain
obligations, including those respecting the defeasance trust and the
obligation to register the transfer or exchange of the Secured Notes, to
replace mutilated, destroyed, lost or stolen Secured Notes and to maintain
a registrar and paying agent in respect of the Secured Notes. Sunbeam at
any time may terminate its obligations under certain covenants contained in
the indenture, including those described under "- Repurchase at the Option
of Holders - Change of Control" and "- Asset Sales" above, the operation of
the cross acceleration provisions, the bankruptcy provisions with respect
to Significant Subsidiaries and the judgment default provision described
under "- Defaults" above and the limitations contained in clause (3) of the
first paragraph under "- Merger and Consolidation" above ("covenant
defeasance").
Sunbeam may exercise its legal defeasance option notwithstanding its
prior exercise of its covenant defeasance option. If Sunbeam exercises its
legal defeasance option, payment of the Secured Notes may not be
accelerated because of an Event of Default with respect thereto. If Sunbeam
exercises its covenant defeasance option, payment of the Secured Notes may
not be accelerated because of an Event of Default specified in clauses (3)
through (8) under "- Defaults" above.
In order to exercise either defeasance option, Sunbeam must
irrevocably deposit in trust (the "defeasance trust") with the trustee
money or U.S. Government Obligations for the payment of principal, premium
(if any) and interest on the Secured Notes to redemption or maturity, as
the case may be, and must comply with certain other conditions, including
delivering to the Trustee an Opinion of Counsel to the effect that Holders
of the Secured Notes will not recognize income, gain or loss for Federal
income tax purposes as a result of such deposit and defeasance and will be
subject to Federal income tax on the same amount and in the same manner and
at the same times as would have been the case if such deposit and
defeasance had not occurred (and, in the case of legal defeasance only,
such Opinion of Counsel must be based on a ruling of the Internal Revenue
Service or a change in applicable Federal income tax law).
The terms of the Senior Credit Agreement would not currently permit
Sunbeam to exercise either of its defeasance options.
COMMISSION REPORTS
As long as Sunbeam is required by applicable law to comply with the
reporting requirements of Section 13 or 15(d) of the Exchange Act, in
respect of any security issued by the Company, Sunbeam will, as long as it
is permitted to do so by the Commission, file with the Commission, furnish
to the Trustee and make available to the Holders such annual reports and
such information, documents and other reports as are specified in Sections
13 and 15(d) of the Exchange Act, including, without limitation, Forms 8-K,
l0-Q and 10-K, such information, documents and other reports to be so
provided within 15 days after the filing of such information, documents or
other reports with the Commission.
CERTAIN DEFINITIONS
"Affiliate" of any specified Person means any other Person, directly
or indirectly, controlling or controlled by or under direct or indirect
common control with such specified Person. For the purposes of this
definition, "control" when used with respect to any Person means the power
to direct the management and policies of such Person, directly or
indirectly, whether through the ownership of voting securities, by contract
or otherwise; and the terms "controlling" and "controlled" have meanings
correlative to the foregoing.
"Asset Disposition" means any sale, lease, transfer or other
disposition (or series of related sales, leases, transfers or dispositions)
of shares of Capital Stock of a Restricted Subsidiary (other than
directors' qualifying shares), property or other assets (each referred to
for the purposes of this definition as a "disposition") by Sunbeam or any
Restricted Subsidiary, including any disposition by means of a merger,
consolidation or similar transaction, for gross proceeds in excess of $1
million, other than:
(1) the disposition of property or assets (other than (a) shares of
Capital Stock of a Restricted Subsidiary and (b) assets which do not
constitute all or substantially all of the assets of any division or line
of business of Sunbeam or any Restricted Subsidiary) at fair market value
in the ordinary course of business;
(2) the disposition of all or substantially all of the assets of
Sunbeam permitted by the covenant described under "- Merger and
Consolidation;"
(3) the disposition of assets in exchange for other assets that will
replace the assets being relinquished by Sunbeam or any Subsidiary in the
exchange or assets that will be used in the business of Sunbeam or any
Subsidiary or in businesses reasonably related thereto;
(4) the disposition of assets by Sunbeam to a Restricted Subsidiary or
by a Restricted Subsidiary to Sunbeam or another Restricted Subsidiary;
(5) the disposition of cash, cash equivalents and other cash
management investments;
(6) the disposition of inventory or obsolete, unused or unnecessary
equipment, in each case, in the ordinary course of business;
(7) the disposition of accounts receivable by Sunbeam or any of its
Subsidiaries pursuant to the Existing Receivables Program, the New
Receivables Program or pursuant to any other transaction permitted by the
terms of the Senior Credit Agreement; and
(8) the disposition of assets of Sunbeam or any Subsidiary or Capital
Stock of any Subsidiary pursuant to or in connection with a foreclosure
action with respect to the collateral subject to the First Lien or the
Collateral subject to the Second Lien.
"Board of Directors" means the Board of Directors of Sunbeam or any
committee thereof duly authorized to act on behalf of such Board.
"Business Day" means each day which is not a Legal Holiday.
"Capital Lease Obligations" of a Person means any obligation which is
required to be classified and accounted for as a capital lease on the face
of a balance sheet of such Person prepared in accordance with GAAP; the
amount of such obligation shall be the capitalized amount thereof,
determined in accordance with GAAP, and the Stated Maturity thereof shall
be the date of the last payment of rent or any other amount due under such
lease prior to the first date upon which such lease may be terminated by
the lessee without payment of a penalty.
"Capital Stock" of any Person means any and all shares, interests,
rights to purchase, warrants, options or participations (or other
equivalents thereof) in such Person (however designated), including any
Preferred Stock, but excluding any debt securities convertible into or
exchangeable for such equity.
"Code" means the Internal Revenue Code of 1986, as amended.
"Collateral" means, collectively, the Pledged Subsidiary Stock and the
proceeds thereof that are from time to time subject to, or purported to be
subject to, the Second Lien.
"Collateral Account" has the meaning given to it in the section
described herein under the heading "Deposit; Use and Release of Trust
Moneys."
"Commission" means the United States Securities and Exchange
Commission.
"Commodity Agreement" means any commodity futures contract, commodity
option or other similar agreement or arrangement (limited in amount to
underlying exposure, and not for speculative purposes) entered into by
Sunbeam or any Restricted Subsidiary that is designed to protect Sunbeam or
a Restricted Subsidiary against fluctuations in the price of commodities
used by Sunbeam or a Restricted Subsidiary as raw materials in the ordinary
course of business.
"Currency Agreement" means, with respect to any Person, any foreign
exchange contract, currency swap agreement or other similar agreement
(limited in amount to underlying exposure, and not for speculative
purposes) to which such Person is a party or a beneficiary.
"Debt" of any Person means, without duplication:
(1) the principal of and premium (if any) in respect of
(a) indebtedness of such Person for money borrowed, and
(b) indebtedness evidenced by notes, debentures, bonds or other
similar instruments the payment of which such Person is responsible or
liable,
(2) all Capital Lease Obligations of such Person,
(3) all obligations of such Person issued or assumed as the deferred
purchase price of property, all conditional sale obligations of such Person
and all obligations of such Person under any title retention agreement (but
excluding trade accounts payable arising in the ordinary course of
business),
(4) all obligations of such Person, contingent or otherwise, for the
reimbursement of any obligor on any letter of credit, letter of guarantee
or banker's acceptance (other than obligations with respect to Letters of
Credit securing obligations (other than obligations described in clauses
(1) through (3) above) entered into in the ordinary course of business of
such Person to the extent such Letters of Credit are not drawn upon),
(5) all Redeemable Stock of such Person and, with respect to any
Subsidiary of such Person, all Preferred Stock other than pay-in-kind
dividends in the form of Preferred Stock (the amount of Debt represented
thereby shall equal the greater of its liquidation preference and the
redemption, repayment or other repurchase obligations with respect thereto,
not excluding any accrued dividends),
(6) all Hedging Obligations of such Person,
(7) all obligations of the type referred to in clauses (1) through (4)
of other Persons and all dividends of other Persons the payment of which,
in either case, such Person is responsible or liable, directly or
indirectly, as obligor, guarantor or otherwise, including by means of any
Guarantee, and
(8) all obligations of the type referred to in clauses (1) through (6)
of other Persons secured by any Lien on any property or asset of such
Person (whether or not such obligation is assumed by such Person), the
amount of such obligation being deemed to be the lesser of the value of
such property or assets or the amount of the obligation so secured.
