-----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, FKy0rp8da/zS5DcL08whmcc1slnBaaymrmUhhhL5Yj04Ns93RaspdT6AALifU7V1 Ae1DbnTXr4iM+oD660lWXw== 0001047469-99-021563.txt : 19990520 0001047469-99-021563.hdr.sgml : 19990520 ACCESSION NUMBER: 0001047469-99-021563 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 4 CONFORMED PERIOD OF REPORT: 19990331 FILED AS OF DATE: 19990519 FILER: COMPANY DATA: COMPANY CONFORMED NAME: COLEMAN CO INC CENTRAL INDEX KEY: 0000021627 STANDARD INDUSTRIAL CLASSIFICATION: ELECTRIC HOUSEWARES & FANS [3634] IRS NUMBER: 133639257 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 001-00988 FILM NUMBER: 99630577 BUSINESS ADDRESS: STREET 1: 2111 E 37TH STREET NORTH STREET 2: SUITE 300 CITY: WICHITA STATE: KS ZIP: 67219- BUSINESS PHONE: (316)-832-2700 MAIL ADDRESS: STREET 1: 2111 E 37TH STREET NORTH STREET 2: SUITE 300 CITY: WICHITA STATE: KS ZIP: 67219- 10-Q 1 FORM 10-Q UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q [X] Quarterly Report Pursuant to Section 13 or 15 (d) of the Securities Exchange Act of 1934 For the quarterly period ended MARCH 31, 1999 -------------- or [ ] Transition Report Pursuant to Section 13 or 15 (d) of the Securities Exchange Act of 1934 For the transition period from to Commission File Number: 1-988 ----- 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) 316-832-2700 ------------------------------------------------ (Registrant's telephone number, including area code) Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports) and (2) has been subject to such filing requirement for the past 90 days. X Yes No ----- ----- The number of shares outstanding of the registrant's par value $.01 common stock was 55,827,490 shares as of May 12, 1999 of which 44,067,520 shares were held by Coleman Worldwide Corporation, an indirect wholly-owned subsidiary of Sunbeam Corporation. Exhibit Index on Page 23 THE COLEMAN COMPANY, INC. AND SUBSIDIARIES INDEX PART I. FINANCIAL INFORMATION Page ---- Item 1. Condensed Consolidated Financial Statements: Condensed Consolidated Statements of Operations Three months ended March 31, 1999 and 1998....................................... 3 Condensed Consolidated Balance Sheets March 31, 1999 and December 31, 1998............................................. 4 Condensed Consolidated Statements of Cash Flows Three months ended March 31, 1999 and 1998....................................... 5 Notes to Condensed Consolidated Financial Statements................................ 6 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations........................................................... 13 PART II. OTHER INFORMATION Item 1. Legal Proceedings...................................................................... 23 Item 6. Exhibits and Reports on Form 8-K....................................................... 23 Signatures ........................................................................... 24
2 THE COLEMAN COMPANY, INC. AND SUBSIDIARIES ITEM 1. CONDENSED CONSOLIDATED FINANCIAL STATEMENTS CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (In thousands, except per share data) (Unaudited)
Three Months Ended March 31, ----------------------------- 1999 1998 ------------ ------------ Net revenues................................................................ $ 280,690 $ 244,499 Cost of sales............................................................... 198,371 175,777 ------------ ------------ Gross profit................................................................ 82,319 68,722 Selling, general and administrative expenses................................ 61,360 74,855 Interest expense, net....................................................... 7,575 9,044 Amortization of goodwill and deferred charges............................... 2,564 2,934 Gain on sale of business.................................................... -- (26,137) Other (income) expense, net................................................. (531) 1,861 ------------ ------------ Earnings before income taxes, minority interest and extraordinary item............................... 11,351 6,165 Income tax expense.......................................................... 4,540 7,518 Minority interest........................................................... 70 61 ------------ ------------ Earnings (loss) before extraordinary item................................... 6,741 (1,414) Extraordinary loss on early extinguishment of debt, net of income tax benefit........................................ -- (1,232) ------------ ------------ Net earnings (loss)......................................................... $ 6,741 $ (2,646) ------------ ------------ ------------ ------------ Basic and diluted earnings (loss) per share: Earnings (loss) before extraordinary item................................. $ 0.12 $ (0.03) Extraordinary item........................................................ -- (0.02) ------------ ------------ Net earnings (loss)..................................................... $ 0.12 $ (0.05) ------------ ------------ ------------ ------------ Weighted average common shares outstanding: Basic and diluted ........................................................ 55,827 53,732 ------------ ------------ ------------ ------------
See Notes to Condensed Consolidated Financial Statements 3 THE COLEMAN COMPANY, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS (In thousands) (Unaudited)
March 31, December 31, 1999 1998 ------------- ------------ ASSETS Current assets: Cash and cash equivalents............................................ $ 18,508 $ 23,413 Accounts and notes receivable, less allowance of $8,695 in 1999 and $8,894 in 1998............................... 222,453 162,108 Inventories.......................................................... 253,409 230,126 Deferred tax assets.................................................. 28,403 26,926 Prepaid expenses and other current assets............................ 17,524 19,627 ------------- ------------ Total current assets............................................... 540,297 462,200 Property, plant and equipment, less accumulated depreciation of $125,613 in 1999 and $122,868 in 1998............................. 141,028 145,823 Goodwill, net........................................................... 274,262 282,015 Deferred tax assets and other assets.................................... 36,645 43,219 ------------- ------------ $ 992,232 $ 933,257 ------------- ------------ ------------- ------------ LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Accounts and notes payable........................................... $ 160,619 $ 146,064 Other current liabilities............................................ 106,370 101,224 ------------- ------------ Total current liabilities.......................................... 266,989 247,288 Debt payable to affiliate............................................... 407,771 365,063 Long-term debt.......................................................... 435 362 Other liabilities....................................................... 74,315 75,231 Minority interest....................................................... 8,000 6,698 Contingencies........................................................... Stockholders' equity: Common stock......................................................... 558 558 Additional paid-in capital........................................... 223,245 221,730 Retained earnings.................................................... 28,718 21,977 Accumulated other comprehensive loss................................. (17,799) (5,650) ------------- ------------ Total stockholders' equity......................................... 234,722 238,615 ------------- ------------ $ 992,232 $ 933,257 ------------- ------------ ------------- ------------
See Notes to Condensed Consolidated Financial Statements 4 THE COLEMAN COMPANY, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (In thousands) (Unaudited)
