UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
----------
FORM 10-Q
[X] Quarterly Report Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934
For the period ended March 31, 2000
OR
[ ] Transition Report Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934
For the transition period from ___________ to ___________
Commission File No. 1-000052
SUNBEAM CORPORATION
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
DELAWARE 25-1638266
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER IDENTIFICATION NUMBER)
INCORPORATION OR ORGANIZATION)
2381 EXECUTIVE CENTER DRIVE 33431
BOCA RATON, FL (ZIP CODE)
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)
(561) 912-4100
(REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE)
NOT APPLICABLE
(FORMER NAME, FORMER ADDRESS AND FORMER FISCAL YEAR,
IF CHANGED SINCE LAST REPORT)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes [X] No [ ]
On May 11, 2000 there were 107,558,065 shares of the registrant's Common Stock
($.01 par value) outstanding.
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SUNBEAM CORPORATION AND SUBSIDIARIES
QUARTERLY REPORT
ON FORM 10-Q
TABLE OF CONTENTS
PART I. FINANCIAL INFORMATION
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PAGE
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Item 1. Financial Statements
Condensed Consolidated Statements of Operations (Unaudited)
for the three months ended March 31, 2000 and March 31, 1999..................... 2
Condensed Consolidated Balance Sheets (Unaudited)
as of March 31, 2000 and December 31, 1999....................................... 3
Condensed Consolidated Statements of Cash Flows (Unaudited)
for the three months ended March 31, 2000 and March 31, 1999..................... 4
Notes to Condensed Consolidated Financial Statements (Unaudited)................. 5
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations........................................................ 20
PART II. OTHER INFORMATION
Item 1. Litigation....................................................................... 31
Item 6. Exhibits and Reports on Form 8-K................................................. 34
SIGNATURE .......................................................................................... 35
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PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
SUNBEAM CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
(AMOUNTS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
THREE MONTHS ENDED
------------------------
MARCH 31, MARCH 31,
2000 1999
--------- ---------
Net sales $ 539,053 $ 523,946
Cost of goods sold 405,764 397,491
Selling, general and administrative expense 135,833 141,249
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Operating loss (2,544) (14,794)
Interest expense, net 52,487 42,841
Other expense (income), net 2,611 (127)
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Loss before income taxes and minority interest (57,642) (57,508)
Income tax provision (benefit):
Current 1,740 (151)
Deferred (73) 1,893
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1,667 1,742
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Minority interest 91 1,489
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Net loss $ (59,400) $ (60,739)
========= =========
Basic and diluted loss per share:
Net loss $ (0.55) $ (0.60)
========= =========
Weighted average common shares outstanding 107,056 100,740
See Notes to Condensed Consolidated Financial Statements.
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SUNBEAM CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)
(AMOUNTS IN THOUSANDS)
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MARCH 31, DECEMBER 31,
2000 1999
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ASSETS
Current assets:
Cash and cash equivalents $ 23,098 $ 40,799
Receivables, net 361,130 364,338
Inventories 539,544 460,680
Prepaid expenses, deferred income taxes and other current assets 68,205 72,130
----------- -----------
Total current assets 991,977 937,947
Property, plant and equipment, net 452,603 447,116
Trademarks, tradenames, goodwill and other, net 1,795,360 1,747,286
----------- -----------
$ 3,239,940 $ 3,132,349
=========== ===========
LIABILITIES AND SHAREHOLDERS' DEFICIENCY
Current liabilities:
Short-term debt and current portion of long-term debt $ 141,325 $ 139,806
Accounts payable 217,940 185,610
Other current liabilities 290,606 300,809
----------- -----------
Total current liabilities 649,871 626,225
Long-term debt, less current portion 2,308,592 2,164,002
Other long-term liabilities 237,224 241,264
Deferred income taxes 111,235 93,288
Minority interest 1,105 66,910
Commitments and contingencies (Notes 3 and 9)
Shareholders' deficiency:
Preferred stock (2,000,000 shares authorized, none outstanding) -- --
Common stock (107,422,500 and 100,746,400 shares issued) 1,074 1,007
Additional paid-in capital 1,179,630 1,122,455
Accumulated deficit (1,168,916) (1,109,516)
Accumulated other comprehensive loss (79,875) (73,286)
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Total shareholders' deficiency (68,087) (59,340)
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$ 3,239,940 $ 3,132,349
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See Notes to Condensed Consolidated Financial Statements.
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SUNBEAM CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
(AMOUNTS IN THOUSANDS)
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THREE MONTHS ENDED
------------------------
MARCH 31, MARCH 31,
2000 1999
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OPERATING ACTIVITIES:
Net loss $ (59,400) $ (60,739)
Adjustments to reconcile net loss to net cash
used in operating activities:
Depreciation and amortization 32,492 32,394
Bond accretion and non-cash interest charges 11,342 11,271
Deferred income taxes (benefit) provision (73) 1,893
Minority interest 91 1,489
Gain on the sale of property, plant and equipment (23) (568)
Changes in working capital and other, net of acquisitions (42,985) (43,224)
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Net cash used in operating activities (58,556) (57,484)
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INVESTING ACTIVITIES:
Capital expenditures, net (16,070) (17,098)
Proceeds from asset sales 6,013 810
Acquisition of Coleman, including acquisition costs (83,445) --
Other, net (467) (165)
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Net cash used in investing activities (93,969) (16,453)
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FINANCING ACTIVITIES:
Net borrowings under revolving credit facilities 136,212 61,468
Payments of debt obligations, including prepayment penalties -- (2,500)
Other debt financing fees (1,179) (234)
Other, net (209) (66)
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Net cash provided by financing activities 134,824 58,668
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Net decrease in cash and cash equivalents (17,701) (15,269)
Cash and cash equivalents at beginning of period 40,799 61,432
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Cash and cash equivalents at end of period $ 23,098 $ 46,163
========= =========
</TABLE>
See Notes to Condensed Consolidated Financial Statements
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<PAGE>
SUNBEAM CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
1. OPERATIONS AND BASIS OF PRESENTATION
ORGANIZATION
Sunbeam Corporation and all of its majority-owned subsidiaries ("Sunbeam" or the
"Company") is a leading designer, manufacturer and marketer of branded consumer
products. The Company's primary business is the manufacturing, marketing and
distribution of durable household and outdoor leisure consumer products through
mass market and other distribution channels in the United States and
internationally. The Company also sells its products to professional and
commercial end users such as small businesses, health care providers, hotels and
other institutions. The Company's principal products include household kitchen
appliances; health monitoring and care products for home use; scales for
consumer and professional use for weight management and business uses; electric
blankets and throws; clippers and trimmers for consumer, professional and animal
uses; smoke and carbon monoxide detectors; outdoor barbecue grills; camping
equipment such as tents, lanterns, sleeping bags and stoves; coolers; backpacks
and book bags; and portable generators and compressors. The Company, through its
Thalia Products Inc. ("Thalia") subsidiary, is developing Home Linking
Technology (TM), or HLT (TM), which is designed to allow products to communicate
with each other.
See Note 3 for information relevant to management's plan to fund its capital and
debt service requirements.
BASIS OF PRESENTATION
The Condensed Consolidated Balance Sheet of the Company as of March 31, 2000 and
the Condensed Consolidated Statements of Operations and Cash Flows for the three
months ended March 31, 2000 and 1999 are unaudited. The unaudited condensed
consolidated financial statements have been prepared in accordance with
generally accepted accounting principles for interim financial information and
with the instructions of Form 10-Q and Rule 10-01 of Regulation S-X. The
December 31, 1999 Condensed Consolidated Balance Sheet was derived from the
consolidated financial statements contained in the Company's Annual Report on
Form 10-K for the year ended December 31, 1999. The condensed consolidated
financial statements contained herein should be read in conjunction with the
consolidated financial statements and related notes contained in the Company's
1999 Annual Report on Form 10-K. In the opinion of management, the unaudited
condensed consolidated financial statements contained herein include all
adjustments (consisting of only recurring adjustments) necessary for a fair
presentation of the results of operations for the interim periods presented.
These interim results of operations are not necessarily indicative of results
for future periods.
BASIC AND DILUTED LOSS PER SHARE OF COMMON STOCK
Basic loss per common share calculations are determined by dividing loss
available to common shareholders by the weighted average number of shares of
common stock outstanding. Diluted loss per share is determined by dividing loss
available to common shareholders by the weighted average number of shares of
common stock and dilutive common stock equivalents outstanding (all related to
outstanding stock options, restricted stock, warrants and the Zero Coupon
Convertible Senior Subordinated Debentures).
For the three months ended March 31, 2000 and 1999, respectively, 120,317 and
25,458 shares related to stock options were not included in diluted average
common shares outstanding because their effect would be antidilutive. Stock
options to purchase 21,341,214 and 18,961,063 common shares were excluded from
potential common shares at March 31, 2000 and 1999, respectively, as the option
exercise prices were greater than the average market price of the Company's
common stock during the year. Diluted average common shares outstanding as of
March 31, 2000 and 1999 excludes 13,242,050 shares related to the conversion
feature of the Zero Coupon Convertible Senior Subordinated Debentures and
27,480,549 and 23,000,000 shares issuable on the exercise of warrants as of
March 31, 2000 and March 31,1999, respectively, due to antidilution.
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SUNBEAM CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
(UNAUDITED)
1. OPERATIONS AND BASIS OF PRESENTATION - (CONTINUED)
NEW ACCOUNTING STANDARDS
In June 1999, the FASB issued SFAS No. 137, ACCOUNTING FOR DERIVATIVE
INSTRUMENTS AND HEDGING ACTIVITIES-DEFERRAL OF THE EFFECTIVE DATE OF STATEMENT
NO. 133, which delays the effective date of Statement No. 133 to fiscal years
beginning after June 15, 2000. SFAS No. 133 requires the recognition of all
derivatives in the Consolidated Balance Sheets as either assets or liabilities
measured at fair value. The Company will adopt SFAS No. 133 for the 2001 fiscal
year. The Company has not yet determined the impact SFAS No. 133 will have on
its consolidated financial position, results of operations or cash flows.
RECLASSIFICATIONS
Certain prior year amounts have been reclassified to conform with the 2000
presentation.
2. ACQUISITIONS
On March 30, 1998, pursuant to a merger agreement dated as of February 27, 1998,
the Company, through a wholly-owned subsidiary, acquired approximately 81% of
the total number of then outstanding shares of common stock of The Coleman
Company, Inc. ("Coleman") from an affiliate of MacAndrews & Forbes Holdings,
Inc. ("M&F"), in exchange for 14,099,749 shares of the Company's common stock
and approximately $160 million in cash. In addition, the Company assumed
approximately $1,016 million in debt. Immediately thereafter, as a result of the
exercise of employee stock options, the Company's indirect beneficial ownership
of Coleman decreased to approximately 79% of the total number of the outstanding
shares of Coleman common stock.
In January 2000, pursuant to a merger agreement dated as of February 27, 1998,
the Company acquired the remaining publicly held Coleman shares pursuant to a
merger transaction pursuant to which the remaining Coleman stockholders (other
than stockholders who are seeking appraisal rights under Delaware law) received
0.5677 of a share of the Company's common stock and $6.44 in cash for each share
of Coleman common stock they owned, aggregating approximately 6.7 million shares
of the Company's common stock and $87 million in cash. The approximate $87
million aggregate cash payment included $4.8 million related to the cash out of
remaining Coleman employee options, in accordance with the merger agreement,
which occurred in December 1999. In addition, pursuant to a court approved
settlement of claims by Coleman public stockholders the Company issued to such
Coleman public stockholders (other than such stockholders who are seeking
appraisal rights under Delaware law), warrants expiring August 24, 2003 to
purchase 4.98 million shares of the Company's common stock at $7.00 per share
less approximately 498,000 warrants issued to the plaintiffs' attorneys for
their fees and expenses. These warrants, which generally have the same terms as
the warrants previously issued to M&F's subsidiary (see Note 9) were issued when
the consideration was paid for the Coleman merger. The total consideration given
for the purchase of the remaining publicly held Coleman shares was valued at
$146 million.
The acquisition of Coleman was accounted for using the purchase method of
accounting, and accordingly, the financial position and results of operations of
Coleman are included in the accompanying Condensed Consolidated Statements of
Operations from the respective dates of acquisition. Prior to the completion of
the merger on January 6, 2000, approximately 20% of Coleman's results of
operations and net equity allocable to the public shareholders was reported as
minority interest.
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SUNBEAM CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
(UNAUDITED)
2. ACQUISITIONS - (CONTINUED)
The purchase price paid for the publicly held Coleman shares has been allocated
based on the estimated fair value of tangible and identified intangible assets
acquired and liabilities assumed as follows (in millions):
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Value of common stock issued...................................... $ 44
Value of warrants issued.......................................... 14
Cash paid including expenses and mandatory redemption of debt,
net of cash acquired.......................................... 88
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Net cash paid and equity issued................................... 146
Fair value of total liabilities assumed, including debt........... 19
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165
Fair value of assets acquired..................................... 157
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Excess of purchase price over fair value of net assets acquired... $ 8
======
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The excess of purchase price over the fair value of net assets acquired has been
classified as goodwill. Goodwill related to the Coleman acquisition is being
amortized on a straight-line basis over 40 years. Approximately $1.1 billion of
goodwill was recorded by the Company in connection with the acquisition of
Coleman. Goodwill has been allocated to the various operating businesses of
Coleman based on the estimated fair value of Coleman's component businesses.
As of the date of the acquisition of approximately 80% of Coleman, in March
1998, the then management of the Company determined that approximately 117
employees of Coleman would need to be involuntarily terminated in order to
eliminate duplicate activities and functions and fully integrate Coleman into
the Company's operations. The Company recognized a liability of approximately $8
million representing severance and benefit costs related to the 117 employees
pursuant to the termination plan. This liability was included in the allocation
of purchase price. As of March 31, 2000, the Company had paid severance benefits
of approximately $7.7 million and 3 employees have not yet been terminated.
Remaining termination costs are expected to be paid by December 31, 2000 and no
additional charges are anticipated in future periods related to this matter.
The following unaudited pro forma financial information for the Company gives
effect to the purchase of the publicly held shares of Coleman common stock as if
the transaction had occurred at the beginning of the period presented. No pro
forma information has been presented for the period ending March 31, 2000
because the transaction occurred at the beginning of the period. The pro forma
results for the period ending March 31, 1999 have been prepared for
informational purposes only and do not purport to be indicative of the results
of operations that actually would have occurred had the acquisition been
consummated on the date indicated, or which may result in the future. The
unaudited pro forma results follow (in millions, except per share data):
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THREE MONTHS ENDED
MARCH 31, 1999
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Net sales...................................................... $523.9
Net loss....................................................... (62.3)
Basic and diluted loss per share from continuing operations.... (0.58)
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3. DEBT
In March 1998, the Company replaced its $250 million syndicated unsecured
five-year revolving credit facility with a revolving and term credit facility
(the "Credit Facility"). The Credit Facility provided for aggregate borrowings
of up to $1.7 billion and in addition to other customary covenants, required the
Company 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 Credit Facility.
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SUNBEAM CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
(UNAUDITED)
3. DEBT - (CONTINUED)
As a result of, among other things, its operating losses incurred during the
first half of 1998, the Company did not achieve the specified financial ratios
for June 30, 1998 and it appeared unlikely that the Company would achieve the
specified financial ratios for September 30, 1998. Consequently, the Company and
its lenders entered into an agreement dated as of June 30, 1998 that waived
through December 31, 1998 all defaults arising from the failure of the Company
to satisfy the specified financial ratios for June 30, 1998 and September 30,
1998. Pursuant to an agreement with the Company dated as of October 19, 1998,
the Company's 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 the Company 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, the Company and its lenders entered into an amendment to the
Credit Facility that, among other things, waived until April 10, 2001 all
defaults arising from any failure by the Company to satisfy certain financial
ratios for any fiscal quarter end occurring through March 31, 2001. As part of
the April 14, 2000 amendment, the Company 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 Credit Facility reflects the significant terms of the Credit
Facility as amended to date.
The Credit Facility provides for aggregate borrowings of up to $1.7 billion
pursuant to: (i) a revolving credit facility in an aggregate principal amount of
up to $400 million maturing March 30, 2005 ($52.5 million of which was used to
complete the Coleman merger which occurred on January 6, 2000); (ii) 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
(iii) a $500.0 million term loan maturing September 30, 2006 (of which $5.0
million has been repaid). As of March 31, 2000, of the $1.7 billion, $1.572
billion was outstanding under the Credit Facility and approximately $48 million
was available for borrowing. The remaining $80.2 million of the $1.7 billion
Credit Facility was committed for outstanding letters of credit.
Pursuant to the Credit Facility, interest accrues, at the Company's option: (i)
at the London Interbank Offered Rate ("LIBOR"), or (ii) 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 Credit Facility. Borrowings under the Credit
Facility are secured by a pledge of the stock of the Company's material
subsidiaries and by a security interest in substantially all of the assets of
the Company and its material domestic subsidiaries. In addition, borrowings
under the Credit Facility are guaranteed by a number of the Company'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 the Company, the
obligations of such subsidiaries are guaranteed by the Company.
Under terms of the April 14, 2000 amendment to the Credit Facility, the Company
is obligated to pay the bank lenders an amendment fee for the April 14, 2000
amendment of 0.50% of the commitments under the Credit Facility as of April 14,
2000, totaling $8.5 million. This fee is payable on the earlier of June 30, 2000
or the closing of the sale of the Company's Eastpak business ("Eastpak"). (See
Note 7.) On November 30, 2000, the Company also must pay an amendment fee
previously agreed to for the April 15, 1999 amendment equal to 0.50% of the
commitments under the Credit Facility 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 bank lenders if the aggregate loan
and commitment exposure under the Credit Facility 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 was
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.
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SUNBEAM CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
(UNAUDITED)
3. DEBT - (CONTINUED)
In addition to the above described ratios and tests, the Credit Facility
contains covenants customary for credit facilities of a similar nature,
including limitations on the ability of the Company and its subsidiaries,
including Coleman, to, among other things, (i) declare dividends or repurchase
stock, (ii) prepay, redeem or repurchase debt, incur liens and engage in
sale-leaseback transactions, (iii) make loans and investments, (iv) incur
additional debt, (v) amend or otherwise alter material agreements or enter into
restrictive agreements, (vi) make capital expenditures, (vii) fail to maintain
its trade receivable securitization programs, (viii) engage in mergers,
acquisitions and asset sales, (ix) engage in certain transactions with
affiliates, (x) settle certain litigation, (xi) alter its cash management system
and (xii) alter the businesses they conduct. The Credit Facility 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
Credit Facility requires the Company to prepay loans under the Credit Facility
on December 31, 2000 to the extent that cash on hand in the Company'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 the Company to satisfy any of
the financial ratios and tests contained in the Credit Facility or the
occurrence of any other event of default under the Credit Facility would entitle
the bank 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 Credit Facility 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 the Company.
Pursuant to the April 14, 2000 amendment, 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 March 1998, the Company completed an offering of Zero Coupon Convertible
Senior Subordinated Debentures due 2018 (the "Debentures") at a yield to
maturity of 5.0% (approximately $2,014 million principal amount at maturity)
which resulted in approximately $730 million of net proceeds. The Debentures are
exchangeable for shares of the Company's common stock at an initial conversion
rate of 6.575 shares for each $1,000 principal amount at maturity of the
Debentures, subject to adjustment upon occurrence of certain events. The
Debentures are subordinated in right of payment to all existing and future
senior indebtedness of the Company. The Debentures are not redeemable by the
Company prior to March 25, 2003. On or after such date, the Debentures are
redeemable for cash with at least 30 days notice, at the option of the Company.
The Company is required to purchase Debentures at the option of the holder as of
March 25, 2003, March 25, 2008 and March 25, 2013, at purchase prices equal to
the issue price plus accrued original discount to such dates. The Company may,
at its option, elect to pay any such purchase price in cash or common stock, or
any combination thereof. However, the Credit Facility prohibits the Company from
redeeming or repurchasing debentures for cash.
The Company believes its borrowing capacity under the Credit Facility, foreign
working capital lines, cash flow from the operations of the Company, existing
cash and cash equivalent balances, proceeds from its receivable securitization
programs, the sale of Eastpak (see Note 7) and sales of non-core assets will be
sufficient to support planned working capital needs, planned capital
expenditures and scheduled debt service to April 10, 2001. Although management
believes they will be successful in accomplishing the above, there can be no
assurance that the aforementioned sources of funds will be sufficient to meet
the Company's cash requirements on a consolidated basis. If the Company is
unable to satisfy such cash requirements, the Company could be required to adopt
one or more alternatives, such as reducing or delaying capital expenditures,
restructuring indebtedness, selling other assets or operations or issuing
additional shares of capital stock in the Company, and some of such actions
would require the consent of the lenders. There can be no assurance that any of
such actions could be effected, or if so, on terms favorable to the Company,
that such actions would enable the Company to continue to satisfy its cash
requirements or that such actions would be permitted under the terms of the
Credit Facility. In anticipation of the expiration of the current waiver on
April 10, 2001, the Company intends to negotiate with its lenders regarding a
further amendment to the Credit Facility, further waiver of the covenants and
other terms, or refinancing of the
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<PAGE>
SUNBEAM CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
(UNAUDITED)
3. DEBT - (CONTINUED)
Credit Facility. Any decisions with respect to such amendment, waiver, or
refinancing will be made based on a review from time to time of the advisability
of particular transactions. There can be no assurance that an amendment, further
waiver of existing covenants and other terms, or refinancing will be entered
into by April 10, 2001. The failure to obtain such an amendment, further waiver
or debt refinancing would likely result in violation of existing covenants and
compliance with other terms, which would permit the bank lenders to accelerate
the maturity of all outstanding borrowings under the Credit Facility, which
would likely have a material adverse effect on the Company.
4. ACCOUNTS RECEIVABLE SECURITIZATION
The Company has entered into a receivable securitization program, which expires
March 2001, to sell without recourse, through a wholly-owned subsidiary, certain
trade accounts receivable. In March 2000, the Company entered into an amendment
to such receivables program to increase this program to $100 million from $70
million. During the first quarters of 2000 and 1999, the Company received
approximately $125.4 million and $60.1 million, respectively, under this
arrangement. At March 31, 2000 and 1999, the Company had reduced accounts
receivable by approximately $67.9 million and $29.5 million, respectively, for
receivables sold under this program. Costs of the program, which primarily
consist of the purchaser's financing cost of issuing commercial paper backed by
the receivables, totaled $1.0 million and $0.4 million during the first quarter
of 2000 and 1999, respectively, and have been classified as interest expense in
the accompanying Condensed Consolidated Statements of Operations. The Company,
through a wholly-owned subsidiary, retains collection and administrative
responsibilities for the purchased receivables. In April 2000, the Company's
Coleman and Powermate subsidiaries entered into an additional revolving trade
accounts receivable securitization program to sell, without recourse, through a
wholly-owned subsidiary of Coleman, up to a maximum of $95 million in trade
accounts receivables. These trade accounts receivable programs contain
cross-default provisions that provide the purchaser of the receivables an option
to cease purchasing receivables from the Company if the Company is in default
under the Credit Facility. In addition, these agreements contain various other
covenants customary for these types of programs, including financial covenants.
5. COMPREHENSIVE LOSS
The components of the Company's comprehensive loss are as follows (in
thousands):
<TABLE>
<CAPTION>
THREE MONTHS ENDED
---------------------------
March 31, March 31,
2000 1999
--------- ---------
<S> <C> <C>
Net loss.................................................. $ (59,400) $ (60,739)
Foreign currency translation adjustment, net of taxes..... (6,589) (9,427)
--------- ---------
Comprehensive loss........................................ $ (65,989) $ (70,166)
========= =========
</TABLE>
As of March 31, 2000 and December 31, 1999, "Accumulated other comprehensive
loss," as reflected in the Condensed Consolidated Balance Sheets is comprised of
the following:
<TABLE>
<CAPTION>
CURRENCY MINIMUM
TRANSLATION PENSION
ADJUSTMENTS LIABILITY TOTAL
----------- --------- ---------
<S> <C> <C> <C>
Balance at March 31, 2000......... $ (31,834) $ (48,041) $ (79,875)
Balance at December 31, 1999...... (25,245) (48,041) (73,286)
</TABLE>
-10-
<PAGE>
SUNBEAM CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
(UNAUDITED)
6. SUPPLEMENTARY FINANCIAL STATEMENT DATA
Supplementary Balance Sheet data at the end of each period is as follows (in
thousands):
<TABLE>
<CAPTION>
MARCH 31, DECEMBER 31,
2000 1999
---------- ------------
<S> <C> <C>
Receivables:
Trade................................. $ 400,143 $ 404,905
Sundry................................ 4,732 3,777
---------- ----------
404,875 408,682
Valuation allowance................... (43,745) (44,344)
---------- ----------
$ 361,130 $ 364,338
========== ==========
Inventories:
Finished goods........................ $ 388,109 $ 330,179
Work in process....................... 50,236 30,691
Raw materials and supplies............ 101,199 99,810
---------- ----------
$ 539,544 $ 460,680
========== ==========
</TABLE>
Supplementary Statement of Cash Flows data is as follows (in thousands):
<TABLE>
<CAPTION>
THREE MONTHS ENDED
-----------------------
MARCH 31, MARCH 31,
2000 1999
---------- ---------
<S> <C> <C>
Cash paid (received) during the period for:
Interest.............................. $ 18,233 $ 30,092
========== ===========
Income taxes, net of refunds $ (923) $ 184
========== ===========
</TABLE>
7. ASSET IMPAIRMENT AND OTHER CHARGES
In March 2000, the Company announced that it intends to shut down operations at
its Glenwillow facility, which manufactures and distributes Mr. Coffee brand
coffee makers and coffee filters. These operations will be consolidated into
other existing facilities. As a result of this decision, the Company recorded a
charge of $3.3 million in the first quarter, primarily related to the write-off
of leasehold improvements, severance costs and contract and lease termination
fees. This charge was recorded in selling, general and administrative expense
("SG&A") ($0.6 million) and Cost of Goods Sold ($2.7 million). The Glenwillow
facility is expected to be closed by the end of the second quarter of 2000 and
will result in the elimination of approximately 300 positions. The Company
anticipates incurring additional incremental costs during the second quarter of
2000, primarily relating to relocation of certain manufacturing equipment and
machinery to other Company manufacturing locations and as a result of duplicate
warehousing costs as inventory levels are built in order to avoid customer
supply issues during the plant shut-down.
In the first quarter of 2000, in connection with the Company's on-going
strategic planning process, the decision was made to close the remaining Sunbeam
retail stores. As a result of this decision, a charge of $2.5 million, primarily
related to the write-off of leasehold improvements, severance and lease
termination fees was recorded in the first quarter of 2000. This charge was
recorded in SG&A ($2.2 million) and Cost of Goods Sold ($0.3 million). The
Company expects that the majority of these stores will be closed by the end of
the second quarter of 2000 and will result in the elimination of approximately
60 positions.
During the fourth quarter of 1999, the Company announced its intent to sell
Eastpak. In March 2000, the Company entered into the an agreement with VF
Corporation which provides for the sale of Eastpak (the "Eastpak Sale
Agreement"). The final purchase price is subject to certain post closing
adjustments and retention of certain liabilities. Eastpak, a wholly-owned
subsidiary of Coleman, was acquired by the Company in March 1998. Net sales from
Eastpak were approximately 5% of consolidated net sales in both the first
quarters of 2000 and 1999. Operating income in the first quarter of 2000 and
1999 was not significant. In the fourth quarter of 1999, as a result of the
Company's change in business strategy for Eastpak, an evaluation for impairment
of Eastpak's long-lived assets was performed pursuant to SFAS No. 121. Based
upon this analysis, the Company determined that the fair market value of
Eastpak's long-lived
-11-
<PAGE>
SUNBEAM CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
(UNAUDITED)
7. ASSET IMPAIRMENT AND OTHER CHARGES - (CONTINUED)
assets including intangibles, was less than the carrying value. Accordingly,
during the fourth quarter of 1999, the Company adjusted the carrying value of
Eastpak's net assets to its estimated fair value (less estimated costs of sale)
resulting in a non-cash impairment charge of $52 million. This charge reduced
the goodwill associated with Eastpak. The fair market value of Eastpak was
determined based upon the purchase price in the Eastpak Sale Agreement. This
charge is reflected in SG&A in the fourth quarter of 1999 Consolidated
Statements of Operations. Eastpak is included in the Company's Outdoor Leisure
business group.
In the fourth quarter of 1999, in connection with the completion of the
Company's 2000 strategic planning process, the decision was made to discontinue
a number of products, primarily scales, humidifiers and certain camping stoves,
lights and air mattresses, previously made by the Company, resulting in
equipment and tooling that will no longer be utilized by the Company and
inventory levels in excess of anticipated sales volume. In addition, as a result
of the Company's business planning process, which was completed in the fourth
quarter of 1999, the Company identified certain other assets that would no
longer be required for ongoing operations. Accordingly, a charge of $8.0 million
was recorded in the fourth quarter of 1999 in Cost of Goods Sold to write
certain of these fixed assets down to their estimated fair market values.