For the avoidance of doubt, it is expressly understood that the sale,
transfer or other disposition of accounts receivable shall be treated, for
all purposes under the indenture governing the Secured Notes, as an Asset
Disposition.
"Default" means any event which is, or after notice or the passage of
time or both would be, an Event of Default.
"Designated Senior Debt" means:
(1) Senior Debt incurred under the Senior Credit Agreement; or
(2) any other particular Senior Debt in which the instrument creating
or evidencing the same or the assumption or guarantee of Senior Debt or
related agreements or documents to which Sunbeam is a party expressly
provides that the Senior Debt shall be "Designated Senior Debt" for
purposes of the indenture; however, the instrument, agreement or other
document may place limitations and conditions on the right of such Senior
Debt to exercise the rights of Designated Senior Debt.
"Equity Interests" means:
(1) in the case of a corporation, corporate stock;
(2) in the case of an association or business entity, any and all
shares, interests, participations, rights or other equivalents (however
designated) of corporate stock;
(3) in the case of a partnership or limited liability company,
partnership or membership interests (whether general or limited); and
(4) any other interest or participation that confers on a Person the
right to receive a share of the profits and losses of, or distributions of
assets of, the issuing Person.
"Equity Offering" means a sale by Sunbeam of shares of its Capital
Stock (however designated and whether voting or non-voting) and any and all
rights, warrants or options to acquire such Capital Stock.
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"Existing Receivables Program" means the accounts receivable sales
program established pursuant to (i) the Receivables Sale and Contribution
Agreement, dated as of December 4, 1997, between Sunbeam Products, Inc. and
Sunbeam Asset Diversification, Inc., (ii) the Receivables Purchase and
Servicing Agreement, dated as of December 4, 1997 (as amended, supplemented
or otherwise modified in accordance with the terms of the Senior Credit
Agreement), by and among Llama Retail Funding, L.P., Capital USA, L.L.C.,
Sunbeam Asset Diversification, Inc. and Sunbeam Products, Inc. and (iii)
any receivables sale agreement executed and delivered after the date hereof
in accordance with the terms of the Senior Credit Agreement.
"First Lien" means, collectively, the Lien granted by Sunbeam in favor
of the Senior Lenders with respect to the Collateral, together with the
related documents (including, without limitation, any guarantee agreements
and security documents), in each case, as such Senior Credit Agreement and
documents have been or may be amended (including any amendment and
restatement thereof), supplemented or otherwise modified from time to time,
including any agreements extending the maturity of, refinancing, replacing
or otherwise restructuring all or any portion of the Obligations under such
agreements.
"First Lien Representative" means the administrative agent under the
Senior Credit Agreement or any other Person designated to the Trustee as
such by the Senior Lenders.
"Foreign Asset Sale" means an Asset Disposition in respect of Capital
Stock or assets of a Foreign Subsidiary or a Restricted Subsidiary of the
type described in Section 936 of the Code to the extent that the proceeds
of such Asset Disposition are received by a Person subject in respect of
such proceeds to the tax laws of a jurisdiction outside the United States.
"Foreign Subsidiary" means a Restricted Subsidiary that is
incorporated under the Laws of a jurisdiction outside the United States.
"GAAP" means generally accepted accounting principles in the United
States of America as in effect as of the Issue Date, including those set
forth:
(1) in the opinions and pronouncements of the Accounting Principles
Board of the American Institute of Certified Public Accountants,
(2) in statements and pronouncements of the Financial Accounting
Standards Board,
(3) in such other statements by such other entity as have been
approved by a significant segment of the accounting profession, and
(4) in the rules and regulations of the Commission governing the
inclusion of financial statements (including pro forma financial
statements) in periodic reports required to be filed pursuant to Section 13
of the Exchange Act, including opinions and pronouncements in Staff
Accounting Bulletins and similar written statements from the accounting
staff of the Commission.
"Guarantee" means, with respect to any Person, any obligation,
contingent or otherwise, of such Person directly or indirectly guaranteeing
any Debt or other obligation of any other Person and any obligation, direct
or indirect, contingent or otherwise of such Person:
(1) to purchase or pay (or advance or supply funds for the purchase or
payment of) any Debt or other obligation of any other Person (whether
arising by virtue of partnership arrangements, or by agreement to
keep-well, to purchase assets, goods, securities or services, to
take-or-pay or to maintain financial statement conditions or otherwise), or
(2) entered into for purposes of assuring in any other manner the
obligee of any Debt or other obligation of any other Person of the payment
thereof or to protect such obligee against loss in respect thereof (in
whole or in part);
provided, however, that the term "Guarantee" shall not include endorsements
for collection or deposits in the ordinary course of business or guarantees
of obligations of a Subsidiary in the ordinary course of business if such
obligations do not constitute Debt of such Subsidiary. The term "Guarantee"
used as a verb has a corresponding meaning.
"Hedging Obligations" of any Person means the obligations of such
Person pursuant to any Interest Rate Agreement, Currency Agreement or
Commodity Agreement (limited in amount to underlying exposure, and not for
speculative purposes).
"Holder" means the Person in whose name a Secured Note is registered
on the registrar's books.
"Incur" means issue, assume, Guarantee, incur or otherwise become
liable for; provided, however, that any Debt or Capital Stock of a Person
existing at the time such Person becomes a Subsidiary (whether by merger,
consolidation, acquisition or otherwise) shall be deemed to be Incurred by
such Subsidiary at the time it becomes a Subsidiary. The term "Incurrence"
when used as a noun shall have a correlative meaning. The accretion of
principal of a non-interest bearing or other discount security shall be
deemed the Incurrence of Debt.
"Interest Rate Agreement" means any interest rate swap agreement,
interest rate cap agreement or other financial agreement or arrangement
(limited in amount to underlying exposure, and not for speculative
purposes) designed to protect Sunbeam or any Restricted Subsidiary against
fluctuations in interest rates.
"Investment" means, with respect to any Person, any loan or advance
to, any acquisition of Capital Stock, equity interest, obligation or other
security of, or capital contribution or other investment in, or any other
credit extension to (including by way of Guarantee of any Debt of), any
other Person.
"Issue Date" means the date on which the Secured Notes are originally
issued.
"Legal Holiday" means a Saturday, a Sunday or a day on which banking
institutions in the City of New York, in the city of the offices of the
Trustee specified in the indenture or at a place of payment are authorized
by law, regulation or executive order to remain closed. If a payment date
is a Legal Holiday, payment may be made at that place on the next
succeeding day that is not a Legal Holiday, and no interest shall accrue on
such payment for the intervening period.
"Lien" means any mortgage, pledge, security interest, encumbrance,
lien or charge of any kind (including any conditional sale or other title
retention agreement or lease in the nature thereof).
"Net Available Cash" from an Asset Disposition means cash payments
received therefrom (including, to the extent permitted, any cash payments
received by way of deferred payment of principal pursuant to a promissory
note or installment receivable or any Return of Capital or otherwise, but
only as and when received, but excluding any other consideration received
in the form of assumption by the acquiring Person of Debt or other
obligations relating to such properties or assets that are the subject of
such Asset Disposition or received in any other noncash form), in each
case, net of:
(1) all legal, title and recording expenses, commissions and other
fees and expenses incurred, and all Federal, state, provincial, foreign and
local taxes required to be accrued as a liability under GAAP, as a
consequence of such transaction,
(2) all payments made on any Debt which is secured by any assets
subject to such transaction, in accordance with the terms of any Lien upon
or other security agreement of any kind with respect to such assets, or
which must by its terms, or in order to obtain a necessary consent to such
transaction, or by applicable law be repaid out of the proceeds from such
transaction,
(3) all distributions and other payments required to be made to any
minority interest holders in Subsidiaries or joint ventures as a result of
such transaction,
(4) the deduction of appropriate amounts provided by the sellers as a
reserve, in accordance with GAAP, against any liabilities associated with
the property or other assets disposed in such transaction and retained by
Sunbeam or any Restricted Subsidiary after such transaction, and
(5) all proceeds from such Asset Disposition which are placed in an
escrow or trust account to secure the obligations of the Payee in
connection therewith, unless and until such proceeds are released from such
trust or escrow account and received by Sunbeam or one of its Subsidiaries.
