-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, Dly1dZ/IocbVNfUV3P4nYqv+msJJ6B+leC2ZTXDn2J2gfE63uwQKudLn28KvS9DI /V5pSYkm3CNMy5+KsoByjQ== 0001047469-98-011021.txt : 19980325 0001047469-98-011021.hdr.sgml : 19980325 ACCESSION NUMBER: 0001047469-98-011021 CONFORMED SUBMISSION TYPE: 10-K405 PUBLIC DOCUMENT COUNT: 12 CONFORMED PERIOD OF REPORT: 19971231 FILED AS OF DATE: 19980324 SROS: NYSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: COLEMAN CO INC CENTRAL INDEX KEY: 0000021627 STANDARD INDUSTRIAL CLASSIFICATION: ELECTRIC LIGHTING & WIRING EQUIPMENT [3640] IRS NUMBER: 133639257 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-K405 SEC ACT: SEC FILE NUMBER: 001-00988 FILM NUMBER: 98571394 BUSINESS ADDRESS: STREET 1: PO BOX 2931 CITY: WICHITA STATE: KS ZIP: 67201 BUSINESS PHONE: 3032022400 MAIL ADDRESS: STREET 1: PO BOX 2931 CITY: WICHITA STATE: KS ZIP: 67201 10-K405 1 FORM 10-K405 UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. FORM 10-K [X] Annual Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 For the fiscal year ended DECEMBER 31, 1997 ------------------------------ or [ ] Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 For the transition period from ___________________ to ____________________ Commission file Number 1-988 THE COLEMAN COMPANY, INC. (Exact name of registrant as specified in its charter) DELAWARE 13-3639257 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 2111 E 37TH STREET NORTH, WICHITA, KANSAS 67219 (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code: 316-832-2700 Securities registered pursuant to Section 12(b) of the Act: Name of each exchange Title of each class on which registered ------------------- --------------------- COMMON STOCK, $.01 PAR VALUE NEW YORK STOCK EXCHANGE SAME CLASS THE PACIFIC STOCK EXCHANGE (unlisted trading privileges) SAME CLASS MIDWEST STOCK EXCHANGE (unlisted trading privileges) Securities registered pursuant to Section 12(g) of the Act: NONE Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. X Yes No --- --- Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. [X] The aggregate market value of the voting stock of the registrant held by non-affiliates, based upon the closing sale price of the common stock on March 3, 1998, was approximately $307,672,838. As of March 3, 1998, there were 53,610,950 shares of the registrant's common stock outstanding, of which 44,067,520 shares were held by an indirect wholly-owned subsidiary of Mafco Holdings Inc. Exhibit Index at pages 39 through 45. THE COLEMAN COMPANY, INC. AND SUBSIDIARIES 1997 FORM 10-K ANNUAL REPORT TABLE OF CONTENTS PART I Page ---- Item 1. Business................................................... 3 Item 2. Properties................................................. 9 Item 3. Legal Proceedings.......................................... 10 Item 4. Submission of Matters to a Vote of Security Holders........ 11 PART II Item 5. Market for Registrant's Common Equity and Related Stockholder Matters............................... 12 Item 6. Selected Financial Data.................................... 13 Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations................................. 14 Item 8. Financial Statements and Supplementary Data................ 21 Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure.................................. 21 PART III Item 10. Directors and Executive Officers of the Registrant......... 21 Item 11. Executive Compensation..................................... 25 Item 12. Security Ownership of Certain Beneficial Owners and Management................................................ 36 Item 13. Certain Relationships and Related Transactions............. 37 PART IV Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K.................................................. 39 Signatures................................................. 46 2 PART I ITEM 1. BUSINESS OVERVIEW The Coleman Company, Inc. ("Coleman" or the "Company") is a leading manufacturer and marketer of consumer products for outdoor recreation and home hardware use on a global basis. The Company's products have been sold domestically and internationally under the Coleman brand name since the 1920s. The Company believes its strong market position is attributable primarily to its well-recognized trademarks, particularly the Coleman brand name, broad product line, product quality and innovation, and marketing, distribution and manufacturing expertise. The Company has two primary classes of products, outdoor recreation and hardware. The Company's principal outdoor recreation products include a comprehensive line of lanterns and stoves, fuel-related products such as disposable fuel cartridges, a broad range of coolers and jugs, sleeping bags, backpacks, daypacks, adventure travel gear, tents, outdoor folding furniture, portable electric lights, spas, camping accessories and other products. The Company's principal hardware products include portable generators, portable and stationary air compressors, and safety and security products such as smoke alarms, carbon monoxide detectors and thermostats. The Company has entered into a Stock Purchase Agreement dated as of February 18, 1998 (the "CSS Sale Agreement") with Ranco Incorporated of Delaware ("Ranco") and Siebe plc, the parent of Ranco, for the sale of Coleman Safety & Security Products, Inc. ("CSS"), which manufactures such safety and security products. The Company's products, which are mostly used for outdoor recreation, home improvement projects, and emergency preparedness, are distributed predominantly through mass merchandisers, home centers and other retail outlets. BACKGROUND Coleman is a subsidiary of Coleman Worldwide Corporation ("Coleman Worldwide"). Coleman Worldwide is an indirect wholly-owned subsidiary of CLN Holdings Inc. ("CLN Holdings"), an indirect wholly-owned subsidiary of New Coleman Holdings Inc. ("Holdings"), an indirect wholly-owned subsidiary of MacAndrews & Forbes Holdings Inc. ("MacAndrews Holdings"), a corporation wholly owned through Mafco Holdings Inc. ("Mafco" and, together with MacAndrews Holdings, "MacAndrews & Forbes") by Ronald O. Perelman. Coleman Worldwide owns 44,067,520 shares of the common stock of Coleman which represented approximately 82% of the outstanding Coleman common stock as of December 31, 1997. On February 27, 1998, CLN Holdings and Coleman (Parent) Holdings Inc., the parent company of CLN Holdings, entered into an Agreement and Plan of Merger (the "CLN Holdings Merger Agreement") with Sunbeam Corporation ("Sunbeam") and a wholly-owned subsidiary of Sunbeam ("Laser Merger Sub"). The CLN Holdings Merger Agreement provides that, among other things, Laser Merger Sub will be merged (the "CLN Holdings Merger") with CLN Holdings. Pursuant to the CLN Holdings Merger Agreement, the shares of CLN Holdings' common stock issued and outstanding immediately prior to the effective time of the CLN Holdings Merger will be converted into the right to receive in the aggregate 14,099,749 shares of Sunbeam's common stock and $159,957,756 in cash, without interest. In addition, the outstanding $732.0 million principal amount at maturity of Senior Secured Discount Exchange Notes due 2001 (the "Escrow Notes") of CLN Holdings will remain an obligation of CLN Holdings following the CLN Holdings Merger. Coincident with the execution of the CLN Holdings Merger Agreement, the Company, Sunbeam and a wholly-owned subsidiary of Sunbeam ("Merger Sub"), entered into an Agreement and Plan of Merger (the "Coleman Merger Agreement" and with the CLN Holdings Merger Agreement, collectively the "Merger Agreements"), providing that, among other things, Merger Sub will be merged (the "Coleman Merger") with the Company. Pursuant to the Coleman Merger Agreement, each share of the Company's common stock issued and 3 outstanding immediately prior to the effective time of the Coleman Merger (other than shares held by Coleman Worldwide and dissenting shares, if any) will be converted into the right to receive (a) 0.5677 of a share of Sunbeam common stock, with cash paid in lieu of fractional shares, and (b) $6.44 in cash, without interest. Consummation of the CLN Holdings Merger is subject to the expiration of the applicable waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, and the satisfaction of certain other customary conditions. It is currently anticipated that the CLN Holdings Merger will be completed later this month or early next month. Consummation of the Company Merger is subject to the completion of the CLN Holdings Merger at the filing of certain definitive documents required in connection therewith with the Securities and Exchange Commission. It is anticipated that the Company Merger will be consummated later this Spring. Following consummation of the CLN Holdings Merger, CLN Holdings will be a direct wholly-owned subsidiary of Sunbeam. Following consummation of the Coleman Merger, the Company will be an indirect wholly-owned subsidiary of Sunbeam. The Company has made several acquisitions in recent years designed to expand its product lines. In 1996, the Company ac quired the French company Application des Gaz ("Camping Gaz") which is a leader in the European camping equipment market and also acquired the assets of Seatt Corporation ("Seatt"), a leading designer, manufacturer and distributor of smoke alarms, thermostats and carbon monoxide detectors. In 1995, the Company acquired Sierra Corporation of Fort Smith, Inc. ("Sierra"), a manufacturer of portable outdoor and recreational folding furniture and accessories and substantially all of the assets of Active Technologies, Inc. ("ATI"), a manufacturer of technologically advanced lightweight generators and battery charging equipment. In 1994, the Company acquired substantially all of the assets of Eastpak, Inc. and all of the capital stock of M.G. Industries, Inc. (together, "Eastpak"), a leading designer, manufacturer and distributor of branded daypacks, sports bags and related products; and substantially all of the assets of Sanborn Manufacturing Company ("Sanborn"), a manufacturer of a broad line of portable and stationary air compressors. The Company also restructured certain operations. In 1994, the Company completed the restructuring of its German manufacturing operations (the "German Restructuring"), including selling its plastic cooler business located in Inheiden, Germany and Loucka, Czech Republic. In 1996, the Company closed the Brazilian manufacturing operations it had acquired from Metal Yanes, Ltda. in 1994. In 1997, the Company undertook further restructuring including (i) exiting various low margin products, including pressure washers, (ii) closing and relocating certain administrative and sales offices, and (iii) closing several manufacturing facilities. On February 18, 1998, the Company entered into the CSS Sale Agreement. The sale price is approximately $105.0 million and is subject to adjustment. The closing under the CSS Sale Agreement is expected to occur by the end of March 1998. In addition, the Company will license to Ranco the right to use the "Coleman" name on retail smoke alarms and carbon monoxide detectors, and certain other products. BUSINESS STRATEGY The Company's business strategy is to build upon its reputation as a leading manufacturer and marketer of high quality brand name consumer products for the outdoor recreation and hardware markets. The specific operating strategies include: FOCUS ON QUALITY AND SERVICE. Since the business of the Company was founded in the early 1900's, Coleman has built a reputation for its quality products and superior customer service. The Company is committed to continuing, and building upon, this reputation. INTRODUCING NEW PRODUCTS. The Company plans to continue introducing new products. Management intends to focus on leveraging the Company's existing technologies, processes and expertise to maximize the speed and efficiency of new product development and introductions. 4 DEVELOPING EXISTING BRANDS. The Company believes it has some of the more prominent brand names for outdoor recreation and home hardware use and plans to strengthen these brands through superior product design, advertising, and promotion. EXPANDING INTERNATIONAL MARKETS. Coleman is currently a market leader in several product categories in various markets around the world, including the United States, Europe and Japan. The Company plans to utilize its well-established infrastructures in these markets to expand its core product categories and to invest appropriately to develop and build businesses in new geographic markets. DEVELOPING HUMAN RESOURCES. The Company plans to continue developing, training, and motivating its personnel at all levels to achieve excellence, including developing and building its team of experienced managers. OPERATING EFFICIENCY. The Company plans to continue seeking ways to further improve the quality and efficiency of its business processes in order to ensure quality, realize cost savings, and improve customer service. Following the consummation of the CLN Holdings Merger, such business strategy may change. PRODUCTS OUTDOOR RECREATION The Company's principal products include a comprehensive line of lanterns and stoves for outdoor recreational use, fuel-related products such as disposable fuel cartridges, a broad range of coolers and jugs, sleeping bags, backpacks, tents, outdoor folding furniture, portable electric lights, spas, camping accessories and other products. These products are used predominantly in outdoor recreation, but many products have applications in emergency preparedness and some are also used in home improvement projects and are distributed predominantly through mass merchandisers, home centers and other retail outlets. LANTERNS AND STOVES. Coleman believes it is the leading manufacturer of lanterns and stoves for outdoor recreational use in the world. Coleman's liquid fuel appliances include single and dual fuel-powered lanterns and stoves. Coleman also manufactures a broad range of propane- and butane-fueled lanterns and stoves, which allow the user to regulate the intensity of light or heat. These products are manufactured at the Company's facilities located in the United States and Europe and are marketed under the Coleman, Campingaz and Peak 1 brand names. FUEL. The Company is a leading supplier to the worldwide camping and outdoor recreation market of propane and butane cartridges and camping fuel. In addition to manufacturing and filling disposable propane cartridges and refillable liquid propane gas cylinders, Coleman sells camping fuel that is refined and canned to its specifications by various suppliers, fills butane gas cartridges and purchases butane-filled gas cartridges from third-party vendors for sale to customers throughout the world. These products are marketed under the Coleman, Campingaz and Peak 1 brand names. COOLERS AND JUGS. The Company manufactures and sells a wide variety of insulated coolers and jugs and reusable ice substitutes. The Company's cooler line includes personal coolers for camping, picnics or lunch box use; large coolers; beverage coolers for use at work sites and recreational and social events; and soft-sided coolers. Coleman's cooler products are manufactured predominantly at the Company's facilities located in the United States and are marketed under the Coleman brand name worldwide and under the Campingaz brand name in Europe. RECREATIONAL SOFT GOODS. The Company designs, manufactures or sources, and markets textile products, including tents, sleeping bags, backpacks, daysacks, sports bags, duffle bags and rucksacks. These products are 5 manufactured at the Company's facilities located in the United States and Puerto Rico or sourced from third-party vendors who manufacture them to the Company's specifications. The Company's tents and sleeping bags are marketed under the Coleman and Peak 1 brand names, while its daysacks, sport bags and related products are marketed under the Coleman, Eastpak and the licensed Timberland brand names. OUTDOOR FURNITURE. The Company manufactures and markets aluminum- and steel-framed, portable, outdoor, folding furniture under the Coleman and Sierra Trails brand names. These products are manufactured predominantly at the Company's facilities located in the United States. ELECTRIC LIGHTS. The Company designs and markets electric lighting products that are manufactured by others and sold under the Coleman, Powermate, Job-Pro and Campingaz brand names. These products include portable electric lights such as hand held spotlights, flashlights and fluorescent lanterns and a line of rechargeable lanterns and flashlights. SPAS. The Company manufactures and markets a wide range of spas, which are made primarily from acrylic, for residential applications. These products are manufactured at the Company's facility located in the United States and are distributed through a nationwide dealer network. CAMPING ACCESSORIES. The Company designs, sources and markets a variety of small accessories for camping and outdoor use, such as cookware and utensils. These products are manufactured by third-party vendors to Coleman's specifications and are marketed under the Coleman brand name. HARDWARE The Company's principal products include portable generators, portable and stationary air compressors. In addition, through CSS, the Company manufactures and markets safety and security products such as smoke alarms, carbon monoxide detectors and thermostats. On February 18, 1998, the Company entered into the CSS Sale Agreement and the closing under such agreement is expected to occur by the end of March 1998. GENERATORS. The Company is a leading manufacturer and distributor of portable generators in the United States and worldwide. Generators are used for home improvement projects, emergency preparedness and outdoor recreation. These products are manufactured by the Company, using engines manufactured by Tecumseh, Briggs & Stratton, Vanguard, Honda and Kawasaki, at its facilities located in the United States, are marketed under the Coleman Powermate brand name and are distributed predominantly through mass merchandisers and home center chains. The Company also produces advanced, light-weight generators incorporating proprietary technology. AIR COMPRESSORS. The Company's air compressors are manufactured at its facilities located in the United States, are marketed under the Coleman Powermate brand name and are distributed predominantly through mass merchandisers and home center chains. SAFETY AND SECURITY PRODUCTS. The Company manufactures a range of safety and security products for residential use, primarily smoke alarms, carbon monoxide detectors and thermostats. The Company manufactures these products at its facilities located in Mexico and markets them under the Firex, Code 1 and Coleman Sheltra brand names. These products are distributed predominantly through electrical wholesalers, mass merchandisers, and home center chains in North America and selected foreign countries, primarily Australia and the United Kingdom. 6 SALES AND MARKETING The following table sets forth the net revenues by class of products for the years ended December 31, 1997, 1996 and 1995. 1997 1996 1995 -------- -------- ------ (In millions) Outdoor Recreation $ 859.7 $ 859.6 $688.9 Hardware 294.6 360.6 244.7 -------- -------- ------ Total $1,154.3 $1,220.2 $933.6 -------- -------- ------ -------- -------- ------
In the United States and Canada, the Company's outdoor recreation products are sold by the Company's own sales force and, to a lesser extent, by sales representatives that serve specialty markets and related distribution channels. Spa products, however, are sold by independent sales representatives to a nationwide dealer network and, to a lesser extent, by regional sales managers employed by the Company. The Company's hardware products are sold by Company and independent sales representatives that serve specialty markets and related distribution channels. The Company promotes its products through national and local advertising campaigns, frequently coordinating with retailers' promotions to maximize the benefits of its advertising efforts. Coleman's major customers include Canadian Tire, Home Depot, Kmart, Price/Costco, Target, and Wal-Mart. Wal-Mart and its affiliates accounted for approximately 13% of the Company's 1997 consolidated net revenues. Although the loss of Wal-Mart as a customer could have an adverse effect on the Company, the Company believes its relationship with Wal-Mart is satisfactory and the Company has no reason to believe Wal-Mart will not continue as a customer. International sales represented 31%, 32% and 24% of net revenues for the years ended December 31, 1997, 1996 and 1995, respectively. For 1997, approximately 80% of the Company's international sales were in Japan and Europe, with the balance in Latin America, Asia-Pacific, Africa and the Middle East. The Company has sales administration offices and warehouse and distribution facilities in Australia, Austria, Belgium, Brazil, the Czech Republic, France, Germany, Hungary, Italy, Japan, The Netherlands, Portugal, Spain, Switzerland, the United Arab Emirates and the United Kingdom. Each office is responsible for sales and distribution of the Company's products in the territories assigned to that office. The Company's direct export operations market its products directly to international customers in certain other markets through Company sales managers, independent distributors, and commissioned sales representatives. In total, the Company sells its products in more than 100 countries. SEASONALITY The Company's sales generally are highest in the second quarter of the year and lowest in the fourth quarter. As a result of this seasonality, the Company has generally incurred a loss in the fourth quarter. The Company's sales may be affected by weather conditions. COMPETITION The markets in which the Company operates are generally highly competitive, based primarily on product quality, product innovation, price and customer service and support. The Company's competitors vary according to product line. The Company believes that no other company produces and markets the breadth of camping and outdoor recreation products marketed by the Company. Lanterns and stoves compete with, among others, products offered by Century Primus (a unit of Century Tool & Manufacturing Inc.), American Camper (a unit 7 of Brunswick Corporation) and Dayton Hudson Corporation. The Company's insulated cooler and jug products compete with products offered by Rubbermaid Incorporated, Igloo Products Corp. (a unit of Brunswick Corporation) and The Thermos Company (a unit of Nippon Sanso KK). The Company's sleeping bags compete with, among others, American Recreation and Slumberjack (units of Kellwood Company), Academy Broadway Corp. and MZH Inc. (a unit of Brunswick Corporation), as well as certain private label manufacturers. In the tent market, the Company competes with, among others, Sears, Wenzel (a unit of Kellwood Company), Eureka (a unit of Johnson Worldwide Associates, Inc.) and Mountain Safety Research (a unit of Thaw Corporation), as well as certain private label manufacturers. The Company's backpack products compete with, among others, American Camper (a unit of Brunswick Corporation), JanSport (a unit of VF Corporation), Nike, Outdoor Products and Kelty (a unit of Kellwood Company), as well as certain private label manufacturers. The Company's competition in the electric light business includes, among others, Eveready (a unit of Ralston Purina Company) and Rayovac Corporation. The Company's spas compete with, among others, Watkins Manufacturing Corporation (d.b.a. Hot Springs, a unit of Masco Corporation) and Clark Manufacturing Company, Inc. (d.b.a. Sundance Spas). The Company's camping accessories compete primarily with Coughlan's. The Company's primary competitors in the generator business are Generac Corporation, Honda Motor Co., Ltd., Kawasaki and Yamaha. Primary competitors in the air compressor business include DeVilbiss and Campbell Hausfield. The Company's safety and security products compete primarily with First Alert, American Sensor and Nighthawk (a unit of Williams Holding PLC). In addition, the Company competes with various other entities in international markets. PATENTS, TRADEMARKS, AND LICENSES The Company's operations are not significantly dependent upon any single or related group of patents. While the Company does not believe any single trademark is material to its business other than the "Coleman" word mark and the "Coleman in parallelogram with lantern symbol" logo mark and the "Eastpak" trademark, it believes its trademarks taken as a whole are material to its business. Accordingly, the Company has taken actions to protect its interests in all such trademarks. The Company licenses the Coleman name and logo under two types of licensing arrangements: general merchandise licenses and licenses to purchasers of businesses divested by the Company and Holdings. The Company's general merchandise licensing activities involve licensing the Coleman name and logo, for a royalty fee, to certain companies that manufacture and sell products that complement the Company's product lines. RESEARCH AND DEVELOPMENT The Company's research and development efforts are linked to the process of marketing its products. New products and improvements to existing products are developed based upon the perceived needs and demands of consumers. The Company's research and development is performed primarily by an in-house team of marketing managers, engineers, draftsmen and product testers using tools such as computer-assisted design and a variety of consumer research techniques. Research and development expenditures are expensed as incurred. The amounts charged against operations for the years ended December 31, 1997, 1996 and 1995 were $11.9 million, $11.1 million and $6.5 million, respectively. INDUSTRY SEGMENTS, FOREIGN AND DOMESTIC OPERATIONS The Company operates in a single business segment. Certain information concerning geographic segments of the Company is set forth in Note 18 of the Notes to Consolidated Financial Statements contained elsewhere in this Form 10-K Annual Report. EMPLOYEES As of December 31, 1997 the Company employed approximately 3,700 persons full time in the United States and 2,300 persons internationally. None of the Company's United States employees are represented by unions. The Company's Canadian warehouse employees are represented by a union. All of the approximately 8 525 production employees at the Company's operations in France and Italy and the approximately 900 production employees at CSS's operations in Mexico are represented by unions. The Company believes that its relations with its employees are satisfactory. ITEM 2. PROPERTIES The Company's principal properties as of December 31, 1997 are as follows: Building Square Location Principal Use Footage -------- ------------- -------- St Genis Laval, France Manufacture of lanterns and stoves, filling of gas 2,070,000 cylinders, and assembly of barbeques; office and warehouse Wichita, KS Manufacture of lanterns and stoves and insulated 1,197,000 coolers and jugs; research and development and design operations; office and warehouse New Braunfels, TX Manufacture of insulated coolers and other plastic 338,000 products Lake City, SC Manufacture of sleeping bags 168,000 Springfield, MN Manufacture of air compressors 166,000 Cedar City, UT Manufacture of sleeping bags 160,000 Kearney, NE Manufacture/assembly of portable generators and pressure 155,000 washers; office and warehouse Pocola, OK Manufacture of outdoor folding furniture 123,000 Maize, KS Manufacture of propane cylinders and machined parts 116,000 Chihuahua, Mexico * Manufacture of smoke alarms and carbon monoxide detectors 110,000 Morovis and Orocovis, Manufacture of daypacks, sports bags, and related 110,000 Puerto Rico products; office and warehouse Chandler, AZ Manufacture of acrylic spas; office and warehouse 78,000 Centenaro di Lonato, Italy Manufacture of butane lanterns, stoves and heaters; 77,000 office and warehouse
* To be disposed of as part of the CSS Sale Agreement. The Wichita, Kansas; New Braunfels, Texas; Lake City, South Carolina; Cedar City, Utah; Pocola, Oklahoma; Chandler, Arizona; Springfield, Minnesota; and Centenaro di Lonato, Italy facilities are owned by the Company. The owned facilities at Kearney, Nebraska reside on land leased under three leases that expire in 2007 with options to extend for three additional ten-year periods. The Maize, Kansas facility is leased by the Company under leases that terminate in 2005. The Company has an option to purchase this facility at the end of the lease period. The Puerto Rico facilities in Morovis and Orocovis are leased for terms that expire in 1999 and 2007, respectively. The warehouse portion of St. Genis Laval, France is leased for terms that expire in 1998, the remaining facility is owned; and 48,000 square feet of the Chihuahua, Mexico property are leased for terms that expire in 2004, the remaining facility is owned. Company management considers the Company's facilities to be well maintained, adequate, suitable and satisfactory for the Company's operations, and believes that the Company's facilities provide sufficient capacity for its production requirements. 9 PRODUCT LIABILITY AND INSURANCE The Company is party to various product liability lawsuits relating to its products and incidental to its business. The Company believes that many of the personal injury and damage claims brought against it arise from the misuse or misapplication of the Company's products. In such cases, the Company vigorously defends against such actions. Since the beginning of 1986, in only one policy period did the Company have a product liability award that exceeded the individual per occurrence self-insured retention amount and product liability awards that exceeded the aggregate self-insured retention amount. There can be no assurance, however, that the Company's future product liability experience will be consistent with its past experience. The Company believes that the ultimate conclusion of the various pending product liability claims and lawsuits of the Company will not have a material adverse effect on the financial position or results of operations of the Company. The Company participates in product liability insurance programs maintained by Holdings and reimburses Holdings for its allocable share of the cost of such coverage. Such liability insurance is written on a "claims made" basis. A "claims made" policy generally insures the Company for any claims made while such insurance coverage is in effect regardless of when the incident or event occurred. There can be no assurance that the Company's insurance carrier would not discontinue the Company's policy after the occurrence of, but prior to a claims with respect to, an incident or event giving rise to a claim. The Company believes that, in such event, it would be able to obtain insurance coverage that would cover the particular incident or event and replace the Company's existing policy, although there can be no assurance that the Company could obtain such coverage or that it would be on terms comparable to its existing coverage. Under Holdings' product liability insurance coverages, the Company retains liability in the amount of $2 million per occurrence and $4 million in the aggregate for the policy year. The Company believes that this type and level of coverage is adequate. For a discussion of the Company's policy on accrual of reserves for the self-insured portions of the risks covered by the insurance programs maintained by Holdings, see Notes 1 and 12 of the Consolidated Financial Statements of the Company. As a result of and effective with the consummation of the CLN Holdings Merger, the Company will no longer participate in insurance programs sponsored by Holdings (except for claims made prior to the consummation of the CLN Holdings Merger), and will either obtain replacement insurance on its own and/or obtain replacement insurance under policies maintained by Sunbeam. ITEM 3. LEGAL PROCEEDINGS ENVIRONMENTAL MATTERS GILBERT AND MOSLEY SITE. As a result of investigations undertaken in 1986, the Kansas Department of Health and Environment ("KDHE") discovered that groundwater in the downtown Wichita area (the "Gilbert and Mosley Site") was contaminated with volatile organic chemicals ("VOCs"). Coleman occupied a facility within the boundaries of the Gilbert and Mosley Site. Subsequent investigations in the area, including investigations in November 1988 by Coleman, indicated that the groundwater beneath the Coleman property is contaminated with VOCs. Coleman is in the process of remediating the contamination on its property. The City of Wichita has entered into a voluntary agreement with KDHE in which the City agreed to investigate and then remediate contamination in the Gilbert and Mosley Site. Coleman has entered into an agreement with KDHE in which Coleman agreed to perform a similar study for the Coleman property and to implement remedial activities at its property. In addition, Coleman entered into an agreement with the City of Wichita in which Coleman agreed to fund its proportionate share of the City's study and remediation of the Gilbert and Mosley site. 10 All previously filed lawsuits alleging that properties in the downtown Wichita area were diminished in value as a result of discharges of volatile organic chemicals from Coleman's downtown Wichita facility have been settled and dismissed. MAIZE SITE. Coleman has undertaken a soil and groundwater investigation at its facility in Maize, Kansas (the "Maize Site"). Results indicate that limited VOC contamination is present in the groundwater under and to the southeast of the facility. The data has been reported to the KDHE, and Coleman has entered into an agreement with KDHE to implement appropriate remedial actions. The remediation system has been installed, and Coleman is in the process of remediating the contaminated groundwater. NORTHEAST SITE. In 1990 Coleman undertook a soil and groundwater investigation of its facility in northeast Wichita (the "Northeast Site"). Results indicated the presence of VOCs in the groundwater and soils. Although some of the contamination may be a result of Coleman's operations at the facility, the data also indicated that contamination was migrating onto the Coleman property from up gradient sources. Coleman reported the initial results of its study to KDHE. Coleman has also provided copies of all data to the United States Environmental Protection Agency (the "EPA"), at its request. The EPA has not initiated any actions against the Company with respect to the Northeast Site. An agreement has been entered into with KDHE to undertake additional investigatory activities, and an interim remediation system has been installed. LAKE CITY SITE. In 1992, Coleman undertook a soil and groundwater investigation of its facility in Lake City, South Carolina (the "Lake City Site"). Results indicated limited VOC and fuel oil contamination in the soil and groundwater. In both instances, the contamination appeared to relate to the activities of a previous occupant of the Lake City Site. The results of the investigation were reported to the appropriate South Carolina environmental agency and Coleman took legal action against the prior owner. In early 1998, the lawsuit was settled and the prior owner agreed to take over further site investigations and remediation actions and to reimburse Coleman for a significant part of Coleman's past costs related to site investigation. The Company has not been named as a potentially responsible party ("PRP") by the EPA nor does it have joint and several liability with any other PRP for remediation at any of the above sites. The Company has adopted an environmental policy designed to ensure that the Company operates in full compliance with applicable environmental regulations and, where appropriate, the Company's own internal standards. Coleman has also undertaken an environmental compliance audit program. The Company makes expenditures that it believes are necessary to comply with environmental management practices. Environmental expenditures that relate to current operations are expensed or capitalized as appropriate and were not significant in 1997 and are not expected to be significant in the foreseeable future. Coleman has established reserves, which it believes are adequate, for environmental matters, including the investigations, remedial activities and litigation described above. OTHER GENERAL. The Company is involved in various claims and legal actions arising in the ordinary course of business, including environmental matters and product liability lawsuits that are incidental to its business. The Company believes the ultimate disposition of these matters is not expected to have a material adverse effect on the Company's consolidated financial condition or results of operations. The Company has entered into a cross-indemnification agreement with Holdings pursuant to which it will indemnify Holdings against all liabilities related to businesses transferred to the Company by Holdings, and Holdings will indemnify the Company against all liabilities of Holdings other than liabilities related to the businesses transferred to the Company. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS No matters were submitted to a vote of security holders during the fourth quarter of 1997. 11 PART II ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS The Company's common stock is listed and traded on the New York Stock Exchange under the symbol "CLN" and has unlisted trading privileges on the Midwest Stock Exchange and the Pacific Stock Exchange. The following table sets forth the high and low sales prices as reported on the NYSE Composite Tape for the Company's common stock for each quarter in 1997 and 1996. High Low ---- --- 1997 ---- First Quarter $16 1/8 $11 1/2 Second Quarter 19 1/8 12 7/8 Third Quarter 18 15 3/16 Fourth Quarter 16 13/16 12 3/8 1996 ---- First Quarter $26 $16 5/16 Second Quarter 23 1/4 19 13/16 Third Quarter 21 8/0 13 3/4 Fourth Quarter 15 1/4 11 3/4
As of the close of business on March 3, 1998, there were approximately 700 holders of record of the Company's common stock. The Company has not declared a cash dividend on its common stock and does not anticipate that any dividends will be declared on its common stock in the foreseeable future. The declaration and payment of dividends are subject to the discretion of the Board of Directors of the Company and subject to certain limitations under Delaware law, and are also limited by the terms of the Company's Credit Agreement which, among other things, prohibits the Company from paying any dividends until on or after January 1, 1999 and limits the amount of dividends the Company may pay thereafter. The Company did not sell any unregistered securities during 1997. 12 ITEM 6. SELECTED FINANCIAL DATA The selected financial data for the years presented in the table below have been derived from the Consolidated Financial Statements. The selected financial data should be read in conjunction with the Consolidated Financial Statements and the notes thereto included elsewhere in this Form 10-K Annual Report. (IN THOUSANDS, EXCEPT PER SHARE DATA) YEAR ENDED DECEMBER 31, -------------------------------------------------------------- 1997 1996 1995 1994 1993 ---------- ---------- -------- -------- -------- STATEMENTS OF OPERATIONS DATA: Net revenues $1,154,294 $1,220,216 $933,574 $751,580 $575,415 Cost of sales (a) 840,331 928,497 649,427 535,710 400,052 ---------- ---------- -------- -------- -------- Gross profit 313,963 291,719 284,147 215,870 175,363 Selling, general and administrative expenses (a) 266,283 291,669 174,688 128,466 102,038 Asset impairment charge (b) -- -- 12,289 -- -- Restructuring expense (c) -- -- -- 18,456 -- Interest expense, net 40,852 38,727 24,545 13,374 7,706 Amortization of goodwill and deferred charges 11,338 10,473 7,745 6,209 5,330 Other expense, net 1,867 1,151 334 1,138 746 ---------- ---------- -------- -------- -------- (Loss) earnings before income taxes, minority interest and extraordinary item (6,377) (50,301) 64,546 48,227 59,543 Income tax (benefit) expense (a) (5,227) (10,927) 24,479 14,747 24,569 Minority interest 1,386 1,872 -- -- -- ---------- ---------- -------- -------- -------- (Loss) earnings before extraordinary item (2,536) (41,246) 40,067 33,480 34,974 Extraordinary loss on early extinguishment of debt, net of income taxes -- (647) (787) (677) -- ---------- ---------- -------- -------- -------- Net (loss) earnings $ (2,536) $ (41,893) $ 39,280 $ 32,803 $ 34,974 ---------- ---------- -------- -------- -------- ---------- ---------- -------- -------- -------- Basic (loss) earnings per common share $ (0.05) $ (0.79) $ 0.74 $ 0.61 $ 0.65 ---------- ---------- -------- -------- -------- ---------- ---------- -------- -------- -------- Weighted average common shares outstanding 53,344 53,197 53,226 53,436 53,909 ---------- ---------- -------- -------- -------- ---------- ---------- -------- -------- --------
DECEMBER 31, -------------------------------------------------------------- 1997 1996 1995 1994 1993 ---------- ---------- -------- -------- -------- BALANCE SHEET DATA: Total assets $1,041,764 $1,160,086 $844,487 $712,265 $526,706 Long-term debt (including current portions) 477,799 583,613 355,257 291,175 168,858 Total stockholders' equity 240,469 252,945 292,342 253,363 228,104
- ------------ (a) The Company recorded restructuring and certain other charges totaling $22,501 and $52,516, net of tax for the years ended December 31, 1997 and 1996, respectively. Cost of sales includes pre-tax charges of $19,673 and $44,005; selling, general and administrative expenses include pre-tax charges of $16,746 and $30,195; and the provision for income tax benefit includes $13,918 and $21,684 of net tax benefits in the years ended December 31, 1997 and 1996, each respectively, resulting from these charges. (b) Asset impairment charge reflects primarily the non-recurring charge taken in connection with the adoption of FAS 121. (c) Restructuring expense reflects primarily the non-recurring charge taken in connection with the German Restructuring which includes severance costs, commitments to third parties and write-downs of leasehold improvements and other assets to estimated realizable values. 13 ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The following discussion should be read in conjunction with the Consolidated Financial Statements and the notes thereto included elsewhere in this Form 10-K Annual Report. RESULTS OF OPERATIONS YEAR ENDED DECEMBER 31, 1997 COMPARED WITH THE YEAR ENDED DECEMBER 31, 1996 Net revenues of $1,154.3 million in 1997 were $65.9 million or 5.4% less than in 1996 with outdoor recreation products unchanged at $859.7 million and hardware products decreasing $66.0 million or 18.3%. The outdoor recreation products revenues were adversely affected by (i) a restructuring program which eliminated certain low margin SKUs (stock keeping units), (ii) lower sales in Japan and Korea due to weak market conditions, and (iii) a program to reduce wholesaler inventories in Japan; however, growth in the core products outside of Japan and Korea offset these declines. Hardware products revenues decreased due to the Company's decision to exit the pressure washer business and lower generator sales resulting from fewer storms on the East Coast of the United States in the second half of 1997. Geographically, United States and Canadian revenues decreased $24.0 million or 2.9% due to lower hardware product sales while international revenues decreased $41.9 million or 10.6% primarily related to lower sales in Japan and Korea. Results in the 1996 period include the Camping Gaz operations from the date of acquisition. The gross margin percentage of 28.9%, excluding the impact of restructuring and other charges which are more fully described below, increased from 27.5% in 1996. The improvement was driven by increased demand for higher margin products and the elimination of certain low margin SKUs. SG&A expenses, excluding the impact of restructuring and other charges which are more fully described below, were $249.5 million in 1997 compared to $261.5 million in 1996, a decrease of 4.5%. The inclusion of a full twelve months of Camping Gaz SG&A costs in the 1997 period increased SG&A expenses; however, these increases were more than offset by benefits resulting from the integration of Camping Gaz operations and the restructuring initiatives. During 1997, the Company recorded pre-tax restructuring and other charges totaling $36.4 million of which $19.7 million was reflected in cost of sales and $16.7 million in SG&A expenses. Tax benefits of $13.9 million associated with these charges are reflected in income tax expense. The restructuring and other charges consisted of (i) $15.7 million to exit various low margin products, including pressure washers, (ii) $15.0 million to close and relocate certain administrative and sales offices, and (iii) $5.7 million to close several manufacturing facilities. Most of these activities were substantially complete as of December 31, 1997, and remaining actions are expected to be completed in 1998. During 1996, the Company recorded restructuring charges of $66.2 million, certain other charges of $8.0 million and related net tax benefits of $21.7 million. The 1996 pre-tax restructuring charges of $66.2 million consisted of (i) $29.1 million to integrate the Camping Gaz and Coleman operations into a global recreation products business, (ii) $19.0 million to exit the low end electric pressure washer business, (iii) $14.1 million to exit a portion of the Company's battery powered light business, and (iv) $4.0 million to settle certain litigation with respect to the battery powered light business. The 1996 pre-tax restructuring charges of $66.2 million included $64.4 million related to exiting products and facilities and $1.8 million of termination costs for 174 administrative employees, of which $40.8 million was reflected in cost of sales and $25.4 million in SG&A expenses. The pre-tax charges for exit costs were comprised of (i) $41.3 million which related primarily to writing down inventory, fixed assets, accounts receivable and certain other receivable and prepaid amounts to estimated net realizable value, and (ii) $23.1 million of other exit costs, including carrying costs of idle facilities, relocation costs, and costs to exit the pressure washer business. 14 The 1996 other pre-tax charges of $8.0 million related primarily to certain asset write-offs. These other charges, of which $3.2 million was reflected in cost of sales and $4.8 million in SG&A expenses, were incurred in the Company's normal course of business, although the amounts involved were higher than similar charges the Company had recorded in prior periods. The provision for income taxes included $21.7 million of tax benefits resulting from these restructuring and other charges, net of an increase in the valuation reserve related to certain foreign deferred tax assets and other foreign tax charges totaling $5.6 million. The components of the combined 1997 and 1996 restructuring and other charges and an analysis of the amounts charged against the reserves are outlined in the following table (dollars in millions): 1996 Charges During 1997 Charges During Original Year Ended Balance at Additional Year Ended Balance at Reserve 12/31/96 12/31/96 Reserves 12/31/97 12/31/97 ------- -------- -------- -------- -------- -------- Impairment of fixed assets $10.0 $ (1.8) $ 8.2 $ 6.4 $ (6.5) $ 8.1 Inventory and other asset impairments 38.3 (25.9) 12.4 11.0 (15.0) 8.4 Termination costs 2.0 (1.6) .4 12.1 (9.7) 2.8 Idle facilities, relocation and other exit costs 23.9 (12.4) 11.5 6.9 (9.7) 8.7 ----- ------ ----- ----- ------ ----- $74.2 $(41.7) $32.5 $36.4 $(40.9) $28.0 ----- ------ ----- ----- ------ ----- ----- ------ ----- ----- ------ -----
The termination costs recognized in 1996 related to approximately 200 employees and the 1997 termination costs related to approximately 525 employees. As of December 31, 1997, $11.3 million of termination costs were paid on behalf of the approximately 700 employees who were terminated as of that date. Interest expense was $40.9 million in 1997 compared with $38.7 million in 1996, an increase of $2.2 million. This increase was a result of the effects of higher interest rates on the Company's variable rate debt partially offset by the favorable effects of lower borrowings in 1997 resulting from the Company's working capital management programs. Minority interest in the 1997 period reflects the minority interests in certain subsidiary operations acquired with the Camping Gaz business. On March 1, 1996, the Company acquired control of approximately 70% of Camping Gaz and in early July 1996 obtained control of the remaining 30% of Camping Gaz and, accordingly, in the 1996 period, minority interest reflects the minority shareholders' approximate 30% proportionate share of the results of operations of Camping Gaz for the period March through June of 1996 and also includes interests of other minority shareholders in certain subsidiary operations acquired with the Camping Gaz business. The Company recorded income tax benefits of $5.2 million in 1997 and $10.9 million in 1996, which includes the net tax benefits of $13.9 million in 1997 and $21.7 million in 1996 associated with restructuring and other charges discussed above. Excluding the net tax benefits from the restructuring and other charges, the provision for income tax expense would have been $8.7 million or 28.9% of pre-tax earnings in 1997 as compared to a provision for income tax expense of $10.8 million or 45.0% of pre-tax earnings in 1996. This decrease is primarily due to the impact of increased foreign tax rates on deferred tax assets and increased foreign earnings at lower tax rates. In 1996, in connection with the renegotiation of its credit agreement, the Company recorded an extraordinary loss of $1.1 million ($0.6 million net of tax) which represented a write-off of the related unamortized financing costs associated with its then existing credit agreement. 15 YEAR ENDED DECEMBER 31, 1996 COMPARED WITH THE YEAR ENDED DECEMBER 31, 1995 Net revenues in 1996 and 1995 were $1,220.2 million and $933.6 million, respectively, an increase of $286.6 million, or 30.7%, with outdoor recreation products increasing by $170.7 million or 24.8% and hardware products increasing $115.9 million or 47.4%. The outdoor recreation products revenues increase included $152.5 million of revenues associated with the Camping Gaz operations acquired in 1996 and approximately $13.4 million of additional revenues associated with the Sierra operations acquired in 1995. Excluding (i) the impact of the Camping Gaz and Sierra acquisitions, (ii) the effect of a weaker yen in 1996 as compared to 1995, which reduced revenues approximately $21.1 million, and (iii) the one-time 1995 thermo-electric cooler premium promotion revenue gain of approximately $16.6 million, outdoor recreation product revenues increased approximately $42.5 million or 6.4%. Increases in revenue were experienced in the backpack, tent and sleeping bag businesses, primarily in international markets. In addition, the Company successfully introduced a new line of camping accessories and expanded its heater and light businesses. These gains were substantially offset by poor weather conditions during the camping season in North America and the economic downturn experienced in Japan, both of which adversely affected the demand for the Company's camping products. The hardware products revenues increase includes approximately $82.1 million as a result of the acquisition of CSS (then named Seatt Corporation) in 1996. Excluding the impact of the CSS acquisition, hardware products revenues increased approximately $33.8 million or 13.8%, driven by increases in generator and pressure washer sales. Geographically, United States and Canada revenues increased $111.6 million or 15.6% primarily related to the CSS acquisition, while international revenues increased $175.0 million or 79.5% primarily related to the Camping Gaz acquisition. Gross margins, excluding the impact of restructuring and other charges totaling $44.0 million which are more fully discussed below, decreased as a percent of sales by 2.9 percentage points from 30.4% in 1995 to 27.5% in 1996. This decrease was primarily the result of lower margins associated with the Company's backpack business and the unfavorable effects of product mix including significantly higher sales of pressure washers at lower gross margin percentages and lower sales of camping products which tend to have higher gross margin percentages than the Company's average. SG&A expenses, excluding $30.2 million of restructuring and other charges as discussed more fully below, were $261.5 million in 1996 compared to $174.7 million in 1995, an increase of 49.7%. The increase in SG&A expenses primarily reflects SG&A expenses associated with the Camping Gaz and CSS business acquisitions of approximately $60.3 million and increased advertising and marketing expenses of approximately $16.6 million. During 1996, the Company recorded restructuring charges of $66.2 million, certain other charges of $8.0 million and related net tax benefits of $21.7 million. The pre-tax restructuring charges of $66.2 million consisted of (i) $29.1 million to integrate the Camping Gaz and Coleman operations into a global recreation products business, (ii) $19.0 million to exit the low end electric pressure washer business, (iii) $14.1 million to exit a portion of the Company's battery powered light business and (iv) $4.0 million to settle certain litigation with respect to the battery powered light business. The charges to integrate the Camping Gaz and Coleman operations reflected primarily the cost to dispose of duplicate manufacturing, distribution and administrative facilities and the related severance cost. These actions are substantially completed at December 31, 1997 and are expected to be fully completed in 1998. The exiting of the battery powered light business was completed by July 1997 and the exiting of the low end pressure washer business was substantially completed in 1997. The pre-tax restructuring charges of $66.2 million included $64.4 million related to exiting products and facilities and $1.8 million of termination costs for 174 administrative employees, of which $40.8 million was reflected in cost of sales and $25.4 million in SG&A expenses. The pre-tax charges for exit costs were comprised of (i) $41.3 million which related primarily to writing down inventory, fixed assets, accounts receivable and 16 certain other receivable and prepaid amounts to estimated net realizable value, and (ii) $23.1 million of other exit costs, including carrying costs of idle facilities, relocation costs, and costs to exit the pressure washer business. Other pre-tax charges of $8.0 million related primarily to certain asset write-offs. These other charges, of which $3.2 million was reflected in cost of sales and $4.8 million in SG&A expenses, were incurred in the Company's normal course of business, although the amounts involved were higher than similar charges the Company had recorded in prior periods. The provision for income taxes includes $21.7 million of tax benefits resulting from these restructuring and other charges, net of an increase in the valuation reserve related to certain foreign deferred tax assets and other foreign tax charges totaling $5.6 million. The Company's interest expense was $38.7 million in 1996 compared with $24.5 million in 1995, an increase of $14.2 million. This increase was primarily the result of higher borrowings to fund business acquisitions and support increased working capital. The Company recorded an income tax benefit in 1996 of $10.9 million, which included net tax benefits of $21.7 million associated with restructuring and other charges discussed above. Excluding the net tax benefit from restructuring and other charges, the provision for income taxes would have been $10.8 million or 45.0% of pre-tax earnings, excluding restructuring and other charges, as compared to a provision for income tax expense of $24.5 million or 37.9% of pre-tax earnings in 1995. The increase was primarily due to losses of certain foreign subsidiaries for which the Company has not recognized a tax benefit and the impact of non-deductible goodwill amortization. The Company obtained control of approximately 70% of Camping Gaz on March 1, 1996 and obtained control of the remaining 30% in early July 1996. Accordingly, the minority interest for 1996 primarily represents the minority shareholders' approximate 30% proportionate share of the results of operations of Camping Gaz for the period March through June of 1996 and also includes interests of other minority shareholders in certain subsidiary operations of Camping Gaz. During the second quarter of 1996, in connection with the renegotiation of its then existing credit agreement, the Company recorded an extraordinary loss of $1.1 million ($0.6 million after taxes, or $0.01 per share) which represents a write-off of the related unamortized financing costs associated with its then existing credit agreement. During the third quarter of 1995, the Company completed a $200.0 million private placement debt issue. In connection with the private placement, the Company renegotiated its previous credit agreement and recorded an extraordinary loss of $1.3 million ($0.8 million after taxes) which represents a write-off of the related unamortized financing costs associated with its previous credit agreement. LIQUIDITY AND CAPITAL RESOURCES The Company's operating activities provided (used) $91.2 million, ($9.3) million, and $2.2 million of cash during the years ended December 31, 1997, 1996, and 1995, respectively. Improved management of receivables and inventories and rationalization of product lines during 1997 as compared to 1996 led to the improvement in cash provided by operating activities. The Company's net cash used for investing activities was $35.5 million, $200.3 million, and $61.5 million for the years ended December 31, 1997, 1996 and 1995, respectively. The Company used $161.9 million of cash for business acquisitions during the year ended December 31, 1996 and an additional $14.3 million in 1997 related to contingent payments and transaction costs. The Company's capital expenditures were $27.0 million and $41.3 million during the years ended December 31, 1997 and 1996, respectively. Net cash (used) provided by financing activities was ($55.5) million, $210.5 million, and $64.8 million for the years ended December 31, 1997, 1996, and 1995, respectively, and consisted primarily of increases in long-term borrowings during the years ended December 31, 1996 and 1995 and a reduction in long-term borrowings during the year ended December 31, 1997. 17 As part of its strategy to improve profitability, the Company announced several restructuring initiatives during 1997. The Company recognized 1997 pre-tax charges of $36.4 million associated with these actions. These restructuring initiatives are expected to generate cost savings in the future from reductions in personnel, production facilities and administrative overhead. There can be no assurance as to the Company's success in implementing its planned initiatives or the results therefrom, the amount of future charges, or against any adverse impact of the Company's restructuring initiatives. The Company's working capital requirements are currently funded by cash flow from operations and domestic and foreign bank lines of credit. In April 1996, the Company amended its credit agreement to: a) provide a term loan of French Franc 385.1 million ($64.9 million at December 31, 1997 exchange rates), b) provide an unsecured revolving credit facility in an amount of $275.0 million, c) allow for the Camping Gaz acquisition and d) extend the maturity of the credit agreement (as amended, the "Company Credit Agreement"). Availability under the Company Credit Agreement is reduced by any commercial paper borrowings outstanding. The Company Credit Agreement is available to the Company until April 30, 2001. At December 31, 1997, $217.4 million would have been available for borrowings under the Company Credit Agreement. The Company intends to use the net proceeds from the sale of CSS to repay first the term loan portion of the Company Credit Agreement and use the remaining proceeds to repay the revolving credit borrowings, which will result in a dollar for dollar reduction in available revolving credit commitments. The outstanding loans under the Company Credit Agreement bear interest at either of the following rates, as selected by the Company from time to time: (i) the higher of the agent's base lending rate or the federal funds rate plus .50% or (ii) the London Inter-Bank Offered Rate ("LIBOR") plus a margin ranging from .25% to 2.125% based on the Company's financial performance. If there is a default, the interest rate otherwise in effect will be increased by 2% per annum. The Company Credit Agreement also bears an overall facility fee ranging from .15% to .375% based on the Company's financial performance. The Company Credit Agreement contains various restrictive covenants including, without limitation, requirements for the maintenance of specified financial ratios, levels of consolidated net worth and profits, and certain other provisions limiting the incurrence of additional debt, purchase or redemption of the Company's common stock, issuance of preferred stock of the Company, and also prohibits the Company from paying any dividends until on or after January 1, 1999 and limits the amount of dividends the Company may pay thereafter. The Company Credit Agreement also contains an event of default upon a change of control of the Company (as defined in the Company Credit Agreement) and other customary events of default. The consummation of the CLN Holdings Merger will constitute a change of control under the Company Credit Agreement. In addition, all of the shares of the Company's common stock owned by Coleman Worldwide are pledged to secure indebtedness of Coleman Worldwide and of its parent, CLN Holdings Inc. The Company's ability to meet its current cash operating requirements, including projected capital expenditures, tax sharing payments and other obligations is dependent upon a combination of cash flows from operations and borrowings under the Company Credit Agreement and foreign lines of credit. The Company's ability to borrow under the terms of the Company Credit Agreement is subject to the Company's continuing requirement to meet the various restrictive covenants, including without limitation, those described above, and the various covenants in the Company's senior notes. If the Company fails to meet the various restrictive covenants of the Company Credit Agreement, or upon a change of control as a result of the consummation of the CLN Holdings Merger, the Company will need to seek a waiver of such provisions, renegotiate its current Company Credit Agreement, and/or enter into alternative financing arrangements. There is no assurance that the Company would be able to obtain such waiver, or that terms and conditions of such waiver or alternative financing arrangements, if any, would be as favorable as those now contained in the Company Credit Agreement. 18 Coleman financed the acquisition of the shares of Camping Gaz with the net proceeds from (i) a private placement issuance and sale of $85.0 million aggregate principal amount of 7.10% Senior Notes, Series A, due 2006 (the "Notes due 2006") and (ii) a private placement issuance and sale of $75.0 million aggregate principal amount of 7.25% Senior Notes, Series B, due 2008 (the "Notes due 2008"). The Notes due 2006 bear interest at the rate of 7.10% per annum payable semiannually, and the principal amount is payable in annual installments of $12.1 million commencing June 13, 2000, with a final payment due on June 13, 2006. If there is a default, the interest rate will be the greater of (i) 9.10% or (ii) 2% above the prime interest rate. The Notes due 2008 bear interest at the rate of 7.25% per annum payable semiannually, and the principal amount is payable in annual installments of $15.0 million commencing June 13, 2004 with a final payment due on June 13, 2008. If there is a default, the interest rate will be the greater of (i) 9.25% or (ii) 2% above the prime interest rate. The Notes due 2006 and the Notes due 2008 are unsecured and are subject to various restrictive covenants, including without limitation, requirements for the maintenance of specified financial ratios and levels of consolidated net worth and certain other provisions limiting the incurrence of additional debt and sale and leaseback transactions under the terms of the Note Purchase Agreement. All of the shares of the Company's common stock owned by Coleman Worldwide are pledged to secure indebtedness of Coleman Worldwide and CLN Holdings. On May 20, 1997, CLN Holdings issued the Escrow Notes. A portion of the net proceeds from the issuance of the Escrow Notes was contributed to Coleman Holdings Inc. ("Coleman Holdings") and used by it to redeem, on July 15, 1997, its Senior Secured Discount Notes due 1998 (the "Holdings Notes"). Following the redemption of the Holdings Notes, Coleman Holdings was merged into CLN Holdings. A portion of the net proceeds from the issuance of the Escrow Notes was contributed to Coleman Worldwide and used by it to accept for exchange, $554.1 million aggregate principal amount at maturity of Liquid Yield Option Notes-TM- due 2013 (the "LYONs"-TM-). Coleman Worldwide plans to redeem the remaining $7.5 million aggregate principal amount at maturity of LYONs no later than May 27, 1998 with the remaining proceeds from the issuance of the Escrow Notes. The LYONs and the Escrow Notes, to which the Company is not a party, provide that it is an additional purchase right event and an event of default, respectively, under these debt instruments if, among other things, the amount of debt incurred by the Company exceeds certain limitations or if there is a change of control of Coleman Worldwide or CLN Holdings, as the case may be, or the Company. A change of control of CLN Holdings or Coleman Worldwide would permit the holder of LYONs or Escrow Notes, as the case may be, to sell such notes to the issuer of such notes. Consummation of the CLN Holdings Merger would be an additional purchase right under these debt instruments. There are expected to be sufficient funds in escrow from the net proceeds of the Escrow Notes to repurchase the LYONs in the event a holder of LYONs seeks to have such LYONs repurchased. CLN Holdings may be required to borrow funds to repurchase the Escrow Notes if a holder of Escrow Notes seeks to have such Escrow Notes repurchased. Sunbeam has informed the Company that, following the consummation of the CLN Holdings Merger, it plans to refinance existing revolving and term debt of Coleman. The Company's international operations are located primarily in Japan, Europe, and Canada, which are not considered to be highly inflationary environments. The Company uses a variety of derivative financial instruments to manage its foreign currency and interest rate exposures. The Company does not speculate on interest rates or foreign currency rates. Instead, it uses derivatives when implementing its risk management strategies to reduce the possible effects of these exposures. With respect to foreign currency exposures, the Company principally uses forward and option contracts to reduce risks arising from firm commitments, anticipated intercompany sales transactions and intercompany receivable and payable balances. The Company generally uses interest rate swaps and interest rate caps to fix certain of its variable rate debt. The Company manages credit risk related to these derivative contracts through credit approvals, exposure limits and other monitoring procedures. 19 IMPACT OF YEAR 2000 Some of the Company's older computer programs were written using two digits rather than four to represent the applicable year. As a result, those computer programs recognize a date represented by "00" as the year 1900 rather than the year 2000. This situation, known as the "Year 2000" issue, could cause a system failure or miscalculations causing disruptions of operations, including, among other things, a temporary inability to process transactions, send invoices, or engage in similar normal business activities. Based on ongoing assessments of the Company's operations, the Company has determined it will be required to modify or replace portions of its computer software so the computer systems will function properly with respect to dates in the year 2000 and thereafter. The Company believes that, in most instances, with minor modifications to existing software, the Year 2000 issue will not pose significant operational problems for its computer systems. The Company has identified one location with significant Year 2000 software issues. Failure to complete a timely conversion of this location to a Year 2000 compliant system could have a material impact on the operations of the Company; however, the Company has begun to replace the software at this location, and such replacement software is expected to be installed prior to December 31, 1999. The Company has initiated formal communications with some of its significant suppliers and large customers to determine the extent to which the Company's interface systems are vulnerable to those third parties' failure to remediate their own Year 2000 issues. There can be no guarantee that the systems of other companies on which the Company's systems rely will be timely converted and would not have an adverse effect on the Company's systems. In 1996, the Company began a project to select and install a Company-wide enterprise resource computer software system designed to improve operational efficiency. The selected system is Year 2000 compliant and complete installation of this software system is expected to take three years. The cost of the purchase of the software and installation costs is expected to range from $20.0 million to $25.0 million. The Company will capitalize a significant portion of these costs and does not believe the costs of this project will have a significant impact on the Company's financial condition or results of operations. The costs of the project and the date on which the Company believes it will be Year 2000 compliant are based on management's best estimates, which were derived utilizing numerous assumptions of future events, including the continued availability of certain resources, third party modification plans and other factors. However, there can be no guarantee that these estimates will be achieved and actual results could differ materially from those anticipated. Specific factors that might cause such material differences include, but are not limited to, the availability and cost of personnel trained in this area, the ability to locate and correct all relevant computer codes, and similar uncertainties. SEASONALITY The Company's sales generally are highest in the second quarter of the year and lowest in the fourth quarter. As a result of this seasonality, the Company has generally incurred a loss in the fourth quarter. The Company's sales may be affected by weather conditions. For the years ended December 31, 1997, 1996 and 1995, second quarter sales comprised approximately 33%, 37% and 33% of annual sales, respectively. Consequently, the company's annual results are largely impacted by its results during the second quarter. INFLATION In general, manufacturing costs are affected by inflation and the effects of inflation may be experienced by the Company in future periods. Management believes, however, that such effects have not been material to the Company during the past three years. 20 FORWARD-LOOKING STATEMENTS The Private Securities Litigation Reform Act of 1995 provides a "safe harbor" for certain forward-looking statements. The forward-looking statements contained in this Form 10-K are subject to certain risks and uncertainties. Actual results could differ materially from current expectations. Among the factors that could affect the Company's actual results and could cause results to differ from those contained in the forward-looking statements are (i) unanticipated costs or delays in developing new products, (ii) a decrease in the public's interest in camping and related activities, (iii) economic softness in Japan, Korea, and other Asian countries, (iv) weather conditions which are adverse to the specific businesses of the Company, (v) significant adverse market or economic conditions which negatively affect demand for the Company's products, (vi) disruptions or delays resulting from the transactions contemplated by the Merger Agreements with Sunbeam for the acquisition of CLN Holdings and the Company, and (vii) changes in operating philosophy following the consummation of the CLN Holdings Merger and the Company Merger. Other factors could also cause actual results to vary materially from the future results covered in such forward-looking statements. ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA See the consolidated financial statements listed in the accompanying List of Financial Statements and Schedules on Page F-1 herein. Information required by schedules called for under Regulation S-X is either not applicable or is included in the consolidated financial statements or notes thereto. ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE None. PART III ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS DIRECTORS The name, age, present principal occupation or employment, five year employment history, selected biographical information, and period of service as a director of the Company of each of the current directors of the Company are set forth below. Ronald O. Perelman, age 55, a director of the Company since 1989, has been Chairman of the Board and Chief Executive Officer of Mafco, MacAndrews Holdings and various of their affiliates since 1980. Mr. Perelman is also Chairman of the Executive Committee of the Board of Consolidated Cigar Holdings Inc. ("Cigar Holdings"), M&F Worldwide Corporation, and Revlon, Inc. ("Revlon") and Chairman of the Board of Meridian Sports Incorporated ("Meridian"). Mr. Perelman is also a director of the following corporations which file reports pursuant to the Securities Exchange Act of 1934, as amended (the "Exchange Act"): California Federal Bank, A Federal Savings Bank ("Cal Fed"), Cigar Holdings, CLN Holdings Inc. ("CLN Holdings"), Coleman Worldwide Corporation ("Coleman Worldwide"), First Nationwide Holdings Inc., First Nationwide (Parent) Holdings Inc., Meridian, M&F Worldwide Corporation, Revlon Consumer Products Corporation ("Revlon Products"), Revlon, and REV Holdings Inc. ("REV Holdings"). (On December 27, 1996, Marvel Holdings Inc., Marvel (Parent) Holdings Inc., and Marvel Entertainment Group, Inc. ("Marvel"), of which Mr. Perelman was then a director, and Marvel III Holdings Inc., of which Mr. Perelman is a director, and several of the subsidiaries of Marvel filed voluntary petitions for reorganization under Chapter 11 of the United States Bankruptcy Code.) Donald G. Drapkin, age 50, a director of the Company since 1989, has been a director and Vice Chairman of Mafco and various of its affiliates since 1987. Mr. Drapkin was a partner in the law firm of Skadden, Arps, Slate, Meagher & Flom in New York for more than five years prior to March 1987. Mr. Drapkin is also a director 21 of the following corporations which file reports pursuant to the Exchange Act: Alogos Pharmaceutical Corporation, Black Rock Asset Investors, Cardio Technologies, Inc., Coleman Worldwide, The Cosmetic Center, Inc., Genta, Inc., Playboy Enterprises, Inc., Revlon, Revlon Products, VIMRx Pharmaceuticals Inc., and Weider Nutrition International, Inc. (On December 27, 1996, Marvel Holdings Inc., Marvel (Parent) Holdings Inc., and Marvel, of which Mr. Drapkin was then a director, and Marvel III Holdings Inc., of which Mr. Drapkin is a director, and several of the subsidiaries of Marvel filed voluntary petitions for reorganization under Chapter 11 of the United States Bankruptcy Code.) Frank Gifford, age 67, has been a director of the Company since 1997. Mr. Gifford has been a commentator with ABC Sports since 1971. (On December 27, 1996, Marvel, of which Mr. Gifford was a director, and several of its subsidiaries filed voluntary petitions for reorganization under Chapter 11 of the United States Bankruptcy Code.) Lawrence M. Jones, age 66, has been a director of the Company since 1989. Mr. Jones was Chairman and Chief Executive Officer of the Company from October 1990 to December 1993 and has been associated with the Company for more than 36 years, including serving as President and Chief Executive Officer from July 1989 to September 1990. Prior to rejoining the Company in 1989, Mr. Jones was Vice Chairman and Chief Financial Officer of Fleming Companies, Inc. (a distributor of food products, health and beauty items) from December 1987 to June 1989. Mr. Jones presently serves as director of Union Pacific Resources, and was a director of Fourth Financial Corporation until January 1996, of Fleming Companies, Inc. until December 1996, and of Prince Sports Group, Inc. until March 1997. Mr. Jones also served as Chairman of Rollerblade, Inc. from February 1996 to April 1997. Ann D. Jordan, age 63, has been a director of the Company since June 1997. Ms. Jordan is a consultant and a director of Johnson & Johnson, Automatic Data Processing, Inc., The Travelers Corporation, and Salant Corporation. Ms. Jordan also serves on the Board of Directors of the National Symphony Orchestra, Sloan Kettering Memorial Medical Center, Child Welfare League, Sasha Bruce Youthworks, University of Chicago, Spellman College, The John F. Kennedy Center for the Performing Arts and the SEC Consumer Affairs Advisory Commission. She was formerly a Field Work Associate Professor at the School of Social Service Administration of the University of Chicago and served as Director of the Department of Social Services for the University of Chicago Medical Center. Jerry W. Levin, age 53, has been Chairman and Chief Executive officer of the Company since February 1997, and a past Chairman of the Company from 1989 to 1991, and a director since 1989. Mr. Levin has been Chairman of the Board of Revlon and of Revlon Products since their respective formations in 1992 and Chairman of the Board of The Cosmetic Center, Inc. since April 1997. Mr. Levin served as Chief Executive Officer of Revlon and of Revlon Products from 1992 until January 1997, and President of Revlon and of Revlon Products from their respective formations in 1992 to November 1995. Mr. Levin has been Executive Vice President of MacAndrews Holdings since March 1989. For 15 years prior to joining MacAndrews Holdings, he held various senior positions with The Pillsbury Company ("Pillsbury"). Mr. Levin is a director of the following corporations which file reports pursuant to the Exchange Act: Coleman Worldwide, The Cosmetic Center, Inc., Ecolab Inc., U.S. Bancorp Inc., Meridian, Revlon, Revlon Products, and REV Holdings. John A. Moran, age 65, has been a director of the Company since July 1996. Mr. Moran currently serves as Chairman of Rutherford-Moran Oil Corporation. From 1967, Mr. Moran was affiliated with Dyson-Kissner-Moran Corporation, a private holding company, serving in various executive positions including Chairman of the Board, President and Chief Executive Officer, and Executive Vice President. He is a director of Bessemer Securities Corporation. He is a member and former Chairman of the National Advisory Council of the University of Utah, as well as a member of World Presidents Organization, the Chief Executives Organization and The Foreign Policy Association. He is a former director of the United Nations Association and trustee of the Brooklyn Museum. 22 James D. Robinson, age 62, has been a director of the Company since June 1997. Mr. Robinson is Chairman and Chief Executive Officer of RRE Investors, LLC, a private venture investment firm, and Chairman of Violy, Byorum & Partners Holdings, LLC, a private firm specializing in financial advisory and investment banking activities in Latin America. He previously served as Chairman, and Chief Executive Officer of the American Express Company from 1977 to 1993. Mr. Robinson is a director of Bristol-Myers Squibb Company, Cambridge Technology Partners, Inc., The Coca-Cola Company, First Data Corporation and Union Pacific Corporation. Bruce Slovin, age 62, a director of the Company since February 1993, has been President of MacAndrews Holdings and various of its affiliates since 1980. Mr. Slovin is also a director of the following corporations which file reports pursuant to the Exchange Act: Cantel Industries, Inc., Coleman Worldwide, Continental Health Affiliates, Inc., Infu-Tech, Inc., Meridian, and M&F Worldwide Corporation. William H. Spoor, age 75, has been a director of the Company since May 1992. Mr. Spoor retired in September 1985 as Chairman and Chief Executive Officer of Pillsbury after 14 years in that position and 36 years with Pillsbury. He returned to Pillsbury as Chairman of the Executive Committee in September 1987, and resumed as Chairman, Chief Executive Officer and President of Pillsbury in March 1988, from which he retired in August 1988. Mr. Spoor now serves as Chairman Emeritus of Pillsbury, and is in the business of personal investments. He is a director of L & L Holdings and Inner City Tennis. COMPENSATION OF DIRECTORS Directors who are not currently receiving compensation as employees of the Company or any of its affiliates are paid an annual $25,000 retainer fee and are reimbursed for reasonable out-of-pocket expenses incurred in connection with Company business. In addition, such directors receive a fee of $1,000 for each meeting of the Board of Directors or any committee meeting they attend. EXECUTIVE OFFICERS The following table sets forth certain information as of March 3, 1998, concerning the executive officers of the Company. All executive officers serve at the pleasure of the Board of Directors. NAME AGE POSITION ---- --- -------- Jerry W. Levin 53 Chairman of the Board, and Chief Executive Officer Mark Goldman 43 Executive Vice President (Chairman - Eastpak) Patrick McEvoy 47 Executive Vice President (President - Coleman Safety & Security Products) Joseph P. Page 44 Executive Vice President and Chief Financial Officer David A. Ramon 42 Executive Vice President (President - Outdoor Recreation Group) Paul E. Shapiro 56 Executive Vice President and General Counsel David K. Stearns 50 Executive Vice President (President - Coleman Powermate) James L. Rasmus 45 Senior Vice President - Human Resources Karen Clark 37 Vice President - Finance