Substantially all of this charge related to machinery, equipment and tooling at
the Company's Hattiesburg, Mississippi manufacturing facility. These assets were
taken out of service at the time of the write-down and were not depreciated
further after the write-down. These assets had either a nominal salvage value or
no significant remaining carrying value as of December 31, 1999 and are expected
to be disposed by September 30, 2000. Depreciation expense associated with these
assets approximated $0.9 million for the year ended 1999. During the fourth
quarter of 1999 the Company also decided to discontinue certain grill and grill
accessory stock keeping units ("SKUs"). As a result of this decision, the
Company reduced the economic useful life associated with the machinery,
equipment and tooling used for these SKUs. Approximately $3 million of
additional depreciation expense was recorded over the fourth quarter of 1999
from the time the decision was made to exit the product line until production
ceased at December 31, 1999 and resulted in the affected assets being fully
depreciated. Depreciation expense associated with these assets was $4.6 million
for the year ended 1999. These assets are expected to be disposed of during the
first half of 2000, and the Company does not expect to generate significant
proceeds as a result of the disposals. Additionally, as a result of the
Company's decision to discontinue certain camping stoves, lights, air
mattresses, scales and humidifiers, a $3.0 million charge was recorded during
the fourth quarter of 1999 to properly state this inventory at the
lower-of-cost-or-market. The Company also recognized approximately $0.8 million
related to certain other product lines to properly state the inventory at the
lower-of-cost-or-market. These charges for excess inventories were based upon
management's best estimate of net realizable value.
At March 31, 2000 and December 31, 1999, the Company had $0.9 million of
restructuring accruals relating to its 1996 restructuring plan. This $0.9
million was comprised of $0.6 million relating to lease payments and termination
fees and $0.3 million relating to discontinued operations. It is anticipated
that the remaining restructuring accrual of $0.9 million will be paid through
2006.
-12-
<PAGE>
SUNBEAM CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
(UNAUDITED)
8. SEGMENT, CUSTOMER AND GEOGRAPHIC DATA
The following tables include selected financial information with respect to
Sunbeam's four operating segments. Corporate expenses include, among other
items, expenses for services which are provided in varying levels to the three
operating groups and for Year 2000 efforts.
<TABLE>
<CAPTION>
OUTDOOR
HOUSEHOLD LEISURE INTERNATIONAL CORPORATE TOTAL
------------ ------------ ------------- ------------ -----------
<S> <C> <C> <C> <C> <C>
THREE MONTHS ENDED MARCH 31, 2000
Net sales to unaffiliated customers...... $ 164,806 $ 228,822 $ 144,088 $ 1,337 $ 539,053
Intersegment net sales................... 20,990 44,471 935 -- 66,396
Segment earnings (loss).................. 6,345 13,943 12,937 (22,305) 10,920
Segment depreciation expense............. 6,133 9,043 1,507 2,426 19,109
THREE MONTHS ENDED MARCH 31, 1999
Net sales to unaffiliated customers... $ 164,078 $ 218,733 $ 139,557 $ 1,578 $ 523,946
Intersegment net sales................ 19,192 42,664 4,750 -- 66,606
Segment earnings (loss)............... 7,264 11,867 11,438 (22,313) 8,256
Segment depreciation expense.......... 6,545 9,259 1,297 1,482 18,583
SEGMENT ASSETS
March 31, 2000........................... $ 655,364 $ 1,851,480 $ 406,359 $ 326,737 $ 3,239,940
December 31, 1999........................ 707,436 1,707,559 385,200 332,154 3,132,349
</TABLE>
Reconciliation of selected segment information to Sunbeam's consolidated totals:
<TABLE>
<CAPTION>
THREE MONTHS ENDED
--------------------------------------
MARCH 31, 2000 MARCH 31, 1999
-------------- --------------
<S> <C> <C>
Net sales:
Net sales for reportable segments................................. $ 605,449 $ 590,552
Elimination of intersegment net sales............................. (66,396) (66,606)
----------- -----------
Consolidated net sales....................................... $ 539,053 $ 523,946
=========== ===========
Segment loss:
Total earnings for reportable segments............................ $ 10,920 $ 8,256
Unallocated amounts:
Interest expense............................................. (52,487) (42,841)
Other (expense) income, net.................................. (2,611) 127
Glenwillow plant closing .................................... (3,257) --
Retail store closing ........................................ (2,544) --
Purchase accounting.......................................... (4,280) --
Insurance recovery........................................... 10,000 --
Year 2000 and system initiative expenses..................... -- (8,118)
Contract termination and other............................... -- (1,121)
Amortization of intangible assets............................ (13,383) (13,811)
----------- -----------
(68,562) (65,764)
----------- -----------
Consolidated loss before income taxes and minority interest. $ (57,642) $ (57,508)
=========== ===========
</TABLE>
-13-
<PAGE>
SUNBEAM CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
(UNAUDITED)
9. COMMITMENTS AND CONTINGENCIES
LITIGATION
On April 23, 1998, two class action lawsuits were filed on behalf of purchasers
of the Company's common stock in the U.S. District Court for the Southern
District of Florida against the Company and some of its present and former
directors and former officers alleging violations of the federal securities laws
as discussed below. After that date, approximately fifteen similar class actions
were filed in the same court. One of the lawsuits also named as defendant Arthur
Andersen LLP ("Arthur Andersen"), the Company's independent accountants for the
period covered by the lawsuit.
On June 16, 1998, the court entered an order consolidating all these suits and
all similar class actions subsequently filed (collectively, the "Consolidated
Federal Actions"). On January 6, 1999, plaintiffs filed a consolidated amended
class action complaint against the Company, some of its present and former
directors and former officers, and Arthur Andersen. The consolidated amended
class action complaint alleges, among other things, that defendants made
material misrepresentations and omissions regarding the Company's business
operations and future prospects in an effort to artificially inflate the price
of the Company's common stock and call options, and that, in violation of
section 20(a) of the Exchange Act, the individual defendants exercised influence
and control over the Company, causing the Company to make material
misrepresentations and omissions. The consolidated amended complaint seeks an
unspecified award of money damages. In February 1999, plaintiffs moved for an
order certifying a class consisting of all persons and entities who purchased
the Company's common stock or who purchased call options or sold put options
with respect to the Company's common stock during the period April 23, 1997
through June 30, 1998, excluding the defendants, their affiliates, and employees
of the Company. Defendants have opposed that motion. In March 1999, all
defendants who had been served with the consolidated amended class action
complaint moved to dismiss it and the court granted the motion only as to
certain non-employee current and former directors and a former officer, and
denied it as to the other defendants. Arthur Andersen has filed counterclaims
against the Company, and a third-party complaint against a director of the
Company and against unnamed third party corporations.
On April 7, 1998, a purported derivative action was filed in the Circuit Court
for the Fifteenth Judicial Circuit in and for Palm Beach County, Florida against
the Company and some of its present and former directors and former officers.
The action alleged that the individual defendants breached their fiduciary
duties and wasted corporate assets when the Company granted stock options in
February 1998 to three of its now former officers and directors. In June 1998,
all defendants filed a motion to dismiss the complaint for failure to make a
pre-suit demand on the Company's board of directors. In February 1999,
plaintiffs filed an amended derivative complaint nominally on behalf of the
Company against some of its present and former directors and former officers and
Arthur Andersen. This amended complaint alleges, among other things, that
Messrs. Dunlap and Kersh, the Company's former Chairman and Chief Executive
Officer and former Chief Financial Officer, respectively, caused the Company to
employ fraudulent accounting procedures in order to enable them to secure new
employment contracts, and seeks a declaration that the individual defendants
have violated fiduciary duties, an injunction against the payment of
compensation to Messrs. Dunlap and Kersh or the imposition of a constructive
trust on such payments, and unspecified money damages. The defendants have each
moved to dismiss the amended complaint in whole or in part.
During 1998, purported class action and derivative lawsuits were filed in the
Court of Chancery of the State of Delaware in New Castle County and in the U.S.
District Court for the Southern District of Florida by stockholders of the
Company against the Company, MacAndrews & Forbes and some of the Company's
present and former directors. These complaints allege, among other things, that
the defendants breached their fiduciary duties when the Company entered into a
settlement agreement with the MacAndrews & Forbes subsidiary that sold the
Company a controlling interest in Coleman. In such settlement agreement, the
MacAndrews & Forbes subsidiary released the Company from threatened claims
arising out of the Company's acquisition of its interest in Coleman, and
MacAndrews & Forbes agreed to provide management support to the Company. Under
the settlement agreement, the MacAndrews & Forbes subsidiary was granted a
warrant expiring August 24, 2003 to purchase up to an additional 23 million
shares of the Company's common stock at an exercise price of $7 per share,
subject to anti-dilution provisions. The derivative actions filed in the
Delaware Court of Chancery were consolidated. The plaintiffs voluntarily
dismissed this action. The action filed in the U.S. District Court for the
Southern District of Florida has been dismissed. In April 2000, a complaint was
filed in the U.S. District Court for the Southern District of Florida against
the Company, certain current and former directors, Messrs. Dunlap and Kersh and
MacAndrews & Forbes alleging, among other things, that certain of the defendants
breached their fiduciary duty when the Company entered into a settlement
agreement with MacAndrews & Forbes, and certain of the defendants breached their
fiduciary duty and wasted corporate assets by, among other things, issuing
-14-
<PAGE>
SUNBEAM CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
(UNAUDITED)
9. COMMITMENTS AND CONTINGENCIES - (CONTINUED)
materially false and misleading statements regarding the Company's financial
condition. The plaintiff in this action seeks, among other things, recission of
the warrants issued to MacAndrews & Forbes and an injunction preventing the
issuance of warrants and damages.
In September 1998, an action was filed in the 56th Judicial District Court of
Galveston County, Texas alleging various claims in violation of the Texas
Securities Act and Texas Business & Commercial Code as well as common law fraud
as a result of the Company's alleged misstatements and omissions regarding the
Company's financial condition and prospects during a period beginning May 1,
1998 and ending June 16, 1998, in which the U.S. National Bank of Galveston,
Kempner Capital Management, Inc. and Legacy Trust Company engaged in
transactions in the Company's common stock on their own behalf and on behalf of
their respective clients. The Company is the only named defendant in this
action. The complaint requests recovery of compensatory damages, punitive
damages and expenses in an unspecified amount. This action was subsequently
transferred to the U.S. District Court for the Southern District of Florida and
consolidated with the Consolidated Federal Actions.
In October 1998, a class action lawsuit was filed in the U.S. District Court for
the Southern District of Florida on behalf of certain purchasers of the
debentures against the Company and certain of the Company's former officers and
directors. In April 1999, a class action lawsuit was filed in the U.S. District
Court for the Southern District of Florida on behalf of persons who purchased
debentures during the period of March 20, 1998 through June 30, 1998, inclusive,
but after the initial offering of such debentures against the Company, Arthur
Andersen, the Company's former auditor, and certain former officers and
directors. The court consolidated the two cases and the plaintiffs have filed a
consolidated class action on behalf of persons who purchased debentures in the
initial offering and in the market during the period March 20, 1998 through June
30, 1998. The amended complaint alleges, among other things, violations of the
federal and state securities laws and common law fraud. The plaintiffs seek,
among other things, either unspecified monetary damages or rescission of their
purchase of the debentures. This action is coordinated with the Consolidated
Federal Actions.
The Company has been named as a defendant in an action filed in the District
Court of Tarrant County, Texas, 48th Judicial District, on November 20, 1998.
The plaintiffs in this action are purchasers of the debentures. The plaintiffs
allege that the Company violated the Texas Securities Act and the Texas Business
& Commercial Code and committed state common law fraud by materially misstating
the financial position of the Company in connection with the offering and sale
of the debentures. The complaint seeks rescission, as well as compensatory and
exemplary damages in an unspecified amount. The Company specially appeared to
assert an objection to the Texas court's exercise of personal jurisdiction over
the Company, and a hearing on this objection took place in April 1999. Following
the hearing, the court entered an order granting the Company's special
appearance and dismissing the case without prejudice. The plaintiffs appealed,
which appeal was denied.
On February 9, 1999, Messrs. Dunlap and Kersh filed with the American
Arbitration Association demands for arbitration of claims under their respective
employment agreements with the Company. Messrs. Dunlap and Kersh are requesting
a finding by the arbitrator that the Company terminated their employment without
cause and that they should be awarded certain benefits based upon their
respective employment agreements. The Company has answered the arbitration
demands of Messrs. Dunlap and Kersh and has filed counterclaims seeking, among
other things, the return of all consideration paid, or to be paid, under the
February 1998 Employment Agreements between the Company and Messrs. Dunlap and
Kersh. An answer was filed by Messrs. Dunlap and Kersh generally denying the
Company's counterclaim. Discovery is pending.
On September 13, 1999, an action naming the Company and Arthur Andersen as
defendants was filed in the Circuit Court for Montgomery County, Alabama. The
plaintiffs in this action are purchasers of the Company's common stock during
the period March 19, 1998 through May 6, 1998. The plaintiffs allege, among
other things, that the defendants violated the Alabama Securities Laws. The
plaintiffs seek compensatory and punitive damages in an unspecified amount.
Arthur Andersen has filed a cross claim against the Company for contribution and
indemnity. The Company has filed a motion to dismiss. In May 2000, the
plaintiffs in this action filed an amended complaint, which added allegations of
violations of the federal securities laws.
The Company intends to vigorously defend each of the foregoing lawsuits, but
cannot predict the outcome and is not currently able to evaluate the likelihood
of the Company's success in each case or the range of potential loss, if any.
However, if the Company were to lose one or more of these lawsuits, judgments
would likely have a material adverse effect on the Company's consolidated
financial position, results of operations or cash flows.
-15-
<PAGE>
SUNBEAM CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
(UNAUDITED)
9. COMMITMENTS AND CONTINGENCIES - (CONTINUED)
In July 1998, the American Alliance Insurance Company ("American Alliance")
filed suit against the Company in the U.S. District Court for the Southern
District of New York requesting a declaratory judgment of the court that the
directors' and officers' liability insurance policy for excess coverage issued
by American Alliance was invalid and/or had been properly canceled by American
Alliance. As a result of a motion made by the Company, this case has been
transferred to the U.S. District Court for the Southern District of Florida for
coordination and consolidation of pre-trial proceedings with the various actions
pending in that court. In October 1998, an action was filed by Federal Insurance
Company ("Federal Insurance") in the U.S. District Court for the Middle District
of Florida requesting the same relief as that requested by American Alliance in
the previously filed action as to additional coverage levels under the Company's
directors' and officers' liability insurance policy. This action has been
transferred to the U.S. District Court for the Southern District of Florida.
Discovery in the cases brought by American Alliance and Federal Insurance is
underway and coordinated with the discovery in the Consolidated Federal Actions.
In December 1998, an action was filed by Executive Risk Indemnity, Inc. in the
Circuit Court of the Seventeenth Judicial Circuit in and for Broward County,
Florida requesting the same relief as that requested by American Alliance and
Federal Insurance in their previously filed actions as to additional coverage
levels under the Company's directors' and officers' liability insurance policy.
In April 1999, the Company filed an action in the U.S. District Court for the
Southern District of Florida against National Union Fire Insurance Company of
Pittsburgh, PA ("National Union"), Gulf Insurance Company ("Gulf") and St. Paul
Mercury Insurance Company ("St. Paul") requesting, among other things, a
declaratory judgment that National Union is not entitled to rescind its
directors' and officers' liability insurance policies to the Company and a
declaratory judgment that the Company is entitled to coverage from these
insurance companies for the various lawsuits described herein under directors'
and officers' liability insurance policies issued by each of the defendants. The
Company has settled its litigation with National Union. In response to the
Company's complaint, defendants St. Paul and Gulf have answered and asserted
counterclaims seeking rescission and declaratory relief that no coverage is
available to the Company. The Company intends to pursue recovery from all of its
insurers if damages are awarded against the Company or its indemnified officers
and/or directors under any of the foregoing actions and to recover attorneys'
fees covered under those policies. The Company's failure to obtain such
insurance recoveries following an adverse judgment in any of the actions
described above could have a material adverse effect on the Company's financial
position, results of operations or cash flows.
By letter dated June 17, 1998, the staff of the Division of Enforcement of the
SEC advised the Company that it was conducting an informal inquiry into the
Company's accounting policies and procedures and requested that the Company
produce certain documents. In July 1998, the SEC issued a Formal Order of
Private Investigation, designating SEC officers to take testimony and pursuant
to which a subpoena was served on the Company requiring the production of
certain documents. In November 1998, another SEC subpoena requiring the
production of additional documents was received by the Company. The Company has
provided numerous documents to the SEC staff and continues to cooperate with the
SEC staff. The Company has, however, declined to provide the SEC with material
that the Company believes is subject to the attorney-client privilege and the
work product immunity. The SEC has not commenced any civil or administrative
proceedings as a result of its investigation, and the Company cannot predict at
this time whether the SEC will seek to impose any monetary or other penalties
against the Company. Under these circumstances, the Company cannot estimate the
duration of the investigation or its outcome.
The Company and its subsidiaries are also involved in various other lawsuits
arising from time to time which the Company considers to be ordinary routine
litigation incidental to its business. In the opinion of the Company, the
resolution of these routine matters, and of certain matters relating to prior
operations, individually or in the aggregate, will not have a material adverse
effect upon the financial position, results of operations or cash flows of the
Company.
-16-
<PAGE>
SUNBEAM CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
(UNAUDITED)
9. COMMITMENTS AND CONTINGENCIES - (CONTINUED)
Amounts accrued for litigation matters represent the anticipated costs (damages
and/or settlement amounts) in connection with pending litigation and claims and
related anticipated legal fees for defending such actions. The costs are accrued
when it is both probable that an asset has been impaired or a liability has been
incurred and the amount can be reasonably estimated. The accruals are based upon
the Company's assessment, after consultation with counsel, of probable loss
based on the facts and circumstances of each case, the legal issues involved,
the nature of the claim made, the nature of the damages sought and any relevant
information about the plaintiffs and other significant factors which vary by
case. When it is not possible to estimate a specific expected cost to be
incurred, the Company evaluates the range of probable loss and records the
minimum end of the range. As of March 31, 2000, the Company had established
accruals for litigation matters of $22.3 million (representing $9.6 million and
$12.7 million for estimated damages or settlement amounts and legal fees,
respectively) and $24.3 million as of December 31, 1999 (representing $9.6
million and $14.7 million for estimated damages or settlement amounts and legal
fees, respectively). It is anticipated that the $22.3 million accrual at March
31, 2000 will be paid as follows: $19.5 million in 2000, $2.7 million in 2001
and $0.1 million in 2002. The Company believes, based on information available
on March 31, 2000, that anticipated probable costs of litigation matters
existing as of March 31, 2000 have been adequately reserved to the extent
determinable.
ENVIRONMENTAL MATTERS
The Company's operations, like those of comparable businesses, are subject to
certain federal, state, local and foreign environmental laws and regulations in
addition to laws and regulations regarding labeling and packaging of products
and the sales of products containing certain environmentally sensitive
materials. The Company believes it is in substantial compliance with all
environmental laws and regulations which are applicable to its operations.
Compliance with environmental laws and regulations involves certain continuing
costs; however, such costs of ongoing compliance have not resulted, and are not
anticipated to result, in a material increase in the Company's capital
expenditures or to have a material adverse effect on the Company's competitive
position, results of operations, financial condition or cash flows.
In addition to ongoing environmental compliance at its operations, the Company
also is actively engaged in environmental remediation activities, many of which
relate to divested operations. As of March 31, 2000, the Company has been
identified by the United States Environmental Protection Agency ("EPA") or a
state environmental agency as a potentially responsible party ("PRP") in
connection with seven sites subject to the federal Superfund Act and five sites
subject to state Superfund laws comparable to the federal law (collectively the
"Environmental Sites"), exclusive of sites at which the Company has been
designated (or expects to be designated) as a de minimis (less than 1%)
participant.
The Superfund Act, and related state environmental remediation laws, generally
authorize governmental authorities to remediate a Superfund site and to assess
the costs against the PRPs or to order the PRPs to remediate the site at their
expense. Liability under the Superfund Act is joint and several and is imposed
on a strict basis, without regard to degree of negligence or culpability. As a
result, the Company recognizes its responsibility to determine whether other
PRPs at a Superfund site are financially capable of paying their respective
shares of the ultimate cost of remediation of the site. Whenever the Company has
determined that a particular PRP is not financially responsible, it has assumed
for purposes of establishing reserve amounts that such PRP will not pay its
respective share of the costs of remediation. To minimize the Company's
potential liability with respect to the Environmental Sites, the Company has
actively participated in steering committees and other groups of PRPs
established with respect to such sites. The Company currently is engaged in
active remediation activities at thirteen sites, seven of which are among the
Environmental Sites referred to above, and six of which have not been designated
as Superfund sites under federal or state law. The remediation efforts in which
the Company is involved include facility investigations, including soil and
groundwater investigations, corrective measure studies, including feasibility
studies, groundwater monitoring, extraction and treatment and soil sampling,
excavation and treatment relating to environmental clean-ups. In certain
instances, the Company has entered into agreements with governmental authorities
to undertake additional investigatory activities and in other instances has
agreed to implement appropriate remedial actions. The Company has also
established reserve amounts for certain non-compliance matters including those
involving air emissions.
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SUNBEAM CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
(UNAUDITED)
9. COMMITMENTS AND CONTINGENCIES - (CONTINUED)
The Company has established reserves to cover the anticipated probable costs of
investigation and remediation, based upon periodic reviews of all sites for
which the Company has, or may have remediation responsibility. The Company
accrues environmental investigation and remediation costs when it is probable
that a liability has been incurred, the amount of the liability can be
reasonably estimated and the Company's responsibility for the liability is
established. Generally, the timing of these accruals coincides with the earlier
of formal commitment to an investigation plan, completion of a feasibility study
or the Company's commitment to a formal plan of action. As of March 31, 2000 and
December 31, 1999, the Company's environmental reserves were $19.7 million
(representing $18.0 million for the estimated costs of facility investigations,
corrective measure studies, or known remedial measures, and $1.7 million for
estimated legal costs) and $19.9 million (representing $18.2 million for the
estimated costs of facility investigations, corrective measure studies, or known
remedial measures, and $1.7 million for estimated legal costs), respectively. It
is anticipated that the $19.7 million accrual at March 31, 2000 will be paid as
follows: $3.1 million in 2000, $3.2 million in 2001, $2.6 million in 2002, $0.8
million in 2003, $0.6 million in 2004 and $9.4 million thereafter. The Company
has accrued its best estimate of investigation and remediation costs based upon
facts known to the Company at such dates and because of the inherent
difficulties in estimating the ultimate amount of environmental costs, which are
further described below, these estimates may materially change in the future as
a result of the uncertainties described below. Estimated costs, which are based
upon experience with similar sites and technical evaluations, are judgmental in
nature and are recorded at undiscounted amounts without considering the impact
of inflation and are adjusted periodically to reflect changes in applicable laws
or regulations, changes in available technologies and receipt by the Company of
new information. It is difficult to estimate the ultimate level of future
environmental expenditures due to a number of uncertainties surrounding
environmental liabilities. These uncertainties include the applicability of laws
and regulations, changes in environmental remediation requirements, the
enactment of additional regulations, uncertainties surrounding remediation
procedures including the development of new technology, the identification of
new sites for which the Company could be a PRP, information relating to the
exact nature and extent of the contamination at each site and the extent of
required cleanup efforts, the uncertainties with respect to the ultimate outcome
of issues which may be actively contested and the varying costs of alternative
remediation strategies. The Company continues to pursue the recovery of some
environmental remediation costs from certain of its liability insurance
carriers; however, such potential recoveries have not been offset against
potential liabilities and have not been considered in determining the Company's
environmental reserves.
Due to uncertainty over remedial measures to be adopted at some sites, the
possibility of changes in environmental laws and regulations and the fact that
joint and several liability with the right of contribution is possible at
federal and state Superfund sites, the Company's ultimate future liability with
respect to sites at which remediation has not been completed may vary from the
amounts reserved as of March 31, 2000.
The Company believes, based on information available as of March 31, 2000 for
sites where costs are estimable, that the costs of completing environmental
remediation of all sites for which the Company has a remediation responsibility
have been adequately reserved and that the ultimate resolution of these matters
will not have a material adverse effect upon the Company's financial condition,
results of operations or cash flows.
PRODUCT LIABILITY MATTERS
As a consumer goods manufacturer and distributor, the Company and/or its
subsidiaries 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 the Company's consolidated financial position, results of operations
or cash flows. Some of the product lines the Company acquired in the 1998
acquisitions have increased its exposure to product liability and related
claims.
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SUNBEAM CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
(UNAUDITED)
9. COMMITMENTS AND CONTINGENCIES - (CONTINUED)
BRK Brands, Inc. and Sunbeam (Canada Limited) are defendants in an alleged class
action lawsuit in Ontario, Canada (the "Canada Action") that claims, among other
things, that the defendants failed to adequately inform consumers of the varying
performance characteristics of smoke detectors utilizing ionization and
photoelectric technology. The alleged class action consists of all consumers in
Ontario, Canada who have purchased ionization detectors manufactured or sold by
the defendants or their predecessors. BRK Brands is also a defendant in two
separate alleged nationwide class action lawsuits in the United States, one in
the United States District Court for the Northern District of Alabama (the
"Alabama Action") and the other in Circuit Court, Twentieth Judicial District,
St. Clair County, Illinois (the "Illinois Action"). The plaintiffs in both the
Alabama Action and the Illinois Action make substantially the same allegations
as in the Canada Action. The defendants and the plaintiffs have entered into a
settlement of the Alabama Action which provides for a nationwide public
information campaign regarding the performance characteristics of ionization and
photoelectric smoke detector technology and also provides for a rebate on the
purchase of dual sensor smoke detectors. The settlement of the Alabama Action is
intended to resolve all similar claims nationwide. The settlement has received
preliminary approval from the U.S. District Court for the Northern District of
Alabama. The defendants intend to vigorously defend the Canada Action and the
Illinois Action, but cannot predict the outcome and is not currently able to
evaluate the likelihood of the defendant's success or the range of potential
loss, if any. However, if the defendants' were to lose one of these lawsuits, it
could have a material adverse effect on the defendants' financial position,
results of operations or cash flows.
The Company is party to various personal injury and property damage lawsuits
relating to its products and incidental to its business. Annually, the Company
sets its product liability insurance program which is an occurrence based
program based on the Company's current and historical claims experience and the
availability and cost of insurance. The Company's program for 2000 is comprised
of a self-insurance retention of $3.5 million per occurrence, and is limited to
$28.0 million in the aggregate.
Cumulative amounts estimated to be payable by the Company with respect to
pending and potential claims for all years in which the Company is liable under
its self-insurance retention have been accrued as liabilities. Such accrued
liabilities are necessarily based on estimates (which include actuarial
determinations made by independent actuarial consultants as to liability
exposure, taking into account prior experience, numbers of claims and other
relevant factors); thus, the Company's ultimate liability may exceed or be less
than the amounts accrued. The methods of making such estimates and establishing
the resulting liability are reviewed on a regular basis and any adjustments
resulting therefrom are reflected in current operating results.
Historically, product liability awards have rarely exceeded the Company's
individual per occurrence self-insured retention. There can be no assurance,
however, that the Company's future product liability experience will be
consistent with its past experience. Based on existing information, the Company
believes that the ultimate conclusion of the various pending product liability
claims and lawsuits of the Company, individually or in the aggregate, will not
have a material adverse effect on the financial position, results of operations
or cash flows of the Company.
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
The following discussion should be read in conjunction with the accompanying
condensed consolidated financial statements and the related footnotes included
in this quarterly report on Form 10-Q, as well as the consolidated financial
statements, related footnotes and management's discussion and analysis of
financial condition and results of operations in the Company's Annual Report on
Form 10-K for the year ended December 31, 1999.
ACQUISITIONS
On March 30, 1998, pursuant to a merger agreement dated as of February 27, 1998,
the Company, through a wholly-owned subsidiary, acquired approximately 81% of
the total number of then outstanding shares of common stock of the Coleman
Company, Inc. ("Coleman") from an affiliate of MacAndrews & Forbes ("M&F"), in
exchange for 14,099,749 shares of the Company's common stock and approximately
$160 million in cash. In addition, the Company assumed approximately $1,016
million in debt of Coleman and its parent corporations. Immediately thereafter,
as a result of the exercise of Coleman employee stock options, the Company's
indirect beneficial ownership of Coleman decreased to approximately 79%.
In January 2000, pursuant to a merger agreement dated as of February 27, 1998,
the Company acquired the remaining publicly held Coleman shares pursuant to a
merger transaction pursuant to which the remaining Coleman stockholders (other
than stockholders who are seeking appraisal rights under Delaware law) received
0.5677 of a share of the Company's common stock and $6.44 in cash for each share
of Coleman common stock they owned, aggregating approximately 6.7 million shares
of the Company's common stock and $87 million in cash. The approximate $87
million aggregate cash payment included $4.8 million related to the cash out of
remaining Coleman employee options, in accordance with the merger agreement,
which occurred in December 1999. In addition, pursuant to a court approved
settlement of claims by Coleman public stockholders the Company issued to such
Coleman public stockholders (other than such stockholders who are seeking
appraisal rights under Delaware law), warrants expiring August 24, 2003 to
purchase 4.98 million shares of the Company's common stock at $7.00 per share
less approximately 498,000 warrants issued to the plaintiffs' attorneys for
their fees and expenses. These warrants, which generally have the same terms as
the warrants previously issued to M&F's subsidiary (see Note 9 to the Condensed
Consolidated Financial Statements) were issued when the consideration was paid
for the Coleman merger. The total consideration given for the purchase of the
remaining publicly held Coleman shares was valued at $146 million.
The acquisition of Coleman was accounted for using the purchase method of
accounting, and accordingly, the financial position and results of operations of
Coleman are included in the accompanying Condensed Consolidated Statements of
Operations from the respective dates of acquisition. Prior to the completion of
the merger on January 6, 2000, the approximate 20% of Coleman's results of
operations and net equity allocable to the public shareholders was reported as
minority interest.