"Net Cash Proceeds" means, with respect to any issuance or sale of
Capital Stock of the Company, the cash proceeds of such issuance or sale
net of attorneys' fees, accountants' fees, underwriters' or placement
agents' fees, discounts or commissions and brokerage, consultants' and
other fees, and other costs and expenses actually incurred in connection
with such issuance or sale and net of taxes paid or payable as a result
thereof.
"New Receivables Program" means the accounts receivable sales program
established pursuant to (i) the Receivables Purchase Agreement, dated as of
April 28, 2000 (as amended, supplemented or otherwise modified in
accordance with the terms of the Senior Credit Agreement), by and among
Redwood Receivables Corporation, General Electric Capital Corporation,
Coleman Funding Corporation, Coleman, Coleman Powermate, Inc. and Sunbeam
and any other documents (including, without limitation, any intercreditor
agreement) executed in connection therewith or pursuant thereto and (ii)
any other accounts receivable sales agreements executed and delivered in
accordance with the terms of the Senior Credit Agreement.
"Obligations" means any principal, interest, penalties, fees,
indemnifications, reimbursements, damages and other liabilities payable
under the documentation governing any Debt, including, with respect to Debt
outstanding under the Senior Credit Agreement only, all interest accruing
subsequent to, or which would accrue but for, the commencement of any
bankruptcy or similar proceeding, whether or not a claim for post-petition
interest is allowable as a claim in any such proceeding.
"Officer" means, with respect to any Person, the Chairman of the
Board, the Chief Executive Officer, the President, the Chief Operating
Officer, the Chief Financial Officer, the Treasurer, any Assistant
Treasurer, the Controller, the Secretary or any Vice President of such
Person.
"Officers' Certificate" means a certificate signed on behalf of
Sunbeam by two Officers of Sunbeam, one of whom must be the principal
executive officer, the principal financial officer or the principal
accounting officer of Sunbeam, and that otherwise meets the requirements of
the indenture.
"Opinion of Counsel" means an opinion from legal counsel, who may be
an employee of or counsel to Sunbeam, any Subsidiary of Sunbeam or the
Trustee, that otherwise meets the requirements of the indenture.
"Permitted Liens" means:
(1) Liens permitted under the Senior Credit Agreement or consented to
by the requisite percentage of Senior Lenders;
(2) Liens existing on the Issue Date or those that secure the Secured
Notes, Senior Debt or other obligations that are permitted to be Incurred
under the Senior Credit Agreement or the indenture;
(3) Liens for taxes, assessments or other governmental charges or
levies not yet due or that are being contested in good faith by appropriate
action or proceedings and with respect to which adequate reserves in
conformity with GAAP are being maintained;
(4) statutory Liens of landlords and Liens of carriers, warehousemen,
mechanics, materialmen, repairmen, workmen, crews, maritime liens and other
Liens imposed by law created in the ordinary course of business for amounts
that are not past due or that are being contested in good faith by
appropriate action or proceedings and with respect to which adequate
reserves in accordance with GAAP are being maintained;
(5) Liens incurred or deposits or pledges made in the ordinary course
of business in connection with workers' compensation, unemployment
insurance and other types of social security, old age or other similar
obligations, or to secure the performance of tenders, statutory
obligations, surety and appeal bonds, bids, leases, government contracts,
performance and return-of-money bonds and other similar obligations
(exclusive of obligations for the payment of borrowed money) incurred in
the ordinary course of business;
(6) irregularities in title, boundaries, or other survey defects,
easements, rights-of-way, restrictions, servitudes, permits, reservations,
exceptions, zoning regulations, conditions, covenants, mineral or royalty
rights or reservations or oil, gas and mineral leases and rights of others
in any property of Sunbeam or any Subsidiary for streets, roads, bridges,
pipes, pipe lines, railroads, electric transmission and distribution lines,
telegraph and telephone lines, the removal of oil, gas or other minerals or
other similar purposes, flood control, water rights, rights of others with
respect to navigable waters, sewage and drainage rights and other similar
charges or encumbrances existing as of the Issue Date (or granted by
Sunbeam or any Subsidiary in the ordinary course of business) that do not,
in the aggregate, materially impair the value of the property of Sunbeam or
any Subsidiary and the occupation, use and enjoyment by Sunbeam or any of
its Subsidiaries of any of their respective properties in the normal course
of business;
(7) Liens securing Debt neither created, assumed nor guaranteed by
Sunbeam or any Subsidiary upon lands over which easements or similar rights
are acquired by Sunbeam or any Subsidiary in the ordinary course of
business of Sunbeam or any Subsidiary;
(8) terminable or short-term leases or permits for occupancy, which
leases or permits expressly grant to Sunbeam or any Subsidiary the right to
terminate them at any time on not more than six months' notice and which
occupancy does not interfere with the operation of the business of Sunbeam
or any Subsidiary;
(9) any Lien or privilege arising by operation of law and vested in
any lessor, licensor or permittor on personal property located on premises
leased by Sunbeam or any Subsidiary, for rent to become due or for other
obligations or acts to be performed, the payment of which rent or the
performance of which other obligations or acts is required under leases,
subleases, licenses or permits;
(10) Liens or privileges of any employee of Sunbeam or any Subsidiary
for salary or wages earned but not yet payable;
(11) any obligations or duties affecting any of the property of
Sunbeam or its Subsidiaries to any municipality or public authority with
respect to any franchise, grant, license or permit that do not materially
impair the use of such property for the purposes for which it is held;
(12) Liens upon property or assets other than as described in clause
(13) immediately below acquired by Sunbeam after the Issue Date provided
that such Liens do not extend to any property or assets other than the
property or assets so acquired;
(13) Liens on property or shares of Capital Stock of another Person at
the time such other Person becomes a Subsidiary of such Person; provided,
however, that such Liens are not created, incurred or assumed in connection
with, or in contemplation of, such other Person becoming such a Subsidiary
and do not extend to any assets other than those of the Person that becomes
a Subsidiary;
(14) Liens resulting from operation of law with respect to any
judgments, awards or orders to the extent that such judgments, awards or
orders do not cause or constitute an Event of Default;
(15) Liens on any property in favor of domestic or foreign
governmental bodies to secure partial, progress, advance or other payments
pursuant to any contract or statute, not yet due and payable;
(16) Liens securing Debt incurred to finance the construction,
purchase or lease of, or repairs, improvements or additions to, property of
such Person used in the business of Sunbeam, to the extent such Debt is
otherwise permitted by the indenture;
(17) easements, rights-of-way, restrictions and other similar charges
or encumbrances granted to others, in each case, not interfering with the
ordinary conduct of the business of Sunbeam or any of its Subsidiaries;
(18) Liens incurred in connection with any transaction related to, or
consummated in connection with, the Existing Receivables Program or the New
Receivables Program or any other transaction permitted by the terms of the
Senior Credit Agreement pursuant to which Sunbeam or any Subsidiary sells,
conveys or otherwise transfers, or grants a security interest in, any
accounts receivable, instruments, chattel paper, general intangibles or
similar assets of Sunbeam or any of its Subsidiaries, and any assets
relating thereto, including, without limitation, all collateral securing
any of the foregoing, all contracts, contract rights and all Guarantees or
other obligations in respect of any of the foregoing, proceeds of any of
the foregoing and any other assets which are customarily transferred or in
respect of which security interests are customarily granted in connection
with asset securitization transactions of such type; and
(19) extensions, renewals, modifications or replacements of any Lien
referred to in the preceding clauses of this definition, provided that such
Lien is otherwise permitted by the terms hereof and, with respect to Liens
securing Debt, no extension or renewal Lien shall (a) secure more than the
amount of the Debt or other obligations secured by the Lien being so
extended or renewed, other than as permitted by clause (12) above, or (b)
extend to any property or assets not subject to the Lien being so extended
or renewed, other than as permitted by clause (12) above.