Three Months Ended March 31, ----------------------------- 1999 1998 ------------- ------------ CASH FLOWS FROM OPERATING ACTIVITIES: Net earnings (loss)............................................................. $ 6,741 $ (2,646) Adjustments to reconcile net earnings (loss) to net cash flows from operating activities: Depreciation and amortization.............................................. 8,138 9,508 Minority interest.......................................................... 70 61 Gain on sale of business................................................... -- (26,137) Extraordinary loss on early extinguishment of debt......................... -- 2,038 Change in assets and liabilities, net of effects from sale of business: Increase in receivables.............................................. (65,104) (34,531) Increase in inventories.............................................. (28,832) (31,043) Increase in accounts payable......................................... 15,466 4,177 Other, net........................................................... 14,541 (5,036) ------------- ------------ Net cash used by operating activities........................................... (48,980) (83,609) ------------- ------------ CASH FLOWS FROM INVESTING ACTIVITIES: Capital expenditures............................................................ (3,919) (9,698) Net proceeds from sale of business and fixed assets............................. 568 98,264 ------------- ------------ Net cash (used) provided by investing activities................................ (3,351) 88,566 ------------- ------------ CASH FLOWS FROM FINANCING ACTIVITIES: Net payments of revolving credit agreement borrowings........................... -- (52,578) Net change in short-term borrowings............................................. 5,468 (3,352) Repayment of long-term debt, including redemption costs......................... (53) (63,416) Net increase in borrowings from affiliate....................................... 42,708 90,711 Proceeds from stock options exercised including tax benefits.................... -- 31,805 ------------- ------------ Net cash provided by financing activities....................................... 48,123 3,170 ------------- ------------ Effect of exchange rate changes on cash......................................... (697) 340 ------------- ------------ Net (decrease) increase in cash and cash equivalents............................ (4,905) 8,467 Cash and cash equivalents at beginning of the period............................ 23,413 13,031 ------------- ------------ Cash and cash equivalents at end of the period.................................. $ 18,508 $ 21,498 ------------- ------------ ------------- ------------
See Notes to Condensed Consolidated Financial Statements 5 THE COLEMAN COMPANY, INC. AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (In thousands, except share data) (Unaudited) 1. 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 an indirect wholly-owned subsidiary of Laser Acquisition Corp. ("Laser"), an indirect wholly-owned subsidiary of Sunbeam Corporation ("Sunbeam"). Coleman Worldwide owns 44,067,520 shares of the common stock of Coleman which represented approximately 79% of the outstanding Coleman common stock as of March 31, 1999. Coleman, Sunbeam and Camper Acquisition Corp. ("CAC"), a wholly-owned subsidiary of Sunbeam, have entered into an Agreement and Plan of Merger (the "Coleman Merger Agreement"), providing that among other things, CAC will be merged with and into Coleman, with Coleman continuing as the surviving corporation (the "Coleman Merger"). 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 indirectly by Sunbeam and shares, if any, for which appraisal rights have been exercised) 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. In addition, unexercised stock options at the time of the Coleman Merger will be cashed out by Sunbeam at a price per share equal to the difference between $27.50 per share and the exercise price of such options. In October 1998, Coleman and Sunbeam entered into a memorandum of understanding to settle, subject to court approval, certain class actions brought by minority shareholders of Coleman against Coleman, Sunbeam and certain of their current and former officers and directors challenging the proposed Coleman Merger. Under the terms of the proposed settlement, if approved by the court, Sunbeam will issue to the Coleman public shareholders five-year warrants to purchase up to 4.98 million shares of Sunbeam common stock at $7.00 per share, subject to certain anti-dilution provisions. Any shareholder who does not exercise his appraisal rights under Delaware law will receive the warrants. These warrants will be issued when the Coleman Merger is consummated, which is now expected to be during the second half of 1999. There can be no assurance that the court will approve the settlement as proposed, although such approval is not a condition to the consummation of the Coleman Merger. The consummation of the Coleman Merger is contingent upon several conditions including, among other things, the filing of a registration statement under the Securities Act of 1933 (the "Securities Act") for the purpose of registering the shares of Sunbeam common stock to be issued in the Coleman Merger (the "Registration Statement") and that the Registration Statement shall have become effective in accordance with the provisions of the Securities Act. Sunbeam has filed a preliminary Registration Statement, but is uncertain when the Registration Statement will become effective. However, it is anticipated the Coleman Merger will be completed during the second half of 1999. Upon consummation of the Coleman Merger, Coleman will become an indirect wholly-owned subsidiary of Sunbeam. 6 THE COLEMAN COMPANY, INC. AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (In thousands, except share data) (Unaudited) 2. BASIS OF FINANCIAL STATEMENT PRESENTATION The accompanying unaudited condensed consolidated financial statements include the accounts of Coleman and its subsidiaries after elimination of all material intercompany accounts and transactions, and have been prepared in accordance with generally accepted accounting principles for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. In the opinion of management, these statements include all adjustments necessary for a fair presentation of results of operations, financial position and cash flows. The balance sheet at December 31, 1998 has been derived from the audited financial statements for that date but does not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. For further information, refer to the consolidated financial statements and footnotes thereto included in the Company's Annual Report on Form 10-K for the year ended December 31, 1998. Operating results for the three months ended March 31, 1999 are not necessarily indicative of the results that may be expected for future periods including the year ended December 31, 1999. 3. INVENTORIES The components of inventories consist of the following:
March 31, December 31, 1999 1998 --------------- --------------- Raw material and supplies......................... $ 48,818 $ 45,395 Work-in-process................................... 8,370 6,539 Finished goods.................................... 196,221 178,192 --------------- --------------- $ 253,409 $ 230,126 --------------- --------------- --------------- ---------------