DIVESTITURES
During the fourth quarter of 1999, the Company announced its intent to sell its
Eastpak business ("Eastpak"). In March 2000, the Company entered into the
Eastpak Sale Agreement with VF Corporation which provides for the sale of
Eastpak. The final purchase price is subject to certain post-closing adjustments
and retention of certain liabilities. Eastpak, a wholly-owned subsidiary of
Coleman, was acquired by the Company in March 1998. Net sales from Eastpak were
approximately 5% of consolidated net sales in both the first quarter of 2000 and
1999. Operating income in the first quarter of 2000 and 1999 was not
significant. In the fourth quarter of 1999, as a result of the Company's change
in business strategy for Eastpak, an evaluation for impairment of Eastpak's
long-lived assets was performed pursuant to SFAS No. 121. Based upon this
analysis, the Company determined that the fair market value of Eastpak's
long-lived assets, including intangibles, was less than the carrying value.
Accordingly, during the fourth quarter of 1999, the Company adjusted the
carrying value of Eastpak's net assets to its estimated fair value (less
estimated costs of sale) resulting in a non-cash impairment charge of $52
million. This charge reduced the goodwill associated with Eastpak. The fair
market value of Eastpak was determined based upon the purchase price in the
Eastpak Sale Agreement. This charge is reflected in SG&A in the fourth quarter
of 1999 Consolidated Statements of Operations. Eastpak is included in the
Company's Outdoor Leisure business group.
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SIGNIFICANT AND UNUSUAL CHARGES
Consolidated operating results for 2000 and 1999 were impacted by a number of
significant and unusual charges. Operating loss, adjusted for these items, is
summarized in the following table and succeeding narrative.
MARCH 31, MARCH 31,
2000 1999
-------- --------
(Amounts in millions)
Net sales--As reported .................... $ 539.1 $ 523.9
Gross margin--As reported ................. 133.3 126.5
Non-recurring items:
Glenwillow plant closure ................ 2.7 --
Retail store closings ................... 0.3 --
Purchase accounting ..................... 4.3 --
-------- --------
Adjusted gross margin ................. 140.6 126.5
ADJUSTED GROSS MARGIN PERCENTAGE .... 26.1% 24.1%
Selling, general and administrative
expense ("SG&A")--As reported ........... 135.8 141.2
Non-recurring items:
Glenwillow plant closure ................ (0.6) --
Retail store closings ................... (2.2) --
Insurance recovery ...................... 10.0 --
Year 2000 and system initiatives expenses -- (8.1)
Contract termination and other .......... -- (1.1)
-------- --------
Adjusted SG&A expense ................. 143.0 132.0
-------- --------
Adjusted operating loss ................... $ (2.4) $ (5.5)
======== ========
GLENWILLOW PLANT CLOSURE
In March 2000, the Company announced that it intends to shut down operations at
its Glenwillow facility, which manufactures and distributes Mr. Coffee brand
coffee makers and coffee filters. These operations will be consolidated into
other existing facilities. As a result of this decision, the Company recorded a
charge of $3.3 million in the first quarter, primarily related to the write-off
of leasehold improvements, severance costs and contract and lease termination
fees. This charge was recorded in SG&A ($0.6 million) and Cost of Goods Sold
($2.7 million). The Glenwillow facility is expected to be closed by the end of
the second quarter of 2000 and will result in the elimination of approximately
300 positions. The Company anticipates incurring additional incremental costs
during the second quarter of 2000, primarily related to relocation of certain
manufacturing equipment and machinery to other Company manufacturing locations
and as a result of duplicate warehousing costs as inventory levels are built in
order to avoid customer supply issues during the plant shut-down.
RETAIL STORE CLOSINGS
In the first quarter of 2000, in connection with the Company's on-going
strategic planning process, the decision was made to close the remaining Sunbeam
retail stores. As a result of this decision, a charge of $2.5 million, primarily
related to the write-off of leasehold improvements, severance and lease
termination fees was recorded in the first quarter of 2000. This charge was
recorded in SG&A ($2.2 million) and Cost of Goods Sold ($0.3 million). The
Company expects that the majority of these stores will be closed by the end of
the second quarter of 2000 and will result in the elimination of approximately
60 positions.
PURCHASE ACCOUNTING
The Company recorded the Coleman acquisition using the purchase method of
accounting. In accordance with this accounting method, inventory pertaining to
the acquisition of the remaining approximately 20% interest in Coleman was
recorded at fair value. The fair value of the inventory exceeded the book value
reflected on the balance sheet of the acquired company as of the acquisition
date. The excess of the fair value of inventory over its pre-acquisition book
value was recorded in cost of sales as the inventory was sold. The non-recurring
impact of this purchase accounting adjustment was $4.3 million in the first
quarter of 2000.
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INSURANCE RECOVERY
In the first quarter of 2000, the Company settled one of its claims related to
its directors' and officers' liability insurance policies pursuant to which,
among other things, the insurer reimbursed the Company for $10 million of
defense costs, which was the limit of the policy at issue. This reimbursement is
included in SG&A in the first quarter of 2000.
YEAR 2000 AND SYSTEMS INITIATIVES EXPENSES
See "Year 2000 Disclosure" within this Item II - "Management's Discussion and
Analysis of Financial Condition and Results of Operations".
CONTRACT TERMINATION AND OTHER
In the first quarter of 1999, the Company recorded a charge of $0.8 million
relating to the renegotiations of a contract with one of the Company's
licensees. In addition, approximately $0.3 million was recorded during the first
quarter of 1999 as a result of management's strategic decision to close a
warehouse in Mexico.
THREE MONTHS ENDED MARCH 31, 2000 COMPARED TO THREE MONTHS ENDED MARCH 31, 1999
Consolidated net sales for the three months ended March 31, 2000 and 1999 were
$539.1 million and $523.9 million respectively, an increase of $15.2 million or
approximately 3%. This increase was driven by the Outdoor Leisure group, where
net sales increased approximately $10 million to $228.8 million in the first
quarter of 2000 as compared to the same period in 1999. The increase in Outdoor
Leisure net sales was primarily driven by strong retail replenishment demand of
outdoor recreation products and by sales of Outdoor Cooking products. The
increase in net sales of Outdoor Cooking products is largely attributable to the
introduction of Coleman(R) branded gas grills and grill accessories. These
increases are partially offset by a decrease in revenue from Powermate(R)
generators as a result of a combination of factors that impacted the entire
portable generator category, including weather conditions and the effect of Year
2000 related sales in the second half of 1999 period. Sales of Powermate
generators are expected to continue to be adversely effected during the second
and third quarters of this year while trade inventories rebalance from the
effect of Year 2000 related sales in the second half of 1999. International net
sales increased $4.5 million to $144.1 million in the first quarter of 2000 as
compared to the same period in 1999. The increase in International net sales in
the first quarter of 2000 is primarily attributable to increases in net sales in
Japan resulting from increased sales of outdoor recreation products and improved
economic conditions in this region. Increased net sales in Latin America driven
by sales of appliances, partially offset by decreases in net sales in Canada as
a result of lower levels of sales of Powermate generators, account for the
remainder of the International sales increase. Household net sales increased
approximately $1 million to $164.8 million in 2000, due to an increase in net
sales of appliances and personal care products largely offset by slight
decreases in sales of postal scales and decreases of First Alert product sales.
Gross margin for the first quarter in 2000 was $133.3 million or $6.8 million
higher than the comparable period in 1999. Excluding the effects of significant
and unusual items, as summarized above under "Significant and unusual charges",
gross margin was $140.6 million in the first quarter of 2000 or $14.1 million
higher than the comparable period in 1999. As a percentage of net sales, gross
margin improved to approximately 26% in the first quarter of 2000 as compared to
the first quarter 1999 gross margin of approximately 24%. The $14.1 million
improvement in gross margin, as adjusted for unusual charges, is reflective of
numerous improvements over the same period in the prior year, including
additional utilization of the Company's factories in 2000 and decreases in
customer returns and allowances, which are deductions from gross sales to arrive
at net sales. These improvements account for approximately $11 million of the
increase in gross margin in the first quarter of 2000 as compared to the same
period in 1999. The balance of the increase in gross margin was driven by the
increase in net sales in the first quarter of 2000, as compared to the first
quarter of 1999.
SG&A expense in the first quarter of 2000 was $135.8 million, representing a 4%
decrease over the same period in the prior year. Excluding the effects of
significant and unusual items, as summarized above under "Significant and
Unusual Charges", SG&A expense for 2000 was approximately $11 million, or 8%
higher than the same period in 1999. This increase is largely attributable to
increased spending related to research and development ("R&D") costs and
advertising and marketing, which increased $3.0 million and $4.5 million,
respectively, in the first quarter of 2000 as compared to the same period in the
prior year. The higher levels of R&D costs relate to new product development,
including "Smart Products", which
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the Company plans to offer through its Thalia subsidiary in 2001. The increases
in advertising and marketing relate to new product introductions, including
"Smart Products", Coleman branded grills and grill accessories and outdoor
recreation products. The remaining increase is primarily due to increased levels
of SG&A in the Outdoor Leisure and International groups driven by increased net
sales.
Consolidated operating results for the first quarters of 2000 and 1999, were
losses of $59.4 million and $60.7 million, respectively. Operating results, as
adjusted, were losses of $2.4 million and $5.5 million in the first quarter of
2000 and 1999, respectively. The adjusted results reflect the factors discussed
above.
Interest expense, net in the first quarter of 2000 was $52.5 million as compared
to $42.8 million in the same period in the prior year. Approximately half of
this increase is attributable to higher levels of borrowings and increased
interest rates in the first quarter of 2000 as compared to the same period in
the prior year. The balance of the increase was driven by the amortization of
the loan amendment fee (approximately $4 million) the Company is obligated to
pay under the terms of the Credit Facility. See Note 3 to the Condensed
Consolidated Financial Statements.
Other expense, net of $2.6 million for the first quarter of 2000 primarily
relates to losses due to foreign exchange rates, primarily from Europe. Other
income, net in the first quarter of 1999 relates to favorable foreign exchange
rates.
The minority interest reported for the first quarter of 1999 primarily relates
to the minority interest held in Coleman by public shareholders.
Tax expense recorded in the first quarter of 2000 totaled $1.7 million, of which
$0.8 million related to Eastpak and the remainder related primarily to taxes on
foreign income. Income taxes in the first quarter of 1999 reflect tax expense on
earnings of foreign operations. No net tax benefit was recorded due to the
Company's U.S. losses in either year as it is management's assessment that the
Company cannot demonstrate that it is more likely than not that deferred tax
assets resulting from these losses would be realized through future taxable
income.
FOREIGN OPERATIONS
Approximately 80% of the Company's business is conducted in U.S. dollars,
including domestic sales, U.S. dollar denominated export sales, primarily to
Latin American markets, Asian sales and the majority of European sales. The
Company's non-U.S. dollar denominated sales are made principally by subsidiaries
in Europe, Canada, Japan, Latin America and Mexico. Translation adjustments
resulting from the Company's non-U.S. denominated subsidiaries have not had a
material impact on the Company's financial condition, results of operations or
cash flows.
On a limited basis, the Company selectively uses derivatives, primarily foreign
exchange option and forward contracts, to manage foreign exchange exposures that
arise in the normal course of business. No derivative contracts are entered into
for trading or speculative purposes. The use of derivatives has not had a
material impact on the Company's financial results.
SEASONALITY
Sunbeam's consolidated sales are not expected to exhibit substantial
seasonality; however, sales are expected to be strongest during the second
quarter of the calendar year and weakest in the first quarter. Furthermore,
sales of a number of products, including warming blankets, vaporizers,
humidifiers, grills, First Alert products, camping and generator products may be
impacted by unseasonable weather conditions.
LIQUIDITY AND CAPITAL RESOURCES
DEBT INSTRUMENTS
In order to finance the 1998 acquisitions of Coleman, First Alert, Inc. ("First
Alert") and Signature Brands USA, Inc. ("Signature Brands") and to refinance
substantially all of the indebtedness of the Company and the three acquired
companies, the Company consummated an offering in March 1998 of zero coupon
debentures due 2018, having a yield to maturity of 5% (approximately $2,014
million principle amount at maturity), which resulted in approximately $730
million of net proceeds and borrowed about $1,325 million under its Credit
Facility.
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The debentures are exchangeable for shares of the Company 's common stock at an
initial conversion rate of 6.575 shares for each $1,000 principal amount at
maturity of the debentures, subject to adjustments upon occurrence of specified
events. The debentures are subordinated in right of payment to all existing and
future senior indebtedness of the Company. The debentures are not redeemable by
the Company prior to March 25, 2003. On or after such date, the debentures are
redeemable for cash with at least 30 days notice, at the option of the Company.
The Company is required to purchase debentures at the option of the holder as of
March 25, 2003, March 25, 2008 and March 25, 2013, at purchase prices equal to
the issue price plus accrued original discount to such dates. The Company may,
at its option, elect to pay any such purchase price in cash or common stock or
any combination thereof. However, the Credit Facility prohibits the Company from
redeeming or repurchasing debentures for cash.
Concurrent with the 1998 acquisitions, the Company replaced its $250 million
syndicated unsecured five-year revolving credit facility with the Credit
Facility. The Credit Facility provided for aggregate borrowings of up to $1.7
billion and in addition to other customary covenants, required the Company 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 Credit Facility.
As a result of, among other things, its operating losses incurred during the
first half of 1998, the Company did not achieve the specified financial ratios
for June 30, 1998 and it appeared unlikely that the Company would achieve the
specified financial ratios for September 30, 1998. Consequently, the Company and
its lenders entered into an agreement dated as of June 30, 1998 that waived
through December 31, 1998 all defaults arising from the failure of the Company
to satisfy the specified financial ratios for June 30, 1998 and September 30,
1998. Pursuant to an agreement with the Company dated as of October 19, 1998,
the Company's lenders extended all of the waivers through April 10, 1999 and
also waived through such date all defaults arising from any failure by the
Company 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, the Company and its lenders entered into an amendment to the
Credit Facility that, among other things, waived until April 10, 2001 all
defaults arising from any failure by the Company to satisfy certain financial
ratios for any fiscal quarter end occurring through March 31, 2001. As part of
the April 14, 2000 amendment, the Company 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 Credit Facility reflects the significant terms of the Credit
Facility as amended to date.
The Credit Facility provides for aggregate borrowings of up to $1.7 billion
pursuant to: (i) a revolving credit facility in an aggregate principal amount of
up to $400 million maturing March 30, 2005 ($52.5 million of which was used to
complete the Coleman merger which occurred on January 6, 2000); (ii) 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
(iii) a $500.0 million term loan maturing September 30, 2006 (of which $5.0
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 $80.2 million of the $1.7 billion Credit Facility was
committed for outstanding letters of credit.
Pursuant to the Credit Facility, interest accrues, at the Company's option: (i)
at the London Interbank Offered Rate ("LIBOR"), or (ii) 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 Credit Facility. Borrowings under the Credit
Facility are secured by a pledge of the stock of the Company's material
subsidiaries and by a security interest in substantially all of the assets of
the Company and its material domestic subsidiaries. In addition, borrowings
under the Credit Facility are guaranteed by a number of the Company'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 the Company, the
obligations of such subsidiaries are guaranteed by the Company.
Under terms of the April 14, 2000 amendment to the Credit Facility, the Company
is obligated to pay the bank lenders an amendment fee for the April 14, 2000
amendment of 0.50% of the commitments under the Credit Facility as of April 14,
2000, totaling $8.5 million. This fee is payable on the earlier of June 30, 2000
or the closing of the Eastpak sale.
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On November 30, 2000, the Company also must pay an amendment fee previously
agreed to for the April 15, 1999 amendment equal to 0.50% of the commitments
under the Credit Facility 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 bank lenders if the aggregate loan and commitment
exposure under the Credit Facility 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 was 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 Credit Facility
contains covenants customary for credit facilities of a similar nature,
including limitations on the ability of the Company and its subsidiaries,
including Coleman, to, among other things, (i) declare dividends or repurchase
stock, (ii) prepay, redeem or repurchase debt, incur liens and engage in
sale-leaseback transactions, (iii) make loans and investments, (iv) incur
additional debt, (v) amend or otherwise alter material agreements or enter into
restrictive agreements, (vi) make capital expenditures, (vii) fail to maintain
its trade receivable securitization programs, (viii) engage in mergers,
acquisitions and asset sales, (ix) engage in certain transactions with
affiliates, (x) settle certain litigation, (xi) alter its cash management system
and (xii) alter the businesses they conduct. The Credit Facility 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
Credit Facility requires the Company to prepay loans under the Credit Facility
on December 31, 2000 to the extent that the cash on hand in the Company'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 the Company to satisfy any of
the financial ratios and tests contained in the Credit Facility or the
occurrence of any other event of default under the Credit Facility would entitle
the bank 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 Credit Facility 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 the Company.
Pursuant to the April 14, 2000 amendment, 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. (See Note 3 to the Condensed Consolidated
Financial Statements.)
CASH FLOWS
As of March 31, 2000, the Company had cash and cash equivalents of $23.1 million
and total debt of $2.4 billion. Cash used in operating activities during the
first three months of 2000 was $58.6 million, consistent with the $57.5 million
used in the first three months of 1999. During the first quarter of 2000,
inventory levels increased approximately $75 million, largely due to the
seasonal inventory build in the Company's Outdoor Leisure group. Accounts
receivable decreased approximately $3 million from December 31, 1999 and
approximately $36 million from the same period in the prior year, as a result of
the impact of the accounts receivable securitization program and as a result of
the Company's management of receivables. (See Note 4 to the Condensed
Consolidated Financial Statements.) Accounts payable increased during the first
quarter of 2000 by approximately $32 million as a result of the aforementioned
inventory build.
Cash used in investing activities in the first quarter of 2000 reflects $83.4
million for the purchase of the remaining approximate 20% interest in Coleman.
Capital spending for the first quarter of 2000 totaled $16.1 million, primarily
for equipment and tooling for new products and the expansion of the Company's
Neosho, Missouri warehouse. Investing activities for the 2000 period also
includes approximately $6 million from the sale of assets, including the sale of
the former Coleman headquarters building ($5 million). Capital spending in the
comparable 1999 period was $17.1 million and was primarily for information
systems and equipment and tooling for new products. The Company anticipates 2000
capital spending to be less than 5% of net sales. Capital expenditures in the
current year are expected to primarily relate to manufacturing equipment
replacement, new product introductions and capacity additions, including the
Neosho warehouse expansion.
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Cash provided by financing activities totaled $134.8 million in the first three
months of 2000 and reflected net borrowings under the Company's Credit Facility.
Approximately $83 million of the borrowings under the Credit Facility resulted
from the Company's purchase of the remaining 20% interest in Coleman and the
balance was used to fund the Company's working capital requirements. Cash
provided by financing activities totaled $58.7 million in the first quarter of
1999 and reflects net borrowings under the Company's Credit Facility. See Note 3
to the Condensed Consolidated Financial Statements.
At March 31, 2000, standby and commercial letters of credit aggregated $80.2
million and were predominately for insurance policies, workers' compensation,
and international trade activities. In addition, as of March 31, 2000, surety
bonds with a contract value of $78.4 million were outstanding largely for the
Company's pension plans and as a result of environmental issues and litigation
judgments that are currently under appeal.
In January 2000, pursuant to a merger agreement dated as of February 27, 1998,
the Company acquired the remaining publicly held Coleman shares pursuant to a
merger transaction pursuant to which the remaining Coleman stockholders (other
than stockholders who are seeking appraisal rights under Delaware law) received
0.5677 of a share of the Company's common stock and $6.44 in cash for each share
of Coleman common stock they owned, aggregating approximately 6.7 million shares
of the Company's common stock and $87 million in cash. The approximate $87
million aggregate cash payment included $4.8 million related to the cash out of
remaining Coleman employee options, in accordance with the merger agreement,
which occurred in December 1999. In addition, pursuant to a court approved
settlement of claims by Coleman public stockholders the Company issued to such
stockholders (other than such stockholders who are seeking appraisal rights
under Delaware law), warrants expiring August 24, 2003 to purchase 4.98 million
shares of the Company's common stock at $7.00 per share less approximately
498,000 warrants issued to the plaintiffs' attorneys for their fees and
expenses. These warrants, which generally have the same terms as the warrants
previously issued to M&F's subsidiary were issued when the consideration was
paid for the Coleman merger. The total consideration given for the purchase of
the remaining publicly held Coleman shares was valued at $146 million.
The Company believes its borrowing capacity under the Credit Facility, foreign
working capital lines, cash flow from the operations of the Company, existing
cash and cash equivalent balances, proceeds from its receivable securitization
programs, the sale of Eastpak and sales of non-core assets will be sufficient to
support planned working capital needs, planned capital expenditures and
scheduled debt service to April 10, 2001. Although management believes they will
be successful in accomplishing the above, there can be no assurance that the
aforementioned sources of funds will be sufficient to meet the Company's cash
requirements on a consolidated basis. If the Company is unable to satisfy such
cash requirements, the Company could be required to adopt one or more
alternatives, such as reducing or delaying capital expenditures, restructuring
indebtedness, selling other assets or operations or issuing additional shares of
capital stock in the Company, and some of such actions would require the consent
of the lenders. There can be no assurance that any of such actions could be
effected, or if so, on terms favorable to the Company that such actions would
enable the Company to continue to satisfy its cash requirements or that such
actions would be permitted under the terms of the Credit Facility. In
anticipation of the expiration of the current waiver on April 10, 2001, the
Company intends to negotiate with its lenders regarding a further amendment to
the Credit Facility, further waiver of the covenants and other terms, or
refinancing of the Credit Facility. Any decisions with respect to such
amendment, waiver, or refinancing will be made based on a review from time to
time of the advisability of particular transactions. There can be no assurance
that an amendment, further waiver of existing covenants and other terms, or
refinancing will be entered into by April 10, 2001. The failure to obtain such
an amendment, further waiver or debt refinancing would likely result in
violation of existing covenants and compliance with other terms, which would
permit the bank lenders to accelerate the maturity of all outstanding borrowings
under the Credit Facility, which would likely have a material adverse effect on
the Company.
By letter dated June 17, 1998, the staff of the Division of Enforcement of the
Securities and Exchange Commission ("SEC") advised the Company that it was
conducting an informal inquiry into the Company 's accounting policies and
procedures and requested that the Company produce documents. On July 2, 1998,
the SEC issued a Formal Order of Private Investigation, designating officers to
take testimony and pursuant to which a subpoena was served on the Company
requiring the production of documents. On November 4, 1998, the Company received
another SEC subpoena requiring the production of additional documents. The
Company has provided numerous documents to the SEC staff and continues to
cooperate with the SEC staff. The Company has, however, declined to provide the
SEC with material that the Company believes is subject to the attorney-client
privilege and the work product immunity. The SEC has not commenced any civil or
administrative proceedings as a result of its investigations and the Company
cannot predict at this time whether the SEC will seek to impose any monetary or
other penalties against the Company. Under these circumstances, the Company
cannot estimate the duration of such investigation or its outcome.
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The Company is involved in significant litigation, including class and
derivative actions, relating to events which led to the restatement of its
consolidated financial statements, the issuance of the M&F warrant, the sale of
the debentures and the employment agreements of Messrs. Dunlap and Kersh. The
Company intends to vigorously defend each of the actions, but cannot predict the
outcome and is not currently able to evaluate the likelihood of the Company's
success in each case or the range of potential loss. However, if the Company
were to lose these suits, the resulting judgments would likely have a material
adverse effect on the Company's financial position, results of operations or
cash flows. Additionally, the Company's insurance carriers, on the one hand, and
the Company on the other, have filed various suits against each other requesting
a declaratory judgment on the validity of the directors' and officers' liability
insurance policies or have advised the Company of their intent to deny coverage
under such policies. The Company is defending these claims and pursuing recovery
from its insurers. See Part 2- Other Information. The Company's failure to
obtain such insurance recoveries following an adverse judgment against the
Company on any of the foregoing actions could have a material adverse effect on
the Company's financial position, results of operations or cash flows.
Amounts accrued for litigation matters represent the anticipated costs (damages
and/or settlement amounts) in connection with pending litigation and claims and
related anticipated legal fees for defending such actions. The costs are accrued
when it is both probable that an asset has been impaired or a liability has been
incurred and the amount can be reasonably estimated. The accruals are based upon
the Company's assessment, after consultation with counsel, of probable loss
based on the facts and circumstances of each case, the legal issues involved,
the nature of the claim made, the nature of the damages sought and any relevant
information about the plaintiff, and other significant factors which vary by
case. When it is not possible to estimate a specific expected amount of cost to
be incurred, the Company evaluates the range of probable loss and records the
minimum end of the range. As of March 31, 2000 the Company had established
accruals for litigation matters of $22.3 million (representing $9.6 million and
$12.7 million for estimated damages or settlement amounts and legal fees,
respectively) and $24.3 million as of December 31, 1999 (representing $9.6
million and $14.7 million for estimated damages or settlements and legal fees,
respectively.) It is anticipated that the $22.3 million accrual will be paid as
follows: $19.5 million in 2000, $2.7 million in 2001 and $0.1 million in 2002.
The Company believes, based on information available to the Company on March 31,
2000, that anticipated probable costs of litigation matters existing as of March
31, 2000 have been adequately reserved, to the extent determinable.
As a consumer goods manufacturer and distributor, the Company faces 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 the Company's financial
position, results of operations or cash flows. Some of the product lines the
Company acquired in the 1998 acquisitions have increased its exposure to product
liability and related claims.
The Company and its subsidiaries are also involved in various lawsuits from time
to time that the Company considers to be ordinary routine litigation incidental
to its business. In the opinion of the Company, the resolution of these routine
matters, and of certain matters relating to prior operations, individually or in
the aggregate, will not have a material adverse effect on the financial
position, results of operations or cash flows of the Company.
See Note 9 to the Condensed Consolidated Financial Statements.
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NEW ACCOUNTING STANDARDS
In June 1999, the FASB issued SFAS No. 137, ACCOUNTING FOR DERIVATIVE
INSTRUMENTS AND HEDGING ACTIVITIES-DEFERRAL OF THE EFFECTIVE DATE OF STATEMENT
NO. 133, which delays the effective date of Statement No. 133 to fiscal years
beginning after June 15, 2000. SFAS No. 133 requires the recognition of all
derivatives in the Consolidated Balance Sheets as either assets or liabilities
measured at fair value. The Company will adopt SFAS No. 133 for the 2001 fiscal
year. The Company has not yet determined the impact SFAS No. 133 will have on
its consolidated financial position, results of operations or cash flows.
YEAR 2000 DISCLOSURE
As a result of the Company's readiness planning, systems corrections and testing
as well as the contingency plans that were developed, the Company was adequately
prepared for the impact of Year 2000 on its operations and experienced no major
Year 2000 issues. The Company initiated a global contingency planning effort to
support the Company's critical business operations. Critical sites were
identified worldwide, and local procedures were developed to maintain business
continuity if a Year 2000 issue should have arisen. For example, this included
having identified disaster-recovery facilities, alternative suppliers,
stockpiling critical materials or having a documented manual procedure.
Additionally, the Company established a Year 2000 Command Center to deal with
unexpected Year 2000 issues and possible disruptions as they occurred. The Year
2000 executive team, with worldwide coordination and oversight by the corporate
Project Management Office oversaw these efforts.
THE COSTS TO ADDRESS SUNBEAM'S YEAR 2000 ISSUES
Through March 31, 2000, including costs incurred in 1999 and 1998, the Company
had expended approximately $67 million to address Year 2000 issues of which
approximately 50% was recorded as capital expenditures and the remainder as SG&A
expense. The Company does not expect to incur material additional costs related
to Year 2000.
The $67 million expenditure includes the following categories:
o uniform international business and accounting system $47 million
o localized business system software upgrades and remediation $9 million
o Year 2000 readiness assessment and tracking $6 million
o upgrade of personal computers and related software $5 million
The amount incurred for Year 2000 issues during 1999 of approximately $48
million represented over 50% of the Company's total 1999 budget for information
systems and related support, including Year 2000 costs. A majority of these
costs were incremental expenditures that will not recur in the Year 2000 or
thereafter. Fees and expenses related to third party consultants, who were
involved in the program management office as well as the modification and
replacement of software, represented approximately 75% of the total cost. The
balance of the total cost related primarily to software license fees and new
hardware, but excluded the costs associated with Company employees. The Company
financed these expenditures through operating cash flows or borrowings, as
applicable. A significant portion of these expenditures enhanced the Company's
operating systems in addition to resolving Year 2000 issues.
Because Year 2000 readiness was critical to the business, the Company redeployed
some resources from non-critical system enhancements to address Year 2000
issues. In addition, due to the importance of information technology systems to
the Company's business, management deferred non-critical systems enhancements as
much as possible. These redeployments and deferrals did not have a material
impact on the Company's financial condition, results of operations or cash
flows.