Notwithstanding anything to the contrary contained in this definition of
"Permitted Liens," any Lien which is deemed to be a Permitted Lien pursuant
to clause (1) or clause (2) above shall be, and shall continue to be, a
Permitted Lien for all purposes under the indenture, notwithstanding that
(i) such Lien would not be deemed to be a Permitted Lien under one or more
other clauses of this definition and (ii) subsequent to the creation of
such Lien, all Obligations under the Senior Credit Agreement are discharged
or otherwise satisfied in full and all lending commitments thereunder are
terminated.
"Person" means any individual, corporation, partnership, limited
liability company, joint venture, association, joint-stock company, trust,
unincorporated organization, government or any agency or political
subdivision thereof or any other entity.
"Pledged Subsidiary Stock" means the Capital Stock of both of
Sunbeam's direct Wholly Owned Subsidiaries, Laser Acquisition Corp. and
Sunbeam Americas Holdings, Ltd.
"Preferred Stock" as applied to the Capital Stock of any corporation,
means Capital Stock of any class or classes (however designated) which is
preferred as to the payment of dividends, or as to the distribution of
assets upon any voluntary or involuntary liquidation or dissolution of such
corporation, over shares of Capital Stock of any other class of such
corporation.
"Redeemable Stock" means any Capital Stock that by its terms or
otherwise is required to be redeemed on or prior to the Stated Maturity of
the Secured Notes or is redeemable at the option of the holder thereof
without regard to the occurrence of any contingency at any time on or prior
to the Stated Maturity of the Secured Notes.
"Representative" means any trustee, agent or representative (if any)
for an issue of Senior Debt of Sunbeam.
"Restricted Subsidiary" means any Subsidiary of Sunbeam that is not an
Unrestricted Subsidiary.
"Return of Capital" means, with respect to any Equity Interest, any
sums paid on or in respect of such Equity Interest (i) as a return, in
whole or in part, of the capital of the issuer of such Equity Interest,
(ii) in redemption of, or in exchange for, such Equity Interest or (iii) in
connection with a partial or total liquidation or dissolution of the issuer
of such Equity Interest.
"Second Lien" means the second-priority Lien granted by Sunbeam in
favor of the Trustee, for the benefit of the Holders of the Secured Notes,
pursuant to the Junior Pledge and Security Agreement to be entered into by
and between Sunbeam and the Trustee, as the same may be amended (including
any amendment and restatement thereof), supplemented or otherwise modified
from time to time.
"Securities Act" means the Securities Act of 1933, as amended.
"Senior Credit Agreement" means that certain Senior Credit Agreement,
dated as of March 30, 1998, among Sunbeam, the Subsidiary Borrower referred
to therein, the lenders party thereto, Morgan Stanley Senior Funding, Inc.,
as Syndication Agent, Bank of America, N.A., as Documentation Agent, and
First Union National Bank, as Administrative Agent, as amended from time to
time in whole or in part (including any deferral, increase, renewal,
extension, replacement, refinancing or refunding of, or amendment,
modification or supplement thereto, and whether or not with the original
Administrative Agent and Senior Lenders or another administrative agent or
other lenders and whether provided under the original Senior Credit
Agreement or any other credit or other agreement or indenture).
"Senior Debt" means:
(1) all Debt of Sunbeam or any Restricted Subsidiary outstanding under
the Senior Credit Agreement;
(2) any other Debt of Sunbeam or any Restricted Subsidiary permitted
to be Incurred under the terms of the indenture, unless the instrument
under which such Debt is Incurred expressly provides that it is
subordinated in right of payment to the Secured Notes; and
(3) all Obligations with respect to the items listed in the preceding
clauses (1) and (2) (including, to the extent provided in the instrument
governing such Debt, all interest accruing subsequent to, or which would
accrue but for, the commencement of any bankruptcy or similar proceeding,
whether or not a claim for post-petition interest is allowable as a claim
in any such proceeding).
Notwithstanding the foregoing, Senior Debt will not include:
(1) any liability for federal, state, local or other taxes owed or
owing by Sunbeam;
(2) any Debt of Sunbeam to any of its Restricted Subsidiaries or other
Affiliates;
(3) any trade payables; or
(4) the portion of any Debt that is Incurred in violation of the
indenture.
"Senior Lenders" means the lenders who are parties from time to time
to the Senior Credit Agreement.
"Significant Subsidiary" means any Restricted Subsidiary that would be
a "significant subsidiary" of Sunbeam as defined in Rule 1-02 of Regulation
S-X, promulgated by the Commission.
"Stated Maturity" means, with respect to any security, the date
specified in such security as the fixed date on which the principal of such
security or Debt is due and payable, including pursuant to any mandatory
redemption provision (but excluding any provision providing for the
repurchase of such security at the option of the holder thereof upon the
happening of any contingency unless such contingency has occurred).
"Subsidiary" means any corporation, association, partnership or other
business entity of which more than 50% of the total voting power of shares
of Capital Stock or other interests (including partnership interests)
entitled (without regard to the occurrence of any contingency) to vote in
the election of directors, managers or trustees thereof is at the time
owned or controlled, directly or indirectly, by:
(1) Sunbeam,
(2) Sunbeam and one or more Subsidiaries, or
(3) one or more Subsidiaries.
"Temporary Cash Investments" means any of the following:
(1) any investment in direct obligations of the United States of
America or any agency thereof or obligations Guaranteed by the United
States of America or any agency thereof,
(2) investments in time deposit accounts, banker's acceptances,
certificates of deposit and money market deposits maturing within 270 days
of the date of acquisition thereof issued by a bank or trust company which
is organized under the laws of the United States of America, any state
thereof or any foreign country recognized by the United States, and which
bank or trust company has capital, surplus and undivided profits
aggregating in excess of $50 million (or the foreign currency equivalent
thereof) and has outstanding debt which is rated "A" (or such similar
equivalent rating) or higher by at least one nationally recognized
statistical rating organization (as defined in Rule 436 under the
Securities Act) or any money-market fund sponsored by a registered broker
dealer or mutual fund distributor,
(3) repurchase obligations with a term of not more than 30 days for
underlying securities of the types described in clause (1) above entered
into with a bank meeting the qualifications described in clause (2) above,
(4) investments in commercial paper, maturing not more than 270 days
after the date of acquisition thereof, issued by a corporation (other than
an Affiliate of Sunbeam) organized and in existence under the laws of the
United States of America or any foreign country recognized by the United
States of America with a rating at the time as of which any Investment
therein is made of "P-l" (or higher) according to Moody's Investors
Service, Inc. or "A-1" (or higher) according to Standard & Poor's Rating
Group,
(5) investments in securities with maturities of six months or less
from the date of acquisition issued or fully guaranteed by any state,
commonwealth or territory of the United States of America, or by any
political subdivision or taxing authority thereof, and rated at least "A"
by Standard & Poor's Rating Group or "A" by Moody's Investors Service,
Inc.,
(6) participations (for a tenor of not more than 90 days) in loans to
Persons having short-term credit ratings of at least "A-1" and "P-1" by
Standard & Poor's Rating Group and Moody's Investors Service, Inc.,
respectively,
(7) with respect to any Foreign Subsidiary organized in Canada,
commercial paper of Canadian companies rated R-l High or the equivalent
thereof by Dominion Bond Rating Services with maturities of less than one
year, and
(8) with respect to Foreign Subsidiaries not organized in Canada,
government obligations of another country whose debt securities are rated
by Standard & Poor's Rating Group and/or Moody's Investors Service, Inc.
"A-1" or "P-1", or the equivalent thereof (if a short-term debt rating is
provided by either), or at least "AA" or "AA2", or the equivalent thereof
(if a long-term unsecured debt rating is provided by either), in each case,
with maturities of less than 12 months.
"Trustee" means The Bank of New York, the trustee under the indenture
for the Secured Notes and any successor thereto.