The following sets forth the position with the Company and selected biographical information for the executive officers of the Company who are not directors. Mark Goldman has been Executive Vice President since April 1995 and President of Eastpak since 1978. He joined Eastpak in 1976. 23 Patrick McEvoy has been Executive Vice President since March 1996 and President of Coleman Safety & Security Products, Inc. since January 1996. He joined Coleman in April 1994 as the Senior Vice President of Product Development and Operations for the Company's North American Recreation business unit. Prior to joining Coleman, he served as Vice President of Black & Decker Corporation from 1990 to 1994, and Vice President for the Chrysler Corporation from 1988 to 1990. Joseph P. Page joined the Company in August 1997 as Executive Vice President and Chief Financial Officer. Since December 1993, Mr. Page has served as Executive Vice President and Chief Financial Officer of Andrews Group Incorporated ("Andrews Group"). From December 1993 through January 1997, Mr. Page was Executive Vice President and Chief Financial Officer of New World Communications Group. Prior to his employment with Andrews Group, Mr. Page was a partner in the accounting firm of Price Waterhouse for more than five years. David A. Ramon has been Executive Vice President since May 1997. Prior to joining the Company, Mr. Ramon was a Director, President, and Chief Operating Officer for New World Television Incorporated from 1995 to 1997, and Executive Vice President and Chief Financial Officer for Gillett Holdings, Inc. from 1985 to 1994. Paul E. Shapiro has been Executive Vice President and General Counsel of the Company since July 1997. Mr. Shapiro has been an Executive Vice President of Andrews Group since 1994, and from January 1994 to June 1997, served as the Executive Vice President and General Counsel of Marvel. Prior to January 1994, Mr. Shapiro was a shareholder in the law firm of Greenberg, Traurig, Hoffman, Lipoff, Rosen & Quental from 1991 to 1993, and is currently Of Counsel to that firm. Mr. Shapiro is a director of Toll Brothers, Inc. (On December 27, 1996, Marvel, of which Mr. Shapiro was an executive officer and director, and several of the subsidiaries of Marvel, filed voluntary petitions for reorganization under Chapter 11 of the United States Bankruptcy Code.) David K. Stearns has been Executive Vice President since January 1995, and Senior Vice President - Marketing from October 1991 to January 1995. He joined the Company in 1976 and has served in various positions, including Vice President/General Manager - Import Division from 1985 to 1990. James L. Rasmus joined the Company in April 1997 as Senior Vice President - Human Resources. Prior to joining Coleman, Mr. Rasmus was the Executive Project Director, Shared Services for Tenneco. He has also held senior human resource positions with Case Corporation, United Technologies and Xerox Corporation. Karen Clark has been Vice President - Finance since July 1997. Prior to joining Coleman, Ms. Clark served as Corporate Controller for Precision Castparts Corp. from 1994 to 1997. She was also Manager - Corporate Planning for Tektronix from 1990 to 1994. Ms. Clark is a member of the Financial Executives Institute and the American Institute of Certified Public Accountants. SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE Section 16(a) of the Exchange Act requires the Company's directors and executive officers, and persons who own more than 10 percent of the Company common stock, to file reports of ownership and changes in ownership with the Securities and Exchange Commission. Based solely on the Company's review of the reporting forms received by it, the Company believes that for 1997 all such filing requirements were satisfied. 24 ITEM 11. EXECUTIVE COMPENSATION SUMMARY COMPENSATION TABLE The following table sets forth information concerning annual, long term and other compensation of the Company's Chief Executive Officer and the next four most highly-compensated executive officers, and three of its former executive officers. Long Term Compensation ----------------------------------- Annual Compensation Awards Payouts ------------------------------------------- ---------- ---------------------- Securities Other Annual Underlying LTIP All Other Name and Principal Position Year Salary Bonus Compensation Options Payouts Compensation - --------------------------- ---- -------- -------- ------------ ---------- ------- ------------ Jerry W. Levin (1) 1997 $300,000 $300,000 $ 2,567 500,000 $ 0 $ 0 Chairman and Chief Executive Officer David A. Ramon (2) 1997 400,000 125,000 2,912 100,000 0 0 Executive Vice President Mark Goldman (3) 1997 250,000 0 6,300 40,000 0 4,230 Executive Vice President 1996 250,000 0 0 0 0 4,270 1995 250,000 0 0 20,000 0 4,492 David K. Stearns (4) 1997 240,000 134,844 105,930 20,000 0 6,212 Executive Vice President 1996 225,500 0 16,899 25,000 0 4,455 1995 189,996 159,425 121,880 40,000 0 3,877 Patrick McEvoy (5) 1997 200,000 0 72,675 0 0 4,064 Executive Vice President 1996 200,000 0 190,114 15,000 0 3,717 1995 190,000 159,290 38,305 20,000 0 794 Michael N. Hammes (6) 1997 116,668 0 27,441 0 0 1,212,035 Former Chief Executive Officer 1996 625,000 0 0 80,000 0 3,270 1995 600,000 891,103 163,950 100,000 0 3,117 Frederik van den Bergh (7) 1997 250,000 0 22,769 10,000 0 641,409 Former Executive Vice President 1996 333,333 233,333 204,266 130,000 0 2,124 Steven Kaplan (8) 1997 186,666 180,666 1,713 10,000 0 175,686 Former Executive Vice President 1996 116,667 50,000 31,592 125,000 0 501
- ----------------------- (1) "Bonus" in 1997 includes $300,000 paid in January 1998 for 1997 performance. "Other Annual Compensation" in 1997 includes $2,567 for Company-paid parking expenses. (2) "Bonus" in 1997 includes $125,000 paid in March 1998 for 1997 performance. "Other Annual Compensation" in 1997 includes Company-paid expense of $2,912 related to relocation. (3) "Other Annual Compensation" in 1997 includes $6,300 for car allowance. "All Other Compensation" in 1997 includes $3,230 for the Company's 401(k) match and $1,000 for premiums paid for term life insurance. (4) "Bonus" in 1997 includes $60,000 bonus paid for relocation during 1997, and $74,844 paid in March 1998 for 1997 performance. "Other Annual Compensation" includes (i) for 1997, $82,500 ordinary income realized upon the exercise/sale of certain stock options during 1997, $4,284 interest differential housing allowance, $8,700 car allowance, $5,455 relocation expenses and $4,991 tax gross-up thereon, (ii) for 1996, $10,155 for interest differential housing allowance, $3,844 for personal use of Company vehicle, $2,900 for car allowance, and (iii) for 1995, $113,561 for relocation costs. "All Other Compensation" includes (i) for 1997, $3,230 and $2,982, respectively, for the Company's 401(k) match and premiums paid for term life insurance, (ii) for 1996, $3,164 and $1,291, respectively, for the Company's 401(k) match and premiums paid for term life insurance, and (iii) in 1995, $3,077 and $800, respectively, for the Company's 401(k) match and premiums paid for term life insurance. 25 (5) "Bonus" for 1995 includes $159,290 paid in February 1996 for 1995 performance. "Other Annual Compensation" includes (i) for 1997, $42,222 forgiveness of a loan, $21,753 interest differential housing allowance, $8,700 car allowance, (ii) for 1996, $141,376 reimbursement of capital loss due to relocation ($45,877 of which is a tax gross-up), $20,844 for other payments related to relocation ($3,510 of which is a tax gross-up), $19,194 interest differential housing allowance, $8,700 car allowance, and (ii) for 1995, $25,513 (which includes $4,402 tax gross-up) related to the forgiveness of a loan, $8,700 car allowance, and $4,092 related to various gifts ($1,410 of which is a tax gross-up on the gifts). "All Other Compensation" includes (i) for 1997, $3,230 and $834, respectively, for the Company's 401(k) match and premiums paid for term life insurance, (ii) for 1995, $3,183 and $534, respectively, for the Company's 401(k) match and premiums paid for term life insurance, and (iii) for 1995, $0 and $794, respectively, for the Company's 401(k) match and premiums paid for term life insurance. (6) Mr. Hammes ceased to be an employee of the Company in February 1997. "Bonus" includes $591,103 paid in February 1996 for 1995 performance pursuant to a predecessor incentive plan and a $300,000 special bonus paid in 1995 pursuant to Mr. Hammes' employment agreement. "Other Annual Compensation" includes (i) for 1997, $13,663 for personal use of a Company vehicle, $10,853 for relocation costs ($4,912 of which is a tax gross-up), and $2,925 interest differential housing allowance, and (ii) for 1995, $137,703 for relocation costs. "All Other Compensation" includes (i) for 1997, $2,380 and $0, respectively, for the Company's 401(k) match and premiums paid for term life insurance, and $1,209,655 for termination of employment payments including but not limited to severance payments, lump sum payments, and the value of benefits received pursuant to a severance agreement entered into with Mr. Hammes as of February 28, 1997 (see "Employment Agreements and Termination of Employment Arrangements"), (ii) for 1996, $3,230 and $40, respectively, for the Company's 401(k) match and premiums paid for term life insurance and (iii) for 1995, $3,077 and $40, respectively, for the Company's 401(k) match and premiums paid for term life insurance. (7) Mr. van den Bergh ceased to be an employee of the Company in June 1997. "Bonus" for 1996 includes $233,333 guaranteed incentive payment made in 1996 pursuant to Mr. van den Bergh's employment agreement. "Other Annual Compensation" includes (i) for 1997, $9,630 for Company vehicle expenses, $5,493 for tax preparation expenses, $6,822 for housing allowance, and $824 for representation allowance, and (ii) for 1996, includes a $153,100 payment made to Mr. van den Bergh to compensation him for the loss of stock option price appreciation upon leaving his former employer. "All Other Compensation" includes (i) for 1997, $641,409 for termination of employment payments including, but not limited to, severance payments, lump sum payments, and the value of benefits received pursuant to a severance agreement entered into with Mr. van den Bergh as of June 30, 1997 (see "Employment Agreements and Termination of Employment Arrangements"), and (ii) for 1996, $2,124 for premiums paid for term life insurance. (8) Mr. Kaplan ceased to be an employee of the Company in August 1997. "Bonus" includes (i) for 1997, $130,666 guaranteed incentive and $50,000 (final installment) signing bonus payments made in 1997 pursuant to Mr. Kaplan's employment agreement and (ii) for 1996, $50,000 payments made during 1996 for first installment of signing bonus pursuant to Mr. Kaplan's employment agreement. "Other Annual Compensation" includes (i) for 1997, $1,416 for the personal use of a Company car, and $297 for relocation costs, and (ii) for 1996, $31,592 for relocation costs ($14,103 of which is a tax gross-up). "All Other Compensation" includes (i) for 1997, $174,812 for payments including, but not limited to, severance payments, lump sum payments and value of benefits received pursuant to a termination agreement entered into with Mr. Kaplan as of August 31, 1997 (see "Employment Agreements and Termination of Employment Arrangements"), and $874 for premiums paid for term life insurance, and (ii) for 1996, $501 for premiums paid for term life insurance. 26 OPTION GRANTS IN LAST FISCAL YEAR The following table sets forth information concerning individual grants of stock options during 1997 to the Company's Chief Executive Officer and the next four most highly-compensated executive officers, and three of its former executive officers. Pursuant to the Company Merger Agreement, each outstanding option to acquire the Company's common stock, which is not currently exercisable, will vest and become exercisable at the effective time of the CLN Holdings Merger and, to the extent not exercised prior to the effective time of the Company Merger, will be converted into the right to receive cash in an amount equal to the excess, if any, of $27.50 over the per share exercise price of such option. % of Total Options Granted to Employees Expiration Grant Date Options in Fiscal Exercise Date Present Name Granted Year Price of Options Value (7) - ------------------ ------- ---------- --------- ---------- ----------- Jerry W. Levin (1) 200,000 9.27% $ 12.250 02/11/07 $ 1,257,120 300,000 13.91% 14.000 04/15/07 2,150,835 David A. Ramon (2) 62,500 2.89% 12.250 02/11/07 392,850 37,500 1.73% 16.875 05/13/07 334,558 Mark Goldman (3) 20,000 .92% 15.000 02/12/07 100,422 20,000 .92% 16.125 12/17/07 160,930 David K. Stearns (4) 20,000 .92% 16.125 12/17/07 158,532 Patrick McEvoy -- -- -- -- -- Michael N. Hammes -- -- -- -- -- Frederik van den Bergh (5) 10,000 .46% 14.000 4/15/07 67,527 Steven F. Kaplan (6) 10,000 .46% 14.000 4/15/07 67,527
- -------------------- (1) Mr. Levin's options were granted on February 11, 1997 and April 15, 1997, respectively. The February 11, 1997 and 200,000 of the April 15, 1997 options were granted pursuant to the 1996 Stock Option Plan. The remainder of the April 15, 1997 option was granted pursuant to the 1993 Stock Option Plan. The options are exercisable in installments of 50%. The earlier option vested on April 15, 1997 and December 31, 1997. The later option vested on April 15, 1997 and is scheduled to vest again on April 15, 1998. (2) Mr. Ramon's options were granted on February 11, 1997 and May 13, 1997, respectively. The February 11, 1997 and May 13, 1997 options were granted pursuant to the 1996 Stock Option Plan. The options are exercisable in installments of 50%. The earlier option vested on April 15, 1997 and December 31, 1997. The later option vested on May 13, 1997 and December 31, 1997. (3) Mr. Goldman's options were granted on February 12, 1997 and December 17, 1997, Respectively. ThE February 12, 1997 option was granted pursuant to the 1996 Stock Option Plan and the December 17, 1997 option was granted pursuant to the 1993 Stock Option Plan. The February 12, 1997 option is exercisable in installments of 33%, 33% and 34%. This option is scheduled to vest on February 12, 2000, February 12, 2001, and February 12, 2002, respectively. The December 17, 1997 option is exercisable in installments of 50%. This option is scheduled to vest on June 17, 1998 and December 17, 1998. (4) Mr. Stearns' options were granted on December 17, 1997 pursuant to the 1996 Stock Option Plan. The option becomes exercisable in installments of 25%. The option is scheduled to vest on December 17, 1998, December 17, 1999, December 17, 2000, and December 17, 2001, respectively. (5) Mr. van den Bergh's options were granted on April 15, 1997 pursuant to the 1996 Stock Option Plan. Pursuant to an agreement entered into with Mr. van den Bergh as of June 30, 1997, Mr. van den Berg's options expired unexercised. (6) Mr. Kaplan's options were granted on April 15, 1997 pursuant to the 1996 Stock Option Plan. Pursuant to an agreement entered into with Mr. Kaplan as of August 31, 1997, Mr. Kaplan's options expired unexercised. 27 (7) The grant date present values were estimated using the Black-Scholes option pricing model and the following weighted-average assumptions; risk-free interest rates from 5.84% to 6.89%, dividend yield of 0%, volatility of the expected market price of the Company's common stock from 27.25% to 35.43%, and a weighted-average expected life of the options from 4.5 to 8.5 years. AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR-END OPTION VALUES The following table sets forth aggregated option exercises in the last fiscal year and fiscal year-end option values for the Company's Chief Executive Officer and the next four most highly-compensated executive officers, and three of its former executive officers. Value of Number of Unexercised Unexercised In-the-Money Shares Options at Options at Acquired FY-End FY-End (1) on Value Exercisable/ Exercisable/ Name Exercise Realized Unexercisable Unexercisable - -------------- -------- -------- -------------- ------------- Jerry W. Levin 0 0 350,000/ $ 1,071,875/ 150,000 309,375 David A. Ramon 0 0 100,000/ 238,281/ 0 0 Mark Goldman 0 0 0/ 0/ 60,000 21,250 David K. Stearns 15,000 82,500 28,720/ 41,790/ 110,280 46,253 Patrick McEvoy 0 0 21,900/ 35,989/ 63,100 39,923 Michael N. Hammes 0 0 0/ 0/ 580,000 (2) 0 Frederik van den Bergh 0 0 0/ 0/ 130,000 (3) 0 Steven F. Kaplan 0 0 0/ 0/ 135,000 (4) 0
- -------------------- (1) Market closing price of $16.0625 per share on December 31, 1997 was used in computing year-end values. (2) Mr. Hammes' right to exercise the options expired on May 29, 1997, pursuant to the agreement entered into with Mr. Hammes on February 28, 1997. The options expired by their terms unexercised on May 29, 1997. (3) Mr. van den Bergh was paid in lieu of the vested options that were in-the-money on August 27, 1997, pursuant to the agreement entered into with Mr. van den Bergh as of June 30, 1997. The options were allowed to expire by their terms unexercised on September 30, 1997. (4) Mr. Kaplan's right to exercise the options expired on November 30, 1997, pursuant to the agreement entered into with Mr. Kaplan as of August 31, 1997. The options expired by their terms unexercised on November 30, 1997. EMPLOYMENT AGREEMENTS AND TERMINATION OF EMPLOYMENT ARRANGEMENTS The Company has an employment agreement with Mr. Levin effective for the term October 1, 1997 through December 31, 2000. Pursuant to the Company Merger Agreement, the Company will not have any responsibility for the Company's obligations under Mr. Levin's employment agreement following consummation of the CLN Holdings Merger, except for payment of the transaction bonus described below. The employment agreement provides for a base salary of $1,000,000 per annum, and participation in The Coleman Company, Inc. Executive Annual Incentive Plan (the "Incentive Plan") with a 100% target bonus opportunity. The employment agreement 28 with Mr. Levin also provides for, among other things, participation in the Company's other benefit plans, certain pension benefits and payments upon death, disability, termination without cause and change of control of the Company. Upon a termination of employment without cause, Mr. Levin would be entitled, among other things, to receive payments equal to base salary for the balance of the term of the agreement (but in any event not less than one year). Upon a change of control Mr. Levin would be entitled to a lump sum payment equal to base salary and target bonus payable for the remainder of the term. In addition, Mr. Levin's employment agreement provides for a gross-up for certain excise taxes resulting from payments and benefits under the employment agreement. Pursuant to the employment agreement, Mr. Levin is entitled to a transaction bonus equal to 1.5% of the enterprise value of certain divestitures, up to a maximum aggregate amount of $1.5 million. The consummation of the sale of CSS would result in a transaction bonus payable to Mr. Levin of $1.5 million. The Company has an employment agreement with Mr. Shapiro effective for the term July 1, 1997 through June 30, 2000. Pursuant to the Company Merger Agreement, the Company will not have any responsibility for the Company's obligations under Mr. Shapiro's employment agreement following consummation of the CLN Holdings Merger. The employment agreement provides for a base salary of $350,000 per annum, and participation in the Incentive Plan with a 70% target bonus opportunity. The employment agreement with Mr. Shapiro also provides for, among other things, participation in the Company's other benefit plans and payments upon death, disability, termination without cause and change of control of the Company. Upon termination of employment without cause, Mr. Shapiro would be entitled, among other things, to receive payments equal to base salary for the balance of the term of the agreement (but in any event not less than one year). Upon a change of control, Mr. Shapiro would be entitled to a lump sum payment equal to base salary and target bonus payable for the remainder of the term. In addition, Mr. Shapiro's employment agreement provides for a gross-up for certain excise taxes resulting from payments and benefits under the employment agreement. The Company has an employment agreement with Mr. McEvoy effective for the term January 1, 1996 through December 31, 1998. Pursuant to the employment agreement, Mr. McEvoy is paid a base salary of $200,000 per annum, and is entitled to participate in the Incentive Plan with a 70% target bonus opportunity. The employment agreement with Mr. McEvoy also provides for, among other things, participation in the Company's other benefit plans and payments upon death, disability, termination without cause, and subject to certain conditions, change of control of the Company. Upon a termination of employment without cause, or termination of employment upon a change of control, Mr. McEvoy would be entitled, for two years, among other things, to receive payments equal to base salary and target bonus and to participate in the Company's medical plans. In addition, Mr. McEvoy's employment agreement provides for a gross-up of certain excise taxes resulting from payments and benefits under the employment agreement. In addition, in connection with the sale of CSS, the Company and Mr. McEvoy entered into a retention agreement. Pursuant to such retention agreement, Mr. McEvoy will receive, among other things, a special bonus for one year in an amount equal to Mr. McEvoy's base salary, provided that if Mr. McEvoy becomes entitled to severance payments under his employment contracts as a result of a termination of employment within three months of a sale of CSS, the severance payments to Mr. McEvoy under his employment agreement will be reduced by the payments of the special bonus. Mr. Goldman had two employment agreements with the Company which became effective November 1, 1994 and terminated December 31, 1997. Under the agreements, which had identical material terms, Mr. Goldman's base salary was $250,000 per year, and Mr. Goldman was eligible for a discretionary incentive payment each year. Mr. Hammes had an employment agreement with the Company effective January 1, 1996, which provided for, among other things, a base salary of $700,000 per annum. Mr. Hammes' employment was terminated February 28, 1997. Effective such date, Mr. Hammes' entered into a severance agreement with the Company having a severance period of two years. Pursuant to the severance agreement, Mr. Hammes is entitled to, among other things, severance payments during the severance period at the rate of $700,000 per annum, and continued participation in the Company's medical plans during the severance period, and is entitled to certain pension 29 payments beginning March 1, 1999. In addition, pursuant to the severance agreement, Mr. Hammes was paid a lump sum payment during 1997 of $450,000 and is entitled to another $450,000 lump sum payment at the end of the severance period. Mr. van den Bergh had an employment agreement with the Company effective as of May 1, 1996, which provided for, among other things, a base salary of $500,000 per annum. Mr. van den Bergh's employment was terminated effective June 30, 1997. Effective such date, Mr. van den Bergh entered into a severance agreement with the Company having a severance period of one year. Pursuant to the severance agreement, Mr. van den Bergh was paid two lump sum payments during 1997 totaling $550,000 and is entitled to, among other things, continued participation in the Company's medical plans during the severance period. Mr. Kaplan had an employment agreement with the Company effective as of August 1, 1996, which provided for, among other things, a base salary of $280,000 per annum. Mr. Kaplan's employment was terminated effective August 31, 1997. Effective such date Mr. Kaplan entered into a severance agreement with the Company, having a severance period or two years. Pursuant to the severance agreement, Mr. Kaplan is entitled to, among other things, severance payments during the severance period at the rate of $426,000 per annum, and continued participation in the Company's medical plans during the severance period. PENSION PLANS RETIREMENT PLAN. The Company participates in the New Coleman Company, Inc. Retirement Plan for Salaried Employees (the "Salaried Pension Plan") which replaced a prior plan that was terminated on June 30, 1989. Participants in the Salaried Pension Plan include participants under the prior plan and certain salaried exempt employees who are at least 21 years old and have completed at least one year of service with the Company. Benefits to participants vest fully after five years of Vesting Service (as defined in the Salaried Pension Plan) and such benefits are determined primarily by a formula based on the average of the five consecutive years of greatest compensation earned during the last ten years of the participant's service to the Company, and the number of years of service attained by the individual participant. Such compensation is composed primarily of regular base salary and contributions to qualified deferred compensation plans and does not include amounts paid pursuant to the Company's annual cash incentive compensation plans. Participants make no contributions to the Salaried Pension Plan. EXCESS BENEFIT PLAN. The Company participates in the New Coleman Holdings Inc. Excess Benefit Plan (the "Excess Benefit Plan") for designated employees who are participants in the Salaried Pension Plan and whose retirement income from the Salaried Pension Plan in the form of payment to be made under the Salaried Pension Plan exceeds the maximum permissible under the Employee Retirement Income Security Act, as amended, and certain provisions of the Internal Revenue Code of 1986, as amended (the "Code"). The Excess Benefit Plan supplements the Salaried Pension Plan by providing additional retirement benefits to its participants in excess of the maximum amount permitted under the Salaried Pension Plan, which benefits generally are payable in conjunction with payments made under the Salaried Pension Plan. Benefits payable under the Excess Benefit Plan have been included in the estimated annual benefits payable listed on the table following discussion of the Consolidated Supplemental Retirement Plan. The Excess Benefit Plan was amended and restated effective January 1, 1995 to add a provision allowing annual cash incentive compensation plan payments to designated participants to be included as compensation in the formula used to determine benefits under the Excess Benefit Plan. Thirteen executives participated in this feature of the Excess Benefit Plan during 1997. CONSOLIDATED SUPPLEMENTAL RETIREMENT PLAN. In addition to the obligation of the Company under the Salaried Pension Plan and the Excess Benefit Plan, the Company had committed to provide other supplemental retirement benefits solely for Mr. Hammes, including credit for additional years of service and certain other formula changes. Pursuant to an agreement entered into with Mr. Hammes in February 1997, discussed above, Mr. Hammes is no longer a participant in the Consolidated Supplemental Retirement Plan. 30 The following table shows estimated annual benefits payable under the Salaried Pension Plan and the Excess Benefit Plan, and reflects the straight life benefit form of payment for employees, assumes normal retirement at age 65, and reflects deductions for Social Security and other offset amounts: Estimated Annual Pension ---------------------------------------------------------------------- Final Average 10 Years 20 Years 30 Years 35 Years Earnings of Service of Service of Service of Service ------------- ---------- ---------- ---------- ---------- $ 100,000 $ 15,896 $ 31,792 $ 47,688 $ 55,636 200,000 35,896 71,792 107,688 125,636 300,000 55,896 111,792 167,688 195,636 400,000 75,896 151,792 227,688 265,636 500,000 95,896 191,792 287,688 335,636 600,000 115,896 231,792 347,688 405,636 700,000 135,896 271,792 407,688 475,636 800,000 155,896 311,792 467,688 545,636 900,000 175,896 351,792 527,688 615,636 1,000,000 195,896 391,792 587,688 685,636 1,100,000 215,896 431,792 647,688 755,636 1,200,000 235,896 471,792 707,688 825,636 1,300,000 255,896 511,792 767,688 895,636 1,400,000 275,896 551,792 827,688 965,636 1,500,000 295,896 591,792 887,688 1,035,636 1,600,000 315,896 631,792 947,688 1,105,636 1,700,000 335,896 671,792 1,007,688 1,175,636 1,800,000 355,896 711,792 1,067,688 1,245,636
Benefits under the Salaried Pension Plan are payable upon normal retirement at age 65, and at age 55 following vested termination, disability, and death. A participant may elect to commence early benefit payments at any time after the participant's 55th birthday or may retire with 30 years of Vesting Service at amounts reduced from those payable upon normal retirement age. As of December 31, 1997, credited years of service for each of the individuals listed on the Summary Compensation Table are as follows: Mr. Levin, 8.7 years; Mr. Ramon, 4.6 years; Mr. Goldman, 4 years; Mr. Stearns, 21.2 years; Mr. McEvoy, 3.8 years; Mr. Hammes, 3.4 years; Mr. van den Bergh, zero years; and Mr. Kaplan, 1.1 years. In accordance with Mr. Hammes' termination of employment agreement (see Employment Agreements and Termination of Employment Arrangements), discussed above, Mr. Hammes will be entitled to receive a pension of $15,110 per month commencing March 1, 1999. Pursuant to the Company Merger Agreement, from and after the effective time of the CLN Holdings Merger, Sunbeam has agreed to allow Company employees to participate in Sunbeam benefit plans on substantially the same basis as similarly situated Sunbeam employees, and has also agreed to cause the Company to continue its employee benefit plans for a period of at least six (6) months following such date. Sunbeam has also agreed to give Company employees full credit for purposes of eligibility and vesting of benefits and benefit accrual for service with the Company and its affiliates prior to the effective time of the CLN Holdings Merger provided, however, that no such crediting of service results in duplication of benefits. 31 REPORT ON EXECUTIVE COMPENSATION BY THE COMPENSATION COMMITTEE The Compensation Committee is comprised entirely of directors who are not officers or employees of the Company. The Compensation Committee is composed of Messrs. Robinson (Chairman), Drapkin and Slovin, and Ms. Jordan. The Compensation Committee is responsible for: - Reviewing and approving the salary and annual incentive compensation of the Company's executive officers; - Reviewing, approving or modifying performance standards against which annual incentive compensation awards will be made for executive officers; - Reviewing, approving or modifying annual incentive compensation awards for executive officers; - Reviewing, approving or modifying stock option awards for all employees, including executive officers; - Reviewing, approving or modifying supplemental benefit or compensation plans which are available to designated executives; - Reviewing and recommending to the Board of Directors changes to current executive officer benefit plans or the adoption of new executive compensation programs requiring shareholder approval; and - Reviewing and acting as appropriate on any other issues relating to executive compensation and brought to the Compensation Committee by the Chairman for its consideration. COMPENSATION PHILOSOPHY In 1994, the compensation philosophy for the Company was developed and adapted. The philosophy includes the following principles: - Support the achievement of the Company's desired financial performance and return to shareholders; - Provide compensation that will attract and retain the required high level talent; and - Align executives officers' interest with the Company's success by linking both annual incentive compensation and long-term incentive compensation, in the form of stock option and/or stock appreciation rights awards, with the Company's success in achieving performance goals. The executive compensation philosophy for the Company, as approved and adopted by the Compensation Committee, provides for an overall level of potential compensation opportunity that, if aggressive financial goals are achieved and superior shareholder returns are realized, will be at a 75th percentile level of competitiveness with consumer products companies of comparable size. To determine pay level opportunities, the Compensation Committee consulted with outside consultants and with the Company's officers responsible for human resources. The Compensation Committee intends, over time, to set salaries in a manner consistent with the foregoing. Annual incentive and stock option opportunities are intended to be set above predicted competitive norms. Actual individual compensation levels may be greater or lesser than median competitive levels, based upon annual and long-term Company performance. The Compensation Committee, at its discretion, sets executive compensation at levels which it judges are justified by external, internal and other circumstances. 32 COMPLIANCE WITH FEDERAL TAX LEGISLATION The Omnibus Budget Reconciliation Act of 1993 added Section 162(m) to the Code which, generally precludes the Company and other public companies from taking a tax deduction for compensation over $1 million which is not "performance-based" and is paid, or otherwise taxable, to executives named in the Summary Compensation Table and employed by the Company at the end of the applicable tax year. The Company attempts to preserve as much deduction as possible without undercutting the compensation objectives set forth above. Each director on the Compensation Committee is an "outside director" within the meaning of Section 162(m) of the Code. BASE COMPENSATION During 1997, the base compensation of each executive officer was reviewed and compared to median levels of competitiveness for similarly sized consumer products companies. The Company has adopted the practice of base compensation increases for executive officers based on an annual review of the executive performance and to adjust compensation and to keep it approximately to the standard described above. ANNUAL CASH INCENTIVE COMPENSATION The Chief Executive Officer was paid a bonus based on the targets in the Incentive Plan, even though a certain condition to payment of the target bonus was not satisfied. The other named executive officers who were employed by Coleman at the end of the year were also paid a bonus based on the same criteria. During 1997, no bonus was paid to the former Chief Executive Officer. The bonuses were paid to recognize the substantial progress made in the restructuring of Coleman. LONG TERM INCENTIVES In 1997, the Compensation Committee approved option grants to the Chief Executive Officer of 200,000 shares on February 11, 1997, at an exercise price of $12.25 and 300,000 shares on April 14, 1997 at an exercise price of $14.00. It also approved grants totaling in the aggregate 160,000 shares to the other named executive officers employed by the Company at the end of 1997. The Compensation Committee believes that these grants, which were primarily made in the first half of 1997, provide an appropriate link between the interest of executives with those of the Company's shareholders. OTHER BENEFITS The Company provides medical and retirement benefits to executive officers that are generally available to Company salaried employees, including participation in medical and dental benefit plans, a qualified 401(k) employee savings plan and a qualified defined benefit retirement plan. In addition, the Company provides certain officers and key management employees a nonqualified benefit equalization plan which is designed to make up for benefits that would otherwise to lost due to various tax limitations. The Company's benefit plans are intended to provide a median level of benefits when compared to similarly sized consumer products companies. The Company also provides certain executive officers with certain executive prerequisites which may be deemed to be a personal benefit or constitute compensation to such executive officers, including (for example) car allowances and reimbursements, and club membership dues. 33 The Compensation Committee believes the executive compensation philosophy and programs are appropriate and serve the interest of the shareholders and the Company. Compensation Committee: James D. Robinson, Chairman Donald G. Drapkin Ann D. Jordan Bruce Slovin CUMULATIVE SHAREHOLDER RETURN PERFORMANCE GRAPH The graph set forth below presents a comparison of cumulative shareholder return for the Company's common stock for the five-year period December 31, 1992 through December 31, 1997, on an indexed basis, as compared with the S&P Midcap 400 stock index and a selected peer group of companies. The group of companies selected for the peer group represents a portfolio of companies which share certain characteristics considered relevant to the earnings performance and related cumulative shareholder return for the Company's common stock. Selection of the peer group for the performance line was impacted by the fact that many of the Company's direct competitors are privately held or are subsidiaries of much larger public companies. Selection criteria applied in formulating the group of 12 companies, each of whose stock is publicly traded, required each company to share one or more of the following characteristics representative of the Company: (a) competitors with the Company in one or more of its product lines; (b) companies which serve mass merchandisers and their customers; (c) companies offering strong brand name consumer products; and (d) companies serving recreational products consumers. 34 The 12 companies selected as the peer group are as follows: Johnson Worldwide Associates, Inc.; Anthony Industries, Inc.; Huffy Corporation; Kellwood Company (parent of American Recreation Products, Inc.); Russell Corporation; Snap-on Tools Corporation; Sunbeam; Brunswick Corporation; V.F. Corporation (parent of JanSport, Inc.); Newell Co.; Rubbermaid Incorporated; and Cooper Industries, Inc. [GRAPH] 12/31/92 12/31/93 12/31/94 12/31/95 12/31/96 12/31/97 --------------------------------------------------------------- Coleman $100 $ 98 $123 $123 $ 96 $113 S&P MidCap 400 $100 $114 $110 $143 $171 $226 Peer Group $100 $107 $100 $106 $124 $160
35 ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT The following table sets forth information concerning beneficial ownership, as of the close of business on March 3, 1998, of the Company's common stock by its 5% beneficial owners, its directors, Chief Executive Officer and the next four most highly-compensated executives, and of directors and executive officers as a group. Name of Amount and Nature of Percent Beneficial Owner Beneficial Ownership of Class - ---------------- -------------------- -------- Ronald O. Perelman 44,067,520 (1) 82% 35 E. 62nd Street New York, New York 10021 Sunbeam Corporation 44,067,520 (2) 82% 1615 South Congress Avenue, Suite 200 Delray Beach, Florida 33445 Donald G. Drapkin 30,000 (3) * Frank Gifford 0 * Lawrence M. Jones 40,512 * Ann Jordan 0 * Jerry W. Levin 373,000 (4) * John A. Moran 10,000 * James D. Robinson III 0 * Bruce Slovin 52,600 (5) * William H. Spoor 6,000 (6) * David A. Ramon 100,000 (7) * Mark Goldman 0 * David K. Stearns 25,342 (8) * Patrick McEvoy 0 * Michael N. Hammes 0 (9) * Steven Kaplan 0 (9) * Frederik van den Bergh 11,000 (9) * All Directors and Executive 44,768,474(10) 83% Officers as a Group (21 persons)
* Less than 1% - ------------- (1) Substantially all of the shares owned are pledged to secure obligations of Coleman Worldwide and CLN Holdings and shares of intermediate holding companies are or from time to time may be pledged to secure obligations of MacAndrews & Forbes Holdings, Inc. or its affiliates. (2) The Statement on Schedule 13D filed by Sunbeam on March 9, 1998 indicates that Sunbeam may be deemed to be the beneficial owner of 44,067,520 shares by reason of its execution of the CLN Holdings Merger Agreement. (3) Includes 10,000 shares owned by trusts for the benefit of Mr. Drapkin's children and as to which beneficial ownership is disclaimed. (4) Includes 2,000 shares owned by trusts for the benefit of Mr. Levin's children and as to which beneficial ownership is disclaimed. Includes 350,000 shares which may be acquired within 60 days pursuant to stock options. (5) Includes 46,300 shares held in trust for family members and as to which beneficial ownership is disclaimed. (6) Includes 4,000 shares held in trust for the benefit of Mr. Spoor pursuant to the IDS Bank & Trust, Trustee, The Pillsbury Company 401(k) Savings Plan. 36 (7) Includes 100,000 shares which may be acquired within 60 days pursuant to stock options. (8) Includes 520 shares held by Mr. Stearns' spouse and as to which beneficial ownership is disclaimed. Includes 20,720 shares which may be acquired within 60 days pursuant to stock options. (9) No current information is available as to share ownership. Reflects information in the Company's records as of the date of termination of employment. (10) Includes an additional 52,500 shares which may be acquired within 60 days by directors and executive officers as a group pursuant to stock options. Excludes 1,002,380 shares which may be acquired by directors and executive officers pursuant to stock options which will vest and become exercisable upon consummation of the CLN Holdings Merger. ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS RELATIONSHIP WITH MACANDREWS & FORBES Ronald O. Perelman, through MacAndrews & Forbes, beneficially owns indirectly 82% of Coleman's common stock. Due to its stock ownership, MacAndrews & Forbes controls Coleman and is able to elect the entire board of directors. On February 27, 1998, the CLN Holdings Merger Agreement and the Company Merger Agreement were executed as described in further detail above. As a result of the CLN Holdings Merger, CLN Holdings will become a wholly-owned subsidiary of Sunbeam and Sunbeam will become the indirect owner of approximately 82% of the outstanding Coleman common stock. Additionally, upon consummation of the CLN Holdings Merger, all of the current members of Coleman's board of directors will resign from their positions as directors, and five individuals designated by Sunbeam will become directors of the Company. MacAndrews & Forbes is a diversified holding company with interests in several industries. The principal executive offices of MacAndrews & Forbes are located at 35 East 62nd Street, New York, New York 10021. CROSS-INDEMNIFICATION AGREEMENT Coleman and Holdings are parties to a cross-indemnification agreement (the "Cross-Indemnification Agreement"), pursuant to which Coleman has agreed to indemnify Holdings against all liabilities related to the outdoor products business transferred to Coleman by Holdings, and Holdings has agreed to indemnify Coleman and its immediate corporate parent against all liabilities of Holdings other than liabilities related to the outdoor products business transferred by Holdings to Coleman. The liabilities that Coleman will indemnify Holdings against include (i) asserted and potential product liability claims arising out of products manufactured or sold by the outdoor products business, and (ii) asserted and potential environmental claims and liabilities related to facilities currently or formerly owned or used by the outdoor products business. TAX SHARING AGREEMENT The Company is included in the consolidated tax group of which Mafco is the common parent and Coleman's tax liability will be included in the consolidated Federal income tax liability of Mafco. Coleman is also included in certain state and local tax returns of Mafco or its affiliates. Coleman participates in a Tax Sharing Agreement (the "Tax Sharing Agreement") pursuant to which it pays to Coleman Worldwide amounts equal to the taxes that Coleman would otherwise have to pay if it were to file separate Federal, state or local income tax returns (including any amounts determined to be due as a result of a redetermination of the tax liability of Mafco arising from an audit or otherwise). Under Federal law, Coleman is subject to liability for the consolidated Federal income tax liabilities of the consolidated group of which Mafco is the common parent, for any taxable period during which Coleman or a subsidiary is a member of that consolidated group. Mafco has agreed, however, to indemnify Coleman for any such Federal income tax liability (and certain state and local tax liabilities) of Mafco or any of its subsidiaries that Coleman is actually required to pay. Because the payments to be made by Coleman under the Tax Sharing Agreement are determined by the amount of taxes that Coleman would otherwise have to pay if it were to file separate Federal, state or local income tax returns, the Tax Sharing Agreement will benefit Mafco to the extent that Mafco can offset the taxable income generated by Coleman against losses and tax credits 37 generated by Mafco and its other subsidiaries. Following the consummation of the CLN Holdings Merger, Coleman will no longer be included in the Mafco consolidated tax group. The Tax Sharing Agreement will be terminated on the date of the CLN Holdings Merger. The CLN Holdings Merger Agreement provides for certain tax indemnities and tax sharing payments with respect to Mafco, Coleman and their respective affiliates. INSURANCE PROGRAMS Coleman is insured under policies maintained by MacAndrews & Forbes or its affiliates, including health and life insurance, workers compensation, and liability insurance. The Company's expense represents its expected costs for self-insured retentions and premiums for excess coverage insurance. For 1997, such expense, including the Company's allocable share of premiums for such insurance, was approximately $13.3 million. Management believes that the terms for such insurance are at least as favorable as terms that could be obtained by the Company were it separately insured. SERVICES PROVIDED BY OTHER AFFILIATES From time to time, Coleman purchases from affiliates, at negotiated rates, specialized accounting and other services. Coleman also provides, at negotiated rates, specialized accounting services and other services to an affiliate. The net expense for such services was approximately $394,000 during 1997. Coleman believes that the terms of such arrangements are at least as favorable to Coleman as those it could have negotiated with nonaffiliated parties. In addition, certain employees of the Company have been paid by MacAndrews & Forbes or other affiliates of the Company, and the Company reimburses such affiliates for the compensation expense for such employees. PURCHASE OF INACTIVE SUBSIDIARIES During the first quarter of 1997, Coleman purchased an inactive subsidiary from an affiliate for approximately $1.0 million, plus a portion of certain tax benefits to the extent such benefits are realized by Coleman. During the fourth quarter of 1997, Coleman purchased an inactive subsidiary from an affiliate for which the Company agreed to pay 50% of the tax benefits realized by Coleman when and if such benefits are realized. Coleman expects to realize certain tax benefits from the tax losses of such subsidiaries. OFFICE LEASE Coleman subleases office space in New York City from an affiliate. The rent paid by Coleman represents the allocable portion, based on the space leased, of the rent paid by the affiliate to its third party landlord. The expense for such rent during 1997 was approximately $158,000. Coleman believes that the terms of the sublease are at least as favorable to Coleman as those it could have negotiated with nonaffiliated parties. PENSION PLANS Holdings maintains pension and other retirement plans in various forms covering employees of Coleman who meet eligibility requirements. Holdings also has an unfunded excess benefit plan covering certain of Coleman's U.S. employees whose benefits under the plans described above are limited by provisions of the Code. Coleman pays to Holdings it allocable costs of maintaining such plans for Coleman's employees. As part of the consummation of the CLN Holdings Merger, such pension and other benefits plans will be assigned and assumed by Coleman. OTHER ARRANGEMENTS At the beginning of 1995, Mr. McEvoy, an Executive Vice President of Coleman, had a noninterest-bearing loan from Coleman in the amount of $63,333. At the end of 1997, the principal balance of the loan was $0. 38 During 1997, Coleman purchased licensing services from an affiliate, for which it paid approximately $650,000. During 1997, Coleman sold products to an affiliate, for which it received approximately $900,000. During 1997, Coleman used an airplane owned by a corporation of which a director of Coleman is a stockholder, for which Coleman paid approximately $158,000. During 1997, a subsidiary of Coleman paid approximately $254,000 for warehouse space leased from a real estate partnership in which Mr. Goldman, an Executive Vice President of Coleman, and three other immediate family members of Mr. Goldman's are partners. A manufacturing business owned by Mr. Goldman's father contracted with Coleman's subsidiary for the manufacture of goods sold to the subsidiary, for which the subsidiary paid approximately $2.6 million during 1997. Pursuant to the agreement by which Coleman acquired the Eastpak business, Mr. Goldman is entitled to certain additional payments from Coleman upon Eastpak achieving certain operating targets. In accordance with such agreement, a final additional payment of $12.0 million was paid to Mr. Goldman for 1997 financial performance. PART IV ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K (a) (1) and (2) Financial Statements and Schedule. See List of Financial Statements and Schedules which appears on page F-1 herein. (3) Exhibits EXHIBIT NO. DESCRIPTION ---------- ----------- 2.1 Agreement and Plan of Merger among Sunbeam Corporation, Camper Acquisition Corp. and The Coleman Company, Inc. dated as of February 27, 1998 (incorporated by reference to Exhibit 2.1 to The Coleman Company, Inc. Current Report on Form 8-K/A filed on March 5, 1998). 2.2 Agreement and Plan of Merger among Sunbeam Corporation, Laser Acquisition Corp, CLN Holdings Inc. and Coleman (Parent) Holdings Inc. dated as of February 27, 1998 (incorporated by reference to Exhibit 10.1 to The Coleman Company, Inc. Current Report on Form 8-K/A filed on March 5, 1998). 3.1 Certificate of Incorporation of The Coleman Company, Inc., filed with the Secretary of State of Delaware on December 17, 1991 (incorporated by reference to Exhibit 3.1 to The Coleman Company, Inc. 1993 Annual Report on Form 10-K). 3.2 Bylaws of The Coleman Company, Inc., as amended (incorporated by reference to Exhibit 3.1 to The Coleman Company, Inc. Form 10-Q for the period ended June 30, 1997). 4.1 Amended and Restated Credit Agreement dated as of August 3, 1995 among the Company, the Lenders party thereto, the Issuing Bank, the Agent, and the Co-Agents (incorporated by reference to Exhibit 4.2 to The Coleman Company Inc. Form 10-Q for the period ended June 30, 1995). 39 4.2 Amendment No. 1 dated as of April 30, 1996 to the Amended and Restated Credit Agreement, dated as of August 3, 1995 among The Coleman Company, Inc., the Lenders party thereto, the Issuing Bank, the Agent and the Co-Agents (incorporated by reference to Exhibit 4.1 to The Coleman Company, Inc. Form 10-Q for the period ended March 31, 1996). 4.3 Amendment No. 2 dated as of April 30, 1996 to the Amended and Restated Credit Agreement, dated as of August 3, 1995 among The Coleman Company, Inc., the Lenders party thereto, the Issuing Bank, the Agent and the Co-Agents (incorporated by reference to Exhibit 4.2 to The Coleman Company, Inc. Form 10-Q for the period ended March 31, 1996). 4.4 Amendment No. 3 dated as of May 29, 1996 to the Amended and Restated Credit Agreement, dated as of August 3, 1995 among The Coleman Company, Inc., the Lenders party thereto, the Issuing Bank, the Agent and the Co-Agents (incorporated by reference to Exhibit 4.1 to The Coleman Company, Inc. Form 10-Q for the period ended September 30, 1996). 4.5 Amendment No. 4 dated as of October 25, 1996 to the Amended and Restated Credit Agreement, dated as of August 3, 1995 among The Coleman Company, Inc., the Lenders party thereto, the Issuing Bank, the Agent and the Co-Agents (incorporated by reference to Exhibit 4.2 to The Coleman Company, Inc. Form 10-Q for the period ended September 30, 1996). 4.6 Amendment No. 5 dated as of March 7, 1997 to the Amended and Restated Credit Agreement, dated as of August 3, 1995 among The Coleman Company, Inc., the Lenders party thereto, the Issuing Bank, the Agent and the Co-Agents (incorporated by reference to Exhibit 4.6 to The Coleman Company, Inc. 1996 Annual Report on Form 10-K). 4.7 Note Purchase Agreement dated as of August 3, 1995 among The Coleman Company, Inc., and Purchasers party thereto (incorporated by reference to Exhibit 4.3 to The Coleman Company Inc. Form 10-Q for the period ended June 30, 1995). 4.8 Note Purchase Agreement dated as of May 1, 1996 among The Coleman Company, Inc., and Purchasers party thereto (incorporated by reference to Exhibit 4.1 to The Coleman Company, Inc., Current Report on Form 8-K dated June 28, 1996). 4.9 Specimen copy of definitive certificate of common stock of The Coleman Company, Inc., par value $.01 per share (incorporated by reference to Exhibit 4.4 to The Coleman Company, Inc. 1992 Annual Report on Form 10-K). 10.1 Cross-Indemnification Agreement dated as of February 26, 1992 among New Coleman Holdings Inc., Coleman Finance Holdings Inc., The Coleman Company, Inc., and certain subsidiaries of New Coleman Holdings Inc. and The Coleman Company, Inc., (incorporated by reference to Exhibit 10.1 to The Coleman Company, Inc. 1992 Annual Report on Form 10-K). 10.2 Amendment No. 1 dated as of December 30, 1992 to the Cross-Indemnification Agreement (incorporated by reference to Exhibit 10.2 to The Coleman Company, Inc. 1992 Annual Report on Form 10-K). 40 10.3 Reimbursement Agreement dated as of February 26, 1992 between The Coleman Company, Inc., and MacAndrews Holdings (incorporated by reference to Exhibit 10.4 to The Coleman Company, Inc. 1992 Annual Report on Form 10-K). 10.4 Tax Allocation Agreement dated as of August 24, 1990 among MacAndrews Holdings, New Coleman Holdings Inc. and subsidiaries of New Coleman Holdings Inc. (incorporated by reference to Exhibit 10.29 to The Coleman Company, Inc. 1992 Annual Report on Form 10-K). 10.5 Amendment No. 1 dated as of February 26, 1992 to the Tax Allocation Agreement dated as of August 24, 1990 among MacAndrews Holdings, New Coleman Holdings Inc. and subsidiaries of New Coleman Holdings Inc. (incorporated by reference to Exhibit 10.30 to The Coleman Company, Inc. 1992 Annual Report on Form 10-K). 10.6 Amendment No. 2 dated as of December 30, 1992 to the Tax Allocation Agreement dated as of August 24, 1990 among MacAndrews Holdings, New Coleman Holdings Inc. and subsidiaries of New Coleman Holdings Inc. (incorporated by reference to Exhibit 10.31 to The Coleman Company, Inc. 1992 Annual Report on Form 10-K). 10.7 Amendment No. 3 dated as of May 27, 1993 to the Tax Allocation Agreement dated as of August 24, 1990 among MacAndrews Holdings, New Coleman Holdings Inc. and subsidiaries of New Coleman Holdings Inc. (incorporated by reference to Exhibit 10.45 to the Coleman Holdings Inc. Registration Statement Form S-1 (File No. 33- 67058), filed on August 6, 1993. 10.8 Tax Sharing Agreement II dated as of February 26, 1992, among Mafco, Coleman Finance Holdings Inc., The Coleman Company, Inc. and certain subsidiaries of The Coleman Company, Inc. (incorporated by reference to Exhibit 10.25 to The Coleman Company, Inc. 1992 Annual Report on Form 10-K). 10.9 Amendment No. 1 dated as of December 30, 1992 to the Tax Sharing Agreement II dated as of February 26, 1992, among Mafco, Coleman Finance Holdings Inc., The Coleman Company, Inc. and certain subsidiaries of The Coleman Company, Inc. (incorporated by reference to Exhibit 10.26 to The Coleman Company, Inc. 1992 Annual Report on Form 10-K). 10.10 Supplemental Tax Sharing Agreement dated as of February 26, 1992, between The Coleman Company, Inc. and MacAndrews and Forbes Holdings Inc. (incorporated by reference to Exhibit 10.32 to The Coleman Company, Inc. 1992 Annual Report on Form 10-K). 10.11 Tax Sharing Agreement III dated as of February 26, 1992 among Mafco, New Coleman Holdings Inc., Coleman Finance Holdings Inc. and subsidiaries of Coleman Finance Holdings Inc. (incorporated by reference to Exhibit 10.27 to The Coleman Company, Inc. 1992 Annual Report on Form 10-K). 10.12 Amendment No. 1 dated as of December 30, 1992 to the Tax Sharing Agreement III dated as of February 26, 1992 among Mafco, New Coleman Holdings Inc., Coleman Finance Holdings Inc. and subsidiaries of Coleman Finance Holdings Inc. (incorporated by reference to Exhibit 10.28 to The Coleman Company, Inc. 1992 Annual Report on Form 10-K). 41 10.13 Tax Sharing Agreement V dated as of May 27, 1993 among Mafco, Coleman Worldwide Corporation, The Coleman Company, Inc. and certain subsidiaries of The Coleman Company, Inc. (incorporated by reference to Exhibit 10.38 to the Coleman Holdings Inc. Registration Statement Form S-1 (File 33-67058), filed on August 6, 1993). 10.14 Tax Sharing Termination Agreement dated as of May 27, 1993 among Mafco, New Coleman Holdings Inc., Coleman Finance Holdings Inc., The Coleman Company, Inc. and subsidiaries of The Coleman Company, Inc. and Coleman Finance Holdings Inc. (incorporated by reference to Exhibit 10.40 to the Coleman Holdings Inc. Registration Statement Form S-1 (File 33-67058), filed on August 6, 1993). 10.15 Worldwide Registration Rights Agreement dated as of May 27, 1993 among Coleman Worldwide Corporation, The Coleman Company, Inc. the Lenders Party thereto and the Agent (incorporated by reference to Exhibit 10.47 to the Coleman Holdings Inc. Registration Statement Form S-1 (File 33-67058), filed on August 6, 1993). 10.16*X The Coleman Company, Inc. Executive Severance Policy effective as of February 27, 1998. 10.17 Contingent Payment Agreement dated as of October 10, 1994, by and among E. Acquisition Corporation, M. Acquisition Corporation, The Coleman Company, Inc. and Mark Goldman (incorporated by reference to Exhibit 10.3 to The Coleman Company, Inc. Current Report on Form 8-K dated November 2, 1994). 10.18 Share Purchase Agreement dated as of February 27, 1996 by and among Butagaz S.N.C. and Bafiges S.A. (incorporated by reference to Exhibit 10.26 to The Coleman Company, Inc. 1995 Annual Report on Form 10-K). 10.19 Amendment to the Share Purchase Agreement dated as of February 27, 1996 by and among Bafiges S.A. and Butagaz S.N.C. (incorporated by reference to Exhibit 10.27 to The Coleman Company, Inc. 1995 Annual Report on Form 10-K). 10.20 Shareholders Agreement dated as of February 27, 1996 by and among Butagaz S.N.C., The Coleman Company, Inc. and Bafiges S.A. (incorporated by reference to Exhibit 10.28 to The Coleman Company, Inc. 1995 Annual Report on Form 10-K). 10.21 Agreement dated as of February 27, 1996 by and between Shell International Petroleum Company Limited, Butagaz S.N.C. on the first part, and Bafiges S.A. and The Coleman Company, Inc. on the second part (incorporated by reference to Exhibit 10.29 to The Coleman Company, Inc. 1995 Annual Report on Form 10-K). 10.22* Letter Agreement dated as of February 28, 1997 between The Coleman Company, Inc. and Michael N. Hammes (incorporated by reference to Exhibit 10.81 to The Coleman Company, Inc. 1996 Annual Report on Form 10-K). 10.23* Employment Agreement dated as of January 1, 1996 between The Coleman Company, Inc. and Patrick McEvoy (incorporated by reference to Exhibit 10.1 to The Coleman Company, Inc. Form 10-Q for the period ended March 31, 1996). 10.24* First Amendment dated August 1, 1996 to Employment Agreement effective as of January 1, 1996, by and between The Coleman Company, Inc., and Patrick McEvoy 42 (incorporated by reference to Exhibit 10.6 to The Coleman Company, Inc. Form 10-Q for the period ended September 30, 1996). 10.25*X Retention Agreement dated September 22, 1997 between The Coleman Company, Inc. and Patrick McEvoy. 10.26* Employment Agreement dated as of January 1, 1996 between The Coleman Company, Inc. and David Stearns (incorporated by reference to Exhibit 10.50 to The Coleman Company, Inc. 1995 Annual Report on Form 10-K). 10.27* First Amendment dated August 1, 1996 to Employment Agreement effective as of January 1, 1996, by and between The Coleman Company, Inc. and David Stearns (incorporated by reference to Exhibit 10.4 to The Coleman Company, Inc. Form 10-Q for the period ended September 30, 1996). 10.28* Letter Agreement dated as of June 30, 1997 between The Coleman Company, Inc. and Frederik van den Bergh (incorporated by reference to Exhibit 10.5 to The Coleman Company, Inc. Form 10-Q for the period ended June 30, 1997). 10.29* Employment Agreement dated as of November 1, 1994 between E. Acquisition Corporation and Mark Goldman (incorporated by reference to Exhibit 10.79 to The Coleman Company, Inc. 1996 Annual Report on Form 10-K). 10.30* Employment Agreement dated as of November 1, 1994 between M. Acquisition Corporation and Mark Goldman (incorporated by reference to Exhibit 10.80 to The Coleman Company, Inc. 1996 Annual Report on Form 10-K). 10.31*X The Coleman Company, Inc. Executive Annual Incentive Plan. 10.32* The Coleman Retirement Salaried Incentive Savings Plan (incorporated by reference to Exhibit 10.3 to The Coleman Company, Inc. Form 10-Q for the period ended March 31, 1996). 10.33* The Coleman Retirement Incentive Savings Plan (the "Savings Plan") (incorporated by reference to Exhibit 10.54 to The Coleman Company, Inc. 1995 Annual Report on Form 10-K). 10.34* First Amendment dated as of October 11, 1994 to the Savings Plan (incorporated by reference to Exhibit 10.55 to The Coleman Company, Inc. 1995 Annual Report on Form 10-K). 10.35* Second Amendment dated as of January 1, 1995 to the Savings Plan (incorporated by reference to Exhibit 10.56 to The Coleman Company, Inc. 1995 Annual Report on Form 10-K). 10.36* Third Amendment dated as of December 14, 1995 to the Savings Plan (incorporated by reference to Exhibit 10.57 to The Coleman Company, Inc. 1995 Annual Report on Form 10-K). 10.37* Fourth Amendment dated as of December 14, 1995 to the Savings Plan (incorporated by reference to Exhibit 10.58 to The Coleman Company, Inc. 1995 Annual Report on Form 10-K). 43 10.38* Fifth Amendment dated as of January 1, 1996 to the Savings Plan (incorporated by reference to Exhibit 10.59 to The Coleman Company, Inc. 1995 Annual Report on Form 10-K). 10.39* Amendment dated as of December 14, 1995 to the Savings Plan (incorporated by reference to Exhibit 10.60 to The Coleman Company, Inc. 1995 Annual Report on Form 10-K). 10.40* Amendment dated as of December 14, 1995 to the Savings Plan (incorporated by reference to Exhibit 10.61 to The Coleman Company, Inc. 1995 Annual Report on Form 10-K). 10.41* Amendment dated as of January 1, 1996 to the Savings Plan (incorporated by reference to Exhibit 10.62 to The Coleman Company, Inc. 1995 Annual Report on Form 10-K). 10.42* New Coleman Holdings Inc. Excess Benefit Plan dated as of January 1, 1995 (incorporated by reference to Exhibit 10.1 to The Coleman Company, Inc. Form 10-Q for the period ended June 30, 1996). 10.43* The New Coleman Company, Inc. Retirement Plan for Salaried Employees (the "Retirement Plan") (incorporated by reference to Exhibit 10.63 to The Coleman Company, Inc. 1995 Annual Report on Form 10-K). 10.44* Amendment dated as of October 17, 1994 to the Retirement Plan (incorporated by reference to Exhibit 10.64 to The Coleman Company, Inc. 1995 Annual Report on Form 10-K). 10.45* Amendment dated as of December 14, 1995 to the Retirement Plan (incorporated by reference to Exhibit 10.65 to The Coleman Company, Inc. 1995 Annual Report on Form 10-K). 10.46* Amendment dated as of December 14, 1995 to the Retirement Plan (incorporated by reference to Exhibit 10.66 to The Coleman Company, Inc. 1995 Annual Report on Form 10-K). 10.47* Amendment dated as of October 12, 1995 to the Retirement Plan (incorporated by reference to Exhibit 10.67 to The Coleman Company, Inc. 1995 Annual Report on Form 10-K). 10.48* Amendment dated as of January 1, 1996 to the Retirement Plan (incorporated by reference to Exhibit 10.68 to The Coleman Company, Inc. 1995 Annual Report on Form 10-K). 10.49* Amendment dated as of December 31, 1995 to the Retirement Plan (incorporated by reference to Exhibit 10.69 to The Coleman Company, Inc. 1995 Annual Report on Form 10-K). 10.50* The Coleman Company, Inc. Consolidated Supplemental Retirement Plan, dated as of January 1, 1996 (incorporated by reference to Exhibit 10.73 to The Coleman Company, Inc. 1995 Annual Report on Form 10-K). 44 10.51* First Amendment dated July 1, 1996 to the Consolidated Supplemental Retirement Plan adopted January 1, 1996 (incorporated by reference to Exhibit 10.5 to The Coleman Company, Inc. Form 10-Q for the period ended June 30, 1996). 10.52* The Coleman Company, Inc. Executive Employees Deferred Compensation Plan, as amended by the First Amendment thereto (incorporated by reference to Exhibit 10.11 to The Coleman Company, Inc. Registration Statement on Form S-1 (File 33-44728), filed on December 23, 1991). 10.53* The Coleman Company, Inc. 1992 Stock Option Plan, as amended (incorporated by reference to Exhibit 10.3 to The Coleman Company, Inc. Form 10-Q for the period ended June 30, 1997). 10.54* The Coleman Company, Inc. 1993 Stock Option Plan, as amended (incorporated by reference to Exhibit 10.1 to The Coleman Company, Inc. Form 10-Q for the period ended June 30, 1997). 10.55* The Coleman Company, Inc. 1996 Stock Option Plan, as amended (incorporated by reference to Exhibit 10.53 to The Coleman Company, Inc. 1996 Annual Report on Form 10-K). 10.56X Stock Purchase Agreement among The Coleman Company, Inc., as Seller, Siebe plc, as Guarantor, and Ranco Incorporated of Delaware, as Buyer, dated as of February 18, 1998. 10.57*X Amendment No. 2 to The New Coleman Company, Inc. Retirement Plan for Salaried Employees. 10.58*X Special Amendment to The New Coleman Company, Inc. Retirement Plan for Salaried Employees. 10.59*X The New Coleman Company, Inc. Pension Plan for Weekly Salaried and Hourly Paid Employees. 21.1X Subsidiaries of the Company. 23.1X Consent of Independent Auditors. 24.1X Powers of Attorney executed by Ronald O. Perelman, Donald G. Drapkin, Frank Gifford, Lawrence M. Jones, Ann D. Jordan, Jerry W. Levin, John A. Moran, James D. Robinson, Bruce Slovin, William H. Spoor. 27X Financial Data Schedule -------------------- * Management Contracts and Compensatory Plans X Filed herewith (b) Reports on Form 8-K A Current Report on Form 8-K was filed on March 3, 1998 to disclose certain information with regard to the acquisition of CLN Holdings and the Company by Sunbeam Corporation. A Current Report on Form 8-K/A was filed on March 5, 1998 to amend and restate the Company's Current Report on Form 8-K filed on March 3, 1998. 45 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. THE COLEMAN COMPANY, INC. (Registrant) Date: March 18, 1998 By: /s/ Jerry W. Levin -------------------- ------------------------------------ Jerry W. Levin Chairman of the Board, Chief Executive Officer, and Director Date: March 18, 1998 By: /s/ Joseph P. Page -------------------- ------------------------------------ Joseph P. Page Executive Vice President and Chief Financial Officer Date: March 18, 1998 By: /s/ Karen Clark -------------------- ------------------------------------ Karen Clark Vice-President Finance Pursuant to the requirements of the Securities and Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated. Date: March 18, 1998 By: Ronald O. Perelman * -------------------- ------------------------------------ Ronald O. Perelman Director Date: March 18, 1998 By: Donald G. Drapkin * -------------------- ------------------------------------ Donald G. Drapkin Director Date: March 11, 1998 By: Frank Gifford * -------------------- ------------------------------------ Frank Gifford Director Date: March 11, 1998 By: Lawrence M. Jones * -------------------- ------------------------------------ Lawrence M. Jones Director Date: March 18, 1998 By: Ann D. Jordan * -------------------- ------------------------------------ Ann D. Jordan Director 46 Date: March 18, 1998 By: Jerry W. Levin * -------------------- ------------------------------------ Jerry W. Levin Director Date: March 14, 1998 By: John A. Moran * -------------------- ------------------------------------ John A. Moran Director Date: March 11, 1998 By: James D. Robinson * -------------------- ------------------------------------ James D. Robinson Director Date: March 18, 1998 By: Bruce Slovin * -------------------- ------------------------------------ Bruce Slovin Director Date: March 18, 1998 By: William H. Spoor * -------------------- ------------------------------------ William H. Spoor Director * Executed on behalf of the named director pursuant to a power of attorney. Date: March 23, 1998 By: /s/ Paul E. Shapiro -------------------- ------------------------------------ Paul E. Shapiro Attorney-in-fact 47 ANNUAL REPORT ON FORM 10-K ITEM 8, ITEM 14(a)(1) AND (2) AND (d) LIST OF FINANCIAL STATEMENTS AND FINANCIAL STATEMENT SCHEDULES YEAR ENDED DECEMBER 31, 1997 THE COLEMAN COMPANY, INC. AND SUBSIDIARIES The following consolidated financial statements of The Coleman Company, Inc. and Subsidiaries are included in Item 8: PAGE ---- Consolidated Balance Sheets as of December 31, 1997 and 1996........ F-3 Consolidated Statements of Operations for the years ended December 31, 1997, 1996 and 1995............... F-4 Consolidated Statements of Stockholders' Equity for the years ended December 31, 1997, 1996 and 1995............... F-5 Consolidated Statements of Cash Flows for the years ended December 31, 1997, 1996 and 1995............... F-6 Notes to Consolidated Financial Statements.......................... F-7 Consolidated financial statement schedules of The Coleman Company, Inc. and Subsidiaries included in Item 14(d): All schedules for which provision is made in the applicable accounting regulation of the Securities and Exchange Commission are not required under the related instructions or are inapplicable and, therefore, have been omitted. F-1 REPORT OF INDEPENDENT AUDITORS Stockholders and Board of Directors The Coleman Company, Inc. We have audited the accompanying consolidated balance sheets of The Coleman Company, Inc. and subsidiaries as of December 31, 1997 and 1996, and the related consolidated statements of operations, stockholders' equity, and cash flows for each of the three years in the period ended December 31, 1997. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the consolidated financial position of The Coleman Company, Inc. and subsidiaries at December 31, 1997 and 1996, and the consolidated results of their operations and their cash flows for each of the three years in the period ended December 31, 1997, in conformity with generally accepted accounting principles. /s/ Ernst & Young LLP Wichita, Kansas February 18, 1998 F-2 THE COLEMAN COMPANY, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (IN THOUSANDS, EXCEPT SHARE DATA) December 31, ------------------------- 1997 1996 ---------- ---------- ASSETS Current assets: Cash and cash equivalents...................... $ 13,031 $ 17,299 Accounts receivable, less allowance of $8,930 in 1997 and $11,512 in 1996............ 154,279 182,418 Notes receivable............................... 25,477 27,524 Inventories.................................... 236,327 287,502 Income tax refunds receivable - affiliate...... 14,860 21,661 Deferred tax assets............................ 26,378 40,466 Prepaid assets and other....................... 21,344 15,769 ---------- ---------- Total current assets......................... 491,696 592,639 Property, plant and equipment, net............... 175,494 199,182 Intangible assets related to businesses acquired, net................................... 332,468 341,715 Deferred tax assets and other.................... 42,106 26,550 ---------- ---------- $1,041,764 $1,160,086 ---------- ---------- ---------- ---------- LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Current portion of long-term debt.............. $ 523 $ 747 Short-term borrowings.......................... 64,207 33,935 Accounts payable............................... 91,846 98,628 Accounts payable - affiliates.................. 2,825 278 Accrued expenses............................... 93,796 112,906 ---------- ---------- Total current liabilities.................... 253,197 246,494 Long-term debt................................... 477,276 582,866 Other liabilities................................ 69,586 76,173 Minority interest................................ 1,236 1,608 Commitments and contingencies Stockholders' equity: Preferred stock, par value $.01 per share; 20,000,000 shares authorized, no shares issued or outstanding................................ -- -- Common stock, par value $.01 per share; 80,000,000 shares authorized; 53,433,414 shares issued and outstanding in 1997; and 53,222,420 shares issued and outstanding in 1996 534 532 Additional paid-in capital..................... 172,072 166,690 Retained earnings.............................. 80,296 82,832 Currency translation adjustment................ (11,510) 3,176 Minimum pension liability adjustment........... (923) (285) ---------- ---------- Total stockholders' equity................... 240,469 252,945 ---------- ---------- $1,041,764 $1,160,086 ---------- ---------- ---------- ----------