4. DEBT PAYABLE TO AFFILIATE Since Sunbeam's credit facility (the "Sunbeam Credit Facility") provides that Sunbeam will not contribute capital to Coleman or, with some exceptions, permit Coleman to borrow money from any source other than Sunbeam, the Company's ability to meet its cash operating requirements, including capital expenditures and other obligations, is dependent upon a combination of cash flows from operations and loans to the Company from Sunbeam. Sunbeam has informed the Company that it has the positive intent and ability to fund the Company's requirements for borrowed funds through April 10, 2000. Amounts loaned by Sunbeam are represented by a promissory note (the "Intercompany Note") which totaled $407,771 at March 31, 1999 and until the amendment and restatement of the Intercompany Note described below, were due on demand. For 1998 and through April 15, 1999, the Intercompany Note bore interest at a floating rate equivalent to the weighted 7 THE COLEMAN COMPANY, INC. AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (In thousands, except share data) (Unaudited) average interest rate incurred by Sunbeam on its outstanding convertible debt and borrowings under its bank credit facility. The weighted average interest rate charged by Sunbeam on the Intercompany Note during the three months ended March 31, 1999 was 7.3% and the total interest charged by Sunbeam to Coleman was $7,173. Sunbeam also charged to Coleman a pro-rata share of amortized debt issuance costs and unused bank credit facility commitment fees totaling $277. Net amounts advanced from Sunbeam along with the related unpaid interest and other costs are reflected as debt payable to affiliate in the Company's condensed consolidated balance sheet. Coleman is also a borrower under the Sunbeam Credit Facility for purposes of letters of credit borrowings. On April 15, 1999, Coleman, Sunbeam and, as to certain agreements, the lenders under the Sunbeam Credit Facility entered into an amended and restated Intercompany Note (the "Amended Intercompany Note"), intercompany security and pledge agreements, an amendment to the Sunbeam Credit Facility and certain other agreements (collectively, the "Agreements"). The Amended Intercompany Note is due April 15, 2000. The Amended Intercompany Note bears interest at an annual rate equal to (i) 4% if the three month London Interbank Offering Rate ("LIBOR") quoted on the Telerate system is less than 6%, or (ii) 5% if the three month LIBOR quoted on the Telerate system is 6% or higher, subject to increases during an event of default, and interest will be payable by adding the amount of such interest to the principal balance of the Amended Intercompany Note. In addition, the Amended Intercompany Note provides an event of default under the Sunbeam Credit Facility will constitute an event of default under the Amended Intercompany Note and in certain circumstances the payment on the Amended Intercompany Note will be subordinate to Coleman's obligations under the Sunbeam Credit Facility. Pursuant to the Agreements, Coleman has pledged substantially all of its domestic assets, other than its real property, including 66% of its ownership interest in its direct foreign subsidiaries and domestic holding companies for its foreign subsidiaries and all of its ownership interest in its other domestic subsidiaries (but Coleman's subsidiaries have not pledged their assets or stock of their subsidiaries), as security for the Amended Intercompany Note. Sunbeam has pledged the Amended Intercompany Note as security for the Sunbeam Credit Facility and assigned to such lenders the security pledged by Coleman for the Amended Intercompany Note. Under the Agreements, Coleman also agreed to give the lenders a direct pledge of the assets securing the Amended Intercompany Note to secure the obligations under the Sunbeam Credit Facility, subject to a cap equal to the balance due from time to time on the Amended Intercompany Note. The Sunbeam Credit Facility provides for a revolving credit facility in an aggregate principal amount of up to $400,000 (subject to certain reductions) maturing March 31, 2005. In addition, pursuant to the Sunbeam Credit Facility, at March 31, 1999, Sunbeam had approximately $1,260,000 outstanding debt consisting of two tranches of term loans with scheduled repayments through maturity on March 31, 2005 and September 30, 2006. As a result of Sunbeam's operating losses, Sunbeam was not in compliance with the financial covenants and other terms contained in the Sunbeam Credit Facility. As of June 30, 1998, Sunbeam entered into an agreement with its bank lenders which waived Sunbeam's compliance through December 31, 1998. On October 19, 1998, Sunbeam's bank lenders agreed to extend this waiver through April 10, 1999. In April 1999, the 8 THE COLEMAN COMPANY, INC. AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (In thousands, except share data) (Unaudited) waiver was extended to April 10, 2000, and the Sunbeam Credit Facility was amended to add certain financial covenants and other terms. Interest accrues at a rate selected at Sunbeam's option of: (i) LIBOR plus an interest rate margin which varies depending upon the occurrence of specified events or, (ii) the base rate of the administrative agent (generally the higher of the prime commercial lending rate of the administrative agent or the Federal Funds Rate plus one-half of 1%), plus an interest rate margin which varies depending upon the occurrence of specified events. Borrowings under the Sunbeam Credit Facility are secured by a pledge of the stock of Sunbeam's material subsidiaries and by a security interest in substantially all of the assets of Sunbeam and its material domestic subsidiaries (other than Coleman and its subsidiaries, except as otherwise described herein), including the Amended Intercompany Note. Sunbeam has pledged its shares of Coleman common stock and its shares of Sunbeam Corporation (Canada) Limited ("Sunbeam Canada") common stock owned by it as security under the Sunbeam Credit Facility. In addition, borrowings under the Sunbeam Credit Facility are guaranteed by a number of Sunbeam's wholly-owned material United States subsidiaries (but not Coleman) and such subsidiary guarantees are secured as described above. Coleman has pledged its inventory (but not that of its subsidiaries) and the proceeds from the sale of such inventory as collateral for its letter of credit borrowings under the Sunbeam Credit Facility. The Sunbeam Credit Facility contains covenants customary for credit facilities of a similar nature, including limitations on the ability of Sunbeam and its subsidiaries, including Coleman, to, among other things, (i) declare dividends or repurchase stock, (ii) prepay, redeem or repurchase debt, incur liens and engage in sale-leaseback transactions, (iii) make loans and investments, (iv) incur additional debt and maintain revolving loan balances, (v) amend or otherwise alter material agreements or enter into restrictive agreements, (vi) make capital and Year 2000 testing and remediation expenditures, (vii) engage in mergers, acquisitions and asset sales, (viii) engage in transactions with affiliates, (ix) alter its fiscal year or accounting policies, (x) enter into hedging agreements, (xi) settle litigations, (xii) alter its cash management system and (xiii) alter the businesses they conduct. Sunbeam is also required to comply with specified financial covenants and ratios. The Sunbeam Credit Facility provides for events of default customary for transactions of this type, including nonpayment, misrepresentation, breach of covenant, cross-defaults, bankruptcy and insolvency, ERISA, judgments and change of ownership and control. The Sunbeam Credit Facility, as amended, also provides it is an event default if the registration statement for the shares of Sunbeam common stock to be issued in the Coleman Merger is not declared effective by October 30, 1999, if Sunbeam fails to complete the Coleman Merger within 25 business days after the related registration statement is declared effective by the SEC, or if Sunbeam has to pay more than $87,500 (excluding expenses) in cash to complete the merger (including any payments made with respect to appraisal rights). 9 THE COLEMAN COMPANY, INC. AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (In thousands, except share data) (Unaudited) 5. RESTRUCTURING AND OTHER CHARGES The Company continuously reviews the adequacy of its restructuring reserves and adjusts the reserves as the various activities are completed or additional information becomes available which allows the Company to refine its estimates. During the three months ended March 31, 1999, the Company reduced its reserves by $558 as a result of these reviews. During the three months ended March 31, 1998, the Company increased its reserves by $715 as a result of these reviews. In addition, during the three months ended March 31, 1998, the Company recorded other charges totaling $12,931 resulting from expenses associated with the acquisition of the Company by Sunbeam including advisory fees, abandoning a company-wide enterprise resource computer software system, and terminating a licensing services agreement. The following table provides an analysis of the changes in the Company's restructuring reserves since December 31, 1998. For detailed information regarding the Company's restructuring charges see Note 3 to the consolidated financial statements included in the Company's Annual Report on Form 10-K for the year ended December 31, 1998.