"Unrestricted Subsidiary" means:
(1) any Subsidiary of Sunbeam that at the time of determination shall
be designated an Unrestricted Subsidiary by the Board of Directors in the
manner provided below, and
(2) any Subsidiary of an Unrestricted Subsidiary.
The Board of Directors may designate any Subsidiary of Sunbeam
(including any newly acquired or newly formed Subsidiary) to be an
Unrestricted Subsidiary so long as neither such Subsidiary nor any of its
Subsidiaries owns any Capital Stock or Debt of, or holds any Lien on any
property of, Sunbeam or any other Subsidiary of Sunbeam that is not an
Unrestricted Subsidiary and provided that:
(1) no Subsidiary of Sunbeam that is a Restricted Subsidiary on the
Issue Date (other than a Restricted Subsidiary with total assets of $1,000
or less on the Issue Date) may be designated an Unrestricted Subsidiary,
and
(2) no Subsidiary holding, directly or indirectly, any assets (other
than assets totaling $1,000 or less which constituted the only assets of a
Restricted Subsidiary on the Issue Date) held by Sunbeam or a Restricted
Subsidiary on the Issue Date may be designated an Unrestricted Subsidiary.
The Board of Directors may designate any Unrestricted Subsidiary to be
a Restricted Subsidiary; provided, however, that immediately after giving
effect to such designation, no Default shall have occurred and be
continuing.
Any such designation by the Board of Directors shall be made by
Sunbeam to the Trustee by promptly filing with the Trustee a copy of the
board resolution giving effect to such designation and an Officers'
Certificate certifying that such designation complies with the foregoing
provisions.
"U.S. Government Obligations" means direct obligations (or
certificates representing an ownership interest in such obligations) of the
United States of America (including any agency or instrumentality thereof)
for the payment of which the full faith and credit of the United States of
America is pledged and which are not callable at the issuer's option.
"Voting Stock" of a corporation means all classes of Capital Stock of
such corporation then outstanding and entitled generally (and not just upon
the happening of an event or events) to vote in the election of directors.
"Wholly Owned Subsidiary" means a Restricted Subsidiary all the
Capital Stock of which (other than directors' qualifying shares) is owned
by Sunbeam and/or another Wholly Owned Subsidiary; provided, however, that
a Foreign Subsidiary shall be a Wholly Owned Subsidiary if more than 90% of
the Capital Stock and Voting Stock thereof is owned by Sunbeam and/or
another Wholly Owned Subsidiary.
"Zero Debentures" means $2,014 million in aggregate principal amount
at maturity of Sunbeam's Zero Coupon Convertible Subordinated Debentures
due 2018.
COMPARISON OF ZERO DEBENTURES AND SECURED NOTES
Set forth below is a comparison of the terms of the Zero Debentures
and the Secured Notes that assumes completion of the exchange offer on
August 11, 2000.
<TABLE>
<CAPTION>
THE ZERO DEBENTURES THE SECURED NOTES
----------------------- ------------------------
<S> <C> <C>
ISSUE.......................... Convertible Senior Senior Secured Subordinated Notes
Subordinated Debentures
ISSUER......................... Sunbeam Corporation Sunbeam Corporation
SECURITY....................... Unsecured Secured by a second-priority
lien on the capital stock of
Sunbeam's two significant
directly owned subsidiaries.
ISSUE DATE...................... March 25, 1998 August 11, 2000
CONVERSION...................... Convertible until Not convertible
maturity at a rate
of 6.575 shares of
common stock per
$1,000 principal
amount at maturity,
subject to adjustment.
PRINCIPAL AMOUNT AT MATURITY.... $2,014,000,000 $348,422,000
ORIGINAL ISSUE PRICE............ 37.24% 86.16%
ACCRETED VALUE (8/11/00) ....... $843,534,294 $300,207,352
COUPON.......................... Zero % 11%
MATURITY........................ March 25, 2018 June 15, 2011
CASH INTEREST PAYMENTS.......... None Interest Payments Year 1: 15% of
aggregate interest payable on the Secured
Notes will be paid in cash, pro rata,
with remainder to be an accretion of
original issue discount;
Interest Payments Year 2: 30% of
aggregate interest payable on the Secured
Notes will be paid in cash, pro rata,
with remainder to be an accretion of
original issue discount;
Thereafter: All interest payable on the
Secured Notes will be paid entirely in
cash.
RANKING; SUBORDINATION.......... The Zero Debentures The Secured Notes will rank senior to the
rank pari passu with Zero Debentures and, to the extent of the
all of Sunbeam's value of the Collateral, to all of
outstanding trade Sunbeam's outstanding unsecured Debt,
payables and junior to including trade payables. The Secured
all of Sunbeam's Senior Notes will be subordinated to all of
Debt. The Zero Sunbeam's existing and future Senior
Debentures are Debt. The Secured Notes will be
unsecured and are effectively subordinated to all Debt and
subordinated to all of other liabilities of Sunbeam's
Sunbeam's existing and Subsidiaries.
future Senior Debt and
will be, when issued,
subordinated to the
Secured Notes. The Zero
Debentures are
effectively
subordinated to all
Debt and other
liabilities of
Sunbeam's Subsidiaries.
OPTIONAL REDEMPTION............. Redeemable Redeemable
REPURCHASE AT OPTION OF HOLDER.. Holders can cause Holders can cause Sunbeam to repurchase
Sunbeam to repurchase the Secured Notes at 101% of par
the Zero Debentures at following a "Change of Control" of
par (subject to certain Sunbeam (as defined in the indenture for
adjustments) following the Secured Notes).
a "Fundamental Change"
affecting Sunbeam (as
defined in the
indenture for the Zero
Debentures).
COVENANTS....................... Restrictions on Restrictions on Sunbeam's ability to
Sunbeam's ability to utilize the proceeds of certain asset
engage in certain dispositions and engage in certain
mergers, consolidations transactions resulting in a Change of
and asset dispositions. Control of Sunbeam.
</TABLE>
DESCRIPTION OF OTHER INDEBTEDNESS
The following statements are brief summaries of provisions of
Sunbeam's outstanding indebtedness. The summaries are qualified in their
entirety by reference to the full text of the agreements governing such
indebtedness.
SENIOR CREDIT AGREEMENT
Concurrent with the 1998 acquisitions of Coleman, First Alert and
Signature Brands, Sunbeam replaced its $250 million syndicated unsecured
five-year revolving credit facility with the senior credit agreement. The
senior credit agreement provided for aggregate borrowings of up to $1,700
million and in addition to other customary covenants, required Sunbeam to
maintain specified consolidated leverage, interest coverage and fixed
charge coverage ratios as of the end of each fiscal quarter occurring after
March 31, 1998 and on or prior to the latest stated maturity date for any
of the borrowings under the senior credit agreement.
As a result of, among other things, its operating losses incurred
during the first half of 1998, Sunbeam did not achieve the specified
financial ratios for June 30, 1998 and it appeared unlikely that Sunbeam
would achieve the specified financial ratios for September 30, 1998.
Consequently, Sunbeam and its senior lenders entered into an agreement
dated as of June 30, 1998 that waived through December 31, 1998 all
defaults arising from the failure of Sunbeam to satisfy the specified
financial ratios for June 30, 1998 and September 30, 1998. Pursuant to an
agreement with Sunbeam dated as of October 19, 1998, Sunbeam's senior
lenders extended all of the waivers under the June 30, 1998 agreement
through April 10, 1999 and also waived through such date all defaults
arising from any failure by Sunbeam to satisfy the specified financial
ratios for December 31, 1998. In April 1999, such waivers were extended
through April 10, 2000 and on April 10, 2000 such waivers were extended
through April 14, 2000. On April 14, 2000, Sunbeam and its senior lenders
entered into an amendment to the senior credit agreement that, among other
things, waived until April 10, 2001 all defaults arising from any failure
by Sunbeam to satisfy certain financial ratios for any fiscal quarter end
occurring through March 31, 2001. As part of the April 14, 2000 amendment,
Sunbeam agreed to a minimum cumulative earnings before interest, taxes,
depreciation and amortization ("EBITDA") covenant that is based on
consolidated EBITDA and is tested at the end of each month occurring on or
prior to March 31, 2001. The minimum cumulative EBITDA is initially $35.8
million for the period from January 1, 2000 through April 30, 2000 and
generally increases on a monthly basis until it reaches $213.6 million for
the period from January 1, 2000 through March 31, 2001. The following
description of the senior credit agreement reflects the significant terms
of the senior credit agreement as amended to date.