CAUTIONARY STATEMENTS
Certain statements in this Quarterly Report on Form 10-Q 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
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factors which may cause the actual results, performance, or achievements of the
Company 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 the Company, 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. The Company
cautions investors that any forward-looking statements made by the Company 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 the Company include, but are not
limited to, risks associated with:
o high leverage;
o the Company's ability to continue to have access to its revolving
credit facility including the Company's ability to (I) comply with the
terms of its Credit Facility, including financial covenants, (ii) enter
into an amendment to its credit agreement containing financial
covenants which it and its bank lenders find mutually acceptable, or
(III) continue to obtain waivers from its bank lenders with respect to
its compliance with the existing covenants contained in the Credit
Facility;
o the prices at which the Company is able to sell receivables under its
trade accounts receivables securitization programs and/or the Company's
ability to continue to sell receivables under either of such programs;
o the Company's ability to refinance its indebtedness, including the
Credit Facility and/or the Debentures, at acceptable rates with
acceptable other terms;
o the Company's ability to consummate the sale of Eastpak pursuant to the
Eastpak Sale Agreement;
o the Company's ability to consummate the planned sale of certain
non-core assets and if consummated, the terms of such sales;
o the Company's ability to continue to have access to foreign working
capital lines;
o the Company's ability to fully integrate the recently acquired Coleman,
Signature Brands and First Alert companies and expenses associated with
such integration;
o the Company's sourcing of products from international vendors,
including the ability to select reliable vendors and to avoid delays in
shipments;
o the Company's ability to maintain and increase market share for its
products at acceptable margins;
o the Company's ability to successfully introduce new products and to
provide on-time delivery and a satisfactory level of customer service;
o changes in domestic and/or foreign laws and regulations, including
changes in tax laws, accounting standards, environmental laws,
occupational, health and safety laws;
o access to foreign markets together with foreign economic conditions,
including currency fluctuations and trade, monetary and/or tax
policies;
o uncertainty as to the effect of competition in existing and potential
future lines of business;
o fluctuations in the cost and availability of raw materials and/or
products;
o changes in the availability and costs of labor;
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o effectiveness of advertising and marketing programs;
o economic uncertainty in Japan, Korea and other Asian countries, as well
as in Mexico, Venezuela, and other Latin American countries;
o product quality, including excess warranty costs;
o product liability expenses consisting of insurance, litigation fees and
damages and/or settlement costs, as well as other costs including
Sunbeam's First Alert subsidiary and costs including legal fees and
penalties (if any) and lost business and/or goodwill of product
recalls;
o weather conditions which can have an unfavorable impact upon sales of
certain of the Company's products;
o the numerous lawsuits against the Company and the SEC investigation
into the Company's accounting practices and policies, and uncertainty
regarding the Company's available coverage under its directors' and
officers' liability insurance;
o the possibility of a recession in the United States or other countries
resulting in a decrease in consumer demands for the Company's products;
o actions by competitors including business combinations, new product
offerings and promotional activities; and
Other factors and assumptions not included in the list above may also cause the
Company's actual results to materially differ from those projected.
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PART II. OTHER INFORMATION
ITEM 1. LITIGATION
On April 23, 1998, two class action lawsuits were filed on behalf of purchasers
of the Company's common stock in the U.S. District Court for the Southern
District of Florida against the Company and some of its present and former
directors and former officers alleging violations of the federal securities laws
as discussed below. After that date, approximately fifteen similar class actions
were filed in the same court. One of the lawsuits also named as defendant Arthur
Andersen LLP ("Arthur Andersen"), the Company's independent accountants for the
period covered by the lawsuit.
On June 16, 1998, the court entered an order consolidating all these suits and
all similar class actions subsequently filed (collectively, the "Consolidated
Federal Actions"). On January 6, 1999, plaintiffs filed a consolidated amended
class action complaint against the Company, some of its present and former
directors and former officers, and Arthur Andersen. The consolidated amended
class action complaint alleges, among other things, that defendants made
material misrepresentations and omissions regarding the Company's business
operations and future prospects in an effort to artificially inflate the price
of the Company's common stock and call options, and that, in violation of
section 20(a) of the Exchange Act, the individual defendants exercised influence
and control over the Company, causing the Company to make material
misrepresentations and omissions. The consolidated amended complaint seeks an
unspecified award of money damages. In February 1999, plaintiffs moved for an
order certifying a class consisting of all persons and entities who purchased
the Company's common stock or who purchased call options or sold put options
with respect to the Company's common stock during the period April 23, 1997
through June 30, 1998, excluding the defendants, their affiliates, and employees
of the Company. Defendants have opposed that motion. In March 1999, all
defendants who had been served with the consolidated amended class action
complaint moved to dismiss it and the court granted the motion only as to
certain non-employee current and former directors and a former officer, and
denied it as to the other defendants. Arthur Andersen has filed counterclaims
against the Company, and a third-party complaint against a director of the
Company and against unnamed third party corporations.
On April 7, 1998, a purported derivative action was filed in the Circuit Court
for the Fifteenth Judicial Circuit in and for Palm Beach County, Florida against
the Company and some of its present and former directors and former officers.
The action alleged that the individual defendants breached their fiduciary
duties and wasted corporate assets when the Company granted stock options in
February 1998 to three of its now former officers and directors. In June 1998,
all defendants filed a motion to dismiss the complaint for failure to make a
pre-suit demand on the Company's board of directors. In February 1999,
plaintiffs filed an amended derivative complaint nominally on behalf of the
Company against some of its present and former directors and former officers and
Arthur Andersen. This amended complaint alleges, among other things, that
Messrs. Dunlap and Kersh, the Company's former Chairman and Chief Executive
Officer and former Chief Financial Officer, respectively, caused the Company to
employ fraudulent accounting procedures in order to enable them to secure new
employment contracts, and seeks a declaration that the individual defendants
have violated fiduciary duties, an injunction against the payment of
compensation to Messrs. Dunlap and Kersh or the imposition of a constructive
trust on such payments, and unspecified money damages. The defendants have each
moved to dismiss the amended complaint in whole or in part.
During 1998, purported class action and derivative lawsuits were filed in the
Court of Chancery of the State of Delaware in New Castle County and in the U.S.
District Court for the Southern District of Florida by stockholders of the
Company against the Company, MacAndrews & Forbes and some of the Company's
present and former directors. These complaints allege, among other things, that
the defendants breached their fiduciary duties when the Company entered into a
settlement agreement with the MacAndrews & Forbes subsidiary that sold the
Company a controlling interest in Coleman. In such settlement agreement, the
MacAndrews & Forbes subsidiary released the Company from threatened claims
arising out of the Company's acquisition of its interest in Coleman, and
MacAndrews & Forbes agreed to provide management support to the Company. Under
the settlement agreement, the MacAndrews & Forbes subsidiary was granted a
warrant expiring August 24, 2003 to purchase up to an additional 23 million
shares of the Company's common stock at an exercise price of $7 per share,
subject to anti-dilution provisions. The derivative actions filed in the
Delaware Court of Chancery were consolidated. The plaintiffs voluntarily
dismissed this action. The action filed in the U.S. District Court for the
Southern District of Florida has been dismissed. In April 2000, a complaint was
filed in the U.S. District Court for the Southern District of Florida against
the Company, certain current and former directors, Messrs. Dunlap and Kersh and
MacAndrews & Forbes alleging, among other things, that certain of the defendants
breached their fiduciary duty when the Company entered into a settlement
agreement with MacAndrews & Forbes, and certain of the defendants breached their
fiduciary duty and wasted corporate assets by, among other things, issuing
materially false and misleading statements regarding the Company's financial
condition. The plaintiff in this action seeks, among other things, recission of
the warrants issued to MacAndrews & Forbes and an injunction preventing the
issuance of warrants and damages.
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In September 1998, an action was filed in the 56th Judicial District Court of
Galveston County, Texas alleging various claims in violation of the Texas
Securities Act and Texas Business & Commercial Code as well as common law fraud
as a result of the Company's alleged misstatements and omissions regarding the
Company's financial condition and prospects during a period beginning May 1,
1998 and ending June 16, 1998, in which the U.S. National Bank of Galveston,
Kempner Capital Management, Inc. and Legacy Trust Company engaged in
transactions in the Company's common stock on their own behalf and on behalf of
their respective clients. The Company is the only named defendant in this
action. The complaint requests recovery of compensatory damages, punitive
damages and expenses in an unspecified amount. This action was subsequently
transferred to the U.S. District Court for the Southern District of Florida and
consolidated with the Consolidated Federal Actions.
In October 1998, a class action lawsuit was filed in the U.S. District Court for
the Southern District of Florida on behalf of certain purchasers of the
debentures against the Company and certain of the Company's former officers and
directors. In April 1999, a class action lawsuit was filed in the U.S. District
Court for the Southern District of Florida on behalf of persons who purchased
debentures during the period of March 20, 1998 through June 30, 1998, inclusive,
but after the initial offering of such debentures against the Company, Arthur
Andersen, the Company's former auditor, and certain former officers and
directors. The court consolidated the two cases and the plaintiffs have filed a
consolidated class action on behalf of persons who purchased debentures in the
initial offering and in the market during the period March 20, 1998 through June
30, 1998. The amended complaint alleges, among other things, violations of the
federal and state securities laws and common law fraud. The plaintiffs seek,
among other things, either unspecified monetary damages or rescission of their
purchase of the debentures. This action is coordinated with the Consolidated
Federal Actions.
The Company has been named as a defendant in an action filed in the District
Court of Tarrant County, Texas, 48th Judicial District, on November 20, 1998.
The plaintiffs in this action are purchasers of the debentures. The plaintiffs
allege that the Company violated the Texas Securities Act and the Texas Business
& Commercial Code and committed state common law fraud by materially misstating
the financial position of the Company in connection with the offering and sale
of the debentures. The complaint seeks rescission, as well as compensatory and
exemplary damages in an unspecified amount. The Company specially appeared to
assert an objection to the Texas court's exercise of personal jurisdiction over
the Company, and a hearing on this objection took place in April 1999. Following
the hearing, the court entered an order granting the Company's special
appearance and dismissing the case without prejudice. The plaintiffs appealed,
which appeal was denied.
On February 9, 1999, Messrs. Dunlap and Kersh filed with the American
Arbitration Association demands for arbitration of claims under their respective
employment agreements with the Company. Messrs. Dunlap and Kersh are requesting
a finding by the arbitrator that the Company terminated their employment without
cause and that they should be awarded certain benefits based upon their
respective employment agreements. The Company has answered the arbitration
demands of Messrs. Dunlap and Kersh and has filed counterclaims seeking, among
other things, the return of all consideration paid, or to be paid, under the
February 1998 Employment Agreements between the Company and Messrs. Dunlap and
Kersh. An answer was filed by Messrs. Dunlap and Kersh generally denying the
Company's counterclaim. Discovery is pending.
On September 13, 1999, an action naming the Company and Arthur Andersen as
defendants was filed in the Circuit Court for Montgomery County, Alabama. The
plaintiffs in this action are purchasers of the Company's common stock during
the period March 19, 1998 through May 6, 1998. The plaintiffs allege, among
other things, that the defendants violated the Alabama Securities Laws. The
plaintiffs seek compensatory and punitive damages in an unspecified amount.
Arthur Andersen has filed a cross claim against the Company for contribution and
indemnity. The Company has filed a motion to dismiss. In May 2000, the
plaintiffs in this action filed an amended complaint, which added allegations of
violations of the federal securities laws.
The Company intends to vigorously defend each of the foregoing lawsuits, but
cannot predict the outcome and is not currently able to evaluate the likelihood
of the Company's success in each case or the range of potential loss, if any.
However, if the Company were to lose one or more of these lawsuits, judgments
would likely have a material adverse effect on the Company's consolidated
financial position, results of operations or cash flows.
In July 1998, the American Alliance Insurance Company ("American Alliance")
filed suit against the Company in the U.S. District Court for the Southern
District of New York requesting a declaratory judgment of the court that the
directors' and officers' liability insurance policy for excess coverage issued
by American Alliance was invalid and/or had been properly canceled by American
Alliance. As a result of a motion made by the Company, this case has been
transferred to the U.S. District Court for the Southern District of Florida for
coordination and consolidation of pre-trial proceedings with the various actions
pending in that court. In October 1998, an action was filed by Federal Insurance
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Company ("Federal Insurance") in the U.S. District Court for the Middle District
of Florida requesting the same relief as that requested by American Alliance in
the previously filed action as to additional coverage levels under the Company's
directors' and officers' liability insurance policy. This action has been
transferred to the U.S. District Court for the Southern District of Florida.
Discovery in the cases brought by American Alliance and Federal Insurance is
underway and coordinated with the discovery in the Consolidated Federal Actions.
In December 1998, an action was filed by Executive Risk Indemnity, Inc. in the
Circuit Court of the Seventeenth Judicial Circuit in and for Broward County,
Florida requesting the same relief as that requested by American Alliance and
Federal Insurance in their previously filed actions as to additional coverage
levels under the Company's directors' and officers' liability insurance policy.
In April 1999, the Company filed an action in the U.S. District Court for the
Southern District of Florida against National Union Fire Insurance Company of
Pittsburgh, PA ("National Union"), Gulf Insurance Company ("Gulf") and St. Paul
Mercury Insurance Company ("St. Paul") requesting, among other things, a
declaratory judgment that National Union is not entitled to rescind its
directors' and officers' liability insurance policies to the Company and a
declaratory judgment that the Company is entitled to coverage from these
insurance companies for the various lawsuits described herein under directors'
and officers' liability insurance policies issued by each of the defendants. The
Company has settled its litigation with National Union. In response to the
Company's complaint, defendants St. Paul and Gulf have answered and asserted
counterclaims seeking rescission and declaratory relief that no coverage is
available to the Company. The Company intends to pursue recovery from all of its
insurers if damages are awarded against the Company or its indemnified officers
and/or directors under any of the foregoing actions and to recover attorneys'
fees covered under those policies. The Company's failure to obtain such
insurance recoveries following an adverse judgment in any of the actions
described above could have a material adverse effect on the Company's financial
position, results of operations or cash flows.
By letter dated June 17, 1998, the staff of the Division of Enforcement of the
SEC advised the Company that it was conducting an informal inquiry into the
Company's accounting policies and procedures and requested that the Company
produce certain documents. In July 1998, the SEC issued a Formal Order of
Private Investigation, designating SEC officers to take testimony and pursuant
to which a subpoena was served on the Company requiring the production of
certain documents. In November 1998, another SEC subpoena requiring the
production of additional documents was received by the Company. The Company has
provided numerous documents to the SEC staff and continues to cooperate with the
SEC staff. The Company has, however, declined to provide the SEC with material
that the Company believes is subject to the attorney-client privilege and the
work product immunity. The SEC has not commenced any civil or administrative
proceedings as a result of its investigation, and the Company cannot predict at
this time whether the SEC will seek to impose any monetary or other penalties
against the Company. Under these circumstances, the Company cannot estimate the
duration of the investigation or its outcome.
The Company and its subsidiaries are also involved in various other lawsuits
arising from time to time which the Company considers to be ordinary routine
litigation incidental to its business. In the opinion of the Company, the
resolution of these routine matters, and of certain matters relating to prior
operations, individually or in the aggregate, will not have a material adverse
effect upon the financial position, results of operations or cash flows of the
Company.
Amounts accrued for litigation matters represent the anticipated costs (damages
and/or settlement amounts) in connection with pending litigation and claims and
related anticipated legal fees for defending such actions. The costs are accrued
when it is both probable that an asset has been impaired or a liability has been
incurred and the amount can be reasonably estimated. The accruals are based upon
the Company's assessment, after consultation with counsel, of probable loss
based on the facts and circumstances of each case, the legal issues involved,
the nature of the claim made, the nature of the damages sought and any relevant
information about the plaintiffs and other significant factors which vary by
case. When it is not possible to estimate a specific expected cost to be
incurred, the Company evaluates the range of probable loss and records the
minimum end of the range. As of March 31, 2000, the Company had established
accruals for litigation matters of $22.3 million (representing $9.6 million and
12.7 million for estimated damages or settlement amounts and legal fees,
respectively) and $24.3 million as of December 31, 1999 (representing $9.6
million and $14.7 million for estimated damages or settlement amounts and legal
fees, respectively). It is anticipated that the $22.3 million accrual at March
31, 2000 will be paid as follows: $19.5 million in 2000, $2.7 million in 2001
and $0.1 million in 2002. The Company believes, based on information available
on March 31, 2000, that anticipated probable costs of litigation matters
existing as of March 31, 2000 have been adequately reserved to the extent
determinable.
PRODUCT LIABILITY
BRK Brands, Inc. and Sunbeam (Canada Limited) are defendants in an alleged class
action lawsuit in Ontario, Canada (the "Canada Action") that claims, among other
things, that the defendants failed to adequately inform consumers of the varying
performance characteristics of smoke detectors utilizing ionization and
photoelectric technology. The alleged class action consists of all consumers in
Ontario, Canada who have purchased ionization detectors manufactured or sold by
the defendants or their predecessors. BRK Brands is also a defendant in two
separate alleged nationwide class action lawsuits in the United States, one in
the United States District Court for the Northern District of Alabama (the
"Alabama Action") and the other in Circuit Court, Twentieth Judicial District,
St. Clair County, Illinois (the "Illinois Action"). The plaintiffs in both the
Alabama Action and the Illinois Action make substantially the same allegations
as in the Canada Action. The defendants and the plaintiffs have entered into a
settlement of the Alabama Action which provides for a nationwide public
information campaign regarding the performance characteristics of ionization and
photoelectric smoke detector technology and also provides for a rebate on the
purchase of dual sensor smoke detectors. The settlement of the Alabama Action is
intended to resolve all similar claims nationwide. The settlement has received
preliminary approval from the U.S. District Court for the Northern District of
Alabama. The defendants intend to vigorously defend the Canada Action and the
Illinois Action, but cannot predict the outcome and is not currently able to
evaluate the likelihood of the defendant's success or the range of potential
loss, if any. However, if the defendants were to lose one of these lawsuits, it
could have a material adverse effect on the defendants' financial position,
results of operations or cash flows.
-33-
<PAGE>
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
EXHIBIT NO. DESCRIPTION
----------- -----------
10.1 Tenth Amendment to Credit Agreement,
dated as of April 14, 2000 among
Sunbeam Corporation ("Sunbeam"), the
Subsidiary Borrowers referred to
therein, the Lenders party thereto,
Morgan Stanley Senior Funding, Inc.,
Bank of America National Trust and
Savings Association and First Union
National Bank.
10.2 Employment agreement dated as of
January 3, 2000 between Sunbeam and
Jerry W. Levin.
10.3 Employment agreement dated as of
January 3, 2000 between Sunbeam and
Paul E. Shapiro.
10.4 Employment agreement dated as of
January 3, 2000 between Sunbeam and
Bobby G. Jenkins.
27 Financial Data Schedule submitted
electronically to the Securities
and Exchange Commission for
information only and not filed.
(b) Report on Form 8-K
No reports on Form 8-K were filed through March 31, 2000.
-34-
<PAGE>
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
SUNBEAM CORPORATION
By: /s/ BOBBY G. JENKINS
Bobby G. Jenkins
Executive Vice President, and
Chief Financial Officer
(Principal Financial Officer)
Dated: May 12, 2000
-35-
<PAGE>
EXHIBIT INDEX
EXHIBIT NO. DESCRIPTION
----------- -----------
10.1 Tenth Amendment to Credit Agreement,
dated as of April 14, 2000 among
Sunbeam Corporation ("Sunbeam"), the
Subsidiary Borrowers referred to
therein, the Lenders party thereto,
Morgan Stanley Senior Funding, Inc.,
Bank of America National Trust and
Savings Association and First Union
National Bank.
10.2 Employment agreement dated as of
January 3, 2000 between Sunbeam and
Jerry W. Levin.
10.3 Employment agreement dated as of
January 3, 2000 between Sunbeam and
Paul E. Shapiro.
10.4 Employment agreement dated as of
January 3, 2000 between Sunbeam and
Bobby G. Jenkins.
27 Financial Data Schedule submitted
electronically to the Securities
and Exchange Commission for
information only and not filed.
EXHIBIT 10.1
AMENDMENT NO. 10 TO CREDIT AGREEMENT
AMENDMENT NO. 10 AND TENTH WAIVER (this "AMENDMENT"), dated as
of April 14, 2000, to and under the Credit Agreement, dated as of March 30, 1998
(as heretofore amended, supplemented or otherwise modified, the "CREDIT
AGREEMENT"), among SUNBEAM CORPORATION (the "PARENT"), 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.
W I T N E S S E T H :
WHEREAS, the Parent, the Subsidiary Borrower, the Lenders and
the Agents are parties to the Credit Agreement;
WHEREAS, the Parent has requested that the Administrative
Agent and the Lenders agree to continue to waive, until April 10, 2001, certain
provisions of the Credit Agreement and, in connection therewith, to amend and
waive certain provisions of the Credit Agreement, all as more fully set forth
below;
WHEREAS, the Administrative Agent and the Lenders are willing
to agree to such requested waivers and amendments, but only upon the terms and
conditions of this Amendment; and
NOW, THEREFORE, in consideration of the premises and for other
good and valuable consideration the receipt of which is hereby acknowledged, the
parties hereto agree as follows:
1 SECTION. DEFINED TERMS; REFERENCES. Unless otherwise
specifically defined herein, each term used herein which is defined in the
Credit Agreement has the meaning assigned to such term in the Credit Agreement.
Each reference to "hereof", "hereunder", "herein" and "hereby" and each other
similar reference and each reference to "this Agreement" and each other similar
reference contained in the Credit Agreement shall, after this Amendment becomes
effective, refer to the Credit Agreement as amended hereby. Except as herein
specifically waived or amended, all terms and provisions of the Credit Agreement
shall remain in full force and effect and shall be performed by the parties
thereto according to its terms and provisions. This Amendment is limited as
specified and shall not constitute a modification, amendment or waiver of any
other provision of the Credit Agreement or any other Loan Document or indicate
the Lenders' willingness to consent to any such other modification, amendment or
waiver of the Credit Agreement or any other Loan Document, including without
limitation, any modification, amendment or waiver for any other date or time
period or in connection with any other transaction.
1 SECTION. DELETION AND ADDITION OF CERTAIN DEFINED TERMS.
Section 1.01 of the Credit Agreement is amended:
(a) to delete in their entirety the defined terms "BUSINESS
PLAN", "ELIGIBLE SUBSIDIARY" and "MANDATORY PREPAYMENT AMOUNT" in such
Section; and
<PAGE>
(b) to add in their appropriate alphabetical order in such
Section the following defined terms:
""BUSINESS PLAN" means (i) in respect of the 2000
fiscal year of the Parent, the business plan for such fiscal
year delivered to the Lenders on February 15, 2000 and (ii) in
respect of each fiscal year of the Parent after the 2000
fiscal year of the Parent, the business plan for such fiscal
year delivered to the Lenders pursuant to Section 5.02(C).
"EASTPAK TRANSACTION" means the sale of substantially
all of the assets of, and the business conducted by, Eastpak
Corporation and its Subsidiaries, pursuant to the VF Purchase
Agreement.
"ELIGIBLE SUBSIDIARY" means Coleman, at any time it
is a Subsidiary.
"FIFTH AMENDMENT FEE" has the meaning assigned to
such term in Section 2.11(d).
"NEW RECEIVABLES CAPITAL INVESTMENT" has the
meaning assigned to the term "Capital Investment" in the New
Receivables Program Purchase Agreement.
"NEW RECEIVABLES PROGRAM" means the accounts
receivable sales program established pursuant to (i) the New
Receivables Program Purchase Agreement and any other documents
(including without limitation, any intercreditor agreement)
executed in connection therewith or pursuant thereto, all in
form and substance satisfactory to the Required Lenders, and
(ii) any other agreements executed and delivered in accordance
with Section 6.09(c)(y).
"NEW RECEIVABLES PROGRAM PURCHASE AGREEMENT" means
the Receivables Purchase Agreement to be entered into by and
among Redwood Receivables Corporation, General Electric
Capital Corporation, Coleman Funding Corporation, Coleman,
Powermate and the Parent, in form and substance satisfactory
to the Required Lenders, as amended, supplemented or otherwise
modified in accordance with Section 6.09(c).
"NEW RECEIVABLES PURCHASE LIMIT" means $95,000,000 or
such other amount designated as the "Maximum Facility
Commitment" pursuant to the New Receivables Program Purchase
Agreement.
"POWERMATE" means Coleman Powermate, Inc., a
Nebraska corporation.
"RESTATEMENT RELATED LITIGATION" means any
litigation, or investigation by any Governmental Authority,
relating to the restatement in October, 1998 of the financial
statements of the Parent and its Consolidated Subsidiaries for
the 1996 and 1997 fiscal years of the Parent and for the
fiscal quarter of the Parent ended March 31, 1998.
3
<PAGE>
"TENTH AMENDMENT EFFECTIVE DATE" means the Amendment
Effective Date under and as defined in Amendment No. 10 and
Tenth Waiver, dated as of April 14, 2000, to and under this
Agreement.
"VF PURCHASE AGREEMENT" the Asset Purchase Agreement,
dated as of March 18, 2000, between VF Corporation and the
Parent, together with any non-material amendments thereof.".
2 SECTION. DEFINITION OF CONSOLIDATED EBITDA. The definition of
"CONSOLIDATED EBITDA" in Section 1.01 of the Credit Agreement is amended:
(a) to replace the word "and" at the end of clause
(ii) in paragraph (2) in such definition with a comma;
(b) to add immediately after clause (iii) in
paragraph (2) in such definition the phrase "and (iv) expenses
on account of Restatement Related Litigation (but deducting
cash disbursements (net of any cash payments received by the
Parent from insurance companies and/or other third parties in
respect of any such expenses) in excess of $12,300,000 on or
after January 1, 2000)";
(c) to replace the period at the end of paragraph (3)
in such definition with the phrase ", PLUS"; and
(d) to add immediately after paragraph (3) in such
definition the following new paragraph (4):
"(4) foreign currency non-cash gains or
losses related to intercompany obligations incurred
prior to January 1, 2000, to the extent included in
consolidated net income in paragraph (1) above.".
3 SECTION. REPAYMENT OF TERM LOANS.
(a) Paragraph (a) of Section 2.09 of the Credit Agreement is
amended to add immediately before the period at the end of such paragraph the
following proviso:
"PROVIDED FURTHER that, effective upon the Tenth
Amendment Effective Date, the date of payment shall be
extended to (x) August 15, 2000 for $69,250,000 of the Term
Loans scheduled to be paid on April 10, 2000 pursuant to the
immediately preceding proviso, (y) November 30, 2000 for
$30,750,000 of the Term Loans scheduled to be paid on April
10, 2000 pursuant to the immediately preceding proviso and (z)
April 10, 2001 for (i) $38,500,000 of the Terms Loan scheduled
to be paid on April 10, 2000 pursuant to the immediately
preceding proviso, (ii) the $66,750,000 installment of the
Tranche A Term Loans scheduled to be paid on each of September
30, 2000 and March 31, 2001 and (iii) the $2,500,000
installment of the Tranche B Term Loans scheduled to be paid
on each of September 30, 2000 and March 31, 2001.".
4
<PAGE>
(b) Paragraph (b)(i) of Section 2.09 of the Credit Agreement
is amended to replace the phrase "to prepay Term Loans (or the Term Commitments
shall be reduced)" in such paragraph with the phrase "to prepay the Loans".
(c) Paragraph (b)(i)(w) of Section 2.09 of the Credit
Agreement is amended in its entirety to read as follows:
"(w) on December 31, 2000 with the amount, if any, by
which the sum of funds on deposit in the Concentration Account
on such date, after giving effect to Section 2.09(d)(ii), PLUS
the aggregate amount of the unused Revolving Commitments on
such date exceeds $185,000,000.".
(d) Paragraph (b)(i)(x) of Section 2.09 of the Credit
Agreement is amended:
(i) to replace the phrase "except as otherwise set
forth in Section 2.09(d)(i)" in such Section with the phrase
"except as otherwise set forth in Sections 2.09(b)(iv) and
(d)(i)";
(ii) to add immediately after the term "Indebtedness
Incurrence" in clause (2) in such paragraph the phrase "or any
issuance of the stock of the Parent or any Subsidiary (other
than any issuance of stock of the Parent pursuant to and in
accordance with stock option plans or other benefit plans or
employment arrangements for management or employees of the
Parent and its Subsidiaries)";
(iii) to add immediately after the term "Existing
Receivables Program" in the proviso in such paragraph the
phrase "and the New Receivables Program"; and
(iv) to replace the reference to "$100,000,000" in
the proviso in such paragraph with a reference to
"$195,000,000".
(e) Paragraph (b)(iv) of Section 2.09 of the Credit Agreement
is amended in its entirety to read as follows:
"(iv) The amount of any repayment of the Loans made
pursuant to clauses (i) and (ii) of this paragraph shall be
applied (A) FIRST, in the direct order of maturity of each
subsequent scheduled repayment of the Term Loans, through and
including the repayment due on November 30, 2000, to be made
by the Borrowers pursuant to paragraph (a) of this Section,
PROVIDED that if (i) the fee payable pursuant to Section
2.11(e) is paid prior to consummation of the Eastpak
Transaction, $8,500,000 of the Net Cash Proceeds of the
Eastpak Transaction shall be applied as a prepayment of the
Revolving Loans (but not reduce the Revolving Commitments or
the Retained Asset Sale Proceeds Amount referred to below),
and (ii) the $69,250,000 amortization payment due on August
15, 2000 is paid prior to consummation of the Eastpak
Transaction, $69,250,000 of the Net Cash Proceeds of the
Eastpak Transaction shall be applied as a prepayment of the
Revolving Loans (but not reduce the Revolving Commitments or
the Retained Asset Sale Proceeds Amount referred to below),
(B) SECOND, to prepay the Revolving Loans (but not reduce the
Revolving Commitments) in an amount
5
<PAGE>
equal to $8,500,000; the amount of any such prepayment of the
Revolving Loans shall create a reserve (the "COMMITMENT
RESERVE") under the Revolving Commitments to be borrowed only
to pay on November 30, 2000 the amount of the Fifth Amendment
Fee due on November 30, 2000 pursuant to Section 2.11(d), (C)
THIRD, in the case of any prepayment of the Loans made
pursuant to clause (i)(x)(1) of this paragraph only, to prepay
an amount of up to $25,000,000 (the "RETAINED ASSET SALE
PROCEEDS AMOUNT") of the Revolving Loans (but not reduce the
Revolving Commitments), (D) FOURTH, in the direct order of
maturity of each scheduled repayment of the Term Loans due
after November 30, 2000 through and including the repayment
due on April 10, 2001, to be made by the Borrowers pursuant to
paragraph (a) of this Section, and (E) FIFTH, to reduce
ratably the amount of all remaining scheduled repayments of
the Term Loans due after April 10, 2001.".