Inventory Idle Impairment and Other Facilities of Fixed Asset Termination and Other Assets Impairments Costs Exit Costs Total ----------- ----------- ----------- ----------- ---------- Balance at December 31, 1998............... $ 8,066 $ 1,809 $ 8,656 $ 3,339 $ 21,870 1999 (Credits) Charges..................... (325) (602) -- 369 (558) Activity................................... (663) (436) (2,502) (676) (4,277) ----------- ----------- ----------- ----------- ---------- Balance at March 31, 1999.................. $ 7,078 $ 771 $ 6,154 $ 3,032 $ 17,035 ----------- ----------- ----------- ----------- ---------- ----------- ----------- ----------- ----------- ----------
Significant components of the restructuring reserves at March 31, 1999 are as follows: IMPAIRMENT OF FIXED ASSETS - This primarily represents the reserve for loss on disposition of an idle warehouse. TERMINATION COSTS - This represents severance benefits associated with the termination of employees following the acquisition of the Company by Sunbeam (the "Sunbeam Acquisition") and for employees who were terminated as part of the Company's restructuring plans during 1997 and 1998. All termination benefits are expected to be paid by December 31, 2000. IDLE FACILITIES AND OTHER EXIT COSTS - This primarily relates to costs to be expended to complete the closing of two foreign facilities. 10 THE COLEMAN COMPANY, INC. AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (In thousands, except share data) (Unaudited) 6. COMPREHENSIVE LOSS The components of the Company's comprehensive loss are as follows:
Three Months Ended March 31, ----------------------------- 1999 1998 ------------- ------------ Net earnings (loss)............................................ $ 6,741 $ (2,646) Foreign currency translation adjustment, net of tax............ (12,149) (2,418) Minimum pension liability adjustment, net of tax............... -- (168) ------------- ------------ Comprehensive loss............................................. $ (5,408) $ (5,232) ------------- ------------ ------------- ------------
7. BASIC AND DILUTED EARNINGS PER COMMON SHARE Basic earnings per share is computed using the weighted average number of shares of outstanding common stock. Diluted earnings per share for the three months ended March 31, 1999 is based only on the weighted average number of common shares outstanding during the three months ended March 31, 1999 because there were no common share equivalents. Stock options to purchase 923,670 shares of common stock were outstanding at March 31, 1999 but were not included in the computation of common share equivalents because the option exercise price was greater than the average market price of Coleman's common stock during each of the respective years. Diluted earnings per share for the three months ended March 31, 1998 is based only on the weighted average number of common shares outstanding during the three months ended March 31, 1998 as the inclusion of 633,571 common share equivalents would have been antidilutive. 8. RECENTLY ISSUED ACCOUNTING STANDARDS In June 1998, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards ("SFAS") No. 133, "Accounting for Derivative Instruments and Hedging Activities". SFAS No. 133 establishes accounting and reporting standards for derivative instruments, including certain derivative instruments embedded in other contracts, (collectively referred to as derivatives) and for hedging activities. It requires an entity to recognize all derivatives as either assets or liabilities in the statement of financial position and measure those instruments at fair value. SFAS No. 133 will be effective for the Company's fiscal year beginning January 1, 2000. Earlier application of the provisions of SFAS No. 133 is encouraged; however, the Company has not determined if it will apply the provisions of SFAS No. 133 prior to January 1, 2000, nor has the Company estimated the impact of applying the provision of SFAS No. 133 on the Company's statement of financial position or on the statement of operations. 11 THE COLEMAN COMPANY, INC. AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (In thousands, except share data) (Unaudited) 9. SEGMENT INFORMATION For detailed information regarding the Company's reportable segments, see Note 18 to the consolidated financial statements included in the Company's Annual Report on Form 10-K for the year ended December 31, 1998. INFORMATION ABOUT SEGMENT PROFITS AND SEGMENTS ASSETS
Outdoor All Recreation Powermate Eastpak International Other Total ---------- ---------- -------- ------------- --------- ----------- Three Months Ended March 31, 1999: Revenues from external customers..... $ 95,146 $ 64,518 $ 3,083 $ 116,497 $ 1,446 $ 280,690 Intersegment revenues................ 24,782 5,664 11,035 64 -- 41,545 Segment profit (loss)................ 9,545 9,324 (3,095) 9,317 (1,605) 23,486 Segment assets....................... 239,405 138,071 88,061 382,450 5,395 853,382 Three Months Ended March 31, 1998: Revenues from external customers..... 75,062 51,154 3,457 90,287 24,539 244,499 Intersegment revenues................ 20,635 295 10,000 80 -- 31,010 Segment profit (loss)................ 1,963 3,269 (3,310) 6,500 2,230 10,652 Segment assets....................... 275,428 133,654 96,702 342,209 15,706 863,699
RECONCILIATION OF SELECTED SEGMENT INFORMATION TO THE COMPANY'S CONSOLIDATED TOTALS
Three Months Ended March 31, --------------------------- 1999 1998 ------------ ------------- REVENUES: Total revenues for reportable segments..................................... $ 320,789 $ 250,970 Other revenues............................................................. 1,446 24,539 Elimination of intersegment revenues....................................... (41,545) (31,010) ------------ ------------- Total consolidated revenues.............................................. $ 280,690 $ 244,499 ------------ ------------- ------------ ------------- PROFIT OR LOSS: Total segment profit....................................................... $ 23,486 $ 10,652 Unallocated items: Corporate expenses....................................................... (3,079) (5,358) Corporate restructuring credits (charges)................................ 552 (11,427) Interest expense, net.................................................... (7,575) (9,044) Amortization of goodwill and deferred charges............................ (2,564) (2,934) Gain on sale of business................................................. -- 26,137 Other income (expense), net.............................................. 531 (1,861) ------------ ------------- Earnings before income taxes, minority interest and extraordinary item............................................. $ 11,351 $ 6,165 ------------ ------------- ------------ -------------
12 THE COLEMAN COMPANY, INC. AND SUBSIDIARIES ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The following discussion should be read in conjunction with the condensed consolidated financial statements and the related footnotes included elsewhere in this quarterly report on Form 10-Q, as well as the consolidated financial statements and related notes, and management's discussion and analysis of financial condition and results of operations in the Company's Annual Report on Form 10-K for the year ended December 31, 1998. RESULTS OF OPERATIONS RESTRUCTURING AND OTHER CHARGES The Company continuously reviews the adequacy of its restructuring reserves and adjusts the reserves as the various activities are completed or additional information becomes available which allows the Company to refine its estimates. During the three months ended March 31, 1999, the Company reduced its reserves by $0.6 million as a result of these reviews. During the three months ended March 31, 1998, the Company increased its reserves by $0.7 million as a result of these reviews. In addition, during the three months ended March 31, 1998, the Company recorded other charges totaling $12.9 million resulting from expenses associated with the Sunbeam Acquisition including advisory fees, abandoning a company-wide enterprise resource computer software system, and terminating a licensing services agreement. The following table (dollars in millions) provides an analysis of the changes in the Company's restructuring reserves since December 31, 1998. For detailed information regarding the Company's restructuring charges see Note 3 to the consolidated financial statements included in the Company's Annual Report on Form 10-K for the year ended December 31, 1998.