The senior credit agreement provides for aggregate borrowings of up to
$1.7 billion pursuant to:
o a revolving credit facility in an aggregate principal amount of
up to $400.0 million maturing March 30, 2005 ($52.5 million of
which was used to complete the Coleman merger which occurred on
January 6, 2000);
o up to $800.0 million in term loans maturing on March 30, 2005
(of which $35.0 million was used to complete the Coleman merger
which occurred on January 6, 2000 and of which $76.2 million
has been repaid); and
o a $500.0 million term loan maturing September 30, 2006 (of
which $7.9 million has been repaid).
As of March 31, 2000, of the $1.7 billion, $1.572 billion was
outstanding and approximately $48 million was available for borrowing. The
remaining $80 million of the $1.7 billion senior credit agreement was
committed for outstanding letters of credit.
Pursuant to the senior credit agreement, interest accrues, at
Sunbeam's option:
o at the London Interbank Offered Rate ("LIBOR"); or
o at the base rate of the administrative agent which is generally
the higher of the prime commercial lending rate of the
administrative agent or the Federal Funds Rate plus 0.50%;
in each case plus an interest margin which was 3.00% for LIBOR borrowings
and 1.75% for base rate borrowings at March 31, 2000. The applicable
interest margins are subject to further downward adjustment upon the
reduction of the aggregate borrowings under the senior credit agreement.
Borrowings under the senior credit agreement are secured by a pledge of the
stock of Sunbeam's material subsidiaries and by a security interest in
substantially all of the assets of Sunbeam and its material domestic
subsidiaries. In addition, borrowings under the senior credit agreement are
guaranteed by a number of Sunbeam's wholly-owned material domestic
subsidiaries and these subsidiary guarantees are secured by substantially
all of the material domestic subsidiaries' assets. To the extent extensions
of credit are made to any subsidiaries of Sunbeam, the obligations of such
subsidiaries are guaranteed by Sunbeam.
Under terms of the April 14, 2000 amendment to the senior credit
agreement, Sunbeam was obligated to pay the bank lenders an amendment fee
for the April 14, 2000 amendment of 0.50% of the commitments under the
senior credit agreement as of April 14, 2000, totaling $8.5 million. This
fee was paid in May 2000. On November 30, 2000, Sunbeam also must pay an
amendment fee previously agreed to for the April 15, 1999 amendment equal
to 0.50% of the commitments under the senior credit agreement as of April
15, 1999, totaling $8.5 million. An additional amendment fee relating to
the April 15, 1999 amendment, equal to $8.5 million, will be payable to the
senior lenders if the aggregate loan and commitment exposure under the
senior credit agreement is equal to or more than $1.2 billion on November
30, 2000, with such fee being payable on June 30, 2001. The $17 million
amendment fee associated with the April 15, 1999 amendment is being
amortized to interest expense using the straight-line method over the
one-year term of the amendment. The $8.5 million amendment fee associated
with the April 14, 2000 amendment will be amortized to interest expense
using the straight-line method over the one-year term of that amendment.
In addition to the above described ratios and tests, the senior credit
agreement contains covenants customary for credit facilities of a similar
nature, including limitations on the ability of Sunbeam and its
subsidiaries, including Coleman, to, among other things:
o declare dividends or repurchase stock;
o prepay, redeem or repurchase debt, incur liens and engage in
sale-leaseback transactions;
o make loans and investments;
o incur additional debt;
o amend or otherwise alter material agreements or enter into
restrictive agreements;
o make capital expenditures;
o fail to maintain its trade receivable securitization programs;
o engage in mergers, acquisitions and asset sales;
o engage in certain transactions with affiliates;
o settle certain litigation;
o alter its cash management system; and
o alter the businesses they conduct.
The senior credit agreement provides for events of default customary for
transactions of this type, including nonpayment, misrepresentation, breach
of covenant, cross-defaults, bankruptcy, material adverse change arising
from compliance with ERISA, material adverse judgments, entering into
guarantees and change of ownership and control. Furthermore, the senior
credit agreement requires Sunbeam to prepay loans under the senior credit
agreement on December 31, 2000 to the extent that the cash on hand in
Sunbeam's concentration accounts plus the aggregate amount of unused
revolving loan commitments on that date exceed $185.0 million.
Unless waived by the bank lenders, the failure of Sunbeam to satisfy
any of the financial ratios and tests contained in the senior credit
agreement or the occurrence of any other event of default under the senior
credit agreement would entitle the senior lenders to (a) receive a 2.00%
increase in the interest rate applicable to outstanding loans and increase
the trade letter of credit fees to 1.00% and (b) declare the outstanding
borrowings under the senior credit agreement immediately due and payable
and exercise all or any of their other rights and remedies. Any such
acceleration or other exercise of rights and remedies would likely have a
material adverse effect on Sunbeam.
Pursuant to the April 14, 2000 amendment, the term loan payments
originally scheduled for September 30, 1999 and March 31, 2000, in the
amount of $69.3 million on each date, are to be made as follows: (i) $69.3
million on the earlier of the sale of Eastpak or August 15, 2000, (ii)
$30.8 million on November 30, 2000 and (iii) $38.5 million on April 10,
2001. In addition, the April 14, 2000 amendment provides that the payment
dates for the $69.3 million term loan payments originally scheduled for
each of September 30, 2000 and March 31, 2001 are deferred until April 10,
2001. In May 2000, Sunbeam paid to the senior lenders $69.3 million in
respect of the term loan payment referenced in clause (i) above and $9.7
million in respect of the term loan payment referenced in clause (ii)
above. See Note 3 of the Notes to Sunbeam's Consolidated Financial
Statements set forth in Sunbeam's 1999 Annual Report on Form 10-K, which
is incorporated herein by reference.
On July 6, 2000, the lenders under Sunbeam's senior credit agreement
agreed to amend and waive certain provisions of the senior credit agreement
to permit Sunbeam to consummate the exchange offer, incur the indebtedness
represented by the secured notes, pay cash interest to the holders of the
secured notes and grant the second-priority lien on the collateral for the
secured notes.
ZERO DEBENTURES
If the exchange offer is completed and less than all of the
outstanding zero debentures have been tendered for exchange, any
non-tendered zero debentures will remain outstanding debt obligations of
Sunbeam. The zero debentures were issued under an indenture dated as of
March 25, 1998, in an aggregate principal amount at maturity of $2,014
million. The zero debentures were issued at a price of $372.43 per $1,000
principal amount at maturity. The zero debentures are unsecured general
obligations of Sunbeam, subordinated in right of payment to borrowings
under our senior credit agreement and other secured obligations of Sunbeam.
The zero debentures are "zero coupon," meaning that Sunbeam is not required
to make any periodic payments of interest on the zero debentures.
The zero debentures are convertible into shares of our common stock,
at the holder's option at any time through the maturity date. The initial
conversion rate is 6.575 shares of common stock per $1,000 principal amount
at maturity of the zero debentures, though this rate is subject to
anti-dilution adjustments.
The indenture governing the zero debentures does not contain any
financial covenants or restrictions on the payment of dividends, the
incurrence of indebtedness or the issuance or repurchase or securities of
Sunbeam.
Beginning on March 25, 2003, Sunbeam will have the option of redeeming
the zero debentures for cash. The table below shows the redemption prices
per each $1,000 principal amount at maturity of zero debentures, at March
25, 2003, at March 25 of each subsequent year prior to maturity and at
maturity on March 25, 2018. The prices set forth below reflect the accrued
original issue discount calculated to each such date. The redemption price
of a zero debenture redeemed between such dates would include an additional
amount reflecting the additional original issue discount accrued from the
next preceding date in the table to the actual redemption date.