See Notes to Consolidated Financial Statements F-3 THE COLEMAN COMPANY, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS (IN THOUSANDS, EXCEPT SHARE DATA) Year Ended December 31, -------------------------------------- 1997 1996 1995 ---------- ---------- -------- Net revenues......................................... $1,154,294 $1,220,216 $933,574 Cost of sales........................................ 840,331 928,497 649,427 ---------- ---------- -------- Gross profit......................................... 313,963 291,719 284,147 Selling, general and administrative expenses......... 266,283 291,669 174,688 Asset impairment charge.............................. -- -- 12,289 Interest expense, net................................ 40,852 38,727 24,545 Amortization of goodwill and deferred charges........ 11,338 10,473 7,745 Other expense, net................................... 1,867 1,151 334 ---------- ---------- -------- (Loss) earnings before income taxes, minority interest and extraordinary item.................... (6,377) (50,301) 64,546 Income tax (benefit) expense......................... (5,227) (10,927) 24,479 Minority interest.................................... 1,386 1,872 -- ---------- ---------- -------- (Loss) earnings before extraordinary item............ (2,536) (41,246) 40,067 Extraordinary loss on early extinguishment of debt, net of income tax benefit of $431 in 1996, and $503 in 1995................................ -- (647) (787) ---------- ---------- -------- Net (loss) earnings $ (2,536) $ (41,893) $ 39,280 ---------- ---------- -------- ---------- ---------- -------- Basic (loss) earnings per share: (Loss) earnings before extraordinary item.......... $ (.05) $ (0.78) $ 0.75 Extraordinary item................................. -- (0.01) (0.01) ---------- ---------- -------- Net (loss) earnings.............................. $ (.05) $ (0.79) $ 0.74 ---------- ---------- -------- ---------- ---------- -------- Diluted (loss) earning per share: (Loss) earnings before extraordinary item.......... $ (.05) $ (0.78) $ 0.75 Extraordinary item................................. -- (0.01) (0.01) ---------- ---------- -------- Net (loss) earnings.............................. $ (.05) $ (0.79) $ 0.74 ---------- ---------- -------- ---------- ---------- --------
See Notes to Consolidated Financial Statements F-4 THE COLEMAN COMPANY, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (IN THOUSANDS, EXCEPT SHARE DATA) Common Stock --------------------- Additional Currency Minimum Number Paid-In Retained Translation Pension of Shares Amount Capital Earnings Adjustment Liability ---------- ------ ---------- -------- ----------- --------- Balance at December 31, 1994.......... 53,071,532 $531 $162,873 $ 89,059 $ 900 $ -- Purchases of common stock........... (220,000) (2) (1,924) (2,160) -- -- Stock issued under stock option plans....................... 325,748 3 3,935 -- -- -- Stock option tax benefits........... -- -- 582 -- -- -- Net earnings........................ -- -- -- 39,280 -- -- Currency translation adjustment..... -- -- -- -- (735) -- ---------- ---- -------- -------- -------- ----- Balance at December 31, 1995.......... 53,177,280 532 165,466 126,179 165 -- Purchases of common stock........... (100,000) (1) (874) (1,454) -- -- Stock split issuance costs.......... -- -- (93) -- -- -- Stock issued under stock option plans....................... 145,140 1 1,737 -- -- -- Stock option tax benefits........... -- -- 454 -- -- -- Net loss............................ -- -- -- (41,893) -- -- Currency translation adjustment..... -- -- -- -- 3,011 -- Minimum pension liability adjustment, net of tax............. -- -- -- -- -- (285) ---------- ---- -------- -------- -------- ----- Balance at December 31, 1996.......... 53,222,420 532 166,690 82,832 3,176 (285) Stock issued under stock option plans....................... 210,994 2 2,358 -- -- -- Stock option tax benefits........... -- -- 225 -- -- -- Contribution to capital by parent... -- -- 2,799 -- -- -- Net loss............................ -- -- -- (2,536) -- -- Currency translation adjustment..... -- -- -- -- (14,686) -- Minimum pension liability adjustment, net of tax............. -- -- -- -- -- (638) ---------- ---- -------- -------- -------- ----- Balance at December 31, 1997.......... 53,433,414 $534 $172,072 $80,296 $(11,510) $(923) ---------- ---- -------- -------- -------- ----- ---------- ---- -------- -------- -------- -----
See Notes to Consolidated Financial Statements F-5 THE COLEMAN COMPANY, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (IN THOUSANDS) Year Ended December 31, --------------------------------- 1997 1996 1995 -------- --------- -------- CASH FLOWS FROM OPERATING ACTIVITIES: Net (loss) earnings............................................... $ (2,536) $ (41,893) $ 39,280 -------- --------- -------- Adjustments to reconcile net (loss) earnings to net cash flows from operating activities: Depreciation and amortization.................................. 37,977 36,358 26,523 Non-cash restructuring and other charges....................... 17,325 48,269 12,289 Extraordinary loss on early extinguishment of debt............. -- 1,078 1,290 Minority interest.............................................. 1,386 1,872 -- Change in assets and liabilities: Decrease (increase) in receivables........................... 23,296 976 (37,833) Decrease (increase) in inventories........................... 35,250 (42,402) (49,396) Increase (decrease) in accounts.payable...................... 1,226 (12,308) 13,825 Other, net................................................... (22,683) (1,279) (3,780) -------- --------- -------- 93,777 32,564 (37,091) -------- --------- -------- Net cash provided (used) by operating activities.................. 91,241 (9,329) 2,189 -------- --------- -------- CASH FLOWS FROM INVESTING ACTIVITIES: Capital expenditures.............................................. (26,973) (41,334) (29,053) Purchases of businesses, net of cash acquired..................... (14,300) (161,875) (33,385) Proceeds from sale of fixed assets................................ 5,728 2,924 928 -------- --------- -------- Net cash used by investing activities............................. (35,545) (200,285) (61,510) -------- --------- -------- CASH FLOWS FROM FINANCING ACTIVITIES: Net change in short-term borrowings............................... 37,071 (11,043) 3,106 Net payments of revolving credit agreement borrowings............. (91,498) (2,779) (61,289) Proceeds from issuance of long-term debt.......................... -- 235,000 200,000 Repayment of long-term debt....................................... (2,867) (6,648) (73,884) Debt issuance and refinancing costs............................... (766) (3,902) (3,569) Purchases of Company common stock................................. -- (2,329) (4,086) Proceeds from stock options exercised including tax benefits...... 2,585 2,192 4,520 -------- --------- -------- Net cash (used) provided by financing activities.................. (55,475) 210,491 64,798 -------- --------- -------- Effect of exchange rate changes on cash........................... (4,489) 4,357 (1,731) -------- --------- -------- Net (decrease) increase in cash and cash equivalents.............. (4,268) 5,234 3,746 Cash and cash equivalents at beginning of the year................ 17,299 12,065 8,319 -------- --------- -------- Cash and cash equivalents at end of the year...................... $ 13,031 $ 17,299 $ 12,065 -------- --------- -------- -------- --------- --------
See Notes to Consolidated Financial Statements F-6 THE COLEMAN COMPANY, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (IN THOUSANDS, EXCEPT SHARE DATA) 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES BACKGROUND: The Coleman Company, Inc. ("Coleman" or the "Company") is a global manufacturer and marketer of consumer products for outdoor recreation and home hardware use. Coleman is a subsidiary of Coleman Worldwide Corporation ("Coleman Worldwide"). Coleman Worldwide is a subsidiary of CLN Holdings Inc. ("CLN Holdings"), an indirect wholly-owned subsidiary of New Coleman Holdings Inc. ("Holdings"), an indirect wholly-owned subsidiary of MacAndrews & Forbes Holdings Inc. ("MacAndrews Holdings"), a corporation wholly owned through Mafco Holdings Inc. ("Mafco" and, together with MacAndrews Holdings, "MacAndrews & Forbes") by Ronald O. Perelman. Coleman Worldwide owns 44,067,520 shares of the common stock of Coleman which represent approximately 82% of the outstanding Coleman common stock as of December 31, 1997. PRINCIPLES OF CONSOLIDATION: The consolidated financial statements include the accounts of the Company and its subsidiaries after elimination of all material intercompany accounts and transactions. CASH AND CASH EQUIVALENTS: All highly liquid investments with a maturity of three months or less at the date of purchase are considered to be cash equivalents. The Company's cash equivalents consist primarily of investments in money market funds and commercial paper. The Company's cash equivalents are generally held until maturity and are carried at cost, which approximates fair value. INVENTORIES: Inventories are stated at the lower of cost or market. Cost is determined by the first-in, first-out method. PROPERTY, PLANT AND EQUIPMENT: Property, plant and equipment is recorded at cost and depreciated on a straight-line basis over the estimated useful lives of such assets as follows: land improvements, 5 to 25 years; buildings and building improvements, 7 to 45 years; and machinery and equipment, 3 to 15 years. Leasehold improvements are amortized over their estimated useful lives or the terms of the leases, whichever is shorter. Repairs and maintenance are charged to operations as incurred, and significant expenditures for additions and improvements are capitalized. INTANGIBLE ASSETS: Intangible assets primarily represent goodwill which is being amortized on a straight-line basis over periods not in excess of 40 years. The carrying amount of goodwill is reviewed if facts and circumstances suggest it may be impaired. If this review indicates goodwill will not be recoverable over the remaining amortization period, as determined based on the estimated undiscounted cash flows of the entity acquired, the carrying amount F-7 THE COLEMAN COMPANY, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) (IN THOUSANDS, EXCEPT SHARE DATA) of the goodwill is reduced to estimated fair value based on market value or discounted cash flows, as appropriate. Accumulated amortization aggregated $47,250 and $38,851 at December 31, 1997 and 1996, respectively. REVENUE RECOGNITION: The Company recognizes revenues at the time title passes to the customer. Net revenues comprise gross revenues less provisions for estimated customer returns and allowances. RESEARCH AND DEVELOPMENT: Research and development expenditures are expensed as incurred. The amounts charged against operations for the years ended December 31, 1997, 1996 and 1995 were $11,871, $11,082, and $6,548, respectively. ADVERTISING AND PROMOTION EXPENSE: Production costs of future media advertising are deferred until the advertising occurs. All other advertising and promotion costs are expensed when incurred. The amounts charged against operations for the years ended December 31, 1997, 1996 and 1995 were $53,408, $58,823, and $37,544, respectively. INSURANCE PROGRAMS: The Company obtains insurance coverage for catastrophic exposures as well as those risks required to be insured by law or contract. It is the policy of the Company to retain a significant portion of certain losses related primarily to workers' compensation, employee health benefits, physical loss and property, and product and vehicle liability. Provisions for losses expected under these programs are recorded based upon the Company's estimates of the aggregate liability for claims incurred. FOREIGN CURRENCY TRANSLATION: Assets and liabilities of foreign operations are generally translated into United States dollars at the rates of exchange in effect at the balance sheet date. Income and expense items are generally translated at the weighted average exchange rates prevailing during each period presented. Gains and losses resulting from foreign currency transactions are included in the results of operations. Gains and losses resulting from translation of financial statements of foreign subsidiaries and branches operating in non-highly inflationary economies are recorded as a component of stockholder's equity. Foreign subsidiaries and branches operating in highly inflationary economies translate nonmonetary assets and liabilities at historical rates and include translation adjustments in the results of operations. DERIVATIVE FINANCIAL INSTRUMENTS: The Company uses derivative financial instruments to reduce interest rate and foreign exchange exposures. The Company maintains a control environment which includes policies and procedures for risk assessment and for the approval, reporting and monitoring of derivative financial instrument activities. The Company does not hold or issue derivative financial instruments for trading purposes. F-8 THE COLEMAN COMPANY, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) (IN THOUSANDS, EXCEPT SHARE DATA) Amounts to be received or paid under interest rate swap and cap contracts designated as hedges are recognized over the life of the contracts as adjustments to interest expense. Gains and losses on terminations of interest rate swap and cap contracts designated as hedges are deferred and amortized as adjustments to interest expense over the remaining life of the terminated contracts. Unrealized gains and losses on outstanding interest rate contracts designated as hedges are not recognized. Foreign currency forward contracts are marked to market and gains and losses on foreign currency forward contracts to hedge firm foreign currency commitments are deferred and accounted for as part of the related foreign currency transaction. Gains and losses on all other forward contracts to hedge third-party and intercompany transactions are recorded in operations as foreign exchange gains and losses. Gains and losses on purchased foreign currency option contracts are deferred and recognized as adjustments to cost of sales upon the sale of the related inventory to the third-party customers. CREDIT RISK: Financial instruments which potentially subject the Company to concentrations of credit risk consist primarily of trade receivables and derivative financial instruments. Credit risk on trade receivables is minimized as a result of the large and diversified nature of the Company's worldwide customer base. Although the Company has one significant customer (See Note 15), there have been no credit losses related to this customer. With respect to its derivative contracts, the Company is also subject to credit risk of non-performance by counterparties and its maximum potential loss may exceed the amount recognized in the financial statements. The Company controls its exposure to credit risk through credit approvals, credit limits and monitoring procedures. Collateral is generally not required for the Company's financial instruments. FAIR VALUE OF FINANCIAL INSTRUMENTS: The following methods and assumptions were used by the Company in estimating its fair value disclosures for financial instruments: CASH AND CASH EQUIVALENTS: The carrying amount reported in the balance sheet for cash and cash equivalents approximates its fair value. LONG- AND SHORT-TERM DEBT: The carrying amounts of the Company's borrowings under its foreign bank lines of credit, revolving credit agreement and other variable rate debt approximate their fair value. The fair value of the Company's senior notes issues (see Note 9) are estimated using discounted cash flow analysis based on the Company's estimated current borrowing rate for similar types of borrowing arrangements. FOREIGN CURRENCY EXCHANGE CONTRACTS: The fair values of the Company's foreign currency contracts are estimated based on quoted market prices of comparable contracts, adjusted through interpolation where necessary for maturity differences. F-9 THE COLEMAN COMPANY, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) (IN THOUSANDS, EXCEPT SHARE DATA) The carrying amounts and fair values of the Company's financial instruments are as follows: December 31, 1997 December 31, 1996 -------------------------- ------------------------ Carrying Fair Carrying Fair Amount Value Amount Value of Asset/ of Asset/ of Asset/ of Asset/ (Liability) (Liability) (Liability) (Liability) ----------- ----------- ----------- ----------- Cash and cash equivalents............... $ 13,031 $ 13,031 $ 17,299 $ 17,299 Short-term debt......................... (64,207) (64,207) (33,935) (33,935) Long-term debt excluding capital leases. (477,499) (445,792) (583,019) (578,921) Foreign currency exchange ocntracts..... 128 128 940 1,629
STOCK-BASED COMPENSATION: Statement of Financial Accounting Standards ("SFAS") No. 123, "Accounting for Stock-Based Compensation", encourages, but does not require companies to record compensation cost for stock-based employee compensation plans at fair value. The Company has chosen to account for stock-based compensation plans using the intrinsic value method prescribed in Accounting Principles Board ("APB") Opinion No. 25, "Accounting for Stock Issued to Employees", and related Interpretations. Accordingly, compensation cost for stock options is measured as the excess, if any, of the quoted market price of Coleman's stock at the date of the grant over the amount an employee must pay to acquire the stock. F-10 THE COLEMAN COMPANY, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) (IN THOUSANDS, EXCEPT SHARE DATA) (LOSS) EARNINGS PER SHARE: In 1997, the Financial Accounting Standards Board (the "FASB") issued SFAS No. 128, "Earnings per Share". SFAS No. 128 replaced the calculation of primary and fully diluted earnings per share with basic and diluted earnings per share. Unlike primary earnings per share, basic earnings per share excludes any dilutive effects of options, warrants, and convertible securities. Diluted earnings per share is very similar to the previously reported fully diluted earnings per share. All earnings per share amounts for all periods have been presented, and where appropriate, restated to conform to SFAS No. 128 requirements. In 1997 and 1996, diluted loss per share does not include any incremental shares that would have been outstanding assuming the exercise of any stock options because the effect of these shares would have been antidilutive. The following table sets forth the computation of basic and diluted earnings per share: Earnings Per Share (Loss) Shares Amount -------- ---------- --------- Year Ended December 31, 1995 Basic earnings before extraordinary item...... $ 40,067 53,225,746 $ 0.75 Effect of dilutive securities stock options... -- 361,269 ------ -------- ---------- ------ Diluted earnings.............................. $ 40,067 53,587,015 $ 0.75 -------- ---------- ------ -------- ---------- ------ Year Ended December 31, 1996 Basic loss before extraordinary item.......... $(41,246) 53,196,979 $(0.78) Effect of dilutive securities stock options... -- -- ------ -------- ---------- ------ Diluted loss.................................. $(41,246) 53,196,979 $(0.78) -------- ---------- ------ -------- ---------- ------ Year Ended December 31, 1997 Basic loss before extraordinary item.......... $ (2,536) 53,343,680 $ (.05) Effect of dilutive securities stock options... -- -- ------ -------- ---------- ------ Diluted loss.................................. $ (2,536) 53,343,680 $ (.05) -------- ---------- ------ -------- ---------- ------
RECLASSIFICATIONS: Certain prior year amounts in the financial statements have been reclassified to conform to the current year presentation. USE OF ESTIMATES: The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results could differ materially from those estimates. RECENTLY ISSUED ACCOUNTING STANDARDS: In June 1997, the FASB issued SFAS No. 130 "Reporting Comprehensive Income". SFAS No. 130 establishes standards for reporting and display of comprehensive income and its components in the financial statements. SFAS No. 130 is effective for fiscal years beginning after December 15, 1997. Reclassification of financial statements for earlier periods provided for comparative purposes is required. F-11 THE COLEMAN COMPANY, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) (IN THOUSANDS, EXCEPT SHARE DATA) In June 1997, the FASB issued SFAS No. 131, "Disclosures about Segments of an Enterprise and Related Information". SFAS No. 131 establishes standards for the way public business enterprises report information about operating segments in annual financial statements and requires those enterprises report selected information about operating segments in interim financial reports. It also establishes standards for related disclosures about products and services, geographic areas, and major customers. SFAS No. 131 is effective for financial statements for fiscal years beginning after December 15, 1997. Financial statement disclosures for prior periods are required to be restated. In February 1998, the FASB issued SFAS No. 132, "Employers' Disclosures about Pensions and Other Postretirement Benefits". SFAS No. 132 revises employers' disclosures about pension and other postretirement benefits to the extent practicable. It also requires additional information on changes in the benefit obligations and fair value of plan assets and eliminates certain other disclosures. SFAS No. 132 is effective for financial statements for fiscal years beginning after December 15, 1997. Financial statement disclosures for prior periods are required to be restated. The Company has not yet determined the impact of adoption of these standards; however, the adoption of these standards will have no impact on Coleman's consolidated results of operations, financial position or cash flows. 2. ACQUISITIONS AND DIVESTITURES On November 2, 1994, the Company purchased substantially all the assets of Eastpak, Inc. and all the capital stock of M.G. Industries, Inc. (collectively, "Eastpak"), a leading designer, manufacturer and distributor of branded daypacks, sports bags and related products. The Company also entered into an agreement with the predecessor owner of Eastpak to make additional payments based upon the achievement of certain annual sales levels of Eastpak products and other products substantially similar to the Eastpak products during the years ended December 31, 1995, 1996, and 1997. A total of $23,000 was earned by the predecessor owner of Eastpak under the terms of this agreement. This amount has been recorded as additional goodwill. During 1995, the Company purchased all of the outstanding shares of capital stock of Sierra Corporation of Fort Smith, Inc., a manufacturer of portable outdoor and recreational folding furniture and accessories, and substantially all of the assets of Active Technologies, Inc. ("ATI"), a manufacturer of technologically advanced lightweight generators and battery charging equipment. The aggregate purchase price for these acquisitions was $19,516 including fees and expenses. These acquisitions were accounted for using the purchase method of accounting. The purchase price and expenses associated with these acquisitions exceeded the fair value of net assets acquired by $11,186 and the excess has been assigned to goodwill and is being amortized over 20 to 30 years on the straight-line method. In connection with the ATI purchase, the Company may also be required to make payments to the predecessor owner of ATI of up to $18,750 based on the Company's sales of ATI related products and royalties received by the Company for licensing arrangements related to ATI patents. As of December 31, 1997, the amounts recorded, as additional goodwill, under the terms of this agreement have been immaterial. The results of operations of these companies on a pro forma basis as if their acquisitions had occurred at the beginning of 1995 individually and in the aggregate were not significant to the Company. On January 2, 1996, the Company purchased substantially all the assets and assumed certain liabilities of Seatt Corporation ("Seatt"), a leading designer, manufacturer and distributor of safety and security related electronic products for residential and commercial applications. The Seatt acquisition, which was accounted for under the purchase method, was completed for approximately $65,300 including fees and expenses. The results F-12 THE COLEMAN COMPANY, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) (IN THOUSANDS, EXCEPT SHARE DATA) of operations of Seatt have been included in the consolidated financial statements from the date of acquisition. In connection with the purchase price allocation of the Seatt acquisition, the Company recorded goodwill of approximately $38,800. The Company is amortizing this amount over 40 years on the straight-line method. On February 18, 1998, the Company announced an agreement was signed for the sale of Coleman Safety & Security Products, Inc., the successor to Seatt, to Ranco Incorporated of Delaware, a U.S. subsidiary of Siebe plc, a United Kingdom diversified engineering group. The sale price is approximately $105,000 and is subject to adjustment upon closing which is expected to occur by the end of March 1998. Net assets of Coleman Safety & Security Products, Inc. at December 31, 1997 were approximately $73,000. On February 28, 1996, the Company purchased approximately 70% of the outstanding shares of Application des Gaz, S.A. ("ADG" or "Camping Gaz"), a leading manufacturer and distributor of camping appliances in Europe. The Company completed the necessary steps to acquire the remaining 30% of the outstanding shares during the second quarter of 1996. The cost of acquiring all the shares of ADG was approximately $100,000 including fees and expenses. The acquisition of Camping Gaz was accounted for under the purchase method. In connection with the final allocation of purchase price to the fair values of assets acquired and liabilities assumed, the Company recorded goodwill of approximately $78,900, which is being amortized over 40 years on the straight- line method. At acquisition, the Company recognized liabilities in the amount of $21,898 representing severance and other termination benefits for certain production and administrative employees of Camping Gaz. As of December 31, 1997, the Company had paid termination costs of approximately $13,350 and anticipates all remaining termination costs will be paid during 1998. The Company has included the results of operations of Camping Gaz in the consolidated financial statements from March 1, 1996, the date on which the Company obtained control of Camping Gaz, and has recognized minority interest related to the remaining shares for the period March 1, 1996 through June 30, 1996. The following summarized, unaudited pro forma results of operations for the years ended December 31, 1996 and 1995 assume the acquisition of Seatt and the acquisition of all the outstanding shares of Camping Gaz occurred as of the beginning of the respective periods. The pro forma results include certain adjustments, primarily reflecting increased amortization and interest expense and a lower income tax provision, and are not necessarily indicative of what the results of operations would have been had the Seatt and Camping Gaz acquisitions occurred at the beginning of the respective periods. Moreover, the pro forma information is not intended to be indicative of future results of operations. Year Ended December 31, ------------------------ 1996 1995 ---------- ---------- Net revenues................................ $1,246,370 $1,193,295 (Loss) earnings before extraordinary item... (41,407) 39,153 Net (loss) earnings......................... (42,054) 38,366 Basic (loss) earnings per common share: (Loss) earnings before extraordinary item. $ (0.78) $ 0.73 Net (loss) earnings....................... (0.79) 0.72
F-13 THE COLEMAN COMPANY, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) (IN THOUSANDS, EXCEPT SHARE DATA) 3. RESTRUCTURING AND OTHER CHARGES During 1997, the Company recorded restructuring charges of $32,791 and certain other charges of $3,628, (collectively, the "1997 Restructuring Charges") and related tax benefits of $13,918. The Company reflected $19,673 of the 1997 Restructuring Charges in cost of sales and reflected $16,746 in selling, general and administrative ("SG&A") expenses. The 1997 Restructuring Charges of $36,419 consisted of (i) $15,735 to exit various low margin products, including pressure washers, (ii) $14,943 to close and relocate certain administrative and sales offices, and (iii) $5,741 to close several manufacturing facilities. Most of these activities were substantially complete as of December 31, 1997, and remaining actions are expected to be completed in 1998. During 1996, the Company recorded restructuring charges of $66,202 and certain other charges of $7,998 (collectively, the "1996 Restructuring Charges") and related net tax benefits of $21,684. The Company reflected $44,005 of the 1996 Restructuring Charges in cost of sales and $30,195 in SG&A. The pre-tax restructuring charges of $66,202 consisted of (i) $29,067 to integrate Camping Gaz and Coleman operations into a global recreation products business, (ii) $19,000 to exit the low end electric pressure washer business, (iii) $14,135 to exit a portion of the Company's battery powered light business and (iv) $4,000 to settle certain litigation with respect to the battery-powered light business. The charges to integrate the Camping Gaz and Coleman operations reflect primarily the cost to dispose of duplicate manufacturing, distribution and administrative facilities and the related severance costs, which actions were substantially completed in 1997 and are expected to be fully completed in 1998. The low end pressure washer and battery powered light businesses were exited by discontinuing the manufacturing and distribution of these products in 1997. The other pre-tax charges of $7,998 related primarily to certain asset write-offs. These charges were incurred in the Company's normal course of business, although the amounts involved were higher than similar charges the Company had recorded in prior years. The provision for income taxes included $21,684 of tax benefits resulting from these restructuring and other charges, net of an increase in the valuation reserve related to certain foreign deferred tax assets and other foreign tax charges totaling $5,595. The components of the combined 1997 Restructuring Charges and 1996 Restructuring Charges and an analysis of the amounts charged against the reserve are outlined in the following table: 1996 Charges During 1997 Charges During Original Year Ended Balance at Additional Year Ended Balance at Reserve 12/31/96 12/31/96 Reserves 12/31/97 12/31/97 -------- -------------- ---------- ---------- -------------- ---------- Impairment of fixed assets......... $10,012 $ (1,789) $ 8,223 $ 6,449 $ (6,530) $ 8,142 Inventory and other asset impairments.... 38,257 (25,875) 12,382 10,961 (14,966) 8,377 Termination costs..... 2,018 (1,633) 385 12,146 (9,729) 2,802 Idle facilities, relocation and other exit costs..... 23,913 (12,429) 11,484 6,863 (9,656) 8,691 ------- -------- ------- ------- -------- ------- $74,200 $(41,726) $32,474 $36,419 $(40,881) $28,012 ------- -------- ------- ------- -------- ------- ------- -------- ------- ------- -------- -------
The termination costs recognized in 1996 related to approximately 200 employees and the 1997 termination costs related to approximately 525 employees. As of December 31, 1997, $11,362 of termination costs were paid on behalf of the approximately 700 employees who were terminated as of that date. F-14 THE COLEMAN COMPANY, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) (IN THOUSANDS, EXCEPT SHARE DATA) During 1995, the Company recognized an asset impairment charge of $12,289 related to its Brazilian operations. The Brazilian operations had not performed to the Company's expectations since acquisition of this business in April of 1994, and in the fourth quarter of 1995, the Company initiated actions to reduce the operating losses in Brazil. These actions included replacing management, increasing prices, downsizing the manufacturing operations and reducing SG&A and other expenses. Because of these actions, the Company performed an impairment review and concluded recognition of an asset impairment charge was appropriate. The basis of the fair values used in the computation of the charge were appraisals for property and equipment and estimated discounted cash flows for goodwill. The charge has been included in the statement of operations under the caption "Asset Impairment Charge". 4. INVENTORIES Inventories consisted of the following: December 31, -------------------- 1997 1996 -------- -------- Raw material and supplies........... $ 59,406 $ 82,399 Work-in-process..................... 7,813 12,878 Finished goods...................... 169,108 192,225 -------- -------- $236,327 $287,502 -------- -------- -------- --------
5. PROPERTY, PLANT AND EQUIPMENT, NET Property, plant and equipment, net consisted of the following: December 31, --------------------- 1997 1996 --------- -------- Land and land improvements.......... $ 7,700 $ 8,772 Buildings and building improvements. 79,101 78,760 Machinery and equipment............. 192,650 194,714 Construction-in-progress............ 10,076 15,519 --------- -------- 289,527 297,765 Accumulated depreciation............ (114,033) (98,583) --------- -------- $ 175,494 $199,182 --------- -------- --------- --------
Depreciation expense was $26,956, $25,770, and $19,142 for the years ended December 31, 1997, 1996 and 1995, respectively. F-15 THE COLEMAN COMPANY, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) (IN THOUSANDS, EXCEPT SHARE DATA) 6. ACCRUED EXPENSES Accrued expenses consisted of the following: December 31, ------------------------ 1997 1996 ----------- ---------- Compensation and related benefits......... $ 20,385 $ 29,331 Other..................................... 73,411 83,575 ---------- ---------- $ 93,796 $ 112,906 ---------- ---------- ---------- ----------
7. OTHER LIABILITIES Other liabilities consisted of the following: December 31, ------------------------ 1997 1996 ----------- ---------- Pensions and other postretirement benefits. $ 49,121 $ 52,229 Other...................................... 20,465 23,944 ---------- ---------- $ 69,586 $ 76,173 ---------- ---------- ---------- ----------
8. SHORT-TERM BORROWINGS The Company maintained short-term bank lines of credit at December 31, 1997 and 1996 aggregating approximately $115,249, and $119,101, respectively, of which approximately $64,207 and $33,935 were outstanding at December 31, 1997 and 1996, respectively. The weighted average interest rate on amounts borrowed under these short-term lines was approximately 2.7% and 2.4% at December 31, 1997 and 1996, respectively. Outstanding letters of credit aggregated approximately $37,208 and $32,897 at December 31, 1997 and 1996, respectively. F-16 THE COLEMAN COMPANY, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) (IN THOUSANDS, EXCEPT SHARE DATA) 9. LONG-TERM DEBT Long-term debt consisted of the following: December 31, ----------------------- 1997 1996 ---------- ---------- 7.26% Senior Notes due 2007 (a)... $ 200,000 $ 200,000 7.10% Senior Notes due 2006 (b)... 85,000 85,000 7.25% Senior Notes due 2008 (c)... 75,000 75,000 Revolving credit facility (d)..... 52,127 146,350 Term loan (d)..................... 64,894 73,478 Other............................. 778 3,785 ---------- ---------- 477,799 583,613 Less current portion.............. 523 747 ---------- ---------- $ 477,276 $ 582,866 ---------- ---------- ---------- ----------
(a) On August 8, 1995, the Company completed a private placement issuance and sale of $200,000 aggregate principal amount of 7.26% Senior Notes due 2007 (the "2007 Notes"). Interest on the 2007 Notes is payable semiannually, and the principal is payable in annual installments of $40,000 each commencing August 8, 2003, with a final installment payment of $40,000 due on August 8, 2007. If there is a default, the interest rate will be the greater of (i) 9.26% or (ii) 2.0% above the prime interest rate. The 2007 Notes are unsecured and are subject to various restrictive covenants including, without limitation, requirements for the maintenance of specified financial ratios and levels of consolidated net worth and certain other provisions limiting the incurrence of additional debt and sale and leaseback transactions under the terms of the note purchase agreement. (b) On June 13, 1996, the Company completed a private placement issuance and sale of $85,000 aggregate principal amount of 7.10% Senior Notes due 2006 (the "2006 Notes"). Interest on the 2006 Notes is payable semiannually, and the principal is payable in annual installments of $12,143 each commencing June 13, 2000, with a final installment payment of $12,143 due on June 13, 2006. If there is a default, the interest rate will be the greater of (i) 9.10% or (ii) 2.0% above the prime interest rate. The 2006 Notes are unsecured and are subject to various restrictive covenants including, without limitation, requirements for the maintenance of specified financial ratios and levels of consolidated net worth and certain other provisions limiting the incurrence of additional debt and sale and leaseback transactions under the terms of the note purchase agreement. (c) On June 13, 1996, the Company completed a private placement issuance and sale of $75,000 aggregate principal amount of 7.25% Senior Notes due 2008 (the "2008 Notes"). Interest on the 2008 Notes is payable semiannually, and the principal is payable in annual installments of $15,000 each commencing June 13, 2004, with a final installment payment of $15,000 due on June 13, 2008. If there is a default, the interest rate will be the greater of (i) 9.25% or (ii) 2.0% above the prime interest rate. F-17 THE COLEMAN COMPANY, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) (IN THOUSANDS, EXCEPT SHARE DATA) The 2008 Notes are unsecured and are subject to various restrictive covenants including, without limitation, requirements for the maintenance of specified financial ratios and levels of consolidated net worth and certain other provisions limiting the incurrence of additional debt and sale and leaseback transactions under the terms of the note purchase agreement. (d) In April 1996, the Company amended its credit agreement to: a) provide a term loan of French Franc 385,125 ($64,894 at December 31, 1997 exchange rates) (the "Term Loan"), b) provide a $275,000 unsecured revolving credit facility line (the "Credit Facility"), c) allow for the Camping Gaz acquisition and d) extend the maturity of the credit agreement (as amended, the "Company Credit Agreement"). In connection with the Company recording the restructuring and other charges as discussed in Note 3 and lower than expected operating results, the Company further amended the Company Credit Agreement in October 1996 and again in March 1997. The Company Credit Agreement is available to the Company until April 30, 2001. The outstanding loans under the Company Credit Agreement bear interest at either of the following rates, as selected by the Company from time to time: (i) the higher of the agent's base lending rate or the federal funds rate plus .50% or (ii) the London Inter-Bank Offered Rate ("LIBOR") plus a margin ranging from .25% to 2.125% based on the Company's financial performance. If there is a default, the interest rate otherwise in effect will be increased by 2% per annum. The Company Credit Agreement also bears an overall facility fee ranging from .15% to .375% based on the Company's financial performance. In addition, the Company Credit Agreement provides, subject to certain exceptions, for the net cash proceeds from disposition of assets other than in the ordinary course of business, to be used to prepay any outstanding Term Loan balances with any remaining excess net cash proceeds to be applied to outstanding borrowings under the Credit Facility with a corresponding reduction in the overall amount of the Credit Facility line. The Company Credit Agreement contains various restrictive covenants including, without limitation, requirements for the maintenance of specified financial ratios, levels of consolidated net worth and profits, and certain other provisions limiting the incurrence of additional debt, purchase or redemption of the Company's common stock, issuance of preferred stock of the Company, and also prohibits the Company from paying any dividends until on or after January 1, 1999 and limits the amount of dividends the Company may pay thereafter. The Company Credit Agreement also contains an event of default upon a change of control of the Company (as defined in the Company Credit Agreement) and other customary events of default. In addition, substantially all of the shares of the Company's common stock owned by Coleman Worldwide are pledged to secure indebtedness of Coleman Worldwide and of its parent, CLN Holdings Inc. The indentures governing this indebtedness contain various covenants including a covenant placing certain limitations on the Company's indebtedness. The aggregate scheduled amounts of long-term debt maturities in the years 1998 through 2002 are $523, $78, $12,207 $129,204, and $12,159, respectively. F-18 THE COLEMAN COMPANY, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) (IN THOUSANDS, EXCEPT SHARE DATA) 10. DERIVATIVE FINANCIAL INSTRUMENTS The Company periodically enters into a variety of foreign currency exchange contracts to reduce its foreign currency exposure resulting primarily from firm commitments, intercompany foreign sales transactions expected to occur within the next twelve months, and intercompany accounts receivable and payable. At December 31, 1997 and December 31, 1996, the Company did not have any outstanding foreign currency exchange contracts related to firm commitments. During the fourth quarter of 1995, the Company elected to adopt the provisions of the Emerging Issues Task Force Issue No. 95-2, "Determination of What Constitutes a Firm Commitment for Foreign Currency Transactions Not Involving a Third Party" ("EITF 95-2") which narrowed the scope of intercompany foreign currency commitments eligible to be hedged for financial reporting purposes. As a result of this change, the Company increased net income by $3,796 in the fourth quarter of 1995. Prior to the adoption of EITF 95-2, the gains and losses associated with these contracts were accounted for under the deferral method. At December 31, 1997, the Company did not have any outstanding foreign currency forward contracts related to intercompany foreign sales transactions. At December 31, 1996, the Company had forward exchange contracts to sell $8,500 in Canadian dollars maturing on February 28, 1997, for which the Company has recognized a net gain of $40 as a component of cost of sales. At December 31, 1997, the Company did not have any outstanding option contracts. At December 31, 1996, the Company had outstanding option contracts for the sale of Japanese yen at fixed exchange rates totaling $20,038 for specified periods of time which expired during 1997. Net unrealized gains deferred at December 31, 1996 were $653. With respect to intercompany accounts receivable and payable, at December 31, 1997, the Company had foreign currency forward contracts to sell $1,580 in foreign currencies, which contracts matured in February 1998, and had deferred a net gain of $128. At December 31, 1996, the Company had foreign currency forward contracts to sell $26,623 and to buy $3,898 in foreign currencies, which contracts matured at various dates in 1997, and had deferred a net gain of $185. At December 31, 1997, $25,000 of the Company's outstanding long-term debt was subject to an interest rate swap agreement and $25,000 of the Company's outstanding long-term debt was subject to an interest rate cap. Under the interest rate swap agreement, the Company pays the counterparty interest at a fixed rate of 6.115%, and the counterparty pays the Company interest at a variable rate equal to the three month LIBOR for a seven-year period commencing January 2, 1996. The agreement is with a major financial institution which is expected to fully perform under the terms of the agreement, thereby mitigating the credit risk from the transaction. The interest rate cap agreement entitles the Company to receive from a major financial institution the amount, if any, by which the Company's interest payments on $25,000 of its variable rate debt exceed 7.35%. The $509 premium paid for this interest rate cap agreement is included in other assets and was amortized to interest expense over the three-year term of the cap, which commenced January 3, 1995. 11. INCOME TAXES The Company is included in the consolidated federal income tax return of Mafco and certain state tax returns of Mafco or its affiliates. For all periods presented, federal and state income taxes are provided as if the Company filed its own income tax returns. The accompanying consolidated balance sheet includes approximately F-19 THE COLEMAN COMPANY, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) (IN THOUSANDS, EXCEPT SHARE DATA) $14,860 and $21,661 of federal and state income taxes receivable from affiliates at December 31, 1997 and 1996, respectively. For financial reporting purposes, (loss) earnings before income taxes, minority interest and extraordinary item include the following components: Year Ended December 31, ------------------------------------ 1997 1996 1995 ---------- ----------- ---------- (Loss) earnings before income taxes, minority interest and extraordinary item: Domestic.................................. $ (14,129) $ (29,532) $ 78,980 Foreign................................... 7,752 (20,769) (14,434) ---------- ----------- ---------- $ (6,377) $ (50,301) $ 64,546 ---------- ----------- ---------- ---------- ----------- ----------
Significant components of the provision for income tax (benefit) expense were as follow: Year Ended December 31, ------------------------------------ 1997 1996 1995 ---------- ----------- ----------- Current: Federal........................... $ (11,045) $ (709) $ 18,415 State............................. -- (334) 3,825 Foreign........................... 1,485 3,454 3,853 ---------- ----------- ---------- Total current................. (9,560) 2,411 26,093 ---------- ----------- ---------- Deferred: Federal........................... 7,851 (10,686) (3,104) State............................. (1,493) (2,178) (725) Foreign........................... (2,025) (474) 2,215 ---------- ----------- ---------- Total deferred................ 4,333 (13,338) (1,614) ---------- ----------- ---------- $ (5,227) $ (10,927) $ 24,479 ---------- ----------- ---------- ---------- ----------- ----------
The effective tax rate on (loss) earnings before income taxes, minority interest and extraordinary item varies from the current statutory federal income tax rate as follows: Year Ended December 31, --------------------------- 1997 1996 1995 ------- ------- ----- (Benefit) provision at statutory rate.. (35.0)% (35.0)% 35.0% State taxes, net....................... (15.2) (4.6) 2.5 Nondeductible amortization............. 37.1 5.0 2.9 Foreign operations..................... (66.4) 4.3 (0.1) Change in tax rates.................... (20.8) -- -- Valuation allowance.................... 37.0 7.0 -- Puerto Rico operations................. (12.9) 0.4 (2.6) Other, net............................. (5.8) 1.2 0.2 ------- ------- ----- Effective tax rate (benefit) provision. (82.0)% (21.7)% 37.9% ------- ------- ----- ------- ------- -----
F-20 THE COLEMAN COMPANY, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) (IN THOUSANDS, EXCEPT SHARE DATA) Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. Significant components of the Company's deferred tax liabilities and assets are as follows: December 31, ------------------------ 1997 1996 ---------- ---------- Deferred tax assets: Postretirement benefits other than pensions..... $ 12,964 $ 12,370 Reserves for self-insurance and warranty costs.. 4,898 6,678 Pension liabilities............................. 7,377 8,828 Inventory....................................... 6,626 8,245 Net operating loss carryforwards................ 56,739 47,013 Other, net...................................... 12,728 24,026 ---------- ---------- Total deferred tax assets.................... 101,332 107,160 Valuation allowance............................. (39,990) (39,639) ---------- ---------- Net deferred tax assets.................. 61,342 67,521 ---------- ---------- ---------- ---------- Deferred tax liabilities: Depreciation.................................... 19,872 18,248 Other, net...................................... 10,676 7,675 ---------- ---------- Total deferred tax liabilities.............. 30,548 25,923 ---------- ---------- Net deferred tax assets.................. $ 30,794 $ 41,598 ---------- ---------- ---------- ----------
The deferred tax account balance at December 31, 1997 differs from the account balance at December 31, 1996 due primarily to the 1997 deferred tax provision, the tax effects of the foreign exchange gain recorded as a component of stockholder's equity, the tax effects of adjustments related to the finalization of the purchase accounting related to the acquisition of Camping Gaz, and the deferred tax asset recorded related to the acquisition in 1997 of inactive companies which were recorded as a capital contribution (see Note 12). During 1997, the Company increased the valuation allowance related to certain foreign deferred tax assets due to uncertainties over realization. At December 31, 1997, the Company had net operating loss carryforwards ("NOL's") of approximately $107,229 for certain foreign income tax purposes. These NOL's expire beginning in 1998. The Company has not provided for taxes on undistributed foreign earnings of approximately $20,860 at December 31, 1997, as the Company intends to permanently reinvest these earnings in the future growth of the business. Determination of the amount of unrecognized deferred U.S. income tax liability is not practicable because of the complexities associated with its hypothetical calculation. 12. RELATED PARTY TRANSACTIONS CAPITAL CONTRIBUTIONS: As of March 31, 1997, the Company purchased an inactive subsidiary from an affiliate for net cash consideration of $1,031, including transaction costs. The Company expects to realize certain foreign tax benefits F-21 THE COLEMAN COMPANY, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) (IN THOUSANDS, EXCEPT SHARE DATA) from this transaction in future years. Under certain circumstances, a portion of these tax benefits will be payable to the affiliate to the extent such tax benefits are realized by the Company. During the fourth quarter of 1997, the Company purchased an inactive subsidiary from an affiliate in a transaction in which the Company expects to realize certain foreign tax benefits in future years and for which the Company agreed to pay 50% of those realized benefits to the affiliate. The Company has recorded a liability to the affiliate in the amount of $219 which represents 50% of the estimated amount of future tax benefits. The Company has accounted for these transactions in a manner similar to a pooling-of-interests due to the Mafco Holdings Inc. common control over each of the parties involved in the transactions. The $2,799 excess value of estimated realizable tax benefits acquired over the total acquisition costs have been accounted for as a capital contribution. INSURANCE PROGRAMS: The Company participates in certain of Holdings' insurance programs, including health and life insurance, workers compensation, and liability insurance. The Company's expense represents its expected costs for self-insured retentions and premiums for excess coverage insurance. The expense was $13,339, $13,923 and $9,875 for the years ended December 31, 1997, 1996 and 1995, respectively. SERVICES AGREEMENT: From time to time, Coleman purchases, at negotiated rates, specialized accounting and other services provided by an affiliate. Coleman also provides, at negotiated rates, services to an affiliate. The net expense for such services was $394 during 1997 and was immaterial in prior years. MANAGEMENT AGREEMENT: The Company provided management services to certain affiliates pursuant to a management agreement through June 30, 1995. The consolidated financial statements reflect the management fees as a reduction in selling, general and administration expenses. For the year ended December 31, 1995, management fees earned by the Company were $2,400. LICENSING AGREEMENT: During 1997, the Company engaged an affiliate of MacAndrews & Forbes to provide licensing services. The Company recorded expenses of $650 related to these services in 1997. OTHER: In 1996, the Company entered into an agreement with an affiliate in which the Company realized approximately $1,800 of net tax benefits associated with certain foreign tax net operating loss carryforwards that had not previously been recognized. The Company purchases and sells products from and to certain affiliates. These amounts are not, in the aggregate, material. The Company subleases six thousand square feet of office space in New York City from an affiliate pursuant to a month-to-month occupancy memorandum (the "Lease") entered into during 1997. The rent paid by the Company during the year ended December 31, 1997 pursuant to the Lease was $158. F-22 THE COLEMAN COMPANY, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) (IN THOUSANDS, EXCEPT SHARE DATA) During 1997, Coleman used an airplane owned by a corporation of which a director of Coleman is a stockholder, for which Coleman paid approximately $158. 13. EMPLOYEE BENEFIT PLANS PENSION PLANS: Holdings maintains pension and other retirement plans in various forms covering employees of the Company who meet eligibility requirements. The U.S. salaried retirement plan is a non-contributory defined benefit plan and provides benefits based on a formula of each participant's final average pay and years of service. The U.S. hourly pension plan is a non-contributory defined benefit plan and contains a flat benefit formula. The salaried and hourly plans provide reduced benefits for early retirement and the salaried plan takes into account offsets for Social Security benefits. The Company's policy is to contribute annually the minimum amount required pursuant to the Employee Retirement Income Security Act, as amended. Under certain circumstances, the Company may make additional contributions to the pension plans up to the maximum deductible amounts for income tax purposes. Holdings also has an unfunded excess benefit plan covering certain of the Company's U.S. employees whose benefits under the plans described above are limited by provisions of the Internal Revenue Code. The following table reconciles the funded status of the pension plans with the amount recognized in the Company's consolidated balance sheets as of the dates indicated: December 31, ------------------- 1997 1996 -------- -------- Actuarial present value of benefit obligation: Accumulated benefit obligation, including vested benefits of $24,296 and $18,686...................... $(27,843) $(21,933) -------- -------- -------- -------- Projected benefit obligation for service rendered to date..................................... $(43,246) $(37,092) Plan assets at fair value................................ 23,102 16,197 -------- -------- Projected benefit obligation in excess of plan assets.... (20,144) (20,895) Unrecognized prior service cost.......................... 130 50 Unrecognized net loss.................................... 6,259 7,999 -------- -------- Accrued pension cost..................................... (13,755) (12,846) Amount reflected as an intangible asset.................. (143) (288) Amount reflected as minimum pension liability adjustment. (1,526) (470) -------- -------- Amount reflected as pension liability.................... $(15,424) $(13,604) -------- -------- -------- --------
The weighted-average discount rate used in determining the actuarial present value of the projected benefit obligation was 7.5% as of December 31, 1997 and 1996. The rate of increase in future compensation levels reflected in such determination was 5% as of December 31, 1997 and 1996. The expected long-term rate of return on assets was 9% as of December 31, 1997, 1996 and 1995. Plan assets consist primarily of common stock, mutual funds and fixed income securities stated at fair market value, and cash equivalents stated at cost, which approximates fair market value. Unrecognized items are being recognized over the estimated remaining service lives of active employees. F-23 THE COLEMAN COMPANY, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) (IN THOUSANDS, EXCEPT SHARE DATA) Net pension expense includes the following components: Year Ended December 31, ------------------------------ 1997 1996 1995 ------ ------- ------- Service cost-benefits attributed to service during the year.............. $3,081 $ 3,098 $ 2,125 Interest cost on projected benefit obligation................... 2,813 2,442 2,004 Curtailment loss....................... 972 -- -- Actual return on plan assets........... (2,908) (1,490) (1,347) Net amortization and deferrals......... 1,537 844 834 ------ ------- ------- Net pension expense.................. $5,495 $ 4,894 $ 3,616 ------ ------- ------- ------ ------- -------
Net pension expense for the year ended December 31, 1997 includes $972 of curtailment loss associated with certain executive officer changes during the year. SAVINGS PLAN: Holdings maintains an employee savings plan under Section 401(k) of the Internal Revenue Code. This plan covers substantially all of the Company's full-time U.S. employees and allows employees to contribute up to 10% of their salary to the plan. The Company matches, at a 34% rate, employee contributions of up to 6% of their salary. Amounts charged to expense for matching contributions were $1,401, $1,314, and $1,165 for the years ended December 31, 1997, 1996 and 1995, respectively. RETIREE HEALTH CARE AND LIFE INSURANCE: The Company, through Holdings, provides certain unfunded health and life insurance benefits for certain retired employees. Approximately 55% of the Company's U.S. employees may become eligible for these benefits if they reach retirement age while working for the Company. The following table reconciles the funded status of the Company's allocable portion of Holdings' postretirement benefit plans with the amount recognized in the Company's consolidated balance sheets as of the dates indicated: December 31, -------------------- 1997 1996 -------- -------- Accumulated postretirement benefit obligation: Retirees............................................ $ (6,852) $ (6,682) Fully eligible active plan participants............. (3,308) (3,015) Other active plan participants...................... (10,322) (10,664) -------- -------- Total accumulated postretirement benefit obligation... (20,482) (20,361) Unrecognized transition benefit....................... (3,707) (3,973) Unrecognized prior service cost....................... (404) (492) Unrecognized net gain................................. (2,415) (976) -------- -------- Net postretirement benefit liability.................. $(27,008) $(25,802) -------- -------- -------- --------
F-24 THE COLEMAN COMPANY, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) (IN THOUSANDS, EXCEPT SHARE DATA) Net periodic postretirement benefit expense includes the following components: Year Ended December 31, ------------------------- 1997 1996 1995 ------ ------ ------ Service cost-benefits attributed to service during the year.............................. $ 927 $1,044 $ 756 Interest cost on accumulated postretirement benefit obligation........................... 1,453 1,454 1,352 Amortization of transition benefit and other net gains.......................... (358) (354) (455) ------ ------ ------ Net periodic postretirement benefit expense.... $2,022 $2,144 $1,653 ------ ------ ------ ------ ------ ------
The discount rate used in determining the accumulated postretirement benefit obligation ("APBO") was 7.5% as of December 31, 1997 and 1996. At December 31, 1997, the assumed health care cost trend rate used in measuring the APBO was 7.5% starting in 1998 then gradually decreasing to 5% by the year 2003 and remaining at that level thereafter. The health care cost trend rate assumption has a significant effect on the amount of the obligation and periodic benefit expense reported. An increase in the assumed health care cost trend rates by 1% in each year would increase the APBO as of December 31, 1997 by approximately 19% and the service and interest cost components of net periodic postretirement benefit expense by approximately 22%. STOCK OPTION PLANS: The Company adopted The Coleman Company, Inc. 1992 Stock Option Plan (the "1992 Stock Option Plan") in 1992. During 1993, the shareholders approved the 1993 Stock Option Plan (the "1993 Stock Option Plan") and during 1996, the shareholders approved The Coleman Company, Inc. 1996 Stock Option Plan (the "1996 Stock Option Plan"). Under the terms of the 1992 Stock Option Plan, the 1993 Stock Option Plan and the 1996 Stock Option Plan (collectively the "Stock Option Plans"), incentive stock options ("ISOs"), non-qualified stock options ("NQSOs") and stock appreciation rights may be granted to key employees of the Company and any of its affiliates from time to time. Stock options have been granted under the Stock Option Plans with vesting terms and maximum terms of approximately five years and ten years, respectively. The aggregate number of shares of common stock as to which options and rights may be granted under the Stock Option Plans may not exceed 4,700,000. F-25 THE COLEMAN COMPANY, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) (IN THOUSANDS, EXCEPT SHARE DATA) The following table summarizes the stock option transactions under the Stock Option Plans: 1997 1996 1995 --------------------------- --------------------------- --------------------------- Weighted- Weighted- Weighted- Average Average Average Options Exercise Price Options Exercise Price Options Exercise Price ----------- -------------- --------- -------------- ---------- -------------- Outstanding - January 1, 3,017,630 $15.84 2,572,930 $15.25 2,310,888 $14.03 Granted: at market price......... 2,081,000 14.77 294,000 19.73 637,000 17.89 above market price...... 75,000 15.00 381,000 15.00 - - Exercised................. (220,750) 11.42 (154,890) 12.17 (325,748) 12.09 Forfeited................. (1,605,330) 16.49 (75,410) 14.19 (49,210) 13.14 ----------- --------- ---------- Outstanding - December 31,.. 3,347,550 15.14 3,017,630 15.84 2,572,930 15.25 ----------- --------- ---------- ----------- --------- ---------- Exercisable - December 31,.. 927,000 14.02 513,440 13.25 413,526 12.84 ----------- --------- ---------- ----------- --------- ---------- Weighted-average fair value of options granted during the year: at market price......... $ 7.43 $ 6.62 $ 7.13 ----------- --------- ---------- ----------- --------- ---------- above market price...... $ 5.28 $ 3.21 $ -- ----------- --------- ---------- ----------- --------- ----------
The following table summarizes information concerning currently outstanding and exercisable options at December 31, 1997: Options Outstanding Options Exercisable - -------------------------------------------------------------- ----------------------------- Range Weighted-Average of Exercise Number Remaining Weighted-Average Number Weighted-Average Prices Outstanding Contractual Life Exercise Price Exercisable Exercise Price - ------------- ----------- ---------------- ---------------- ----------- ---------------- $12.25-$13.82 543,030 5.26 years $12.96 425,230 $12.79 $13.83-$14.00 878,500 9.29 14.00 181,250 14.00 $14.01-$16.12 806,520 6.66 15.38 226,020 15.24 $16.13-$20.38 1,119,500 9.20 16.92 94,500 16.67 --------- ------- $12.25-$20.38 3,347,550 7.97 15.14 927,000 14.02 --------- ------- --------- -------
As described in Note 1, the Company follows APB Opinion No. 25 in accounting for stock compensation arrangements. Pro forma financial information regarding net income and earnings per share has been determined as if the Company had accounted for its employee stock options under the fair value method of SFAS No. 123. The fair value of ISOs and NQSOs granted during 1997, 1996 and 1995 were estimated at the date of grant using the Black-Scholes option pricing model with the following weighted-average assumptions: risk-free interest rates of 6.53%, 6.11% and 5.91% for 1997, 1996 and 1995, respectively, dividend yield of 0.0%, volatility of the expected market price of the Company's common stock of 31.3%, 20.2% and 30.8% for 1997, 1996 and 1995, respectively, and a weighted-average expected life of the option of 7.7, 5.5 and 5.5 years for 1997, 1996 and 1995, respectively. F-26 THE COLEMAN COMPANY, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENT (CONTINUED) (IN THOUSANDS, EXCEPT SHARE DATA) SFAS No. 123 requires the use of option valuation models, one of which is the Black-Scholes model, that were not developed for use valuing ISOs or NQSOs. Further, these option valuation models require the input of highly subjective assumptions, including the expected stock price volatility. In management's opinion, based on the above, the existing models do not necessarily provide a reliable single measure of the fair value of its ISOs or NQSOs. The following summarized, unaudited pro forma results of operations assume the estimated fair value of the ISOs and NQSOs granted during the years ended December 31, 1997, 1996 and 1995 is amortized to expense over the ISOs' and NQSOs' vesting period. SFAS No. 123 does not require disclosure of the effect of any grants of stock based compensation prior to 1995 and, therefore, the pro forma effect of SFAS No. 123 on net earnings is not representative of the pro forma effect on net earnings in future years. Year Ended December 31, ------------------------------ 1997 1996 1995 -------- --------- ------- Pro forma net (loss) earnings......... $(6,069) $(42,760) $39,009 Pro forma basic net (loss) earnings per common share.................... (0.11) (0.80) 0.73 Pro forma diluted net (loss) earnings per common share.................... (0.11) (0.80) 0.73
14. COMMITMENTS AND CONTINGENCIES LEASES: The Company leases manufacturing, administrative and sales facilities and various types of equipment under operating lease agreements expiring through 2007. Rental expense was $15,620, $14,164, and $11,526 for the years ended December 31, 1997, 1996 and 1995, respectively. Minimum rental commitments under all noncancellable operating leases with remaining lease terms in excess of one year from December 31, 1997, aggregated $31,506; such commitments for each of the five years subsequent to December 31, 1997 are $7,571, $6,683, $4,622, $2,848, and $3,560, respectively, and $6,222 thereafter. The Company leases its former corporate office building in Denver, Colorado under agreements which give the Company the right, subject to certain qualifications, to renew or terminate the lease, or purchase the property. Upon termination, the Company has guaranteed the lessor certain residual values. ENVIRONMENTAL MATTERS: GILBERT AND MOSLEY SITE. As a result of investigations undertaken in 1986, the Kansas Department of Health and Environment ("KDHE") discovered that groundwater in the downtown Wichita area (the "Gilbert and Mosley Site") was contaminated with volatile organic chemicals ("VOCs"). Coleman occupied a facility within the boundaries of the Gilbert and Mosley Site. Subsequent investigations in the area, including investigations in November 1988 by Coleman, indicated the groundwater beneath the Coleman property is contaminated with VOCs. Coleman is in the process of remediating the contamination on its property. The City of Wichita has entered into a voluntary agreement with KDHE in which the City agreed to investigate and then remediate contamination in the Gilbert and Mosley Site. Coleman has entered into an F-27 THE COLEMAN COMPANY, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENT (CONTINUED) (IN THOUSANDS, EXCEPT SHARE DATA) agreement with KDHE in which Coleman agreed to perform a similar study for the Coleman property and to implement remedial activities at its property. In addition, Coleman entered into an agreement with the City of Wichita in which Coleman agreed to fund its proportionate share of the City's study and remediation of the Gilbert and Mosley site. MAIZE SITE. Coleman has undertaken a soil and groundwater investigation at its facility in Maize, Kansas (the "Maize Site"). Results indicate that limited VOC contamination is present in the groundwater under and to the southeast of the facility. The data has been reported to the KDHE, and Coleman has entered into an agreement with KDHE to implement appropriate remedial actions. The remediation system has been installed, and Coleman is in the process of remediating the contaminated groundwater. NORTHEAST SITE. In 1990, Coleman undertook a soil and groundwater investigation of its facility in northeast Wichita (the "Northeast Site"). Results indicated the presence of VOCs in the groundwater and soils. Although some of the contamination may be a result of Coleman's operations at the facility, the data also indicated that contamination was migrating onto the Coleman property from up gradient sources. Coleman reported the initial results of its study to KDHE. Coleman has also provided copies of all data to the United States Environmental Protection Agency (the "EPA"), at its request. The EPA has not initiated any actions against the Company with respect to the Northeast Site. An agreement has been entered into with KDHE to undertake additional investigatory activities, and an interim remediation system has been installed. The Company has not been named as a potentially responsible party ("PRP") by the EPA nor does it have joint and several liability with any other PRP for remediation at any of the above sites. The Company has adopted an environmental policy designed to ensure the Company operates in full compliance with applicable environmental regulations and, where appropriate, the Company's own internal standards. Coleman has also undertaken an environmental compliance audit program. The Company makes expenditures it believes are necessary to comply with environmental management practices. Environmental expenditures that relate to current operations are expensed or capitalized as appropriate and were not significant in 1997 and are not expected to be significant in the foreseeable future. The Company accrues for losses associated with environmental remediation obligations when such losses are probable and reasonably estimable. Accruals for estimated losses from environmental remediation obligations generally are recognized no later than completion of the remedial feasibility study. Such accruals are adjusted as further information develops or circumstances change. Costs of future expenditures for environmental remediation obligations are not discounted to their present value. Recoveries of environmental remediation costs from other parties are recognized as assets when their receipt is deemed probable. While it is possible the Company reserves may change in the near term, the Company believes the reserves established for environmental matters are adequate. This belief is based on results of environmental investigations of the groundwater and soils at the manufacturing facilities operated by Coleman conducted by independent consultants specializing in environmental investigations and remediation and estimates provided by such independent consultants, together with estimates provided by Coleman's environmental engineering staff. OTHER: The Company and Holdings are involved in various claims and legal actions arising in the ordinary course of business. The Company believes the ultimate disposition of these matters is not expected to have a material adverse effect on the Company's consolidated financial condition or results of operations. The Company has F-28 THE COLEMAN COMPANY, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENT (CONTINUED) (IN THOUSANDS, EXCEPT SHARE DATA) entered into a cross-indemnification agreement with Holdings pursuant to which it will indemnify Holdings against all liabilities related to businesses transferred to the Company by Holdings, and Holdings will indemnify the Company against all liabilities of Holdings other than liabilities related to the businesses transferred to the Company. The Company is party to a license agreement which requires payments of minimum guaranteed royalties aggregating to $11,778 at December 31, 1997; such commitments for each of the five years remaining under the agreement subsequent to December 31, 1997 are $1,040, $1,745, $2,434, $3,010, and $3,549, respectively. 15. SIGNIFICANT CUSTOMERS The Company's U.S. and Canadian operations have one significant customer which accounted for approximately 13%, 15%, and 19% of net revenues in the years ended December 31, 1997, 1996 and 1995, respectively. 16. CASH FLOW REPORTING The Company uses the indirect method to report cash flows from operating activities. Interest paid was $42,217, $37,608, and $23,976 and net income taxes (refunded) paid were $(16,138), $7,041, and $12,246 for the years ended December 31, 1997, 1996 and 1995, respectively. Certain non-cash transactions relating to acquisitions and the issuance of long-term debt have been reported in Notes 2 and 9. 17. PREFERRED STOCK The Company has authorized 20,000,000 shares of preferred stock, par value $0.01 per share. The Company's Certificate of Incorporation authorizes the Board of Directors to provide for the issuance of a series of preferred stock, to establish the number of shares of each such series and to fix the designation, powers, preferences and rights of the shares of each such series and any qualifications, limitations or restrictions thereof. 18. GEOGRAPHIC SEGMENTS The Company designs, manufactures and markets a wide variety of multiuse products and accessories, which are primarily marketed through independent retail markets, for the outdoor recreation and hardware consumers. The Company is a leading manufacturer and marketer of brand name consumer products for the camping and related outdoor recreation markets in the United States, Canada, Europe, and Japan. Operating profit, as indicated below, represents net revenues less operating expenses and amortization of goodwill. Generally, sales between geographic areas are made at cost plus a share of operating profit. Identifiable assets are those used by each geographic segment. Corporate assets are principally cash, certain property and equipment, income tax refunds receivable - - affiliate, and deferred charges. F-29 THE COLEMAN COMPANY, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENT (CONTINUED) (IN THOUSANDS, EXCEPT SHARE DATA) Information related to the Company's geographic segments is as follows: Year Ended December 31, ---------------------------------- 1997 1996 1995 ---------- ---------- -------- Net revenues: Domestic - U.S.................................. $ 855,365 $ 916,260 $716,018 - Export............................... 78,120 91,125 90,434 Europe.......................................... 217,863 168,780 52,233 Other foreign................................... 167,119 219,350 169,836 Eliminations.................................... (164,173) (175,299) (94,947) ---------- ---------- -------- $1,154,294 $1,220,216 $933,574 ---------- ---------- -------- ---------- ---------- -------- Operating profit: Domestic (a).................................... $ 34,754 $ 19,915 $120,915 Europe (b)...................................... 1,299 (17,505) (3,241) Other foreign (c)............................... 26,384 4,027 (10,540) ---------- ---------- -------- 62,437 6,437 107,134 Corporate expenses (d).......................... (27,962) (18,011) (18,043) Interest expense................................ (40,852) (38,727) (24,545) ---------- ---------- -------- (Loss) earnings before income taxes, minority interest and extraordinary item.................. $ (6,377) $ (50,301) $ 64,546 ---------- ---------- -------- ---------- ---------- -------- Identifiable assets: Domestic........................................ $ 681,325 $ 782,373 $696,681 Europe.......................................... 216,816 247,412 70,478 Other foreign................................... 91,192 83,033 59,107 Corporate....................................... 52,431 47,268 18,221 ---------- ---------- -------- $1,041,764 $1,160,086 $844,487 ---------- ---------- -------- ---------- ---------- --------
- --------------- (a) Includes restructuring and other charges of $21,025 in 1997 and $49,257 in 1996. (b) Includes restructuring and other charges of $114 in 1997 and $20,002 in 1996. (c) Includes restructuring and other charges of $4,151 in 1997 and $4,941 in 1996; and $12,289 of asset impairment charges in 1995. (d) Includes restructuring and other charges of $11,129 in 1997. F-30 THE COLEMAN COMPANY, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENT (CONTINUED) (IN THOUSANDS, EXCEPT SHARE DATA) 19. QUARTERLY FINANCIAL SUMMARIES (UNAUDITED) Summarized quarterly financial data for 1997 and 1996 are as follow: Quarter Ended --------------------------------------------------- March 31, June 30, September 30, December 31, --------- -------- ------------- ------------ 1997 - ---- Net revenues........................ $295,464 $383,514 $252,434 $222,882 Gross profit (a).................... 81,042 101,913 69,867 61,141 Net earnings (loss) (a)............. 699 10,119 (8,077) (5,277) Basic earnings (loss) per share..... $ 0.01 $ 0.19 $ (0.15) $ (0.10) 1996 - ---- Net revenues........................ $273,560 $452,654 $269,607 $224,395 Gross profit (a).................... 80,966 137,538 39,894 33,321 Earnings (loss) before extraordinary item (a)............. 15,039 28,046 (48,458) (35,873) Net earnings (loss) (a)............. 15,039 27,399 (48,458) (35,873) Basic earnings (loss) per share: Earnings (loss) before extraordinary item............... $ 0.28 $ 0.53 $ (0.91) $ (0.67) Net earnings (loss)............... 0.28 0.52 (0.91) (0.67) - -------------- (a) Includes restructuring and other charges (credits) as follows: 1997 ---- Gross profit................... $ (425) $ 11,402 $ 9,010 $ (314) Net earnings................... 2,435 11,547 9,433 (914) 1996 ---- Gross profit.................. -- -- 33,567 10,438 Earnings before extraordinary item........... -- -- 44,495 8,021 Net earnings.................. -- -- 44,495 8,021