(f) Paragraph (d) of Section 2.09 of the Credit Agreement is
amended (i) to replace the word "and" immediately before the reference to
"(iii)" in such paragraph with a comma and (ii) to add immediately before the
period at the end of such paragraph the phrase "and (iv) as set forth in
Sections 2.09(b)(iv)(B) and (C) above".
4 SECTION. FEES. Section 2.11 of the Credit Agreement is
amended:
(a) to replace in its entirety paragraph (d) in such
Section to read as follows:
"(d) The Parent agrees that on the Fifth
Amendment Effective Date the Lenders shall have
earned a fee (as such fee may be increased pursuant
to this paragraph (d), the "FIFTH AMENDMENT FEE") in
an amount equal to .25% of the Commitments in effect
as of the Fifth Amendment Effective Date; PROVIDED
that on the Tenth Amendment Effective Date, the Fifth
Amendment Fee shall be increased and fully earned in
an amount equal to .50% of the Commitments in effect
as of the Fifth Amendment Effective Date; PROVIDED
FURTHER that (i) on the earlier of (A) November 30,
2000 and (B) the date on which the Commitments shall
have terminated and the principal of and interest on
the Loans and all other amounts payable by the
Obligors under this Agreement and the other Loan
Documents shall have been paid in full, the Parent
shall pay to the Administrative Agent, for the
account of the Lenders, a portion of the Fifth
Amendment Fee equal to .50% of the Commitments in
effect as of the Fifth Amendment Effective Date and
(ii) if the Aggregate Exposure shall not have been
reduced to $1,200,000,000 or less on or before
November 30, 2000, the Fifth Amendment Fee shall be
increased to, and fully earned on such date in, an
amount equal to 1.00% of the Commitments in effect as
of the Fifth Amendment Effective Date and, in such
event, the Parent shall pay to the Administrative
Agent, for the account of the Lenders, on the earlier
of (A) June 30, 2001 and (B) the date on which the
Commitments shall have terminated and the principal
of and interest on the Loans and all other amounts
payable by the Obligors under this Agreement and the
other Loan Documents shall have been paid
6
<PAGE>
in full, the unpaid portion of such increased amount
of the Fifth Amendment Fee."; and
(b) to reletter paragraph (e) in such Section as
paragraph (f) and to add immediately after paragraph (d) in
such Section the following new paragraph (e):
"(e) The Parent further agrees that on the
Tenth Amendment Effective Date the Lenders shall have
earned a fee in an amount equal to .50% of the
Commitments in effect as of the Tenth Amendment
Effective Date, which fee the Parent shall pay to the
Administrative Agent, for the account of the Lenders,
on the earliest of (i) June 30, 2000, (ii) the date
of the consummation of the Eastpak Transaction and
(iii) the date on which the Commitments shall have
terminated and the principal of and interest on the
Loans and all other amounts payable by the Obligors
under this Agreement and the other Loan Documents
shall have been paid in full.".
5 SECTION. CONDITIONS TO EACH CREDIT EVENT. Section 4.04 of the
Credit Agreement is amended to add immediately after paragraph (f) in such
Section the following new paragraph (g):
"(g) From and after the implementation of the New
Receivables Program, at the time of and immediately after
giving effect to such Borrowing, the aggregate New Receivables
Capital Investment shall not be less than 75% of the New
Receivables Purchase Limit, PROVIDED that, if the aggregate
New Receivables Capital Investment is less than 75% of the New
Receivables Purchase Limit at such time, this condition shall
nonetheless be deemed satisfied so long as at the time of and
immediately after giving effect to such Borrowing, no less
than 75% of the aggregate outstanding balance of all accounts
receivable owed to Coleman and Powermate shall be Eligible
Receivables (as defined in the New Receivables Program
Purchase Agreement).".
6 SECTION. FINANCIAL STATEMENTS. Section 5.01 of the Credit
Agreement is amended:
(a) to replace the phrase "within 90 days after the
end of each fiscal year of the Parent," in paragraph (a) in
such Section with the phrase "(i) within 46 days after the end
of each fiscal year of the Parent, its preliminary unaudited
consolidated balance sheet and related statements of
operations, stockholders' equity and cash flows as of the end
of and for such fiscal year and (ii) within 105 days after the
end of each fiscal year of the Parent,";
(b) to replace the reference to "Arthur Andersen LLP"
in paragraph (a) in such Section with a reference to "Deloitte
& Touche LLP";
(c) to replace the reference to "60 days" in
paragraph (b) in such Section with a reference to "45 days";
7
<PAGE>
(d) to replace the reference to "90 days" in the
parenthetical in paragraph (b) in such Section with a
reference to "105 days";
(e) to replace the phrase "under clause (a) or (b)
above and clauses (A) and (J) of Section 5.02" in paragraph
(c) in such Section with the phrase "under clause (a)(ii) or
(b) above and Section 5.02(A)";
(f) to replace the phrase "Sections 6.01 and 6.11
through 6.17" in paragraph (c) in such Section with the phrase
"Sections 6.01 and 6.11 through 6.16"; and
(g) to replace the phrase "under clause (a) above" in
paragraph (d) in such Section with the phrase "under clause
(a)(ii) above".
7 SECTION. ADDITIONAL INFORMATIONAL REQUIREMENTS. Section 5.02
of the Credit Agreement is amended:
(a) to replace the phrase "On or before the last
Business Day of each month" in paragraph (B)(i) in such
Section with the phrase "Within five days after the end of
each month";
(b) to replace the reference to "fifteenth day" in
paragraph (B)(ii) in such Section with a reference to
"twentieth day";
(c) to replace in their entirety paragraphs (C)
through (E) of such Section to read as follows:
"(C) (i) On or before December 31st of each
calendar year, a preliminary Business Plan for the
immediately following fiscal year of the Parent
setting forth for each Strategic Business Unit and on
a consolidated and consolidating basis monthly
forecasted income statements, cash flow statements
and balance sheets, in each case on a preliminary
basis, and (ii) on or before February 22nd of such
fiscal year, a final Business Plan for such fiscal
year setting forth for each Strategic Business Unit
and on a consolidated and consolidating basis monthly
forecasted income statements, cash flow statements
and balance sheets, in each case on a final basis.
(D) On or before January 31st of each
calendar year, projections for the immediately
following two fiscal years of the Parent, on a
preliminary basis, setting forth (1) for each
Strategic Business Unit and on a consolidated basis
projected summaries of net sales and EBITDA and (2)
on a consolidated basis projected cash flow
statements and balance sheets and (ii) on or before
February 28th of each such calendar year, projections
for the immediately following two fiscal years of the
Parent, on a final basis, setting forth (1) for each
Strategic Business Unit and on a consolidated basis
projected summaries of net sales and EBITDA and (2)
on a consolidated basis projected cash flow
statements and balance sheets.
8
<PAGE>
(E)(1) On or before September 30, 2000, the
Parent shall present to the Lenders its written plan
for meeting the amortization payments due on or
before September 30, 2001 and (2) on or before
February 1, 2001, the Parent shall present to the
Lenders its updated written plan, in form and
substance reasonably satisfactory to the Lenders, for
meeting the amortization payments due on or before
September 30, 2001."; and
(d) to replace in their entirety paragraphs (H), (J)
and (K) in such Section with the following new paragraphs (H),
(J) and (K):
"(H) Biweekly, a report summarizing the
status of all Restatement Related Litigation (on or
before the last day of each month, in the case of any
other litigation commenced after the Fifth Amendment
Effective Date if such other litigation involves
potential liability and/or projected costs in excess
of $3,500,000), including all fees and expenses
incurred by the Parent or any of its Subsidiaries to
the extent such amounts have been reported to the
Parent, together with copies of all material
pleadings filed with respect to any Restatement
Related Litigation since the date of the last report
delivered pursuant to this paragraph (H).
(J)(1) Biweekly until the termination of the
transitional arrangements contemplated by the VF
Purchase Agreement, a report summarizing the status
of the developments and efforts of the Parent and its
Subsidiaries in relation to the Eastpak Transaction,
and (2) on or before the last day of each month, a
report summarizing (x) the status of any efforts of
the Parent to explore strategic alternatives for any
of its Strategic Business Units and (y) developments
in connection with, and Investments in, Thalia
Products, Inc.
(K)45 days after the end of each fiscal
quarter, beginning with the fiscal quarter ended
March 31, 2000, (1) projections for the four fiscal
quarters immediately following the fiscal quarter
then ended, setting forth on a consolidated basis
quarterly forecasted income statements, cash flow
statements and balance sheets and (2) a report of key
strategic initiatives, together with a timetable with
respect to the implementation of such initiatives
during the period of the four fiscal quarters
immediately following the fiscal quarter then
ended.".
8 SECTION. INDEBTEDNESS. Section 6.01 of the Credit Agreement is
amended:
(a) to replace paragraph (c) in such Section in its
entirety to read as follows:
"(c) (i) Indebtedness of the Parent to any
Subsidiary and of any Subsidiary Guarantor to the
Parent or any Subsidiary, (ii) Indebtedness existing
on the Tenth Amendment Effective Date of the Parent
to any Subsidiary and of any Subsidiary to the Parent
or any other Subsidiary, (iii) Indebtedness of any
Subsidiary organized under the laws of any
jurisdiction outside the United States to any other
Subsidiary organized under the laws of any
9
<PAGE>
jurisdiction outside the United States, (iv)
Indebtedness of any Subsidiary organized under the
laws of any jurisdiction outside the United States to
the Parent or any Subsidiary Guarantor in an
aggregate amount not to exceed $5,000,000 for all
such Subsidiaries at any time outstanding, (v)
Indebtedness of Thalia Products, Inc. to the Parent
or any Subsidiary Guarantor, (vi) Indebtedness of any
Inactive Subsidiary to the Parent or any Subsidiary
in respect of environmental remediation, litigation
and product liability issues and (vii) Indebtedness
of any Inactive Subsidiary to the Parent or any
Subsidiary (exclusive of Indebtedness permitted under
clause (vi) of this paragraph) in an amount not to
exceed $100,000 at any time outstanding;";
(b) to replace the reference to "$40,000,000" in
paragraph (g) in such Section with a reference to
"$50,000,000"; and
(c) to replace paragraph (h) in such Section in its
entirety to read as follows:
"(h) other unsecured Indebtedness in an
aggregate principal amount not exceeding $5,000,000
at any time outstanding.".
9 SECTION. LIENS. Paragraph (f) of Section 6.02 of the Credit
Agreement is amended to add immediately before the semicolon at the end of such
paragraph the phrase "and the New Receivables Program".
10 SECTION. FUNDAMENTAL CHANGES; ASSET SALES. Paragraph (c) of
Section 6.03 of the Credit Agreement is amended:
(a) to add immediately after the reference to "the
Existing Receivables Program" in such paragraph the phrase "or
the New Receivables Program";
(b) to replace the word "and" immediately preceding
the reference to "(ii)" in clause (y) in the proviso in such
paragraph with a comma; and
(c) to amend in its entirety clause (y)(ii) in the
proviso in such paragraph to read as follows: "(ii) other
Asset Sales the fair market value of which does not exceed
$5,000,000 in the aggregate for any such Asset Sale or series
of related Asset Sales and (iii) Asset Sales of Non-Core
Assets".
11 SECTION. INVESTMENTS, LOANS, ADVANCES, GUARANTEES AND
ACQUISITIONS. Section 6.04 of the Credit Agreement is amended:
(a) to replace the reference to "Material
Subsidiaries" in the introductory clause in such Section with
a reference to "Subsidiaries";
(b) to replace paragraph (c) in such Section in its
entirety to read as follows:
10
<PAGE>
"(c) loans or advances (i) made by the
Parent to any Material Subsidiary and made by any
Subsidiary to the Parent or any Material Subsidiary,
(ii) existing on the Tenth Amendment Effective Date
made by the Parent to any Subsidiary and made by any
Subsidiary to the Parent or any other Subsidiary and
(iii) constituting Indebtedness permitted under
Sections 6.01(c);";
(c) to add immediately before the semicolon at the
end of paragraph (d) in such Section the phrase "and any
Guarantee by the Parent of the performance of any Subsidiary
pursuant to the New Receivables Program"; and
(d) to add immediately before the semicolon at the
end of paragraph (f) in such Section the phrase "and capital
contributions, or deemed capital contributions, by Coleman or
Powermate in Coleman Asset Diversification, Inc. pursuant to
the New Receivables Program".
12 SECTION. RESTRICTED PAYMENTS; VOLUNTARY PAYMENTS. Paragraph
(b) of Section 6.06 of the Credit Agreement is amended to add immediately before
the period at the end of such paragraph the following: "or (iii) make any
payment in respect of the Existing Insurance Loans or the Additional Insurance
Loans (each such term as defined in the Seventh Waiver and Consent, dated as of
March 27, 2000, under this Agreement) other than from the proceeds of the
benefits payable under the applicable insurance policies pursuant to which the
Existing Insurance Loans and Additional Insurance Loans were made".
13 SECTION. MODIFICATION OF CERTAIN DOCUMENTS. Section 6.09 of
the Credit Agreement is amended to add immediately after paragraph (b) of such
Section the following new paragraph (c):
"(c) From and after the Tenth Amendment Effective
Date, without the consent of the Required Lenders, (x) the
Parent will not, and will not permit any of its Subsidiaries
to, consent to or solicit or enter into any amendment or
supplement to, or any waiver or other modification of, the New
Receivables Program Purchase Agreement, any document executed
in connection therewith or pursuant thereto or any receivables
sale agreements of the type described in clause (y) below if
such amendment, supplement, waiver or other modification (i)
would result in a reduction of the New Receivables Purchase
Limit or (ii) would otherwise reduce the financing available
to the Parent or any of its Subsidiaries pursuant to the New
Receivables Program or have an adverse effect on the interests
of the Lenders or the Administrative Agent and (y) the Parent
will not, and will not permit any of its Subsidiaries to,
enter into any receivables sale agreement relating to the New
Receivables Program other than a receivables sale agreement
intended to provide for the inclusion of certain accounts
receivable of the Parent or such Subsidiary in the New
Receivables Program, which receivables sale agreement shall be
in form and substance reasonably satisfactory to the Required
Lenders.".
14 SECTION. CAPITAL EXPENDITURES. Section 6.11 is amended to
replace in its entirety the last paragraph in such Section with the following
new paragraph:
11
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"Notwithstanding the foregoing, Consolidated Capital
Expenditures at any time during each of the periods set forth
below will not exceed the amount set forth below opposite such
period:
PERIOD AMOUNT
January 1, 2000 - June 30, 2000 $50,000,000
January 1, 2000 - September 30, 2000 $70,000,000
January 1, 2000 - December 31, 2000 $83,000,000
January 1, 2000 - March 31, 2001 $100,000,000".
1 SECTION. CONSOLIDATED EBITDA. Section 6.15 is amended in its
entirety to read as follows:
"SECTION 6.15. CONSOLIDATED EBITDA. At the last day
of each calendar month set forth below, Consolidated EBITDA
(excluding bank amendment expenditures and expenditures for
the Lenders' advisors, in each case to the extent deducted in
determining Consolidated EBITDA) for the period from January
1, 2000 through the last day of such month will not be less
than the amount set forth below opposite such month:
MONTH CONSOLIDATED EBITDA
April, 2000 $35,800,000
May, 2000 $53,800,000
June, 2000 $69,500,000
July, 2000 $86,000,000
August, 2000 $104,400,000
September, 2000 $128,300,000
12
<PAGE>
MONTH CONSOLIDATED EBITDA
October, 2000 $149,900,000
November, 2000 $173,500,000
December, 2000 $186,400,000
January, 2001 $186,300,000
February, 2001 $186,700,000
March, 2001 $213,600,000".
1 SECTION. RECEIVABLES PROGRAM. Section 6.21 is amended in its
entirety to read as follows:
"SECTION 6.21. RECEIVABLES PROGRAMS. The Parent
will not, and will not permit any Subsidiary to, fail (a)(i)
to maintain the Existing Receivables Program, and comply with
the terms and provisions of such program, unless within 60
days after termination thereof, the Existing Receivables
Program is replaced with an alternative accounts receivables
program, which shall be on terms and conditions, and provide
an amount of financing, reasonably satisfactory to the
Required Lenders and (ii) from and after the implementation
thereof, to maintain the New Receivables Program, and comply
with the terms and provisions of such program, unless prior to
any termination thereof, a replacement program on terms and
conditions, and providing for an amount of financing,
reasonably satisfactory to the Required Lenders is implemented
and (b) to use their respective reasonable best efforts to
maximize the aggregate Capital Investment up to the
Receivables Purchase Limit and to maximize the aggregate New
Receivables Capital Investment up to the New Receivables
Purchase Limit.".
2 SECTION. ADDITIONAL NEGATIVE COVENANT. Article 6 of the Credit
Agreement is amended to add immediately after Section 6.21 the following new
Section 6.22:
"SECTION 6.22. EASTPAK TRANSACTION. The Parent
will not, and will not permit any Subsidiary to, fail to use
their respective reasonable best efforts to consummate the
Eastpak Transaction and, in connection therewith, the Parent
shall, and shall cause its Subsidiaries to, provide such
information as reasonably
13
<PAGE>
requested by the Administrative Agent or the Lenders to review
and discuss such efforts.".
3 SECTION. REPLACEMENT OF SCHEDULES AND NEW EXHIBIT. The Credit
Agreement is amended to replace Schedule 3.01(a) (Material Domestic
Subsidiaries), Schedule 3.01(b) (Material Foreign Subsidiaries) and Schedule A
(Strategic Business Units) thereto with new Schedules in the forms attached to
this Amendment as Exhibits A, B and C, respectively.
4 SECTION. WAIVER WITH RESPECT TO FINANCIAL STATEMENTS. The
Lenders hereby waive, until May 1, 2000, any Default or Event of Default by
reason of the failure of the Parent to comply with the requirement of Section
5.01(a) (FINANCIAL STATEMENTS AND OTHER INFORMATION) of the Credit Agreement,
after giving effect to the Eighth Waiver, dated as of March 30, 2000 under the
Credit Agreement, to deliver to the Administrative Agent on or before April 14,
2000 the financial statements set forth in such Section.
5 SECTION. WAIVER TO PERMIT EASTPAK TRANSACTION. The Lenders
hereby waive Section 6.03 (FUNDAMENTAL CHANGES; ASSET SALES) of the Credit
Agreement (after giving effect to this Amendment) solely to the extent necessary
to permit the Parent to consummate the Eastpak Transaction pursuant to the VF
Purchase Agreement; PROVIDED that the foregoing waiver is conditioned upon the
VF Purchase Agreement not having been amended or modified in any material
respect or in any manner that could reasonably be expected to have an adverse
effect on the Lenders, in either case without the prior written consent of the
Required Lenders. Notwithstanding anything to the contrary contained in Section
2.09(b)(iv) of the Credit Agreement (after giving effect to this Amendment) the
Net Cash Proceeds of the Eastpak Transaction shall be applied FIRST, to pay in
full the fee payable from such Net Cash Proceeds, unless previously paid,
pursuant to Section 2.11(e) of the Credit Agreement and SECOND, to the Term
Loans in accordance with Section 2.09(b)(iv) of the Credit Agreement, PROVIDED,
HOWEVER, the Parent may apply any post-closing adjustments to be paid to the
Parent pursuant to the VF Purchase Agreement to repay the Revolving Loans (but
not reduce the Revolving Commitments).
6 SECTION. WAIVERS OF FINANCIAL STATEMENT DELIVERY, HEDGING
OBLIGATIONS, FINANCIAL COVENANTS AND REPRESENTATIONS.
(a) The Lenders hereby waive, until April 10, 2001, any Default or
Event of Default arising by reason of the representations and warranties
contained in Sections 3.04 (FINANCIAL CONDITION; NO MATERIAL ADVERSE Change),
3.06 (LITIGATION AND ENVIRONMENTAL MATTERS) and 3.07 (COMPLIANCE WITH LAWS AND
AGREEMENTS) of the Credit Agreement to have proven to have been materially
incorrect when made or deemed made at any time prior to the Fifth Amendment
Effective Date.
(b) The Lenders hereby waive, until April 10, 2001, any Default or
Event of Default arising by reason of the representation and warranty contained
in Section 3.11 (DISCLOSURE) of the Credit Agreement to have proven to have been
materially incorrect when made or deemed made at any time prior to the Fifth
Amendment Effective Date; PROVIDED that such waiver is conditioned upon the
representation and warranty contained in the second sentence of such Section
3.11 on and after the Fifth Amendment Effective Date to be true and correct (for
purposes of Section 4.04(b), and not materially incorrect, for purposes of
paragraph (c) of Article 7) in respect of all reports, financial statements,
certificates or other information (taken as a
14
<PAGE>
whole) furnished on or after September 30, 1998 by or on behalf of any Obligor
to the Administrative Agent or any Lender.
(c) The Lenders hereby waive, until April 10, 2001, (i) any Default or
Event of Default arising by reason of the representation and warranty contained
in Section 3.04(c) or Section 3.14 (ACQUISITION DOCUMENTS) of the Credit
Agreement to have proven to have been materially incorrect when made or deemed
made and (ii) the condition under Section 4.04(b) that each representation and
warranty referenced in clause (i) be true and correct when made or deemed made.
(d) The Lenders hereby waive, until April 10, 2001, any Default or
Event of Default arising by reason of the failure by the Parent to comply with
Section 5.10 (APPROVED HEDGING AGREEMENTS) of the Credit Agreement.
(e) The Lenders hereby waive, until April 10, 2001, (i) the Events of
Default arising by reason of the failure by the Parent to comply with Section
6.12 (LEVERAGE RATIO), Section 6.13 (INTEREST COVERAGE RATIO) and Section 6.14
(FIXED CHARGE COVERAGE RATIO) of the Credit Agreement at the last day of the
fiscal quarters of the Parent ending during the period on and after June 30,
1998 through and including December 31, 1999 and (ii) any Event of Default
arising by reason of any failure by the Parent to comply with Section 6.12
(LEVERAGE RATIO), Section 6.13 (INTEREST COVERAGE RATIO) and Section 6.14 (FIXED
CHARGE COVERAGE RATIO) of the Credit Agreement at the last day of any fiscal
quarter of the Parent during the 2000 fiscal year of the Parent and at the last
day of the fiscal quarter of the Parent ending March 31, 2001.
(f) The Lenders hereby waive, until April 10, 2001, any Default or
Event of Default that existed on June 30, 1998. This waiver shall not constitute
a waiver of any Default or Event of Default existing on or after July 1, 1998
after giving effect to this Amendment.
7 SECTION. GOVERNING LAW. This Amendment shall be governed by and
construed in accordance with the laws of the State of New York.
8 SECTION. COUNTERPARTS. This Amendment may be signed in any number of
counterparts, each of which shall be an original, with the same effect as if the
signatures thereto and hereto were upon the same instrument.
9 SECTION. REPRESENTATIONS AND WARRANTIES; NO DEFAULT. After giving
effect to this Amendment, the Parent and the Subsidiary Borrower (to the extent
applicable to it thereunder) hereby represent and warrant that all
representations and warranties contained in the Credit Agreement are true and
correct on and as of the Amendment Effective Date (unless stated to relate to a
specific earlier date, in which case, such representations and warranties shall
be true and correct as of such earlier date) and that no Default or Event of
Default shall have occurred and be continuing or would result from the execution
and delivery of this Amendment.
10 SECTION. EFFECTIVENESS. This Amendment shall become effective on the
date (the "AMENDMENT EFFECTIVE DATE") on which:
(a) the Administrative Agent shall have received from each of the
Parent, the Subsidiary Borrower and the Lenders, a counterpart hereof signed by
such party or facsimile or
15
<PAGE>
other written confirmation (in form satisfactory to the Administrative Agent)
that such party has signed a counterpart hereof;
(b) the Administrative Agent shall have received such documents and
certificates as the Administrative Agent or its counsel may reasonably request
relating to the organization, existence and good standing of the Parent, the
authorization of the transactions contemplated by this Amendment and any other
legal matters relating to any of the foregoing, all in form and substance
satisfactory to the Administrative Agent and its counsel;
(c) the Lenders shall be (and by their execution hereof, hereby confirm
that they are) satisfied with (a) all of their legal, regulatory and financial
due diligence and (b) the cash flow and other projections and other financial
information provided by the Parent for the period through March 31, 2001; and
(d) the Administrative Agent shall have received payment of all fees
and other amounts due and payable pursuant to the Credit Agreement, including
reimbursement or payment of all out-of-pocket expenses of the Administrative
Agent and the Lenders invoiced to the Parent and required to be reimbursed or
paid by the Parent under the Credit Agreement.
16
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this
Amendment to be duly executed as of the date first above written.
SUNBEAM CORPORATION
By__________________________________________
Name:
Title:
THE COLEMAN COMPANY, INC.
By__________________________________________
Name:
Title:
MORGAN STANLEY SENIOR FUNDING, INC.,
individually and as Syndication Agent
By__________________________________________
Name:
Title:
BANK OF AMERICA, N.A.,
individually and as Documentation Agent
By__________________________________________
Name:
Title:
FIRST UNION NATIONAL BANK,
individually and as Administrative Agent
By__________________________________________
Name:
Title:
17
EXHIBIT 10.2
EMPLOYMENT AGREEMENT
AGREEMENT, made and entered into as of the Effective Date by and
between Sunbeam Corporation, a Delaware corporation (together with its
successors and assigns permitted under this Agreement, the "Company"), and Jerry
W. Levin (the "Executive").
W I T N E S S E T H :
- - - - - - - - - -
WHEREAS, the Executive currently serves the Company as Chairman of its
Board of Directors and Chief Executive Officer pursuant to an employment
agreement dated August 12, 1998 (the "1998 Agreement");
WHEREAS, the Company wishes that the Executive continue to serve as
Chairman of its Board of Directors and Chief Executive Officer for the period
through June 30, 2003 and the Executive is willing to so serve;
WHEREAS, the Company and the Executive desire to enter into an
agreement embodying the terms of such continued employment (the "Agreement");
NOW, THEREFORE, in consideration of the premises and mutual covenants
contained herein and for other good and valuable consideration, the receipt of
which is mutually acknowledged, the Company and the Executive (individually a
"Party" and together the "Parties") agree as follows:
1. DEFINITIONS.
(a) "Affiliate" of a person or other entity shall mean a person or
other entity that directly or indirectly controls, is controlled by, or is under
common control with the person or other entity specified.
(b) "Base Salary" shall mean the salary provided for in Section 4 below
or any increased salary granted to the Executive pursuant to Section 4.
(c) "Board" shall mean the Board of Directors of the Company.
(d) "Cause" shall mean:
(i) the Executive is convicted of a felony or of any crime
involving moral turpitude;
(ii) the Executive is guilty of willful gross neglect or
willful gross misconduct in carrying out his duties under this Agreement,
resulting, in either case, in material economic
<PAGE>
harm to the Company unless the Executive acted, or failed to act, in a good
faith belief that such act or failure to act was in, or not contrary to, the
best interests of the Company.
(e) A "Change in Control" shall mean the occurrence of any one of the
following events:
(i) any "person" (as such term is used in Sections 3(a)(9) and
13(d) of the Securities Exchange Act of 1934, but excluding a person who owns
more than 10% of the outstanding shares of the Company as of the date of this
Agreement), becomes a "beneficial owner" (as such term is used in Rule 13d-3
promulgated under that Act), of 25% or more of the Voting Stock of the Company;
(ii) the majority of the Board consists of individuals other
than Incumbent Directors, which term means the members of the Board on the date
of this Agreement; provided that any person becoming a director subsequent to
such date whose election or nomination for election was supported by two-thirds
of the directors who then comprised the Incumbent Directors shall be considered
to be an Incumbent Director;
(iii) the Company adopts any plan of liquidation providing for
the distribution of all or substantially all of its assets;
(iv) all or substantially all of the assets or business of the
Company is disposed of pursuant to a merger, consolidation or other transaction
(unless the shareholders of the Company immediately prior to such merger,
consolidation or other transaction beneficially own, directly or indirectly, in
substantially the same proportion as they owned the Voting Stock of the Company,
all of the Voting Stock or other ownership interests of the entity or entities,
if any, that succeed to the business of the Company); or
(v) the Company combines with another company and is the
surviving corporation but, immediately after the combination, the shareholders
of the Company immediately prior to the combination hold, directly or
indirectly, 50% or less of the Voting Stock of the combined company (there being
excluded from the number of shares held by such shareholders, but not from the
Voting Stock of the combined company, any shares received by Affiliates of such
other company in exchange for stock of such other company).
For purposes of the Change in Control definition, "the Company" shall
include any entity that succeeds to all or substantially all of the business of
the Company, and "Voting Stock" shall mean capital stock of any class or classes
having general voting power, in the absence of specified contingencies, to elect
the directors of a corporation.
(f) "Constructive Termination Without Cause" shall mean termination by
the Executive of his employment at his initiative within 30 days following the
occurrence of any of the following events without his consent:
2
<PAGE>
(i) a reduction in the Executive's then current Base Salary or
target bonus opportunity as a percentage of Base Salary;
(ii) the taking of any other action by the Company that would
diminish the incentive opportunities of the Executive as provided hereunder,
including eliminating an incentive plan without providing a substitute or
reducing his awards under such a plan.