Inventory Idle Impairment and Other Facilities of Fixed Asset Termination and Other Assets Impairments Costs Exit Costs Total ------ ----------- ----------- ---------- ------- Balance at December 31, 1998............... $ 8.1 $ 1.8 $ 8.7 $ 3.3 $ 21.9 1999 (Credits) Charges..................... (0.3) (0.6) -- 0.3 (0.6) Activity................................... (0.7) (0.4) (2.5) (0.7) (4.3) ------ ------- -------- ------- ------- Balance at March 31, 1999.................. $ 7.1 $ 0.8 $ 6.2 $ 2.9 $ 17.0 ------ ------- -------- ------- ------- ------ ------- -------- ------- -------
Significant components of the restructuring reserves at March 31, 1999 are as follows: IMPAIRMENT OF FIXED ASSETS - This primarily represents the reserve for loss on disposition of an idle warehouse. TERMINATION COSTS - This represents severance benefits associated with the termination of employees following the Sunbeam Acquisition and for employees who were terminated as part of the 13 THE COLEMAN COMPANY, INC. AND SUBSIDIARIES Company's restructuring plans during 1997 and 1998. All termination benefits are expected to be paid by December 31, 2000. IDLE FACILITIES AND OTHER EXIT COSTS - This primarily relates to costs to be expended to complete the closing of two foreign facilities. THREE MONTHS ENDED MARCH 31, 1999 COMPARED WITH THE THREE MONTHS ENDED MARCH 31, 1998 Net revenues of $280.7 million for the three months ended March 31, 1999 were $36.2 million or 14.8% greater than for the three months ended March 31, 1998. The outdoor recreation products revenues, reflecting both United States and foreign non-hardware products, increased $33.6 million or 19.1% and occurred in nearly all product categories, primarily reflecting strong retail replenishment demand. The Company experienced unusually weak retail replenishment demand in the first quarter of 1998. The hardware products revenues increase of $2.6 million includes the impact of the loss of revenues from the Company's safety and security business in 1999 due to the sale of this business in March 1998. Excluding the revenues of this business, the hardware products revenues reflected an increase of $18.9 million, or 36.2%, over comparable 1998 revenues reflecting an increase in generator revenues attributable to increased awareness of power shortages arising from poor weather conditions and other events partially offset by a decline in compressor revenues. Geographically, United States revenues increased $15.5 million, or 10.4%, and foreign revenues increased $20.7 million, or 21.6%. The United States revenues for the 1998 period includes revenues from the Company's safety and security business and spa business, both of which were sold during 1998. Excluding these revenues from the 1998 period, United States revenues in 1999 reflected an increase of $36.8 million or 28.9%. Gross profit for the three months ended March 31, 1999 was $82.3 million as compared to $68.7 million for the three months ended March 31, 1998. Higher sales volume and favorable manufacturing efficiencies resulting from higher production levels associated with the higher sales volume in the 1999 period accounted for primarily all of the increase in gross profit. Selling, general and administrative ("SG&A") expenses, excluding the impact of restructuring credits of $0.6 million in 1999 and restructuring and other charges of $13.6 million in 1998, which are more fully described above, were $61.9 million or 22.1% of net revenues in 1999 compared to $61.2 million or 25.0% of net revenues in 1998. The overall dollar increase in SG&A expenses is primarily due to increased selling costs associated with the increase in 1999 sales partially offset by the reduction in SG&A expenses associated with the Company's safety and security business and spa business, both of which were sold during 1998, and whose total SG&A expenses during the first quarter of 1998 were $5.4 million. SG&A expenses as a percent of net revenues decreased to 22.1% in 1999 from 25.0% in 1998 as revenues grew faster than SG&A expenses. Interest expense was $7.6 million in 1999 compared with $9.0 million in 1998, a decrease of $1.4 million. The decrease in interest expense reflects the favorable effects of lower borrowings. Minority interest represents the interest of minority shareholders in the Company's subsidiary operations in the Philippines, Indonesia, and Canada. The Company recorded a provision for income tax expense of $4.5 million or 40.0% of pre-tax earnings in 1999 compared to a provision for income tax expense of $7.5 million in 1998. The 14 THE COLEMAN COMPANY, INC. AND SUBSIDIARIES 1998 income tax provision reflects, among other things, (i) the write-off of approximately $1.7 million deferred tax assets that became unrealizable as a result of the change of control in the Company at the time of the Sunbeam Acquisition, (ii) $0.4 million of tax expense due to the impact of decreased foreign tax rates on deferred tax assets, and (iii) the impact of $7.1 million non-deductible costs associated with the Sunbeam Acquisition. Excluding these items, the 1998 effective income tax rate would have been approximately 40.8%. LIQUIDITY AND CAPITAL RESOURCES Cash used in operating activities during the three months ended March 31, 1999 was $49.0 million compared to $83.6 million for the three months ended March 31, 1998. This decrease is attributable to higher earnings before non-cash charges and gain on sale of business. During the three months ended March 31, 1999, receivables increased $65.1 million and inventories increased approximately $28.8 million as a result of the seasonality of the Company's sales. The Company's capital expenditures were $3.9 million during the three months ended March 31, 1999. The Company's uses of cash for 1999 are expected to be primarily for working capital and capital expenditure requirements. Since the Sunbeam Credit Facility provides that Sunbeam will not contribute capital to Coleman or, with some exceptions, permit Coleman to borrow money from any source other than Sunbeam, the Company's ability to meet its cash operating requirements, including capital expenditures and other obligations, is dependent upon a combination of cash flows from operations and loans to the Company from Sunbeam. Sunbeam has informed the Company that it has the positive intent and ability to fund the Company's requirements for borrowed funds through April 10, 2000. Amounts loaned by Sunbeam are represented by the Intercompany Note which totaled $407.8 million at March 31, 1999 and, until the amendment and restatement of the Intercompany Note described below, were due on demand. For 1998 and through April 15, 1999, the Intercompany Note bore interest at a floating rate equivalent to the weighted average interest rate incurred by Sunbeam on its outstanding convertible debt and borrowings under its bank credit facility which during the three months ended March 31, 1999 was 7.3%. Coleman is a borrower under the Sunbeam Credit Facility for purposes of letters of credit borrowings. On April 15, 1999, Coleman, Sunbeam and, as to certain agreements, the lenders under the Sunbeam Credit Facility entered into the Agreements, including the Amended Intercompany Note, intercompany security and pledge agreements, an amendment to the Sunbeam Credit Facility and certain other agreements. The Amended Intercompany Note is due April 15, 2000. The Amended Intercompany Note bears interest at an annual rate equal to (i) 4% if the three month LIBOR quoted on the Telerate system is less than 6%, or (ii) 5% if the three month LIBOR quoted on the Telerate system is 6% or higher, subject to increases during an event of default, and interest will be payable by adding the amount of such interest to the principal balance of the Amended Intercompany Note. In addition, the Amended Intercompany Note provides an event of default under the Sunbeam Credit Facility will constitute an event of default under the Amended Intercompany Note and in certain circumstances the payment on the Amended Intercompany Note will be subordinate to Coleman's obligations under the Sunbeam Credit Facility. Pursuant to the Agreements, Coleman has pledged substantially all of its