20. SUBSEQUENT EVENT (UNAUDITED) On February 27, 1998, CLN Holdings and Coleman (Parent) Holdings Inc., the parent company of CLN Holdings, entered into an Agreement and Plan of Merger (the "CLN Holdings Merger Agreement") with Sunbeam Corporation ("Sunbeam") and a wholly-owned subsidiary of Sunbeam ("Laser Merger Sub"). The CLN Holdings Merger Agreement provides that, among other things, Laser Merger Sub will be merged (the "CLN Holdings Merger") with CLN Holdings. Pursuant to the CLN Holdings Merger Agreement, the shares of CLN Holdings' common stock issued and outstanding immediately prior to the effective time of the CLN Holdings Merger will be converted into the right to receive in the aggregate 14,099,749 shares of Sunbeam's common stock and $159,957 in cash, without interest. In addition, the outstanding debt of CLN Holdings will remain an obligation of CLN Holdings following the CLN Holdings Merger. F-31 THE COLEMAN COMPANY, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONCLUDED) (IN THOUSANDS, EXCEPT SHARE DATA) Coincident with the execution of the CLN Holdings Merger Agreement, the Company, Sunbeam and a wholly-owned subsidiary of Sunbeam ("Merger Sub"), entered into an Agreement and Plan of Merger (the "Coleman Merger Agreement" and with the CLN Holdings Merger Agreement, collectively the "Merger Agreements"), providing that, among other things, Merger Sub will be merged (the "Coleman Merger") with the Company. Pursuant to the Coleman Merger Agreement, each share of the Company's common stock issued and outstanding immediately prior to the effective time of the Coleman Merger (other than shares held by Coleman Worldwide and dissenting shares, if any) will be converted into the right to receive (a) 0.5677 of a share of Sunbeam common stock, with cash paid in lieu of fractional shares, and (b) $6.44 in cash, without interest. Following consummation of the CLN Holdings Merger, CLN Holdings will be a direct wholly-owned subsidiary of Sunbeam. Following consummation of the Coleman Merger, the Company will be an indirect wholly-owned subsidiary of Sunbeam. The CLN Holdings Merger is subject to the expiration of antitrust waiting periods and certain other customary conditions. The Coleman Merger Agreement is subject to consummation of the CLN Holdings Merger. These transactions will constitute a change in control as defined in the Company Credit Agreement. Per the terms of the Merger Agreements, certain arrangements with related parties may be altered or terminated. In addition, outstanding, unvested Company stock options immediately vest upon consummation of the CLN Holdings Merger. F-32 EX-10.16 2 EXECUTIVE SEVERANCE POLICY THE COLEMAN COMPANY, INC. EXECUTIVE SEVERANCE POLICY Effective Date: February 27, 1998 I. POLICY It is the intent of this Policy to provide guidelines for the granting of severance pay and certain other benefits to certain Participants separated from the The Coleman Company, Inc. (the "Company") and its subsidiaries. II. APPLICATION AND ELIGIBILITY This Policy applies to certain terminations of employment of employees of the Company and its subsidiaries who as of the Effective Date of the Policy are participants in the Company's management incentive plan or who are in the positions of country general managers/presidents and above (the "Participants"). For purposes of this Policy, continued employment by a Participant with any entity controlled by, controlling or under common control with the Company (whether before or after a Change of Control) shall be treated as employment and service with the Company. This Policy supersedes any and all prior policies or practices relating to severance pay for such Participants. The acceptance of any severance pay or benefits under this Policy shall constitute a waiver of any severance pay the Participant would have been entitled to under any such superseded policies or practices. III. ADMINISTRATION A. EXCLUSIONS Severance pay or other benefits will not be granted under any circumstances to a Participant who leaves the Company under the following circumstances: 1. Resignation without "Good Reason" (as defined below). 2. Retirement under the terms of the Company Retirement Plan, or any other pension plan that might be provided by the Company (other than a termination for "Good Reason"). 3. Termination by the Company for "Cause" (as defined below). For purposes of this Policy, with respect to any Participant, "Good Reason" shall 1 mean (i) the assignment to the Participant of any duties inconsistent in any material respect with the Participant's position (including status, offices, titles and reporting requirements), authority, duties or responsibilities immediately before the Change of Control, or any other action by the Company which results in a significant diminution in such position, authority, duties or responsibilities, excluding for this purpose an isolated, insubstantial and inadvertent action not taken in bad faith and which is remedied by the Company promptly after receipt of notice thereof given by the Participant; (ii) any material reduction in the Participant's annual base salary, opportunity to earn annual bonuses, or other compensation or employee benefits, other than as a result of an isolated and inadvertent action not taken in bad faith and which is remedied by the Company promptly after receipt of notice thereof given by the Participant; (iii) the Company's requiring the Participant to relocate his or her principal place of business to a location which is more than 25 miles from his or her previous principal place of business; (iv) any purported termination of this Policy otherwise than as expressly permitted by this Policy; or (v) any failure by the Company to comply with and satisfy Section V of this Policy. For purposes of this Policy, any good faith determination of "Good Reason" made by the Participant shall be conclusive. For purposes of this Policy, with respect to any Participant, "Cause" shall mean (i) the willful and continued failure of the Participant to perform substantially the Participant's duties with the Company or one of its affiliates (other than any such failure resulting from incapacity due to physical or mental illness), after a written demand for substantial performance is delivered to the Participant which specifically identifies the manner in which the Company believes that the Participant has not substantially performed the Participant's duties, (ii) the willful engaging by the Participant in illegal conduct or gross misconduct which is materially and demonstrably injurious to the Company, or (iii) the Participant's conviction of, or plea of guilty or nolo contendere to, a felony. For purposes of this definition, no act or failure to act on the part of the Participant shall be considered "willful" unless it is done, or omitted to be done, by the Participant in bad faith or without reasonable belief that the Participant's action or omission was in the best interests of the Company. Any act or failure to act based upon authority given pursuant to a resolution duly adopted by the Board of Directors of the Company or upon the instructions of the Chief Executive Officer or a senior officer of the Company or based upon the advice of counsel for the Company shall be conclusively presumed to be done, or omitted to be done, by the Participant in good faith and in the best interests of the Company. Severance pay and benefits under this Policy are not granted where following a Change of Control, the Company or the acquiror in the Change of Control sells or otherwise disposes of the business in which the Participant was employed, and the buyer of the business agrees to continue the Policy as if it was the Company and either (i) the Participant accepts employment with the buyer of the business or (ii) the Participant rejects an offer of employment by the buyer involving compensation and benefits substantially equivalent, taken as a whole, to the Participant's compensation 2 and benefits with the Company, and an employment location within 25 miles from the Participant's previous principal place of business. 3. B. SEVERANCE PAY The following schedule determines the number of months of severance pay ("Severance Period") eligible Participants will receive if they are terminated without Cause by the Company or terminate for Good Reason during the 3-year period immediately following a Change of Control, or are terminated by the Company without Cause prior to a Change of Control, but following the execution of an agreement, consummation of which would constitute a Change of Control, if a Change of Control subsequently occurs (each, a "Severance Termination"). EXECUTIVE SEVERANCE GROUP PERIOD --------- --------- Group A 12 months Group B 9 months Group C 6 months Group A Participants are Participants with a target incentive level at 50% of base salary and above under the Company's management incentive plans; Group B Participants are Participants with a target incentive level at 30% to 49% of base salary; and Group C Participants are other participants in the Company's management incentive plans, and country general managers, presidents and higher ranking executives. For purposes of this Policy, a "Change of Control" of the Company shall be deemed to occur if Ronald O. Perelman, individually, or his estate, heirs, personal representatives or any trust created for the benefit of his wife or children, or any corporation or other entity which such persons control, directly or indirectly, cease to maintain beneficial ownership (as defined in Rule 13d-3 of the Securities Exchange Act of 1934, as amended), individually or in the aggregate, of securities of the Company sufficient to designate a majority of the members of the Company's Board of Directors. Eligible Participants will receive severance pay to which they are entitled semi-monthly (or monthly) at their base rate of pay in effect as of the date of employment termination (without giving effect to any reduction in base salary that otherwise constitutes Good Reason under this Policy). Anything in this Policy to the contrary notwithstanding, in the event it shall be determined that any payment, award, benefit or distribution by the Company (or any of its affiliated entities) to or for the benefit of Participant (whether pursuant to this 3 Policy or otherwise, but determined without regard to any additional payments required under this paragraph) (a "Payment") would be subject to the excise tax imposed by Section 4999 of the Internal Revenue Code of 1986, as amended (the "Code") or any corresponding provisions of state or local tax laws, or any interest or penalties are incurred by the Participant with respect to such excise tax (such excise tax, together with any such interest and penalties, are hereinafter collectively referred to as the "Excise Tax"), then the Participant shall be entitled to receive an additional payment (a "Gross-Up Payment") in an amount such that after payment by the Participant of all taxes (including any interest or penalties imposed with respect to such taxes), including, without limitation, any income taxes (and any interest and penalties imposed with respect thereto) and Excise Tax imposed upon the Gross-Up Payment, the Participant retains an amount of the Gross-Up Payment equal to the Excise Tax imposed upon the Payments. Notwithstanding the foregoing provisions, if it shall be determined that the Participant is entitled to a Gross-Up Payment, but that the portion of the Payments that would be treated as "parachute payments" under Section 280G of the Code does not exceed 110% of the greatest amount (the "Safe Harbor Amount") that could be paid to the Participant such that the receipt of Payments would not give rise to any Excise Tax, then no Gross-Up Payment shall be made to the Participant and the amounts payable under this Policy shall be reduced so that the Payments, in the aggregate, are reduced to the Safe Harbor Amount. For purposes of reducing the Payments to the Safe Harbor Amount, only amounts payable under this Policy (and no other Payments) shall be reduced. If the reduction of the amounts payable under this Policy would not result in a reduction of the Payments to the Safe Harbor Amount, no amounts payable under this Policy shall be so reduced. All determinations required to be made, including whether and when a Gross-Up Payment is required and the amount of such Gross-Up Payment and the assumptions to be utilized in arriving at such determination, shall be made by Ernst & Young which shall provide detailed supporting calculations both to the Company and the Participant within 15 business days of the receipt of notice from the Participant an anticipated Payment may give rise to Excise Tax, or such earlier time as is requested by the Company. In the event that the Accounting Firm is serving as accountant or auditor for the individual, entity or group effecting the Change of Control, the Company shall appoint another nationally recognized accounting firm to make the determinations required hereunder (which accounting firm shall then be referred to as the Accounting Firm hereunder). All fees and expenses of the Accounting Firm shall be borne solely by the Company. Any Gross-Up Payment, shall be paid by the Company to the Participant within five days of the event giving rise to the Excise Tax. Any determination by the Accounting Firm shall be binding upon the Company and the Participant. C. CONTINUATION OF MEDICAL/DENTAL BENEFITS If a Participant has a Severance Termination, the Participant will be permitted to continue participation in the Company's group medical and/or dental benefit plans under COBRA at the contribution level in effect for active Participants until the end 4 of the Severance Period (or if longer, the maximum required period for continuation coverage under applicable federal law, generally 18 months); PROVIDED, that the Company will continue to pay the portion of the premiums it was paying prior to the Change of Control during the Severance Period. However, the Participant will cease to be eligible for these benefits when the Participant becomes covered by medical or dental plans of another employer or becomes eligible for Medicare. Continued participation in the Company's group plans will be governed by the terms and conditions of the plans as in effect when employment terminates, provided that if such plans are amended as to the group of Participants in which the Participant was included at the time of termination, the newer provisions shall apply. In order to remain eligible for continued medical or dental benefits during the Severance Period, the Participant must make timely premium payments in the same amount paid by then current Participants, which amounts will be deducted from the Participant's severance pay, and must submit such evidence of non-coverage as the Company may reasonably require. If the Participant is entitled and elects under applicable federal law to continue such benefits under COBRA after the Severance Period, the Participant must make timely COBRA premium payments as required. D. PRO RATA ANNUAL BONUS In the event a Participant has a Severance Termination under this Policy prior to December 31, 1998, the Participant shall be paid a pro rata bonus payment under the Company management incentive plan, upon the earlier of February 28, 1999 or the date on which Company employees are paid bonuses for 1998 under such plan, equal to the product of (x) the bonus the Participant would have earned under the management incentive plan based upon performance had the Participant remained employed through the plan year, and (y) a fraction, the numerator of which is the number of days in such year through the date of termination, and the denominator of which is 365. E. PENSION CREDIT In the event a Participant has a Severance Termination under this Policy, the Company shall pay such Participant, within fifteen days following the Participant's date of termination, an amount equal to the excess of (a) the aggregate benefit under the Company's qualified defined benefit retirement plans (collectively, the "Retirement Plan") and any excess or supplemental defined benefit retirement plans in which the Participant participates (collectively, the "SERP") which the Participant would have accrued (whether or not vested) if the Participant's employment had continued for the Separation Period, over (b) the actual vested benefit, if any, of the Participant under the Retirement Plan and the SERP, determined as of the date of termination (with the foregoing amounts to be computed on an actuarial present value basis, using actuarial assumptions no less favorable to the Participant than the most favorable of those in effect for purposes of computing benefit entitlements under the Retirement Plan and the SERP at any time from the day before the Effective Date through the date of 5 termination). F. OTHER EMPLOYEE BENEFITS The provisions of other Participant benefit and/or compensation programs (other than severance policies and practices), including, but not limited to, vacation pay and the Company's management incentive plan, with respect to benefits available upon termination of employment will apply; provided, that upon a Severance Termination the Participant shall be paid out his or her accrued vacation. This Policy is not intended to describe the provisions or administrative practices of any other Participant benefit and/or compensation program, policy or plan. Any benefits that may be available under any other such program, policy or plan must be determined solely in accordance with the terms and administrative provisions of such program, policy or plan. G. EMPLOYMENT CONTRACTS OR OTHER WRITTEN AGREEMENTS IN EFFECT If on the date of termination an employment contract or other written agreement between an eligible Participant and the Company is in effect, then unless otherwise provided by the terms of such written agreement the Participant will be permitted to choose between (i) the severance pay and benefits provided in such employment contract or agreement, or (ii) the severance pay and benefits payable in accordance with this Policy. H. NO MITIGATION The obligations of the Company to pay the severance benefits under this Policy shall be absolute and unconditional and shall not be affected by any circumstances, including, without limitation, any set-off, counterclaim, recoupment, defense or other right which the Company or any of its subsidiaries may have against any Participant. In no event shall a Participant be obligated to seek other employment or take any other action by way of mitigation of the amounts payable to a Participant under any of the provisions of this Plan, nor shall the amount of any payment hereunder be reduced by any compensation earned by a Participant as a result of employment by another employer, except as specifically provided in this Policy. The Company agrees to pay as incurred, to the full extent permitted by law, all legal fees and expenses which a Participant may reasonably incur as a result of any contest (regardless of the outcome thereof) by the Company, the Participant or others as to the validity or enforceability of, or liability or entitlement under, any provision of this Policy. IV. AMENDMENT OR TERMINATION OF POLICY The Company reserves the right to amend, modify or terminate this Policy or any portion of it at any time, and for any reason, by action of the Company's Board of Directors (or officers expressly authorized by the Board); provided, that this Policy may not be terminated or amended in any manner that could adversely affect the rights of any Participant (i) following 6 a Change of Control, (ii) at the request of a third party who has taken steps reasonably calculated to effect a Change of Control, or (iii) otherwise in connection with or in anticipation of a Change of Control. V. SUCCESSOR TO COMPANY This Policy shall bind any successor of the Company, its assets or its businesses (whether direct or indirect, by purchase, merger, consolidation or otherwise), in the same manner and to the same extent that the Company would be obligated under this Policy if no succession had taken place. In the case of any transaction in which a successor would not by the foregoing provision or by operation of law be bound by this Policy, the Company shall require such successor expressly and unconditionally to assume and agree to perform the Company's obligations under this Policy, in the same manner and to the same extent that the Company would be required to perform if no such succession had taken place. The term "Company," as used in this Policy, shall mean the Company as hereinbefore defined and any successor or assignee to the business or assets which by reason hereof becomes bound by this Policy. VI. OTHER IMPORTANT INFORMATION A. SOURCE OF PLAN BENEFITS This Plan is intended to be an unfunded plan maintained primarily for the purpose of providing deferred compensation for a select group of management or highly compensated employees, within the meaning of Section 401 of the Employee Retirement Income Security Act of 1974, as amended ("ERISA"). All payments under this Policy will be made from the Company's general assets. Benefits under this Policy are not insured under Title IV of ERISA. B. PROCEDURE FOR CLAIMING BENEFITS Severance benefits are awarded in appropriate circumstances without application. However, if a Participant believes that he or she is entitled to severance benefits under this Policy and such benefits are not awarded, the Participant must present a written claim for such benefits to the Company as the "Plan Administrator". If the Plan Administrator determines that the claim should be denied, the Plan Administrator must provide the Participant with notice of the denial, written in clear and precise terms and giving specific reasons for the denial within 30 days. Within 90 days after the Participant is notified of the denial of his or her application, the Participant also has the right to appeal to the Plan Administrator for a full and fair review of any such denial. The Participant also has the right to review any relevant documents and to submit issues and comments in writing to the Plan Administrator. If the Participant needs more time, the Plan Administrator may allow the Participant more than 90 days to file a request for review. The Plan Administrator shall conduct a hearing and/or 7 take such other steps as the Plan Administrator deems appropriate for a full and fair review of the appeal from the denial of a claim. The Plan Administrator will issue, within 60 days after the request for review is received, a written decision which shall include specific reasons for the decision and references to the pertinent plan provisions on which the decision is based. This decision shall be written in a manner calculated to be understood by the Participant. Nothing herein shall prevent the Participant from contesting any decision by the Plan Administrator in a court of appropriate jurisdiction. C. GOVERNING LAW The validity, interpretation, construction and performance of this Policy shall be governed by the laws of the State of Delaware, without reference to principles of conflicts of law, except to the extent pre-empted by federal law. 8 EX-10.25 3 SAFETY AND SECURITY September 22, 1997 Mr. Patrick McEvoy c/o Coleman Safety and Security Products, Inc. 2820 Thatcher Road Downers Grove, Illinois 60515 Dear Patrick: The Coleman Company, Inc. ("Coleman") has determined at this time to seek a buyer for, and to sell (a "Sale"), its interest in Coleman Safety and Security Products, Inc. (the "CSS"), through a sale of CSS' capital stock, all or substantially all of its assets or by other means. You have agreed to assist and to provide support to Coleman in this regard. We greatly appreciate your willingness to take on the additional challenge in assisting in Coleman's efforts along with your ongoing job of continuing to manage the CSS' success. In consideration of your agreement to actively assist in bringing about and concluding a Sale and your agreement to remain an active employee of CSS in your current capacity through the conclusion of any such Sale and subject to your performance of these agreements, Coleman will provide you with the following additional benefits: 1. STAY BONUS In order to induce you to continue the successful operations of CSS through the closing of any Sale, Coleman will pay you a special bonus (the "Special Bonus") equal to one years base salary at your current level of salary within 15 days after the date of the closing of a Sale ("Closing Date"). In the event that, within 3 months of the closing date of a Sale, Coleman terminates your employment with Coleman (other than as a result of your acceptance of employment with a Buyer in a Sale) such that you are entitled to receive payments pursuant to Section 6(c) of your Employment Agreement, dated as of January 1, 1996, as amended, with Coleman (the "Employment Agreement"), then the monthly compensation continuation payments payable pursuant to Section 6(c)(3) of the Employment Agreement shall, for the first year of such payments, be reduced by 1/12 of the Special Bonus. 2. STOCK OPTIONS In the event that, within 3 months of the closing date of a Sale, Coleman terminates your employment with Coleman or you terminate your employment with Coleman as a result of your acceptance of employment with a Buyer in a Sale, to the extent that you have stock options for the purchase of Common Stock of Coleman ("Coleman Common Stock") the exercise of which has not vested by the date of such termination of your employment, such options will become vested at that time and you will be entitled to exercise those options according to their terms for 90 days beginning with the first calendar day following the date of such termination of your employment; PROVIDED, HOWEVER, that prior to any such exercise you give Coleman three business days prior written notice of any intended exercise and Coleman shall have the option to purchase for cash any or all of those options which your notice indicates you intend to exercise at a price equal to the difference between (i) the closing price for the Coleman Company Stock on the New York Stock Exchange on the intended day of exercise set forth in your notice and (ii) the applicable exercise price. Coleman will notify you no later than 10:30 a.m. New York time on the intended day of exercise whether it will exercise its option and, if it so elects, the closing of its purchase shall be completed within five business days of the intended exercise day. 3. MISCELLANEOUS This agreement will terminate on June 30, 1998 (unless a Sale has previously occurred), provided that in the event you are terminated for cause prior to June 30, 1998, this agreement shall terminate on the date of such termination for cause. This agreement amends the Employment Agreement. For purposes of this Agreement, in no event shall a Sale include any transaction with an affiliate (whether a natural person or a legal entity) of Coleman or any transaction which is part of or consistent with the conduct in the ordinary course of Coleman's or CSS' business. This agreement is binding upon you and Coleman as well as to our respective legal representatives and successors. You shall keep the existence and the contents of this agreement, as well as the fact that Coleman and CSS are contemplating a Sale and the terms of any such Sale confidential and shall not disclose any of such information to any other person. You hereby acknowledge that you are aware that the United States securities laws prohibit any person who has received from an issuer material, non-public information concerning an issuer from purchasing or selling securities of such issuer or from communicating such information to any other person under circumstances in which it is reasonably foreseeable that such person is likely to purchase or sell such securities. If you are in agreement with contents of this letter, kindly sign the bottom of this letter in the space provided therefor, at which time this letter will become the binding agreement of you and Coleman. Very truly yours. THE COLEMAN COMPANY, INC. By: Jerry Levin ------------------------------ Jerry Levin Chairman By: Patrick McEvoy ----------------------------- Patrick McEvoy EX-10.31 4 EXECUTIVE ANNUAL INCENTIVE THE COLEMAN COMPANY, INC. EXECUTIVE ANNUAL INCENTIVE PLAN i. PURPOSE. The purpose of The Coleman Company, Inc. Executive Annual Incentive Plan is to encourage behaviors that create superior financial performance and to strengthen the commonality of interests between Plan Participants and owners in creating superior shareholder value. ii. DEFINITIONS. The following terms, as used herein, shall have the following meanings: (i) "Award" shall mean an annual incentive compensation award, granted pursuant to the Plan, which is contingent upon the attainment of Performance Factors with respect to a Performance Period. (ii) "Board" shall mean the Board of Directors of the Company. (iii) "Code" shall mean the Internal Revenue Code of 1986, as amended. (iv) "Committee" shall mean the Committee of the Board appointed to administer the Plan in accordance with Section 3. (v) "Company" shall mean, collectively, the Coleman Company, Inc. and its subsidiaries. (vi) "Covered Employee" shall have the meaning set forth in Section 162(m)(3) of the Code. (vii) "Exchange Act" shall mean the Securities Exchange Act of 1934, as amended. (viii) "Executive Officer" shall mean an officer of the Company who is an "executive officer" within the meaning of Rule 3b-7 promulgated under the Exchange Act. (ix) "Participant" shall mean an officer, employee or other associate of the Company who is, pursuant to Section 4 of the Plan, selected to participate herein. (x) "Performance Factors" shall mean the criteria and objectives, determined by the Committee, which must be met during the applicable Performance Period as a condition of the Participant's receipt of payment with respect to an Award. Performance Factors may include any or all of the following: revenue; net sales; operating income; earnings before all or any of interest, taxes, depreciation and/or amortization ("EBIT", "EBITA" or "EBITDA"); cash flow; working capital and components thereof; return on equity; return on assets; market share; sales (net or gross) measured by product line, territory, customer(s), or other category; earnings per share; earnings from continuing operations; net worth; levels of expense, cost or liability by category, operating unit or any other delineation; or any increase or decrease of one or more of the foregoing over a specified period. Such Performance Factors may relate to the performance of the Company, a business unit, product line, territory, or any combination thereof. With respect to Participants who are not Executive Officers, Performance Factors may also include such objective or subjective performance goals as the Committee may, from time to time, establish. Subject to Section 5(c) hereof, the Committee shall have the sole discretion to determine whether, or to what extent, Performance Factors are achieved. (xi) "Performance Period" shall mean the Company's fiscal year. (xii) "Plan" shall mean The Coleman Company, Inc. Executive Annual Incentive Plan. iii. ADMINISTRATION. The Plan shall be administered by the Management Compensation and Stock Option Committee of the Board of Directors. The Committee shall have the authority in its sole discretion, subject to and not inconsistent with the express provisions of the Plan, to administer the Plan and to exercise all the powers and authorities either specifically granted to it under the Plan or necessary or advisable in the administration of the Plan, including, without limitation, the authority to grant Awards; to determine the persons to whom and the time or times at which Awards shall be granted; to determine the terms, conditions, restrictions and performance criteria, including Performance Factors, relating to any Award; to determine whether, to what extent, and under what circumstances an Award may be settled, canceled, forfeited, or surrendered; to make adjustments in the Performance Factors in recognition of unusual or non-recurring events affecting the Company or the financial statements of the Company, or in response to changes in applicable laws, regulations, or accounting principles; to construe and interpret the Plan and any Award; to prescribe, amend and rescind rules and regulations relating to the Plan; to determine the terms and provisions of Awards; and to make all other determinations deemed necessary or advisable for the administration of the Plan. The Committee shall consist of two or more persons each of whom shall be an "outside director" within the meaning of Section 162(m) of the Code. All decisions, determinations and interpretations of the Committee shall be final and binding on all persons, including the Company and the Participant (or any person claiming any rights under the Plan from or through any Participant). No member of the Board or the Committee shall be liable for any action taken or determination made in good faith with respect to the Plan or any Award granted hereunder. iv. ELIGIBILITY. Awards may be granted to Participants in the sole discretion of the Committee. Subject to Section 5(b) below, in determining the persons to whom Awards shall be granted and the Performance Factors relating to each Award, the Committee shall take into account such factors as the Committee shall deem relevant in connection with accomplishing the purposes of the Plan. v. TERMS OF AWARDS. Awards granted pursuant to the Plan shall be communicated to Participants in such form as the Committee shall from time to time approve and the terms and conditions of such Awards shall be set forth therein. (i) IN GENERAL. The Committee shall specify with respect to a Performance Period the Performance Factors applicable to each Award. Performance Factors may include a level of performance below which no payment shall be made and levels of performance at which specified percentages of the Award shall be paid as well as a maximum level of performance above which no additional award will be paid. Unless otherwise provided by the Committee in connection with specified terminations of employment, payment in respect of Awards shall be made only if and to the extent the Performance Factors with respect to such Performance Period are attained. (ii) SPECIAL PROVISIONS REGARDING AWARDS. Notwithstanding anything to the contrary contained in this Section 5, in no event shall payment in respect of Awards granted for a Performance Period be made to a Participant in an amount that exceeds $2,000,000 (two million) and in no event may the Committee increase at its discretion the amount of an Award payable to a Covered Employee upon attainment of the specified Performance Factors. (iii) TIME AND FORM OF PAYMENT. Unless otherwise determined by the Committee, all payments in respect of Awards granted under this Plan shall be made, in cash, within a reasonable period after the end of the Performance Period. In the case of Participants who are Covered Employees, unless otherwise determined by the Committee, such payments shall be made only after achievement of the Performance Factors has been certified by the Committee. vi. GENERAL PROVISIONS. (i) COMPLIANCE WITH LEGAL REQUIREMENTS. The Plan and the granting and payment of Awards, and the other obligations of the Company under the Plan shall be subject to all applicable federal and state laws, rules and regulations, and to such approvals by any regulatory or governmental agency as may be required. (ii) NONTRANSFERABILITY. Awards shall not be transferable by a Participant except upon the Participant's death following the end of the Performance Period but prior to the date payment is made, in which case the Award shall be transferable by will or the laws of descent and distribution. (iii) NO RIGHT TO CONTINUED EMPLOYMENT. Nothing in the Plan or in any Award granted pursuant hereto shall confer upon any Participant the right to continue in the employ of the Company or to be entitled to any remuneration or benefits not set forth in the Plan or to interfere with or limit in any way the right of the Company to terminate such Participant's employment. (iv) WITHHOLDING TAXES. Where a Participant or other person is entitled to receive a payment pursuant to an Award hereunder, the Company shall have the right to require the Participant or such other person to pay to the Company the amount of any taxes that the Company may be required to withhold before delivery to such Participant or other person of such payment. (v) AMENDMENT, TERMINATION AND DURATION OF THE PLAN. The Board or the Committee may at any time and from time to time alter, amend, suspend, or terminate the Plan in whole or in part; PROVIDED THAT, no amendment that requires shareholder approval in order for the Plan to continue to comply with Code Section 162(m) shall be effective unless the same shall be approved by the requisite vote of the shareholders of the Company. Notwithstanding the foregoing, no amendment shall affect adversely any of the rights of any Participant under any Award following the end of the Performance Period to which such Award relates. (vi) PARTICIPANT RIGHTS. No Participant shall have any claim to be granted any Award under the Plan, and there is no obligation for uniformity of treatment for Participants. (vii) TERMINATION OF EMPLOYMENT. Unless otherwise provided by the Committee in connection with specified terminations of employment, if a Participant's employment terminates for any reason prior to the end of a Performance Period, no Award shall be payable to such Participant for that Performance Period. A Participant who is terminated for gross misconduct after the end of the Performance Period shall forfeit participation in the Plan, and no Award shall be payable to such a Participant. (viii) UNFUNDED STATUS OF AWARDS. The Plan is intended to constitute an "unfunded" plan for incentive and deferred compensation. With respect to any payments not yet made to a Participant pursuant to an Award, nothing contained in the Plan or any Award shall give any such Participant any rights that are greater than those of a general creditor of the Company. (ix) GOVERNING LAW. The Plan and all determinations made and actions taken pursuant hereto shall be governed by the laws of the State of Delaware without giving effect to the conflict of laws principles thereof. (x) EFFECTIVE DATE. The Plan shall take effect upon its adoption by the Board; PROVIDED, HOWEVER, that the Plan shall be subject to the requisite approval of the shareholders of the Company in order to comply with Section 162(m) of the Code. In the absence of such approval, the Plan (and any Awards made pursuant to the Plan prior to the date of such approval) shall be null and void. (xi) BENEFICIARY. A Participant may file with the Committee a written designation of a beneficiary on such form as may be prescribed by the Committee and may, from time to time, amend or revoke such designation. If no designated beneficiary survives the Participant and an Award is payable to the Participant's beneficiary pursuant to Section 6(b), the executor or administrator of the Participant's estate shall be deemed to be the grantee's beneficiary. (xii) INTERPRETATION. The Plan is designed and intended to comply, to the extent applicable, with Section 162(m) of the Code, and all provisions hereof shall be construed in a manner to so comply. EX-10.56 5 EXHIBIT 10.56 - ------------------------------------------------------------------------------- - ------------------------------------------------------------------------------- STOCK PURCHASE AGREEMENT AMONG THE COLEMAN COMPANY, INC., AS SELLER, SIEBE PLC, AS GUARANTOR, AND RANCO INCORPORATED OF DELAWARE, AS BUYER DATED AS OF FEBRUARY 18, 1998 - ------------------------------------------------------------------------------- - ------------------------------------------------------------------------------- TABLE OF CONTENTS PAGE ARTICLE I PURCHASE AND SALE Section 1.1 Purchase and Sale of Shares . . . . . . . . . . . . . . . . 2 Section 1.2 Closing . . . . . . . . . . . . . . . . . . . . . . . . . . 2 Section 1.3 Deliveries at Closing . . . . . . . . . . . . . . . . . . . 3 Section 1.4 Purchase Price Adjustment . . . . . . . . . . . . . . . . . 4 Section 1.5 Intercompany Accounts . . . . . . . . . . . . . . . . . . . 9 ARTICLE II REPRESENTATIONS AND WARRANTIES OF SELLER Section 2.1 Organization and Qualification. . . . . . . . . . . . . . . 9 Section 2.2 Authority Relative to This Agreement. . . . . . . . . . . . 11 Section 2.3 Capitalization; Title . . . . . . . . . . . . . . . . . . . 12 Section 2.4 Consents and Approvals; No Violation. . . . . . . . . . . . 14 Section 2.5 Financial Statements. . . . . . . . . . . . . . . . . . . . 16 Section 2.6 Assets Necessary to Business. . . . . . . . . . . . . . . . 18 Section 2.7 Title to Properties; Encumbrances . . . . . . . . . . . . . 18 Section 2.8 Contracts and Commitments . . . . . . . . . . . . . . . . . 20 Section 2.9 Absence of Certain Changes or Events. . . . . . . . . . . . 24 Section 2.10 Absence of Litigation . . . . . . . . . . . . . . . . . . . 24 Section 2.11 Intellectual Property . . . . . . . . . . . . . . . . . . . 25 Section 2.12 ERISA Compliance. . . . . . . . . . . . . . . . . . . . . . 27 Section 2.13 Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . 30 Section 2.14 Environmental Matters . . . . . . . . . . . . . . . . . . . 33 Section 2.15 No Undisclosed Liabilities. . . . . . . . . . . . . . . . . 35 Section 2.16 Transactions with Affiliates. . . . . . . . . . . . . . . . 36 Section 2.17 Brokers . . . . . . . . . . . . . . . . . . . . . . . . . . 37 Section 2.18 Insurance . . . . . . . . . . . . . . . . . . . . . . . . . 37 Section 2.19 Labor Difficulties. . . . . . . . . . . . . . . . . . . . . 37 Section 2.20 Compliance with Laws. . . . . . . . . . . . . . . . . . . . 38 Section 2.21 Customer Accounts Receivable; Inventories . . . . . . . . . 39 Section 2.22 Information . . . . . . . . . . . . . . . . . . . . . . . . 40 ARTICLE III REPRESENTATIONS AND WARRANTIES OF BUYER AND GUARANTOR Section 3.1 Organization and Qualification. . . . . . . . . . . . . . . 41 Section 3.2 Authority Relative to This Agreement. . . . . . . . . . . . 41 i Section 3.3 Consents and Approvals; No Violation. . . . . . . . . . . . 42 Section 3.4 Financing . . . . . . . . . . . . . . . . . . . . . . . . . 43 Section 3.5 Brokers . . . . . . . . . . . . . . . . . . . . . . . . . . 44 Section 3.6 No Representation Regarding Future Prospects. . . . . . . . 44 Section 3.7 Investment. . . . . . . . . . . . . . . . . . . . . . . . . 45 Section 3.8 Year 2000 . . . . . . . . . . . . . . . . . . . . . . . . . 45 ARTICLE IV COVENANTS OF THE PARTIES Section 4.1 Conduct of the Business . . . . . . . . . . . . . . . . . . 45 Section 4.2 HSR Act Compliance. . . . . . . . . . . . . . . . . . . . . 49 Section 4.3 Post-Closing Collections. . . . . . . . . . . . . . . . . . 49 Section 4.4 Expenses. . . . . . . . . . . . . . . . . . . . . . . . . . 50 Section 4.5 Severance Arrangements. . . . . . . . . . . . . . . . . . . 50 Section 4.6 Public Announcements. . . . . . . . . . . . . . . . . . . . 51 Section 4.7 Transaction Costs . . . . . . . . . . . . . . . . . . . . . 52 Section 4.8 Further Assurances. . . . . . . . . . . . . . . . . . . . . 52 Section 4.9 Product Liability . . . . . . . . . . . . . . . . . . . . . 52 Section 4.10 Use of Name . . . . . . . . . . . . . . . . . . . . . . . . 54 Section 4.11 Books and Records . . . . . . . . . . . . . . . . . . . . . 55 Section 4.12 Transfer of Nominee Share . . . . . . . . . . . . . . . . . 57 ARTICLE V CERTAIN EMPLOYEE AND BENEFIT MATTERS Section 5.1 Continued Employment; Service Credit. . . . . . . . . . . . 57 Section 5.2 Continuation of Benefits. . . . . . . . . . . . . . . . . . 59 Section 5.3 Severance Pay . . . . . . . . . . . . . . . . . . . . . . . 59 Section 5.4 Indemnification of Buyer for Plans Not Assumed. . . . . . . 61 Section 5.5 Company Defined Contribution Plan . . . . . . . . . . . . . 61 ARTICLE VI TAXES Section 6.1 Tax Indemnification . . . . . . . . . . . . . . . . . . . . 62 Section 6.2 Procedures Relating to Indemnification of Tax Claims. . . . 65 Section 6.3 Section 338(h)(10) Election . . . . . . . . . . . . . . . . 69 Section 6.4 Survival of Tax Provisions. . . . . . . . . . . . . . . . . 73 Section 6.5 Return Filings, Refunds and Credits . . . . . . . . . . . . 73 Section 6.6 Transfer Taxes. . . . . . . . . . . . . . . . . . . . . . . 80 Section 6.7 Termination of Tax Sharing Agreements . . . . . . . . . . . 80 Section 6.8 Disputes. . . . . . . . . . . . . . . . . . . . . . . . . . 80 ii Section 6.9 Determination and Characterization of Payments. . . . . . . 81 ARTICLE VII CONDITIONS TO CLOSING Section 7.1 Conditions to the Obligations of All Parties. . . . . . . . 82 Section 7.2 Conditions to the Obligations of Seller . . . . . . . . . . 83 Section 7.3 Conditions to the Obligations of Buyer. . . . . . . . . . . 84 ARTICLE VIII TERMINATION Section 8.1 Termination . . . . . . . . . . . . . . . . . . . . . . . . 84 Section 8.2 Effect of Termination . . . . . . . . . . . . . . . . . . . 85 ARTICLE IX INDEMNIFICATION Section 9.1 Survival. . . . . . . . . . . . . . . . . . . . . . . . . . 86 Section 9.2 Indemnification by Seller . . . . . . . . . . . . . . . . . 87 Section 9.3 Indemnification by Buyer. . . . . . . . . . . . . . . . . . 88 Section 9.4 Limitations of Claims . . . . . . . . . . . . . . . . . . . 88 Section 9.5 Procedures. . . . . . . . . . . . . . . . . . . . . . . . . 93 Section 9.6 Exclusivity of Remedies . . . . . . . . . . . . . . . . . . 97 ARTICLE X MISCELLANEOUS PROVISIONS Section 10.1 Disclosure Schedules; Exhibits . . . . . . . . . . . . . . 98 Section 10.2 Amendment and Modification . . . . . . . . . . . . . . . . 99 Section 10.3 Waiver of Compliance . . . . . . . . . . . . . . . . . . . 99 Section 10.4 Notices. . . . . . . . . . . . . . . . . . . . . . . . . . 99 Section 10.5 Parties in Interest; Assignment. . . . . . . . . . . . . .102 Section 10.6 Counterparts . . . . . . . . . . . . . . . . . . . . . . .102 Section 10.7 Construction; Interpretation . . . . . . . . . . . . . . .103 Section 10.8 Entire Agreement . . . . . . . . . . . . . . . . . . . . .104 Section 10.9 Severability . . . . . . . . . . . . . . . . . . . . . . .104 Section 10.10 Governing Law. . . . . . . . . . . . . . . . . . . . . . .105 Section 10.11 Guarantee. . . . . . . . . . . . . . . . . . . . . . . . .105 EXHIBIT A License Agreement iii Index of Defined Terms DEFINED TERM WHERE DEFINED Adjusted GAAP. . . . . . . . . . . . . . . . . . . . . . . . . . . . . Section 1.4(b) Affected Employees . . . . . . . . . . . . . . . . . . . . . . . . . . . .Section 5.1 Agreement. . . . . . . . . . . . . . . . . . . . . . . . . . . . .Introductory Clause Allocations. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Section 6.3(b) appropriate Seller or Company personnel. . . . . . . . . . . . . . . .Section 10.7(b) Article. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .Section 10.7(c) Auditor. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Section 1.4(d) Buyer. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .Introductory Clause Closing. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .Section 1.2 Closing Date . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .Section 1.2 Closing Statement of Company Business Net Worth. . . . . . . . . . . . Section 1.4(b) Code . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .Section 2.12(a) Common Stock . . . . . . . . . . . . . . . . . . . . . . . . . . .Introductory Clause Company. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .Introductory Clause Company Business Net Worth . . . . . . . . . . . . . . . . . . . . . . Section 1.4(a) Company DC Plan. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .Section 5.5 Company Employee Benefit Plans . . . . . . . . . . . . . . . . . . . . . Section 2.12 Company ERISA Affiliate. . . . . . . . . . . . . . . . . . . . . . . . . Section 2.12 Confidentiality Agreement. . . . . . . . . . . . . . . . . . . . . . . . .Section 8.2 Confidential Memorandum. . . . . . . . . . . . . . . . . . . . . . . . . .Section 3.6 December 31, 1996 Financial Statements . . . . . . . . . . . . . . . . Section 2.5(a) December 31, 1997 Statement of Company Business Net Worth. . . . . . . Section 2.5(a) December 31, 1997 Financial Statements . . . . . . . . . . . . . . . . Section 2.5(a) Disclosure Schedule. . . . . . . . . . . . . . . . . . . . . . . . . . Section 1.4(a) Documents. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .Section 4.11(a) Election . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Section 6.1(a) Employment Losses. . . . . . . . . . . . . . . . . . . . . . . . . . . . .Section 5.3 Environmental Laws . . . . . . . . . . . . . . . . . . . . . . . . . . . Section 2.14 Environmental Permits. . . . . . . . . . . . . . . . . . . . . . . . . . Section 2.14 ERISA. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Section 2.12 Estimated Net Worth. . . . . . . . . . . . . . . . . . . . . . . . . . Section 1.4(a) Executive. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .Section 4.5 Exhibit. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .Section 10.7(c) Finder . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .Section 3.5 GAAP . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Section 1.4(b) Governmental Entity. . . . . . . . . . . . . . . . . . . . . . . . . . . .Section 2.4 Guarantor. . . . . . . . . . . . . . . . . . . . . . . . . . . . .Introductory Clause iv HSR Act. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .Section 2.4 Indemnified Party. . . . . . . . . . . . . . . . . . . . . . . . . . . Section 9.5(a) Indemnifying Party . . . . . . . . . . . . . . . . . . . . . . . . . . Section 9.5(a) Indemnity Claim. . . . . . . . . . . . . . . . . . . . . . . . . . . . Section 9.4(d) Intellectual Property. . . . . . . . . . . . . . . . . . . . . . . . . . Section 2.11 Intercompany Accounts. . . . . . . . . . . . . . . . . . . . . . . . . . .Section 1.5 knowledge. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .Section 10.7(b) License Agreement. . . . . . . . . . . . . . . . . . . . . . . . . . . Section 1.3(a) Liens. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .Section 2.3 Limitations Period . . . . . . . . . . . . . . . . . . . . . . . . . . . .Section 9.1 Losses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .Section 9.2 Material Adverse Effect. . . . . . . . . . . . . . . . . . . . . . . . . .Section 2.1 Nominee Share. . . . . . . . . . . . . . . . . . . . . . . . . . . . . Section 2.3(c) Notice . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Section 9.5(a) Permitted Liens. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .Section 2.7 Pre-Closing Tax Period . . . . . . . . . . . . . . . . . . . . . . . . Section 6.1(a) Predecessor Policies . . . . . . . . . . . . . . . . . . . . . . . . . Section 4.9(c) Private Placement Notes. . . . . . . . . . . . . . . . . . . . . . . . Section 2.3(a) Purchase Price . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .Section 1.1 Retention Agreements . . . . . . . . . . . . . . . . . . . . . . . . . . .Section 4.5 Schedule . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .Section 10.7(c) Section. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .Section 10.7(c) Section 338 Statement. . . . . . . . . . . . . . . . . . . . . . . . . Section 6.3(b) Seller . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .Introductory Clause Seller Credit Agreement. . . . . . . . . . . . . . . . . . . . . . . . Section 2.3(a) Seller DC Plan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .Section 5.5 Seller Group . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Section 2.16 Separate Returns . . . . . . . . . . . . . . . . . . . . . . . . . . . Section 6.5(a) Shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .Introductory Clause Straddle Period . . . . . . . . . . . . . . . . . . . . . . . . . . . Section 6.1(c) subsidiary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .Section 2.1 Tax Benefit. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Section 9.4(d) Tax Claim . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Section 6.2(a) Tax Indemnified Party . . . . . . . . . . . . . . . . . . . . . . . . Section 6.2(a) Tax Indemnifying Party . . . . . . . . . . . . . . . . . . . . . . . . Section 6.2(a) Tax Notice . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Section 6.2(a) Tax Returns. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .Section 2.13(h) Taxes. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .Section 2.13(h) Taxing Authority . . . . . . . . . . . . . . . . . . . . . . . . . . .Section 2.13(h) Third Party Claim. . . . . . . . . . . . . . . . . . . . . . . . . . . Section 9.5(a) Year 2000 Compliant. . . . . . . . . . . . . . . . . . . . . . . . . . . .Section 3.8
v STOCK PURCHASE AGREEMENT STOCK PURCHASE AGREEMENT, dated as of February 18, 1998 (the "Agreement"), among The Coleman Company, Inc., a Delaware corporation ("Seller"), Siebe plc, an English corporation ("Guarantor"), and Ranco Incorporated of Delaware, a Delaware corporation and a wholly-owned subsidiary of Guarantor ("Buyer"). WHEREAS, Seller owns all of the issued and outstanding shares (the "Shares") of common stock, par value $1.00 per share (the "Common Stock"), of Coleman Safety & Security Products, Inc., a Delaware corporation (the "Company"), which, together with its subsidiaries, engages in designing, manufacturing, marketing and selling smoke alarms and carbon monoxide alarms which it markets to home builders and remodelers principally via the electrical wholesale distribution channel and to individual consumers via retail distribution channels and a broad range of other electronic products for residential homes and commercial buildings, including electronic and mechanical thermostats and duct smoke detectors; and WHEREAS, Seller desires to sell and transfer to Buyer, and Buyer desires to purchase and accept from Seller, all of the Shares; NOW, THEREFORE, in consideration of the foregoing and the agreements set forth herein, the parties hereto agree as follows: ARTICLE I PURCHASE AND SALE Section 1.1 PURCHASE AND SALE OF SHARES. Upon the terms and subject to the conditions set forth in this Agreement, at the Closing (as hereinafter defined) Seller shall sell, assign and transfer to Buyer, and Buyer shall purchase and accept from Seller, the Shares for an aggregate purchase price of $105,000,000 in immediately available funds, adjusted as provided in Sections 1.4(a) and (e) hereof (the "Purchase Price"). Section 1.2 CLOSING. Upon the terms and 2 subject to the conditions of this Agreement, the closing with respect to the transactions provided for herein (the "Closing") shall take place at the offices of Skadden, Arps, Slate, Meagher & Flom LLP, 919 Third Avenue, New York, New York on the fifth business day following the satisfaction or waiver of all of the conditions to each party's obligations to close hereunder, other than those conditions which can only be satisfied at the Closing or such other date as the parties shall agree (the "Closing Date"). Section 1.3 DELIVERIES AT CLOSING. (a) At the Closing, Seller shall deliver to Buyer: (i) a certificate or certificates representing all of the Shares, endorsed in blank or accompanied by stock powers executed in blank and any other instruments necessary to transfer to Buyer good and marketable title to such Shares; (ii) the License Agreement (the "License Agreement") in the form attached hereto as Exhibit A, duly executed by Seller and the Company; 3 (iii) evidence of the release of the Shares and the Company as a guarantor under the Seller Credit Agreement (as hereinafter defined) and the Private Placement Notes (as hereinafter defined); and (iv) the certificate required by Section 7.3(c) hereof. (b) At the Closing, Buyer shall deliver to Seller: (i) the Purchase Price as adjusted pursuant to Section 1.4(a) hereof, by wire transfer to an account or accounts identified by Seller not later than three business days prior to the Closing Date; (ii) the License Agreement, duly executed by Buyer; and (iii) the certificate required by Section 7.2(c) hereof. Section 1.4 PURCHASE PRICE ADJUSTMENT. (a) ADJUSTMENT AT CLOSING. Not later than three business days prior to the Closing, Seller shall deliver to Buyer a statement of the consolidated tangible net worth of the 4 Company and its subsidiaries, adjusted by the accounting adjustments set forth in Section 1.4(a) of the disclosure schedule delivered by Seller to Buyer on or prior to the date hereof (the "Disclosure Schedule") (the "Company Business Net Worth") estimated as of the close of business on the Closing Date (the "Estimated Net Worth"), determined on a basis consistent with that used for the December 31, 1997 Statement of Company Business Net Worth (as hereinafter defined), accompanied by a certificate of the Chief Financial Officer of Seller to the effect that such estimate represents a good faith estimate of the Estimated Net Worth in accordance with this Agreement. At the Closing, (i) if the Estimated Net Worth exceeds the Company Business Net Worth as of December 31, 1997, the Purchase Price shall be increased by the amount of such excess and (ii) if the Estimated Net Worth is less than the Company Business Net Worth as of December 31, 1997, the Purchase Price shall be decreased by the amount of such deficit; provided that the amount to be paid by Buyer at the Closing shall not exceed $105,000,000. 5 (b) CLOSING STATEMENT OF COMPANY BUSINESS NET WORTH. As promptly as practicable, but in any event not later than 60 days after the Closing, Seller shall cause to be prepared and delivered to Buyer an audited consolidated statement of Company Business Net Worth and the notes thereto as of the Closing Date (the "Closing Statement of Company Business Net Worth") determined in accordance with Adjusted GAAP (as hereinafter defined) applied on a basis consistent with the December 31, 1997 Statement of Company Business Net Worth. The Closing Statement of Company Business Net Worth delivered pursuant to this Section 1.4(b) shall be accompanied by a special-purpose report of Ernst & Young LLP to the effect that such statement and any related notes thereto were prepared in accordance with Adjusted GAAP. "Adjusted GAAP" shall mean United States generally accepted accounting principles in effect on the date hereof ("GAAP") applied on a basis consistent with the December 31, 1997 Statement of Company Business Net Worth, as adjusted by the accounting adjustments in Section 1.4(a) of the Disclo- 6 sure Schedule. (c) COOPERATION BY BUYER. Buyer shall make available to Seller and its representatives (at no cost to Seller) such books, records and employees of Buyer, the Company or any of the Company's subsidiaries as may be necessary for Seller's preparation of the Closing Statement of Company Business Net Worth. Buyer and its representatives shall have the right to observe any inventory count and, after the delivery of the Closing Statement of Company Business Net Worth pursuant to Section 1.4(b) above, to review the work papers, schedules, memoranda and other documents and information prepared or reviewed by Seller and to communicate with the persons who conducted such preparation, review or count. (d) DISPUTE RESOLUTION. Within 45 days after the delivery of the Closing Statement of Company Business Net Worth to Buyer, Buyer shall notify Seller of any objections to the Closing Statement of Company Business Net Worth, specifying in reasonable detail any such 7 objections, and if Buyer fails to notify Seller of any objections within such period, Buyer shall be deemed to have agreed to the Closing Statement of Company Business Net Worth as prepared by Seller. If Buyer has no objections or if Seller and Buyer agree on the resolution of all such objections, the Closing Statement of Company Business Net Worth (with any such changes as may be agreed) shall be final and binding. Seller and Buyer shall each have the right, at any time, to unilaterally terminate, in writing, all discussions with respect to such objections or changes. Not later than 10 business days after either Seller or Buyer shall have terminated such discussions, all such disputed items shall be submitted for resolution to a certified public accounting firm of national standing designated by Seller and Buyer (the "Auditor"), which Auditor must be independent of and have no ongoing business relationship with Seller, Buyer or their respective affiliates. Seller and Buyer shall use reasonable efforts to cause the report of the Auditor to be rendered within 30 days of its appointment, and the 8 Auditor's determination as to the appropriateness and extent of changes (if any) to the Closing Statement of Company Business Net Worth shall be final and binding. (e) POST-CLOSING NET WORTH ADJUSTMENT. (i) If the Company Business Net Worth as finally determined pursuant to subsection (d) of this Section 1.4 is less than the Estimated Net Worth, the Purchase Price shall be reduced by the amount of such deficit. If the Company Business Net Worth as finally determined pursuant to subsection (d) of this Section 1.4 is greater than the Estimated Net Worth, the Purchase Price shall be increased by the amount of such excess. (ii) If the Purchase Price, as adjusted pursuant to this subsection (e), is less than the amount paid by Buyer at the Closing, Seller shall pay to Buyer, in immediately available funds, the amount of such deficit with interest from the Closing Date through the date of payment at the rate of 6% per annum. If the Purchase Price, as adjusted pursuant to this subsection (e), is greater than the amount paid by Buyer at the Closing, 9 Buyer shall pay to Seller, in immediately available funds, the amount of such excess with interest from the Closing Date through the date of payment at the rate of 6% per annum. (iii) Any sums payable pursuant to this subsection (e) shall be paid within five business days after the final determination of Company Business Net Worth pursuant to subsection (d) hereof. (f) FEES OF AUDITOR. The fees and expenses of the Auditor shall be shared equally by Seller and Buyer. Section 1.5 INTERCOMPANY ACCOUNTS. On or prior to the Closing Date, all intercompany account balances between the Company and Seller or any of its subsidiaries (as defined below) ("Intercompany Accounts") shall be cancelled, effective immediately prior to the Closing Date. No adjustment shall be made to the Purchase Price as a result of any such cancellation, except to the extent provided in Section 1.4 hereof. 10 ARTICLE II REPRESENTATIONS AND WARRANTIES OF SELLER Seller hereby represents and warrants to Buyer as follows: Section 2.1 ORGANIZATION AND QUALIFICATION. Section 2.1 of the Disclosure Schedule contains a complete list of each of the subsidiaries of the Company and jurisdictions in which they and the Company are qualified (to the extent such concepts are applicable in such jurisdictions) to conduct their business. Each of the Company and its subsidiaries is a corporation duly organized, validly existing and in good standing under the laws of the jurisdiction of its incorporation or organization (to the extent such concepts are applicable in such jurisdictions), has all requisite corporate power and corporate authority to own, lease and operate its properties and to carry on its business as now being conducted, and is duly qualified and in good standing to do business in each jurisdiction in which such concepts are applicable and the nature of the business conducted by it or the ownership, lease or operation of its proper- 11 ties makes such qualification necessary, other than where the failure to be so duly qualified and in good standing have not had, prior to the Closing, a Material Adverse Effect. (For purposes of this Agreement, "Material Adverse Effect" means any condition, event, circumstance, change or effect that, individually or in the aggregate, would result in a material adverse effect on the business, assets or results of operations of the Company and its subsidiaries, taken as a whole. A "subsidiary" of any entity means any corporation, partnership, joint venture or other business entity of which the specified entity, directly or indirectly, beneficially owns, 50% or more of the equity interests, or holds the voting control of 50% or more of the equity interests). Seller has heretofore delivered to Buyer a true and correct copy of the constituent documents of the Company and each subsidiary of the Company as in effect on the date hereof. Section 2.2 AUTHORITY RELATIVE TO THIS AGREEMENT. Seller has full corporate power and authority to execute and deliver this Agreement and to consummate the 12 transactions contemplated hereby. The execution of this Agreement and the consummation of the transactions contemplated hereby have been duly and validly authorized by Seller and no other corporate proceedings on the part of Seller (or any other person) are necessary to authorize the execution of this Agreement by Seller or the consummation by Seller of the transactions contemplated hereby. This Agreement has been duly and validly executed by Seller and (assuming the valid execution of this Agreement by Buyer) constitutes a valid and binding agreement of Seller, enforceable against Seller in accordance with its terms, except (a) that such enforcement may be limited by bankruptcy, insolvency, reorganization, fraudulent conveyance, moratorium and similar laws now or hereafter in effect relating to or affecting creditors' rights generally and (b) the remedy of specific performance and injunctive and other forms of equitable relief may be subject to equitable defenses and to the discretion of the court before which any proceeding therefor may be 13 brought. Section 2.3 CAPITALIZATION; TITLE. (a) The authorized capital stock of the Company consists of 1,000 shares of Common Stock all of which are issued and outstanding. Each of the Shares has been duly authorized and validly issued, and is fully paid and non-assessable, and all of the Shares are owned by Seller, free and clear of any and all liens, encumbrances, security interests, mortgages, pledges, claims, options or restrictions of any kind whatsoever ("Liens"). Except as expressly contemplated by this Agreement and except for the obligations of the Company pursuant to (i) the Amended and Restated Credit Agreement, dated as of August 3, 1995, among Seller, certain subsidiaries of Seller named therein, the banks named therein, as Lenders, and Credit Suisse, as Agent (the "Seller Credit Agreement") and (ii) the Note Purchase Agreement, dated August 3, 1995, relating to the 7.26% Senior Notes due 2007, and the Note Purchase Agreement, dated May 1, 1996, relating to the 7.10% Senior Notes, Series A, due 2006 and 7.25% Senior 14 Notes, Series B, due 2008 (collectively, the "Private Placement Notes"), which obligations will terminate on or prior to the Closing Date without any continuing liability or obligation to the Company or any of its subsidiaries as a result thereof, there is no subscription, option, warrant, call, right, contract, agreement, commitment, understanding or arrangement of any kind, direct or indirect, relating to (x) the issuance, purchase, acquisition, sale, pledge, delivery or transfer of any shares of capital stock of the Company (including the Shares), including any right of direct or indirect conversion or exchange under any security or other instrument, or (y) the voting or control of any such capital stock, security or other instrument (including the Shares). (b) Upon consummation of the transactions contemplated by this Agreement, Buyer will acquire good and marketable title to the Shares, free and clear of all Liens. (c) All of the outstanding shares of capital stock, or other equity interests, of each of the Com- 15 pany's subsidiaries have been duly authorized and validly issued, are fully paid and non-assessable and are owned by either the Company or another of its subsidiaries (except for one share of Series A stock of Coleman Manufacturing de Mexico, S.A. de C.V., of which an employee of the Seller is the record owner as nominee of the Company's subsidiary Jasan Products Ltd. (the "Nominee Share")), free and clear of all Liens. Except as expressly contemplated by this Agreement and except for the obligations of the Company with respect to its subsidiaries pursuant to (i) the Seller Credit Agreement and (ii) the Private Placement Notes, which obligations will terminate on or prior to the Closing Date without any continuing liability or obligation to the Company or any of its subsidiaries as a result thereof, there is no subscription, option, warrant, call, right, contract, agreement, commitment, understanding or arrangement of any kind, direct or indirect, relating to (x) the issuance, purchase, acquisition, sale, pledge, delivery or transfer of any shares of capital stock, or other equity 16 interests, of any of the Company's subsidiaries, including any right of direct or indirect conversion or exchange under any security or other instrument, or (y) the voting or control of any such capital stock, security or other instrument. Section 2.4 CONSENTS AND APPROVALS; NO VIOLATION. Neither the execution and delivery of this Agreement nor the consummation of the transactions contemplated hereby will (i) require Seller to file or register with, notify, or obtain any permit, authorization, consent, or approval of or from, any Governmental Entity (as defined below), with the exception of filings pursuant to the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, and the rules and regulations promulgated thereunder (together, the "HSR Act") and filings with the Mexican Comision Federal de Competencia (if any), (ii) conflict with or breach any provision of the certificate of incorporation or by-laws (or other similar charter documents) of Seller or any of its subsidiaries, including the Company and its subsidiaries, (iii) violate or 17 breach any provision of, or constitute a default (or an event which, with notice or lapse of time or both, would constitute a default) under, or result in the creation of a Lien on the Shares or any asset of the Company or any of its subsidiaries pursuant to, any agreement or other obligation to which Seller or any of its subsidiaries, including the Company and its subsidiaries, is a party, or by which any of them may be bound, except for those listed in Section 2.4 of the Disclosure Schedule as to which Seller will use its best efforts to obtain requisite waivers or consents prior to the Closing, or (iv) violate any material order, writ, injunction, decree, judgment, statute, law or ruling of any Governmental Entity applicable to Seller or any of its subsidiaries, including the Company and its subsidiaries, excluding from the foregoing clauses (i) and (iii) such requirements, defaults, rights or violations which would not have a Material Adverse Effect or would not have a material adverse effect on the ability of Seller to consummate the transactions contemplated by this Agreement, or 18 which become applicable as a result of any acts or omissions by Buyer (other than the execution and performance of this Agreement by Buyer) or the status of Buyer. For purposes of this Agreement, "Governmental Entity" means any nation or government, any state or other political subdivision thereof, any entity, authority or body exercising executive, legislative, judicial, regulatory or administrative functions of or pertaining to government, including any governmental authority, agency, department, board, commission or instrumentality of the United States, any state of the United States or any political subdivision thereof, or any nation, or any court, or legally constituted tribunal or arbitrator. Section 2.5 FINANCIAL STATEMENTS. (a) Seller has previously delivered to Buyer the audited consolidated statement of Company Business Net Worth and consolidated statement of operations as of and for the year ended December 31, 1996 (collectively, the "December 31, 1996 Financial Statements") which were prepared in accordance with Adjusted GAAP and are included in Section 19 2.5(a) of the Disclosure Schedule. Seller has also delivered to Buyer an unaudited consolidated statement of Company Business Net Worth as of December 31, 1997 with the review report of Ernst & Young LLP (the "December 31, 1997 Statement of Company Business Net Worth") and an unaudited consolidated statement of operations for the year ended December 31, 1997 for the Company and its subsidiaries with the review report of Ernst & Young LLP (together with the December 31, 1997 Statement of Company Business Net Worth, the "December 31, 1997 Financial Statements"), which were prepared in accordance with Adjusted GAAP, applied on a basis consistent with the December 31, 1996 Financial Statements (except for the accounting adjustments set forth in Section 2.5(a) of the Disclosure Schedule) and are included in Section 2.5(a) of the Disclosure Schedule. The December 31, 1996 Financial Statements and the December 31, 1997 Financial Statements fairly present, in all material respects, the Company Business Net Worth and the results of operations of the Company and its subsidiaries as of the respective 20 dates and for the respective periods then ended on the basis described in the notes thereto. (b) The Closing Statement of Company Business Net Worth when delivered will have been prepared in accordance with Adjusted GAAP applied on a basis consistent with the December 31, 1997 Statement of Company Business Net Worth as adjusted by the accounting adjustments in Section 1.4(a) of the Disclosure Schedule and will fairly present, in all material respects, the Company Business Net Worth as of the Closing Date on the basis described in the notes thereto. Section 2.6 ASSETS NECESSARY TO BUSINESS. Except for the "Coleman" trademark and tradename, the Company and its subsidiaries collectively have good and marketable title to or valid leasehold interest in all of the assets, properties and rights which are necessary to carry on the business of the Company and its subsidiaries as presently conducted. From January 1, 1997 until the date hereof, neither the Company nor any of its subsidiaries have disposed of any assets, properties or rights 21 of the business of the Company and its subsidiaries necessary for the conduct of the Company's business as conducted during such period, except in the ordinary course of business, including but not limited to dispositions and/or replacements of obsolete assets. Section 2.7 TITLE TO PROPERTIES; ENCUMBRANCES. Section 2.7 of the Disclosure Schedule sets forth a complete list of all real property owned, leased or otherwise occupied by the Company or any of its subsidiaries. Except as otherwise contemplated by this Agreement (and, since December 31, 1997, other than any of such properties or assets sold or otherwise disposed of in the ordinary course of business or with respect to which any lease relating thereto has terminated) at the Closing, the Company and its subsidiaries will have good and marketable title to, or a valid leasehold interest in, all of the properties and assets (real, personal and mixed, tangible and intangible, wherever located) reflected in the December 31, 1997 Statement of Company Business Net Worth or acquired after the date thereof. 