(iii) the taking of any action by the Company that would
significantly diminish the aggregate value of the benefits provided to the
Executive under the Company's medical, health, accident, disability, life
insurance, thrift and retirement plans;
(iv) the failure to elect or reelect the Executive to any of
the positions described in Section 3 below or removal of him from any such
position;
(v) the failure of the Company's shareholders to approve
either any amendment required to the Company's Management Incentive Plan or the
January 3, 2000 option grant necessary in order to grant the Executive all the
benefits to which he is entitled hereunder;
(vi) a material diminution in the Executive's duties;
(vii) a change in the reporting structure so that the
Executive reports to someone other than as provided in the Agreement;
(viii) relocation of the Executive's principal place of
employment to a location other than Palm Beach County, or North Broward County,
Florida or New York City;
(ix) a material breach by the Company of any provision of the
Agreement;
(x) any purported termination of the Executive's employment
that is not effected pursuant to Section 11(b) due to Disability, Section 11(c)
for Cause or Section 11(d) without Cause;
(xi) the failure of the Company to obtain the assumption in
writing of its obligation to perform this Agreement by any successor to all or
substantially all of the assets of the Company within 15 days after a merger,
consolidation, sale or similar transaction, provided that, in the event of a
Change in Control as provided in subclause (xii) below, the Executive shall be
entitled to give notice of a Constructive Termination even if a successor has
assumed this Agreement, or
(xii) the occurrence of a Change in Control.
3
<PAGE>
Following written notice from the Executive of any of the events described
above, the Company shall have 20 calendar days in which to cure. If the Company
fails to cure, the Executive's termination shall become effective on the 30th
calendar day following the written notice.
(g) "Disability" shall mean the Executive's inability, due to physical
or mental incapacity, to substantially perform his duties and responsibilities
under this Agreement for a period of six consecutive months as determined by a
medical doctor selected by the Company and the Executive. If the Parties cannot
agree on a medical doctor, each Party shall select a medical doctor and the two
doctors shall select a third who shall be the approved medical doctor for this
purpose.
(h) "Effective Date" shall be January 3, 2000.
(i) "Fair Market Value" per share on any given date shall mean the
average of the high and low prices of a share of Stock on such date (or if the
Stock is not traded on such date on the most recent trading day prior thereto)
on the principal securities exchange or national market system, including
without limitation the NASDAQ National Market, on which such Stock is at the
time listed, or if such Stock is not so listed, but is regularly quoted by a
recognized securities dealer, the mean between the high bid and low asked prices
for the Stock on such date (or on the most recent trading day on which the Stock
is quoted).
(j) "Pro Rata" shall mean a fraction, the numerator of which is the
number of days that the Executive was employed in the applicable performance
period (a calendar year in the case of an annual bonus and a performance cycle
in the case of an award under the Long-Term Incentive Plan) and the denominator
of which shall be the number of days in the applicable performance period.
(k) "Stock" shall mean the common stock of the Company.
(l) "Term of Employment" shall mean the period specified in Section 2
below (including any extension as provided therein).
2. TERM OF EMPLOYMENT.
The Term of Employment shall begin as of the Effective Date, and shall
extend until June 30, 2003, with automatic one-year renewals thereafter unless
either Party notifies the other at least 12 months before the scheduled
expiration date that the term is not to renew. Notwithstanding the foregoing,
the Term of Employment shall be earlier terminated if either Party terminates
the Executive's employment hereunder in accordance with the provisions of
Section 11, in which case the Term of Employment shall terminate on the date
such termination of employment is effective.
4
<PAGE>
3. POSITION, DUTIES AND RESPONSIBILITIES.
(a) The Executive shall continue to serve as the Chairman of the Board
and Chief Executive Officer of the Company and be responsible for the general
management of the affairs of the Company. It is the intention of the parties
that the Executive shall continue to be elected a member of the Board to serve
during the Term of Employment and that the Board shall continue to designate the
Executive as its Chairman. The Executive, in carrying out his duties under this
Agreement, shall report to the Board. During the Term of Employment, the
Executive shall devote substantially all of his business time and attention to
the business and affairs of the Company and shall use his best efforts, skills
and abilities to promote its interests.
(b) Nothing herein shall preclude the Executive from (i) serving on the
boards of directors of a reasonable number of other corporations with the
concurrence of the Board (which concurrence shall not be unreasonably withheld),
(ii) serving on the boards of a reasonable number of trade associations and/or
charitable organizations, (iii) engaging in charitable activities and community
affairs, and (iv) managing his personal investments and affairs, provided that
such activities set forth in this Section 3(b) do not conflict or materially
interfere with the effective discharge of his duties and responsibilities under
Section 3(a).
4. BASE SALARY.
The Executive shall be paid an annualized Base Salary, payable in
accordance with the regular payroll practices of the Company, of $1,150,000 per
year; increasing to $1,300,000 per year, effective July 1, 2000; increasing to
$1,450,000 per year effective July 1, 2001; and increasing to $1,600,000 per
year, effective July 1, 2002. The Base Salary shall be reviewed periodically for
any further increase in the sole discretion of the Board.
5. ANNUAL INCENTIVE AWARD.
During the Term of Employment, commencing in 2000 the Executive shall
have a target bonus opportunity each year equal to 125% of Base Salary, payable
in that amount if the performance goals established for the relevant year are
met. If such performance goals are exceeded, the Executive shall receive a
larger amount of up to 250% of Base Salary and if such performance goals are not
met, the Executive shall receive a lesser amount (or nothing), as determined in
accordance with the Company's Management Incentive Plan (or any successor annual
incentive plan). The Executive shall be paid his annual incentive awards no
later than the date other senior executives of the Company are paid their annual
incentive awards and in no event later than 60 days following the last day of
the fiscal year to which the annual incentive award is being paid.
6. RE-SIGNING ARRANGEMENTS.
(a) CASH RE-SIGNING BONUS. The Company shall pay the Executive the
following amounts on the dates indicated:
5
<PAGE>
- $500,000 on July 1, 2000
- $500,000 on July 1, 2001
- $500,000 on July 1, 2002
(b) STOCK OPTION GRANT. As of January 3, 2000 the Company shall have
granted, subject to the approval of such grant by the Company's stockholders at
the annual stockholders' meeting held in 2000, the Executive a stock option, in
the form attached hereto as Exhibit A, to purchase 3 million shares of Stock.
7. EMPLOYEE BENEFIT PROGRAMS.
During the Term of Employment, the Executive shall be entitled to
participate in any employee pension and welfare benefit plans and programs made
available to the Company's senior level executives or to its employees
generally, as such plans or programs may be in effect from time to time,
including, without limitation, pension, profit sharing, savings and other
retirement plans or programs, 401(k), medical, dental, hospitalization,
short-term and long-term disability and life insurance plans, accidental death
and dismemberment protection, travel accident insurance, and any other pension
or retirement plans or programs and any other employee welfare benefit plans or
programs that may be sponsored by the Company from time to time, including any
plans that supplement the above-listed types of plans or programs, whether
funded or unfunded. The Executive's participation shall be based on, and the
calculation of all benefits shall be based on, the assumptions that the
Executive has met all service-period or other requirements for such
participation. The Executive shall be entitled to four weeks paid vacation per
year of employment, which shall accrue and otherwise be subject to the Company's
vacation policy for senior executives.
8. PERQUISITES.
The Executive shall be entitled to perquisites on the same basis as
provided to other senior level executives and, in any event, shall be entitled
to the following:
(a) Company-provided automobile (late-model top-of-the-line), including
reimbursement of expenses of operation, maintenance and insurance;
(b) Expenses of one country club;
(c) Residential security system;
(d) Reimbursement for reasonable financial planning, tax preparation
and estate planning fees. During the Term of Employment, the Company shall
maintain, and pay the premiums on, portable term insurance on the life of the
Executive in an amount no less than four times the Executive's Base Salary, from
time to time, the proceeds of which shall be payable to such beneficiary or
beneficiaries as the Executive specifies.
6
<PAGE>
9. AIRCRAFT TRAVEL.
For security purposes, the Executive shall be required to use at
Company expense private aircraft for travel in North America. Outside North
America he shall be entitled to first class air travel.
10. REIMBURSEMENT OF BUSINESS AND OTHER EXPENSES.
The Executive is authorized to incur reasonable expenses in carrying
out his duties and responsibilities under this Agreement and the Company shall
promptly reimburse him for all reasonable business expenses incurred in
connection with carrying out the business of the Company, subject to
documentation in accordance with the Company's policy. The Company shall pay all
legal fees and expenses incurred by the Executive in connection with the
negotiation of the Executive's employment arrangements with the Company.
11. TERMINATION OF EMPLOYMENT.
(a) TERMINATION DUE TO DEATH. In the event that the Executive's
employment is terminated due to his death, his estate or his beneficiaries, as
the case may be, shall be entitled to the following:
(i) a lump sum payment equal to 60% of Base Salary that would
be payable for a period which is the greater of (A) 12 months or (B) the
remaining term of the Employment Agreement (without regard to early termination
thereof);
(ii) a lump sum payment equal to 60% of all re-signing bonus
amounts not previously paid;
(iii) a Pro-Rata Annual Incentive Award for the year in which
the Executive's death occurs based on the target bonus for the year of
termination, payable when bonuses are paid to other officers;
(iv) full vesting and exercisability of all outstanding
options which shall remain exercisable through the end of their originally
scheduled term; and
(v) for Executive's spouse and eligible dependents, continued
participation in all medical, dental, vision and hospitalization insurance plans
in which they were participating at the time of Executive's death, with
continuation in all such plans for his spouse until she reaches age 65.
(b) TERMINATION DUE TO DISABILITY. In the event that the Executive's
employment is terminated by either Party hereto due to the Executive's
Disability, he shall be entitled to the following:
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(i) Disability benefits provided in accordance with the
long-term disability program in effect for senior executives at the Company;
provided, however, in no event shall such benefits provide the Executive less
than 60% of his then Base Salary to age 65;
(ii) Base Salary through the end of the month in which
Disability benefits commence;
(iii) a lump sum payment equal to 60% of all re-signing bonus
amounts not previously paid;
(iv) a Pro-Rata Annual Incentive Award for the year in which
termination due to Disability occurs based on the target bonus for the year of
termination, payable when bonuses are paid to other officers;
(v) full vesting and exercisability of all outstanding options
which shall remain exercisable through the end of their originally scheduled
term; and
(vi) for the Executive, his spouse and his eligible
dependents, continued participation in all medical, dental, vision and
hospitalization insurance plans in which they were participating at the time of
the Executive's termination, with continuation in all such plans for the
Executive and his spouse until he and his spouse reach age 65 respectively and
for the Executive, continued participation in other employee benefit plans or
programs in which he was participating on the date of the termination of his
employment for a period of 24 months following termination of employment
provided that if the Company's plans do not permit continuation of the
Executive's participation following his termination, the Company shall provide
the Executive with an amount which, after taxes, is sufficient for him to
purchase equivalent benefits.
In no event shall a termination of the Executive's employment for
Disability occur until the Party terminating his employment gives written notice
to the other Party in accordance with Section 22 below.
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(c) TERMINATION BY THE COMPANY FOR CAUSE.
(i) A termination for Cause shall not take effect unless the
provisions of this subclause (i) are complied with. The Executive shall be given
written notice by the Board of the intention to terminate him for Cause, such
notice (A) to state in detail the particular act or acts or failure or failures
to act that constitute the grounds on which the proposed termination for Cause
is based and (B) to be given within 60 days of the Board learning of such act or
acts or failure or failures to act. In the event the proposed termination is
based on subclause (ii) of Section 1(d) above, the Executive shall have ten
calendar days after the date that such written notice has been given to the
Executive in which to cure such conduct. If he fails to cure such conduct, the
Executive shall then be entitled to a hearing before the Board, and, thereafter,
upon a determination by affirmative vote of no fewer than three-quarters of the
members of the Board that Cause exists he shall be terminated for Cause.
(ii) In the event the Company terminates the Executive's
employment for Cause:
(A) he shall be entitled to Base Salary through the
date of the termination; and
(B) all outstanding options which are not then
exercisable shall be forfeited; exercisable options shall remain exercisable
until the earlier of the ninetieth day after the date of termination or the
originally scheduled expiration date of the options.
(d) TERMINATION WITHOUT CAUSE, CONSTRUCTIVE TERMINATION WITHOUT CAUSE
OR NON-RENEWAL BY THE Company.
In the event the Executive's employment is terminated by the Company
without Cause, other than due to Disability or death, there is a Constructive
Termination without Cause or the Company gives notice of non-renewal pursuant to
Section 2 above, the Executive shall be entitled to the following benefits:
(i) Base Salary through the date of termination;
(ii) all re-signing bonus amounts not previously paid;
(iii) pro-rata Annual Incentive Award for the year of
termination, award based on the target bonus for such year, payable promptly
following such termination;
(iv) a lump sum payment in an amount equal to the greater of
(A) the Executive's Base Salary for the remainder of the term (without regard to
early termination thereof), multiplied by the applicable target bonus
opportunity percentage or (B) two times the Executive's Base Salary, determined
as provided in the last paragraph of this Section 11(d), payable promptly
following such termination;
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(v) a lump sum payment in an amount equal to the greater of
(A) the Executive's Base Salary for the remainder of the term (without regard to
early termination thereof), multiplied by the applicable target bonus
opportunity percentage or (B) two times the Executive's Annual Incentive Award,
based on the target bonus for the year of termination, payable promptly
following such termination;
(vi) all outstanding options shall become fully vested and
exercisable and shall remain exercisable through the end of their originally
scheduled term; and
(vii) for the Executive, his spouse and his eligible
dependents, continued participation in all medical, dental, vision and
hospitalization insurance plans in which they were participating at the time of
the Executive's termination, with continuation in all such plans for the
Executive and his spouse until he and his spouse reach age 65 respectively and
for the Executive, continued participation in all other employee and
senior-level executive benefit plans or programs in which he was participating
on the date of the termination of his employment for a period equal to the
greater of (A) the remainder of the term or (B) 24 months following termination
of employment; provided, however, that if the Executive becomes re-employed with
another employer and is eligible to receive medical or other welfare benefits
under another employer-provided plan, the medical and other welfare benefits
described above shall be secondary to those provided under such other plan
during such applicable period of eligibility.
In the event the Company's plans do not permit continuation of the Executive's
participation following his termination, the Company shall provide the Executive
with an amount which, after taxes, is sufficient for him to purchase equivalent
benefits.
For purposes of Section 11(d)(iv) and (v) above, Base Salary shall be
determined by the Base Salary at the annualized rate in effect on the date of
termination of the Executive's employment (subject to the last sentence of this
paragraph) adjusted for any scheduled increase pursuant to Section 4 above. Such
adjustment shall be made as follows: the aggregate scheduled remaining salary
payments for the remaining Term of Employment (without regard to early
termination thereof) shall be divided by the remaining months of the Term of
Employment (without regard to early termination thereof) and the resulting
monthly rate shall be multiplied by 12. For purposes of the first sentence of
this paragraph, if, prior to the termination of the Executive's employment
pursuant to this Section 11(d), the Base Salary has been reduced, the Base
Salary in effect on the date of termination of the Executive's employment shall
be deemed to be the highest Base Salary in effect prior to any such reduction.
(e) VOLUNTARY TERMINATION. A termination of employment by the Executive
on his own initiative, other than a termination due to death or Disability or a
Constructive Termination without Cause, shall have the same consequences as
provided in Section 11(c)(ii) for a termination for Cause. A voluntary
termination under this Section 11(e) shall be effective 30 calendar days after
prior written notice is received by the Company, unless the Company elects to
make it effective earlier.
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(f) CONSEQUENCES OF A CHANGE IN CONTROL.
Upon a Change in Control, all amounts, entitlements or
benefits in which the Executive is not yet vested shall become fully vested
including, without limitation, all outstanding options which shall remain
exercisable through the end of their regularly scheduled term.
In the event that any payment or benefit made or provided to
or for the benefit of the Executive in connection with this Agreement, the
Executive's employment with the Company, or the termination thereof (a
"Payment") is determined to be subject to any excise tax ("Excise Tax") imposed
by Section 4999 of the Code (or any successor to such Section), the Company
shall pay to the Executive, prior to the time any Excise Tax is payable with
respect to such Payment (through withholding or otherwise), an additional amount
which, after the imposition of all income, employment, excise and other taxes,
penalties and interest thereon, is equal to the sum of (i) the Excise Tax on
such Payment plus (ii) any penalty and interest assessments associated with such
Excise Tax. The determination of whether any Payment is subject to an Excise Tax
and, if so, the amount to be paid by the Company to the Executive and the time
of payment shall be made by an independent auditor (the "Auditor") selected
jointly by the Parties and paid by the Company. Unless the Executive agrees
otherwise in writing, the Auditor shall be a nationally recognized United States
public accounting firm that has not, during the two years preceding the date of
its selection, acted in any way on behalf of the Company or any of its
Affiliates. If the Parties cannot agree on the firm to serve as the Auditor,
then the Parties shall each select one accounting firm and those two firms shall
jointly select the accounting firm to serve as the Auditor.
(g) OTHER TERMINATION BENEFITS. In the case of any of the foregoing
terminations, the Executive or his estate shall also be entitled to:
(i) the balance of any incentive awards due for performance
periods which have been completed, but which have not yet been paid (subject to
deferral of payments to the extent the Executive has elected, irrevocably, such
deferral);
(ii) any expense reimbursements due the Executive; and
(iii) other benefits, including senior level executive
benefits, if any, in accordance with applicable plans and programs of the
Company.
(h) NO MITIGATION; NO OFFSET. In the event of any termination of
employment under this Section 11, the Executive shall be under no obligation to
seek other employment and there shall be no offset against amounts due the
Executive under this Agreement on account of any claims asserted by the Company
or any remuneration attributable to any subsequent employment that he may
obtain.
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(i) NATURE OF PAYMENTS. Any amounts due under this Section 11 are in
the nature of severance payments considered to be reasonable by the Company and
are not in the nature of a penalty.
12. CONFIDENTIALITY; NON-COMPETITION.
(a) The Executive agrees that he will not, at any time during the Term
of Employment or thereafter, disclose or use any proprietary or confidential
information of the Company or any subsidiary or Affiliate of the Company,
obtained during the course of his employment, except as required in the course
of such employment or with the written permission of the Company or, as
applicable, any subsidiary or Affiliate of the Company or as may be required by
law, provided that, if the Executive receives legal process with regard to
disclosure of such information, he shall promptly notify the Company and
cooperate with the Company in seeking a protective order. For this purpose,
"proprietary or confidential information" shall include "know how," trade
secrets, customer lists, pricing policies, operational methods, technical
processes, formulae, inventions, research projects or other information
regarding the financial and business affairs of the Company that have not been
disclosed to the public or within the business community (other than due to a
breach by the Executive of this Section 12).
(b) The Executive agrees that at the time of the termination of his
employment with the Company, whether at the instance of the Executive or the
Company, and regardless of the reasons therefor, he will deliver to the Company,
and not keep or deliver to anyone else, any and all notes, files, memoranda,
papers and, in general, any and all physical matter containing information,
including any and all documents significant to the conduct of the business of
the Company or any subsidiary or Affiliate of the Company which are in his
possession, except for any documents for which the Company or any subsidiary or
Affiliate of the Company has given written consent to removal at the time of the
termination of the Executive's employment and his personal rolodex, personal
files, phone book and similar items.
(c) During the Term, the Executive shall not, directly or indirectly,
on his own behalf or on behalf of any other person or entity, enter the employ
of, or render any services to, any person, firm or corporation engaged in any
business competitive with the business then being conducted by the Company or
any of its then subsidiaries or affiliates; the Executive shall not engage in
such business on the Executive's own account; and the Executive shall not become
interested in any such business, directly or indirectly, as an individual,
partner, shareholder, director, officer, principal, agent, employee, trustee,
consultant, or in any other relationship or capacity; PROVIDED, HOWEVER, that
nothing contained in this Section 12(c) shall be deemed to prohibit the
Executive from acquiring, solely as an investment, up to five percent (5%) of
the outstanding shares of capital stock of any public corporation. In addition,
the Executive shall, at all times, be subject to the noncompetition,
confidentiality and ownership of inventions covenants required pursuant to the
Management Incentive Plan.
(d) The Executive agrees that the Company's remedies at law would be
inadequate in the event of a breach or threatened breach of this Section 12;
accordingly, the Company shall be
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entitled, in addition to its rights at law, to seek an injunction and other
equitable relief without the need to post a bond.
13. RESOLUTION OF DISPUTES.
Any disputes arising under or in connection with this Agreement shall
be resolved by binding arbitration, to be held in Manhattan, in accordance with
the rules and procedures of the American Arbitration Association. Judgment upon
the award rendered by the arbitrator may be entered in any court having
jurisdiction thereof. Each Party shall bear his or its own costs of the
arbitration or litigation, except that the Company shall bear all such costs if
the Executive prevails in such arbitration or litigation on any material issue.
14. INDEMNIFICATION.
(a) The Company agrees that if the Executive is made a party, or is
threatened to be made a party, to any action, suit or proceeding, whether civil,
criminal, administrative or investigative (a "Proceeding"), by reason of the
fact that he is or was a director, officer or employee of the Company or is or
was serving at the request of the Company as a director, officer, member,
employee or agent of another corporation, partnership, joint venture, trust or
other enterprise, including service with respect to employee benefit plans,
whether or not the basis of such Proceeding is the Executive's alleged action in
an official capacity while serving as a director, officer, member, employee or
agent, the Executive shall be indemnified and held harmless by the Company to
the fullest extent legally permitted or authorized by the Company's certificate
of incorporation or bylaws or resolutions of the Company's Board of Directors
or, if greater, by the laws of the State of Delaware, against all cost, expense,
liability and loss (including, without limitation, attorney's fees, judgments,
fines, ERISA excise taxes or other liabilities or penalties and amounts paid or
to be paid in settlement) reasonably incurred or suffered by the Executive in
connection therewith, and such indemnification shall continue as to the
Executive even if he has ceased to be a director, member, employee or agent of
the Company or other entity and shall inure to the benefit of the Executive's
heirs, executors and administrators. The Company shall advance to the Executive
all reasonable costs and expenses incurred by him in connection with a
Proceeding within 20 calendar days after receipt by the Company of a written
request for such advance. Such request shall include an undertaking by the
Executive to repay the amount of such advance if it shall ultimately be
determined that he is not entitled to be indemnified against such costs and
expenses; provided that the amount of such obligation to repay shall be limited
to the after-tax amount of any such advance except to the extent the Executive
is able to offset such taxes incurred on the advance by the tax benefit, if any,
attributable to a deduction for the repayment.
(b) Neither the failure of the Company (including its board of
directors, independent legal counsel or stockholders) to have made a
determination prior to the commencement of any proceeding concerning payment of
amounts claimed by the Executive under Section 14(a) above that indemnification
of the Executive is proper because he has met the applicable standard of
conduct, nor a determination by the Company (including its board of directors,
independent legal
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counsel or stockholders) that the Executive has not met such applicable standard
of conduct, shall create a presumption in any judicial proceeding that the
Executive has not met the applicable standard of conduct.
(c) The Company agrees to continue and maintain a directors' and
officers' liability insurance policy covering the Executive in an amount of no
less than $50 million.
15. ASSIGNABILITY; BINDING NATURE.
This Agreement shall be binding upon and inure to the benefit of the
Parties and their respective successors, heirs (in the case of the Executive)
and assigns. Rights or obligations of the Company under this Agreement may be
assigned or transferred by the Company pursuant to a merger or consolidation in
which the Company is not the continuing entity, or the sale or liquidation of
all or substantially all of the assets of the Company, provided that the
assignee or transferee is the successor to all or substantially all of the
assets of the Company and such assignee or transferee assumes the liabilities,
obligations and duties of the Company, as contained in this Agreement, either
contractually or as a matter of law. The Company further agrees that, in the
event of a sale of assets or liquidation as described in the preceding sentence,
it shall take whatever action it reasonably can in order to cause such assignee
or transferee to expressly assume the liabilities, obligations and duties of the
Company hereunder. No rights or obligations of the Executive under this
Agreement may be assigned or transferred by the Executive other than his rights
to compensation and benefits, which may be transferred only by will or operation
of law.
16. ENTIRE AGREEMENT.
This Agreement contains the entire understanding and agreement between
the Parties concerning the subject matter hereof and supersedes all prior
agreements, including without limitation the 1998 Agreement, understandings,
discussions, negotiations and undertakings, whether written or oral, between the
Parties with respect thereto.
17. AMENDMENT OR WAIVER.
No provision in this Agreement may be amended unless such amendment is
agreed to in writing and signed by the Executive and an authorized officer of
the Company. No waiver by either Party of any breach by the other Party of any
condition or provision contained in this Agreement to be performed by such other
Party shall be deemed a waiver of a similar or dissimilar condition or provision
at the same or any prior or subsequent time. Any waiver must be in writing and
signed by the Executive or an authorized officer of the Company, as the case may
be.
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18. SEVERABILITY.
In the event that any provision or portion of this Agreement shall be
determined to be invalid or unenforceable for any reason, in whole or in part,
the remaining provisions of this Agreement shall be unaffected thereby and shall
remain in full force and effect to the fullest extent permitted by law so as to
achieve the purposes of this Agreement.
19. SURVIVORSHIP.
Except as otherwise expressly set forth in this Agreement, the
respective rights and obligations of the Parties hereunder shall survive any
termination of the Executive's employment. This Agreement itself (as
distinguished from the Executive's employment) may not be terminated by either
Party without the written consent of the other Party. Upon the expiration of the
term of the Agreement, the respective rights and obligations of the Parties
shall survive such expiration to the extent necessary to carry out the
intentions of the Parties as embodied in the rights (such as vested rights) and
obligations of the Parties under this Agreement.
20. REFERENCES.
In the event of the Executive's death or a judicial determination of
his incompetence, reference in this Agreement to the Executive shall be deemed,
where appropriate, to refer to his beneficiary, estate or other legal
representative.
21. GOVERNING LAW.
This Agreement shall be governed in accordance with the laws of
Delaware without reference to principles of conflict of laws.
22. NOTICES.
All notices and other communications required or permitted hereunder
shall be in writing and shall be deemed given when (a) delivered personally, (b)
delivered by certified or registered mail, postage prepaid, return receipt
requested or (c) delivered by overnight courier (provided that a written
acknowledgment of receipt is obtained by the overnight courier) to the Party
concerned at the address indicated below or to such changed address as such
Party may subsequently give such notice of:
If to the Company: Sunbeam Corporation
2381 Executive Center Drive
Boca Raton, Florida 33431
If to the Executive: Jerry W. Levin
Boca Raton, Florida
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23. HEADINGS.
The headings of the sections contained in this Agreement are for
convenience only and shall not be deemed to control or affect the
meaning or construction of any provision of this Agreement.
24. COUNTERPARTS.
This Agreement may be executed in two or more counterparts.
IN WITNESS WHEREOF, the undersigned have executed this Agreement as of
the date first written above.
Sunbeam Corporation
By:
----------------------------------
Ronald H. Dunbar
Senior Vice President
----------------------------------
Jerry W. Levin
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EXHIBIT 10.3
EMPLOYMENT AGREEMENT
AGREEMENT, made and entered into as of the Effective Date by and
between Sunbeam Corporation, a Delaware corporation (together with its
successors and assigns permitted under this Agreement, the "Company"), and Paul
E. Shapiro (the "Executive").
W I T N E S S E T H :
- - - - - - - - - -
WHEREAS, the Executive currently serves the Company as Executive Vice
President and Chief Administrative Officer pursuant to an employment agreement
dated August 12, 1998 (the "1998 Agreement");
WHEREAS, the Company wishes that the Executive continue to serve as
Executive Vice President and Chief Administrative Officer for the period through
June 30, 2003 and the Executive is willing to so serve;
WHEREAS, the Company and the Executive desire to enter into an
agreement embodying the terms of such continued employment (the "Agreement");
NOW, THEREFORE, in consideration of the premises and mutual covenants
contained herein and for other good and valuable consideration, the receipt of
which is mutually acknowledged, the Company and the Executive (individually a
"Party" and together the "Parties") agree as follows:
1. DEFINITIONS.
(a) "Affiliate" of a person or other entity shall mean a person or
other entity that directly or indirectly controls, is controlled by, or is under
common control with the person or other entity specified.
(b) "Base Salary" shall mean the salary provided for in Section 4 below
or any increased salary granted to the Executive pursuant to Section 4.
(c) "Board" shall mean the Board of Directors of the Company.
(d) "Cause" shall mean:
(i) the Executive is convicted of a felony or of any crime
involving moral turpitude;
(ii) the Executive is guilty of willful gross neglect or
willful gross misconduct in carrying out his duties under this Agreement,
resulting, in either case, in material economic
<PAGE>
harm to the Company unless the Executive acted, or failed to act, in a good
faith belief that such act or failure to act was in, or not contrary to, the
best interests of the Company.
(e) A "Change in Control" shall mean the occurrence of any one of the
following events:
(i) any "person" (as such term is used in Sections 3(a)(9) and
13(d) of the Securities Exchange Act of 1934, but excluding a person who owns
more than 10% of the outstanding shares of the Company as of the date of this
Agreement), becomes a "beneficial owner" (as such term is used in Rule 13d-3
promulgated under that Act), of 25% or more of the Voting Stock of the Company;
(ii) the majority of the Board consists of individuals other
than Incumbent Directors, which term means the members of the Board on the date
of this Agreement; provided that any person becoming a director subsequent to
such date whose election or nomination for election was supported by two-thirds
of the directors who then comprised the Incumbent Directors shall be considered
to be an Incumbent Director;
(iii) the Company adopts any plan of liquidation providing for
the distribution of all or substantially all of its assets;
(iv) all or substantially all of the assets or business of the
Company is disposed of pursuant to a merger, consolidation or other transaction
(unless the shareholders of the Company immediately prior to such merger,
consolidation or other transaction beneficially own, directly or indirectly, in
substantially the same proportion as they owned the Voting Stock of the Company,
all of the Voting Stock or other ownership interests of the entity or entities,
if any, that succeed to the business of the Company); or
(v) the Company combines with another company and is the
surviving corporation but, immediately after the combination, the shareholders
of the Company immediately prior to the combination hold, directly or
indirectly, 50% or less of the Voting Stock of the combined company (there being
excluded from the number of shares held by such shareholders, but not from the
Voting Stock of the combined company, any shares received by Affiliates of such
other company in exchange for stock of such other company).