domestic assets, other than its real property, including 66% of its ownership interest in its direct foreign subsidiaries and domestic holding companies for its foreign subsidiaries and all of its ownership interest in its other domestic subsidiaries (but Coleman's subsidiaries have 15 THE COLEMAN COMPANY, INC. AND SUBSIDIARIES not pledged their assets or stock of their subsidiaries), as security for the Amended Intercompany Note. Sunbeam has pledged the Amended Intercompany Note as security for the Sunbeam Credit Facility and assigned to such lenders the security pledged by Coleman for the Amended Intercompany Note. Under the Agreements, Coleman also agreed to give the lenders a direct pledge of the assets securing the Amended Intercompany Note to secure the obligations under the Sunbeam Credit Facility, subject to a cap equal to the balance due from time to time on the Amended Intercompany Note. The Sunbeam Credit Facility provides for a revolving credit facility in an aggregate principal amount of up to $400.0 million (subject to certain reductions) maturing March 31, 2005. In addition, pursuant to the Sunbeam Credit Facility, at March 31, 1999, Sunbeam had approximately $1,260.0 million outstanding debt consisting of two tranches of term loans with scheduled repayments through maturity on March 31, 2005 and September 30, 2006. As a result of Sunbeam's operating losses, Sunbeam was not in compliance with the financial covenants and other terms contained in the Sunbeam Credit Facility. As of June 30, 1998, Sunbeam entered into an agreement with its bank lenders which waived Sunbeam's compliance through December 31, 1998. On October 19, 1998, Sunbeam's bank lenders agreed to extend this waiver through April 10, 1999. In April 1999, the waiver was extended to April 10, 2000, and the Sunbeam Credit Facility was amended to add certain financial covenants and other terms. At the end of March 1999, approximately $230.0 million was available to the Company under the Sunbeam Credit Facility either through letters of credit borrowings or loans from Sunbeam. Borrowings under the Sunbeam Credit Facility are secured by a pledge of the stock of Sunbeam's material subsidiaries and by a security interest in substantially all of the assets of Sunbeam and its material domestic subsidiaries (other than Coleman and its subsidiaries, except as otherwise described herein), including the Amended Intercompany Note. Sunbeam has pledged its shares of Coleman common stock and its shares of Sunbeam Canada common stock owned by it as security under the Sunbeam Credit Facility. In addition, borrowings under the Sunbeam Credit Facility are guaranteed by a number of Sunbeam's wholly-owned material United States subsidiaries (but not Coleman) and such subsidiary guarantees are secured as described above. Coleman has pledged its inventory (but not that of its subsidiaries) and the proceeds from the sale of such inventory as collateral for its letter of credit borrowings under the Sunbeam Credit Facility. The Sunbeam Credit Facility contains covenants customary for credit facilities of a similar nature, and events of default customary for transactions of this type. Sunbeam is also required to comply with specified financial covenants and ratios. If an event of default occurs under the Sunbeam Credit Facility or Sunbeam is unable to refinance the Sunbeam Credit Facility or obtain another waiver or amendment of certain financial covenants and other terms by the time its existing waiver expires on April 10, 2000, the Company may be required to reduce, delay or cancel capital or other expenditures and/or seek loans or capital contributions from, or sell assets or capital stock to, lending institutions and/or other third parties or affiliates. There can be no assurance that any of such transactions could be consummated or if consummated, would be on favorable terms or in amounts sufficient to permit the Company to meets its cash requirements, or that any of such transactions would be permitted under Sunbeam's debt instruments then in effect. See Note 13 to the 16 THE COLEMAN COMPANY, INC. AND SUBSIDIARIES Consolidated Financial Statements in the Company's Annual Report on Form 10-K for the year ended December 31, 1998. EXPOSURE TO MARKET RISK QUALITATIVE INFORMATION Coleman uses a variety of derivative financial instruments to manage its foreign currency and interest rate exposures. Coleman 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. See also Note 11 to the Consolidated Financial Statements in the Company's Annual Report on Form 10-K for the year ended December 31, 1998. The Company's international operations are located primarily in Europe, Japan and Canada, which are not considered to be highly inflationary environments. 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. Coleman is most vulnerable to changes in United States dollar/Japanese yen (JPY), United States dollar/Canadian dollar (CAD), United States dollar/German Deutschemark (DM), and United States dollar/British Pound (GBP) exchange rates. The Company's interest income and expense are most sensitive to changes in the general level of U.S. interest rates. In this regard, changes in U.S. interest rates affect the interest earned on the Company's cash equivalents and short-term investments as well as interest paid on its debt. To mitigate the impact of fluctuations in U.S. interest rates, the Company maintains a portion of its debt as fixed rate in nature by entering into interest rate swap transactions. Coleman manages credit risk related to its derivative instruments through credit approvals, exposure limits, threshold amounts and other monitoring procedures. QUANTITATIVE INFORMATION Set forth below are tabular presentations of certain information related to Coleman's investments in market risk sensitive instruments. All of the instruments set forth in the following tables have been entered into by Coleman for purposes other than trading. INTEREST RATE SENSITIVITY. The table below provides information about Coleman's derivative financial instruments and other financial instruments that are sensitive to changes in interest rates, including interest rate swaps and debt obligations. 17 THE COLEMAN COMPANY, INC. AND SUBSIDIARIES For debt obligations, the table presents principal cash flows by expected maturity date and related March 31, 1999 weighted average interest rates. For interest rate swaps, the table presents notional amounts and weighted average interest rates for the contracts at March 31, 1999. Notional amounts are used to calculate the contractual payments to be exchanged under the contracts.
Expected Maturity Date Balance ----------------------------------------------------------- at There- Fair 3/31/99 1999 2000 2001 2002 2003 after Total Value ------- ------ ----- ----- ---- ---- ------- ------ ----- (US$ Equivalent in Millions) Long-Term Debt: Fixed Rate.................. $ 0.6 $ 0.1 $ 0.2 $ 0.1 $ 0.1 $ 0.1 $ -- $ 0.6 $ 0.6 Average Interest Rate....... 2.91% Interest Rate Derivatives: Interest Rate Swaps: Variable to Fixed (US$).. $ 25.0 $ -- $ -- $ -- $ -- $ 25.0 $ -- $ 25.0 $ (0.6) Average Pay Rate......... 6.12% Average Receive Rate..... 5.08%
EXCHANGE RATE SENSITIVITY. The table below provides information about Coleman's foreign currency derivative financial instruments and other financial instruments, including forward exchange agreements, by functional currency and presents such information in U.S. dollar equivalents. The table summarizes information on instruments and transactions that are sensitive to foreign currency exchange rates, including foreign currency variable rate credit lines, foreign currency forward exchange agreements and foreign currency purchased put option contracts. For debt obligations, the table represents principal cash flows and related weighted average interest rates by expected maturity dates. For foreign currency forward exchange agreements and foreign currency put option contracts, the table presents the notional amounts and weighted average exchange rates by expected (contractual) maturity dates. These notional amounts generally are used to calculate the contractual payments to be exchanged under the contract.