22 All such properties and assets are owned or held under lease, in each case, free and clear of all Liens, except for Permitted Liens and, to the actual knowledge of the Senior Vice President of Operation of Seller, there are no material defects in the buildings, improvements and structures located on any of the owned property of the Company or its subsidiaries which would substantially impair the conduct of the business of the Company and its subsidiaries immediately following the Closing as compared with the conduct of the business of the Company and its subsidiaries immediately prior to the Closing. For purposes of this Agreement, "Permitted Liens" means (i) mechanics', carriers', workmen's, repairmen's or other similar Liens arising or incurred in the ordinary course of business with respect to liabilities that are not yet due or delinquent, (ii) Liens for Taxes (as defined below), assessments and other governmental charges not yet due and payable or, if due and payable, for which adequate reserves have been made, and (iii) Liens that do not, individually or in the aggregate, materially impair 23 the use, or materially detract from the value, of the property to which they relate. Permitted Liens have been accrued to the extent required by GAAP. Section 2.8 CONTRACTS AND COMMITMENTS. (a) Section 2.8 of the Disclosure Schedule sets forth, with respect to the Company and its subsidiaries, a complete and accurate list of: (i) all contracts or agreements, whether oral or written (including, without limitation, mortgages, leases, indentures and loan agreements), except (x) such contracts and agreements which are required to be set forth in the Disclosure Schedule pursuant to clauses (ii) through (xiii) of this Section 2.8 or are listed on other Disclosure Schedules required by this Agreement, (y) contracts and agreements which involve, or which may reasonably be expected to involve, the payment by or to any one or more of the Company and its subsidiaries of less than $50,000 with respect to any one contract or agreement or $75,000 with respect to any related group of contracts or agreements and (z) contracts or agreements in the nature of purchase and sales 24 orders entered into by the Company or any subsidiary in the ordinary course of business and containing normal terms and conditions, (ii) all sales agency, distribution or dealership contracts that are not cancellable on notice of not less than 90 days and without liability, penalty or premium for such cancellation under such contract; (iii) all employment and consulting agreements or other agreements with employees that contain any severance or termination pay liabilities or obligations that are not cancellable on notice of not less than 90 days without liability, penalty or premium for such cancellation under such contract; (iv) all collective bargaining or union contracts or agreements; (v) all non-competition or other agreements between the Company or any of its subsidiaries and any third party preventing or restricting the Company or any of its subsidiaries from carrying on their respective businesses anywhere in the world; (vi) all debt obligations, mortgages, notes or indentures for borrowed money, including guaranties of or agreements to acquire any such debt obligation of others 25 (other than obligations to be extinguished at or before the Closing) including the amount of any credit line or commitment and the names of all persons authorized to borrow or to discount debt obligations or otherwise act on behalf of the Company or any subsidiary in any dealings with any bank or financial institution; (vii) the name of each bank or other financial institution in which the Company or any subsidiary has an account or safe deposit box, the numbers of such accounts or boxes and the names of all persons authorized to draw thereof or have access thereto; (viii) the names of the ten largest suppliers to, and the ten largest customers of, the Company and its subsidiaries as a whole for the year ended December 31, 1997 together with the approximate dollar volume by supplier and customer and a general description of the goods or services provided by each supplier; (ix) all loans to, or guarantees of loans to, employees of the Company or any subsidiary made by the Company or any subsidiary; (x) all outstanding commitments by the Company or any subsidiary to make a capital 26 expenditure, capital addition or capital improvement involving an amount in excess of $50,000, together with any Capital Expenditure Report by the Company or any subsidiary related to making or committing to make any capital expenditure, capital addition or capital improvement subsequent to the date hereof involving an amount in excess of $50,000; (xi) all contracts or agreements under which the Company or any subsidiary has granted, or is obligated to grant, rights to others to use, reproduce, market or exploit any United States or foreign patents, trademarks, trade names, service marks, service names, technology, copyrights, logos, brand names, designs, industrial designs, inventions, trade secrets, secret processes or know-how involving an amount in excess of $50,000; (xii) the names and current annual compensation rates of all employees of the Company or any subsidiary whose current annual rate of compensation (including bonuses) is $75,000 or more; and (xiii) the names of all retired employees of the Company or any subsidiary who are receiving or are entitled to receive any pension or 27 other benefits under any unfunded plan not qualified under Section 401 of the Internal Revenue Code of 1954, as amended, their ages and their current annual unfunded pension rates. (b) True and complete copies of all documents referred to in Section 2.8 of the Disclosure Schedule have been heretofore made available to the Buyer. Neither the Company nor any of its subsidiaries is in default under any document listed or required to be listed on Section 2.8 of the Disclosure Schedule and, to the knowledge of Seller, after due inquiry, no other person is in breach thereof. (c) All such contracts have been entered into lawfully and individually and collectively do not violate the provisions of any federal, state or local, statute, rule, regulation or ordinance, including without limitation, with respect to pricing, except for such violations which, individually or collectively, would not have a Material Adverse Effect. Section 2.9 ABSENCE OF CERTAIN CHANGES OR 28 EVENTS. Except as set forth in Section 2.9 of the Disclosure Schedule, since December 31, 1997 neither the Company nor any of its subsidiaries (a) has taken any of the actions set forth in Sections 4.1(a) through (j) hereof or entered into any transaction, or conducted its business or operations other than in the ordinary and usual course of business or (b) has suffered a material adverse change in its business or financial condition. Section 2.10 ABSENCE OF LITIGATION. Except as set forth in Section 2.10 of the Disclosure Schedule, there is no action, suit or proceeding of any kind, at law or in equity (including actions or proceedings seeking injunctive relief), by or before any Governmental Entity pending or, to the knowledge of Seller after due inquiry of appropriate Seller or Company personnel, threatened against the Company or any of its subsidiaries. None of such actions, suits or proceedings, if adversely determined, would have a Material Adverse Effect or would have a material adverse effect on Seller's ability to consummate the transactions contem- 29 plated hereby. Section 2.11 INTELLECTUAL PROPERTY. For purposes hereof, "Intellectual Property" means (a) all inventions (whether patentable or unpatentable and whether or not reduced to practice), all improvements thereto, and all patents, patent applications and patent disclosures, together with all reissuances, continuations, continuations-in-part, revisions, extensions and reexaminations thereof, (b) all trademarks, service marks, trade names and corporate names, including all goodwill associated therewith, and all applications, registrations and renewals in connection therewith, (c) all copyrights and all applications, registrations and renewals in connection therewith, (d) all trade secrets and confidential business information (including ideas, research and development, know-how, formulas, compositions, manufacturing and production processes and techniques, technical data, designs, drawings, specifications, customer and supplier lists, pricing and cost information and business and marketing plans and proposals), (f) all computer 30 software (including data and related document) and (g) all other proprietary rights. Section 2.11 of the Disclosure Schedule sets forth all patents, registered trademarks and registered copyrights (and applications for any of the foregoing) and material common law trademarks owned by the Company. To the knowledge of Seller, after due inquiry of appropriate Seller or Company personnel, in addition to the items set forth in Section 2.11 of the Disclosure Schedule, the Company and its subsidiaries own, free and clear of all Liens, all right, title and interest in and to the Intellectual Property necessary to the conduct of the business of the Company and its subsidiaries as now being conducted, other than the "Coleman" trademark and tradename and other than such Intellectual Property which the Company has the right to use pursuant to a license, sublicense, agreement or permission, set forth, where applicable, in Section 2.8 of the Disclosure Schedule. With respect to any such license, sublicense, agreement or permission, to the knowledge of Seller, (i) the underlying item of Intellec- 31 tual Property is not subject to any outstanding injunction, judgment, order, decree, ruling or charge, and (ii) no action, suit, proceeding, hearing, investigation, charge, complaint, claim or demand is pending or is threatened which challenges the legality, validity or enforceability of the underlying item of Intellectual Property. Except for the matters set forth in Section 2.11 of the Disclosure Schedule, there is no claim, action, proceeding, suit, complaint, or, to the knowledge of Seller, investigation pending or threatened that (i) the operations, products, Intellectual Property or manufacturing processes of the Company or any of its subsidiaries infringe upon or conflict with the intellectual property rights of any other person, or (ii) challenges the legality, validity, enforceability, use or ownership of the Intellectual Property owned by the Company. To the knowledge of Seller, no third party has interfered with, infringed upon or misappropriated any Intellectual Property rights of the Company or its subsidiaries. Section 2.12 ERISA COMPLIANCE. (a) Section 32 2.12 of the Disclosure Schedule sets forth a true and complete list of all employee benefit and compensation plans, programs or agreements maintained for the benefit of the current or former employees or directors of the Company or any of its subsidiaries, which employee benefit and compensation plans, programs or agreements are sponsored, maintained or contributed to by the Company or any affiliate of the Company, or with respect to which the Company or any affiliate of the Company has any liability, including any such plan that is an "employee benefit plan" as defined in Section 3(3) of the Employee Retirement Income Security Act of 1974 ("ERISA") (collectively, the "Company Employee Benefit Plans"). Except as set forth in Section 2.12 of the Disclosure Schedule, all Company Employee Benefit Plans have been maintained in compliance with all applicable requirements of law, including but not limited to ERISA and the Internal Revenue Code of 1986, as amended (the "Code"), except to the extent where the failure to be so maintained would not have, individually or in the aggregate, a Material 33 Adverse Effect. (b) None of the Company Employee Benefit Plans is a "defined benefit plan" (within the meaning of Section 3(35) of ERISA) or a "multiemployer plan" (within the meaning of Section 4001(a)(3) of ERISA), and neither the Company nor any of its subsidiaries has maintained, sponsored or contributed to any such plan within the previous six (6) years. (c) Each Company Employee Benefit Plan that is intended to qualify under Section 401 of the Code, and each trust maintained pursuant thereto, has been determined to be exempt from federal income taxation under Section 501 of the Code by the Internal Revenue Service, and, to the Seller's knowledge, nothing has occurred that would cause the loss of such qualification or exemption. With respect to each Company Employee Benefit Plan, (i) no "prohibited transaction" (within the meaning of Section 406 of ERISA and Section 4975 of the Code) has occurred, and (ii) no audit or investigation has been commenced by the Internal Revenue Service or the Depart- 34 ment of Labor, and no such audit or investigation is pending or, to the Seller's knowledge, threatened. No material liability under Title IV of ERISA has been or is reasonably expected to be incurred by the Company or any entity which is considered one employer with the Company under Section 4001(a)(15) of ERISA or Section 414 of the Code (each, a "Company ERISA Affiliate"). (d) The Company does not maintain or contribute to any "employee benefit plan" as defined in Section 3(3) of ERISA which provides or has any liability to provide life insurance or medical or other employee welfare benefits to any employee or former employee upon retirement or termination of employment. (e) Except as set forth in Section 2.12 of the Disclosure Schedule, the execution of, and performance of the transactions contemplated by, this Agreement will not (either alone or in combination with another event) constitute an event under any Company Employee Benefit Plan that will or may result in any payment (whether of severance pay or otherwise), acceleration, forgiveness of 35 indebtedness, vesting, distribution, increase in benefits or compensation or obligation to fund benefits or compensation with respect to any current or former employee or director. Section 2.13 TAXES. Except as set forth in Section 2.13 of the Disclosure Schedule: (a) All Tax Returns required to be filed by or with respect to or which includes or included the Company and each of its subsidiaries have been filed in accordance with all applicable laws with the appropriate Taxing Authorities on or before the due date thereof (including extensions), other than those Tax Returns which the failure to file would not have a Material Adverse Effect. All material Taxes of the Company and each of its subsidiaries due and payable by them (whether or not shown to be due on such Tax Returns) have been paid in full, other than Taxes being contested in good faith in appropriate proceedings and for which adequate provision has been made therefor. (b) There are no Liens for Taxes upon the 36 assets of the Company or any of its subsidiaries except for statutory Liens for Taxes not yet due and payable. (c) There are no audits or proceedings pending, proposed or in progress with respect to liabilities for Taxes of the Company or any of its subsidiaries, and neither the Company nor any of its affiliates has received any written notice of a pending, proposed or asserted deficiency or assessment from any Taxing Authority with respect to liabilities for Taxes of the Company or any of its subsidiaries which has not been paid or finally settled or is not being contested in good faith in appropriate proceedings and for which adequate reserves have been made. (d) Except with respect to the person identified on Section 4.5(ii) of the Disclosure Schedule, no payment (whether in cash, property or the vesting of property) made by the Company or the Buyer to an Affected Employee, in connection with the execution of, and performance of the transactions contemplated in, this Agreement (whether alone or upon the occurrence of any other 37 event) could be characterized as an "excess parachute payment" within the meaning of Section 280G of the Code. (e) No extension of time within which to file any Tax Returns required to be filed by the Company or any of its subsidiaries (which Tax Returns shall not under any circumstances include Tax Returns that relate to an affiliated, consolidated, combined or unitary group which includes a company other than the Company and any of its subsidiaries) has been requested which Tax Return has not since been filed. (f) There are no waivers or extensions of any applicable statute of limitations for the assessment or collection of Taxes with respect to any Tax Returns required to be filed by the Company or any of its subsidiaries which waivers or extensions are pending or remain in effect. (g) The Company and its subsidiaries have withheld and paid all Taxes required to have been withheld and paid in connection with amounts paid or owing to any employee, independent contractor, creditor, stock- 38 holder or other third party. (h) For purposes of this Agreement: (i) "Taxes" means all federal, state, local and foreign net income, gross income, sales, use, franchise, profits, service, withholding, payroll, employment, excise, gross receipts, capital stock, occupation, net worth, transfer, stamp, estimated, ad valorem, gains, property taxes, asset tax, value added tax, and other similar taxes, charges, duties, tariffs, levies, fees, or assessments together with any interest, penalties, and additions to tax or additional amounts thereon, imposed by any Taxing Authority, (ii) "Taxing Authority" means any federal, state, local or foreign governmental authority responsible for the imposition of any Taxes; and (iii) "Tax Returns" means any return, report, declaration, estimate or other information filed or required to be supplied to a Taxing Authority in connection with Taxes. Section 2.14 ENVIRONMENTAL MATTERS. (a) The Company and its subsidiaries hold, and are in material compliance with, all permits, licenses and other govern- 39 ment authorizations ("Environmental Permits") required for the Company and its subsidiaries to conduct their respective businesses under Environmental Laws. (For purposes of this Agreement, "Environmental Laws" means all applicable foreign, federal, state and local, laws, statutes, ordinances, rules, regulations, orders, judgments and decrees relating to pollution or the protection of the environment.) The Company and its subsidiaries are in material compliance with all such Environmental Laws and have no liability under any indemnity agreement or other contractual obligations relating to pollution or the protection of the environment or human health or safety. (b) Except as set forth in Section 2.14 of the Disclosure Schedule, the Company has not received any written or, to the Company's knowledge, oral request for information, or been notified or the subject of any claim that it is or may be a potentially responsible party or otherwise is or may be responsible for the investigation or cleanup of hazardous substances, under the federal 40 Comprehensive Environmental Response Compensation and Liability Act of 1980, as amended, or any other Environmental Law with respect to any on-site or off-site location, whether or not currently or previously owned, leased, used or occupied by the Company. (c) The Company is not subject to, nor has it received any notice that it may be subject to, any judgment, decree, order or other agreement relating to compliance with, or the cleanup of regulated substances under, any applicable Environmental Laws. (d) There has been no release or disposal as a result of the Company's or any of its subsidiaries' operations or, to the Company's knowledge, operations by others, at any time of any regulated substances at, on, under, from or affecting any real property currently or formerly owned, leased or operated by the Company or any of its subsidiaries or any of their predecessors-in-interest (other than pursuant to and in accordance with Environmental Permits held by the Company, its subsidiaries or any of their predecessors, or that will not give 41 rise to liability under Environmental Laws). (e) To the knowledge of Seller, Seller has made available to Buyer true and complete copies of all environmental reports, studies, audits and assessments which are in the possession or control of the Company relating to any real property or facilities currently or formerly owned, leased or operated by the Company or any of its subsidiaries or any of their predecessors-in-interest. Section 2.15 NO UNDISCLOSED LIABILITIES. Except as and to the extent set forth in the December 31, 1997 Statement of Company Business Net Worth, neither the Company nor any of its subsidiaries had, at December 31, 1997, any undisclosed liabilities except for those liabilities which, separately or in the aggregate, are not expected to have a Material Adverse Effect. Except as and to the extent set forth in Section 2.15 of the Disclosure Schedule, neither the Company nor any of its subsidiaries has incurred any liabilities (absolute, accrued, contingent or otherwise) which would be required 42 by Adjusted GAAP to be included in a consolidated statement of the Company Business Net Worth dated as of the date hereof, except liabilities incurred since December 31, 1997 in the ordinary course of business and liabilities incurred in connection with this Agreement. To the knowledge of Seller, after due inquiry, there is no latent or overt design, manufacturing or other defect in any products of the Company or its subsidiaries which could reasonably be expected to result in a series of liability claims which would have a Material Adverse Effect. Section 2.16 TRANSACTIONS WITH AFFILIATES. Except as set forth in Section 2.16 of the Disclosure Schedule, none of the Company or any of its subsidiaries has any outstanding contract, agreement or other arrangement with any member of the Seller Group (as defined below) which will continue in effect subsequent to the Closing. "Seller Group" means Seller and its affiliates, other than the Company and its subsidiaries. 43 Section 2.17 BROKERS. No broker, finder or investment banker, including any director, officer, employee, affiliate or associate of Seller, is entitled to any brokerage, finder's or other fee or commission in connection with the transactions contemplated by this Agreement by reason of any action taken by Seller, except for BancAmerica ROBERTSON STEPHENS, the fees and expenses of which shall be paid by Seller. Section 2.18 INSURANCE. Section 2.18 of the Disclosure Schedule contains an accurate and complete list as of the date hereof of all material policies, currently in force, of fire, liability, workmen's compensation, public and product liability, title and other forms of insurance owned, held by or applicable to the Company or any of its subsidiaries or their respective assets or businesses. All such policies are in full force and effect. Seller has heretofore delivered to Buyer an accurate summary description of all such policies. Section 2.19 LABOR DIFFICULTIES. Except as 44 set forth in Section 2.10 or Section 2.19 of the Disclosure Schedule, (a) there is no unfair labor practice complaint or charge of discrimination or other employee claim against the Company or any of its subsidiaries pending or, to the knowledge of Seller after due inquiry of appropriate Seller or Company personnel, threatened, (b) there is no labor strike, dispute, slowdown, stoppage or other labor difficulty actually pending or, to the knowledge of the Seller after due inquiry of appropriate Seller or Company personnel, threatened against or affecting the Company or any of its subsidiaries and (c) there are no pending union negotiations relating to employees of the Company or any of its subsidiaries. Section 2.20 COMPLIANCE WITH LAWS. Except as set forth in Section 2.20 of the Disclosure Schedule or as provided for in Sections 2.10, 2.12, 2.13 and 2.14 hereof, the Company and its subsidiaries have operated their respective businesses in compliance with all laws, ordinances, regulations and orders of all Governmental Entities except for violations of such laws, ordinances, 45 regulations and orders which do not and are not expected to have a Material Adverse Effect. The Company and its subsidiaries have all permits, certificates, licenses, approvals and other authorizations required in connection with the operation of their respective businesses, except those the absence of which does not and are not expected to have a Material Adverse Effect. No notice has been received by, and, to the knowledge of the Seller after due inquiry of appropriate Seller or Company personnel, no investigation or review is pending or threatened by, any Governmental Entity with respect to (i) any alleged violation by the Company of any law, ordinance, regulation or order of any Governmental Entity which may have a Material Adverse Effect or (ii) any alleged failure to have all permits, certificates, licenses, approvals and other authorizations required in connection with the operation of the respective businesses of the Company and its subsidiaries which may have a Material Adverse Effect. Section 2.21 CUSTOMER ACCOUNTS RECEIVABLE; 46 INVENTORIES. (a) All customer accounts receivable of the Company and its subsidiaries, whether reflected on the December 31, 1997 Financial Statements or subsequently created, have arisen from bona fide transactions in the ordinary course of business. Except as set forth in Section 2.21(a) of the Disclosure Schedule, to the knowledge of the Seller, after due inquiry, all such customer accounts receivable are, in the aggregate, good and collectible at the aggregate recorded amounts thereof, net of any applicable reserves for doubtful accounts returns or credits as the ordinary course of business reflected on the December 31, 1997 Financial Statements. (b) Except as set forth in Section 2.21(b) of the Disclosure Schedule, to the knowledge of Seller, after due inquiry, the cost of inventories, net of any revenues, of the Company and its subsidiaries reflected on the December 31, 1997 Financial Statements or subsequently acquired prior to the Closing Date, represent inventory which are generally of a quality and quantity usable and salable in all material respects in accordance 47 with past practice of the Company (except as otherwise noted in the December 31, 1997 Financial Statements or the Closing Statement of Company Business Net Worth). No representation is made under this Section with respect to the inventory relating to the DC carbon monoxide detectors existing on December 31, 1997, the date hereof or the Closing Statement of Company Business Net Worth. Section 2.22 INFORMATION. To the knowledge of the Seller, after due inquiry and subject to the limitations contained in Section 3.6, none of the information provided by Seller to Buyer in connection with transactions contemplated by this Agreement contains any material misstatement of fact or omits to state any material fact necessary to be stated in order to make the statements therein not misleading. ARTICLE III REPRESENTATIONS AND WARRANTIES OF BUYER AND GUARANTOR Buyer and Guarantor hereby jointly and severally represent and warrant to Seller as to the matters set 48 forth in Sections 3.1, 3.2 and 3.3 hereof, and Buyer hereby represents and warrants to Seller as to the matters set forth in Sections 3.4, 3.5, 3.6, 3.7 and 3.8 hereof, as follows: Section 3.1 ORGANIZATION AND QUALIFICATION. Each of Buyer and Guarantor is a corporation duly organized, validly existing and in good standing under the laws of the jurisdiction of its incorporation or organization. Section 3.2 AUTHORITY RELATIVE TO THIS AGREEMENT. Each of Buyer and Guarantor has full corporate power and authority to execute and deliver this Agreement and to consummate the transactions contemplated hereby. The execution of this Agreement and the consummation of the transactions contemplated hereby has been duly and validly authorized by each of Buyer and Guarantor and no other corporate proceedings on the part of each of Buyer and Guarantor (or any other person) are necessary to authorize the execution of this Agreement by each of Buyer 49 and Guarantor or the consummation by each of Buyer and Guarantor of the transactions contemplated hereby. This Agreement has been duly and validly executed by each of Buyer and Guarantor, and (assuming the valid execution of the Agreement by Seller) constitutes a valid and binding agreement of each of Buyer and Guarantor, enforceable against each of Buyer and Guarantor in accordance with its terms, except (a) that such enforcement may be limited by bankruptcy, insolvency, reorganization, fraudulent conveyance, moratorium and similar laws now or hereafter in effect relating to or affecting creditors' rights generally and (b) the remedy of specific performance and injunctive and other forms of equitable relief may be subject to equitable defenses and to the discretion of the court before which any proceeding therefor may be brought. Section 3.3 CONSENTS AND APPROVALS; NO VIOLATION. Neither the execution and delivery of this Agreement nor the consummation of the transactions contemplated hereby will (i) require Buyer or Guarantor to file or register with, notify, or obtain any permit, authoriza- 50 tion, consent, or approval of or from, any Governmental Entity, with the exception of filings pursuant to the HSR Act and filings with the Mexican Comision Federal de Competencia (if any), (ii) conflict with or breach any provision of the Certificate of Incorporation, By-Laws or other organizational documents of Buyer or Guarantor, (iii) violate or breach any provision of, or constitute a default (or an event which, with notice or lapse of time or both, would constitute a default) under, any agreement or other obligation to which Buyer or Guarantor is a party, or by which it may be bound, or (iv) violate any order, writ, injunction, decree, judgment, statute, law or ruling of any Governmental Entity applicable to Buyer or Guarantor, excluding from the foregoing clauses (i), (iii) and (iv) such requirements, defaults, rights or violations which would not, individually or in the aggregate, have a material adverse effect on the ability of Buyer or Guarantor to consummate the transactions contemplated by this Agreement, or which become applicable as a result of any acts or omissions by, or the status of, 51 Seller. Section 3.4 FINANCING. Buyer has on the date of execution of this Agreement and will have at the Closing sufficient immediately available funds, in cash or pursuant to credit agreements in effect on the date of this Agreement, to pay the Purchase Price and any other amounts payable pursuant to this Agreement and to effect the transactions contemplated hereby. Section 3.5 BROKERS. No broker, finder or investment banker ("Finder"), including any director, officer, employee, affiliate or associate of Buyer, is entitled to any brokerage, finder's or other fee or commission in connection with the transactions contemplated by this Agreement by reason of any action taken by Buyer. Buyer has not dealt with any Finder except BancAmerica ROBERTSON STEPHENS, whose fees are payable by Seller. Section 3.6 NO REPRESENTATION REGARDING FUTURE PROSPECTS. Buyer acknowledges and agrees that neither the representations and warranties of Seller contained in 52 Article II hereof nor any other information contained in the documents to be delivered at the Closing, the Confidential Offering Memorandum relating to the Company and its subsidiaries prepared by BancAmerica ROBERTSON STEPHENS and previously distributed to Buyer (the "Confidential Memorandum") or otherwise provided to Buyer, shall be construed as a representation or warranty with respect to any projections, estimates or budgets heretofore delivered to or made available to Buyer regarding future revenues, future expenses or expenditures, future results of operations, future cash flows, future financial condition, the future business and operations of the Company and its subsidiaries, or future relationships with customers or suppliers, including any such information as may have been set forth in the Confidential Memorandum. Section 3.7 INVESTMENT. Buyer is acquiring the Shares for its own account, for investment, and without a view to the public distribution thereof and will not sell or transfer the Shares in violation of the 53 Securities Act of 1933, as amended, or the rules and regulations promulgated thereunder. Section 3.8 YEAR 2000. Buyer acknowledges that Seller's software, hardware and other information technologies, whether owned or licensed by Seller, are not Year 2000 Compliant. For purposes of this Agreement, "Year 2000 Compliant" means that any applicable hardware, software or other information technologies can properly process dates after the date December 31, 1999. ARTICLE IV COVENANTS OF THE PARTIES Section 4.1 CONDUCT OF THE BUSINESS. Seller agrees that, during the period from the date of this Agreement to the Closing, except as (i) otherwise contemplated by this Agreement, (ii) set forth in Section 4.1 of the Disclosure Schedule or (iii) consented to by Buyer in writing, Seller shall cause the business operations of the Company and its subsidiaries to be conducted in the ordinary course. Without limitation to the generality of 54 the foregoing, Seller shall not permit the Company, and, as applicable, the Company shall not permit any of its subsidiaries, to: (a) (i) amend their respective certificates of incorporation or by-laws (or other charter documents), (ii) split, combine or reclassify any shares of their respective outstanding capital stock, or (iii) directly or indirectly redeem or otherwise acquire any shares of its capital stock or shares of the capital stock of any of their respective subsidiaries; (b) authorize for issuance, issue or sell or agree to issue or sell any shares of, or rights to acquire any shares of, their respective capital stock (whether through the issuance or granting of options, warrants, commitments, subscriptions, rights to purchase or otherwise); (c) (i) merge, combine or consolidate with another entity, (ii) acquire or purchase an equity interest in or a substantial portion of the assets of another corporation, partnership or other business organization 55 or otherwise acquire any assets outside the ordinary course of business or otherwise enter into any contract, commitment or transaction outside the ordinary course of business, or (iii) sell, lease, license, waive, release, transfer, encumber (except for Liens which will be removed prior to or at the Closing) or otherwise dispose of any of their respective assets outside the ordinary course of business; (d) (i) incur, assume or prepay any indebtedness or any other liabilities other than, in each case, in the ordinary course of business or indebtedness or liabilities which can be prepaid or repaid at any time without penalty, (ii) assume, guarantee, endorse or otherwise become liable or responsible (whether directly, contingently or otherwise) for the obligations of any other person, in each case, other than in the ordinary course of business or other than those which will be removed at or prior to the Closing, or (iii) make any loans, advances or capital contributions to, or investments in, any other person (other than between the Compa- 56 ny and its subsidiaries); (e) modify or amend, or waive any benefit of, any non-competition agreement to which the Company or any of its subsidiaries is a party; (f) authorize or make capital expenditures in excess of $100,000 individually, or in excess of $300,000 in the aggregate; (g) cancel or terminate any insurance policy naming the Company or any of its subsidiaries as a beneficiary or a loss payee other than in the ordinary course of business; (h) (i) adopt, enter into, terminate or amend in any material respect (except as may be required by applicable law) any plan for the current or future benefit or welfare of any officer, director or employee of the Company or any of its subsidiaries, (ii) enter into amend, waive, modify or renew any employment or consulting agreement, (iii) increase in any manner the compensation or fringe benefits of, or pay any bonus to, any officer, director or employee (except for normal increas- 57 es in salaries, compensation and bonuses and payment of bonuses, in each case in the ordinary course of business or as required by contract), or (iv) take any action to fund or in any other way secure, or to accelerate or otherwise remove restrictions with respect to, the payment of compensation or benefits under any employee plan, agreement, contract, arrangement or plan other than in the ordinary course of business; (i) make any material change in its accounting or Tax policies or procedures, except as required by law or to comply with mandatory principles of accounting; or (j) enter into any contract, agreement, commitment or arrangement with respect to any of the foregoing. Section 4.2 HSR ACT COMPLIANCE AND OTHER GOVERNMENTAL FILINGS. Each party hereto agrees to use its best efforts to file as expeditiously as possible (i) a completed notification report under the HSR Act in connection with the transactions contemplated by this Agreement and (ii) filings with or required by the Mexi- 58 can Comision Federal de Competencia (if any), and upon the request of the Mexican Comision Federal de Competencia, the Federal Trade Commission or the Department of Justice, as the case may be, to supply such entity with any additional requested information as expeditiously as possible. Each party shall promptly inform the other of any such request and shall cooperate with the other in responding to such request. Section 4.3 POST-CLOSING COLLECTIONS. Seller and its affiliates shall promptly pay over to Buyer all amounts received by Seller or its affiliates on or after the Closing Date in respect of the accounts receivable or other assets of the Company and its subsidiaries, and Buyer shall promptly pay over to Seller all amounts received by Buyer on or after the Closing Date that are not related to the accounts receivable or other assets of the Company and its subsidiaries. Section 4.4 EXPENSES. Each of Seller and Buyer shall pay all of its own costs and expenses associated with the negotiation and conclusion of this Agree- 59 ment and the consummation of the transactions contemplated hereby. Section 4.5 SEVERANCE ARRANGEMENTS. Buyer shall, or shall cause the Company to, honor and be solely responsible for payment of the amounts described in the section entitled "Severance Arrangements" in each of the letter agreements between the Company and certain of its officers (each, an "Executive") set forth in Section 4.5(i) of the Disclosure Schedule (the "Retention Agreements") in accordance with the terms and conditions regarding such payment set forth in such Retention Agreements, except to the extent modified or superseded by any separate agreement which may be entered into by the Executive and Buyer or any of its subsidiaries. Seller shall honor and be solely responsible for payment of the amounts described in the sections of such Retention Agreements entitled "Stay Bonus" and shall take any actions required to be taken by such Retention Agreements with respect to stock options granted by Seller in such Retention Agreements, subject to and in accordance with 60 the terms and conditions regarding such payment or actions set forth in the Retention Agreements. Seller shall be solely responsible for payment of any amounts which arise pursuant to the employment agreement referred to in Section 4.5(ii) of the Disclosure Schedule. Section 4.6 PUBLIC ANNOUNCEMENTS. No party hereto shall make or issue, or cause to be made or issued, any announcement or written statement concerning this Agreement or the transactions contemplated hereby for dissemination to the media or the public without the prior written consent of the other party. The preceding sentence shall not apply, however, to any announcement or written statement required to be made by applicable law or administrative or legal process or pursuant to any securities exchange rules, except that the party required to make the announcement shall, whenever practicable, consult with the other parties prior to the making of any such announcement concerning the timing and content thereof. 61 Section 4.7 TRANSACTION COSTS. Seller shall pay all sales, use, transfer, documentary stamp and other similar Taxes with respect to the sale and purchase of the Shares. Section 4.8 FURTHER ASSURANCES. Each of Seller and Buyer shall use its best efforts to take all action and to do all things necessary to consummate and make effective the transactions contemplated by this Agreement; PROVIDED, HOWEVER, that neither Seller nor Buyer nor their respective affiliates shall be required to dispose of any part of its business or the assets pertaining thereto. In the event that, at any time after the Closing, any further action is necessary or desirable to carry out the purposes of this Agreement, each party to this Agreement shall take, and shall cause its officers and directors, as the case may be, to take, all such necessary action including, without limitation, the execution and delivery of such further instruments and documents as may reasonably be requested by the parties hereto for such purposes or otherwise to complete the 62 transactions contemplated hereby. Section 4.9 PRODUCT LIABILITY. (a) Seller is and shall be solely responsible for any and all claims for injury (including, without limitation, death) or claims for damage, direct or consequential, resulting from or connected with goods manufactured or sold or products-related services provided by the Company or any of its subsidiaries on or before the Closing Date, to the extent that such claims are delivered to Seller on or before the first anniversary of the Closing Date. (b) Buyer is and shall be solely responsible for any and all claims for injury (including, without limitation, death) or claims for damage, direct or consequential, resulting from or connected with goods manufactured or sold or products-related services provided by the Company on or prior to the Closing Date, to the extent that such claims are not delivered to Seller on or before the first anniversary of the Closing Date, and shall be solely responsible for all claims for all products manufactured after the Closing Date. If the parties 63 hereto cannot determine, in good faith, whether a product was manufactured on or before the Closing Date, then all claims with respect to that product shall be the responsibility of Buyer. (c) Buyer acknowledges that prior to Seller's ownership of the Company certain insurance policies which included coverage for product liability were purchased by the Company's predecessor (the "Predecessor Policies"). Such Predecessor Policies are in the name of predecessor companies to the Company and are assets of the Company. Buyer and the Company hereby grant Seller the authority to file claims with the insurers under the Predecessor Policies and pursue the benefits of such coverage to the extent that such Predecessor Policies provide coverage for product liability claims retained by Seller pursuant to Section 4.9(a) above. Buyer assigns to Seller all benefits of the insurance under the Predecessor Policies to the extent such benefits are actually received for the product liability claims retained by Seller pursuant to Section 4.9(a) above and turned over to Buyer to the 64 extent required by Section 4.9. Buyer agrees to aid and support Seller in pursuit of the insurance under the Predecessor Policies which shall include, but not be limited to, supplying records, personnel, and, if necessary, filing lawsuits or claims against insurers to collect the insurance under the Predecessor Policies and Seller shall reimburse Buyer for its third party costs incurred in connection with such assistance to Seller. Seller shall be entitled to control the proceedings for any such lawsuits or claims. Section 4.10 USE OF NAME. Promptly after the Closing but in no event more than 30 days following the Closing Date, Buyer shall file an amendment to the certificate of incorporation or other charter documents of the Company and, to the extent applicable, its subsidiaries, and each qualification to do business in each jurisdiction in which the Company and its subsidiaries is so qualified changing the name of the Company and any applicable subsidiary to a name which does not include or resemble in any way "Coleman" or any other trade name or 65 trademark owned or used by Seller or its affiliates. Section 4.11 BOOKS AND RECORDS. (a) Seller will deliver to Buyer as promptly as practicable on or after the Closing Date all books and records of the Company and its subsidiaries (collectively, the "Documents"), PROVIDED, HOWEVER, that Seller may retain copies of Documents and certain Documents related to Taxes, product liability claims, insurance or required by law to be kept by Seller. Each party hereto agrees to make reasonably available to the other party, at the other party's expense (including, with respect to clause (i) below, the right to make copies) (i) any and all such Documents (other than Documents relating to liabilities for which Seller is indemnifying Buyer and its subsidiaries, including Taxes as set forth in Article VI hereof), and including, without limitation, those reasonably necessary to respond to inquiries regarding the Company or any of its subsidiaries from Governmental Entities or any customer or supplier of the Company or any of its subsidiaries or to defend claims or otherwise indemnify 66 Seller or Buyer, as the case may be, under the terms of this Agreement and (ii) in connection with another party's review of any such Documents, any and all personnel as are reasonably requested by such other party, who will render all assistance as may reasonably be requested in that regard. (b) Subject to (x) the provisions of Section 6.5(c) hereof, (y) the following four sentences and (z) damage or destruction beyond Buyer's or Seller's reasonable control, as applicable, Buyer shall maintain and keep all Documents delivered to Buyer pursuant to this Agreement. In the event that Buyer determines that it does not wish to keep certain Documents, Buyer shall notify Seller of its intent to ship such Documents to Seller, and of the approximate amount of such Documents to be shipped, no later than 30 days before the date of shipment. At the request of Seller made prior to the scheduled shipment date, Buyer shall permit Seller to inspect such Documents at Buyer's usual location for the same on a mutually convenient date and shall permit 67 Seller to destroy any or all of such Documents at such site. Any of such Documents not so destroyed (or all such Documents if no such request is timely made) shall be shipped to Seller at Seller's expense. Seller has no obligation to retain any Document so shipped to it. Section 4.12 TRANSFER OF NOMINEE SHARE. At or immediately prior to the Closing, Seller will cause the Nominee Share to be transferred to an employee of the Company. ARTICLE V CERTAIN EMPLOYEE AND BENEFIT MATTERS Section 5.1 CONTINUED EMPLOYMENT; SERVICE CREDIT. Buyer shall on the Closing Date continue the employment of all employees of the Company and its subsidiaries as of the Closing Date (the "Affected Employees"). The Affected Employees shall be given credit for all service with the Company or its subsidiaries (and service credited by the Company or such subsidiary), to the same extent as such service was credited for such 68 purpose by the Company or such subsidiary, under (a) all employee benefit plans, programs and policies, and fringe benefits of Buyer in which they become participants for purposes of eligibility and vesting (but not for purposes of benefit accrual), and (b) severance plans for purposes of calculating the amount of each Affected Employee's severance benefits; PROVIDED, HOWEVER, that no Executive who is a party to a Retention Agreement that provides for Severance Arrangements shall be eligible to participate in any severance plan of the Buyer or any affiliate of the Buyer while such Retention Agreement remains in effect. To the extent permissible under the terms thereof and required by applicable law, Buyer shall (i) waive all limitations as to preexisting conditions exclusions and waiting periods with respect to participation and coverage requirements applicable to the Affected Employees under any welfare benefit plans that such employees may be eligible to participate in after the Closing Date, other than limitations or waiting periods that are already in effect with respect to such employees and that 69 have not been satisfied as of the Closing Date under any welfare benefit plan maintained for the Affected Employees immediately prior to the Closing Date, and (ii) provide each Affected Employee with credit for any co-payments and deductibles paid prior to the Closing Date in satisfying any applicable deductible or out-of-pocket requirements under any welfare plans that such employees are eligible to participate in after the Closing Date. Nothing in this Section shall be deemed to require the employment of any Affected Employee to be continued for any particular period of time after the Closing Date. Section 5.2 CONTINUATION OF BENEFITS. Buyer will maintain for a period of at least one year after the Closing Date, without interruption, such employee compensation and benefit plans (other than stock option plans), programs, policies and fringe benefits as will, in the aggregate, provide benefits to the Affected Employees that are no less favorable than those provided pursuant to such employee compensation and benefit plans, programs, policies and fringe benefits of the Company and 70 its subsidiaries, as in effect on the Closing Date. Section 5.3 SEVERANCE PAY. In addition to and notwithstanding the provisions of Section 4.5 hereof, Buyer will bear, and will indemnify, defend and hold harmless Seller from and against, all losses, damages, deficiencies, suits, claims, demands, judgments, costs, expenses or other liabilities, including without limitation reasonable expenses and fees of counsel, arising from or relating to claims made by or on behalf of any Affected Employee in respect of employment agreements and corporate policy pertaining to payroll, severance pay, accrued vacation and similar obligations ("Employment Losses") relating to the termination of any Affected Employee's employment with the Company or any of its subsidiaries as a result of actions by Buyer or the Company at or after the Closing; PROVIDED, HOWEVER, that nothing in this Section 5.3 shall (i) be construed to cause any person other than Seller to be responsible for payment of any amounts which arise pursuant to the employment agreement referred to in Section 4.5(ii) of the 71 Disclosure Schedule and (ii) affect Buyer's right in respect of Seller's representations, warranties and covenants. Seller agrees that all Employment Losses with respect to employees (other than Affected Employees) terminated from employment with the Company or any of its subsidiaries arising before the Closing Date will be discharged in full to the extent required prior to the Closing Date; PROVIDED, HOWEVER, that Seller will indemnify Buyer from and against Employment Losses with respect to employees other than Affected Employees to the extent such Employment Losses are not either discharged prior to the Closing Date or accrued on the Closing Statement of Company Business Net Worth. Section 5.4 INDEMNIFICATION OF BUYER FOR PLANS NOT ASSUMED. Seller shall indemnify and hold harmless Buyer, the Company and all of the Company's subsidiaries against any and all Losses (as defined in Section 9.2) arising under Title IV of ERISA, Section 302 of ERISA and Sections 412 and 4971 of the Code which may be incurred by any of them arising out of or relating to any employee 72 benefit plan sponsored by the Seller or any Company ERISA Affiliate, other than the Company Employee Benefit Plans, whether such Losses arise out of or relate to any event or state of facts occurring or existing before, on or after the Closing Date. Section 5.5 COMPANY DEFINED CONTRIBUTION PLAN. Effective as of the Closing Date, Buyer shall make available (or cause one of its affiliates to make available) a defined contribution plan for the benefit of the Affected Employees (the "Company DC Plan"). As promptly as practicable after the Closing Date, the Seller shall cause the trustee of the Coleman Monthly Salaried Retirement Income Savings Plan and the Coleman Retirement Incentive Savings Plan (collectively, the "Seller DC Plans") to transfer to the trustee of the Company DC Plan the account balances of each Affected Employee with respect to whom the Seller DC Plans maintain an account as of the close of business on the Closing Date. Such transfers shall be equal to the value of the transferred account balances as of the close of business on the day preceding 73 the date of transfer and shall be in cash (or, in the case of participant loans granted prior to the Closing Date, if any, such loans and any promissory notes or other documents evidencing such loans). ARTICLE VI TAXES Section 6.1 TAX INDEMNIFICATION. Independent, and without duplication of the indemnification provisions set forth in Article IX of this Agreement: (a) Seller shall indemnify Buyer, the Company and the Company's subsidiaries and hold them harmless from and against, without duplication, (i) all liability for all Taxes (except as provided in paragraph (b) of this Section 6.1) of the Company and its subsidiaries for all taxable periods ending on or before the Closing Date and the portion ending on the Closing Date of any taxable period that includes (but does not end on) the Closing Date ("Pre-Closing Tax Period"), (ii) all liability for Taxes resulting from a valid, timely and effective elec- 74 tion under Section 338(h)(10) of the Code and Section 1.338(h)(10)-1 of the Treasury Regulations and any comparable election under state or local tax law with respect to the Company and the subsidiaries set forth in Section 6.1 of the Disclosure Schedule (collectively, the "Election"), as contemplated by Section 6.3 hereof, (iii) any and all liability for Taxes of any member of an affiliated, consolidated, combined or unitary group of which the Company or any of its subsidiaries (or any predecessor of any of the foregoing) is or was a member on or prior to the Closing Date, including by reason of the liability of the Company or any of its subsidiaries (or any predecessor of any of the foregoing) pursuant to Treasury Regulation Section 1.1502-6 or any analogous or similar state, local or foreign law or regulation, (iv) any payments required to be made after the Closing Date under any Tax sharing, Tax indemnity, Tax allocation or similar contracts (whether or not written) to which the Company was obligated, or was a party, on or prior to the Closing Date, and (v) all liability for Taxes of any person 75 (other than the Company and its subsidiaries) imposed on the Company or any of its subsidiaries as a transferee or successor, by contract or pursuant to any law, rule or regulation, which Taxes relate to an event or transaction occurring before the Closing; PROVIDED, HOWEVER, that in the case of clauses (i), (ii), (iii), (iv) and (v) above, Seller shall be liable only to the extent that such Taxes are in excess of the amount, if any, reserved for such Taxes on the Closing Statement of Company Business Net Worth. Subject to the specific allocation of expenses set forth in Article VI and any provision relating to expenses to be borne by Buyer set forth in this Article VI, Seller shall indemnify Buyer, the Company and the Company's subsidiaries for Losses (as defined in Section 9.2) incurred in defense of any Tax Claim that is initiated by any Taxing Authority against the Buyer, the Company or the Company's subsidiaries that relates to liabilities for Taxes described in clauses (i), (ii), (iii), (iv) and (v) above. (b) Buyer shall, and shall cause the Company 76 to, indemnify Seller and its affiliates and hold them harmless from and against all liability for Taxes of Company or any of its subsidiaries for any taxable period ending after the Closing Date (except to the extent such taxable period began before the Closing Date, in which case Buyer's indemnity will cover only that portion of any such Taxes that do not relate to the Pre-Closing Tax Period). (c) In the case of any taxable period that includes (but does not end on) the Closing Date (a "Straddle Period"), the Taxes of the Company and its subsidiaries for the Pre-Closing Tax Period shall be determined based on an interim closing of the books as of the close of business on the Closing Date (and for such purpose, the taxable period of any partnership or other pass-through entity in which the Company or any subsidiary holds a beneficial interest shall be deemed to terminate at such time), except that the amount of any such Taxes that are imposed on a periodic basis and are not based on or measured by income or receipts shall be 77 determined by reference to the relative number of days in the pre-Closing and post-Closing portions of such Straddle Period. All determinations necessary to effect the foregoing allocations shall be made in a manner consistent with prior practice of the Company and its subsidiaries. Section 6.2 PROCEDURES RELATING TO INDEMNIFICATION OF TAX CLAIMS. (a) If a claim for Taxes shall be made by any Taxing Authority in writing, which, if successful, could reasonably result in an indemnity payment pursuant to Section 6.1 hereof, the party seeking indemnification (the "Tax Indemnified Party") shall upon receipt thereof promptly notify the other party (the "Tax Indemnifying Party") in writing of such claim (a "Tax Claim"). If the Tax Claim is delivered to the party that would be the Tax Indemnifying Party for such Tax Claim, the Tax Indemnifying Party shall promptly notify the Tax Indemnified Party, in writing, of the existence of such claim. If notice of a Tax Claim ("Tax Notice") is not given to the Tax Indemnifying Party by the Tax Indemni- 78 fied Party within a reasonably sufficient period of time to allow the Tax Indemnifying Party effectively to contest such Tax Claim, or in reasonable detail to notify the Tax Indemnifying Party of the nature of the Tax Claim, taking into account the facts and circumstances with respect to such Tax Claim, the Tax Indemnifying Party shall not be liable to the Tax Indemnified Party or any of its affiliates to the extent that the Tax Indemnifying Party's position is actually prejudiced as a result thereof. (b) With respect to any Tax Claim which might result in Seller being obligated to make an indemnity payment to Buyer pursuant to Section 6.1(a) hereof (other than a Tax Claim relating to Taxes of the Company or any of its subsidiaries for a Straddle Period) or any Tax Claim involving Seller's Tax gain pursuant to the Election, Seller shall at its sole expense control all proceedings in connection with such Tax Claim (including, without limitation, selection of counsel) and without limiting the foregoing, may in its sole discretion and at 79 its sole expense pursue or forego any and all administrative appeals, proceedings, hearings and conferences with any Taxing Authority with respect thereto, and may, in its sole discretion, either pay the Tax claimed and sue for a refund where applicable law permits such refund suits or contest such Tax Claim in any permissible manner. Buyer and the Company may participate in, but not control, all proceedings relating to such Tax Claim at their sole expense; PROVIDED, HOWEVER, that such participation shall not, under any circumstances, require the disclosure of any Tax Return relating to a Pre-Closing Tax Period of an affiliated, consolidated, combined or unitary group which includes a company other than the Company and any of its subsidiaries or any work papers relating thereto. In no case shall Buyer or the Company settle or otherwise compromise any Tax Claim referred to in the preceding sentence without Seller's prior written consent, which consent will not be unreasonably withheld. In no case shall Seller settle or otherwise compromise any Tax Claim referred to above which could have an 80 adverse effect which is material to the Company and any of its subsidiaries with respect to Taxes owed for any taxable period beginning after the Closing Date or post-Closing portion of a Straddle Period, without Buyer's prior written consent, which consent will not be unreasonably withheld. Buyer, the Company and their affiliates shall reasonably cooperate with Seller in contesting such Tax Claim, which cooperation shall include, without limitation, the reasonable retention and (upon Seller's request) the provision to Seller of copies of records and information which are reasonably relevant to such Tax Claim, and making employees reasonably available to provide additional information or explanation of any material provided hereunder or to testify at proceedings relating to such Tax Claim, all at Seller's expense. (c) The contest of any Tax Claim that relates to Taxes of the Company or any of its subsidiaries for a Straddle Period shall be conducted and controlled jointly by Buyer and Seller, with either party having the option with the other party's consent of 81 ceding the entire defense to the other, and each party shall reasonably cooperate (which cooperation shall not, under any circumstances, require the disclosure of any Tax Return relating to a Pre-Closing Tax Period of an affiliated, consolidated, combined or unitary group which includes a company other than the Company and its subsidiaries or any work papers relating thereto) and consult with the other party at its own expense and there shall be no settlement or closing or other agreement with respect thereto without the consent of the other party, which consent shall not be unreasonably withheld. Section 6.3 SECTION 338(h)(10) ELECTION. (a) Seller and Buyer shall jointly make the Election on a timely basis in accordance with all rules and regulations applicable to the Election. As soon as practicable after the Closing, Seller and Buyer shall mutually prepare a Form 8023-A, with all attachments, and Seller shall sign such Form 8023-A. Also, Buyer and Seller shall cooperate with each other to take all actions necessary and appropriate (including timely filing such additional forms, 82 returns, elections, schedules and other documents on a joint or separate basis) as may be required to effect and preserve a timely Election in accordance with the provisions of Section 1.338(h)(10)-1 of the Treasury Regulations (or any comparable provisions of state or local tax law) or any successor provisions. Seller and Buyer shall report the purchase by Buyer of the Shares pursuant to this Agreement consistent with the Election and shall take no position inconsistent therewith in any Tax Return or any proceeding before any Taxing Authority. (b) In connection with the Election, not later than 70 days after the Closing, Seller and Buyer shall, together and in good faith, determine and agree upon the "Modified Aggregate Deemed Sale Price" of the assets of the Company and the subsidiaries set forth in Section 6.1 of the Disclosure Schedule (within the meaning of, and in accordance with Section 1.338(h)(10)-1(f) of the Treasury Regulations and any comparable provisions of state or local tax law). Each of Seller and Buyer can terminate in writing at any time negotiations with respect to 83 the "Modified Aggregate Deemed Sale Price" within 70 days after the Closing. In the event of such termination, Seller and Buyer shall, not later than 10 days after such termination, submit all such disputed items for resolution to the Auditor which shall resolve the disputed items within 20 days thereafter. The parties' agreement on the amount of "Modified Aggregate Deemed Sales Price" and the Auditor's resolution of disputed items with respect thereto shall be final and binding on the parties. In connection with the Election, not later than 60 days after the later of the parties' agreement as to the amount of the "Modified Aggregate Deemed Sales Price" or the Auditor's resolution of disputed items with respect thereto, Buyer shall reasonably determine the proper allocations (the "Allocations") of the "Modified Aggregate Deemed Sale Price" among the assets of the Company and such subsidiaries (in accordance with Section 338(b)(5) of the Code and the Treasury Regulations promulgated thereunder and comparable provisions of state or local tax law) and shall submit a statement (the "Section 84 338 Statement") to Seller setting forth the foregoing. Seller may dispute Buyer's determination of the Allocations within 40 days ("40 Day Review") of delivery of the Section 338 Statement to Seller if Seller reasonably believes that Buyer's determinations are unreasonable. In the event of such a dispute, the parties shall commence negotiations (which either party may terminate at any time) and shall attempt in good faith to resolve any such dispute and any resolution of such dispute by them shall be final and binding on them. If either party terminates such negotiations, or if the parties cannot resolve any such dispute within 40 days of such delivery by Buyer to Seller, the dispute shall be submitted no later than 10 days thereafter for resolution to the Auditor which shall make its determination within 20 days after submission to it of the dispute. Buyer and Seller shall be bound by Buyer's determinations of the Allocations unless the Auditor determines that they are unreasonable. The "Modified Aggregate Deemed Sales Price" and Allocations shall be adjusted as appropriate to reflect 85 the final and binding Closing Statement of Company Net Worth. In the event that the parties cannot resolve any disputes over such adjustments within 20 days after the receipt of the final and binding Closing Statement of Company Net Worth, the disputes shall be submitted no later than 10 days thereafter for resolution to the Auditor which shall make its determination within 20 days after submission to it of the dispute. Seller and Buyer shall (i) be bound by the final determination of the "Modified Aggregate Deemed Sale Price" and such Allocations for purposes of determining any Taxes, unless otherwise required by law, (ii) prepare and file their Tax Returns on a basis consistent with such final determination of the "Modified Aggregate Deemed Sale Price" and such Allocations, subject to adjustment to reflect (x) Seller's selling expenses as a reduction of sales proceeds, and (y) Buyer's acquisition expenses as an adjustment to Purchase Price, and (iii) take no position inconsistent with such determination of the "Modified Aggregate Deemed Sales Price" and Allocations on any 86 applicable Tax Return or in any proceeding before any Taxing Authority. No Tax Returns reflecting the Allocations shall be filed prior to the later of (i) the last day of the 40 Day Review and (ii) if any items with respect to the Allocations are in dispute, the Auditor's resolution of such disputed items, except as otherwise required by law. In the event that any of the Allocations is disputed by any Taxing Authority, the party receiving notice of the dispute shall promptly notify the other party hereto concerning resolution of the dispute. Section 6.4 SURVIVAL OF TAX PROVISIONS. Any claim to be made pursuant to this Article VI hereof must be made within 15 days of the expiration (with valid extensions) of the applicable statutes of limitations relating to the Taxes at issue. Buyer shall notify Seller in writing in the event that Buyer extends the statute of limitations for any period that begins prior to the Closing Date; PROVIDED, HOWEVER, the failure of Buyer to provide such notification shall not affect the rights of Buyer, the Company or any subsidiaries of the 87 Company to indemnification under Section 6.1(a). Section 6.5 RETURN FILINGS, REFUNDS AND CREDITS. (a) Seller shall prepare or cause to be prepared and file or cause to be filed on a timely basis all Tax Returns with respect to the Company and its subsidiaries for taxable periods ending on or prior to the Closing Date. Seller shall timely pay or cause to be paid all Taxes shown on all such Tax Returns and Buyer and/or the Company shall pay to Seller from the reserves, if any, on the Closing Statement of Company Business Net Worth for such Taxes an amount not in excess of the amount paid by the Seller in respect of such Taxes. Such Tax Returns shall be prepared in a manner consistent with past practices and such Tax Returns which do not relate to or include a company other than the Company and any of its subsidiaries ("Separate Returns") shall be provided to Buyer to allow for Buyer's review prior to filing. Seller and Buyer agree to consult and resolve in good faith any issue arising as a result of the review of such Separate Returns. In the event the parties are unable to 88 resolve any dispute within ten days following the delivery of such Separate Returns, the parties shall jointly request the Auditor to resolve any issue at least five days before the due date of any such Separate Return, in order that such Separate Return may be timely filed. The Seller and Buyer shall each pay one-half of the Auditor's fees and expenses. (b) Buyer shall prepare or cause to be prepared and shall file or cause to be filed on a timely basis all Tax Returns with respect to the business of the Company and its subsidiaries other than those set forth in clause (a) of this Section 6.5. Buyer shall cause to be timely paid all Taxes shown on all such Tax Returns related to Straddle Periods, except that Seller shall be responsible for and shall pay any Taxes for which Seller has agreed to indemnify Buyer pursuant to Section 6.1 hereof. Buyer shall provide Seller with copies of any such Tax Returns covering Taxes for which Seller has agreed to indemnify Buyer pursuant to Section 6.1 hereof at least 20 days prior to the due date thereof (giving 89 effect to any extensions thereto), accompanied by a statement calculating Seller's indemnification obligation pursuant to Section 6.1 hereof. Seller shall pay to Buyer the amount of Seller's indemnification obligation within 10 days of receiving copies of such Tax Returns unless Seller objects to the calculation of Seller's indemnification obligation in the statement provided by Buyer. In the event of an objection, the parties will commence negotiations to resolve such disagreement (which negotiations either party may terminate at any time) and if necessary resolve any disputes in accordance with Section 6.8 hereof. (c) Seller, Buyer and the Company shall reasonably cooperate, and shall cause their respective affiliates, officers, employees, agents, auditors and representatives reasonably to cooperate, in preparing and filing all Tax Returns (including amended returns and claims for refund), including maintaining and making reasonably available to each other all records necessary in connection with Taxes with respect to, and in resolv- 90 ing all disputes and audits relating to Taxes with respect to, all taxable periods ending on or prior to or which include the Closing Date; provided however, that cooperation as required by this clause (c) of Section 6.5 shall not, under any circumstances, require the disclosure of any Tax Return relating to a Pre-Closing Tax Period of an affiliated, consolidated, combined or unitary group which includes a company other than the Company and its subsidiaries or any work papers relating thereto. Buyer and Seller recognize that Seller and its affiliates will need access, from time to time, after the Closing Date, to certain accounting and Tax records and information held by the Company or its subsidiaries to the extent such records and information pertain to events occurring prior to the Closing Date; therefore, Buyer agrees that (i) from and after the Closing Date until the seventh anniversary of the Closing Date, Buyer shall, and shall cause the Company to, (A) use all reasonable efforts to properly retain and maintain such records until such time as Seller agrees that such retention and main- 91 tenance is no longer necessary, and (B) allow Seller and its agents and representatives (and agents or representatives of any of its affiliates), to inspect, review and make copies of such records as Seller may reasonably deem necessary or appropriate from time to time, such activities to be conducted during normal business hours and at Seller's expense and (ii) from and after the seventh anniversary of the Closing Date, Buyer shall not, and shall cause the Company and its subsidiaries not to, dispose of any of such records without first providing Seller with an opportunity to take possession of such records or to make copies thereof, at Seller's expense, prior to such disposal. (d) Any refunds or credits of Taxes of the Company or any of its subsidiaries for any taxable period ending on or before the Closing Date shall be for the account of Seller but only to the extent that the amount of any such refund or credit is in excess of the amount of such refund or credit reflected on the Closing Statement of Company Business Net Worth. If such Tax refunds 92 or credits are received or used by or on behalf of Buyer or any affiliate or successor thereto including the Company or any of its subsidiaries, then Buyer shall, within 10 days of such receipt, pay the amount of such Tax refund or credit to the Seller (reduced by any Taxes that the Buyer, the Company or any of the Company's subsidiaries shall be required to pay with respect thereto; PROVIDED, HOWEVER, that Buyer, the Company or any subsidiary shall use its reasonable best efforts to minimize such Taxes if and to the extent that any such efforts will not have an adverse effect which is material to the Company and any of its subsidiaries with respect to Taxes owed in any taxable period beginning after the Closing Date or the post-Closing portion of a Straddle Period). Any refunds or credits of Taxes of the Company or any of its subsidiaries for any taxable period beginning after the Closing Date shall be for the account of Buyer. If such Tax refunds or credits are received by or on behalf of Seller or any affiliate or successor thereto, then Seller shall within 10 days of such receipt, pay 93 the amount of such Tax refund or credit to Buyer (reduced by any Taxes that the Seller shall be required to pay with respect thereto; PROVIDED, HOWEVER, that the amount of such Tax refund or credit shall be net of Taxes only if Seller uses its best efforts to minimize such Taxes). Any refunds or credits of Taxes of the Company or any of its subsidiaries for any Straddle Period shall be apportioned between Seller and Buyer on the same basis on which such Taxes were apportioned under Section 6.1 hereof between Buyer and Seller. Buyer shall, if Seller so requests and at Seller's sole expense, cause the Company or any of its subsidiaries, as appropriate, to file for and use its reasonable best efforts to obtain any refunds or credits to which Seller is entitled under this Section 6.5 provided that the seeking of any such refund or credit shall not have any adverse effect which is material to the Company and any of its subsidiaries with respect to Taxes owed in any taxable period beginning after the Closing Date or the post-Closing portion of a Straddle Period. Buyer shall permit Seller to 94 participate in, but not control, the prosecution of any such refund claim. Buyer shall cause the Company or such subsidiary to forward to Seller any such refund within 10 days after the refund is received (or reimburse Seller for any such credit within 10 days after the relevant Tax Return is filed in which the credit is actually applied against the Company or such subsidiary's liability for Taxes). Section 6.6 TRANSFER TAXES. Notwithstanding any other provisions of this Agreement to the contrary, Seller shall prepare or cause to be prepared and timely file or cause to be timely filed with the appropriate Taxing Authority all Tax Returns with respect to all transfer, stamp, duties, recording, value added tax and similar taxes imposed in connection with Buyer's purchase of the Shares pursuant to this Agreement. As provided in Section 4.7 hereof, Seller shall pay or cause to be paid all such Taxes. Section 6.7 TERMINATION OF TAX SHARING AGREEMENTS. Seller hereby agrees and covenants that any Tax 95 sharing, indemnity, allocation, or similar agreements to which the Company or any of its subsidiaries is a party will cease to apply to the Company or any of its subsidiaries as of the Closing Date and, after the Closing Date, the Buyer, the Company and its subsidiaries will not be bound by or have any liability thereunder. Section 6.8 DISPUTES. If the parties disagree as to (i) the calculation of any Tax or (ii) the amount of or liability for any Tax-related payment to be made under this Article VI or (iii) the definition of "adverse effect which is material to the Company and any of its subsidiaries" as used in Sections 6.2(b) and 6.5(d), the parties shall cooperate in good faith to resolve any such dispute, and any agreed-upon amount shall be paid to the appropriate party. A party may, at any time, terminate, in writing, discussions with respect to such dispute. Not later than 10 business days after either Seller or Buyer shall have terminated such discussion, all such disputed items set forth in clauses (i) and (ii) above shall be submitted for resolution to the Auditor. The 96 decision of such firm shall be final and binding. The fees and expenses incurred in connection with such decision shall be shared by Seller and Buyer in accordance with the final allocation of the Tax liability in dispute. Following the decision of the Auditor, the parties shall each take or cause to be taken any action that is necessary or appropriate to implement such decision, including, without limitation, the filing of amended Tax Returns and the prompt payment of underpayment or overpayment, with interest calculated on such underpayment or overpayment at the interest rate specified in Section 6621(a)(2) of the Code (or such successor provision) from the date such payment was due. Section 6.9 DETERMINATION AND CHARACTERIZATION OF PAYMENTS. The payments made pursuant to this Article VI shall be treated as adjustments to the Purchase Price. 