For purposes of the Change in Control definition, "the Company" shall
include any entity that succeeds to all or substantially all of the business of
the Company, and "Voting Stock" shall mean capital stock of any class or classes
having general voting power, in the absence of specified contingencies, to elect
the directors of a corporation.
(f) "Constructive Termination Without Cause" shall mean termination by
the Executive of his employment at his initiative within 30 days following the
occurrence of any of the following events without his consent:
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(i) a reduction in the Executive's then current Base Salary or
target bonus opportunity as a percentage of Base Salary;
(ii) the taking of any other action by the Company that would
diminish the incentive opportunities of the Executive as provided hereunder,
including eliminating an incentive plan without providing a substitute or
reducing his awards under such a plan.
(iii) the taking of any action by the Company that would
significantly diminish the aggregate value of the benefits provided to the
Executive under the Company's medical, health, accident, disability, life
insurance, thrift and retirement plans;
(iv) the removal of the Executive from any of the positions
described in Section 3 below,
(v) the failure of the Company's shareholders to approve
either any amendment required to the Company's Management Incentive Plan or the
January 3, 2000 option grant necessary in order to grant the Executive all the
benefits to which he is entitled hereunder;
(vi) a material diminution in the Executive's duties;
(vii) a change in the reporting structure so that the
Executive reports to someone other than as provided in the Agreement;
(viii) relocation of the Executive's principal place of
employment to a location other than Palm Beach County, or North Broward County,
Florida or New York City;
(ix) a material breach by the Company of any provision of the
Agreement;
(x) any purported termination of the Executive's employment
that is not effected pursuant to Section 11(b) due to Disability, Section 11(c)
for Cause or Section 11(d) without Cause;
(xi) the failure of the Company to obtain the assumption in
writing of its obligation to perform this Agreement by any successor to all or
substantially all of the assets of the Company within 15 days after a merger,
consolidation, sale or similar transaction, provided that, in the event of a
Change in Control as provided in subclause (xii) below, the Executive shall be
entitled to give notice of a Constructive Termination even if a successor has
assumed this Agreement, or
(xii) the occurrence of a Change in Control.
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Following written notice from the Executive of any of the events described
above, the Company shall have 20 calendar days in which to cure. If the Company
fails to cure, the Executive's termination shall become effective on the 30th
calendar day following the written notice.
(g) "Disability" shall mean the Executive's inability, due to physical
or mental incapacity, to substantially perform his duties and responsibilities
under this Agreement for a period of six consecutive months as determined by a
medical doctor selected by the Company and the Executive. If the Parties cannot
agree on a medical doctor, each Party shall select a medical doctor and the two
doctors shall select a third who shall be the approved medical doctor for this
purpose.
(h) "Effective Date" shall be January 3, 2000.
(i) "Fair Market Value" per share on any given date shall mean the
average of the high and low prices of a share of Stock on such date (or if the
Stock is not traded on such date on the most recent trading day prior thereto)
on the principal securities exchange or national market system, including
without limitation the NASDAQ National Market, on which such Stock is at the
time listed, or if such Stock is not so listed, but is regularly quoted by a
recognized securities dealer, the mean between the high bid and low asked prices
for the Stock on such date (or on the most recent trading day on which the Stock
is quoted).
(j) "Pro Rata" shall mean a fraction, the numerator of which is the
number of days that the Executive was employed in the applicable performance
period (a calendar year in the case of an annual bonus and a performance cycle
in the case of an award under the Long-Term Incentive Plan) and the denominator
of which shall be the number of days in the applicable performance period.
(k) "Stock" shall mean the common stock of the Company.
(l) "Term of Employment" shall mean the period specified in Section 2
below (including any extension as provided therein).
2. TERM OF EMPLOYMENT.
The Term of Employment shall begin as of the Effective Date, and shall
extend until June 30, 2003, with automatic one-year renewals thereafter unless
either Party notifies the other at least 12 months before the scheduled
expiration date that the term is not to renew. Notwithstanding the foregoing,
the Term of Employment shall be earlier terminated if either Party terminates
the Executive's employment hereunder in accordance with the provisions of
Section 11, in which case the Term of Employment shall terminate on the date
such termination of employment is effective.
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3. POSITION, DUTIES AND RESPONSIBILITIES.
(a) The Executive shall continue to serve as the Executive Vice
President and Chief Administrative Officer of the Company. The Executive, in
carrying out his duties under this Agreement, shall report to the Chief
Executive Officer of the Company. During the Term of Employment, the Executive
shall devote substantially all of his business time and attention to the
business and affairs of the Company and shall use his best efforts, skills and
abilities to promote its interests.
(b) Nothing herein shall preclude the Executive from (i) serving on the
boards of directors of a reasonable number of other corporations with the
concurrence of the Board (which concurrence shall not be unreasonably withheld),
(ii) serving on the boards of a reasonable number of trade associations and/or
charitable organizations, (iii) engaging in charitable activities and community
affairs, and (iv) managing his personal investments and affairs, provided that
such activities set forth in this Section 3(b) do not conflict or materially
interfere with the effective discharge of his duties and responsibilities under
Section 3(a).
4. BASE SALARY.
The Executive shall be paid an annualized Base Salary, payable in
accordance with the regular payroll practices of the Company, of $750,000 per
year; increasing to $850,000 per year, effective July 1, 2000; increasing to
$950,000 year effective July 1, 2001; and increasing to $1,050,000 per year,
effective July 1, 2002. The Base Salary shall be reviewed periodically for any
further increase in the sole discretion of the Board.
5. ANNUAL INCENTIVE AWARD.
During the Term of Employment, commencing in 2000 the Executive shall
have a target bonus opportunity each year equal to 75% of Base Salary, payable
in that amount if the performance goals established for the relevant year are
met. If such performance goals are exceeded, the Executive shall receive a
larger amount of up to 150% of Base Salary and if such performance goals are not
met, the Executive shall receive a lesser amount (or nothing), as determined in
accordance with the Company's Management Incentive Plan (or any successor annual
incentive plan). The Executive shall be paid his annual incentive awards no
later than the date other senior executives of the Company are paid their annual
incentive awards and in no event later than 60 days following the last day of
the fiscal year to which the annual incentive award is being paid.
6. RE-SIGNING ARRANGEMENTS.
(a) CASH RE-SIGNING BONUS. The Company shall pay the Executive the
following amounts on the dates indicated:
- $250,000 on July 1, 2000
- $250,000 on July 1, 2001
- $250,000 on July 1, 2002
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(b) STOCK OPTION GRANT. As of January 3, 2000 the Company shall have
granted, subject to the approval of such grant by the Company's stockholders at
the annual stockholders' meeting held in 2000, the Executive a stock option, in
the form attached hereto as Exhibit A, to purchase 600,000 shares of Stock.
7. EMPLOYEE BENEFIT PROGRAMS.
During the Term of Employment, the Executive shall be entitled to
participate in any employee pension and welfare benefit plans and programs made
available to the Company's senior level executives or to its employees
generally, as such plans or programs may be in effect from time to time,
including, without limitation, pension, profit sharing, savings and other
retirement plans or programs, 401(k), medical, dental, hospitalization,
short-term and long-term disability and life insurance plans, accidental death
and dismemberment protection, travel accident insurance, and any other pension
or retirement plans or programs and any other employee welfare benefit plans or
programs that may be sponsored by the Company from time to time, including any
plans that supplement the above-listed types of plans or programs, whether
funded or unfunded. The Executive's participation shall be based on, and the
calculation of all benefits shall be based on, the assumptions that the
Executive has met all service-period or other requirements for such
participation. The Executive shall be entitled to four weeks paid vacation per
year of employment, which shall accrue and otherwise be subject to the Company's
vacation policy for senior executives.
8. PERQUISITES.
The Executive shall be entitled to perquisites on the same basis as
provided to other senior level executives and, in any event, shall be entitled
to the following:
(a) Company-provided automobile (late-model top-of-the-line), including
reimbursement of expenses of operation, maintenance and insurance;
(b) Expenses of one country club; including, without limitations,
initiation fees;
(c) Residential security system;
(d) Reimbursement for reasonable financial planning, tax preparation
and estate planning fees. During the Term of Employment, the Company shall
maintain, and pay the premiums on, portable term insurance on the life of the
Executive in an amount no less than four times the Executive's Base Salary, from
time to time, the proceeds of which shall be payable to such beneficiary or
beneficiaries as the Executive specifies.
9. AIRCRAFT TRAVEL.
The Executive shall be entitled to first class air travel.
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10. REIMBURSEMENT OF BUSINESS AND OTHER EXPENSES.
The Executive is authorized to incur reasonable expenses in carrying
out his duties and responsibilities under this Agreement and the Company shall
promptly reimburse him for all reasonable business expenses incurred in
connection with carrying out the business of the Company, subject to
documentation in accordance with the Company's policy. The Company shall pay all
legal fees and expenses incurred by the Executive in connection with the
negotiation of the Executive's employment arrangements with the Company.
11. TERMINATION OF EMPLOYMENT.
(a) TERMINATION DUE TO DEATH. In the event that the Executive's
employment is terminated due to his death, his estate or his beneficiaries, as
the case may be, shall be entitled to the following:
(i) a lump sum payment equal to 60% of Base Salary that would
be payable for a period which is the greater of (A) 12 months or (B) the
remaining term of the Employment Agreement (without regard to early termination
thereof);
(ii) a lump sum payment equal to 60% of all re-signing bonus
amounts not previously paid;
(iii) a Pro-Rata Annual Incentive Award for the year in which
the Executive's death occurs based on the target bonus for the year of
termination, payable when bonuses are paid to other officers; and
(iv) full vesting and exercisability of all outstanding
options which shall remain exercisable through the end of their originally
scheduled term; and
(v) for Executive's spouse and eligible dependents, continued
participation in all medical, dental, vision and hospitalization insurance plans
in which they were participating at the time of Executive's death, with
continuation in all such plans for his spouse until she reaches age 65.
(b) TERMINATION DUE TO DISABILITY. In the event that the Executive's
employment is terminated by either Party hereto due to the Executive's
Disability, he shall be entitled to the following:
(i) Disability benefits provided in accordance with the
long-term disability program in effect for senior executives at the Company;
provided, however, in no event shall such benefits provide the Executive less
than 60% of his then Base Salary to age 65;
(ii) Base Salary through the end of the month in which
Disability benefits commence;
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(iii) a lump sum payment equal to 60% of all re-signing bonus
amounts not previously paid;
(iv) a Pro-Rata Annual Incentive Award for the year in which
termination due to Disability occurs based on the target bonus for the year of
termination, payable when bonuses are paid to other officers;
(v) full vesting and exercisability of all outstanding options
which shall remain exercisable through the end of their originally scheduled
term; and
(vi) for the Executive, his spouse and his eligible
dependents, continued participation in all medical, dental, vision and
hospitalization insurance plans in which they were participating at the time of
Executive's termination, with continuation in all such plans for the Executive
and his spouse until he and his spouse reach age 65 respectively and for the
Executive, continued participation in other employee benefit plans or programs
in which he was participating on the date of the termination of his employment
for a period of 24 months following termination of employment provided that if
the Company's plans do not permit continuation of the Executive's participation
following his termination, the Company shall provide the Executive with an
amount which, after taxes, is sufficient for him to purchase equivalent
benefits.
In no event shall a termination of the Executive's employment for
Disability occur until the Party terminating his employment gives written notice
to the other Party in accordance with Section 22 below.
(c) TERMINATION BY THE COMPANY FOR CAUSE.
(i) A termination for Cause shall not take effect unless the
provisions of this subclause (i) are complied with. The Executive shall be given
written notice by the Board of the intention to terminate him for Cause, such
notice (A) to state in detail the particular act or acts or failure or failures
to act that constitute the grounds on which the proposed termination for Cause
is based and (B) to be given within 60 days of the Board learning of such act or
acts or failure or failures to act. In the event the proposed termination is
based on subclause (ii) of Section 1(d) above, the Executive shall have ten
calendar days after the date that such written notice has been given to the
Executive in which to cure such conduct. If he fails to cure such conduct, the
Executive shall then be entitled to a hearing before the Board, and, thereafter,
upon a determination by affirmative vote of no fewer than three-quarters of the
members of the Board that Cause exists he shall be terminated for Cause.
(ii) In the event the Company terminates the Executive's
employment for Cause:
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(A) he shall be entitled to Base Salary through the
date of the termination; and
(B) all outstanding options which are not then
exercisable shall be forfeited; exercisable options shall remain exercisable
until the earlier of the ninetieth day after the date of termination or the
originally scheduled expiration date of the options.
(d) TERMINATION WITHOUT CAUSE, CONSTRUCTIVE TERMINATION WITHOUT CAUSE
OR NON-RENEWAL BY THE Company.
In the event the Executive's employment is terminated by the Company
without Cause, other than due to Disability or death, there is a Constructive
Termination without Cause or the Company gives notice of non-renewal pursuant to
Section 2 above, the Executive shall be entitled to the following benefits:
(i) Base Salary through the date of termination;
(ii) all re-signing bonus amounts not previously paid;
(iii) pro-rata Annual Incentive Award for the year of
termination, award based on the target bonus for such year, payable promptly
following such termination;
(iv) a lump sum payment in an amount equal to the greater of
(A) the Executive's Base Salary for the remainder of the term (without regard to
early termination thereof) or (B) two times the Executive's Base Salary,
determined as provided in the last paragraph of this Section 11(d), payable
promptly following such termination;
(v) a lump sum payment in an amount equal to the greater of
(A) the Executive's Base Salary for the remainder of the term (without regard to
early termination thereof), multiplied by the applicable target bonus
opportunity percentage or (B) two times the Executive's Annual Incentive Award,
based on the target bonus for the year of termination, payable promptly
following such termination;
(vi) all outstanding options shall become fully vested and
exercisable and shall remain exercisable through the end of their originally
scheduled term; and
(vii) for the Executive, his spouse and his eligible
dependents, continued participation in all medical, dental, vision and
hospitalization insurance plans in which they were participating at the time of
Executive's termination, with continuation in all such plans for the Executive
and his spouse until he and his spouse reach age 65 respectively and for the
Executive, in all other employee and senior-level executive benefit plans or
programs in which he was participating on the date of the termination of his
employment for a period equal to the greater of (A) the remainder of the term or
(B) 24 months following termination of employment; provided, however, that if
the Executive becomes re-employed with another employer and is eligible to
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receive medical or other welfare benefits under another employer-provided plan,
the medical and other welfare benefits described above shall be secondary to
those provided under such other plan during such applicable period of
eligibility.
In the event the Company's plans do not permit continuation of the Executive's
participation following his termination, the Company shall provide the Executive
with an amount which, after taxes, is sufficient for him to purchase equivalent
benefits.
For purposes of Section 11(d)(iv) and (v) above, Base Salary shall be
determined by the Base Salary at the annualized rate in effect on the date of
termination of the Executive's employment (subject to the last sentence of this
paragraph) adjusted for any scheduled increase pursuant to Section 4 above. Such
adjustment shall be made as follows: the aggregate scheduled remaining salary
payments for the remaining Term of Employment (without regard to early
termination thereof) shall be divided by the remaining months of the Term of
Employment (without regard to early termination thereof) and the resulting
monthly rate shall be multiplied by 12. For purposes of the first sentence of
this paragraph, if, prior to the termination of the Executive's employment
pursuant to this Section 11(d), the Base Salary has been reduced, the Base
Salary in effect on the date of termination of the Executive's employment shall
be deemed to be the highest Base Salary in effect prior to any such reduction.
(e) VOLUNTARY TERMINATION. A termination of employment by the Executive
on his own initiative, other than a termination due to death or Disability or a
Constructive Termination without Cause, shall have the same consequences as
provided in Section 11(c)(ii) for a termination for Cause. A voluntary
termination under this Section 11(e) shall be effective 30 calendar days after
prior written notice is received by the Company, unless the Company elects to
make it effective earlier.
(f) CONSEQUENCES OF A CHANGE IN CONTROL.
Upon a Change in Control, all amounts, entitlements or
benefits in which the Executive is not yet vested shall become fully vested
including, without limitation, all outstanding options which shall remain
exercisable through the end of their regularly scheduled term.
In the event that any payment or benefit made or provided to
or for the benefit of the Executive in connection with this Agreement, the
Executive's employment with the Company, or the termination thereof (a
"Payment") is determined to be subject to any excise tax ("Excise Tax") imposed
by Section 4999 of the Code (or any successor to such Section), the Company
shall pay to the Executive, prior to the time any Excise Tax is payable with
respect to such Payment (through withholding or otherwise), an additional amount
which, after the imposition of all income, employment, excise and other taxes,
penalties and interest thereon, is equal to the sum of (i) the Excise Tax on
such Payment plus (ii) any penalty and interest assessments associated with such
Excise Tax. The determination of whether any Payment is subject to an Excise Tax
and, if so, the amount to be paid by the Company to the Executive and
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the time of payment shall be made by an independent auditor (the "Auditor")
selected jointly by the Parties and paid by the Company. Unless the Executive
agrees otherwise in writing, the Auditor shall be a nationally recognized United
States public accounting firm that has not, during the two years preceding the
date of its selection, acted in any way on behalf of the Company or any of its
Affiliates. If the Parties cannot agree on the firm to serve as the Auditor,
then the Parties shall each select one accounting firm and those two firms shall
jointly select the accounting firm to serve as the Auditor.
(g) OTHER TERMINATION BENEFITS. In the case of any of the foregoing
terminations, the Executive or his estate shall also be entitled to:
(i) the balance of any incentive awards due for performance
periods which have been completed, but which have not yet been paid (subject to
deferral of payments to the extent the Executive has elected, irrevocably, such
deferral);
(ii) any expense reimbursements due the Executive; and
(iii) other benefits, including senior level executive
benefits, if any, in accordance with applicable plans and programs of the
Company.
(h) NO MITIGATION; NO OFFSET. In the event of any termination of
employment under this Section 11, the Executive shall be under no obligation to
seek other employment and there shall be no offset against amounts due the
Executive under this Agreement on account of any claims asserted by the Company
or any remuneration attributable to any subsequent employment that he may
obtain.
(i) NATURE OF PAYMENTS. Any amounts due under this Section 11
are in the nature of severance payments considered to be reasonable by the
Company and are not in the nature of a penalty.
12. CONFIDENTIALITY; NON-COMPETITION.
(a) The Executive agrees that he will not, at any time during the Term
of Employment or thereafter, disclose or use any proprietary or confidential
information of the Company or any subsidiary or Affiliate of the Company,
obtained during the course of his employment, except as required in the course
of such employment or with the written permission of the Company or, as
applicable, any subsidiary or Affiliate of the Company or as may be required by
law, provided that, if the Executive receives legal process with regard to
disclosure of such information, he shall promptly notify the Company and
cooperate with the Company in seeking a protective order. For this purpose,
"proprietary or confidential information" shall include "know how," trade
secrets, customer lists, pricing policies, operational methods, technical
processes, formulae, inventions, research projects or other information
regarding the financial and business affairs of the Company that have not been
disclosed to the public or within the business community (other than due to a
breach by the Executive of this Section 12).
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(b) The Executive agrees that at the time of the termination of his
employment with the Company, whether at the instance of the Executive or the
Company, and regardless of the reasons therefor, he will deliver to the Company,
and not keep or deliver to anyone else, any and all notes, files, memoranda,
papers and, in general, any and all physical matter containing information,
including any and all documents significant to the conduct of the business of
the Company or any subsidiary or Affiliate of the Company which are in his
possession, except for any documents for which the Company or any subsidiary or
Affiliate of the Company has given written consent to removal at the time of the
termination of the Executive's employment and his personal rolodex, personal
files, phone book and similar items.
(c) During the Term, the Executive shall not, directly or indirectly,
on his own behalf or on behalf of any other person or entity, enter the employ
of, or render any services to, any person, firm or corporation engaged in any
business competitive with the business then being conducted by the Company or
any of its then subsidiaries or affiliates; the Executive shall not engage in
such business on the Executive's own account; and the Executive shall not become
interested in any such business, directly or indirectly, as an individual,
partner, shareholder, director, officer, principal, agent, employee, trustee,
consultant, or in any other relationship or capacity; PROVIDED, HOWEVER, that
nothing contained in this Section 12(c) shall be deemed to prohibit the
Executive from acquiring, solely as an investment, up to five percent (5%) of
the outstanding shares of capital stock of any public corporation. In addition,
the Executive shall, at all times, be subject to the noncompetition,
confidentiality and ownership of inventions covenants required pursuant to the
Management Incentive Plan.
(d) The Executive agrees that the Company's remedies at law would be
inadequate in the event of a breach or threatened breach of this Section 12;
accordingly, the Company shall be entitled, in addition to its rights at law, to
seek an injunction and other equitable relief without the need to post a bond.
13. RESOLUTION OF DISPUTES.
Any disputes arising under or in connection with this Agreement shall
be resolved by binding arbitration, to be held in Manhattan, in accordance with
the rules and procedures of the American Arbitration Association. Judgment upon
the award rendered by the arbitrator may be entered in any court having
jurisdiction thereof. Each Party shall bear his or its own costs of the
arbitration or litigation, except that the Company shall bear all such costs if
the Executive prevails in such arbitration or litigation on any material issue.
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14. INDEMNIFICATION.
(a) The Company agrees that if the Executive is made a party, or is
threatened to be made a party, to any action, suit or proceeding, whether civil,
criminal, administrative or investigative (a "Proceeding"), by reason of the
fact that he is or was a director, officer or employee of the Company or is or
was serving at the request of the Company as a director, officer, member,
employee or agent of another corporation, partnership, joint venture, trust or
other enterprise, including service with respect to employee benefit plans,
whether or not the basis of such Proceeding is the Executive's alleged action in
an official capacity while serving as a director, officer, member, employee or
agent, the Executive shall be indemnified and held harmless by the Company to
the fullest extent legally permitted or authorized by the Company's certificate
of incorporation or bylaws or resolutions of the Company's Board of Directors
or, if greater, by the laws of the State of Delaware, against all cost, expense,
liability and loss (including, without limitation, attorney's fees, judgments,
fines, ERISA excise taxes or other liabilities or penalties and amounts paid or
to be paid in settlement) reasonably incurred or suffered by the Executive in
connection therewith, and such indemnification shall continue as to the
Executive even if he has ceased to be a director, member, employee or agent of
the Company or other entity and shall inure to the benefit of the Executive's
heirs, executors and administrators. The Company shall advance to the Executive
all reasonable costs and expenses incurred by him in connection with a
Proceeding within 20 calendar days after receipt by the Company of a written
request for such advance. Such request shall include an undertaking by the
Executive to repay the amount of such advance if it shall ultimately be
determined that he is not entitled to be indemnified against such costs and
expenses; provided that the amount of such obligation to repay shall be limited
to the after-tax amount of any such advance except to the extent the Executive
is able to offset such taxes incurred on the advance by the tax benefit, if any,
attributable to a deduction for the repayment.
(b) Neither the failure of the Company (including its board of
directors, independent legal counsel or stockholders) to have made a
determination prior to the commencement of any proceeding concerning payment of
amounts claimed by the Executive under Section 14(a) above that indemnification
of the Executive is proper because he has met the applicable standard of
conduct, nor a determination by the Company (including its board of directors,
independent legal counsel or stockholders) that the Executive has not met such
applicable standard of conduct, shall create a presumption in any judicial
proceeding that the Executive has not met the applicable standard of conduct.
(c) The Company agrees to continue and maintain a directors' and
officers' liability insurance policy covering the Executive in an amount of no
less than $50 million.
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15. ASSIGNABILITY; BINDING NATURE.
This Agreement shall be binding upon and inure to the benefit of the
Parties and their respective successors, heirs (in the case of the Executive)
and assigns. Rights or obligations of the Company under this Agreement may be
assigned or transferred by the Company pursuant to a merger or consolidation in
which the Company is not the continuing entity, or the sale or liquidation of
all or substantially all of the assets of the Company, provided that the
assignee or transferee is the successor to all or substantially all of the
assets of the Company and such assignee or transferee assumes the liabilities,
obligations and duties of the Company, as contained in this Agreement, either
contractually or as a matter of law. The Company further agrees that, in the
event of a sale of assets or liquidation as described in the preceding sentence,
it shall take whatever action it reasonably can in order to cause such assignee
or transferee to expressly assume the liabilities, obligations and duties of the
Company hereunder. No rights or obligations of the Executive under this
Agreement may be assigned or transferred by the Executive other than his rights
to compensation and benefits, which may be transferred only by will or operation
of law.
16. ENTIRE AGREEMENT.
This Agreement contains the entire understanding and agreement between
the Parties concerning the subject matter hereof and supersedes all prior
agreements, including without limitation the 1998 Agreement, understandings,
discussions, negotiations and undertakings, whether written or oral, between the
Parties with respect thereto.
17. AMENDMENT OR WAIVER.
No provision in this Agreement may be amended unless such amendment is
agreed to in writing and signed by the Executive and an authorized officer of
the Company. No waiver by either Party of any breach by the other Party of any
condition or provision contained in this Agreement to be performed by such other
Party shall be deemed a waiver of a similar or dissimilar condition or provision
at the same or any prior or subsequent time. Any waiver must be in writing and
signed by the Executive or an authorized officer of the Company, as the case may
be.
18. SEVERABILITY.
In the event that any provision or portion of this Agreement shall be
determined to be invalid or unenforceable for any reason, in whole or in part,
the remaining provisions of this Agreement shall be unaffected thereby and shall
remain in full force and effect to the fullest extent permitted by law so as to
achieve the purposes of this Agreement.
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19. SURVIVORSHIP.
Except as otherwise expressly set forth in this Agreement, the
respective rights and obligations of the Parties hereunder shall survive any
termination of the Executive's employment. This Agreement itself (as
distinguished from the Executive's employment) may not be terminated by either
Party without the written consent of the other Party. Upon the expiration of the
term of the Agreement, the respective rights and obligations of the Parties
shall survive such expiration to the extent necessary to carry out the
intentions of the Parties as embodied in the rights (such as vested rights) and
obligations of the Parties under this Agreement.
20. REFERENCES.
In the event of the Executive's death or a judicial determination of
his incompetence, reference in this Agreement to the Executive shall be deemed,
where appropriate, to refer to his beneficiary, estate or other legal
representative.
21. GOVERNING LAW.
This Agreement shall be governed in accordance with the laws of
Delaware without reference to principles of conflict of laws.
22. NOTICES.
All notices and other communications required or permitted hereunder
shall be in writing and shall be deemed given when (a) delivered personally, (b)
delivered by certified or registered mail, postage prepaid, return receipt
requested or (c) delivered by overnight courier (provided that a written
acknowledgment of receipt is obtained by the overnight courier) to the Party
concerned at the address indicated below or to such changed address as such
Party may subsequently give such notice of:
If to the Company: Sunbeam Corporation
2381 Executive Center Drive
Boca Raton, Florida 33431
If to the Executive: Paul E. Shapiro
Boca Raton, Florida
23. HEADINGS.
The headings of the sections contained in this Agreement are for
convenience only and shall not be deemed to control or affect the
meaning or construction of any provision of this Agreement.
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24. COUNTERPARTS.
This Agreement may be executed in two or more counterparts.
IN WITNESS WHEREOF, the undersigned have executed this Agreement as of
the date first written above.
Sunbeam Corporation
By:
------------------------------
Ronald H. Dunbar
Senior Vice President
------------------------------
Paul E. Shapiro
16
EXHIBIT 10.4
EMPLOYMENT AGREEMENT
AGREEMENT, made and entered into as of the Effective Date by and
between Sunbeam Corporation, a Delaware corporation (together with its
successors and assigns permitted under this Agreement, the "Company"), and Bobby
G. Jenkins (the "Executive").
W I T N E S S E T H :
- - - - - - - - - -
WHEREAS, the Executive currently serves the Company as Executive Vice
President and Chief Financial Officer pursuant to an employment agreement dated
August 12, 1998 (the "1998 Agreement");
WHEREAS, the Company wishes that the Executive continue to serve as
Executive Vice President and Chief Financial Officer for the period through June
30, 2003 and the Executive is willing to so serve;
WHEREAS, the Company and the Executive desire to enter into an
agreement embodying the terms of such continued employment (the "Agreement");
NOW, THEREFORE, in consideration of the premises and mutual covenants
contained herein and for other good and valuable consideration, the receipt of
which is mutually acknowledged, the Company and the Executive (individually a
"Party" and together the "Parties") agree as follows:
1. DEFINITIONS.
(a) "Affiliate" of a person or other entity shall mean a person or
other entity that directly or indirectly controls, is controlled by, or is under
common control with the person or other entity specified.
(b) "Base Salary" shall mean the salary provided for in Section 4 below
or any increased salary granted to the Executive pursuant to Section 4.
(c) "Board" shall mean the Board of Directors of the Company.