Balance at Fair 3/31/99 (1) Value ----------- ----- (US$ Equivalent in Millions) Foreign Currency Short-Term Debt: Variable Rate Credit Lines (Europe, Japan and Asia).......... $ 48.4 $ 48.4 Weighted Average Interest Rate............................... 2.8% Forward Exchange Agreements: (Receive US$/Pay DM) Contract Amount........................................ $ 9.0 $ 9.9 Average Contractual Exchange Rate...................... 1.62 (Receive US$/Pay JPY) Contract Amount........................................ $ 9.0 $ 9.2 Average Contractual Exchange Rate...................... 114.73 (Receive US$/Pay GBP) Contract Amount........................................ $ 3.5 $ 3.6 Average Contractual Exchange Rate...................... .60 18 THE COLEMAN COMPANY, INC. AND SUBSIDIARIES Purchased Put Option Agreements: (Receive US$/Pay DM) Contract Amount........................................ $ 15.8 $ 0.4 Average Strike Price................................... 1.80 (Receive US$/Pay JPY) Contract Amount........................................ $ 12.4 $ 0.3 Average Strike Price................................... 125.0 (Receive US$/Pay GBP) Contract Amount........................................ $ 1.4 $ 0.0 Average Strike Price................................... .62 (Receive US$/Pay CAD) Contract Amount........................................ $ 15.0 $ 0.1 Average Strike Price................................... 1.54
- ------------------ (1) None of the instruments listed in the table have maturity dates beyond 1999. 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 unseasonable weather conditions. YEAR 2000 READINESS DISCLOSURE The Company is continuing the process of assessing the impact of the Year 2000 on its operations. The Company is being assisted in its review and remediation work by Sunbeam's Year 2000 Program Management Office and consulting firms employed by Sunbeam. The Company has completed an inventory of its hardware and software systems, manufacturing equipment, electronic data interchange, telecommunications and other technical assets potentially subject to Year 2000 problems, such as security and telephone systems and controls for lighting, heating, ventilation and facility access. Additionally, the Company is assessing the effects of noncompliance by its vendors, service providers, customers and financial institutions. The Company relies on its information technology functions to perform many tasks critical to its operations. Significant transactions that could be impacted by Year 2000 noncompliance include, among others, purchases of materials, production management, order entry and fulfillment, and payroll processing. Systems and applications that have been identified by the Company to date as not currently Year 2000 compliant that are critical to the Company's operations include certain of its financial software systems, which process the order entry, purchasing, production management, general ledger, accounts receivable, and accounts payable functions, and critical applications in the Company's manufacturing and distribution facilities. The Company's corrective work to achieve Year 2000 compliance has included the following: (i) installation of Year 2000 compliant JD Edwards software which has recently been completed in one location and is scheduled to be completed in another location in September of 1999; (ii) the installation of Year 2000 compliant JBA software in one location which is scheduled to be completed 19 THE COLEMAN COMPANY, INC. AND SUBSIDIARIES by June 1999; and (iii) remediation of software codes for existing programs in another location which is scheduled to be completed by July of 1999. The Company has identified one of these locations as possessing significant Year 2000 issues. Coleman's failure to complete a timely conversion of this location to a Year 2000 compliant system could have a material impact on the Company's operations. Management believes, although there are significant systems that are being or will be modified or replaced, Coleman's information systems environment will be made Year 2000 compliant prior to January 1, 2000. As of March 31, 1999, the Company had expended approximately $6.0 million related to remediation of Year 2000 issues, of which approximately $5.0 million was recorded as SG&A expenses and the remainder as capital expenditures. The Company's preliminary assessment of the total costs to address and remedy Year 2000 issues is approximately $12.0 million. This estimate includes the costs of software and hardware modifications and replacements, and fees to third party consultants, but excludes the costs associated with Company employees. The Company expects these expenditures to be financed through operating cash flows or borrowings, as applicable. There can be no assurance that these preliminary estimates will not change as the Company completes its assessment of the Year 2000 issues. Additionally, the Sunbeam Credit Facility does not permit Sunbeam and its subsidiaries, including Coleman and its subsidiaries, to spend more than $50.0 million in the aggregate on Year 2000 testing and remediation during the year ended December 31, 1999. Sunbeam currently expects that for 1999, Year 2000 testing and remediation spending for Sunbeam and its subsidiaries, including Coleman and its subsidiaries, will total approximately $41.0 million. With the exception of certain aspects of the Company's Year 2000 readiness program, the Company did not engage an independent third party to verify the program's overall approach or total cost. However, the Company believes through its use of various external consulting firms which perform significant roles within the program, the Company's exposure in this regard is mitigated. In addition, through the use of external third party diagnostic tools which helped to identify potential Year 2000 issues in the software code which the Company is remediating, the Company believes it has also mitigated its risk by validating and verifying key program components. The Company has contacted its major vendors and suppliers of products and services to determine their Year 2000 readiness, and is continuing to monitor their status with respect to such plans. This review includes third party providers to whom the Company has outsourced the processing of its cash receipt and cash disbursement transactions and its payroll. The Company is currently assessing the vendor responses and will conduct additional reviews, including on-site meetings, if deemed necessary, with any major suppliers who have not indicated their readiness for the Year 2000. The failure of certain of these third party suppliers to become Year 2000 compliant could have a material adverse impact on the Company. The Company will also contact its customers to determine if they are prepared for Year 2000 issues. Their failure to evaluate and prepare for Year 2000 issues could have a material adverse effect on Coleman's operations. The Company plans to establish a contingency plan for addressing any effects of the Year 2000 on its operations, whether due to noncompliance of the Company's systems or those of third parties. The Company expects to complete such contingency plan by September 30, 1999 and expects such contingency plan will include an analysis of the Company's worst case scenario and will address 20 THE COLEMAN COMPANY, INC. AND SUBSIDIARIES alternative processes, such as manual procedures to replace those processed by noncompliant systems, potential alternative service providers, and plans to address compliance issues as they arise. At this time, the Company believes the most likely "worst-case" scenario relating to Year 2000 issues generally involves potential disruptions in areas in which the Company's operations must rely on vendors, suppliers and customers whose systems may not work properly after January 1, 2000. While such failures could either directly or indirectly affect important operations of the Company and its subsidiaries in a significant manner, the Company cannot at present estimate either the likelihood or the potential cost of such failures. However, subject to the nature of the systems and applications of the Company or third parties which are not made Year 2000 compliant, the impact of such non-compliance on the Company's operations could be material if appropriate contingency plans cannot be developed prior to January 1, 2000. Because Year 2000 readiness is critical to the business, the Company has redeployed some resources from non-critical system enhancements to address Year 2000 issues. In addition, due to the importance of information systems to the Company's business, management has deferred non-mission-critical systems enhancements as much as possible. The Company does not expect these redeployments and deferrals to have a material impact on the Company's financial condition or results of operations. CAUTIONARY STATEMENTS Certain statements in this Quarterly Report on Form 10-Q may constitute "forward-looking" statements within the meaning of the Private Securities Litigation Reform Act of 1995, as the same may be amended from time to time (the "Act") and in releases made by the Securities and Exchange Commission from time to time. Such forward-looking statements involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of the Company to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements. Statements that are not historical facts, including statements about