97 ARTICLE VII CONDITIONS TO CLOSING Section 7.1 CONDITIONS TO THE OBLIGATIONS OF ALL PARTIES. The obligations of Seller and Buyer to effect the transactions contemplated by this Agreement are subject to the satisfaction or waiver, on or before the Closing Date, of each of the following conditions: (a) no statute, rule or regulation shall have been enacted or promulgated and no injunction or other order shall have been entered, and not vacated, by a court or administrative agency of competent jurisdiction in any proceeding or action, which enjoins, restrains, makes illegal or prohibits consummation of the transactions contemplated hereby; (b) all waiting periods under any law, regulation, rule or order applicable to, or deemed to be applicable to, any of the transactions contemplated by this Agreement, including without limitation the HSR Act, shall have expired or been terminated, and all approvals required thereunder shall have been granted, including 98 but not limited to any approvals required from the Mexican Comision Federal de Competencia; if approval under any such law is subject to the satisfaction of any material conditions, then each such condition shall have been approved by the party affected by such condition, which approval shall not be unreasonably withheld; and (c) Seller shall have received (i) all necessary consents or waivers required under the Seller Credit Agreement and (ii) the release of the Company as a guarantor under the Private Placement Notes and the Seller Credit Agreement. Section 7.2 CONDITIONS TO THE OBLIGATIONS OF SELLER. The obligations of Seller to effect the transactions contemplated by this Agreement are subject to the satisfaction or waiver by Seller, on or before the Closing Date, of the following conditions: (a) the representations and warranties of Buyer contained herein shall have been true and correct in all material respects when made and as of the Closing Date, as if made on the Closing Date; 99 (b) Buyer shall have performed or complied in all material respects with all agreements, covenants and conditions required by this Agreement to be performed or complied with by it at or prior to the Closing; and (c) Seller shall have been furnished with a certificate of an executive officer of Buyer, dated the Closing Date, certifying to the foregoing. Section 7.3 CONDITIONS TO THE OBLIGATIONS OF BUYER. The obligations of Buyer to effect the transactions contemplated by this Agreement are subject to the satisfaction or waiver by Buyer, on or before the Closing Date, of the following conditions: (a) the representations and warranties of Seller contained herein shall have been true and correct in all material respects when made and as of the Closing Date, as if made on the Closing Date; (b) Seller shall have performed or complied in all material respects with all agreements, covenants and conditions required by this Agreement to be performed or 100 complied with by it at or prior to the Closing; and (c) Buyer shall have been furnished with a certificate of an executive officer of Seller, dated the Closing Date, certifying to the foregoing. ARTICLE VIII TERMINATION Section 8.1 TERMINATION. This Agreement may be terminated at any time prior to the Closing: (a) by mutual consent of Seller and Buyer; (b) by Buyer after April 30, 1998 (which date shall be automatically extended to June 30, 1998 if the conditions set forth in Section 7.1(b) or (c) have not been satisfied or waived and are still capable of being satisfied) if any of the conditions provided for in Sections 7.1 or 7.3 hereof shall not have been met or waived in writing by Buyer prior to or on such date; or (c) by Seller after April 30, 1998 (which date shall be automatically extended to June 30, 1998 if the conditions set forth in Section 7.1(b) or (c) have not 101 been satisfied or waived and are still capable of being satisfied) if any of the conditions provided for in Sections 7.1 or 7.2 hereof shall not have been met or waived in writing by Seller prior to or on such date. If any party has caused a delay in closing the transactions contemplated hereby by its failure to perform any covenant hereunder, which failure has resulted in the failure of a condition contained in Article VII hereof, such party shall not be entitled to terminate this Agreement pursuant to subsections (b) or (c) of this Section, as the case may be, until the expiration of a period following the date specified in such subsection corresponding to the period of delay so caused. Section 8.2 EFFECT OF TERMINATION. In the event of termination of this Agreement pursuant to this Article VIII, this Agreement shall immediately terminate and be of no further force and effect, and there shall be no liability on the part of Buyer or Seller (except for liabilities arising from willful breach of this Agreement prior to such termination); PROVIDED, HOWEVER, that 102 Sections 4.4, 4.5, 10.4, 10.8 and 10.10 hereof and this Article VIII shall survive the termination hereof; PROVIDED FURTHER, that all information received by Buyer with respect to the Company and its subsidiaries shall be treated in accordance with the Confidentiality Agreement dated November 17, 1997 between Buyer and BancAmerica ROBERTSON STEPHENS (the "Confidentiality Agreement"), which shall remain in full force and effect notwithstanding the execution or termination of this Agreement. ARTICLE IX INDEMNIFICATION Section 9.1 SURVIVAL. The representations and warranties: (i) contained in this Agreement (except for those set forth in Sections 2.13 and 2.14 hereof) shall survive the Closing and shall continue in full force and effect for a period of eighteen months (18) months thereafter; (ii) contained in Section 2.13 hereof shall not survive the Closing and (iii) contained in Section 2.14 hereof shall survive the Closing and shall continue in 103 full force and effect for a period of three (3) years, after which such representations and warranties shall terminate and have no further force or effect. The periods set forth in clauses (i), (ii) and (iii) above are collectively referred to herein as the "Limitations Period." No action or proceeding may be brought with respect to any of the representations and warranties hereunder unless written notice thereof, setting forth in reasonable detail the claimed misrepresentation or breach of warranty, shall have been delivered prior to the expiration of the applicable Limitations Period to the party alleged to have breached such representation or warranty. The covenants and agreements contained herein to be performed or complied with after the Closing shall survive indefinitely or for such shorter term as is specified in such covenants and agreements. Section 9.2 INDEMNIFICATION BY SELLER. Seller shall indemnify, defend and hold harmless Buyer and its affiliates against any and all losses, damages, deficiencies, suits, claims, demands, judgments, costs, expenses 104 or other liabilities including, without limitation, reasonable attorneys' fees and related expenses ("Losses") resulting from, arising from, or relating to (i) any breach of a representation or warranty of Seller contained in Article II of this Agreement except those representations and warranties of Seller contained in Section 2.13 hereof, and (ii) any failure by Seller to perform or comply with any agreement or obligation contained in this Agreement. Section 9.3 INDEMNIFICATION BY BUYER. Buyer shall indemnify, defend and hold harmless Seller against any and all Losses resulting, arising from, or relating to (i) any breach of a representation or warranty of Buyer contained in Article III of this Agreement, (ii) any failure by Buyer to perform or comply with any agreement or obligation contained in this Agreement, and (iii) all liabilities and obligations relating to the Company and its subsidiaries, except to the extent that Seller is required to indemnify Buyer in respect thereof (without regard to any deductible or cap on the dollar amount of 105 indemnity). Section 9.4 LIMITATIONS OF CLAIMS. (a) Indemnification pursuant to this Article IX with respect to a breach of the representations and warranties set forth in Article II or Article III hereof shall be available to any party only (i) if any such Loss or series of related Losses is greater than $10,000 and (ii) to the extent such party's aggregate Losses exceed the sum of $1,500,000; provided that, for purposes of computing Losses in respect of this Article IX, any reference to materiality or Material Adverse Effect in the representations and warranties shall be disregarded, and, provided, further, that indemnification with respect to a breach of the representations and warranties set forth in Section 2.14 hereof shall be available to Buyer and its affiliates to the extent Buyer's aggregate Losses exceed the sum of $500,000. (b) Anything to the contrary herein notwithstanding, the aggregate indemnification to be provided by any party pursuant to Article VI hereof or this Article 106 IX shall not exceed the Purchase Price, as adjusted by any payments pursuant to Section 1.4 hereof. (c) The amount of any Loss for which indemnification is provided under this Article IX shall be net of (i) any amounts recovered by the Indemnified Party (as defined below) pursuant to any indemnification by or indemnification agreement with any third party and (ii) any insurance proceeds or other cash receipts or sources of reimbursement received as an offset against such Loss (and no right of subrogation shall accrue to any third party indemnitor, insurer or reimburser hereunder); provided that the Indemnified Party shall use its best efforts (at the sole cost and expense of the Indemnifying Party, which shall reimburse third party expenses as they are incurred) to receive the benefits of any such indemnification and insurance and, upon such receipt, to pay such funds over to the Indemnifying Party as reimbursement of any indemnification payment hereunder. If the amount to be netted hereunder from any payment required under Sections 9.2 or 9.3 above is determined after 107 payment by the Indemnifying Party (as defined below) of any amount required to be paid to an Indemnified Party pursuant to this Article IX, the Indemnified Party shall repay to the Indemnifying Party, promptly after such determination, any amount that the Indemnifying Party would not have had to pay pursuant to this Article IX had such determination been made at the time of such payment. Indemnification payments hereunder shall be treated as adjustments to the Purchase Price. (d) Anything to the contrary herein notwithstanding, if an amount with respect to which any claim is made under Article VI or Article IX (an "Indemnity Claim") gives rise to a current Tax deduction to the party (the "Indemnified Party") making the Indemnity Claim (as opposed to an increase in the Tax basis of the Indemnified Party's assets), then the amount of the related indemnity payment shall be (x) reduced by the amount of any Tax Benefit whenever utilized by the Indemnified Party as a result of such Tax deduction in respect of such Indemnity Claim, and (y) increased by the amount 108 of any Tax Detriment whenever suffered by the Indemnified Party as a result of the receipt of such indemnity payment (including by reason of a reduction in the Tax basis of the Indemnified Party's assets). For purposes of this Section 9.4, a "Tax Benefit" means an amount by which the Tax liability or Tax sharing liability of a party is reduced (including, without limitation, by deduction, reduction of income by virtue of increased Tax basis or otherwise, entitlement to refund, credit or otherwise) plus any related interest received from the relevant Taxing Authority, and a "Tax Detriment" means an amount by which the Tax liability or Tax sharing liability of a party is increased plus any related interest paid to the relevant Taxing Authority. For purposes of determining Tax detriment, the "amount by which the Tax liability or Tax sharing liability of a party is increased" in the case where such increase is attributable to a reduction in the Tax basis of assets shall be the present value of the Amount amortized or depreciated over the Adjustment Period (properly weighted to take into account the rele- 109 vant amortization or depreciation method) using the Interest Rate. The Amount shall mean the amount that Tax basis is reduced by reason of the receipt of an indemnity payment in respect of an Indemnity Claim. The Adjustment Period shall mean the remaining life of the asset or assets whose Tax basis has been so reduced at the time of such reduction using the amortization or depreciation method applicable to such asset or assets at such time. The Interest Rate shall mean the prime rate as reported in the Wall Street Journal on the date which is three business days prior to the date such indemnity payment in respect of such Indemnity Claim is made. Where a party has other losses, deductions, credits or items available to it such that it would not have any Tax liability or Tax sharing liability for a Tax year, the determination of any Tax Benefit or Tax Detriment (as the case may be) of such party for such Tax year shall be calculated by comparing (A) the Tax liability or Tax sharing liability of such Party, computed without regard to any income, gains, losses, credits, deductions, or items relating to 110 such Indemnity claim and such indemnity payment (as applicable), to (B) the Tax liability or Tax sharing liability of such party, computed after taking into account any income, gains, losses, deductions, credits or items relating to such Indemnity Claim and such indemnity payment (as applicable). In the event that there shall be a determination disallowing all or any portion of a Tax Benefit or a Tax Detriment, the amount of the related indemnity payment shall be recalculated in accordance with the terms of this Section 9.4(d), taking into account such disallowance, and the Indemnifying Party shall be liable to pay to the Indemnified Party the amount of any resulting upward adjustment to the amount of the related indemnity payment, and the Indemnified Party shall be liable to pay to the Indemnifying Party the amount of any resulting downward adjustment to the amount of the related indemnity payment. (e) Any claim made under or with respect to this Agreement or the subject matter hereof, including statutory and common law claims, shall be subject to the 111 provisions set forth in this Section 9.4 or, with respect to Taxes, Article VI hereof. Section 9.5 PROCEDURES. (a) A party seeking indemnification pursuant to Sections 9.2 or 9.3 above or Section 4.9 hereof (an "Indemnified Party") shall give prompt notice to the party from whom such indemnification is sought (the "Indemnifying Party") of the assertion of any claim or assessment, or the commencement of any action, suit, audit or proceeding, by a third party in respect of which indemnity may be sought hereunder (a "Third Party Claim") and will give the Indemnifying Party such information with respect thereto as the Indemnifying Party may reasonably request, but no failure to give such notice shall relieve the Indemnifying Party of any liability hereunder (except to the extent the Indemnifying Party has suffered actual prejudice thereby). Thereafter, the Indemnified Party shall deliver to the Indemnifying Party, within five business days after the Indemnified Party's receipt thereof, copies of all notices and documents (including court papers) received by the Indem- 112 nified Party relating to the Third Party Claim. The Indemnifying Party shall have the right, exercisable by written notice (the "Notice") to the Indemnified Party within 10 days of receipt of notice from the Indemnified Party of the commencement of or assertion of any Third Party Claim, to assume the defense of such Third Party Claim, using counsel selected by the Indemnifying Party and reasonably acceptable to the Indemnified Party. Should the Indemnifying Party so elect to assume the defense of a Third Party Claim, the Indemnifying Party will not be liable to the Indemnified Party for legal expenses subsequently incurred by the Indemnified Party in connection with the defense thereof. If the Indemnifying Party shall fail to assume the defense of the Third Party Claim within such 10-day period, the Indemnified Party shall have the right to undertake the defense of such Third Party Claim on behalf of the Indemnifying Party. If the Indemnifying Party elects to assume the defense of any such Third Party Claim, the Indemnified Party shall not admit any liability with respect to, or 113 settle, compromise or discharge, such Third Party Claim without the Indemnifying Party's prior written consent. If the Indemnifying Party does not elect to assume the defense of any such Third Party Claim, the Indemnified Party shall not admit any liability with respect to, or settle, compromise or discharge, such Third Party Claim without the Indemnifying Party's prior written consent, which consent will not be unreasonably withheld; provided that, if the Indemnifying Party fails to reaffirm its obligations to provide indemnification in respect of such Third Party Claim if requested to do so by the Indemnified Party, the Indemnified Party may settle, compromise or discharge such Third Party Claim on commercially reasonable terms without the consent of the Indemnifying Party. (b) The Indemnifying Party or the Indemnified Party, as the case may be, shall in any event have the right to participate, at its own expense, in the defense of any Third Party Claim which the other is defending. (c) The Indemnifying Party, if it shall have 114 assumed the defense of any Third Party Claim in accordance with the terms hereof, shall have the right, upon five days prior written notice to the Indemnified Party, to consent to the entry of judgment with respect to, or otherwise settle such Third Party Claim provided the Indemnifying Party agrees that as between the Indemnifying Party and the Indemnified Party, the Indemnifying Party shall be solely obligated to satisfy and discharge such judgment or settlement unless the Third Party Claim involves equitable or other non-monetary damages. In the event such judgment or settlement involves equitable or non-monetary damages and in the reasonable judgment of the Indemnified Party such judgment or settlement would have a continuing material adverse effect on the Indemnified Party's business (including any material impairment of its relationships with customers and suppliers), the consent to the entry of such judgment or such settlement may only be made with the written consent of the Indemnified Party, which consent shall not be unreasonably withheld. 115 (d) Whether or not the Indemnifying Party chooses to defend or prosecute any Third Party Claim, all the parties hereto shall cooperate in the defense or prosecution thereof and shall furnish such records, information and testimony, and attend such conferences, discovery proceedings, hearings, trials and appeals as may be reasonably requested in connection therewith. Such cooperation shall include access during normal business hours afforded to the Indemnifying Party to, and reasonable retention by the Indemnified Party of, records and information which are reasonably relevant to such Third Party Claim, and making employees available on a mutually convenient basis to provide additional information and explanation of any material provided hereunder, and the Indemnifying Party shall reimburse the Indemnified Party for all its reasonable out-of-pocket expenses in connection therewith. Section 9.6 EXCLUSIVITY OF REMEDIES. As between Seller, on the one hand, and Buyer, on the other hand, the remedies set forth in this Article IX and 116 Article VI hereof shall be the exclusive remedies with respect to all claims for which indemnification may be sought, except for claims relating to fraud or deceit under common law. As of the Closing, each party will release and forever discharge the other party's officers, directors, employees, agents and affiliates (other than Buyer's or Seller's subsidiaries), and such affiliates' officers, directors, employees and agents from any and all rights to seek reimbursement for or to make any claim against such other person in respect of any Losses incurred in connection with the execution, delivery and performance of this Agreement (including the accuracy of the representations and warranties contained herein) and the transactions contemplated hereby, provided that such release and discharge shall not apply to any other matters. This Section 9.6 shall not restrict the rights of either party to seek and obtain injunctive relief to specifically enforce the other party's obligations hereunder or constitute a release or waiver of any person or entity for actions taken by such person or entity after 117 the Closing. ARTICLE X MISCELLANEOUS PROVISIONS Section 10.1 DISCLOSURE SCHEDULES; EXHIBITS. Matters reflected in the Schedules and Exhibits hereto are not necessarily limited to those matters that Seller believes are required by this Agreement to be disclosed herein or therein. Such additional matters are provided for informational purposes only, and such inclusion shall not be deemed to be an acknowledgment by Seller that such items would have a Material Adverse Effect, nor shall such inclusion be applied to affect or modify the definition of the term Material Adverse Effect for purposes of this Agreement. Section 10.2 AMENDMENT AND MODIFICATION. This Agreement may be amended, modified or supplemented only by written agreement of the parties hereto. Section 10.3 WAIVER OF COMPLIANCE. Any party hereto may waive compliance by the other party or parties 118 with any of the agreements or conditions contained herein. Any such waiver shall be valid only if set forth in a written instrument signed by the party or parties to be bound thereby. Section 10.4 NOTICES. All notices and other communications given or made pursuant hereto shall be in writing and shall be deemed to have been duly given on the date delivered, if delivered personally, on the fifth business day after being mailed by registered or certified mail (postage prepaid, return receipt requested) or on the business day after being sent by reputable overnight courier (delivery prepaid), in each case, to the parties at the following addresses, or on the date sent and confirmed by electronic transmission to the facsimile number specified below (or at such other address or 119 facsimile number for a party as shall be specified by notice given in accordance with this Section 11.4): (a) if to Seller, to: The Coleman Company, Inc. 625 Madison Avenue New York, New York 10022 Attention: Chief Executive Officer Tel: (212) 527-4000 Fax: (212) 527-4150 with a copy to: The Coleman Company, Inc. 3600 North Hydraulic Wichita, Kansas 67219 Attention: Corporate Secretary Tel: (316) 832-2700 Fax: (316) 832-2634 and Skadden, Arps, Slate, Meagher & Flom LLP 919 Third Avenue New York, New York 10022 Attention: Stephen M. Banker, Esq. Tel: (212) 735-2760 Fax: (212) 735-2000 120 (b) if to Buyer, to: Ranco Incorporated of Delaware 300 Delaware Avenue, Suite 1704 Wilmington, Delaware 19804-1612 Attention: President Tel: (302) 427-5779 Fax: (302) 738-7210 with a copy to: Siebe plc Saxon House 2-4 Victoria Street Windsor, Berkshire SL4 1EN Attention: Chief Legal Officer Tel: 011-41-1753-839-296 Fax: 011-44-1753-622-030 with a copy to: Fried Frank Harris Shriver & Jacobson One New York Plaza New York, New York 10004 Attention: Sanford Krieger, Esq. Tel: (212) 859-8230 Fax: (212) 859-4000 (c) if to Guarantor, to: Siebe plc Saxon House 2-4 Victoria Street Windsor, Berkshire SL4 1EN Attention: Chief Legal Officer 121 Tel: 011-44-1753-839-296 Fax: 011-44-1753-622-030 with a copy to: Fried Frank Harris Shriver & Jacobson One New York Plaza New York, New York 10004 Attention: Sanford Krieger, Esq. Tel: (212) 859-8230 Fax: (212) 859-4000 Section 10.5 PARTIES IN INTEREST; ASSIGNMENT. This Agreement shall be binding upon and inure to the benefit of each party hereto and its respective successors and permitted assigns, and no provision of this Agreement, express or implied, is intended to or shall confer upon any other person any right, benefit or remedy of any nature whatsoever under or by reason of this Agreement, except as provided in Article IX hereof. Neither this Agreement nor any of the rights, interests or obligations hereunder may be assigned, directly or indirectly, by any party hereto without the prior written consent of the other parties hereto. Notwithstanding the foregoing, Seller may assign any or all of its rights or 122 interests under this Agreement to a wholly-owned subsidiary; PROVIDED, HOWEVER, Seller may not so assign any of its obligations hereunder, and Buyer may assign its rights hereunder (but such assignment will not relieve it of any of its obligations) to any wholly-owned subsidiary of Guarantor. Section 10.6 COUNTERPARTS. This Agreement may be executed in two or more counterparts, each of which when executed shall be deemed to be an original and all of which taken together shall constitute one and the same agreement. Section 10.7 CONSTRUCTION; INTERPRETATION. (a) Any rule of law that would require interpretation of any claimed ambiguities in this Agreement against the party that drafted it shall have no application and is expressly waived. (b) For purposes of this Agreement, all references to the "appropriate Seller or Company personnel" shall refer solely to the appropriate corporate officer of Seller or the Company listed in Section 10.7(b) of the 123 Disclosure Schedule of whom due inquiry was made and "knowledge" of Seller shall be deemed to include only the actual current knowledge of such corporate officer of Seller or the Company. (c) References made to an "Exhibit" or a "Schedule," unless otherwise specified, refer to an Exhibit or Schedule, respectively, attached to this Agreement, and references made to an "Article" or a "Section," unless otherwise specified, refer to an Article or Section, respectively, of this Agreement or the Disclosure Schedule. The article and section headings contained in this Agreement are solely for the purpose of reference, are not part of the agreement of the parties and shall not in any way affect the meaning or interpretation of this Agreement. (d) As used herein, the plural form of any noun shall include the singular and the singular shall include the plural, unless the context requires otherwise. Each of the masculine, neuter and feminine forms of any pronoun shall include all such forms unless the 124 context requires otherwise. Section 10.8 ENTIRE AGREEMENT. Except for the Confidentiality Agreement, this Agreement (together with the Disclosure Schedule, Exhibits, and the further agreements expressly referred to herein) and the License Agreement constitute the entire agreement of the parties hereto with respect to the subject matter hereof and supersede all prior agreements and undertakings, both written and oral, between or among the parties, or any of them, with respect to the subject matter hereof. Section 10.9 SEVERABILITY. If any term or other provision of this Agreement, or any portion thereof, is invalid, illegal or incapable of being enforced by any rule of law or public policy, all other terms and provisions of this Agreement, or the remaining portions thereof, shall nevertheless remain in full force and effect. Upon such determination that any such term or other provision, or any portion thereof, is invalid, illegal or incapable of being enforced, the parties hereto shall negotiate in good faith to modify this 125 Agreement so as to effect the original intent of the parties as closely as possible in an acceptable manner to the end that the transactions contemplated hereby are consummated to the fullest possible extent. Section 10.10 GOVERNING LAW. This Agreement shall be governed by the laws of the State of New York as to all matters, without regard to the conflict of laws principles thereof. Section 10.11 GUARANTEE. Guarantor hereby unconditionally and irrevocably guarantees all of the obligations and liabilities of Buyer under this Agreement, including but not limited to the full and prompt payment of all sums that now are or may hereafter become due and payable from Buyer to Seller under this Agreement and the full and prompt performance of all present and future obligations and liabilities of Buyer to Seller under this Agreement. Guarantor further promises to pay all such sums due Seller under this guarantee promptly on demand, without deduction for any claim or set-off or counterclaim and regardless of whether recourse has first 126 been sought against Buyer. This is a guarantee of payment and not of collection. 127 IN WITNESS WHEREOF, Seller, Guarantor and Buyer have caused this Agreement to be signed by their respective duly authorized officers as of the date first above written. THE COLEMAN COMPANY, INC. By: Paul Shapiro ---------------------------------- Name: Paul Shapiro Title: Executive Vice President/ General Counsel SIEBE PLC By: JAMES F. MUELLER ---------------------------------- Name: James F. Mueller Title: Director RANCO INCORPORATED OF DELAWARE By: TIMOTHY J. DOLAN ---------------------------------- Name: Timothy J. Dolan Title: Vice President EXHIBIT A LICENSE AGREEMENT THIS AGREEMENT, made and entered into as of [___________], 1998 by and among THE COLEMAN COMPANY, INC., a Delaware corporation (hereinafter referred to as "Licensor"), SIEBE PLC, an English corporation (hereinafter referred to as "Guarantor"), and RANCO INCORPORATED OF DELAWARE, a Delaware corporation and a wholly-owned subsidiary of Guarantor (hereinafter referred to as "Licensee"). WITNESSETH: WHEREAS Licensee desires to obtain a license to use the Licensed Mark (as defined below) in connection with the manufacture, merchandising, promotion, advertising, sale and distribution of the Merchandise (as defined below), and Licensor is willing to grant such license subject to all the terms of this Agreement: NOW, THEREFORE, in consideration of the premises and the mutual covenants hereinafter set forth, Licensor and Licensee agree as follows: I DEFINITIONS The following definitions shall be applicable throughout this Agreement: 1.1 The term "Licensed Mark" shall mean the trademark "COLEMAN," and the variations thereof and associated logos set forth in Schedule A. 1.2 The term "Licensed Merchandise" shall mean Merchandise (as that term is defined in Section 1.C below) that is approved by Licensor in accordance with Section 4 hereof and is sold or promoted by Licensee under the Licensed Mark. 1.3 The term "Merchandise" shall mean smoke alarms, carbon monoxide detectors, heat detectors, flammable gas detectors and indoor air quality monitors. 1.4 The term "Territory" shall mean the world. 1.5 The term "Net Sales" shall mean the total invoiced price of the Licensed Merchandise shipped by Licensee to its customers, less federal, state and local sales, use and excise taxes, freight and insurance (if separately stated), and actual returns. Net Sales in any quarter shall be reduced by returns made in such quarter, regardless of when the sales of such returned items were made. For purposes of calculating Net Sales in the case of "direct ship", "first-cost" or F.O.B. sales made by Licensee hereunder, any Licensed Merchandise shipped by Licensee's contract manufacturer directly to a customer of Licensee shall be valued at Licensee's customary wholesale price to its trade customers, regardless of the actual invoiced price to the customer. 1.6 The term "Stock Purchase Agreement" shall mean the Stock Purchase Agreement between Licensor and Licensee dated February 18, 1998. 1.7 The term ("Term") shall mean the duration of this Agreement, as set forth in Section 3, and shall include any renewal period(s) as described therein. II LICENSE GRANT 2.1 Licensor hereby grants to Licensee an exclusive license throughout the Territory during the Term to all of Licensor's right, title and interest in and to the Licensed Mark for use as a trademark and service mark, solely in conjunction with the term "Sheltra," for use solely in connection with the manufacture, advertising, merchandising, promotion, publicity, 2 use, sale, distribution and servicing of Licensed Merchandise, subject to all the terms and conditions of this Agreement. It is agreed that during the Term, Licensor shall not grant to any other entity, nor shall Licensor have, the right to use the word "Coleman" alone, or with other terms or symbols, in connection with Merchandise. It is further agreed that should the Term last through, and end upon the conclusion of, a Second Renewal Term, then for one (1) year following the end of the Term, Licensor shall not use the word "Coleman" alone, or with other terms or symbols, in connection with the advertising, promotion, publicity, distribution or sale of Merchandise, nor license any other entity to so use the word or otherwise allow such use in return for compensation. 2.2 Licensee accepts said grant, and agrees to use its reasonable efforts to exploit the rights granted herein including, without limitation, maintaining a sales force or distribution network sufficient to provide effective distribution of the Licensed Merchandise, and assisting with Licensor's advertising program. It is agreed that nothing herein shall require Licensee to sell Licensed Merchandise at a loss or shall interfere with Licensee's right to sell Merchandise which is not Licensed Merchandise. 2.3 Licensee may use the Licensed Mark only in connection with the manufacture, advertising, merchandising, promotion, publicity, use, sale, distribution and servicing of Licensed Merchandise. No license is granted hereunder for the use of the Licensed Mark for any purpose other than upon or in connection with the Licensed Merchandise. 2.4 Licensor makes no representation or warranty as to any rights to use the Licensed Mark outside of the United States and Canada. 3 2.5 Licensee shall have no right to sublicense the Licensed Mark, except that Licensee may sublicense the Licensed Mark to any wholly-owned subsidiary of Guarantor, so long as such subsidiary remains a wholly-owned direct or indirect subsidiary of Guarantor. In the event that Licensee shall grant a sublicense as permitted hereby, Licensee shall be jointly and severally liable along with any such authorized sublicensee to comply in all respects with all requirements of this Agreement. In addition, Licensor shall have the direct right under any such sublicense agreement to exercise direct control over the quality of Licensed Merchandise and related materials to the same extent as it has under this Agreement. III TERM 3.1 This Agreement shall become effective as of the date first above written (the "Effective Date") and shall continue for a period of five (5) years, terminating on the fifth anniversary of the Effective Date (the "Initial Term"), unless terminated prior thereto in accordance with the terms and conditions hereof. 3.2 Licensee shall have the option to renew this Agreement for two additional five (5) year periods (the "First Renewal Term" and "Second Renewal Term," respectively) by giving Licensor written notice at least one hundred and twenty (120) days prior to the end of the Initial Term or the First Renewal Term, respectively; PROVIDED that Licensee is in compliance in all material respects with all terms and conditions of this Agreement. The First Renewal Term shall commence upon the date of expiration of the Initial Term and shall terminate on the fifth anniversary of such date; the Second Renewal Term shall commence upon the date of expiration of the First Renewal Term and shall terminate on the fifth anniversary of such date. IV LICENSED MERCHANDISE AND QUALITY CONTROL 4 4.1 Licensee agrees that Licensed Merchandise and its Packaging will be designed, manufactured, advertised, promoted, publicized, distributed and sold only in a manner which (i) is consistent with Licensor's standards for the Licensed Merchandise in the six (6) months prior to the date hereof, (ii) is consistent with the safety and quality standards of the industry standards for the Licensed Merchandise, and (iii) is commensurate with the prestige and reputation of the Licensed Mark. 4.2 Licensee must obtain the prior written approval of Licensor for all material changes in designs, specifications, colors, materials and contract manufacturers of all Merchandise and components thereof intended to be sold as Licensed Merchandise, including any labels, instructions, packaging, containers and displays (said labels, instructions, packaging, containers and displays hereinafter collectively "Packaging") intended to be utilized in connection with the Licensed Merchandise, to the extent that any such changes affect the safety, performance or quality standards of such Licensed Merchandise and Packaging or the use of the Licensed Mark thereon. The designs, specifications, colors, materials and contract manufacturers for the Merchandise and Packaging sold by Licensor immediately prior to the date hereof shall be deemed pre-approved. 4.3 From time to time during the Term, Licensee shall submit to Licensor design change proposals for any items or styles of Licensed Merchandise and Packaging proposed by Licensee, which materially differ from the Licensed Merchandise and Packaging sold by Licensor immediately prior to the date hereof, to the extent such design change proposals or Packaging affect the safety, performance or quality standards of the Licensed Merchandise or Packaging or the use of the Licensed Mark thereon. Within ten (10) business days of Licensor's receipt of such design proposals of the Li- 5 censed Merchandise and Packaging, Licensor will review them and Licensee will provide its full assistance and cooperation to Licensor in such review, including making available a qualified person(s) appointed by Licensee to meet with Licensor and assist Licensor in its review. Not later than the end of such ten (10) business day period, Licensor shall notify Licensee of which if any of the design proposals or Packaging Licensor has approved and of objections, if any, to any aspect of the design proposals or Packaging. Failure to notify Licensee of approval or objections within said ten (10) business day period shall be deemed an approval. 4.4 The Licensed Merchandise and Packaging manufactured, sold, advertised or promoted by Licensee shall be identical to the Licensed Merchandise and Packaging approved by Licensor pursuant to Section 4.B with respect to the safety, performance or quality standards of such Licensed Merchandise and Packaging and the use of the Licensed Mark thereon. Immediately upon commencement of commercial production of any Licensed Merchandise and Packaging, Licensee shall notify Licensor and permit Licensor to inspect a production sample of each stock keeping unit (an "SKU") of the Licensed Merchandise and Packaging. If, in Licensor's judgment, the production sample is "Nonconforming" (i.e., not substantially identical to the previously-approved Licensed Merchandise and Packaging in the above-mentioned respects), Licensor shall promptly notify Licensee and shall specify in which respects the sample is Nonconforming. Upon receipt of such notice, Licensee shall immediately stop production and sale of the Nonconforming Licensed Merchandise and Packaging until a production sample is submitted and approved by Licensor. 4.5 For purposes of monitoring quality, Licensee agrees to permit Licensor to inspect samples of each SKU of Licensed Merchandise and related Packaging 6 from time to time, upon request throughout the Term. In addition, upon request Licensee shall provide to Licensor, free of charge, at least one sample of each SKU (not including color variations) of Licensed Merchandise and related Packaging for presenting Licensor's licensing activities to corporate and business constituencies and for display purposes at Licensor's headquarters. 4.6 Licensee will comply with all laws, rules, regulations and requirements of any governmental or administrative body (including, without limitation, the Federal Trade Commission and the Consumer Product Safety Commission), which may be applicable to the manufacture, advertising, merchandising, packaging, publicity, promotion, sale, distribution, shipment, import and export of the Licensed Merchandise, its Packaging and its componentry. 4.7 Licensor and its duly authorized representatives shall have the right, during normal business hours and upon reasonable notice and the execution of a confidentiality agreement with Licensee substantially in the form attached hereto as Exhibit 1, once per quarter during the Term to inspect all manufacturing facilities utilized by Licensee (and its contractors and suppliers to the extent Licensee may use the same) and to examine all processes and records relating to the manufacturing, packaging, warehousing and distribution of the Licensed Merchandise and Packaging including, without limitation, the right to open and inspect shipping cartons, and make such other tests and inspections as it shall deem necessary to insure the quality of the Licensed Merchandise and Packaging. Licensee shall take all necessary steps requested by Licensor to correct any deficiencies that might affect the quality of the Licensed Merchandise and Packaging. 4.8 Licensee agrees to use its best efforts to safeguard the prestige of the Licensed Mark for the 7 benefit of Licensor. Licensee shall not market any of the Licensed Merchandise as close-outs or irregulars, in excess of 5% of total unit sales during any calendar year, except as approved in advance by Licensor in writing on a case-by-case basis. In the event Licensor approves the sale of Licensed Merchandise as close-outs, Licensor shall have the absolute right to determine the appropriate close-out outlets. 4.9 All Licensed Merchandise and/or Packaging will bear at least one label or display with the Licensed Mark in a form approved by Licensor in advance in accordance with Section 4.B hereof and will bear no label or display of the Licensed Mark unless previously approved by Licensor. 4.10 The Licensed Merchandise shall be sold by Licensee only to (i) retail outlets to which Licensor has sold Licensed Merchandise immediately prior to the date hereof in its ordinary course of business and not for closeout, or such other outlets as are specified on Schedule B hereto, (ii) such other retail outlets as may be expressly approved by Licensor in writing prior to any sale of Licensed Merchandise to such outlet, and (iii) such retail outlets as are established in the future that are of at least the same quality and reputation as those described in clauses (i) and (ii) above (collectively, the "Approved Retail Outlets"). Licensee shall not sell the Licensed Merchandise other than to Approved Retail Outlets, unless, and then only to the extent that, such sale has been previously approved in writing by Licensor. Licensee shall upon notice immediately stop selling to any previously approved customer or other approved entity which becomes engaged in reselling Licensed Merchandise otherwise than to consumers at retail in the Territory. 8 V PUBLIC RELATIONS, ADVERTISING AND PROMOTION 5.1 Licensee shall submit to Licensor for its prior written approval any and all public statements, press releases and responses to press inquiries relating in any way to this Agreement. 5.2 Licensor shall have the right to approve in advance any and all advertising, marketing and promotions to be conducted by Licensee and all trade materials, business cards, invoices, stationery and other printed matter prepared by or for Licensee using or referring to the Licensed Mark. Licensee shall submit to Licensor for its prior approval copies of all of the foregoing. Such approval shall not be unreasonably withheld and shall be deemed granted if Licensor does not respond within ten (10) business days of receipt of such submission. 5.3 At least once each year, Licensee will submit for Licensor's information a presentation detailing Licensee's plans to market, promote and advertise the Licensed Merchandise. VI ROYALTY PAYMENTS 6.1 Licensee shall pay Licensor on a quarterly basis, for the duration of the Initial Term, and First Renewal Term and Second Renewal Term, if any, a royalty of five percent (5%) of Net Sales (the "Royalties"). 6.2 Royalties shall be paid within thirty (30) days of the close of each calendar quarter. Each royalty payment shall be accompanied by a statement signed and certified by the Chief Financial Officer of Licensee that the accompanying remittance is the full amount due hereunder. Each such accounting statement shall be in such form as Licensor may specify and shall show the Net Sales by customer made during the preceding quarter, and a 9 computation of the amount of Royalties payable hereunder in respect of such Net Sales for such period (the "Royalty Report"). Such Royalty Report shall be furnished to Licensor whether or not any Royalty payments are payable for such period. The first Royalty Report due under this Agreement shall be for the quarter ending March 31, 1998. Upon request by Licensor, Licensee shall submit invoices, credit memoranda, factor statements and/or computer printouts substantiating the reported information, in addition to a summary by customer and product code and invoices and other supporting documentation. Receipt or acceptance by Licensor of any Royalty Report furnished, or of any sums paid by Licensee, shall not preclude Licensor from questioning their correctness at any time. 6.3 In the event Licensee exercises its option pursuant to Section 13.B hereof to extend the license herein granted for purposes of liquidating its inventory of Licensed Merchandise, Licensee shall pay all Royalties with the accompanying Royalty Report quarterly within thirty (30) days following the close of each calendar quarter during the extension period following termination. 6.4 As soon as practicable, but not later than ninety (90) days after the end of each year during the Term, and within ninety (90) days after the expiration or termination of the Term, Licensee shall submit to Licensor a statement signed and certified by the Chief Financial Officer of Licensee that the quarterly statements furnished by Licensee hereunder as well as Licensee's related books of account and other records and that such quarterly statements have been prepared in accordance with generally accepted accounting principles (except as provided in Section 6.H) applied on a basis consistent with Licensee's audited financial statements and that such statements and report are correct. At the same time, Licensee shall also submit to Licensor a copy of the audited financial statements of Guarantor for its 10 most recently completed fiscal year. 6.5 All royalty payments and accounting statements are to be directed as provided in Section 16.A, below. 6.6 In the event that payment of Royalties to Licensor hereunder gives rise to any taxes, duties and other governmental charges in the Territory, including, without limitation, any withholding taxes, stamp duties or documentary taxes, turnover, sales or use taxes, value added taxes, excise taxes, customs or exchange control duties or any charges, Licensee and Licensor shall each be responsible for one half of such taxes, duties or charges, except that Licensor shall be responsible for any tax imposed on Licensor's income by the jurisdictions in which it conducts business. 6.7 All royalty payments shall accrue upon the sale of the Licensed Merchandise regardless of the time of collection by Licensee. For purposes of this Agreement, Licensed Merchandise shall be considered "sold" upon the date of invoicing. 6.8 Royalty payments shall be based on U.S. dollar calculations and paid by Licensee in U.S. dollars. Local currency sales shall be converted to U.S. dollars on a monthly basis using the average exchange rates of New York banks as published in the WALL STREET JOURNAL during the month in which sales are made, in accordance with generally accepted accounting principles as the same may be amended from time to time. 6.9 If any governmental entity restricts or prohibits, by exchange controls or otherwise, the payment to Licensee of any sums due it on sales of Licensed Merchandise hereunder, Licensee shall, notwithstanding any such restriction, pay to Licensor in the United States any and all such sums due Licensor hereunder in 11 U.S. dollars, as and when due in accordance with the terms hereof. VII USE OF LICENSED MARK 7.1 Licensee shall use and display the Licensed Mark only in such forms detailed in the standards and specifications guidelines provided by Licensor, as the same may be changed from time to time, or otherwise approved by Licensor in writing; provided, however, that Licensor shall provide thirty (30) days' advance notice of any such change to the guidelines, but Licensee may continue to use the Packaging, stationery and other items containing the previously approved forms of the Licensed Mark to the extent such items are held in inventory on the date of such notice, but in no event for more than nine (9) months following such notice. 7.2 Licensee will not use the Licensed Mark as a corporate name or as a trade name, in whole or in part, or in such a way as, in Licensor's sole judgment, may give the impression that the Licensed Mark is the property of Licensee. No name or names shall be conjoined or used by Licensee in connection with the Licensed Mark in or on any advertising, publicity, trade or promotional material or Packaging utilized by Licensee in connection with the Licensed Merchandise except as required by Section 2.A or to the extent that such is specifically required by law to indicate the source of manufacture or distribution of the Licensed Merchandise. Licensee shall not use any name which, in Licensor's judgment, may be confusingly similar to the Licensed Mark on Merchandise or otherwise, during the Term or thereafter. 7.3 Licensee acknowledges that the Licensed Mark has acquired valuable goodwill with the public and that any products bearing the Licensed Mark have acquired a reputation of high quality. Licensee acknowledges that Licensor is the owner of all right, title and interest in 12 and to the Licensed Mark, and is also the owner of the goodwill attached to the Licensed Mark including that which arises from the sale of Licensed Merchandise hereunder. All use by Licensee of the Licensed Mark shall be deemed to have been made by and for the benefit of Licensor for the purposes of securing and maintaining trademark rights, applications and/or registrations, and all uses of the Licensed Mark by Licensee, or by any sublicensee or assignee, and any goodwill arising therefrom, shall inure to the sole and exclusive benefit of Licensor. 7.4 Licensee hereby assigns to Licensor any rights to the Licensed Mark which may, by operation of law or otherwise, vest in Licensee as a consequence of Licensee's activities under this Agreement, and any goodwill arising therefrom, which shall in any event inure to the sole and exclusive benefit of Licensor. Licensee will not, at any time, do or suffer to be done any act or thing which will, in any way, impair or adversely affect the ownership or the rights of Licensor in or to the Licensed Mark or its reputation, and Licensee will make no applications nor seek any registration or ownership rights in or to the Licensed Mark in the Territory or elsewhere. 7.5 Licensee acknowledges that only Licensor may file or prosecute trademark applications to register the Licensed Mark. Licensee will cooperate with Licensor in connection with the filing and prosecution by Licensor of any such applications, and the maintenance or renewal of any trademark registration for the Licensed Mark, and will supply Licensor with Merchandise bearing the Licensed Mark, including samples, Packaging and other uses of the Licensed Mark, as may reasonably be requested by Licensor in connection herewith. Licensee shall execute all documents, including, but not limited to, registered user agreements and any cancellations thereof, which Licensor may request in order to obtain or maintain a 13 registration or to establish or to maintain Licensor's ownership of the Licensed Mark. 7.6 Licensor currently owns registrations and applications for registration of the Licensed Mark for Merchandise in the jurisdictions listed on Schedule A hereto. Licensee will give Licensor reasonable advance notice prior to using any of the Licensed Marks in any jurisdiction not covered by a registration or application for registration licensed hereunder. Licensor will (i) file and prosecute applications for registration of the Licensed Mark for use for Merchandise in such other jurisdictions as Licensee reasonably deems appropriate at Licensee's cost, and (ii) if Licensor elects not to maintain or renew any trademark registration of the Licensed Mark, Licensee may request that Licensor do so and Licensor will so renew or maintain such registration at Licensee's expense; provided that in either case, Licensee shall be entitled to deduct Licensee's costs and expenses from the Royalties payable to Licensor hereunder on account of sales of Licensed Merchandise in such jurisdiction. 7.7 Licensee agrees and undertakes to use the Licensed Mark in compliance with any and all applicable trademark and other laws and to use such legends, markings or notices in connection therewith as are required by law or otherwise reasonably required by Licensor to protect its rights. Upon expiration or termination of this Agreement for any reason whatsoever, Licensee will execute and file any and all documents acknowledging that it no longer has rights in the Licensed Mark which Licensor shall require. Licensor shall bear all expenses reasonably incurred in preparing and recording any such documents. 7.8 Licensee agrees not (i) to challenge the validity of or Licensor's ownership of the Licensed Mark when used separately or in composite form with other 14 trademarks, logos, or designs, or any application for registration thereof, or any trademark registration thereof, in any jurisdiction, or (ii) to contest the fact that Licensee's rights under this Agreement terminate upon termination or expiration of this Agreement. The provisions of this Section 7.H shall survive termination or expiration of this Agreement. 7.9 Licensee shall promptly notify Licensor of any infringement, imitation or act inconsistent with Licensor's ownership of the Licensed Mark by third parties, or any act of unfair competition by third parties relating to the Licensed Mark, wherever and whenever such infringement or act shall come to the attention of the executive of Licensee responsible for licensing matters or the general manager of Licensee's business, and any successors thereto or replacements therefor. After receipt of such notice from Licensee, Licensor shall in its sole discretion decide whether to take action with respect to such infringement or act, and Licensee shall fully cooperate with Licensor in such action and, if so requested by Licensor, shall join with Licensor as a party to any such action brought by Licensor. Licensor shall bear all expenses in connection with the foregoing. Any recovery as a result of such action shall belong solely to Licensor. Licensee agrees that Licensor shall have the sole power to take legal or other action before any court or governmental authority with respect to the infringement and the protection of the Licensed Mark. If Licensor decides not to take action with respect to such infringement or act, Licensee may request that Licensor so act and upon such request, Licensor shall take all reasonable steps to stop the infringement, imitation or act, provided that Licensee reimburse Licensor for all costs incurred by Licensor (net of amounts recovered by Licensor). 7.10 Licensee shall not at any time use the Licensed Mark or the Licensed Merchandise, or any materi- 15 al utilizing or reproducing the Licensed Mark or Licensed Merchandise, in a manner that is reasonably likely to derogate the value, reputation or goodwill associated with the Licensed Mark. VIII BOOKS AND RECORDS Licensee shall maintain, at its main offices, true and accurate books and records, in accordance with generally accepted accounting principles, containing all particulars which may be necessary for the purpose of verifying compliance with the terms and conditions hereof and for determining all amounts payable to Licensor hereunder, which books and records shall be separate and distinct from those relating to Licensee's businesses other than the sale of Licensed Merchandise. Licensee shall make such books and records available to Licensor and its designated representatives during regular business hours and upon reasonable notice once per quarter throughout the Term, including any renewal terms, and a period of twelve (12) months thereafter, for the purpose of auditing Licensee's reports, accounting statements and royalty payments hereunder. Licensor shall be entitled to make copies, at its expense, of any such records. Without limitation of Licensor's rights under Section 12, if Licensor uncovers an error in Net Sales or royalty computation or in the computation of any other amounts due to Licensor or payable by Licensee, Licensee agrees to pay immediately all sums due (with interest at the prime rate from the date payment was due hereunder), and if such error exceeds 5% of the amount properly payable by Licensee, Licensee will at the same time reimburse Licensor for its reasonable costs of conducting such audit. IX REPRESENTATIONS AND WARRANTIES OF LICENSEE AND GUARANTOR 9.1 ORGANIZATION. Each of Licensee and Guar- 16 antor is a corporation duly organized, validly existing and in good standing under the laws of the jurisdiction of its incorporation or organization. 9.2 AUTHORITY RELATIVE TO THIS AGREEMENT. Each of Licensee and Guarantor has full corporate power and authority to execute, perform and deliver this Agreement. The execution, delivery and performance of this Agreement has been duly and validly authorized by all necessary corporate action, and no other corporate proceedings on the part of Licensee or Guarantor are necessary to authorize this Agreement. This Agreement has been duly and validly executed and delivered by each of Licensee and Guarantor and constitutes a valid and binding agreement of each of Licensee and Guarantor, enforceable in accordance with its terms, except that (i) such enforcement may be limited by bankruptcy, insolvency, reorganization, moratorium or other similar laws now or hereafter in effect relating to creditors' rights and (ii) the remedy of specific performance and injunctive and other forms of equitable relief may be subject to equitable defenses and to the discretion of the court before which any proceeding therefor may be brought. 9.3 NO VIOLATION. The execution, performance and delivery of this Agreement by each of Licensee and Guarantor will not (i) violate any provision of the Certificate of Incorporation, By-Laws or other organizational documents of Licensee or Guarantor, (ii) violate, or be in conflict with, or constitute a default or termination event (or an event which, with notice or lapse of time or both, would constitute a default or a termination event) under, any agreement or commitment to which Licensee or Guarantor is a party, or (iii) violate any applicable statute or law or any judgment, decree, order, regulation or rule of any court or governmental authority binding on Licensee or Guarantor. 9.4 CONSENTS AND APPROVALS. No consent, 17 approval or authorization of, or declaration, filing or registration with, any governmental or regulatory authority is required in connection with the execution, delivery and performance of this Agreement by Licensee or Guarantor. No consent of any person is necessary for the execution, performance or delivery of this Agreement by Licensee or Guarantor, including, without limitation, consents from parties to loans, contracts, leases or other agreements to which Licensee or Guarantor is a party. X REPRESENTATION AND WARRANTIES OF LICENSOR 10.1 ORGANIZATION. Licensor is a corporation duly organized, validly existing and in good standing under the laws of the State of Delaware. 10.2 AUTHORITY RELATIVE TO THIS AGREEMENT. Licensor has full corporate power and authority to execute, perform and deliver this Agreement. The execution, delivery and performance of this Agreement has been duly and validly authorized by all necessary corporate action, and no other corporate proceedings on the part of Licensor are necessary to authorize this Agreement. This Agreement has been duly and validly executed and delivered by Licensor and constitutes a valid and binding agreement of Licensor, enforceable in accordance with its terms, except that (i) such enforcement may be limited by bankruptcy, insolvency, reorganization, moratorium or other similar laws now or hereafter in effect relating to creditors' rights and (ii) the remedy of specific performance and injunctive and other forms of equitable relief may be subject to equitable defenses and to the discretion of the court before which any proceeding therefor may be brought. 10.3 NO VIOLATION. The execution, performance and delivery of this Agreement by Licensor will not (i) violate any provision of the Certificate of Incorporation 18 or By Laws of Licensor, (ii) violate, or be in conflict with, or constitute a default or termination event (or an event which, with notice or lapse of time or both, would constitute a default or a termination event) under, any agreement or commitment to which Licensor is a party, or (iii) violate any applicable statute or law or any judgment, decree, order, regulation or rule of any court or governmental authority binding on Licensor. 10.4 CONSENTS AND APPROVALS. No consent, approval or authorization of, or declaration, filing or registration with, any governmental or regulatory authority is required in connection with the execution, delivery and performance of this Agreement by Licensor. No consent of any person is necessary for the execution, performance or delivery of this Agreement by Licensor, including, without limitation, consents from parties to loans, contracts, leases or other agreements to which Licensor is a party. 10.5 LICENSED MARK. To the knowledge of Licensor after due inquiry of appropriate Licensor personnel, Licensor owns all right, title and interest in and to the Licensed Mark in the United States and Canada. There is no claim, action, proceeding, suit, complaint or, to the knowledge of Licensor, investigation pending or, to the knowledge of Licensor, threatened that (i) the use of the Licensed Mark in connection with the Merchandise infringes upon or conflicts with the intellectual property rights of any other person, or (ii) challenges the legality, validity, enforceability, use or ownership of the Licensed Mark. To the knowledge of Licensor, no third party has interfered with, infringed upon or misappropriated the Licensed Mark. XI INDEMNIFICATION AND INSURANCE 11.1 Licensor hereby agrees to indemnify and hold harmless Licensee, its affiliates and each of their 19 respective shareholders, officers, directors, employees and agents against any and all liability, claims, causes of action, suits, damages and expenses (including reasonable attorneys' fees), for which they or any of them may become liable or may incur or be compelled to pay in any action or claim against them or any of them arising from infringement of statutory or common law trademark or trade name rights of others through the use of the Licensed Mark by Licensee in the United States, Canada or Mexico in compliance with all of the terms and conditions of this Agreement, provided that Licensee: (i) gives Licensor written notice of each such action or claim promptly following its receipt thereof, (ii) gives Licensor the opportunity to undertake and to control the defense and settlement of such claim through counsel of its own choosing, and (iii) fully cooperates with Licensor in the investigation, defense and settlement of any such claim. Licensee shall have the right to participate in (but not to control) any such defense through counsel of its choice, but at Licensee's expense. If Licensor fails or refuses to undertake the defense of any such claim within a reasonable period after notice from Licensor, Licensee shall be entitled to defend such claim through counsel of its choice, and Licensor shall be responsible for reimbursing Licensee for any expenses incurred by Licensee, including but not limited to reasonable attorneys', accountants', and other experts' fees and expenses in the investigation, defense and settlement of such claim and in enforcing its rights pursuant to this Section 11.A, in addition to any damages and penalties ultimately awarded against Licensee which are indemnifiable hereunder. 11.2 Licensee agrees to indemnify and hold harmless Licensor, its affiliates and each of their respective shareholders, officers, directors, employees and agents against any and all liability, claims, causes of action, suits, damages and expenses for which they or any of them may become liable or may incur or be com- 20 pelled to pay in any action or claim against them or any of them by any persons other than Licensor for or by reason of (a) the infringement of design rights, patents, trade secret rights or rights to any intellectual property of third persons (other than trademark rights infringed by use of the Licensed Mark in accordance with all the terms hereof, or resulting from a breach by Licensee of its representations and warranties in the Stock Purchase Agreement) as a result of the manufacture, warehousing, marketing, promotion, publicity, advertising, sale or distribution of Licensed Merchandise by Licensee or any of its agents, representatives, contractors, sublicensees or assigns, (b) any acts, whether of omission or commission, that may be committed or suffered by Licensee or any of its agents, representatives, contractors, sublicensees or assigns in connection with this Agreement, (c) any liability (including, without limitation, any personal injury or property damage) arising out of the manufacture, warehousing, marketing, promotion, publicity, sale, advertising, or distribution of or the use by any professional or consumer of, Licensed Merchandise, or any violation of any warranty, representation or agreement made or deemed made by Licensee or any of its agents, representatives, contractors, sublicensees or assigns with respect to the Licensed Merchandise, or (d) the breach by Licensee of any of its representations, warranties or covenants in this Agreement. Licensor shall give Licensee written notice of any such claim promptly following its receipt thereof. Licensee shall have the opportunity to undertake and to control the defense and settlement thereof through attorneys selected by Licensee after notice to and consultation with Licensor and good faith negotiations regarding alternative counsel if Licensor has reasonable objections to Licensee's choice of counsel. Notwithstanding the foregoing, Licensee shall not, without the consent of Licensor, settle or compromise any claim or consent to the entry of any judgment which includes a remedy other than the payment of money by Licensee. Licensor will cooperate 21 with Licensee in the investigation, defense and settlement of any such claim and shall have the right to participate in (but not to control) any such defense through counsel of its own choice, but at Licensor's own expense. If Licensee elects not to undertake the defense of any such claim, it will be responsible for reimbursing Licensor for any expenses incurred by Licensor, including but not limited to reasonable attorneys', accountants', and other experts' fees and expenses in the investigation, defense and settlement of such claim and in enforcing its rights pursuant to this Section 11.B, in addition to any damages and penalties ultimately awarded against Licensor which are indemnifiable hereunder. 11.3(i) Without limiting the indemnification provided in Section 11.B above and in addition to it, Guarantor agrees to carry and maintain, throughout the Term (including all renewal terms, if any) and for five years thereafter, with an insurance carrier authorized to do business in all jurisdictions in which Licensee is qualified to do business and having a rating of "A" Class "X" or better according to Best's Insurance Reports and a rating of classification "A" or better according to Standard and Poor's, the following insurance coverage: (1) a broad form Comprehensive General Liability Insurance Policy or, if such policy is not reasonably available, such other policy as would provide substantially the same protection to Licensor and Licensee or Guarantor written on occurrence basis covering Licensee's activities with respect to the Licensed Merchandise which includes but is not limited to coverage for contractual liability, premises operations, products liability, personal injury and advertising injury liability and broad form property damage liability, which shall provide protection to Licensor of at least Ten Mil- 22 lion Dollars ($10,000,000) per occurrence and Ten Million Dollars ($10,000,000) in the annual aggregate; (2) statutory workers' compensation and employers liability insurance with a limit for Bodily Injury by Accident of not less than One Million Dollars ($1,000,000) each accident and for Bodily Injury by Disease of not less than One Million Dollars ($1,000,000) policy limit and of not less than One Million Dollars ($1,000,000) for each employee; and (3) automobile liability insurance covering all owned, non-owned, and hired vehicles to be used in the performance of this Agreement with minimum limits of Two Million Dollars ($2,000,000) combined single limit. These stipulated limits of coverage shall not be construed as a limitation of any potential liability of Licensee or Guarantor. Guarantor shall have Licensor, its parents, subsidiaries, affiliated companies and their respective officers, directors, employees, and agents named as additional insureds on such policies. Guarantor shall, within thirty (30) days after the date first above written, provide to Licensor a Certificate of Insurance and certified copies of endorsements to such policies from the insurance carrier which evidences each insurance coverage required, the limits of liability stated above, without any provision for deductibles or self-insured retentions, and further provides that the policies may not be materially changed or canceled without at least sixty (60) days prior written notice to Licensor. Not less than thirty (30) days prior to any such cancellation or expiration of the policies, Guarantor shall provide Licensor with a Certificate of Insurance and certified copies of endorsements evidencing that a new insurance policy with the same coverage and terms described above will be in place prior to such termination. Upon reason- 23 able request by Licensor during the Term, Guarantor shall deliver to Licensor evidence in form and substance reasonably satisfactory to Licensor, of the maintenance and renewal of the required insurance, including, without limitation, renewal certificates and copies of those portions of policies, riders and endorsements pertaining to this Agreement. Any insurance policy purchased by or carried by Licensor or any of its affiliates shall not be required to contribute in case of any loss by any person, including Licensor or Licensee and their affiliates, relating to the Licensed Merchandise and either the Certificate of Insurance to be provided hereunder or an endorsement to such policy shall state the same, with a certified copy of such endorsement accompanying the Certificate of Insurance to be delivered to Licensor. Guarantor's failure to deliver said insurance certificate or renewals thereof and/or Licensor's failure to request said insurance documentation shall not be construed as a waiver of Guarantor's obligation to provide the required insurance. (ii) Each of Licensee and Guarantor hereby waives all rights to claim against Licensor with respect to any bodily injury, personal injury losses or damages to real or personal property, or any other loss arising from any claim however so caused covered by Licensee's indemnification obligation hereunder and agrees to obtain a waiver of subrogation from any insurance company insuring its interests in favor of Licensor, its parents, subsidiaries, affiliated companies, and their respective officers, directors, employees and agents. (iii) Guarantor shall require all subcontractors for whom Guarantor or Licensee does not furnish insurance to carry and maintain throughout their performance of services in connection with this Agreement the insurance coverage required under this Section 11.C with the appropriate endorsements as required hereunder. 24 (iv) Should Guarantor fail to obtain the insurance coverage and provide the documentation required by this Section 11.C, Licensor shall have the right itself to obtain such coverage, at Guarantor's expense. XII TERMINATION Notwithstanding the terms and conditions of Section 3 hereof, this Agreement may be terminated in accordance with the following provisions: 12.1 Licensor may terminate this Agreement immediately by giving notice in writing to Licensee in the event Licensee fails to make payment of royalties and any other amounts due hereunder as and when due, and fails to cure such default (i) for the first or third calendar quarter, within thirty (30) working days, or (ii) for the second or fourth calendar quarter, within ten (10) working days, after delivery of written notice of such default by Licensor. 12.2 Either party may terminate this Agreement immediately by giving notice in writing to the other party in the event the other party materially fails to perform its obligations hereunder (including, without limitation, the obligations to submit timely its quarterly reports; to obtain prior approvals as required hereby; to distribute only through approved distribution channels; to maintain adequate insurance and to use only as expressly permitted hereunder the Licensed Mark) or otherwise materially breaches any of its covenants, representations or warranties as set forth in this Agreement and such party fails to cure such default within thirty (30) days after delivery of written notice of such default from the other party. 12.3 If Licensee or Guarantor shall make an assignment for the benefit of creditors, or shall generally not pay its debts as they become due, or shall file 25 a petition commencing a voluntary case under the Bankruptcy Reform Act of 1978, 11 U.S.C. Section 101 et seq., as amended or any successor thereto (the "Bankruptcy Code"), or shall be adjudicated an insolvent, or shall file any petition or answer seeking for itself any reorganization, arrangement, composition, readjustment, liquidation, dissolution, or similar relief under any present or future statute, law or regulations, or shall file any answer admitting or shall fail to deny the material allegations of such petition filed against it for such relief, or consent to the filing of any such petition or shall seek or consent to or acquiesce in the appointment of any agent, trustee, receiver, custodian, liquidator or similar officer for it or of all or any substantial part of its assets or properties, or its directors or majority stockholders shall take any action authorizing any of the foregoing or looking to its dissolution or liquidation, or it shall cease doing business as a going concern, or an order for relief shall be entered against it under any chapter of the Bankruptcy Code, or if, within sixty (60) days after the filing of any petition or the commencement of any proceeding against either party seeking any reorganization, arrangement, composition, readjustment, liquidation, dissolution or similar relief under the Bankruptcy Code or any other similar present or future statute, law or regulation, such proceeding shall not have been dismissed, or a decree or order of a court having competent jurisdiction shall have been entered approving as properly filed any such petition, or if, within sixty (60) days after the appointment, without the consent or acquiescence of such party, of any agent, trustee, receiver, custodian, liquidator or similar officer for it or of all or any substantial part of its properties, such appointment shall not have been vacated this Agreement shall automatically, without notice or any further act or deed of any party, terminate and be of no further force or effect, except that any and all liabilities and obligations of Licensee or Guarantor at the time outstanding under or in connec- 26 tion with this Agreement shall automatically, without notice or any creditor's act or deed of any party, become due and payable. 12.4 In the event Licensee assigns or sublicenses any of its rights hereunder, or otherwise engages in a transfer prohibited by Section 16.C, without the prior written approval of Licensor, Licensor may, at its option, terminate this Agreement pursuant to Section 12.B. 12.5 Notwithstanding anything to the contrary herein, in the event that Licensor terminates this Agreement pursuant to this Section 12, Licensor does not waive and shall have and reserves all rights and remedies provided under this Agreement and available at law and in equity, and in addition shall be entitled to accelerate payment to Licensor of all unpaid Royalties due up through the date of termination of the Agreement, which shall be payable to Licensor in full within thirty (30) days of the effective date of termination. 12.6 If this Agreement shall be determined by a court, administrative or governmental body or authority to be in violation of any applicable law, or to require any material change to be in compliance with any judicial or administrative decision or ruling, the parties shall negotiate in good faith to revise the offending provision, and if either party in good faith determines that such offending provision cannot be revised without adversely affecting the material benefits to it of this Agreement, either party may elect to terminate this Agreement upon thirty (30) days' written notice to the other party. 27 XIII EFFECT OF EXPIRATION OR TERMINATION 13.1 Except to the extent provided in Section 13.B hereof, upon the expiration or termination of this Agreement for any reason, neither Licensee nor its receivers, representatives, agents, successors or assigns shall have any right to exploit or in any way use the Licensed Mark. Except to the extent provided in Section 13.B hereof, upon such expiration or termination of this Agreement, Licensee shall forthwith discontinue all use of the Licensed Mark and shall not thereafter use the Licensed Mark or any variation or simulation thereof, and Licensee hereby irrevocably releases and disclaims any right or interest in or to the Licensed Mark. Within thirty (30) days of the expiration or termination of this Agreement, Licensee shall provide Licensor with an accurate schedule of all work in process and finished inventory of Licensed Merchandise to which the Licensed Mark is affixed, which is on hand as of the close of business on the date of such expiration or termination (hereinafter the "Inventory"). 13.2 If, upon the expiration or termination of this Agreement, Licensee shall have on hand any Inventory of the Licensed Merchandise and if Licensee is not otherwise in default under this Agreement, Licensee may continue to use the Licensed Mark solely in connection with the advertising, merchandising, promotion and sale of the Inventory of Licensed Merchandise for a period of up to nine (9) months following the expiration or termination of this Agreement. During such nine (9) month period, Licensee shall be obligated to continue to pay Licensor the Royalties, if any, provided for in Section 6.A. If Licensee elects to continue to use the Licensed Mark as provided under this paragraph, it shall notify Licensor of its election at least ninety (90) days prior to the expiration or termination of this Agreement. Such notice shall include a complete and accurate schedule of Inventory of Licensed Merchandise which is projected to be on 28 hand as of the close of business on the date of such expiration or termination and shall reflect Licensee's actual cost of each such item as set forth or reflected on the balance sheet contained in Licensee's latest quarterly report on Form 10-Q or annual report on Form 10-K. 13.3 Upon the expiration or termination of this Agreement or, if applicable, upon the expiration of the period provided for in Section 13.B hereof, Licensee shall, at its own expense, remove all uses of or references to the Licensed Mark from all Inventory or destroy such Inventory, Packaging, advertising and promotional materials bearing the Licensed Mark or prepared for use in connection with the Licensed Merchandise. XIV CONFIDENTIALITY 14.1 In connection with the performance of this Agreement, Licensor and Licensee will have access to certain confidential and proprietary information of the other party, including, but not limited to, business plans, proposed advertising, designs, sales records, financial data and manufacturer's know-how, and also including the business terms of this Agreement. Recognizing that such information represents valuable assets and property of the disclosing party, and the harm that may befall such party if any of such information is disclosed, the recipient agrees to hold all such information in strict confidence and not to use or otherwise disclose any such information to third parties without having received the prior written consent of the disclosing party and a written agreement from such third party to maintain such information in strict confidence. The obligation of confidentiality created herein shall survive the expiration or termination of this Agreement. 14.2 The obligations of confidentiality created herein shall cease to apply: 29 (i) to information which comes into the public domain, provided it did not come into the public domain through the unauthorized acts of the receiving party; (ii) to information which was in the receiving party's possession prior to its disclosure, or was later disclosed to the receiving party by a third party who is lawfully in possession of such and, to the receiving party's knowledge, was under no obligation to keep such information confidential; (iii) to information which, in the opinion of the receiving party's counsel, is required to be disclosed by law, but only to the extent so required and only upon prior written notice to the other party hereto; and (iv) to information of Licensee which Licensor may be required to disclose in order to enforce its rights under this Agreement. XV BANKRUPTCY 15.1 Notwithstanding the provisions of Section 12.C, in the event that it is determined by any court or bankruptcy trustee that this Agreement may be assumed or assigned in connection with a case commenced by or against either party under the Bankruptcy Code, Licensor and Licensee hereby acknowledge that adequate assurance of future performance under this Agreement (within the meaning of the Bankruptcy Code) shall include, INTER ALIA, adequate assurance: (i) that any and all royalty payments and other consideration due from Licensee to Licensor under or pursuant to this Agreement shall be duly and timely paid; 30 (ii) that the assumption or assignment of this Agreement will not result in the breach by either party of any provision in any other license, contract, or agreement relating to the Licensed Mark or otherwise; (iii) that any person or entity that assumes this Agreement or to which this Agreement is assigned shall fully and faithfully assume, observe and comply with all of the covenants, requirements and restrictions provided for under this Agreement and that termination rights for breach of this Agreement shall continue to apply without change; and (iv) that the value of the Licensed Mark to Licensor shall not be materially diminished by reason of the assumption or assignment of this Agreement. Notwithstanding the foregoing, the parties recognize that circumstances may give rise to additional considerations, and nothing contained herein shall be construed to mean that considerations other than those set forth above shall not be deemed relevant to adequate assurance. 