(d) "Cause" shall mean:
(i) the Executive is convicted of a felony or of any crime
involving moral turpitude;
(ii) the Executive is guilty of willful gross neglect or
willful gross misconduct in carrying out his duties under this Agreement,
resulting, in either case, in material economic
<PAGE>
harm to the Company unless the Executive acted, or failed to act, in a good
faith belief that such act or failure to act was in, or not contrary to, the
best interests of the Company.
(e) A "Change in Control" shall mean the occurrence of any one of the
following events:
(i) any "person" (as such term is used in Sections 3(a)(9) and
13(d) of the Securities Exchange Act of 1934, but excluding a person who owns
more than 10% of the outstanding shares of the Company as of the date of this
Agreement), becomes a "beneficial owner" (as such term is used in Rule 13d-3
promulgated under that Act), of 25% or more of the Voting Stock of the Company;
(ii) the majority of the Board consists of individuals other
than Incumbent Directors, which term means the members of the Board on the date
of this Agreement; provided that any person becoming a director subsequent to
such date whose election or nomination for election was supported by two-thirds
of the directors who then comprised the Incumbent Directors shall be considered
to be an Incumbent Director;
(iii) the Company adopts any plan of liquidation providing for
the distribution of all or substantially all of its assets;
(iv) all or substantially all of the assets or business of the
Company is disposed of pursuant to a merger, consolidation or other transaction
(unless the shareholders of the Company immediately prior to such merger,
consolidation or other transaction beneficially own, directly or indirectly, in
substantially the same proportion as they owned the Voting Stock of the Company,
all of the Voting Stock or other ownership interests of the entity or entities,
if any, that succeed to the business of the Company); or
(v) the Company combines with another company and is the
surviving corporation but, immediately after the combination, the shareholders
of the Company immediately prior to the combination hold, directly or
indirectly, 50% or less of the Voting Stock of the combined company (there being
excluded from the number of shares held by such shareholders, but not from the
Voting Stock of the combined company, any shares received by Affiliates of such
other company in exchange for stock of such other company).
For purposes of the Change in Control definition, "the Company" shall
include any entity that succeeds to all or substantially all of the business of
the Company, and "Voting Stock" shall mean capital stock of any class or classes
having general voting power, in the absence of specified contingencies, to elect
the directors of a corporation.
(f) "Constructive Termination Without Cause" shall mean termination by
the Executive of his employment at his initiative within 30 days following the
occurrence of any of the following events without his consent:
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(i) a reduction in the Executive's then current Base Salary or
target bonus opportunity as a percentage of Base Salary;
(ii) the taking of any other action by the Company that would
diminish the incentive opportunities of the Executive as provided hereunder,
including eliminating an incentive plan without providing a substitute or
reducing his awards under such a plan.
(iii) the taking of any action by the Company that would
significantly diminish the aggregate value of the benefits provided to the
Executive under the Company's medical, health, accident, disability, life
insurance, thrift and retirement plans;
(iv) the removal of the Executive from any of the positions
described in Section 3 below,
(v) the failure of the Company's shareholders to approve
either any amendment required to the Company's Management Incentive Plan or the
January 3, 2000 option grant necessary in order to grant the Executive all the
benefits to which he is entitled hereunder;
(vi) a material diminution in the Executive's duties;
(vii) a change in the reporting structure so that the
Executive reports to someone other than as provided in the Agreement;
(viii) relocation of the Executive's principal place of
employment to a location other than Palm Beach County, or North Broward County,
Florida or New York City;
(ix) a material breach by the Company of any provision of the
Agreement;
(x) any purported termination of the Executive's employment
that is not effected pursuant to Section 11(b) due to Disability, Section 11(c)
for Cause or Section 11(d) without Cause;
(xi) the failure of the Company to obtain the assumption in
writing of its obligation to perform this Agreement by any successor to all or
substantially all of the assets of the Company within 15 days after a merger,
consolidation, sale or similar transaction, provided that, in the event of a
Change in Control as provided in subclause (xii) below, the Executive shall be
entitled to give notice of a Constructive Termination even if a successor has
assumed this Agreement, or
(xii) the occurrence of a Change in Control.
3
<PAGE>
Following written notice from the Executive of any of the events described
above, the Company shall have 20 calendar days in which to cure. If the Company
fails to cure, the Executive's termination shall become effective on the 30th
calendar day following the written notice.
(g) "Disability" shall mean the Executive's inability, due to physical
or mental incapacity, to substantially perform his duties and responsibilities
under this Agreement for a period of six consecutive months as determined by a
medical doctor selected by the Company and the Executive. If the Parties cannot
agree on a medical doctor, each Party shall select a medical doctor and the two
doctors shall select a third who shall be the approved medical doctor for this
purpose.
(h) "Effective Date" shall be January 3, 2000.
(i) "Fair Market Value" per share on any given date shall mean the
average of the high and low prices of a share of Stock on such date (or if the
Stock is not traded on such date on the most recent trading day prior thereto)
on the principal securities exchange or national market system, including
without limitation the NASDAQ National Market, on which such Stock is at the
time listed, or if such Stock is not so listed, but is regularly quoted by a
recognized securities dealer, the mean between the high bid and low asked prices
for the Stock on such date (or on the most recent trading day on which the Stock
is quoted).
(j) "Pro Rata" shall mean a fraction, the numerator of which is the
number of days that the Executive was employed in the applicable performance
period (a calendar year in the case of an annual bonus and a performance cycle
in the case of an award under the Long-Term Incentive Plan) and the denominator
of which shall be the number of days in the applicable performance period.
(k) "Stock" shall mean the common stock of the Company.
(l) "Term of Employment" shall mean the period specified in Section 2
below (including any extension as provided therein).
2. TERM OF EMPLOYMENT.
The Term of Employment shall begin as of the Effective Date, and shall
extend until June 30, 2003, with automatic one-year renewals thereafter unless
either Party notifies the other at least 12 months before the scheduled
expiration date that the term is not to renew. Notwithstanding the foregoing,
the Term of Employment shall be earlier terminated if either Party terminates
the Executive's employment hereunder in accordance with the provisions of
Section 11, in which case the Term of Employment shall terminate on the date
such termination of employment is effective.
4
<PAGE>
3. POSITION, DUTIES AND RESPONSIBILITIES.
(a) The Executive shall continue to serve as the Executive Vice
President and Chief Financial Officer of the Company. The Executive, in carrying
out his duties under this Agreement, shall report to the Chief Executive Officer
of the Company. During the Term of Employment, the Executive shall devote
substantially all of his business time and attention to the business and affairs
of the Company and shall use his best efforts, skills and abilities to promote
its interests.
(b) Nothing herein shall preclude the Executive from (i) serving on the
boards of directors of a reasonable number of other corporations with the
concurrence of the Board (which concurrence shall not be unreasonably withheld),
(ii) serving on the boards of a reasonable number of trade associations and/or
charitable organizations, (iii) engaging in charitable activities and community
affairs, and (iv) managing his personal investments and affairs, provided that
such activities set forth in this Section 3(b) do not conflict or materially
interfere with the effective discharge of his duties and responsibilities under
Section 3(a).
4. BASE SALARY.
The Executive shall be paid an annualized Base Salary, payable in
accordance with the regular payroll practices of the Company, of $425,000 per
year; increasing to $475,000 per year, effective July 1, 2000; increasing to
$525,000 year effective July 1, 2001; and increasing to $575,000 per year,
effective July 1, 2002. The Base Salary shall be reviewed periodically for any
further increase in the sole discretion of the Board.
5. ANNUAL INCENTIVE AWARD.
During the Term of Employment, commencing in 2000 the Executive shall
have a target bonus opportunity each year equal to 60% of Base Salary, payable
in that amount if the performance goals established for the relevant year are
met. If such performance goals are exceeded, the Executive shall receive a
larger amount of up to 120% of Base Salary and if such performance goals are not
met, the Executive shall receive a lesser amount (or nothing), as determined in
accordance with the Company's Management Incentive Plan (or any successor annual
incentive plan). The Executive shall be paid his annual incentive awards no
later than the date other senior executives of the Company are paid their annual
incentive awards and in no event later than 60 days following the last day of
the fiscal year to which the annual incentive award is being paid.
6. STOCK OPTION GRANT. As of January 3, 2000 the Company shall have
granted, subject to the approval of such grant by the Company's stockholders at
the annual stockholders' meeting held in 2000, the Executive a stock option, in
the form attached hereto as Exhibit A, to purchase 550,000 shares of Stock.
5
<PAGE>
7. EMPLOYEE BENEFIT PROGRAMS.
During the Term of Employment, the Executive shall be entitled to
participate in any employee pension and welfare benefit plans and programs made
available to the Company's senior level executives or to its employees
generally, as such plans or programs may be in effect from time to time,
including, without limitation, pension, profit sharing, savings and other
retirement plans or programs, 401(k), medical, dental, hospitalization,
short-term and long-term disability and life insurance plans, accidental death
and dismemberment protection, travel accident insurance, and any other pension
or retirement plans or programs and any other employee welfare benefit plans or
programs that may be sponsored by the Company from time to time, including any
plans that supplement the above-listed types of plans or programs, whether
funded or unfunded. The Executive's participation shall be based on, and the
calculation of all benefits shall be based on, the assumptions that the
Executive has met all service-period or other requirements for such
participation. The Executive shall be entitled to four weeks paid vacation per
year of employment, which shall accrue and otherwise be subject to the Company's
vacation policy for senior executives.
8. PERQUISITES.
The Executive shall be entitled to perquisites on the same basis as
provided to other senior level executives and, in any event, shall be entitled
to the following:
(a) Company-provided automobile (late-model top-of-the-line), including
reimbursement of expenses of operation, maintenance and insurance;
(b) Expenses of one country club; including, without limitations,
initiation fees;
(c) Residential security system;
(d) Reimbursement for reasonable financial planning, tax preparation
and estate planning fees. During the Term of Employment, the Company shall
maintain, and pay the premiums on, portable term insurance on the life of the
Executive in an amount no less than four times the Executive's Base Salary, from
time to time, the proceeds of which shall be payable to such beneficiary or
beneficiaries as the Executive specifies.
9. AIRCRAFT TRAVEL.
The Executive shall be entitled to first class air travel.
6
<PAGE>
10. REIMBURSEMENT OF BUSINESS AND OTHER EXPENSES.
The Executive is authorized to incur reasonable expenses in carrying
out his duties and responsibilities under this Agreement and the Company shall
promptly reimburse him for all reasonable business expenses incurred in
connection with carrying out the business of the Company, subject to
documentation in accordance with the Company's policy. The Company shall pay all
legal fees and expenses incurred by the Executive in connection with the
negotiation of the Executive's employment arrangements with the Company.
11. TERMINATION OF EMPLOYMENT.
(a) TERMINATION DUE TO DEATH. In the event that the Executive's
employment is terminated due to his death, his estate or his beneficiaries, as
the case may be, shall be entitled to the following:
(i) a lump sum payment equal to 60% of Base Salary that would
be payable for a period which is the greater of (A) 12 months or (B) the
remaining term of the Employment Agreement (without regard to early termination
thereof);
(ii) a Pro-Rata Annual Incentive Award for the year in which
the Executive's death occurs based on the target bonus for the year of
termination, payable when bonuses are paid to other officers; and
(iii) full vesting and exercisability of all outstanding
options which shall remain exercisable through the end of their originally
scheduled term.
(b) TERMINATION DUE TO DISABILITY. In the event that the Executive's
employment is terminated by either Party hereto due to the Executive's
Disability, he shall be entitled to the following:
(i) Disability benefits provided in accordance with the
long-term disability program in effect for senior executives at the Company;
provided, however, in no event shall such benefits provide the Executive less
than 60% of his then Base Salary to age 65;
(ii) Base Salary through the end of the month in which
Disability benefits commence;
(iii) a Pro-Rata Annual Incentive Award for the year in which
termination due to Disability occurs based on the target bonus for the year of
termination, payable when bonuses are paid to other officers;
(iv) full vesting and exercisability of all outstanding
options which shall remain exercisable through the end of their originally
scheduled term; and
(vi) continued participation in all medical, dental, vision
and hospitalization insurance coverage for himself, his spouse and eligible
dependents and in other employee benefit
7
<PAGE>
plans or programs in which he was participating on the date of the termination
of his employment for a period of 24 months following termination of employment
provided that if the Company's plans do not permit continuation of the
Executive's participation following his termination, the Company shall provide
the Executive with an amount which, after taxes, is sufficient for him to
purchase equivalent benefits.
In no event shall a termination of the Executive's employment for
Disability occur until the Party terminating his employment gives written notice
to the other Party in accordance with Section 22 below.
(c) TERMINATION BY THE COMPANY FOR CAUSE.
(i) A termination for Cause shall not take effect unless the
provisions of this subclause (i) are complied with. The Executive shall be given
written notice by the Board of the intention to terminate him for Cause, such
notice (A) to state in detail the particular act or acts or failure or failures
to act that constitute the grounds on which the proposed termination for Cause
is based and (B) to be given within 60 days of the Board learning of such act or
acts or failure or failures to act. In the event the proposed termination is
based on subclause (ii) of Section 1(d) above, the Executive shall have ten
calendar days after the date that such written notice has been given to the
Executive in which to cure such conduct. If he fails to cure such conduct, the
Executive shall then be entitled to a hearing before the Board, and, thereafter,
upon a determination by affirmative vote of no fewer than three-quarters of the
members of the Board that Cause exists he shall be terminated for Cause.
(ii) In the event the Company terminates the Executive's
employment for Cause:
(A) he shall be entitled to Base Salary through the
date of the termination; and
(B) all outstanding options which are not then
exercisable shall be forfeited; exercisable options shall remain exercisable
until the earlier of the ninetieth day after the date of termination or the
originally scheduled expiration date of the options.
(d) TERMINATION WITHOUT CAUSE, CONSTRUCTIVE TERMINATION WITHOUT CAUSE
OR NON-RENEWAL BY THE Company.
In the event the Executive's employment is terminated by the Company
without Cause, other than due to Disability or death, there is a Constructive
Termination without Cause or the Company gives notice of non-renewal pursuant to
Section 2 above, the Executive shall be entitled to the following benefits:
(i) Base Salary through the date of termination;
8
<PAGE>
(ii) pro-rata Annual Incentive Award for the year of
termination, award based on the target bonus for such year, payable promptly
following such termination;
(iii) a lump sum payment in an amount equal to the greater of
(A) the Executive's Base Salary for the remainder of the term (without regard to
early termination thereof) or (B) two times the Executive's Base Salary,
determined as provided in the last paragraph of this Section 11(d), payable
promptly following such termination;
(iv) a lump sum payment in an amount equal to the greater of
(A) the Executive's Base Salary for the remainder of the term (without regard to
early termination thereof), multiplied by the applicable target bonus
opportunity percentage or (B) two times the Executive's Annual Incentive Award,
based on the target bonus for the year of termination, payable promptly
following such termination;
(v) all outstanding options shall become fully vested and
exercisable and shall remain exercisable through the end of their originally
scheduled term; and
(vi) continued participation in all medical, dental, vision
and hospitalization insurance coverage for himself, his spouse and eligible
dependents and in all other employee and senior-level executive benefit plans or
programs in which he was participating on the date of the termination of his
employment for a period equal to the greater of (A) the remainder of the term or
(B) 24 months following termination of employment; provided, however, that if
the Executive becomes re-employed with another employer and is eligible to
receive medical or other welfare benefits under another employer-provided plan,
the medical and other welfare benefits described above shall be secondary to
those provided under such other plan during such applicable period of
eligibility.
In the event the Company's plans do not permit continuation of the Executive's
participation following his termination, the Company shall provide the Executive
with an amount which, after taxes, is sufficient for him to purchase equivalent
benefits.
For purposes of Section 11(d)(iv) and (v) above, Base Salary shall be
determined by the Base Salary at the annualized rate in effect on the date of
termination of the Executive's employment (subject to the last sentence of this
paragraph) adjusted for any scheduled increase pursuant to Section 4 above. Such
adjustment shall be made as follows: the aggregate scheduled remaining salary
payments for the remaining Term of Employment (without regard to early
termination thereof) shall be divided by the remaining months of the Term of
Employment (without regard to early termination thereof) and the resulting
monthly rate shall be multiplied by 12. For purposes of the first sentence of
this paragraph, if, prior to the termination of the Executive's employment
pursuant to this Section 11(d), the Base Salary has been reduced, the Base
Salary in effect on the date of termination of the Executive's employment shall
be deemed to be the highest Base Salary in effect prior to any such reduction.
9
<PAGE>
(e) VOLUNTARY TERMINATION. A termination of employment by the
Executive on his own initiative, other than a termination due to death or
Disability or a Constructive Termination without Cause, shall have the same
consequences as provided in Section 11(c)(ii) for a termination for Cause. A
voluntary termination under this Section 11(e) shall be effective 30 calendar
days after prior written notice is received by the Company, unless the Company
elects to make it effective earlier.
(f) CONSEQUENCES OF A CHANGE IN CONTROL.
Upon a Change in Control, all amounts, entitlements or
benefits in which the Executive is not yet vested shall become fully vested
including, without limitation, all outstanding options which shall remain
exercisable through the end of their regularly scheduled term.
In the event that any payment or benefit made or provided to
or for the benefit of the Executive in connection with this Agreement, the
Executive's employment with the Company, or the termination thereof (a
"Payment") is determined to be subject to any excise tax ("Excise Tax") imposed
by Section 4999 of the Code (or any successor to such Section), the Company
shall pay to the Executive, prior to the time any Excise Tax is payable with
respect to such Payment (through withholding or otherwise), an additional amount
which, after the imposition of all income, employment, excise and other taxes,
penalties and interest thereon, is equal to the sum of (i) the Excise Tax on
such Payment plus (ii) any penalty and interest assessments associated with such
Excise Tax. The determination of whether any Payment is subject to an Excise Tax
and, if so, the amount to be paid by the Company to the Executive and the time
of payment shall be made by an independent auditor (the "Auditor") selected
jointly by the Parties and paid by the Company. Unless the Executive agrees
otherwise in writing, the Auditor shall be a nationally recognized United States
public accounting firm that has not, during the two years preceding the date of
its selection, acted in any way on behalf of the Company or any of its
Affiliates. If the Parties cannot agree on the firm to serve as the Auditor,
then the Parties shall each select one accounting firm and those two firms shall
jointly select the accounting firm to serve as the Auditor.
(g) OTHER TERMINATION BENEFITS. In the case of any of the
foregoing terminations, the Executive or his estate shall also be entitled to:
(i) the balance of any incentive awards due for performance
periods which have been completed, but which have not yet been paid (subject to
deferral of payments to the extent the Executive has elected, irrevocably, such
deferral);
(ii) any expense reimbursements due the Executive; and
(iii) other benefits, including senior level executive
benefits, if any, in accordance with applicable plans and programs of the
Company.
10
<PAGE>
(h) NO MITIGATION; NO OFFSET. In the event of any termination of
employment under this Section 11, the Executive shall be under no obligation to
seek other employment and there shall be no offset against amounts due the
Executive under this Agreement on account of any claims asserted by the Company
or any remuneration attributable to any subsequent employment that he may
obtain.
(i) NATURE OF PAYMENTS. Any amounts due under this Section 11
are in the nature of severance payments considered to be reasonable by the
Company and are not in the nature of a penalty.
12. CONFIDENTIALITY; NON-COMPETITION.
(a) The Executive agrees that he will not, at any time during the Term
of Employment or thereafter, disclose or use any proprietary or confidential
information of the Company or any subsidiary or Affiliate of the Company,
obtained during the course of his employment, except as required in the course
of such employment or with the written permission of the Company or, as
applicable, any subsidiary or Affiliate of the Company or as may be required by
law, provided that, if the Executive receives legal process with regard to
disclosure of such information, he shall promptly notify the Company and
cooperate with the Company in seeking a protective order. For this purpose,
"proprietary or confidential information" shall include "know how," trade
secrets, customer lists, pricing policies, operational methods, technical
processes, formulae, inventions, research projects or other information
regarding the financial and business affairs of the Company that have not been
disclosed to the public or within the business community (other than due to a
breach by the Executive of this Section 12).
(b) The Executive agrees that at the time of the termination of his
employment with the Company, whether at the instance of the Executive or the
Company, and regardless of the reasons therefor, he will deliver to the Company,
and not keep or deliver to anyone else, any and all notes, files, memoranda,
papers and, in general, any and all physical matter containing information,
including any and all documents significant to the conduct of the business of
the Company or any subsidiary or Affiliate of the Company which are in his
possession, except for any documents for which the Company or any subsidiary or
Affiliate of the Company has given written consent to removal at the time of the
termination of the Executive's employment and his personal rolodex, personal
files, phone book and similar items.
(c) During the Term, the Executive shall not, directly or indirectly,
on his own behalf or on behalf of any other person or entity, enter the employ
of, or render any services to, any person, firm or corporation engaged in any
business competitive with the business then being conducted by the Company or
any of its then subsidiaries or affiliates; the Executive shall not engage in
such business on the Executive's own account; and the Executive shall not become
interested in any such business, directly or indirectly, as an individual,
partner, shareholder, director, officer, principal, agent, employee, trustee,
consultant, or in any other relationship or capacity; PROVIDED, HOWEVER, that
nothing contained in this Section 12(c) shall be deemed to
11
<PAGE>
prohibit the Executive from acquiring, solely as an investment, up to five
percent (5%) of the outstanding shares of capital stock of any public
corporation. In addition, the Executive shall, at all times, be subject to the
noncompetition, confidentiality and ownership of inventions covenants required
pursuant to the Management Incentive Plan.
(d) The Executive agrees that the Company's remedies at law would be
inadequate in the event of a breach or threatened breach of this Section 12;
accordingly, the Company shall be entitled, in addition to its rights at law, to
seek an injunction and other equitable relief without the need to post a bond.
13. RESOLUTION OF DISPUTES.
Any disputes arising under or in connection with this Agreement shall
be resolved by binding arbitration, to be held in Manhattan, in accordance with
the rules and procedures of the American Arbitration Association. Judgment upon
the award rendered by the arbitrator may be entered in any court having
jurisdiction thereof. Each Party shall bear his or its own costs of the
arbitration or litigation, except that the Company shall bear all such costs if
the Executive prevails in such arbitration or litigation on any material issue.
14. INDEMNIFICATION.
(a) The Company agrees that if the Executive is made a party, or is
threatened to be made a party, to any action, suit or proceeding, whether civil,
criminal, administrative or investigative (a "Proceeding"), by reason of the
fact that he is or was a director, officer or employee of the Company or is or
was serving at the request of the Company as a director, officer, member,
employee or agent of another corporation, partnership, joint venture, trust or
other enterprise, including service with respect to employee benefit plans,
whether or not the basis of such Proceeding is the Executive's alleged action in
an official capacity while serving as a director, officer, member, employee or
agent, the Executive shall be indemnified and held harmless by the Company to
the fullest extent legally permitted or authorized by the Company's certificate
of incorporation or bylaws or resolutions of the Company's Board of Directors
or, if greater, by the laws of the State of Delaware, against all cost, expense,
liability and loss (including, without limitation, attorney's fees, judgments,
fines, ERISA excise taxes or other liabilities or penalties and amounts paid or
to be paid in settlement) reasonably incurred or suffered by the Executive in
connection therewith, and such indemnification shall continue as to the
Executive even if he has ceased to be a director, member, employee or agent of
the Company or other entity and shall inure to the benefit of the Executive's
heirs, executors and administrators. The Company shall advance to the Executive
all reasonable costs and expenses incurred by him in connection with a
Proceeding within 20 calendar days after receipt by the Company of a written
request for such advance. Such request shall include an undertaking by the
Executive to repay the amount of such advance if it shall ultimately be
determined that he is not entitled to be indemnified against such costs and
expenses; provided that the amount of such obligation to repay shall be limited
to the after-tax amount of any such advance except to the
12
<PAGE>
extent the Executive is able to offset such taxes incurred on the advance by the
tax benefit, if any, attributable to a deduction for the repayment.
(b) Neither the failure of the Company (including its board of
directors, independent legal counsel or stockholders) to have made a
determination prior to the commencement of any proceeding concerning payment of
amounts claimed by the Executive under Section 14(a) above that indemnification
of the Executive is proper because he has met the applicable standard of
conduct, nor a determination by the Company (including its board of directors,
independent legal counsel or stockholders) that the Executive has not met such
applicable standard of conduct, shall create a presumption in any judicial
proceeding that the Executive has not met the applicable standard of conduct.
(c) The Company agrees to continue and maintain a directors' and
officers' liability insurance policy covering the Executive in an amount of no
less than $50 million.
15. ASSIGNABILITY; BINDING NATURE.
This Agreement shall be binding upon and inure to the benefit of the
Parties and their respective successors, heirs (in the case of the Executive)
and assigns. Rights or obligations of the Company under this Agreement may be
assigned or transferred by the Company pursuant to a merger or consolidation in
which the Company is not the continuing entity, or the sale or liquidation of
all or substantially all of the assets of the Company, provided that the
assignee or transferee is the successor to all or substantially all of the
assets of the Company and such assignee or transferee assumes the liabilities,
obligations and duties of the Company, as contained in this Agreement, either
contractually or as a matter of law. The Company further agrees that, in the
event of a sale of assets or liquidation as described in the preceding sentence,
it shall take whatever action it reasonably can in order to cause such assignee
or transferee to expressly assume the liabilities, obligations and duties of the
Company hereunder. No rights or obligations of the Executive under this
Agreement may be assigned or transferred by the Executive other than his rights
to compensation and benefits, which may be transferred only by will or operation
of law.
16. ENTIRE AGREEMENT.
This Agreement contains the entire understanding and agreement between
the Parties concerning the subject matter hereof and supersedes all prior
agreements, including without limitation the 1998 Agreement, understandings,
discussions, negotiations and undertakings, whether written or oral, between the
Parties with respect thereto.
13
<PAGE>
17. AMENDMENT OR WAIVER.
No provision in this Agreement may be amended unless such amendment is
agreed to in writing and signed by the Executive and an authorized officer of
the Company. No waiver by either Party of any breach by the other Party of any
condition or provision contained in this Agreement to be performed by such other
Party shall be deemed a waiver of a similar or dissimilar condition or provision
at the same or any prior or subsequent time. Any waiver must be in writing and
signed by the Executive or an authorized officer of the Company, as the case may
be.
18. SEVERABILITY.
In the event that any provision or portion of this Agreement shall be
determined to be invalid or unenforceable for any reason, in whole or in part,
the remaining provisions of this Agreement shall be unaffected thereby and shall
remain in full force and effect to the fullest extent permitted by law so as to
achieve the purposes of this Agreement.
19. SURVIVORSHIP.
Except as otherwise expressly set forth in this Agreement, the
respective rights and obligations of the Parties hereunder shall survive any
termination of the Executive's employment. This Agreement itself (as
distinguished from the Executive's employment) may not be terminated by either
Party without the written consent of the other Party. Upon the expiration of the
term of the Agreement, the respective rights and obligations of the Parties
shall survive such expiration to the extent necessary to carry out the
intentions of the Parties as embodied in the rights (such as vested rights) and
obligations of the Parties under this Agreement.
20. REFERENCES.
In the event of the Executive's death or a judicial determination of
his incompetence, reference in this Agreement to the Executive shall be deemed,
where appropriate, to refer to his beneficiary, estate or other legal
representative.
21. GOVERNING LAW.
This Agreement shall be governed in accordance with the laws of
Delaware without reference to principles of conflict of laws.
14
<PAGE>
22. NOTICES.
All notices and other communications required or permitted hereunder
shall be in writing and shall be deemed given when (a) delivered personally, (b)
delivered by certified or registered mail, postage prepaid, return receipt
requested or (c) delivered by overnight courier (provided that a written
acknowledgment of receipt is obtained by the overnight courier) to the Party
concerned at the address indicated below or to such changed address as such
Party may subsequently give such notice of:
<PAGE>
If to the Company: Sunbeam Corporation
2381 Executive Center Drive
Boca Raton, FL 33431
If to the Executive: Mr. Bobby G. Jenkins
Boca Raton, FL
23. HEADINGS.
The headings of the sections contained in this Agreement are for
convenience only and shall not be deemed to control or affect the
meaning or construction of any provision of this Agreement.
24. COUNTERPARTS.
This Agreement may be executed in two or more counterparts.
IN WITNESS WHEREOF, the undersigned have executed this Agreement as of
the date first written above.
Sunbeam Corporation
By:
----------------------------------
Ronald H. Dunbar
Senior Vice President
----------------------------------
Bobby G. Jenkins
15
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
SUNBEAM CORPORATION FINANCIAL STATEMENTS FOR THE PERIODS ENDED MARCH 31, 2000
AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-2000
<PERIOD-START> JAN-01-2000
<PERIOD-END> MAR-31-2000
<CASH> 23,098
<SECURITIES> 0
<RECEIVABLES> 404,875
<ALLOWANCES> 43,745
<INVENTORY> 539,544
<CURRENT-ASSETS> 991,977
<PP&E> 671,321
<DEPRECIATION> (218,718)
<TOTAL-ASSETS> 3,239,940
<CURRENT-LIABILITIES> 649,871
<BONDS> 2,308,592
0
0
<COMMON> 1,074
<OTHER-SE> (69,161)
<TOTAL-LIABILITY-AND-EQUITY> 3,239,940
<SALES> 539,053
<TOTAL-REVENUES> 539,053
<CGS> 405,764
<TOTAL-COSTS> 405,764
<OTHER-EXPENSES> 0
<LOSS-PROVISION> (2,492)
<INTEREST-EXPENSE> 52,487
<INCOME-PRETAX> (57,642)
<INCOME-TAX> 1,667
<INCOME-CONTINUING> (59,400)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (59,400)
<EPS-BASIC> (0.55)
<EPS-DILUTED> (0.55)
</TABLE>