<TABLE>
<CAPTION>
(2)
(1) ACCRUED (3)
ZERO ORIGINAL ISSUE REDEMPTION
DEBENTURE DISCOUNT PRICE
REDEMPTION DATE ISSUE PRICE AT 5% (1) + (2)
--------------- --------------- --------------- ---------------
<S> <C> <C> <C>
March 25, 2003 $372.43 $104.32 $476.75
March 25, 2004 372.43 128.45 500.88
March 25, 2005 372.43 153.81 526.24
March 25, 2006 372.43 180.45 552.88
March 25, 2007 372.43 208.44 580.87
March 25, 2008 372.43 237.84 610.27
March 25, 2009 372.43 268.74 641.17
March 25, 2010 372.43 301.20 673.63
March 25, 2011 372.43 335.30 707.73
March 25, 2012 372.43 371.13 743.56
March 25, 2013 372.43 408.77 781.20
March 25, 2014 372.43 448.32 820.75
March 25, 2015 372.43 489.87 862.30
March 25, 2016 372.43 533.52 905.95
March 25, 2017 372.43 579.39 951.82
March 25, 2018 372.43 627.57 1,000.00
</TABLE>
In addition, if any of the fundamental changes described in the
indenture governing the zero debentures occurs prior to the maturity of the
zero debentures, each holder of a zero debenture has the right to require
Sunbeam to redeem any or all of such holder's zero debentures for a cash
amount equal to the then-present accreted value of the zero debentures (see
the table above). A fundamental change is defined as the occurrence of any
transaction or event in which all or substantially all of Sunbeam's common
stock is to be exchanged for, converted into, acquired for or constitute
solely the right to receive consideration, whether by means of an exchange
offer, liquidation, tender offer, consolidation, merger, combination,
reclassification, recapitalization or otherwise. A fundamental change would
not be deemed to have occurred in the event that any such transaction
involves consideration that is all or substantially all common stock of a
company which is listed or, upon consummation of or immediately following
such transaction or event, which will be listed on a United States national
securities exchange or approved for quotation on the NASDAQ National Market
or any similar United States system of automated dissemination of
quotations of securities prices.
Finally, on March 25, 2003, March 25, 2008 and March 25, 2013, Sunbeam
also will become obligated to purchase, at the option of the zero debenture
holder, any outstanding zero debenture for which the holder has delivered a
written purchase notice and complied with the specified terms of the
indenture governing the zero debentures. The purchase price to be paid by
Sunbeam on each such date is as set forth in the table above, except that
such amount may be paid by Sunbeam in shares of common stock, subject to
the terms of the indenture. Sunbeam's senior credit agreement presently
would permit the purchase of the zero debentures with shares of common
stock, though any future credit agreements, including an extension of the
senior credit agreement, or other agreements relating to indebtedness to
which Sunbeam may become a party may contain prohibitions on or defaults
with respect to the repurchase of the zero debentures or provide that
prepayment or redemption would constitute an event of default.
Although the indenture governing the zero debentures provides for the
optional and mandatory redemption of the zero debentures by Sunbeam as
described above, Sunbeam's senior credit agreement currently prohibits the
redemption of the zero debentures for cash. In the case of a fundamental
change described above, Sunbeam currently would be prohibited from
redeeming the zero debentures. Sunbeam could seek the consent of its then
existing lenders to redeem the zero debentures or could attempt to
refinance the borrowings that contain the prohibitions. If Sunbeam does not
obtain required consents or repay these borrowings, Sunbeam would remain
prohibited from redeeming the zero debentures. In that case, Sunbeam's
failure to redeem zero debentures required to be redeemed would constitute
an event of default under the indenture governing the zero debentures and
would likely constitute a default under the terms of any other indebtedness
of Sunbeam outstanding at such time. Neither Sunbeam nor the trustee,
without the consent of the holders of the zero debentures, can waive the
requirement that Sunbeam redeem zero debentures at the option of holders
upon a fundamental change described above.
OTHER DEBT
For additional information concerning Sunbeam's outstanding
indebtedness, see the unaudited consolidated financial statements of
Sunbeam and related notes set forth in Sunbeam's First Quarter 2000
Quarterly Report on Form 10-Q and the audited consolidated financial
statements of Sunbeam and related notes set forth in Sunbeam's 1999 Annual
Report on Form 10-K, each of which is incorporated herein by reference.
Copies of Sunbeam's First Quarter 2000 Quarterly Report on Form 10-Q and
1999 Annual Report on Form 10-K are enclosed with this Offering Circular.
DESCRIPTION OF CAPITAL STOCK
The following statements are brief summaries of provisions of
Sunbeam's capital stock. The summaries are qualified in their entirety by
reference to the full text of Sunbeam's Restated Certificate of
Incorporation (the "Sunbeam Charter") and By-Laws.
Sunbeam's authorized capital stock currently consists of 500,000,000
shares of common stock, par value $.01 per share, and 2,000,000 shares of
preferred stock, par value $.01 per share.
COMMON STOCK
As of July 6, 2000, there were 107,558,065 shares of common stock
outstanding. Each share of common stock has one vote on all matters upon
which stockholders are entitled or permitted to vote, including the
election of directors. There are no cumulative voting rights. Shares of
common stock would participate ratably in any distribution of assets in a
liquidation, dissolution or winding up of Sunbeam, subject to prior
distribution rights of any shares of preferred stock then outstanding. The
common stock has no preemptive rights or conversion rights nor are there
any redemption or sinking fund provisions applicable to the common stock.
Holders of common stock are entitled to participate in dividends as and
when declared by the Sunbeam board out of funds legally available therefor.
Sunbeam's ability to pay cash dividends is subject to certain restrictions.
Sunbeam's senior credit agreement currently prohibits Sunbeam from paying
cash dividends.
The transfer agent and registrar for the common stock is American
Stock Transfer & Trust Company.
PREFERRED STOCK
There are no shares of Sunbeam preferred stock currently outstanding.
The Sunbeam Charter provides that the Sunbeam board may authorize the
issuance of one or more series of preferred stock having such rights,
including voting, conversion and redemption rights, and such preferences,
including dividend and liquidation preferences, as the Sunbeam board may
determine without any further action by the stockholders of Sunbeam.
As described above, under some circumstances, Sunbeam may be obligated
to issue to the lenders under its senior credit agreement up to 4.5 million
shares of Sunbeam preferred stock to be designated "Series A Convertible
Participating Preferred Stock." The Series A Preferred Stock to be issued
to the senior lenders, if issued, will entitle the holders thereof to
receive, in preference to any dividends on the Sunbeam common stock and any
other security ranking junior to the Series A Preferred Stock, cash
dividends, when, as and if declared by the Sunbeam board, in an amount per
annum per share equal to 1% of the stated value of such preferred
stock. All dividends on the Series A Preferred Stock will accrue and be
payable at the earlier of (i) the time any liquidating distribution is made
to the holders of the Series A Preferred Stock, (ii) any time at which all
of the outstanding shares of Series A Preferred Stock are exchanged for
shares of Sunbeam common stock and (iii) the time of certain
consolidations, mergers, combinations or similar transactions involving
Sunbeam. Holders of Series A Preferred Stock will also participate equally
in any dividend declared and paid on the Sunbeam common stock. Each share
of Series A Preferred Stock will also entitle the holder thereof to receive
a liquidation preference in an amount equal to the stated value of such
share of Series A Preferred Stock, plus the aggregate amount of all accrued
and unpaid dividends thereon to the date of liquidation. After payment of a
like amount to the holders of the Sunbeam common stock, holders of Series A
Preferred Stock will participate ratably in all other amounts available for
distribution upon any liquidation of Sunbeam. Each share of Series A
Preferred Stock will entitle the holder thereof to one vote on all matters
submitted to a vote of the stockholders of Sunbeam.