15.2 Any person or entity to which this Agreement is assigned pursuant to the provisions of the Bankruptcy Code shall be deemed without further act or deed to have assumed all of the obligations arising under this Agreement on and after the date of such assignment. Any such assignees shall upon demand execute and deliver to Licensor or Licensee, as the case may be, an instrument confirming such assumption. XVI MISCELLANEOUS 16.1 All notices required or permitted by this Agreement to be given to a party shall be in writing and shall be deemed to be duly given on the date delivered if delivered personally, on the fifth business day after being mailed by certified or registered mail (postage 31 prepaid, return receipt requested) or on the next business day after being sent by reputable overnight courier (delivery prepaid), in each case, to the parties at the following addresses, or on the date sent and confirmed by electronic transmission to the facsimile number specified below (or at such other address or facsimile number for a party as shall be specified by notice given in accordance with this Section): If to Licensor: The Coleman Company, Inc. 3600 North Hydraulic Wichita, KS 67219 Attention: Corporate Secretary Telephone: (316) 832-2700 Facsimile: (316) 832-2634 with a copy to: The Coleman Company, Inc. 625 Madison Avenue New York, NY 10022 Attention: Chief Executive Officer Telephone: (212) 527-4000 Facsimile: (212) 527-4150 and: Skadden, Arps, Slate, Meagher & Flom LLP 919 Third Avenue New York, NY 10022 Attention: Stephen M. Banker, Esq. Telephone: (212) 735-2760 Facsimile: (212) 735-2000 If to Licensee: Ranco Incorporated of Delaware 32 300 Delaware Avenue, Suite 1704 Wilmington, DE 19804-1612 Attention: President Telephone: (302) 427-5779 Facsimile: (302) 738-7210 with a copy to: Siebe plc Saxon House 2-4 Victoria Street Windsor, Berkshire SL4 1EN Attention: Chief Legal Officer Telephone: 011-44-1753-839-296 Facsimile: 011-44-1753-622-030 and: Fried, Frank, Harris, Shriver and Jacobson One New York Plaza New York, NY 10004 Attention: Sanford Krieger Telephone: (212) 859-8230 Facsimile: (212) 859-4000 Either party may change the address to which such notice and communications shall be sent by written notice to the other party, provided that any notice of change of address shall be effective only upon receipt. 16.2 This Agreement (including Schedules) and the Stock Purchase Agreement set forth the entire agreement and understanding between the parties hereto relating in any way to the use of the Licensed Mark on the Licensed Merchandise, and to any other subject matter contained herein and merges all prior discussions between them. Neither party shall be bound by any definition, condition, warranty or representation other than as 33 expressly stated in this Agreement, and this Agreement may not be amended or modified except by a written instrument signed by the party against whom such modification or amendment is to be enforced. 16.3 The rights granted to Licensee hereunder are strictly personal to Licensee. Other than pursuant to Section 2.E, neither this Agreement nor any of the rights granted to Licensee hereunder may be assigned or sublicensed by Licensee or otherwise transferred (voluntarily or by operation of law), to any person, firm or corporation without the prior written approval of Licensor (which shall be in Licensor's sole discretion). 16.4 In any review or consultation conducted by or on behalf of Licensor hereunder, Licensor is acting solely on its behalf and not as a consultant or advisor, and shall have no responsibility for the operation of Licensee's business or its manufacturing, distribution, sales or facilities used in connection therewith, whether upon the recommendation of Licensor or otherwise. Nothing herein contained shall be construed to constitute the parties hereto as partners or as joint venturers, or either as an employee or agent of the other. 16.5 This Agreement shall be deemed to be a contract made under the laws of the State of New York and shall be governed by and construed in accordance with the laws of such State, as if both parties were residents of such State. The parties hereby consent to the exclusive jurisdiction of any court of competent jurisdiction sitting in the State of Delaware and hereby waive any objection to venue in such court. 16.6 The headings in this Agreement are for the convenience of the parties only and shall not affect the meaning or interpretation of this Agreement or any provisions thereof. 34 16.7 No waiver by either party, whether expressed or implied, of any provision of this Agreement, or of any breach or default, shall constitute a continuing waiver of such provision or a waiver of any other provision of this Agreement. Acceptance of payments by Licensor shall not be deemed a waiver of any violation of, or default in, any of the provisions of this Agreement by Licensee. 16.8 Except as otherwise provided herein, this Agreement shall be binding upon and inure to the benefit of the parties, their successors and permitted assigns. 16.9 Guarantor hereby unconditionally and irrevocably guarantees all of the obligations and liabilities of Licensee under this Agreement, including but not limited to the full and prompt payment of all sums that now are or may hereafter become due and payable from Licensor to Licensee under this Agreement and the full and prompt performance of all present and future obligations and liabilities of Licensee to Licensor under this Agreement. Guarantor further promises to pay all such sums due Licensor under this guarantee promptly on demand, without deduction for any claim or set-off or counterclaim and regardless of whether recourse has first been sought against Licensee. This is a guarantee of payment and not of collection. 16.10 This Agreement may be executed in one or more counterparts, each of which shall be an original, but all of which, together, shall be deemed to constitute a single document. 35 IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement as of the date and year first above written. THE COLEMAN COMPANY, INC. By: --------------------------------------------- Name: PAUL SHAPIRO ------------------------------------------- Title: EXECUTIVE VICE PRESIDENT/GENERAL COUNSEL ------------------------------------------ RANCO INCORPORATED OF DELAWARE By: --------------------------------------------- Name: ------------------------------------------- Title: ------------------------------------------ SIEBE PLC By: --------------------------------------------- Name: ------------------------------------------- Title: ------------------------------------------ EX-10.57 6 EXHIBIT 10.57 AMENDMENT NO. 2 TO THE NEW COLEMAN COMPANY, INC. RETIREMENT PLAN FOR SALARIED EMPLOYEES WHEREAS, New Coleman Holdings Inc. (the "Employer") maintains the New Coleman Company, Inc. Retirement Plan for Salaried Employees (the "Plan"); WHEREAS, the Employer has reserved the right to amend the Plan; and WHEREAS, it is desirable to make certain amendments to the Plan. NOW, THEREFORE, in consideration of the above stated premises, the Plan shall be amended to read as follows: FIRST: Section 2.21 of the Plan shall be amended by adding a new paragraph at the end of said section to read as follows: Effective January 1, 1997, the term Highly Compensated Employee means any Employee who was a 5% owner at anytime during the current or preceding Plan Year or for the preceding Plan Year received compensation from the Employee in excess of $80,000 (as adjusted and defined in Section 414(q)) and, if the Employer so elects, was in the top-paid 20% of Employees. The provisions of subsection E. above shall apply in determining who is a Highly Compensated Employee. SECOND: Section 5.1(d) shall be amended by adding a new paragraph at the end of said section to read as follows: Effective January 1, 1997, the term "required beginning date" means the later of (i) the calendar year in which the Employee attains age 70 1/2 or (ii) the calendar year in which the Employee retires, PROVIDED that clause (ii) shall not apply to any Employee who is a 5% owner in the Plan Year in which the Employee attains age 70 1/2. IN WITNESS WHEREOF, the Employer has caused this Amendment is executed on its behalf as of the 10th day of October, 1997. NEW COLEMAN HOLDINGS INC. By Kyle Wendt ------------------------------------- Its Secretary, Retirement and Benefits Committee --------------------------------------------- ATTEST: Elizabeth Heinemann - ---------------------------- EX-10.58 7 EXHIBIT 10.58 SPECIAL AMENDMENT REGARDING TRANSFERS TO THE NEW COLEMAN COMPANY, INC. RETIREMENT PLAN FOR SALARIED EMPLOYEES WHEREAS, New Coleman Holdings, Inc. ("Company" or "Employer") sponsors and maintains the New Coleman Company, Inc. Retirement Plan for Salaried Employees ("Plan") for the exclusive benefit of participants in the Plan and their beneficiaries; and WHEREAS, the Company wishes to amend the New Coleman Company, Inc. Retirement Plan for Salaried Employees ("Plan") in order to provide specific provisions for employees transferred within the MacAndrews and Forbes Group of Companies; and WHEREAS, Plan Section 10.1 as amended provides that the Company may amend the Plan from time to time. NOW, THEREFORE, in consideration of the above stated premises, the Plan shall be amended as follows: FIRST: A new "Appendix C" shall be created which shall set forth a list of "Associated Plans" as that term is defined in amended Section 5.5. SECOND: Effective December 1, 1997, Plan Section 5.5 of the Plan shall be amended to read as follows: 5.5 TRANSFERS: CORRELATION WITH OTHER PLANS AND MAXIMUM SERVICE. (a) RETIREMENT BENEFIT OFFSET BY ASSOCIATED PLAN BENEFIT. In the event that a benefit described in this Article is payable to a Member who is entitled to a benefit under an "Associated Plan" (listed on Appendix C), such Member's retirement benefit shall be payable only to the extent that the actuarial value of said retirement benefit (determined as of his Annuity Starting Date) exceeds the actuarial value of his accrued benefit under such Associated Plan (determined as if such accrued benefit were first payable as of the Member's Annuity Starting Date). For purposes of applying this Section 5.5(a), service under an Associated Plan will be considered Credited Service (as defined in Article III) under this Plan. (b) RETIREMENT PENSION LIMITED BY BENEFITS UNDER OTHER PLANS. In the event that a retirement benefit is payable to a Member who is not covered by Appendix A applicable to Canadian Coleman Transferred Members and who is entitled to benefits under (i) any other funded pension, retirement, annuity or defined benefit retirement plan contributed to or maintained by an Employer or Affiliate (other than any Associated Plan, the Revlon Employees' Savings and Investment Plan, The Revlon Management Corporation Benefit Plan, the Coleman Retirement Income Savings Plan, the Coleman Monthly Salaried Retirement Income Savings Plan), or (ii) any unfunded plan contributed to or maintained by an Employer or Affiliate outside of the United States: (1) NONDUPLICATION OF BENEFITS. If his benefits under such other plans are determined with reference to any period for which he is entitled to benefits under this Plan, he shall be -1- deemed to have accepted the benefits provided under such other plans with respect to such period in discharge of the actuarially equivalent value of his benefits provided under this Plan with respect to the same period; and (2) LIMITATION ON COMBINED BENEFITS. The Member's retirement benefit under this Plan shall in no event exceed the retirement benefit which would have been payable under this Plan if all service credited for benefit accrual purposes under such other plans were treated as Credited Service under this Plan, reduced by the actuarial equivalent of the benefits payable under all such other plans. (c) TRANSFERS FROM UNION SERVICE. Subject to Section 5.5(b), in the event that on or after January 1, 1996, an individual shall be transferred to employment as an Eligible Employee form employment which is subject to union jurisdiction and which is not taken into account under Sections 2.16(c) and 3.5(b) ("excludable employment"), his Service completed prior to such transfer shall be deemed Credited Service to the extent that it would qualify as Credited Service but for the provisions of Sections 2.16(c) and 3.5(b), if: (1) He shall complete at least five (5) years of Credited Service subsequent to such transfer (determined without regard to this Section 5.5(c)); and (2) He shall be an Eligible Employee at his termination of employment and shall then have vested rights to a retirement benefit pursuant to Sections 5.1 through 5.4. Notwithstanding the foregoing, remuneration paid during such excludable employment shall in no event be considered Compensation. (d) TEMPORARY EMPLOYMENT WITH AFFILIATE. Subject to Section 5.5(b), except for individuals covered by Appendix A, in the event that an Eligible Employee shall be transferred to employment with an Affiliate on or after January 1, 1996, and if he shall subsequently be directly transferred back to employment as an Eligible Employee, his Service completed and remuneration paid while so employed by such Affiliate shall be deemed Credited Service and Compensation to the extent they would be so treated if such employment with an Affiliate had been in employment with an Employer. (e) TRANSFERS FROM OTHER PLANS. (1) Except in the case of individuals covered by Appendix A, if (i) on or after January 1, 1996 an individual shall be transferred to employment as an Eligible Employee from employment with an Affiliate or an Employer other than as an Eligible Employee ("Excluded Employment") (or such a transfer occurred prior to 1996 with respect to an individual employed as an Eligible Employee on January 1, 1996), (ii) such individual was, immediately prior to such transfer, an active participant in a Related Benefit Plan (as hereinafter defined) maintained by such Affiliate or Employer, and (iii) such individual completes at least two (2) years of Credited Service following such transfer: (A) There shall be taken into account as Credited Service under this Plan: (i) his prior Service in Excluded Employment with such Employer or Affiliate which is taken into account for purposes of benefit accrual under such Related Benefit Plan, and (ii) if provided for by resolution of the Executive Committee of the Company, his prior employment with an entity which was not an Employer or Affiliate and which is recognized for purposes of benefit accrual under the provisions of such Related Benefit Plans. -2- (B) His benefits under such Related Benefit Plan shall be disregarded in applying the provisions of Sections 5.5(b)(1) and 5.5(b)(2); (C) Remuneration paid by his prior employer during any period which is taken into account as Credited Service under this Section 5.5(e)(1) shall be taken into account in determining the amount of his Compensation under this Plan (subject to the applicable provisions of Section 2.10); and (D) To the extent that his benefits (whether or not vested) under such Related Benefit Plan, determined as of the date of transfer, are (i) determined with reference to any period taken into account as Credited Service under this Plan, and (ii) are not attributable to voluntary employee contributions, he shall be deemed to have accepted such benefits with respect to such period in discharge of the actuarially equivalent value of his benefits provided under this Plan with respect to the same period. (2) Except as the Committee shall otherwise provide, the provisions of this Section 5.5(e) shall not apply to: (i) any transfer of employment to which Section 5.5(d) applies; (ii) any transfer of employment to which Section 5.5(c) would apply if the employee complied with the requirements of Sections 5.5(c)(1) and 5.5(c)(2); (iii) any transfer of employment incident to a transfer of assets and liabilities from another plan or the merger of another plan into this Plan; (iv) any transfer of employment incident to any merger, liquidation, reorganization, or transfer of assets by or between any trade or business (whether or not incorporated), or incident to the creation or transfer of an operating division; and (v) any transfer of employment covered by a supplement to this Plan, unless and to the extent that such Supplement expressly states that this Section shall apply. In addition, the provisions of this Section 5.5(e) shall not apply to any transfer of employment to the extent expressly excluded from operation of this Section 5.5(e) by action of the Committee within one (1) year of the individual's transfer of employment. (3) For purposes of this Section 5.5(e), a Related Benefit Plan means a pension, annuity, retirement, superannuation or similar plan (other than this Plan, a defined contribution plan, an Associated Plan, the Revlon Employees' Savings and Investment Plan, the Revlon Pension Equalization Plan, the Revlon Supplemental Retirement Plan for Key Employees, the Coleman Retirement Incentive Savings Plan, the Monthly Salaried Coleman Retirement Incentive Savings Plan, the Coleman Executive Deferred Compensation Plan, the Coleman Excess Benefit Plan, a plan maintained pursuant to a collective bargaining agreement and such other plans as the Committee may designate), funded or unfunded, which is sponsored or maintained or to which contributions are or have been made by an Employer or Affiliate. (4) For purposes of Section 5.5(e)(1)(D), in determining the amount of a Participant's benefits under a Related Benefit Plan as of the date of transfer, there shall be taken into account the amount of: (i) any distribution from such Related Benefit Plan to or in respect of a Participant prior to the date he first began participating in this Plan (other than benefits derived from voluntary employee contributions), and (ii) benefits accrued, payable or paid under any other plan which reduce the Participant's benefits under such Related Benefit Plan. (5) In the case of a Related Benefit Plan benefits payable in other than United States currency, the Committee shall determine the appropriate conversion factor to be used in applying the provisions of this Section 5.5. -3- (f) NO REDUCTION IN ACCRUED BENEFITS. This Section 5.5 shall be interpreted in a manner not to decrease a Member's accrued benefit. (g) NONDISCRIMINATION. In no event shall any benefits accrue under this Section 5.5 if and to the extent such benefits are discriminatory under the Code. (h) MAXIMUM SERVICE. The maximum combined benefit paid from this Plan and The New Coleman Company, Inc. Pension Plan for Weekly Salaried and Hourly Paid Employees (and their respective "Prior Plans") to any Member who retires under this Plan, and has 35 or more total years of Credited Service under both plans, shall be a benefit equal to what the Member would have received under this Plan had the Member had 35 years of Credited Service under this Plan. (i) CANADIAN COLEMAN TRANSFERS. Except for Section 5.5(h), this Section 5.5 shall not be applied to Members who at any time have been Employees of the Canadian Coleman Company, Limited and who, as of January 1, 1983 or thereafter, are employed by either the Company or Canadian Coleman. The Plan benefits of such individuals shall be calculated in accordance with the provisions of Appendix A. (j) THE PRIOR PLAN. Except for Section 5.5(h), this Section 5.5 shall not be applied to restrict consideration of a Member's service under the Prior Plan when calculating the benefit payable under this Plan. THIRD: Except to the extent provided herein, the Plan is not amended in any other respect. IN WITNESS WHEREOF, the Employer has caused this Special Amendment to be executed on its behalf and adopted this 15th day of December, 1997. NEW COLEMAN HOLDINGS, INC. By: J. W. Levin ----------------------------------- EX-10.59 8 EXHIBIT 10.59 THE NEW COLEMAN COMPANY, INC. PENSION PLAN FOR WEEKLY SALARIED AND HOURLY PAID EMPLOYEES (Amended and Restated as of January 1, 1996) THE NEW COLEMAN COMPANY, INC. PENSION PLAN FOR WEEKLY SALARIED AND HOURLY PAID EMPLOYEES (Amended and Restated as of January 1, 1996) TABLE OF CONTENTS PAGE ---- ARTICLE I. THE PLAN . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 1.1 ESTABLISHMENT AND AMENDMENT OF THE PLAN.. . . . . . . . . . 1 1.2 APPLICABILITY OF THE PLAN . . . . . . . . . . . . . . . . . 1 ARTICLE II. DEFINITIONS . . . . . . . . . . . . . . . . . . . . . . . . . 1 2.1 "ACTUARIAL EQUIVALENT". . . . . . . . . . . . . . . . . . . 1 2.2 "AFFILIATE" . . . . . . . . . . . . . . . . . . . . . . . . 2 2.3 "ANNUITY STARTING DATE" . . . . . . . . . . . . . . . . . . 2 2.4 "BASE HOURLY WAGE". . . . . . . . . . . . . . . . . . . . . 2 2.5 "BENEFICIARY" . . . . . . . . . . . . . . . . . . . . . . . 3 2.6 "BOARD" . . . . . . . . . . . . . . . . . . . . . . . . . . 3 2.7 "BREAK IN SERVICE". . . . . . . . . . . . . . . . . . . . . 3 2.8 "CODE". . . . . . . . . . . . . . . . . . . . . . . . . . . 3 2.9 "COMMITTEE" . . . . . . . . . . . . . . . . . . . . . . . . 3 2.10 "COMPANY" . . . . . . . . . . . . . . . . . . . . . . . . . 3 2.11 "CREDITED SERVICE". . . . . . . . . . . . . . . . . . . . . 3 2.12 "DISABILITY". . . . . . . . . . . . . . . . . . . . . . . . 3 2.13 "EARLIEST RETIREMENT AGE" . . . . . . . . . . . . . . . . . 3 2.14 "EARLY RETIREMENT AGE". . . . . . . . . . . . . . . . . . . 4 2.15 "ELIGIBLE EMPLOYEE" . . . . . . . . . . . . . . . . . . . . 4 2.16 "EMPLOYEE". . . . . . . . . . . . . . . . . . . . . . . . . 4 2.17 "EMPLOYER". . . . . . . . . . . . . . . . . . . . . . . . . 4 2.18 "ERISA" . . . . . . . . . . . . . . . . . . . . . . . . . . 4 2.19 "FINAL AVERAGE COMPENSATION". . . . . . . . . . . . . . . . 4 2.20 "HIGHLY COMPENSATED EMPLOYEE" . . . . . . . . . . . . . . . 5 2.21 "INACTIVE PARTICIPANT". . . . . . . . . . . . . . . . . . . 6 2.22 "MEMBER". . . . . . . . . . . . . . . . . . . . . . . . . . 6 2.23 "NORMAL RETIREMENT AGE" . . . . . . . . . . . . . . . . . . 6 2.24 "ONE-YEAR BREAK IN SERVICE" . . . . . . . . . . . . . . . . 6 2.25 "PARTICIPANT" . . . . . . . . . . . . . . . . . . . . . . . 6 2.26 "PLAN". . . . . . . . . . . . . . . . . . . . . . . . . . . 6 2.27 "PLAN YEAR" . . . . . . . . . . . . . . . . . . . . . . . . 6 2.28 "PRIOR PLAN". . . . . . . . . . . . . . . . . . . . . . . . 6 2.29 "QUALIFIED JOINT AND SURVIVOR ANNUITY". . . . . . . . . . . 6 2.30 "RETIREMENT DATE" . . . . . . . . . . . . . . . . . . . . . 7 -i- 2.31 "RETIREMENT FUND" . . . . . . . . . . . . . . . . . . . . . 7 2.32 "SOCIAL SECURITY RETIREMENT AGE". . . . . . . . . . . . . . 7 2.33 "TERMINATION OF SERVICE". . . . . . . . . . . . . . . . . . 8 2.34 "TRUST AGREEMENT" . . . . . . . . . . . . . . . . . . . . . 8 2.35 "TRUSTEE" . . . . . . . . . . . . . . . . . . . . . . . . . 8 2.36 "TRUST FUND". . . . . . . . . . . . . . . . . . . . . . . . 8 2.37 "VESTING SERVICE" . . . . . . . . . . . . . . . . . . . . . 8 2.38 "YEAR OF ELIGIBILITY SERVICE" . . . . . . . . . . . . . . . 8 ARTICLE III. SERVICE. . . . . . . . . . . . . . . . . . . . . . . . . . . 8 3.1 HOUR OF SERVICE . . . . . . . . . . . . . . . . . . . . . . 8 3.2 BREAK IN SERVICE. . . . . . . . . . . . . . . . . . . . . . 10 3.3 ONE-YEAR BREAK IN SERVICE . . . . . . . . . . . . . . . . . 11 3.4 VESTING SERVICE . . . . . . . . . . . . . . . . . . . . . . 11 3.5 CREDITED SERVICE. . . . . . . . . . . . . . . . . . . . . . 11 3.6 LEASED EMPLOYEES. . . . . . . . . . . . . . . . . . . . . . 12 ARTICLE IV. PARTICIPATION. . . . . . . . . . . . . . . . . . . . . . . . . 12 4.1 DATE OF PARTICIPATION . . . . . . . . . . . . . . . . . . . 12 4.2 REENTRY INTO THE PLAN FOLLOWING A BREAK IN SERVICE. . . . . 13 4.3 DURATION. . . . . . . . . . . . . . . . . . . . . . . . . . 13 4.4 EMPLOYEES OF NEWLY ACQUIRED BUSINESSES. . . . . . . . . . . 13 ARTICLE V. BENEFITS . . . . . . . . . . . . . . . . . . . . . . . . . . . 13 5.1 NORMAL RETIREMENT BENEFITS. . . . . . . . . . . . . . . . . 13 5.2 EARLY RETIREMENT BENEFITS . . . . . . . . . . . . . . . . . 15 5.3 DISABILITY RETIREMENT BENEFITS. . . . . . . . . . . . . . . 15 5.4 VESTED RETIREMENT BENEFITS. . . . . . . . . . . . . . . . . 17 5.5 ADJUSTMENT TO BENEFITS. . . . . . . . . . . . . . . . . . . 17 5.6 NORMAL FORM OF PENSION FOR MARRIED MEMBERS. . . . . . . . . 18 5.7 OPTIONAL METHODS OF PAYMENT . . . . . . . . . . . . . . . . 19 5.8 INCIDENTAL DEATH BENEFITS . . . . . . . . . . . . . . . . . 20 5.9 PAYMENT OF SMALL AMOUNTS. . . . . . . . . . . . . . . . . . 20 5.10 MAXIMUM ANNUAL BENEFITS . . . . . . . . . . . . . . . . . . 22 5.11 WITHHOLDING TAXES . . . . . . . . . . . . . . . . . . . . . 23 ARTICLE VI. SUSPENSION OF BENEFITS UPON CERTAIN EMPLOYMENT OR REEMPLOYMENT. . . . . . . . . . . . . . . . . . . . . . . . 23 6.1 REEMPLOYMENT BEFORE NORMAL RETIREMENT DATE. . . . . . . . . 23 6.2 CONTINUED EMPLOYMENT OR REEMPLOYMENT ON OR AFTER NORMAL RETIREMENT DATE . . . . . . . . . . . . . . . . . . . . . 24 6.3 SUSPENSION OF BENEFITS NOTICE PROCEDURES. . . . . . . . . . 24 ARTICLE VII. DEATH BENEFITS . . . . . . . . . . . . . . . . . . . . . . . 25 -ii- 7.1 PRERETIREMENT DEATH BENEFITS FOR MARRIED MEMBERS. . . . . . 25 7.2 NO REDUCTION TO OTHER BENEFITS. . . . . . . . . . . . . . . 25 7.3 ADDITIONAL DEATH BENEFITS . . . . . . . . . . . . . . . . . 25 ARTICLE VIII. FINANCING. . . . . . . . . . . . . . . . . . . . . . . . . . 26 8.1 FINANCING . . . . . . . . . . . . . . . . . . . . . . . . . 26 8.2 CONTRIBUTIONS . . . . . . . . . . . . . . . . . . . . . . . 26 8.3 NONREVERSION. . . . . . . . . . . . . . . . . . . . . . . . 27 ARTICLE IX. ADMINISTRATION . . . . . . . . . . . . . . . . . . . . . . . . 27 9.1 COMMITTEE AND FIDUCIARY . . . . . . . . . . . . . . . . . . 27 9.2 COMPENSATION AND EXPENSES . . . . . . . . . . . . . . . . . 28 9.3 MANNER OF ACTION. . . . . . . . . . . . . . . . . . . . . . 28 9.4 CHAIRMAN, SECRETARY, AND SPECIALISTS. . . . . . . . . . . . 28 9.5 RECORDS . . . . . . . . . . . . . . . . . . . . . . . . . . 28 9.6 ADMINISTRATION. . . . . . . . . . . . . . . . . . . . . . . 28 9.7 APPEALS FROM DENIAL OF CLAIMS . . . . . . . . . . . . . . . 29 9.8 NOTICE OF ADDRESS AND MISSING PERSONS . . . . . . . . . . . 29 9.9 DATA AND INFORMATION FOR BENEFITS . . . . . . . . . . . . . 30 9.10 INDEMNITY FOR LIABILITY . . . . . . . . . . . . . . . . . . 30 9.11 EFFECT OF A MISTAKE . . . . . . . . . . . . . . . . . . . . 30 9.12 SELF INTEREST . . . . . . . . . . . . . . . . . . . . . . . 30 ARTICLE X. AMENDMENT AND TERMINATION . . . . . . . . . . . . . . . . . . . 30 10.1 AMENDMENT AND TERMINATION . . . . . . . . . . . . . . . . . 30 10.2 DISTRIBUTION ON TERMINATION . . . . . . . . . . . . . . . . 31 10.3 MERGER, CONSOLIDATION, OR TRANSFER. . . . . . . . . . . . . 31 ARTICLE XI. RESTRICTIONS ON BENEFITS. . . . . . . . . . . . . . . . . . . 31 11.1 TEMPORARY RESTRICTIONS ON BENEFITS FOR MEMBERS OF EACH EMPLOYER. . . . . . . . . . . . . . . . . 31 ARTICLE XII. TOP-HEAVY PROVISIONS . . . . . . . . . . . . . . . . . . . . 32 12.1 APPLICATION OF TOP-HEAVY PROVISIONS . . . . . . . . . . . . 32 12.2 DEFINITIONS . . . . . . . . . . . . . . . . . . . . . . . . 33 12.3 VESTING REQUIREMENTS. . . . . . . . . . . . . . . . . . . . 34 12.4 MINIMUM BENEFIT . . . . . . . . . . . . . . . . . . . . . . 34 12.5 LIMIT ON ANNUAL ADDITIONS: COMBINED PLAN LIMIT . . . . . . 35 12.6 COLLECTIVE BARGAINING AGREEMENTS. . . . . . . . . . . . . . 36 ARTICLE XIII. PARTICIPATION IN AND WITHDRAWAL FROM THE PLAN BY AN AFFILIATE . . . . . . . . . . . . . . . . . . . . . . . . 36 -iii- 13.1 PARTICIPATION IN THE PLAN . . . . . . . . . . . . . . . . . 36 13.2 WITHDRAWAL FROM THE PLAN. . . . . . . . . . . . . . . . . . 36 ARTICLE XIV. GENERAL PROVISIONS . . . . . . . . . . . . . . . . . . . . . 37 14.1 INCOMPETENCY. . . . . . . . . . . . . . . . . . . . . . . . 37 14.2 NONALIENATION OF BENEFITS . . . . . . . . . . . . . . . . . 37 14.3 NO GUARANTEE OF EMPLOYMENT. . . . . . . . . . . . . . . . . 37 14.4 APPLICABLE LAW. . . . . . . . . . . . . . . . . . . . . . . 37 14.5 SEVERABILITY. . . . . . . . . . . . . . . . . . . . . . . . 38 APPENDIX . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38 -iv- THE NEW COLEMAN COMPANY, INC. PENSION PLAN FOR WEEKLY SALARIED AND HOURLY PAID EMPLOYEES (Amended and Restated as of January 1, 1996) ARTICLE I. THE PLAN 1.1 ESTABLISHMENT AND AMENDMENT OF THE PLAN. The Coleman Company, Inc. previously established a defined benefit pension plan for certain eligible employees of the Company and any Affiliates that had adopted the plan. This plan was known as The Coleman Company, Inc. Pension Plan for Weekly Salaried and Hourly Paid Employees ("Prior Plan"). The Prior Plan was initially effective on May 9, 1955 and was terminated on June 30, 1989. New Coleman Holdings, Inc. (the "Company") established a replacement defined benefit plan for the employees who previously participated in the Prior Plan. This replacement plan, known as The New Coleman Company, Inc. Pension Plan for Weekly Salaried and Hourly Paid Employees (the "Plan") was initially effective as of July 1, 1989. This Plan is hereby amended and restated as of January 1, 1996. 1.2 APPLICABILITY OF THE PLAN. The provisions of this Plan are generally applicable only to Employees who are employed by an Employer on or after July 1, 1989. Any person who was covered by the Prior Plan as in effect before July 1, 1989, and who had a Termination of Service before July 1, 1989, shall continue to be entitled to the retirement benefits (if any) provided under the Prior Plan. ARTICLE II. DEFINITIONS Whenever used in the Plan, the following terms shall have the meanings set forth below unless otherwise expressly provided. When the defined meaning is intended, the term is capitalized. The definition of any term in the singular shall also include the plural and any masculine terminology shall be deemed to refer to either a male or a female. 2.1 "ACTUARIAL EQUIVALENT" means a benefit having the same value as the benefit it replaces, determined as follows: (a) GENERAL RULE. Except as otherwise provided in subsection (b), Actuarial Equivalence shall be based on: (1) the 1971 male Group Annuity Table with a two-year setbacks; and (2) 6 percent interest, compounded annually. -1- (b) For the purpose of determining the value of a single sum distribution under section 5.9, Actuarial Equivalence shall be determined under either subsection (a) or this subsection (b), whichever produces the greater benefit. Actuarial Equivalence under this subsection (b) shall be based on: (1) the 1984 Unisex Pension Mortality Table; and (2) the immediate and deferred interest rates which would be used by the Pension Benefit Guaranty Corporation (as of the first day of the Plan Year of distribution) for the purpose of determining the present value of a single sum distribution upon the distress termination of a trusteed single-employer. 2.2 "AFFILIATE" means: (a) any corporation while it is a member of the same "controlled group" of corporations (within the meaning of Code section 414(b)) as the Company; (b) any other trade or business (whether or not incorporated) while it is under "common control" (within the meaning of Code section 414(c)) with the Company; (c) any organization during any period in which it (along with the Company) is a member of an "affiliated service group" (within the meaning of Code section 414(m)); or (d) any other entity during any period in which it is required to be aggregated with the Company under Code section 414(o). 2.3 "ANNUITY STARTING DATE" mean the following: (a) BENEFITS PAYABLE IN THE FORM OF AN ANNUITY. In the case of benefits payable in the form of an annuity, Annuity Starting Date means the first day of the first period for which an amount is payable under the Plan. (b) BENEFITS PAYABLE IN THE FORM OF A SINGLE SUM PAYMENT. In the case of a benefit payable in the form of as single sum payment, Annuity Starting Date means the date on which all events have occurred that entitle the Member to the benefit. (c) BENEFITS FOR DISABLED MEMBERS. In the case of a Member who is receiving a disability benefit under section 5.3(a), Annuity Starting Date means the first day of the month coinciding with or next following the Member's attainment of Normal Retirement Age. 2.4 "BASE HOURLY WAGE" for a Plan Year means a Participant's base rate of pay from an Employer determined for each Plan Year on the date of the Participant's Termination of Service occurring within that Plan Year, or if no Termination of Service occurred, on December 31 of the Plan Year. In determining the Base Hourly Wage for Plan Years beginning after December 31, 1988, the Compensation of each Participant taken into account under the Plan for each Plan Year shall not exceed the Compensation Limitation prescribed by Code Section 401(a)(17). The Compensation Limitation is $200,000 for the 1989 Plan Year, a higher indexed amount for the 1990 through 1993 Plan Years, and $150,000 for the 1994 Plan Year. For Plan Years beginning after December 31, 1994, the Compensation Limitation is the adjusted dollar amount determined in accordance with Code Section -2- 401(a)(17). Prior to January 1, 1997, in determining the Compensation of a Participant for purposes of this limitation, the rules of Code Section 414(q)(6) shall apply, except in applying such rules, the term family shall include only the spouse of the Participant and any lineal descendants of the Participant who have not attained age 19 before the close of the year. If, as a result of the application of the family aggregation rules, the Compensation of a Participant is limited, then the limitation shall be prorated among the individuals affected in proportion to each such individual's Compensation as determined under this Section prior to the application of the limitation. 2.5 "BENEFICIARY" means the person designated by the Participant to receive a survivor benefit under Section 5.7 or 7.3. For distributions under Section 5.7, the Beneficiary of a married Member shall be his or her spouse unless the spouse has consented to the designation of a different Beneficiary under Section 5.6(b). Subject to the consent requirements contained in Section 5.6(b), a Member may change his or her Beneficiary at any time by filing written notice with the Committee at a time and manner determined by the Committee. If the Member's Beneficiary does not survive the Member or if the Member dies without designating a beneficiary, any benefits payable on the Member's behalf after his or her death shall be paid to the Member's surviving spouse; or if there is no surviving spouse, to the Member's estate. 2.6 "BOARD" means the Company's Board of Directors. 2.7 "BREAK IN SERVICE" means an absence from employment as described in section 3.2. 2.8 "CODE" means the Internal Revenue Code of 1986, as amended, or as it may be amended from time to time. A reference to a particular section of the Code shall also be deemed to refer to the regulations under that Code section. 2.9 "COMMITTEE" means the administrative committee appointed by the Board under Article IX. 2.10 "COMPANY" means New Coleman Holdings, Inc., or any successor thereto which agrees to assume and continue the Plan. Whenever the Company under the terms of this Plan is permitted or required to do or perform any act or matter or thing, it shall be authorized by the Company's governing board or body or shall be performed by an officer or other delegate thereunto duly authorized by such governing board or body. 2.11 "CREDITED SERVICE" means the period of employment described in section 3.5. 2.12 "DISABILITY" means any physical or mental condition other than alcoholism or the current use of illegal drugs which, on the basis of medical evidence satisfactory to the Committee, renders the Member totally and permanently unable to engage in any employment for wage or profit. To constitute a Disability under the Plan, the physical or mental condition must not have resulted from the Member's participation in a felonious criminal act or an intentionally self-inflicted injury. 2.13 "EARLIEST RETIREMENT AGE" means the earliest date on which, under the Plan, a Member could elect to receive a retirement benefit. -3- 2.14 "EARLY RETIREMENT AGE" means a Member's age prior to Normal Retirement Age, but after: (a) attaining age 55 and completing one year of Credited Service; or (b) completing 30 years of Vesting Service. 2.15 "ELIGIBLE EMPLOYEE" means any Employee who is employed and compensated (by a payroll check issued directly from the Employer to the Employee or direct payroll deposit made to the Employee's account) by an Employer on an hourly or weekly salaried basis. An Employee shall not be an Eligible Employee if he is: (a) in a newly acquired group to which this Plan has not been extended under section 4.4; or (b) covered by a collective bargaining agreement between employee representatives and an Employer under which retirement benefits were the subject of good faith bargaining (unless the collective bargaining agreement provides for such Employee's participation in the Plan). 2.16 "EMPLOYEE" means any person who is employed by the Company or an Affiliate. 2.17 "EMPLOYER" means the Company and any Affiliate which elects to become an Employer by adopting the Plan for the benefit of its Employees in the manner described in Article XIII. Participating Employers (other than the Company) are listed in the Appendix. 2.18 "ERISA" means the Employee Retirement Income Security Act of 1974, as amended, or as it may be amended from time to time. A reference to a particular section of ERISA shall also be deemed to refer to the regulations under that section. 2.19 "FINAL AVERAGE COMPENSATION" shall be determined as follows: (a) GENERAL RULE. For purposes of the formula in Section 5.1(b)(1), and the offset in Section 5.1(b)(2)(B), "Final Average Compensation" means the monthly average of a Participant's Compensation for the period of 60 consecutive months, selected from the Participant's last 120 months of participation, during which the Participant received the largest total Compensation. However, if the Participant has fewer than 60 months of Plan participation, his Final Average Compensation shall be determined over his longest period of uninterrupted participation in the Plan. (b) EXCEPTION. For purposes of calculating the offset described in section 5.1(b)(2)(A), Three-Year Final Average Compensation means the monthly average of a Participant's Compensation for the 36-month period ending on the Participant's Termination of Service. However, if the Participant has fewer than 36 months of service, Three-Year Final Average Compensation under this subsection (b) will be based on the Participant's full period of Vesting Service. (c) HOUR OF SERVICE means each hour described in section 3 1. -4- 2.20 "HIGHLY COMPENSATED EMPLOYEE" means prior to January 1, 1997, with respect to any Plan Year, any employee who at any time during the preceding year (or such other period as the Company may elect pursuant to Treasury Regulations): (a) received Compensation (as defined in Code Section 414(q)(7)) from the Employer and all affiliates in excess of $75,000; (b) received Compensation (as defined in Code Section 414(q)(7)) from the Employer and all affiliates in excess of $50,000 and was in the top-paid 20% of Employees; (c) was an officer and received Compensation (as defined in Code Section 414(q)(7)) from the Employer and all affiliates in excess of $45,000, or, if greater, one-half of the amount in effect under Code Section 415(b)(1)(A) for the preceding Plan Year; or (d) was a 5% owner. Unless the Company makes the election under Treasury Regulations, Highly Compensated Employee also means, with respect to any Plan Year, any Employee who, at any time during such Plan Year, met the descriptions contained in paragraphs (a), (b), or (c) and was among the top-paid 100 Employees or any Employee who was a 5% owner. A family member of a Highly Compensated Employee and a former employee shall be treated as a Highly Compensated Employee to the extent required by Code Section 414(q)(6) and (9) and the Regulations thereunder. The dollar limits described in paragraphs (a), (b), and (c) will be adjusted to reflect increases in the cost of living, in the manner and at the times prescribed by the Secretary of the Treasury. In determining who is a Highly Compensated Employee, the following rules shall apply: (e) for purposes of determining the number of Employees in the top-paid 20%, the following Employees are excluded: 1. Employees who have not completed six months of Service; 2. Employees who normally work less than 17 1/2 hours per week; 3. Employees who normally work during not more than six months during any Plan Year; 4. Employees who have not attained age 21; and 5. to the extent allowable under Treasury Regulation 1.414(q)-1T, Employees covered by a collective bargaining agreement between Employee representatives and the Company or an affiliate. (f) The number of officers is limited to 50 (or, if lesser, the greater of 3 Employees or 10% of Employees), excluding those Employees described in (e)1, (e)2, (e)3, (e)4, or (e)5 above. (g) When no officer has Compensation in excess of the dollar limit described in C above (as adjusted for increases in the cost of living as prescribed by the Secretary of the Treasury), the highest paid officer is treated as Highly Compensated. (h) A Highly Compensated Former Employee shall mean a former Employee who separated from service prior to the Plan Year and who was an active Highly Compensated Employee for either (i) the year the Employee separated from service, or (ii) any Plan Year ending on or after the Employee's 55th birthday. If the Employee separated from service before January 1, 1987, such an Employee shall be included as a Highly Compensated Former Employee only if the Employee -5- was a 5% owner or received Compensation in excess of $50,000 during (I) the Employee's year of separation or the year preceding such year, (II) any year ending on or after such Employee's 55th birthday, or (III) the last year ending on or after such Employee's 55th birthday. As an alternative to the above method of identifying Highly Compensated Employees, the Plan Administrator may elect to use the simplified identification method of IRS Revenue Procedure 93-42, which is incorporated by reference herein, including the use of a snapshot day if applicable. Effective January 1, 1997, the term Highly Compensated Employee means any Employee who was a 5% owner at anytime during the current or preceding Plan Year or for the preceding Plan Year received compensation from the Employee in excess of $80,000 (as adjusted and defined in Section 414(q)) and, if the Employer so elects, was in the top-paid 20% of Employees. The provisions of subsection (e) above shall apply in determining who is a Highly Compensated Employee. 2.21 "INACTIVE PARTICIPANT" means an Employee who was a Participant, but who is transferred to and is in a position of employment where he is no longer an Eligible Employee. 2.22 "MEMBER" means a Participant, Inactive Participant, or former Employee receiving or entitled to receive benefits under the Plan. 2.23 "NORMAL RETIREMENT AGE" means the Member's sixty-fifth birthday. 2.24 "ONE-YEAR BREAK IN SERVICE" means a period of absence from employment as described in section 3.3. 2.25 "PARTICIPANT" means an Eligible Employee who has met and continues to meet the eligibility requirements of Article IV. 2.26 "PLAN" means The New Coleman Company, Ice. Pension Plan for Weekly Salaried and Hourly Paid Employees, as amended from time to time. 2.27 "PLAN YEAR" means initially the six-month period beginning July 1, 1989 and ending December 31, 1989. Thereafter, the Plan Year shall mean the calendar year. 2.28 "PRIOR PLAN" means The Coleman Company, Inc. Pension Plan for Weekly Salaried and Hourly Paid Employees which was terminated on June 30, 1989. 2.29 "QUALIFIED JOINT AND SURVIVOR ANNUITY" means an annuity which provides reduced payments for the lifetime of the Members with a survivor annuity for the lifetime of the Member's spouse. This survivor annuity shall be 50 percent of the annuity which is payable during the joint lives of the Member and his spouse. The Qualified Joint and Survivor Annuity is the Actuarial Equivalent of the single life annuity determined under section 5.1, 5.2, 5.3, or 5.4, whichever is applicable. -6- 2.30 "RETIREMENT DATE" means the date as of which retirement benefit payments under the Plan begin. The Retirement Dates under the Plan shall be defined as follows: (a) "NORMAL RETIREMENT DATE" means the first day of the month coinciding with or next following the date on which the Member actually retires on or after his Normal Retirement Age. (b) "EARLY RETIREMENT DATE" means, for a Member who incurs a Termination of Service after attaining Early Retirement Age, but before attaining Normal Retirement Age, the first day of any month elected by the Member following such Termination of Service. However, a Member's Early Retirement Date may not be later than the first day of the month coinciding with or next following the Member's sixty-fifth birthday. (c) "DISABILITY RETIREMENT DATE" means, for a Member who is eligible for a disability benefit under section 5.3, the later of: (1) the first day of the sixth month coinciding with or next following the Member's Termination of Service on account of Disability; (2) the first day of the month coinciding with or next following the expiration of any temporary disability benefits payable under a sickness and accident plan sponsored by the Company or an Affiliate; or (3) the first day of the month coinciding with or next following the date on which an eligible Member makes application for a disability benefit under the Plan. (d) "VESTED RETIREMENT DATE" means, for a Member who has a Termination of Service before his Normal Retirement Date or Early Retirement Date, but after completing at least five years of Vesting Service, the first day of the month coinciding with or next following the date on which the Member attains age 65. However, a Member who has completed one year of Credited Service may elect as a Vested Retirement Date the first day of any month coinciding with or following the Member's fifty-fifth birthday, but no later than the first day of the month coinciding with or next following the Member's sixty-fifth birthday. 2.31 "RETIREMENT FUND" means the Trust Fund or any insurance fund established and maintained under any Trust Agreement or any group annuity contract designated as a part of this Plan to finance the benefits under this Plan. 2.32 "SOCIAL SECURITY RETIREMENT AGE" means: (a) age 65 for a Member born before January 1, 1938; (b) age 66 for a Member born after December 31, 1937, but before January 1, 1955; and (c) age 67 for a Member born after December 31, 1954. 2.33 "TERMINATION OF SERVICE" means an Employee's death or resignation, discharge, or retirement from the Company and its Affiliates. -7- 2.34 "TRUST AGREEMENT" means any agreement in the nature of a trust established to form a part of this Plan to receive, hold, invest, and dispose of the Trust Fund. 2.35 "TRUSTEE" means the corporation, individual, individuals, or combination thereof, acting as trustee under the Trust Agreement at any time of reference. 2.36 "TRUST FUND" means the assets of every kind and description held under any Trust Agreement forming a part of this Plan. 2.37 "VESTING SERVICE" means the period of employment described in section 3.4. 2.38 "YEAR OF ELIGIBILITY SERVICE" means either: (a) the first anniversary of the date on which an Employee performs his first Hour of Service upon employment or reemployment, provided that the Employee is credited with at least 1,000 Hours of Service during such one-year period; or (b) any Plan Year (starting with the Plan Year in which the anniversary described in subsection (a) occurs) during which the Employee completes at least 1,000 Hours of Service. ARTICLE III. SERVICE 3.1 HOUR OF SERVICE. "Hours of Service" are used to determine an Employee's Years of Eligibility Service, Vesting Service, and Credited Service. Hours of Service shall be determined as follows: (a) FOR THE PERFORMANCE OF DUTIES. An Employee shall receive an Hour of Service for each hour for which he is paid or entitled to payment by the Company or an Affiliate for the performance of duties. Hours of Service under this subsection shall be credited to the Employee in the calendar year in which the duties are performed. (b) PERIODS DURING WHICH NO DUTIES ARE PERFORMED. An Employee shall receive an Hour of Service for each hour for which he is directly or indirectly paid or entitled to payment by the Company or an Affiliate on account of a period of time during which no duties are performed (irrespective of whether the employment relationship has terminated) due to vacation, holidays, illness, incapacity (including disability), layoff, jury duty, military duty, or leave of absence. Hours of Service under this subsection shall be credited to the Employee in the calendar year for which the Employee is paid or entitled to payment. Such hours shall be credited on the basis of the Employee's regular work schedule, or if the Employee has no regularly scheduled working hours, on the basis of eight hours per day or 40 hours per week. (c) BACK PAY. An Employee shall receive an Hour of Service for each hour for which back pay, irrespective of mitigation of damages, is either awarded or agreed to by the Company or an Affiliate. Hours of Service under this subsection shall be credited to the Employee in the calendar -8- year to which the award or agreement relates. Such hours shall be credited on the basis of the Employee's regular work schedule, or if the Employee has no regularly scheduled working hours, on the basis of eight hours per day or 40 hours per week. (d) HOURS NOT COUNTED. This subsection limits the Hours of Service credited for periods during which no duties are performed. This subsection applies whether or not Hours of Service otherwise would have been counted for such periods under subsection (b) or (c). (1) NONDUPLICATION. No hour shall be credited as an Hour of Service more than once under this section 3.1. (2) UNPAID TIME. An hour for which an Employee is not paid, either directly or indirectly, shall not be credited, except as provided in subsection (e) (regarding maternity and paternity leaves), subsection (f) (regarding other unpaid leaves), and subsection (g) (regarding military leaves). (3) WORKERS' COMPENSATION, DISABILITY INSURANCE, OR UNEMPLOYMENT COMPENSATION. Except as otherwise provided in subsection (f), an hour for which an Employee is directly or indirectly paid or entitled to payment on account of a period during which he performs no duties shall not be credited as an Hour of Service if such payment is made or due under a plan maintained solely for the purpose of complying with applicable workers' compensation, disability insurance, or unemployment compensation laws. (4) MEDICAL REIMBURSEMENT. Hours of Service shall not be credited for a payment which solely reimburses the Employee for medical or medically-related expenses. (5) 501 HOUR LIMITATION. Except as otherwise provided in subsections (f) and (g), no more than 501 Hours of Service shall be credited on account of any single continuous period during which no duties are performed. (e) MATERNITY/PATERNITY LEAVE. Solely for the purpose of determining whether a One-Year Break in Service has occurred, an Employee shall receive Hours of Service for each day of an Employee's absence from employment for maternity or paternity reasons. An absence for maternity or paternity reasons shall mean an absence by reason of: (1) the Employee's pregnancy; (2) the birth of the Employee's child; (3) the placement of a child with the Employee in connection with the adoption of the child; or (4) the caring for a child for a period immediately following such birth or placement. If the number of hours that would have been credited to the Employee cannot be determined, 8 Hours of Service shall be credited per day of such absence. No more than 501 Hours of Service shall be credited under this subsection for any such absence. Hours of Service under this subsection shall be credited in the Plan Year in which the absence from employment commences if necessary -9- to prevent a One-Year Break in Service; in all other cases, these Hours of Service shall be credited in the following Plan Year. Effective as of August 5, 1993, the foregoing definition shall also apply to an absence from employment, not to exceed 12 weeks, for which an Employee is entitled to leave under Section 102(a) of the Family and Medical Leave Act of 1993 for maternity or paternity reasons stated above or (i) for purposes of caring for a spouse, child, or parent (but not parent-in-law) who has a serious health condition; or (ii) because of the Employee's own serious health condition. (f) UNPAID LEAVE. An Employee shall receive Hours of Service for the following periods of unpaid absence: (1) ABSENCE ON ACCOUNT OF DISABILITY; leave of absence authorized by an Employer; or (2) ABSENCE ON ACCOUNT OF LAYOFF; hours under this subsection (f) shall be credited at the rate of eight hours per day or 40 hours per week. However, an Employee shall not earn more than two years of Vesting Service for Hours of Service that are credited under paragraphs (2) and (3) (g) MILITARY LEAVE. An Employee shall receive an Hour of Service for each hour of the normally scheduled work week for each week during any period he is absent from work with the Company or an Affiliate for voluntary or involuntary military service with the armed forces of the United States, but not to exceed the period required under the law pertaining to veterans' reemployment rights. However, if the Employee fails to report for work at the end of this absence before his reemployment rights expire, he shall not receive credit for hours during the leave. (h) CONSTRUCTION. For purposes of crediting Hours of Service, the Committee shall follow Department of Labor Regulation Sections 2530 200b-2(b) and (c). 3.2 BREAK IN SERVICE means the cessation of crediting Hours of Service when the Employee: (a) resigns; (b) is discharged; (c) fails to report for work within the period required under the law pertaining to veterans' reemployment rights after release from military duty with the armed forces of the United States, in which case his Break in Service shall be deemed to have occurred on the first day of his leave for duty; (d) fails to return to employment after an authorized leave of absence; or (e) retires or dies. 3.3 ONE-YEAR BREAK IN SERVICE means a Plan Year in which an Employee who has had a Break in Service has fewer than 425 Hours of Service. 3.4 VESTING SERVICE is used to determine a Member's eligibility to receive benefits. Vesting Service is also used to determine if a former Employee's Vesting Service and Credited, Service prior to a Break in Service shall be reinstated if he is reemployed. An Employee shall receive credit for Vesting Service for his period of employment with the Company and its Affiliates as follows: -10- (a) Except as otherwise provided in subsection (c), Vesting Service shall be determined in completed full years of service as calculated under subsection (c). (b) For employment before July 1, 1989, an Employee shall be credited with Vesting Service equal to the "Vested Service" he had under the terms of the Prior Plan as of June 30, 1989. (See the Appendix for service dates for participating Employers.) (c) For employment on and after July 1, 1989, an Employee shall receive credit for one full year of Vesting Service for each Plan Year in which he completes at least 425 Hours of Service. (No Employee may accrue more than one year of Vesting Service during the 12-month period which begins on January 1, 1989 and ends on December 31, 1989.) If an Employee has less than 425 Hours of Service in the Plan Year in which he was hired (or rehired following a break in service), or the Plan Year in which he incurred a Termination of Service, he shall receive credit for one month of Vesting Service for each completed month of employment during such Plan Year. (d) If an Employee who has had a Break in Service is subsequently reemployed as an Employee, he shall be considered a new Employee for purposes of the Plan, except: (1) if at such Break in Service he became eligible for a benefit under Article V, the Vesting Service he had at such Break in Service shall be reinstated upon the completion of one year of Vesting Service following his reemployment; (2) if he is reemployed before he has incurred a One-Year Break in Service, his prior Vesting Service shall be reinstated upon his reemployment; or (3) if neither paragraph (1) nor (2) above is applicable and if the number of consecutive One-Year Breaks in Service ending after a Break in Service does not equal or exceed the greater of (A) five or (B) the number of years of Vesting Service he had prior to such Break in Service, his prior Vesting Service shall be reinstated upon the completion of one year of Vesting Service following his reemployment. Notwithstanding the above, any service before January 1, 1985 that was properly disregarded on account of an earlier absence under the Prior Plan shall not be reinstated under this Plan. 3.5 CREDITED SERVICE is used to determine the amount of a Member's benefit under section 5.1(b) and a Member's eligibility to begin receiving early retirement benefits under sections 2.14 and 2.29(b). Credited Service shall be determined as follows: (a) SERVICE BEFORE JULY 1, 1989. For employment before July 1, 1989, an Employee shall be credited with Credited Service equal to the "Credited Service" he had under the terms of the Prior Plan as of June 30, 1989. (See the Appendix for service dates for participating Employers.) (b) SERVICE AFTER JUNE 30, 1989. For employment after June 30, 1989, a Member shall receive credit for Credited Service for each Plan Year under the following table: HOURS OF SERVICE CREDITED SERVICE ---------------- ----------------
-11- 1,700 or more 1 year 1,275 - 1,699 3/4 year 850 - 1,274 1/2 year 425 - 849 1/4 year Less than 425 none
For purposes of this subsection (b), a Member's Hours of Service shall not include hours attributable to: (1) employment as an Inactive Participant; and (2) employment in a position where he is not an Eligible Employee. (In no event shall a Member receive credit for more than one year of Credited Service for the 12-month period which begins on January 1, 1989 and ends on December 31, 1989.) (c) REINSTATEMENT OF CREDITED SERVICE. If a Member incurs a Break in Service and is then reemployed as an Eligible Employee, his prior Credited Service shall be reinstated only to the extent that his Vesting Service is reinstated under section 3.4(d). 3.6 LEASED EMPLOYEES. A person who is a "leased employee" (as defined in Code section 414(n)) of the Company or an Affiliate shall not be considered an Employee for purposes of the Plan. However, if such a person participates in the Plan as a result of subsequent employment with the Company or an Affiliate, he shall receive Vesting Service and Years of Eligibility Service, but not Credited Service, for his employment as a leased employee. Notwithstanding the preceding provisions of this section, a leased employee shall be included as an Employee for purposes of applying the requirements described in Code section 414(n)(3). ARTICLE IV. PARTICIPATION 4.1 DATE OF PARTICIPATION. Each Employee who was a participant in the Prior Plan on June 30, 1989 shall automatically become a Participant in this Plan on July 1, 1989, if he is still an Eligible Employee. Each other Employee shall become a Participant in this Plan on the first working day of the month coinciding with or next following the latest of the date on which the Employee: (a) completes one Year of Eligibility Service; (b) attains age 21: or (c) becomes an Eligible Employee. 4.2 REENTRY INTO THE PLAN FOLLOWING A BREAK IN SERVICE. A rehired Employee who was previously a Participant shall again become a Participant upon completing his first Hour of Service following his reemployment -12- as an Eligible Employee. If the rehired Employee was not previously a Participant, he shall become a Participant on the date described in section 4.1 4.3 DURATION. An Eligible Employee who becomes a Participant shall continue to be a Participant or Inactive Participant until he has a Break in Service. Such an individual shall continue to be a Member thereafter for as long as he is entitled to receive any benefits under the Plan. 4.4 EMPLOYEES OF NEWLY ACQUIRED BUSINESSES. Notwithstanding any provision of this Plan to the contrary, a person employed by another company, corporation, or business enterprise which was acquired, purchased, or operated by, or merged with or consolidated into the Company or any other Employer after July 1, 1989, shall not be eligible to become a Participant in this Plan unless this Plan is extended to such person or class of persons by instrument in writing duly adopted and executed by the Committee acting on behalf of the Company (or any other Employer). Until and unless provided in that writing, participation shall be denied for the period of time such person is employed in relation to such business operation. The Committee shall make such rules, regulations, and other determinations as shall be necessary to determine what constitutes employment in relation to that business operation. Unless otherwise provided in the instrument extending participation under this section 4.4, no service shall be counted under this Plan for any period prior to the date of such acquisition, purchase or operation by or merger with or consolidation into the Company or any other Employer. Additionally, no Credited Service shall be granted prior to the date the Plan is extended to such person or class of persons unless specifically provided to the contrary in the writing extending the Plan. ARTICLE V. BENEFITS 5.1 NORMAL RETIREMENT BENEFITS. (a) ELIGIBILITY. A Member who attains Normal Retirement Age while employed by the Company or an Affiliate shall be eligible for a normal retirement benefit under this Plan. Except as otherwise provided in sections 5.6 and 5.7, this normal retirement benefit shall be calculated and paid as a single life annuity commencing on the Member's Normal Retirement Date. If a Member remains employed or is reemployed after his Normal Retirement Date, his benefit payments under this section may be suspended under Article VI. At Normal Retirement Age, a Member's right to his normal retirement benefit shall be 100 percent vested and nonforfeitable except upon death or reemployment. (b) AMOUNT. Subject to section 5.5, a Member who is eligible for a normal retirement benefit under subsection (a) shall be entitled to a monthly benefit equal to (1), reduced by (2) where: (1) is the sum of the monthly benefit determined from the following table for each year of Credited Service: -13- MEMBER'S BASE HOURLY MONTHLY ACCRUAL FOR FULL WAGE FOR THE PLAN YEAR YEAR OF CREDITED SERVICE ---------------------- ------------------------ $5.00 or less $10.00 $5.01 - $5.50 $11.00 $5.51 - $6.00 $12.00 $6.01 - $6.50 $13.00 $6.51 - $7.00 $14.00 $7.01 - $7.50 $15.00 $7.51 - $8.00 $16.00 etc. by $.50 increments etc. by $1.00 increments
(The accrual under this subsection (b) shall be reduced proportionately for each Plan Year in which the Member is credited with less than a full year of Credited Service); and (2) is the retirement benefit (or the Actuarial Equivalent thereof) previously paid or payable to the Member under the Prior Plan as of his Normal Retirement Date. (c) MINIMUM BENEFIT. Notwithstanding any provision to the contrary, in no event shall a monthly normal retirement benefit determined under this section 5.1 be less than the largest early retirement benefit the Member would have been entitled to receive under section 5.2 by retiring at any time after his Early Retirement Age, but before Normal Retirement Age. (d) AGE 70-1/2 COMMENCEMENT. Notwithstanding any provision in this section 5.1 to the contrary, monthly normal retirement benefits must commence no later than April 1 of the year following the year in which the Member attains age 70-1/2. However, a Member who is employed and who has attained age 70-1/2 as of January 1, 1988 (and who was not a 5 percent owner (as defined in Code section 416(i)) at any time during the Plan Year in which he attained age 66-1/2, or during any subsequent Plan Year) may defer commencement of his distribution to April 1 of the year following the year in which he retires. The date described above shall be referred to as the Member's "required beginning date." In the event that the Member continues his employment beyond his required beginning date, the required beginning date shall be his Annuity Starting Date for purposes of waiving the Qualified Joint and Survivor Annuity and electing an optional form of payment under sections 5.6 and 5.7. If a Member remains in employment after his required beginning date, his monthly retirement benefit shall be recalculated and adjusted as of the end of each Plan Year to reflect the additional accrual for such Plan Year. These additional accruals shall be offset (but not below zero) by the Actuarial Equivalent of any benefits distributed to the Member after his required beginning date. Effective January 1, 1997, the term "required beginning date" means the later of (i) the calendar year in which the Employee attains age 70-1/2 or (ii) the calendar year in which the Employee retires, PROVIDED that this clause (ii) shall not apply to any Employee who is a 5% owner in the Plan Year in which the Employee attains age 70-1/2. -14- 5.2 EARLY RETIREMENT BENEFITS. (a) ELIGIBILITY. A Member who attains his Early Retirement Age while employed by an Employer or an Affiliate, but who has not yet reached Normal Retirement Age, shall be eligible for an early retirement benefit under the Plan. Except as otherwise provided in sections 5.6 and 5.7, this early retirement benefit shall be calculated and paid as a single life annuity commencing on the Member's Early Retirement Date. If a Member is reemployed after his Early Retirement Date, his benefit payments under this section may be suspended under Article VI. (b) AMOUNT. If the Member's Early Retirement Date is on or after the Member's sixty-second birthday, the monthly benefit payable under subsection (a) shall equal the benefit calculated under section 5.1(b) as of the Member's Termination of Service. If the Member's Early Retirement Date is before his sixty-second birthday, the monthly benefit payable under subsection (a) shall be reduced by six-tenths of 1 percent for each month by which the Member's Early Retirement Date precedes the first day of the month coinciding with or next following his sixty-second birthday. The early retirement benefit under this subsection (b) will in no event be less than the largest early retirement benefit which the Member would have been entitled to receive under this section by retiring at any time after reaching his Early Retirement Age. 5.3 DISABILITY RETIREMENT BENEFITS. (a) ELIGIBILITY. A Member who has completed at least 15 years of Vesting Service, and who incurs a Termination of Service before reaching Normal Retirement Age on account of Disability, shall be eligible for a disability benefit under the Plan. Prior to the Member's Annuity Starting Date (as defined in section 2.3(c)), this disability benefit shall be calculated and paid as a single life annuity commencing on the Member's Disability Retirement Date. If a Member remains disabled until the first day of the month coinciding with or next following his attainment of Normal Retirement Age, the disability benefit shall be converted into a normal retirement benefit which shall be calculated and paid as a single life annuity (except as otherwise provided in section 5.6). If a Member is reemployed after benefits begin under this section 5.3, these payments may be suspended under Article VI. (b) AMOUNT. (1) AT DISABILITY RETIREMENT DATE. The monthly benefit payable to a Member on his Disability Retirement Date shall be the amount determined under section 5.1(b) based on Credited Service determined as of the Member's Disability Retirement Date. Except as otherwise provided in subsection (c), this amount shall continue to be paid to the disabled Member through the month which immediately precedes the month in which the Member attains Normal Retirement Age. (2) UPON NORMAL RETIREMENT AGE. If the Member remains disabled through the first day of the month coinciding with or next following his attainment of Normal Retirement Age, the benefit determined under paragraph (1) shall be recalculated using the benefit formula in -15- effect when the Member incurred a Termination of Service on account of Disability, assuming (A) the Member continued to earn Credited Service through the date on which he attained Normal Retirement Age; and (B) the Member's Base Hourly Wage for each Plan Year following his Termination of Service on account of Disability is the same as his Base Hourly Wage at the time he became disabled. (3) MINIMUM DISABILITY BENEFIT FOR CERTAIN MEMBERS. Notwithstanding the provisions of Sections 5.3(b)(1) or 5.3(b)(2), the monthly Disability Retirement Benefit payable under either Section 5.3(b)(1) or 5.3(b)(2) to a Member who incurs a Termination of Service due to Disability within the 5-year period prior to Normal Retirement Age shall not be less than the monthly Disability Retirement Benefit calculated under this Section 5.3(b)(3). The minimum monthly Disability Retirement Benefit under this Section 5.3(b)(3) shall be determined in the same manner as the amount of the monthly Disability Retirement Benefit is determined under Section 5.3(b)(1). However, if a Member remains disabled after attaining Normal Retirement Age, one Year of Credited Service shall be added for each Plan Year after Normal Retirement Age during which the Member remains disabled but in no event shall the total Years of Credited Service for purposes of computing the minimum monthly Disability Retirement under this Section 5.3(b)(3) exceed 5. Any increase in a member's monthly Disability Retirement Benefit as a result of the application of this Section 5.3(b)(3) shall commence as of the first day of the Plan Year following the plan Year in which the additional Year of Credited Service due to remaining disabled after Normal Retirement Age is recognized. (c) RECOVERY FROM DISABILITY. If a Member recovers from his Disability before reaching Normal Retirement Age, any benefit being paid under this section 5.3 shall be terminated. The Member shall then be entitled to a benefit under section 5.1, 5.2, or 5.4, whichever is applicable. This subsequent benefit shall be based on Credited Service up to the date on which the Disability was incurred, plus Credited Service for the period of Disability. A Member shall be treated as having recovered from Disability if: (1) the Member engages in any employment for remuneration or profit (except employment which has been approved by the Committee for purposes of rehabilitation); (2) on the basis of medical evidence satisfactory to the Committee, the Member has sufficiently recovered to resume active employment, and declines an offer of employment by an Employer; or (3) the Member refuses to submit to a medical examination requested by the Committee, provided that the Committee may not request the Member to undergo a medical examination more than once every six months. 5.4 VESTED RETIREMENT BENEFITS. -16- (a) ELIGIBILITY. A Member who has completed at least five years of Vesting Service prior to his Termination of Service, but who is not yet eligible for a normal or early retirement benefit, shall be eligible for a vested retirement benefit under the Plan. Except as otherwise provided in section 5.6, this vested retirement benefit shall be calculated and paid as a single life annuity commencing on the Member's Vested Retirement Date. If a Member is reemployed after his Vested Retirement Date, his benefit payments under this section may be suspended under Article VI. (b) AMOUNT. A terminated Member who is eligible for a vested retirement benefit under subsection (a) shall be entitled to a monthly benefit equal to the benefit calculated under section 5.1(b) as of the Member's Termination of Service. However, if the Member's Vested Retirement Date precedes the first day of the month coinciding with or next following the Member's sixty-fifth birthday, the benefit payable to the Member shall be reduced by six-tenths of 1 percent for each month that the Member's Vested Retirement Date precedes the first day of the month coinciding with or next following his sixty-fifth birthday. 5.5 ADJUSTMENT TO BENEFITS. (a) NONDUPLICATION. Except as otherwise provided with respect to benefits under the Prior Plan, a Member shall not be entitled to any benefits under this Article V with respect to any period of service with the Company or an Affiliate during which the Member is accruing benefits under any other qualified defined benefit plan contributed to by the Company or an Affiliate. (b) COORDINATION OF BENEFITS. The maximum combined benefit paid from this Plan and The New Coleman Company, Inc. Retirement Plan for Salaried Employees (and their respective "Prior Plans") to any Member who retires under this Plan, and has 35 or more total years of Credited Service under both plans, shall be a benefit equal to what the Member would have received under The New Coleman Company, Inc. Retirement Plan for Salaried Employees had the Member retired with 35 years of Credited Service under such plan. -17- 5.6 NORMAL FORM OF PENSION FOR MARRIED MEMBERS. (a) NORMAL FORM. Subject to sections 5.3(a) and 5.7 through 5.9, the form of pension payable to a Member who is entitled to a benefit under section 5.1, 5.2, 5.3, or 5.4, and who is married on his Annuity Starting Date, shall be a Qualified Joint and Survivor Annuity. (b) WAIVER PROCEDURES. (1) GENERAL RULE. A married Member who is entitled to a normal or early retirement benefit under section 5.1 or 5.2, may elect in writing, on a form supplied by the Committee, to waive the Qualified Joint and Survivor Annuity, and to receive benefits in accordance with an optional form of payment under section 5.7. Any election by a Member pursuant to this paragraph (1) must be filed with the Committee within the 90-day period ending on the Member's Annuity Starting Date. For such an election to be effective: (A) the Member's spouse must consent in writing to such election; (B) such election must designate a Beneficiary (if applicable); (C) the Member's spouse must acknowledge the financial consequences of such consent; and (D) such spouse's consent must be witnessed by a Plan representative or notary public. (2) EXCEPTION TO CONSENT REQUIREMENT. The consent of a Member's spouse shall not be required where: (A) the Member elects a joint and survivor annuity option under section 5.7(a) with his spouse as Beneficiary; (B) the Committee determines that the required consent cannot be obtained because there is no spouse or the Member's spouse cannot be located; (C) the Committee determines that the Member is legally separated; (D) the Committee determines that the Member has been abandoned within the meaning of local law and there is a court order to that effect; or (E) there exists any other circumstance (as determined by the Committee) prescribed by law as an exception to the consent requirement. (3) REVOCATION AND MODIFICATION. An election by a Member under paragraph (1) to waive the Qualified Joint and Survivor Annuity may be revoked by the Member in writing without the consent of his spouse at any time during the election period. Any subsequent election by a Member to waive the Qualified Joint and Survivor Annuity, or any subsequent modification of a prior election (other than a revocation of a waiver of the Qualified Joint and Survivor Annuity or a change in the form of payment or designation of Beneficiary where there is in effect a valid "general consent"), must comply with the requirements in -18- paragraph (1) above. A spouse's consent shall be considered a "general consent" if the following requirements are satisfied: (A) the consent permits the Member to waive the Qualified Joint and Survivor Annuity; (B) the consent permits the Member to change the optional form of benefit payment and/or the Beneficiary without any requirement of further consent by the spouse; and (C) the spouse acknowledges in the consent that: (i) he has the right to limit consent to a specific optional form of benefit and/or Beneficiary (as applicable), and (ii) he voluntarily relinquishes either or both of such rights (as applicable). (c) NOTICE AND EXPLANATION TO MEMBERS. The Committee shall provide to each Member (by mail or personal delivery), between 30 and 90 days before the Member's Annuity Starting Date, a written explanation of the Qualified Joint and Survivor Annuity. This explanation shall describe the terms and conditions of the benefit, the material features and relative values of other optional forms of benefit available under the Plan, the Member's right to make (and the effect of) an election to waive the benefit, the right of the Member's spouse to consent in writing to the waiver, and the right to make (and the effect of) a revocation of an election to waive the benefit. 5.7 OPTIONAL METHODS OF PAYMENT. In lieu of the normal form of benefit otherwise payable under section 5.1, 5.2, or 5.6, a Member who is entitled to a normal or early retirement benefit may elect to receive his benefit under an optional method of payment. Any such election made by a married Member must comply with the requirements of section 5.6(b). Any such election by an unmarried Member shall be valid only if the Member is furnished with an explanation of the material features of the optional forms of payment within the notice period described in section 5.6(e). Instead of a Qualified Joint and Survivor Annuity, a Member who is married on his Annuity Starting Date may elect a single life annuity or one of the optional payment forms described in this section 5.7. Instead of a single life annuity, a Member who is not married on his Annuity Starting Date may elect one of the optional payment forms described in this section 5.7. Each optional payment form described below shall be the Actuarial Equivalent of a single life annuity payable for the lifetime of the Member. (a) JOINT AND SURVIVOR ANNUITY OPTION. A joint and survivor annuity option is a reduced monthly retirement benefit payable to the Member for life and to the Member's surviving Beneficiary for the lifetime of such Beneficiary in an amount equal to either 50 percent or 100 percent (as elected by the Member) of the amount payable during the Member's lifetime. (Any election under this subsection (a) shall be null and void if the Beneficiary designated by the Member dies before the Member's Annuity Starting Date.) (b) CERTAIN AND LIFE ANNUITY OPTION. A certain and life annuity option is a reduced monthly retirement benefit payable to the Member for life, and if he dies before receiving 60 or 120 monthly payments (as elected by the Member), such payments shall continue to the Member's Beneficiary until a total of 60 or 120 monthly payments have been made. -19- If a Member elects an optional form of payment under this section 5.7 and dies before his Annuity Starting Date, his election shall be null and void, and any benefits with respect to the Member shall be payable in accordance with Article VII (regarding preretirement death benefits). 5.8 INCIDENTAL DEATH BENEFITS. No optional forms of retirement benefits shall be granted under section 5.7 above that would extend the payment period longer than (i) the lifetime of the Member or the joint lives of the Member and his Beneficiary or (ii) the Member's life expectancy or the joint life expectancies of the Member and his Beneficiary. In addition, no optional method of payment in the form of an annuity shall be permitted unless the minimum distribution incidental benefit rule is satisfied. This rule will automatically be satisfied if distribution is in the form of a Qualified Joint and Survivor Annuity or if the Member's spouse is his designated Beneficiary. Otherwise, this rule is satisfied if the distribution satisfies subsection (a) or (b) below. (a) ANNUITY OPTION. If distribution is made in the form of a nonspouse annuity, the periodic annuity payments payable to the Beneficiary may not exceed the "applicable percentage" of the annuity payments payable to the Member. The "applicable percentage" shall be determined under regulations under Code section 401(a)(9), and in particular pursuant to the appropriate table in section 1.401(a)(9)-2 of these regulations. (b) PERIOD CERTAIN AND LIFE ANNUITY. If distribution is made in the form of a nonspouse period certain and life annuity, the "period certain" may not exceed the "applicable period" determined under regulations under Code section 401(a)(9), and in particular pursuant to the appropriate table in section 1.401(a)(9)-2 of these regulations. 5.9 PAYMENT OF SMALL AMOUNTS. (a) GENERAL RULE. If the single sum value of the benefit payable to a Member under this Article V (or the benefit payable to a surviving spouse under section 7.1) does not exceed $3,500, the benefit shall be paid in a single sum as soon as practicable following the Member's Retirement Date, Termination of Service, or death (whichever is applicable). A Member who has a Termination of Service and whose vested benefit is zero shall be deemed to have received an immediate single sum payment of his benefit and shall thereupon cease to be a Member. (b) DIRECT ROLLOVERS. In the event a single sum distribution shall become available to a Member (or a Member's surviving spouse) after December 31, 1992, the Distributee may elect, subject to the provisions of this subsection 5.9(b), at the time and in the manner prescribed by the Committee, to have any portion of an Eligible Rollover Distribution paid directly to an Eligible Retirement Plan specified by the Distributee in a Direct Rollover. (1) DEFINITIONS. (A) ELIGIBLE ROLLOVER DISTRIBUTION. An Eligible Rollover Distribution is any distribution of all or any portion of the balance to the credit of the Distributee, except that an Eligible Rollover Distribution does not include: any distribution that is one of a series of substantially equal -20- periodic payments (not less frequently than annually) made for the life (or life expectancy of the Distributee or the joint lives (or joint life expectancies) of the Distributee and the distributee's designated beneficiary, or for a specified period of ten years or more; any distribution to the extent such distribution is required under Section 401(a)(9) of the Code; and the portion of any distribution that is not includable in gross income (determined without regard to the exclusion for net unrealized appreciation with respect to employer securities). The Committee will not permit a Distributee to elect a Direct Rollover of his or her distributions during a Plan Year if such distributions are reasonably expected to total less than $200 (regardless of whether such distributions might qualify as Eligible Rollover Distributions). (B) ELIGIBLE RETIREMENT PLAN. An Eligible Retirement Plan is an individual retirement account described in Section 408(a) of the Code, an individual retirement annuity described in Section 408(b) of the Code, an annuity plan described in Section 403(a) of the Code, or a qualified trust described in Section 401(a) of the Code, that accepts the Distributee's Eligible Rollover Distribution. However, in the case of an Eligible Rollover Distribution to the surviving spouse, an Eligible Retirement Plan is an individual retirement account or individual retirement annuity. (C) DISTRIBUTEE. A Distributee includes an employee or former employee. In addition, the employee's or former employee's surviving spouse and the employee's or former employee's spouse or former spouse who is the alternate payee under a qualified domestic relations order, as defined in Section 414(p) of the Code, are Distributees with regard to the interest of the spouse or former spouse. (D) DIRECT ROLLOVER. A Direct Rollover is a payment by the plan to the Eligible Retirement Plan specified by the Distributee. (E) DIVIDED DISTRIBUTIONS. The Committee shall permit a Distributee to elect to have a portion of his or her eligible Rollover Distribution paid to an Eligible Retirement Plan in a Direct Rollover and to have the remainder of that distribution paid to the Distributee, PROVIDED, HOWEVER, if the Distributee elects to have only a portion of an Eligible Rollover paid to an Eligible Retirement Plan in a Direct Rollover, that portion must equal at least $500. If the entire amount of the Eligible Rollover Distribution is $500 or less, the distributee is not permitted to divide the distribution. A Member who has a Termination of Service and whose vested benefit is zero shall be deemed to have received an immediate single sum payment of his benefit and shall thereupon cease to be a Member. 5.10 MAXIMUM ANNUAL BENEFITS. -21- (a) Notwithstanding any other provision of this Plan to the contrary, in no event may the annual benefit provided under this Plan (together with that provided by all other defined benefit plans of the Company and all Affiliates) for any Member for a limitation year exceed the lesser of: (1) $90,000, or (2) 100 percent of the Member's average annual compensation (as defined in Treasury regulation section 1.415-2(d)) over the three consecutive years during which he had the greatest aggregate compensation from the Company and all Affiliates. For purposes of the Plan, the limitation year shall be the Plan Year. If a Member has fewer than ten years of participation in the Plan, the dollar limit described in paragraph (1) shall be multiplied by a fraction (not to be less than 1/10 or greater than one), the numerator of which is the Member's years of participation in the Plan and the denominator of which is ten. If a Member has fewer than ten years of Vesting Service, the compensation limit described in paragraph (2) shall be multiplied by a fraction (not to be less than 1/10 or greater than one), the numerator of which is the Member's years of Vesting Service and the denominator of which is ten. (b) The limits of subsection (a) shall be adjusted to reflect the form of benefits described in section 5.7. The limits shall also be adjusted if a Member's Annuity Starting Date does not coincide with the Member's attaining Social Security Retirement Age. These adjustments shall be made as specified in Code section 415(b)(2). (c) The limit in subsection (a)(l), and the limit in subsection (a)(2) for a Member who has incurred a Termination of Service, shall be adjusted for increases in the cost of living in the manner specified in applicable regulations. (d) In applying the limitations on benefits hereunder, the qualified plans of any employer that is not the Company or an Affiliate shall be aggregated with the Plan or any other plan of the Company or an Affiliate if the employer would be an Affiliate if the phrase "at least 80 percent" in Code section 1563(a)(1), in applying such section to Code section 414(b) or (c), were replaced with "more than 50 percent." (e) If any Member is a participant in a defined contribution plan of the Company or any Affiliate, the sum of the "defined benefit plan fraction" and the "defined contribution plan fraction" (as such terms are defined in Code section 415(e)) for any Plan Year with respect to the Member shall not exceed one. (This defined contribution plan fraction shall be adjusted to the extent permitted by section 1106(i)(4) of the Tax Reform Act of 1986. Any annual additions made for Plan Years beginning before January 1, 1987 shall be determined in the manner prescribed by the Code prior to the enactment of the Tax Reform Act of 1986.) Effective January 1, 1993, if this sum would otherwise exceed one, the Member's retirement benefits shall be reduced in the following order to comply with the requirements of this subsection: (1) benefits under this Plan shall be reduced first; -22- (2) if additional reductions are required to comply with this subsection, the Member's benefits under any other defined benefit plan maintained by the Company or an Affiliate shall then be reduced; and (3) if the reductions in paragraphs (1) and (2) are not sufficient to comply with this subsection, the Member's allocations to any defined contribution plan shall then be reduced. (However, in no event will a benefit adjustment under this subsection (e) cause a Member's accrued benefit under this Plan to be reduced below that which had accrued as of December 31, 1992.) (f) If a Member was a participant in any other defined benefit plan maintained by the Company or an Affiliate before January 1, 1983, or January 1, 1987, nothing in this section 5.10 shall limit or prohibit payment under those plans of benefits accrued prior to those dates. 5.11 WITHHOLDING TAXES. The Company or Affiliate may withhold from a Member's compensation, and the Trustee may withhold from any payment under this Plan, any taxes required to be withheld with respect to contributions or benefits under this Plan and such sum as the Company, Affiliate, or Trustee may reasonably estimate as necessary to cover any taxes for which they may be liable and which may be assessed with respect to contributions or benefits under this Plan. ARTICLE VI. SUSPENSION OF BENEFITS UPON CERTAIN EMPLOYMENT OR REEMPLOYMENT 6.1 REEMPLOYMENT BEFORE NORMAL RETIREMENT DATE. If a Member is reemployed by the Company or an Affiliate before his Normal Retirement Date, but after he has begun to receive a benefit under the Plan: (a) benefit payments under the Plan shall cease during the period of his reemployment; (b) upon the Member's subsequent Termination of service, benefits under the Plan shall be redetermined as if he then first retires, based on Credited Service and Compensation earned before and after his absence; (c) this redetermined benefit shall then be reduced by the Actuarial Equivalent value of all payments previously received prior to the Member's reemployment (but not below the amount of benefits paid on account of his prior retirement); and (d) the Member shall be entitled during his period of reemployment (subject to the election procedures of sections 5.6 and 5.7) to revise any prior election affecting the form in which benefits are paid. 6.2 CONTINUED EMPLOYMENT OR REEMPLOYMENT ON OR AFTER NORMAL RETIREMENT DATE. In the case of a Member who remains employed or is reemployed by the Company or an Affiliate after his Normal Retirement Date: (a) no benefits shall be paid under the Plan for any month in which he is compensated for 40 or more Hours of Service; -23- (b) for periods of employment or reemployment described in subsection (a), Department of Labor regulation section 2530.203-3, including the notice procedures described in section 6.3, shall be followed; (c) benefits paid after a subsequent Termination of Service shall not be adjusted on account of payments suspended during period of employment or reemployment; and (d) in the case of a Member who is reemployed after his Normal Retirement Date: (1) benefits under the Plan shall be redetermined upon the Member's subsequent Termination of Service as if he then first retired, based on Credited Service and Compensation earned before and after his absence; (2) this redetermined benefit shall then be reduced by the Actuarial Equivalent value of all payments previously received prior to the Member's reemployment (but not below the amount of benefits paid on account of his prior retirement); and (3) the Member shall be entitled during such period of reemployment (subject to the election procedures of sections 5.6 and 5.7) to revise any prior elections affecting the form in which benefits are paid. In no event shall benefits payable to a Member after his "required beginning date" (as defined in section 5.1(d)) be suspended under this Article VI. 6.3 SUSPENSION OF BENEFITS NOTICE PROCEDURES. If a Member's benefits are suspended after Normal Retirement Age under this Article VI, the Committee shall notify the Member of such suspension. This notice shall be by personal delivery or first class mail during the first calendar month for which payments are withheld. This notice shall contain: (a) a general description of the reasons why payments are suspended; (b) a general description of the Plan provisions relating to the suspension of benefits; (c) a copy of such Plan provisions; (d) a statement that applicable Department of Labor regulations may be found in section 2530.203-3 of the Code of Federal Regulations; and (e) a statement that a review of the suspension may be requested under the claims procedure found in section 9.7. ARTICLE VII. DEATH BENEFITS 7.1 PRERETIREMENT DEATH BENEFITS FOR MARRIED MEMBERS. -24- (a) ELIGIBILITY. The surviving spouse of a married Member who has a nonforfeitable right to a retirement benefit under Article V, and who dies prior to his Annuity Starting Date, shall be entitled to a preretirement survivor annuity in an amount determined under subsection (b). (b) AMOUNT OF BENEFITS. Except as provided below, the monthly payments to a surviving spouse under this section 7.1 shall equal the amounts which would have been payable as a survivor annuity under the Qualified Joint and Survivor Annuity under the Plan if (1) in the case of a Member who dies after his Earliest Retirement Age, such Member had retired with an immediate Qualified Joint and Survivor Annuity on the day before his death, or (2) in the case of a Member who dies on or before attaining his Earliest Retirement Age, such Member had terminated employment on the date of death (if his employment had not yet terminated), survived to his Earliest Retirement Age, retired with an immediate Qualified Joint and Survivor Annuity on his Earliest Retirement Age, and died on the day after the day on which he would have attained his Earliest Retirement Age. If, pursuant to subsection (c) below, a spouse elects to defer the commencement of the preretirement survivor annuity, the amount of the benefit payable thereunder shall be increased (as if the Member had deferred commencement of his benefit) to reflect such deferral. (c) COMMENCEMENT. Unless the spouse elects a later commencement date, payment of the preretirement death benefit under this section 7.1 shall commence on the first day of the month coinciding with or immediately following (1) the date of the Member's death, in the case of a Member who dies on or after attaining his Earliest Retirement Age; or (2) the date the Member would have attained his Earliest Retirement Age, in the case of a Member who dies before attaining such age. In no event, however, may the surviving spouse defer the commencement of benefits under this subsection (c) beyond the first day of the month coinciding with or next following the Member's Normal Retirement Age. 7.2 NO REDUCTION TO OTHER BENEFITS. The monthly retirement benefits payable to a Member if he does not die prior to his Annuity Starting Date, and the amount payable to his surviving spouse under this Article VII, shall not be reduced to reflect the cost of coverage under this Article VII. 7.3 ADDITIONAL DEATH BENEFITS. Effective October 11, 1994 solely with respect to Members employed at Soniform, Inc. (Soniform Member), in addition to any other benefits payable on account of a Soniform Member's death under Article V or Article VII, the Beneficiary of a Soniform Member who either dies: (a) after his Annuity Starting Date; or (b) while actively employed, but after reaching Early Retirement Age shall be entitled to an additional death benefit under this Section 7.3. The additional benefit for the Beneficiary of a Soniform Member described in subsection (a) shall be paid in a lump sum and such additional post annuity starting -25- date death benefit shall equal the amount that would have been paid over a period limited to twelve months, calculated as if the Soniform Member had elected a single life annuity regardless of which benefit option the Soniform Member actually elected. The additional benefit for the Beneficiary of a Soniform Member described in subsection (b) shall be paid in a lump-sum and such additional post-Early Retirement Age death benefit shall equal the amount that would have been paid over a period limited to twelve months, calculated as if the Soniform Member had retired as of the first day of the month in which his death occurred and had elected a single life annuity. In addition, the Beneficiary of Soniform Member described in subsection (b) shall receive a lump sum payment equal to the amount that would have been paid in a single month, calculated as if the Soniform Member had elected a 50% Qualified Joint and Survivor Annuity. ARTICLE VIII. FINANCING 8.1 FINANCING. The Company shall maintain a Retirement Fund as a part of the Plan to implement the provisions of the Plan and to finance the benefits under the Plan. The Company shall enter into one or more Trust Agreements or insurance contracts, or shall cause insurance contracts to be held under a Trust Agreement. Any Trust Agreement 80 designated shall constitute a part of this Plan. All rights that may accrue to any person under this Plan shall be subject to all the terms and provisions of the Trust Agreement. The Company, by action of the Board, may modify any Trust Agreement or insurance contract from time to time to accomplish the purposes of the Plan. The Company may replace any insurance company or appoint a successor Trustee or Trustees. By entering into Trust Agreements or insurance contracts, the Company shall establish a funding policy for the Plan. The Company shall vest in the Trustee and/or in one or more investment managers appointed under the Trust Agreement responsibility for the management and control of the Retirement Fund pursuant to such funding policy. If the Company appoints any investment manager, the Trustee shall not be liable for the acts or omissions of this investment manager or have any responsibility to invest or otherwise manage any portion of the Retirement Fund subject to the management and control of the investment manager. 8.2 CONTRIBUTIONS. The Employers shall make contributions to the Retirement Fund which, under accepted actuarial principles, are at least sufficient to maintain the Plan as a qualified employee defined benefit plan meeting the minimum funding standard requirements of the Code. All contributions made by the Employers hereunder are strictly conditioned on their deductibility under Code section 404. (Employee contributions are neither required nor permitted.) Except as provided in Title I and Title IV of ERISA, all benefits payable under the Plan shall be payable only from the Retirement Fund. No liability for the payment of benefits under the Plan shall be imposed on the Company, Affiliates, Trustees, or officers, directors, or shareholders of the Company or the Affiliates. Forfeitures arising under the Plan for any reason shall be used as soon as possible to reduce the contributions of the Employers. 8.3 NONREVERSION. The Employers shall not have any right, title, or interest in the contributions made to the Retirement Fund under the Plan. No part of the Retirement Fund shall revert to the Employers except as follows: -26- (a) If the Internal Revenue Service initially determines that the Plan does not meet the requirements of Code section 401(a), the Plan shall be null and void from July 1, 1989, and any contributions shall be returned to all Employers within one year following such determination (unless the Employers elect to change the Plan as necessary to obtain a determination from the Internal Revenue Service that the Plan meets the requirements of Code section 401(a)). (b) Upon complete termination of the Plan and the allocation and distribution of the Retirement Fund under section 10.2, any funds remaining in the Retirement Fund after the satisfaction of all fixed and contingent liabilities under the Plan shall revert to the Employers at that time. (c) An Employer contributes to the Retirement Fund on the condition its contribution is not due to a mistake of fact and the Revenue Service will not disallow its deduction for that contribution. The Trustee, upon written request from an Employer, must return to the Employer the amount of the Employer's contribution made by the Employer by mistake of fact or the amount of the Employer's contribution disallowed as a deduction under Code Section 404. The Trustee will not return any portion of the Employer's contribution under the provisions of this Subsection more than one year after: (1) the Employer made the contribution by mistake of fact; or (2) the disallowance of the contribution as a deduction, and then, only to the extent of the disallowance. Furthermore, the Trustee will not increase the amount of the Employer contribution returnable under this Subsection for any earnings attributable to the contribution, but the Trustee will decrease the Employer contribution returnable for any losses attributable to it. The Trustee may require the Employer to furnish it whatever evidence the Trustee deems necessary to enable the Trustee to confirm the amount the Employer has requested be returned is properly returnable under ERISA. ARTICLE IX. ADMINISTRATION 9.1 COMMITTEE AND FIDUCIARY. The Company shall be responsible for the general administration of the Plan. The Company shall be the "administrator" within the meaning of ERISA section 3(16)(A) and the "named fiduciary" under ERISA section 402. The Committee shall act on behalf of the Company with respect to all matters relating to Plan administration. The Committee shall be composed of as many members as the Board may appoint from time to time and shall hold office at the pleasure of the Board. Any member of the Committee may resign by delivering his written resignation to the Board. Vacancies in the Committee arising by resignation, death, removal, or otherwise shall be filled by the Board. 9.2 COMPENSATION AND EXPENSES. A member of the Committee shall serve without compensation for services as such if he is receiving full-time pay from the Company or an Affiliate as an Employee. Any member of -27- the Committee may receive reimbursement from the Retirement Fund, to the extent not paid by an Employer in its sole and absolute discretion, for expenses properly and actually incurred. 9.3 MANNER OF ACTION. A majority of the members of the Committee at the time in office shall constitute a quorum for the transaction of business. All resolutions adopted and other actions taken by the Committee at any meeting shall be by a majority vote of those present at any such meeting. Upon the unanimous concurrence of the members at the time in office, action of the Committee may be taken other that at a meeting. 9.4 CHAIRMAN, SECRETARY, AND SPECIALISTS. The members of the Committee may elect one of their number as chairman and may elect a secretary who may, but need not, be a member of the Committee. They may authorize one or more of their number or any agent to execute or deliver any instrument or instruments on their behalf. The Committee may employ any counsel, auditors, and other specialists, and any clerical, actuarial, and other services as it may require in carrying out the provisions of the Plan. These expenses shall be paid by the Retirement Fund to the extent not paid by the Employers in their sole and absolute discretion. 9.5 RECORDS. All resolutions, proceedings, acts, and determinations of the Committee shall be recorded by the secretary thereof or under his supervision. All such records, together with any documents and instruments as may be necessary for the administration of the Plan, shall be preserved in the custody of the secretary. 9.6 ADMINISTRATION. Except with respect to duties delegated under the terms of the Plan, the Committee shall be responsible for the administration of the Plan. The Committee shall have all powers necessary or appropriate to carry out the provisions of the Plan. It may, from time to time, establish rules for the administration of the Plan and the transaction of the Plan's business. In making any determination or rule, the Committee shall pursue uniform policies established by the Committee. It shall not discriminate in favor of or against any Member. The Committee shall have the exclusive right to make any finding of fact necessary or appropriate for any purpose under the Plan including, but not limited to the exclusive right and discretionary authority to make determination of the eligibility for and the amount of any benefit payable under the Plan. The Committee shall have the exclusive right and discretionary authority to interpret the terms and provisions of the Plan and to determine any and all questions arising under the Plan or in connection with the administration thereof, including, without limitations the right to remedy or resolve possible ambiguities, inconsistencies, or omissions, by general rule or particular decision. The Committee shall make, or cause to be made, all reports or other filings necessary to meet the reporting, disclosure, and other filing requirements of ERISA that are the responsibility of "plan administrators" under ERISA. To the extent permitted by law, all findings of fact, determinations, interpretations, and decisions of the Committee shall be conclusive and binding upon all persons having or claiming to have any interest or right under the Plan. In carrying out its responsibilities hereunder, the Committee shall have the utmost discretion permitted by law. 9.7 APPEALS FROM DENIAL OF CLAIMS. If any claim for benefits under the Plan is wholly or partially denied, the claimant shall be given notice in writing of the denial. This notice shall be given, within a reasonable period of time after receipt of the claim by the Committee (not to exceed 90 days after receipt of the claim, except -28- that if special circumstances require an extension of time, written notice of the extension shall be furnished to the claimant, and an additional 90 days will be considered reasonable). This notice shall be written in a manner calculated to be understood by the claimant and shall set forth the following information: (a) the specific reasons for the denial; (b) specific reference to the Plan provisions on which the denial is based; (c) a description of any additional material or information necessary for the claimant to perfect the claim and an explanation of why this material or information is necessary; and (d) an explanation that a full and fair review by the Committee of the decision denying the claim may be requested by the claimant or his authorized representative by filing with the Committee, within 60 days after the notice has been received, a written request for the review; and (e) if such request is so filed, the claimant or his authorized representative may review pertinent documents and submit issues and comments in writing within the same 60-day period specified in sub-section (d) above. The decision of the Committee upon review shall be made promptly, and not later than 60 days after the Committee's receipt of the request for review, unless special circumstances require an extension of time for processing. In such a case the claimant shall be so notified and a decision shall be rendered as soon as possible, but not later than 120 days after receipt of the request for review. If the claim is denied, wholly or in part, the claimant shall be given a copy of the decision promptly. The decision shall be in writing, shall include specific reasons for the denial, shall include specific references to the pertinent Plan provisions on which the denial is based, and shall be written in a manner calculated to be understood by the claimant. 9.8 NOTICE OF ADDRESS AND MISSING PERSONS. Each person entitled to benefits under the Plan must file with the Committee or its agent, in writing, his post office address and each change of post office address. Any communication, statement, or notice addressed to such a person at his latest reported post office address will be binding upon him for all purposes of the Plan. The Committee, the Company, Affiliates, or Trustee shall not be obliged to search for or ascertain his whereabouts. If a person cannot be located, the Committee may direct that his benefit and all further benefits with respect to him shall be discontinued and all liability for the payment thereof shall terminate. However, in the event of the subsequent reappearance of the Member or Beneficiary prior to termination of the Plan, the benefits that were due and payable shall be paid in a single sum, and the future benefits due such person shall be reinstated in full. -29- 9.9 DATA AND INFORMATION FOR BENEFITS. All persons claiming benefits under the Plan must furnish to the Committee or its designated agent such documents, evidence, or information as the Committee or its designated agent consider necessary or desirable to administer the Plan. Any such person must furnish this information promptly and sign any documents the Committee or its designated agent may require before any benefits become payable under the Plan. 9.10 INDEMNITY FOR LIABILITY. The Company shall indemnify each member of the Committee against any and all claims, losses, damages, and expenses (including counsel fees) incurred by the Committee. The Company shall indemnify the Committee members against any liability (including any amounts paid in settlement with the Committee's approval) arising from the member's or Committee's action or failure to act. The Company is not liable to indemnify these persons against claims, losses, damages, expenses, or liabilities when the same is judicially determined to be attributable to gross negligence or willful misconduct. The Company shall pay the premiums on any bond secured under this section and shall be entitled to reimbursement by the other Employers for their proportionate share. 9.11 EFFECT OF A MISTAKE. In the event of a mistake or misstatement as to the eligibility, participation, or service of any Member, or the amount of payments made or to be made to a Member or Beneficiary, the Committee shall, if possible, cause such payment amounts to be withheld, accelerated, or otherwise adjusted as will in its sole judgment result in the Member or Beneficiary receiving the proper amount of payments under this Plan. 9.12 SELF INTEREST. A member of the Committee who is also a Member shall not vote on any question relating specifically to himself. ARTICLE X. AMENDMENT AND TERMINATION 10.1 AMENDMENT AND TERMINATION. The Company hereby reserves the right, at will, to amend or modify in any respect, or to terminate, the Plan at any time, for any reason whatsoever. The Company may make any modifications or amendments to the Plan, retroactively if necessary or appropriate, to qualify or maintain the Plan as a plan meeting the requirements of Code Section 401(a) and ERISA. No amendment of the Plan shall cause any part of the Retirement Fund to be used for or diverted to purposes other than the exclusive benefit of the Members or Beneficiaries. No plan amendment may (a) eliminate or exclude an early retirement benefit or a retirement-type subsidy (as defined in Treasury Regulations) or (b) eliminate an optional form of benefit with respect to benefits attributable to service before the amendment, except as permitted under Code Section 411(d)(6). Retroactive plan amendments may not decrease the monthly normal retirement benefit of any Member determined as of the time the amendment was adopted (except to the extent permitted under Code Section 412(c)(8)). 10.2 DISTRIBUTION ON TERMINATION. Upon termination or partial termination of the Plan, the rights of the Members who are employed by the Company or an Affiliate on the date of termination (and who in the case of a partial termination are affected thereby) to their monthly normal retirement benefit as of the date of such termination shall be nonforfeitable to the extent then funded. However, in no event shall any Member or Beneficiary have recourse to other than the Retirement Fund and, if applicable, the Pension Benefit Guaranty Corporation. -30- In the case of a complete termination of the Plan, the assets then held in the Retirement Fund shall be allocated, after payment of all expenses of administration or liquidation, in the manner prescribed by ERISA section 4044. If any assets remain, they shall revert to the Employers as provided in section 8.3. At the Committee's discretion, distribution may be implemented through the continuance of the Retirement Fund, the creation of a new retirement fund, the purchase of nontransferable annuity contracts, a cash distribution, or a combination thereof, subject to the requirements of the Pension Benefit Guaranty Corporation. 10.3 MERGER, CONSOLIDATION, OR TRANSFER. In the case of any merger or consolidation of the Plan with--or in the case of any transfer of assets or liabilities of the Plan to or from--any other plan, each Member in the Plan shall (if the Plan then terminated) receive a benefit immediately after the merger, consolidation, or transfer that is equal to or greater than the benefit he would have been entitled to receive immediately before the merger, consolidation, or transfer (if the Plan had then terminated). Subject to the provisions of this Section, the Plan may be amended to provide for the merger of the Plan, in whole or in part, a spinoff of a portion of the Plan, or a transfer of all of a part of the Plan's assets to any other qualified plan within the meaning of Section 401(a) or 403(a) of the Code, including such a merger, spinoff or transfer in lieu of a distribution which might otherwise be required under the Plan. ARTICLE XI. RESTRICTIONS ON BENEFITS 11.1 TEMPORARY RESTRICTIONS ON BENEFITS FOR MEMBERS OF EACH EMPLOYER. (a) Notwithstanding any other provisions in the Plan to the contrary, in the event of the termination of the Plan, the benefit of any Highly Compensated Employee (and any former Highly Compensated Employee) is limited to a benefit that is nondiscriminatory under Code Section 401(a)(4). (b) In any year, the annual benefits payable under the Plan for the 25 highest paid Members described in (a) above will be restricted to an amount equal to the payments that would be restricted to an amount equal to the payments that would be made on the Member's behalf under a single life annuity that is the actuarial equivalent of the sum of the Member's accrued benefit and the Member's other benefits (if any) under the Plan. (c) The restriction of Subsection (b) above will not apply, however, if: (1) after payment to such a Member of all benefits described in Regulation Section 1.401(a)(4)-5(b)(3)(iii), the value of Plan assets equals or exceeds 110% of the value of current liabilities as defined in Code Section 412(l)(7); (2) the value of the benefits described in Regulation Section 1.401(a)(4)-5(b)(3)(iii) for such a Member is less than 1% of the value of current liabilities before distribution; (3) the value of the benefits described in Regulation Section 1.401(a)(4)-5(b)(3)(iii) is $3,500 or less; or -31- (4) the Commissioner of Internal Revenue determines that such restrictions are not necessary to prevent the prohibited discrimination that may occur in the event of an early termination of the Plan. (d) In the event the Plan ever provides a benefit which would otherwise be payable under the Plan to a Member or former Member but which would be restricted by the provisions of this Section 11.1, the Committee may authorize the Trustees to enter into an escrow agreement, bond, or letter of credit with the affected Member or former Member and a suitable financial institution so that benefits can be distributed to such Member or former Member without regard to the limitations which would otherwise be applicable under this Section 11.1. Any such escrow, bond, or letter of credit shall be structured in accordance with Rev. Rul. 92-76 (or other applicable Treasury Department guidance) so that the Trust shall have a legally enforceable right and guarantee to additional assets (other than assets already owned by the Trust) in the event the plan terminates and the applicable provisions of this Section would restrict the distribution of a portion of the Participant's payment. ARTICLE XII. TOP-HEAVY PROVISIONS 12.1 APPLICATION OF TOP-HEAVY PROVISIONS. (a) SINGLE PLAN DETERMINATION. Except as provided in subsection (b)(2) below, if as of a Determination Date the sum of the Section 416 Benefits of Key Employees and the Beneficiaries of deceased Key Employees exceeds 60 percent of the Section 416 Benefits of all Members and Beneficiaries of other than former Key Employees, the Plan is top-heavy. In this event, the provisions of this Article shall become applicable. (b) AGGREGATION GROUP DETERMINATION. (1) If as of a Determination Date the Plan is part of a top-heavy Aggregation Group, the provisions of this Article shall become applicable. Top heavy status for the purpose of this subsection shall be determined with respect to the Aggregation Group in the same manner as described in subsection (a) above. (2) If the Plan is top-heavy under subsection (a) above, but the Aggregation Group is not top-heavy, this Plan shall not be top-heavy, and this Article shall not be applicable. (c) COMMITTEE RESPONSIBILITY. The Committee shall have responsibility to make all calculations to determine whether the Plan is top-heavy. 12.2 DEFINITIONS. (a) "AGGREGATION GROUP" means the Plan and all other plans maintained by the Company and all Affiliates that cover a Key Employee, and any other plan that enables a plan covering a Key Employee to satisfy Code section 401(a)(4) or 410. In addition, at the election of the Committee, -32- the Aggregation Group may include any other qualified plan maintained by the Company or an Affiliate if this expanded Aggregation Group satisfies Code sections 401(a)(4) and 410. (b) "DETERMINATION DATE" means the last day of the Plan Year immediately preceding the Plan Year for which top-heaviness is to be determined. (c) "KEY EMPLOYEE" means a Member who is a "key employee" under Code section 416(i) and for purposes of such determination, a Key Employee's compensation shall mean compensation as defined in Code Section 415(c)(3) but including employer contributions made to a salary reduction agreement. (d) "SECTION 416 BENEFIT" means the sum of: (1) the present value of the benefit credited as of a Determination Date to a Member or Beneficiary under the Plan and any other qualified defined benefit plan that is part of an Aggregation Group determined under a uniform accrual method applicable to all defined benefit plans in the Aggregation Group, or, where there is no such method, as if such benefit accrued not more rapidly than the slowest rate of accrual permitted under the fractional rule of Code Section 411(b)(1)(C). (2) the amount credited to a Member's or Beneficiary's account under a qualified defined contribution plan that is part of an Aggregation Group; and (3) the amount of distributions to the Member or Beneficiary during the five-year period ending on the Determination Date. Such distributions shall not include any tax-free rollover contribution (or similar transfer) which is not initiated by the Member or which is contributed to a plan maintained by the Company or an Affiliate; reduced by (4) the amount of rollover contributions (or similar transfer) and earnings thereon credited as of a Determination Date under the Plan or a plan forming part of an Aggregation Group that is attributable to a rollover contribution (or similar transfer) initiated by the Member and derived from a plan not maintained by the Company or an Affiliate. The present value of the benefits shall be determined as of the most recent valuation date used for Code section 412 that is within the 12-month period ending on the Determination Date. The benefit of a current Member shall be determined as if the Member terminated service as of the valuation date. In valuing benefits under this Article XII, the Committee shall be able to use any reasonable actuarial assumptions permitted under Code section 416 provided that if an Aggregation Group includes two or more defined benefit plans, the same actuarial assumptions must be used with respect to all such plans and those actuarial assumptions must be specified in such plans. The account or benefit of a Member who was a Key Employee and who subsequently is not a Key Employee for the Plan Year containing the Determination Date, is not a Section 416 Benefit. This accrual or account balance shall be excluded from all computations under this Article. Furthermore, if a Member has not received any compensation from the Company or an Affiliate (other than benefits under the Plan) during the five-year period ending on the Determination Date, any benefit for the Member (and any account of the Member) shall not be taken into account. -33- 12.3 VESTING REQUIREMENTS. If the Plan is determined to be top-heavy with respect to a Plan Year under the provisions of section 12.1, a Member's interest in his benefit shall vest in accordance with the following schedule: YEARS OF VESTING SERVICE VESTING PERCENTAGE ------------------------ ------------------ Less than 2 0% 2 20% 3 40% 4 60% 5 or more 100%
The vesting provisions described in this section shall not apply to a Member who does not have an Hour of Service after the Plan becomes top-heavy. If in a subsequent Plan Year the Plan is no longer top-heavy, the vesting provisions that were in effect prior to the time the Plan became top-heavy shall be reinstated. Any portion of a Member's benefit which was vested prior to the time the Plan was no longer top-heavy shall remain vested, and a Member who has at least three years of Vesting Service at the start of such Plan Year shall have the option of remaining under the vesting schedule in effect while the Plan was top-heavy. 12.4 MINIMUM BENEFIT. (a) MINIMUM ACCRUAL FORMULA. If the Plan is determined to be top-heavy under the provisions of section 12.1 with respect to a Plan Year, the benefit, when expressed as an Annual Retirement Benefit (as defined below), of a Member who is not a Key Employee shall not be less than the difference between paragraphs (1) and (2) where: (1) is the product of: (A) the number of Years of Top-Heavy Service (as defined below); and (B) 2 percent of the Member's average compensation (as defined in Income tax regulations 1.415-2(d)) during the period of the five consecutive Years of Top-Heavy Service during which the Member had the greatest aggregate compensation; but this product shall not exceed 20 percent of the average compensation; and (2) is the amount of the Annual Retirement Benefit that would be provided by the Member's account balance attributable to Employer contributions under a defined contribution plan which is included in an Aggregation Group. (b) DEFINITIONS. (1) ANNUAL RETIREMENT BENEFIT means a benefit payable annually in the form of a single life annuity commencing at age 65. If the benefit is payable in another form or commences at another time, the amount described in subsection (a) above shall be adjusted on an -34- actuarial basis. Preretirement death benefits shall not cause a reduction in the amount of the benefit. (2) YEAR OF TOP-HEAVY SERVICE means each year of Vesting Service that is credited with respect to a Plan Year in which the Plan is top-heavy. 12.5 LIMIT ON ANNUAL ADDITIONS: COMBINED PLAN LIMIT. (a) GENERAL. If the Plan is determined to be top-heavy under section 12.1, Code section 415(e) shall be applied to the Plan by substituting "1.0" for "1.25" each place "1.25" appears in Code section 415(e)(2)(B) and 415(e)(3)(B). (b) EXCEPTION. Subsection (a) above shall not be applicable if: (1) section 12.4 is applied by substituting "3 percent" for "2 percent"; (2) section 12.4 is applied by increasing (but not by more than 10 percentage points) "20 percent" by 1 percentage point for each year for which such plan was taken into account under this subsection; and (3) the Plan would not be top-heavy if "90 percent" is substituted for "60 percent" in section 12.1. (c) TRANSITION RULE. If, but for this subsection, subsection (a) above would begin to apply with respect to the Plan, the application of subsection (a) above shall be suspended with respect to a Member as long as there are: (1) no Employer contributions, forfeitures, or voluntary nondeductible contributions allocated to the Member; and (2) no accruals under a qualified defined benefit plan for the Member. 12.6 COLLECTIVE BARGAINING AGREEMENTS. The requirements of sections 12.3 and 12.4 shall not apply with respect to any Employee included in a unit of Employees covered by a collective bargaining agreement between Employee representatives and an Employer if retirement benefits were the subject of good faith bargaining between such Employee representatives and the Employer. ARTICLE XIII. PARTICIPATION IN AND WITHDRAWAL FROM THE PLAN BY AN AFFILIATE 13.1 PARTICIPATION IN THE PLAN. Any Affiliate that desires to become an Employer hereunder may elect, with the consent of the Committee, to become a party to the Plan. Such Affiliate shall adopt the Plan for the benefit of its eligible Employees, effective as of the date specified in the adoption resolution: -35- (a) by filing with the Committee a written resolution to that effect, and any other instruments as the Committee may require; and (b) by the Committee filing with the Trustee a copy of such resolution, together with a copy of resolution of the Committee approving the adoption. The adoption resolution shall contain specific provisions regarding Vesting Service, Credited Service, and eligibility for initial participation that apply to the adopting Affiliate and its Employees. However, the sole, exclusive right of any other amendment of whatever kind or extent to the Plan is reserved by the Board. The Board may not amend specific changes and variations in the Plan provisions as adopted by the Affiliate in its adoption resolution without the consent of the Affiliate. The adoption resolution shall become, as to the Affiliate and its Employees, a part of this Plan as then amended or thereafter amended. To the extent of any conflict between the adoption resolution and this Plan, the adoption resolution shall control. It shall not be necessary for the adopting Affiliate to sign or execute the original or then amended Plan. The effective date of the Plan for any adopting Affiliate shall be that stated in the resolution of adoption. From and after the effective date, the adopting Affiliate shall assume all the rights, obligations, and liabilities of an individual Employer entity hereunder. The administrative powers and control of the Company and Board, as provided in the Plan, including the sole right to amendment, and of appointment and removal of the Committee, the Trustee, and their successors, shall not be diminished by reason of the participation of any adopting Affiliate in the Plan. 13.2 WITHDRAWAL FROM THE PLAN. Any Employer, by action of its board of directors or other governing authority, may withdraw from the Plan after giving notice to the Company. In the event such withdrawal constitutes a partial termination of this Plan, the affected Members in the part of the Plan that is terminated shall have fully vested and nonforfeitable rights to their accrued benefits. Distribution upon such a withdrawal may be implemented through continuation of the Retirement Fund, or transfer to a trust fund exempt from tax under Code section 501, or to a group annuity contract qualified under Code section 401. However, no such action shall divert any part of such fund to any purpose other than the exclusive benefit of the Employees of the Employer prior to the satisfaction of all liabilities under the Plan as provided under section 8.3. ARTICLE XIV. GENERAL PROVISIONS 14.1 INCOMPETENCY. Every person receiving or claiming benefits under the Plan shall be conclusively presumed to be mentally competent and of age until the Committee receives written notice, in a form and manner acceptable to it, that the person is incompetent or a minor, and that a guardian, conservator, or other person legally vested with the care of his estate has been appointed. If the Committee finds that any person to whom a benefit is payable under the Plan is unable to care properly for his affairs, or is a minor, any payment due (unless a prior claim therefor shall have been made by a duly appointed legal representative) may be paid to the spouse, a child, a parent, a brother, or a sister, or to any person deemed by the Committee to have incurred expense for such person otherwise entitled to payment. -36- If a guardian or conservator of the estate of any person receiving or claiming benefits under the Plan is appointed by a court of competent jurisdiction, payments shall be made to such guardian or conservator if proper proof of the appointment is furnished in a form and manner suitable to the Committee. To the extent permitted by law, any payment made under the provisions of this section shall be a complete discharge of liability under the Plan. 14.2 NONALIENATION OF BENEFITS. Except as provided in Code section 401(a)(13), no benefit payable at any time under the Plan shall be subject in any manner to alienation, sale, transfer, assignment, pledge, attachment, garnishment, or encumbrance of any kind. Any attempt to alienate, sell, transfer, assign, pledge, or otherwise encumber any such benefit, whether presently or thereafter payable, shall be void. The Retirement Fund under the Plan shall not in any manner be liable for or subject to the debts or liabilities of any Member or Beneficiary entitled to any benefit. The preceding paragraph shall also apply to the creation, assignment, or recognition of a right to any interest or benefit payable with respect to a Member pursuant to a domestic relations order, unless the order is determined to be a qualified domestic relations order (as defined in Code section 414(p)). The Committee shall establish reasonable procedures to determine the qualified status of domestic relations orders and to administer distributions under such qualified orders. 14.3 NO GUARANTEE OF EMPLOYMENT. Nothing contained in the Plan shall be deemed to give any Employee the right to be retained in the service of the Company or an Affiliate or to interfere with the right of the Company or an Affiliate to discharge or retire any Employee at any time. 14.4 APPLICABLE LAW. To the extent not preempted by ERISA, the Plan shall be governed by and construed according to the laws of Kansas. 14.5 SEVERABILITY. If a provision of this Plan shall be held illegal or invalid, the illegality or invalidity shall not affect the remaining parts of the Plan, and the Plan shall be construed and enforced as if the illegal or invalid provision had not been included in this Plan. IN WITNESS WHEREOF, NEW COLEMAN HOLDINGS, INC. has caused this Plan to be signed and its corporate seal to be hereunto affixed by its duly authorized officers, effective as of the dates provided herein. NEW COLEMAN HOLDINGS, INC. By: Glenn Dickes ---------------------------------------------- Title: Vice President and Assistant Secretary ------------------------------------------- -37- ATTEST: (Seal) By: ----------------------------------------- Title: -------------------------------------- APPENDIX The Prior Plan was extended, as of the dates listed in the following table, to cover former employees of the companies therein listed who have become Employees of the Company through acquisition by the Company of part or all of the business of such companies and who are otherwise eligible for coverage under the Plan. Credited Service for any such Employee shall not include any period prior to the later of the dates set forth on the table or his actual date of employment. NAME OF COMPANY DATE OF ACQUISITION --------------- ------------------- Boise Cascade Corporation August 1, 1965 Canvas Specialty Manufacturing Co. October 1, 1965
Certain Employees included in Payroll Group 6, whose effective date of coverage under the Prior Plan was January 1, 1975, were at one time employed by Powerhouse Manufacturing Company, Inc., LaSalle Lighting Inc., or Sattler Manufacturing, Inc. and became employees of the Company when the Company acquired portions of the business of such former employers. For purposes of the Plan, the seniority date of any such Employee shall be deemed to be his date of employment by the Company, even though such seniority date was prior to the date of acquisition by the Company of the business in which he was originally employed. Effective January 1, 1980, the Company extended coverage under the Prior Plan to the weekly salaried and hourly paid Employees of its wholly-owned subsidiary O'Brien International, Inc. For the purposes of determining the Vesting Service of an O'Brien International, Inc. weekly salaried or hourly paid Employee, an Employee's date of employment will be considered to be the later of January 1, 1980, or his actual date of employment. The following are Employers under this Plan: ADOPTING EMPLOYER SERVICE DATE * ----------------- -------------- O'Brien International, Inc. 1-1-80 Master Craft Boat Company 1-1-84 for Vesting Service; 4-1-85 for Credited Service SoniForm, Inc. 1-1-82 for Vesting Service; 1-1-84 for Credited Service Western Cutlery Company 1-1-85 Tennessee Acquisition Corp. 4-1-93 MasterCraft Acquisition Corp. 4-1-93 Skeeter Products, Inc. 1-1-83 for Vesting Service; 1-1-87 for Credited Service Coleman Spas, Inc. Date of employment with the Company (or Adopting Employer) for Vesting Service; 1-1-92 for Credited Service Coleman Powermate, Inc. 1-1-90 for Credited Service and 11-15-86 for Vesting Service The Coleman Company, Inc. 1-1-55 for Credited Service; date of employment with the Company
-38- for Vesting Service Coleman Outdoor Products, Inc. Date of employment with the Company (or the Adopting Employer) Coleman Recreational Vehicles, Inc. Date of employment with the Company (or the Adopting Employer) through December 28, 1989 Inc. (for weekly salaried employees only)
* Service Date refers to both Credited Service and Vesting Service unless otherwise indicated. Effective at the end of December 31, 1995, (a) all employees, former employees and beneficiaries of employees and former employees of Meridian Sports Incorporated and the following subsidiaries: Skeeter Products, Inc., MasterCraft Acquisition Corp., O'Brien International Inc. and Soniform, Inc. (together with Meridian Sports Incorporated, "the Meridian Group") shall cease to accrue any benefits under the Plan, (b) all liabilities, as well as the assets relating to such liabilities, with respect to the accrued benefits as of such date of such employees, former employees and beneficiaries of the Meridian Group shall be transferred to the defined benefit plan established by Meridian Sports Incorporated, and (c) such employees, former employees and beneficiaries shall have no further rights under this Plan. -39- EX-21.1 9 EXHIBIT 21.1 EXHIBIT 21.1 SUBSIDIARIES The following is a list of all the subsidiaries of The Coleman Company, Inc. JURISDICTION OF ASSUMED NAME INCORPORATION NAME ---- --------------- ------- Application des Gaz, S.A. France Australian Coleman, Inc. Kansas Bafiges S.A. France Beacon Exports, Inc. Kansas C C Outlet, Inc. Delaware Camp Coleman Camping Gaz do Brasil Brazil Camping Gaz Great Britian Limited United Kingdom Camping Gaz (Poland) Poland Camping Gaz Suisse AG Switzerland Camping Gaz CS, Spol. SRO Czech Republic Camping Gaz GmbH Austria Camping Gaz International Deutschland GmbH Germany Camping Gaz Hellas Greece Camping Gaz International (Portugal) Ltd. Portugal Camping Gaz Kft Hungary Camping Gaz Philippines, Inc. Philippines SUBSIDIARIES, CONTINUED JURISDICTION OF ASSUMED NAME INCORPORATION NAME ---- --------------- ------- Camping Gaz Italie Srl Italy Campiran SA Iran The Canadian Coleman Company, Limited Ontario (Canada) La Compagnie Canadien Coleman Coleman Argentina, Inc. Delaware Coleman Asia Limited Hong Kong Coleman Country, Ltd. Kansas Coleman Dubai Coleman (Deutschland) GmbH Germany Coleman do Brasil Ltda. Brazil Coleman Europe N.V. Belgium Coleman Holland B.V. The Netherlands Coleman Japan Co., Ltd. Japan Coleman International SARL Switzerland Coleman Lifestyles K.K. Japan Coleman Manufacturing de Mexico, S.A. de C.V. Mexico Coleman Mexico S. A. de C.V. Mexico Coleman Powermate Compressors, Inc. Delaware Coleman Powermate, Inc. Nebraska Coleman Puerto Rico, Inc. Delaware Coleman Safety & Security Products, Inc. Delaware Coleman SARL France SUBSIDIARIES, CONTINUED JURISDICTION OF ASSUMED NAME INCORPORATION NAME ---- --------------- ------- Coleman Spas, Inc. California Coleman SVB S.r.l. Italy Coleman Taymar Limited United Kingdom Coleman U.K. Holdings Limited United Kingdom Coleman U.K. PLC United Kingdom Coleman Venture Capital, Inc. Kansas Eastpak Corporation Delaware American Lifestyles Group Eastpak Manufacturing Corporation Delaware Epigas International Limited United Kingdom General Archery Industries, Inc. Arkansas Jasan Products Ltd. Bermuda Kansas Acquisition Corp. Delaware Nippon Coleman, Inc. Kansas Pearson Holdings, Inc. Arkansas Productos Coleman, S.A. Spain PT Camping Gaz Indonesia Indonesia River View Corporation of Barling, Inc. Arkansas Sierra Corporation of Fort Smith, Inc. Arkansas TCCI Management Inc. Delaware Taymar Gas Limited United Kingdom SUBSIDIARIES, CONTINUED JURISDICTION OF ASSUMED NAME INCORPORATION NAME ---- --------------- ------- Tsana Internacional, S.A. Costa Rica Woodcraft Equipment Company Missouri EX-23.1 10 EXHIBIT 23.1 Consent of Independent Auditors We consent to the incorporation by reference (i) in the Registration Statement dated May 20, 1993 (Form S-3 No. 33-61346) of The Coleman Company, Inc. and in the related Prospectus, (ii) in the Registration Statement dated February 25, 1993 (Form S-8 No. 33-58726) pertaining to The Coleman Company, Inc. 1992 Stock Option Plan and in the Related Prospectus, (iii) in the Registration Statement dated January 18, 1994 (Form S-8 No. 33-74144) pertaining to The Coleman Company, Inc. 1993 Stock Option Plan and in the related Prospectus, and (iv) in the registration Statement dated May 12, 1997 (Form No. 333-26907) pertaining to The Coleman Company, Inc. 1996 Stock Option Plan and in the related Prospectus, of our report dated February 18, 1998, with respect to the consolidated financial statements of The Coleman Company, Inc. included in the Annual Report (Form 10-K) for the year ended December 31, 1997. /s/ Ernst & Young LLP Ernst & Young LLP Wichita, Kansas March 20, 1998 EX-24.1 11 EXHIBIT 24.1 POWER OF ATTORNEY KNOWN ALL MEN BY THESE PRESENTS, that the undersigned hereby constitutes and appoints each of Paul E. Shapiro, Steven R. Isko, Lynn E. Feldkamp and Karen Clark or any of them, each acting alone, his true and lawful attorney-in-fact and agent, with full power of substitution, for him and in his name, place and stead, in any and all capacities, in connection with THE COLEMAN COMPANY, INC. (the "Corporation") Annual Report on Form 10-K for the year ended December 31, 1997 under the Securities Exchange Act of 1934, as amended, including, without limiting the generality of the foregoing, to sign the Form 10-K in the name of and on behalf of the Corporation or on behalf of the undersigned as a director or officer of the Corporation, and any amendments to the Form 10-K and any instrument, contract, document or other writing, of or in connection with the Form 10-K or amendments thereto, and to file the same, with all exhibits thereto, and other documents in connection therewith, including this power of attorney, with the Securities and Exchange Commission and any applicable securities exchange or securities self-regulatory body, granting unto said attorneys-in-fact and agents, each acting alone, full power and authority to do and perform each and every act and thing requisite and necessary to be done in and about the premises, as fully to all intents and purposes as he might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents, each acting alone, or his substitute or substitutes, may lawfully do or cause to be done by virtue hereof. IN WITNESS WHEREOF, the undersigned has signed these presents this 18th day of March, 1998. Ronald O. Perelman ---------------------------------------------- Ronald O. Perelman POWER OF ATTORNEY KNOWN ALL MEN BY THESE PRESENTS, that the undersigned hereby constitutes and appoints each of Paul E. Shapiro, Steven R. Isko, Lynn E. Feldkamp and Karen Clark or any of them, each acting alone, his true and lawful attorney-in-fact and agent, with full power of substitution, for him and in his name, place and stead, in any and all capacities, in connection with THE COLEMAN COMPANY, INC. (the "Corporation") Annual Report on Form 10-K for the year ended December 31, 1997 under the Securities Exchange Act of 1934, as amended, including, without limiting the generality of the foregoing, to sign the Form 10-K in the name of and on behalf of the Corporation or on behalf of the undersigned as a director or officer of the Corporation, and any amendments to the Form 10-K and any instrument, contract, document or other writing, of or in connection with the Form 10-K or amendments thereto, and to file the same, with all exhibits thereto, and other documents in connection therewith, including this power of attorney, with the Securities and Exchange Commission and any applicable securities exchange or securities self-regulatory body, granting unto said attorneys-in-fact and agents, each acting alone, full power and authority to do and perform each and every act and thing requisite and necessary to be done in and about the premises, as fully to all intents and purposes as he might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents, each acting alone, or his substitute or substitutes, may lawfully do or cause to be done by virtue hereof. IN WITNESS WHEREOF, the undersigned has signed these presents this 18th day of March, 1998. Donald G. Drapkin --------------------------------------------- Donald G. Drapkin POWER OF ATTORNEY KNOWN ALL MEN BY THESE PRESENTS, that the undersigned hereby constitutes and appoints each of Paul E. Shapiro, Steven R. Isko, Lynn E. Feldkamp and Karen Clark or any of them, each acting alone, his true and lawful attorney-in-fact and agent, with full power of substitution, for him and in his name, place and stead, in any and all capacities, in connection with THE COLEMAN COMPANY, INC. (the "Corporation") Annual Report on Form 10-K for the year ended December 31, 1997 under the Securities Exchange Act of 1934, as amended, including, without limiting the generality of the foregoing, to sign the Form 10-K in the name of and on behalf of the Corporation or on behalf of the undersigned as a director or officer of the Corporation, and any amendments to the Form 10-K and any instrument, contract, document or other writing, of or in connection with the Form 10-K or amendments thereto, and to file the same, with all exhibits thereto, and other documents in connection therewith, including this power of attorney, with the Securities and Exchange Commission and any applicable securities exchange or securities self-regulatory body, granting unto said attorneys-in-fact and agents, each acting alone, full power and authority to do and perform each and every act and thing requisite and necessary to be done in and about the premises, as fully to all intents and purposes as he might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents, each acting alone, or his substitute or substitutes, may lawfully do or cause to be done by virtue hereof. IN WITNESS WHEREOF, the undersigned has signed these presents this 11th day of March, 1998. Frank Gifford -------------------------------------------- Frank Gifford POWER OF ATTORNEY KNOWN ALL MEN BY THESE PRESENTS, that the undersigned hereby constitutes and appoints each of Paul E. Shapiro, Steven R. Isko, Lynn E. Feldkamp and Karen Clark or any of them, each acting alone, his true and lawful attorney-in-fact and agent, with full power of substitution, for him and in his name, place and stead, in any and all capacities, in connection with THE COLEMAN COMPANY, INC. (the "Corporation") Annual Report on Form 10-K for the year ended December 31, 1997 under the Securities Exchange Act of 1934, as amended, including, without limiting the generality of the foregoing, to sign the Form 10-K in the name of and on behalf of the Corporation or on behalf of the undersigned as a director or officer of the Corporation, and any amendments to the Form 10-K and any instrument, contract, document or other writing, of or in connection with the Form 10-K or amendments thereto, and to file the same, with all exhibits thereto, and other documents in connection therewith, including this power of attorney, with the Securities and Exchange Commission and any applicable securities exchange or securities self-regulatory body, granting unto said attorneys-in-fact and agents, each acting alone, full power and authority to do and perform each and every act and thing requisite and necessary to be done in and about the premises, as fully to all intents and purposes as he might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents, each acting alone, or his substitute or substitutes, may lawfully do or cause to be done by virtue hereof. IN WITNESS WHEREOF, the undersigned has signed these presents this 11th day of March, 1998. Lawrence M. Jones -------------------------------------------- Lawrence M. Jones POWER OF ATTORNEY KNOWN ALL MEN BY THESE PRESENTS, that the undersigned hereby constitutes and appoints each of Paul E. Shapiro, Steven R. Isko, Lynn E. Feldkamp and Karen Clark or any of them, each acting alone, his true and lawful attorney-in-fact and agent, with full power of substitution, for him and in his name, place and stead, in any and all capacities, in connection with THE COLEMAN COMPANY, INC. (the "Corporation") Annual Report on Form 10-K for the year ended December 31, 1997 under the Securities Exchange Act of 1934, as amended, including, without limiting the generality of the foregoing, to sign the Form 10-K in the name of and on behalf of the Corporation or on behalf of the undersigned as a director or officer of the Corporation, and any amendments to the Form 10-K and any instrument, contract, document or other writing, of or in connection with the Form 10-K or amendments thereto, and to file the same, with all exhibits thereto, and other documents in connection therewith, including this power of attorney, with the Securities and Exchange Commission and any applicable securities exchange or securities self-regulatory body, granting unto said attorneys-in-fact and agents, each acting alone, full power and authority to do and perform each and every act and thing requisite and necessary to be done in and about the premises, as fully to all intents and purposes as he might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents, each acting alone, or his substitute or substitutes, may lawfully do or cause to be done by virtue hereof. IN WITNESS WHEREOF, the undersigned has signed these presents this 18th day of March, 1998. Ann Jordan -------------------------------------------- Ann Jordan POWER OF ATTORNEY KNOWN ALL MEN BY THESE PRESENTS, that the undersigned hereby constitutes and appoints each of Paul E. Shapiro, Steven R. Isko, Lynn E. Feldkamp and Karen Clark or any of them, each acting alone, his true and lawful attorney-in-fact and agent, with full power of substitution, for him and in his name, place and stead, in any and all capacities, in connection with THE COLEMAN COMPANY, INC. (the "Corporation") Annual Report on Form 10-K for the year ended December 31, 1997 under the Securities Exchange Act of 1934, as amended, including, without limiting the generality of the foregoing, to sign the Form 10-K in the name of and on behalf of the Corporation or on behalf of the undersigned as a director or officer of the Corporation, and any amendments to the Form 10-K and any instrument, contract, document or other writing, of or in connection with the Form 10-K or amendments thereto, and to file the same, with all exhibits thereto, and other documents in connection therewith, including this power of attorney, with the Securities and Exchange Commission and any applicable securities exchange or securities self-regulatory body, granting unto said attorneys-in-fact and agents, each acting alone, full power and authority to do and perform each and every act and thing requisite and necessary to be done in and about the premises, as fully to all intents and purposes as he might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents, each acting alone, or his substitute or substitutes, may lawfully do or cause to be done by virtue hereof. IN WITNESS WHEREOF, the undersigned has signed these presents this 18th day of March, 1998. Jerry W. Levin -------------------------------------------- Jerry W. Levin POWER OF ATTORNEY KNOWN ALL MEN BY THESE PRESENTS, that the undersigned hereby constitutes and appoints each of Paul E. Shapiro, Steven R. Isko, Lynn E. Feldkamp and Karen Clark or any of them, each acting alone, his true and lawful attorney-in-fact and agent, with full power of substitution, for him and in his name, place and stead, in any and all capacities, in connection with THE COLEMAN COMPANY, INC. (the "Corporation") Annual Report on Form 10-K for the year ended December 31, 1997 under the Securities Exchange Act of 1934, as amended, including, without limiting the generality of the foregoing, to sign the Form 10-K in the name of and on behalf of the Corporation or on behalf of the undersigned as a director or officer of the Corporation, and any amendments to the Form 10-K and any instrument, contract, document or other writing, of or in connection with the Form 10-K or amendments thereto, and to file the same, with all exhibits thereto, and other documents in connection therewith, including this power of attorney, with the Securities and Exchange Commission and any applicable securities exchange or securities self-regulatory body, granting unto said attorneys-in-fact and agents, each acting alone, full power and authority to do and perform each and every act and thing requisite and necessary to be done in and about the premises, as fully to all intents and purposes as he might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents, each acting alone, or his substitute or substitutes, may lawfully do or cause to be done by virtue hereof. IN WITNESS WHEREOF, the undersigned has signed these presents this 14th day of March, 1998. John A. Moran --------------------------------- John A. Moran POWER OF ATTORNEY KNOWN ALL MEN BY THESE PRESENTS, that the undersigned hereby constitutes and appoints each of Paul E. Shapiro, Steven R. Isko, Lynn E. Feldkamp and Karen Clark or any of them, each acting alone, his true and lawful attorney-in-fact and agent, with full power of substitution, for him and in his name, place and stead, in any and all capacities, in connection with THE COLEMAN COMPANY, INC. (the "Corporation") Annual Report on Form 10-K for the year ended December 31, 1997 under the Securities Exchange Act of 1934, as amended, including, without limiting the generality of the foregoing, to sign the Form 10-K in the name of and on behalf of the Corporation or on behalf of the undersigned as a director or officer of the Corporation, and any amendments to the Form 10-K and any instrument, contract, document or other writing, of or in connection with the Form 10-K or amendments thereto, and to file the same, with all exhibits thereto, and other documents in connection therewith, including this power of attorney, with the Securities and Exchange Commission and any applicable securities exchange or securities self-regulatory body, granting unto said attorneys-in-fact and agents, each acting alone, full power and authority to do and perform each and every act and thing requisite and necessary to be done in and about the premises, as fully to all intents and purposes as he might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents, each acting alone, or his substitute or substitutes, may lawfully do or cause to be done by virtue hereof. IN WITNESS WHEREOF, the undersigned has signed these presents this 11th day of March, 1998. James D. Robinson --------------------------------- James D. Robinson POWER OF ATTORNEY KNOWN ALL MEN BY THESE PRESENTS, that the undersigned hereby constitutes and appoints each of Paul E. Shapiro, Steven R. Isko, Lynn E. Feldkamp and Karen Clark or any of them, each acting alone, his true and lawful attorney-in-fact and agent, with full power of substitution, for him and in his name, place and stead, in any and all capacities, in connection with THE COLEMAN COMPANY, INC. (the "Corporation") Annual Report on Form 10-K for the year ended December 31, 1997 under the Securities Exchange Act of 1934, as amended, including, without limiting the generality of the foregoing, to sign the Form 10-K in the name of and on behalf of the Corporation or on behalf of the undersigned as a director or officer of the Corporation, and any amendments to the Form 10-K and any instrument, contract, document or other writing, of or in connection with the Form 10-K or amendments thereto, and to file the same, with all exhibits thereto, and other documents in connection therewith, including this power of attorney, with the Securities and Exchange Commission and any applicable securities exchange or securities self-regulatory body, granting unto said attorneys-in-fact and agents, each acting alone, full power and authority to do and perform each and every act and thing requisite and necessary to be done in and about the premises, as fully to all intents and purposes as he might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents, each acting alone, or his substitute or substitutes, may lawfully do or cause to be done by virtue hereof. IN WITNESS WHEREOF, the undersigned has signed these presents this 18th day of March, 1998. Bruce Slovin --------------------------------- Bruce Slovin POWER OF ATTORNEY KNOWN ALL MEN BY THESE PRESENTS, that the undersigned hereby constitutes and appoints each of Paul E. Shapiro, Steven R. Isko, Lynn E. Feldkamp and Karen Clark or any of them, each acting alone, his true and lawful attorney-in-fact and agent, with full power of substitution, for him and in his name, place and stead, in any and all capacities, in connection with THE COLEMAN COMPANY, INC. (the "Corporation") Annual Report on Form 10-K for the year ended December 31, 1997 under the Securities Exchange Act of 1934, as amended, including, without limiting the generality of the foregoing, to sign the Form 10-K in the name of and on behalf of the Corporation or on behalf of the undersigned as a director or officer of the Corporation, and any amendments to the Form 10-K and any instrument, contract, document or other writing, of or in connection with the Form 10-K or amendments thereto, and to file the same, with all exhibits thereto, and other documents in connection therewith, including this power of attorney, with the Securities and Exchange Commission and any applicable securities exchange or securities self-regulatory body, granting unto said attorneys-in-fact and agents, each acting alone, full power and authority to do and perform each and every act and thing requisite and necessary to be done in and about the premises, as fully to all intents and purposes as he might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents, each acting alone, or his substitute or substitutes, may lawfully do or cause to be done by virtue hereof. IN WITNESS WHEREOF, the undersigned has signed these presents this 18th day of March, 1998. William H. Spoor --------------------------------- William H. Spoor EX-27 12 FINANCIAL DATA SCHEDULE
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE CONSOLIDATED FINANCIAL STATEMENTS AS FILED IN THE COMPANY'S ANNUAL REPORT ON FORM 10-K FOR THE YEAR ENDED DECEMBER 31, 1997 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 1,000 YEAR DEC-31-1997 JAN-01-1997 DEC-31-1997 13,031 0 188,686 8,930 236,327 491,696 289,527 114,033 1,041,764 253,197 477,276 0 0 534 239,935 1,041,764 1,143,349 1,154,294 840,331 840,331 0 2,200 40,852 (6,377) (5,227) (2,536) 0 0 0 (2,536) (.05) (.05)
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