WARRANTS
Sunbeam currently has outstanding one warrant which entitles the
holder to purchase up to 23 million shares of Sunbeam common stock at an
exercise price of $7 per share, subject to anti-dilution adjustments. This
warrant was issued on August 24, 1998 under the terms of a settlement
agreement, dated August 12, 1998, by and between Sunbeam and Coleman
(Parent) Holdings, Inc., the MacAndrews & Forbes subsidiary from which
Sunbeam acquired a controlling interest in Coleman. The MacAndrews & Forbes
subsidiary is the holder of the warrant. The warrant has a term of five
years. See the section of our 1999 Annual Report on Form 10-K captioned
"Significant 1998 Financial and Business Developments - Settlement of
Claims of MacAndrews & Forbes."
Under the terms of a settlement of litigation relating to the Coleman
merger, Sunbeam issued additional warrants to purchase up to 4.98 million
shares of Sunbeam common stock at an exercise price of $7 per share,
subject to anti-dilution adjustments. The warrants were issued to the
minority stockholders and plaintiffs' counsel upon completion of the
Coleman merger. See the section of our 1999 Annual Report on Form 10-K
captioned "Significant 1998 Financial and Business Developments -
Settlement of Coleman-Related Claims."
INCORPORATION OF DOCUMENTS BY REFERENCE
The following documents previously filed with the SEC are incorporated
in this Offering Circular by reference and copies are being provided
herewith:
1. Sunbeam's Quarterly Report on Form 10-Q for the fiscal quarter
ended March 31, 2000;
2. Sunbeam's Annual Report on Form 10-K for the fiscal year ended
December 31, 1999; and
3. Sunbeam's Proxy Statement on Schedule 14A relating to the 2000
Annual Meeting of Stockholders of Sunbeam.
The following section of Sunbeam's First Quarter 2000 Quarterly Report on
Form 10-Q is specifically incorporated herein by reference: "Management's
Discussion and Analysis of Financial Condition and Results of Operations."
The following sections of Sunbeam's 1999 Annual Report on Form 10-K are
specifically incorporated herein by reference: "Business - Significant 1998
Financial and Business Developments," "Market for Registrant's Common
Equity and Related Shareholder Matters," "Management's Discussion and
Analysis of Financial Condition and Results of Operations," "Changes in and
Disagreements with Accountants on Accounting and Financial Disclosure" and
"Business." The following sections of Sunbeam's 2000 Annual Meeting Proxy
Statement are specifically incorporated herein by reference: "Management,"
"Stock Ownership of Management" and "Stock Ownership of Certain Beneficial
Owners." Holders of the zero debentures are encouraged to review the
sections referenced above, as well as the remainder of Sunbeam's First
Quarter 2000 Quarterly Report on Form 10-Q, 1999 Annual Report on Form 10-K
and 2000 Annual Meeting Proxy Statement, copies of which are enclosed with
this Offering Circular.
In addition to the foregoing, all reports and other documents filed by
Sunbeam pursuant to Section 13(a), 13(c), 14 or 15(d) of the Exchange Act
subsequent to the date of this Offering Circular and prior to the
expiration date of the exchange offer shall be deemed to be incorporated
herein by reference and to be a part hereof from the dates of filing of
such reports and documents. Any statement contained in a document
incorporated or deemed to be incorporated by reference herein shall be
deemed to be modified or superseded for purposes of this Offering Circular
to the extent that a statement contained herein, or in any other
subsequently filed document which also is incorporated or deemed to be
incorporated by reference herein, modifies or supersedes such statement.
Any statement so modified or superseded shall not be deemed, except as so
modified or superseded, to constitute a part of this Offering Circular.
CAUTIONARY STATEMENTS
Certain statements in this Offering Circular may constitute
"forward-looking" statements within the meaning of the Private Securities
Litigation Reform Act of 1995, as the same may be amended from time to time
(the "Act") and in releases made by the SEC. These forward-looking
statements involve known and unknown risks, uncertainties and other factors
which may cause the actual results, performance, or achievements of Sunbeam
to be materially different from any future results, performance, or
achievements expressed or implied by such forward-looking statements.
Statements that are not historical fact are forward-looking statements.
Forward-looking statements can be identified by, among other things, the
use of forward-looking language, such as the word "estimate," "project,"
"intend," "expect," "believe," "may," "well," "should," "seeks," "plans,"
"scheduled to," "anticipates," or "intends," or the negative of these terms
or other variations of these terms or comparable language, or by
discussions of strategy or intentions, when used in connection with
Sunbeam, including its management. These forward-looking statements were
based on various factors and were derived utilizing numerous important
assumptions and other important factors that could cause actual results to
differ materially from those in the forward-looking statements. These
cautionary statements are being made pursuant to the Act, with the
intention of obtaining the benefits of the "safe harbor" provisions of the
Act. Sunbeam cautions investors that any forward-looking statements made by
Sunbeam are not guarantees of future performance. Important assumptions and
other important factors that could cause actual results to differ
materially from those in the forward-looking statements with respect to
Sunbeam include, but are not limited to, the risks and uncertainties
affecting our business described in the section of this Offering Circular
captioned "Risk Factors," as well as elsewhere in this Offering Circular.
WHERE YOU CAN FIND MORE INFORMATION
Sunbeam is subject to the informational requirements of the Securities
Exchange Act of 1934. Accordingly, Sunbeam files annual, quarterly and
current reports, proxy statements and other information with the SEC.
Sunbeam also furnishes to its stockholders annual reports, which include
financial statements audited by its independent certified public
accountants, and other reports which the law requires us to send to its
stockholders. The public may read and copy any reports, proxy statements,
or other information that Sunbeam files at the SEC's public reference room
at Judiciary Plaza, 450 Fifth Street N.W., Washington, D.C. 20549. The
public may obtain information on the operation of the public reference room
by calling the SEC at 1-800-SEC-0330. Sunbeam's SEC filings are also
available to the public from commercial document retrieval services and at
the web site maintained by the SEC at "http://www.sec.gov."
Sunbeam's common stock is listed on the New York Stock Exchange. You
can inspect and copy reports, proxy statements and other information about
Sunbeam at the NYSE's offices at 20 Broad Street, New York, New York 10005.
[BACK COVER]
We have appointed MacKenzie Partners, Inc. as the Information Agent
for the exchange offer. All inquiries relating to this Offering Circular
and the transactions contemplated hereby should be directed to the
information agent at the telephone numbers and address set forth below.
The Information Agent for the Offer is:
MacKenzie Partners, Inc.
156 Fifth Avenue
New York, NY 10010
(212)929-5500 (call collect)
or
Call Toll Free: (800) 322-2885
We have appointed American Stock Transfer & Trust Company as the
exchange agent for the exchange offer. All completed letters of transmittal
and agent's messages should be directed to the exchange agent at one of the
addresses set forth below. All questions regarding the procedures for
tendering in the exchange offer and requests for assistance in tendering
your zero debentures should also be directed to the exchange agent at one
of the following telephone numbers and addresses:
Delivery To: American Stock Transfer & Trust Company, Exchange Agent
By Regular or By Facsimile: By Overnight Courier
Certified Mail: (Eligible Guarantor or Hand:
Institutions Only)
American Stock Transfer American Stock Transfer
& Trust Company (718) 234-5001 & Trust Company
40 Wall Street 40 Wall Street
46th Floor To Confirm by Telephone 46th Floor
New York, NY 10005 or for Information Call: New York, NY 10005
Attention: Joe Wolf Attention: Joe Wolf
(718) 921-8200
DELIVERY OF A LETTER OF TRANSMITTAL OR AGENT'S MESSAGE TO AN ADDRESS
OTHER THAN THE ADDRESS LISTED ABOVE OR TRANSMISSION OF INSTRUCTIONS BY
FACSIMILE OTHER THAN AS SET FORTH ABOVE IS NOT VALID DELIVERY OF THE LETTER
OF TRANSMITTAL OR AGENT'S MESSAGE.
Requests for additional copies of this Offering Circular, Sunbeam's
First Quarter 2000 Quarterly Report on Form 10-Q, Sunbeam's 1999 Annual
Report on Form 10-K, Sunbeam's 2000 Annual Meeting Proxy Statement, the
enclosed Letter of Transmittal or the enclosed Notice of Guaranteed
Delivery may be directed to either the Exchange Agent or the Information
Agent at the respective telephone numbers and addresses listed above.