the Company's beliefs and expectations, are forward-looking statements. Forward-looking statements can be identified by, among other things, the use of forward-looking language, such as "believe," "expects," "estimates", "projects", "may," "will," "should," "seeks," "plans," "scheduled to," "anticipates" or "intends" or the negative of those terms, or other variations of those terms or comparable language, or by discussions of strategy or intentions. Forward-looking statements speak only as of the date they are made, and the Company undertakes no obligation to update them. These forward-looking statements were based on various factors and were derived utilizing numerous important assumptions and other important factors that could cause actual results to differ materially from those in the forward-looking statements. These cautionary statements are being made pursuant to the Act, with the intention of obtaining the benefits of the "Safe Harbor" provisions of the Act. The Company cautions investors that any forward-looking statements made by the Company are not guarantees of future performance. Important assumptions and other important factors that could cause actual results to differ materially from those contained in the forward-looking statements with respect to the Company include, but are not limited to risks associated with: - high leverage, 21 THE COLEMAN COMPANY, INC. AND SUBSIDIARIES - Sunbeam having sufficient borrowing capacity or other funds to lend to the Company to satisfy the Company's cash needs, - unavailability of sufficient cash flows from operations and borrowings from Sunbeam, and the inability of the Company to secure loans or capital contributions from, or sell assets or capital stock to, lending institutions and/or other third parties or affiliates, - Sunbeam's ability to comply with the terms of the Sunbeam Credit Facility, or to continue to obtain waivers from its bank lenders with respect to compliance with the existing covenants contained in the Sunbeam Credit Facility, and to continue to have access to its revolving credit facility, - Coleman's ability to maintain and increase market shares for its products at acceptable margins, - Coleman's ability to successfully introduce new products and to provide on-time delivery and a satisfactory level of customer service, - changes in domestic and/or foreign laws and regulations, including changes in tax laws, accounting standards, environmental laws, occupational, health and safety laws, - access to foreign markets together with foreign economic and political conditions, including currency fluctuations, and trade, monetary, fiscal and/or tax policies, - uncertainty as to the effect of competition in existing and potential future lines of business, - fluctuations in the cost and/or availability of raw materials and/or products, - changes in the availability and/or costs of labor, - effectiveness of advertising and marketing programs, - product quality, including excess warranty costs, product liability expenses and costs of product recalls, - weather conditions which are adverse to the specific businesses of Coleman, - the possibility of a recession in the United States or other countries resulting in a decrease in consumer demands for Coleman's products, - ability of third party service providers that have been engaged to provide services such as factory maintenance and certain back office administrative services to timely and accurately provide their services to the Company, - changes in consumer preferences or a decrease in the public's interest in camping and related activities, - combinations or other actions by retail customers that adversely affect sales or profitability, - actions by competitors including business combinations, new product offerings and marketing and promotional activities, and - failure of Coleman and/or its customers and suppliers of goods or services to timely complete the remediation of computer systems to effectively process Year 2000 information. Other factors and assumptions not included in the foregoing may cause the Company's actual results to materially differ from those projected. The Company assumes no obligation to update any forward-looking statements or these cautionary statements to reflect actual results or changes in other factors affecting such forward-looking statements. 22 THE COLEMAN COMPANY, INC. AND SUBSIDIARIES PART II. OTHER INFORMATION ITEM 1. LEGAL PROCEEDINGS None ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K (a) Exhibits
Exhibit No. Description ----------- ----------- 4.1 /X/ Intercompany Pledge and Security Agreement, dated as of April 15, 1999, between The Coleman Company, Inc. and Sunbeam Corporation. 4.2 /X/ Intercompany Security Agreement dated as of April 15, 1999, between The Coleman Company, Inc. and Sunbeam Corporation. 27 /X/ Financial Data Schedule, submitted electronically to the Securities and Exchange Commission for information only and only and not filed. ------------------ /X/ Filed herewith
(b) Report on Form 8-K No reports on Form 8-K were filed during the quarter ended March 31, 1999. 23 THE COLEMAN COMPANY, INC. AND SUBSIDIARIES 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. Date: May 19, 1999 By: /s/ Gwen C. Wisler ------------------------- ----------------------------------------- Gwen C. Wisler Executive Vice President and Chief Financial Officer 24 EX-4.1 2 EXHIBIT 4.1 INTERCOMPANY PLEDGE AND SECURITY AGREEMENT PLEDGE AND SECURITY AGREEMENT (this "AGREEMENT"), dated as of April 15, 1999, between THE COLEMAN COMPANY, INC. (with its successors, the "GRANTOR") and SUNBEAM CORPORATION (the "PARENT"). W I T N E S S E T H : WHEREAS, the Parent and the Grantor are parties to the Credit Agreement, dated as of March 30, 1998 (as amended, supplemented or otherwise modified from time to time, the "CREDIT AGREEMENT"), among the Parent, the subsidiary borrowers referred to therein (including the Grantor, the "SUBSIDIARY BORROWERS"), the lenders party thereto (the "LENDERS"), Morgan Stanley Senior Funding, Inc., as Syndication Agent, Bank of America National Trust and Savings Association, as Documentation Agent, and First Union National Bank, as administrative agent (the "ADMINISTRATIVE AGENT"); WHEREAS, in connection with the Credit Agreement, the Parent executed a Parent Pledge and Security Agreement, dated as of March 30, 1998 (as amended, supplemented or otherwise modified from time to time, the "PARENT PLEDGE AND SECURITY AGREEMENT"), between the Parent and the Administrative Agent, pursuant to which, among other things, all Pledged Instruments (as defined in the Parent Pledge and Security Agreement) in favor of the Parent, including the Parent Intercompany Note (as hereafter defined), are pledged to the Administrative Agent, for the benefit of the Lenders, to secure the Secured Obligations (as defined in the Parent Pledge and Security Agreement), including without limitation, the obligations of the Parent under the Credit Agreement; WHEREAS, the Grantor has executed an Amended and Restated Subordinated Intercompany Note, dated April 6, 1998 (as amended, supplemented or otherwise modified from time to time, the "COLEMAN INTERCOMPANY NOTE"), in favor of the Parent; WHEREAS, in order to secure its obligations under the Coleman Intercompany Note, the Grantor has agreed to grant a continuing security interest in and to the Collateral (as hereafter defined) to secure the Secured Intercompany Obligations (as hereafter defined); and WHEREAS, pursuant to this Agreement and the Parent Pledge and Security Agreement under which the Coleman Intercompany Note has been pledged to the Administrative Agent, the security interests in the Collateral granted by the Grantor pursuant to this Agreement, including all of the right, title and interest of the Parent, as Secured Party (as hereafter defined) hereunder, have been pledged and collaterally assigned to the Administrative Agent, for the benefit of the Lenders, to secure the Secured Obligations (as hereafter defined) in accordance with the terms of the Parent Pledge and Security Agreement; NOW, THEREFORE, in consideration of the premises and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows: Section 1. DEFINITIONS. Terms defined in the Coleman Intercompany Note and not otherwise defined herein have, as used herein, the respective meanings provided for therein. The following additional terms, as used herein, have the following respective meanings: "BUSINESS DAY" means any day that is not a Saturday, Sunday or other day on which commercial banks in New York City or Charlotte, North Carolina are authorized or required by law to remain closed. "COLEMAN COLLATERAL DOCUMENTS" has the meaning set forth in the Credit Agreement. "COLEMAN MERGER EFFECTIVE DATE" has the meaning set forth in the Credit Agreement. "COLLATERAL" has the meaning assigned to such term in Section 3(A). "DIRECT DOMESTIC SUBSIDIARY" means a Direct Subsidiary organized under the laws of the United States of America or a state thereof. "DIRECT DOMESTIC SUBSIDIARY SHARES" means the shares of capital stock, membership or limited liability company interests or other equity interests of each Direct Domestic Subsidiary listed on Schedule I opposite such Direct Domestic Subsidiary's name. "DIRECT FOREIGN SUBSIDIARY" means a Direct Subsidiary organized under the laws of any jurisdiction outside the United States. "DIRECT FOREIGN SUBSIDIARY SHARES" means the shares of capital stock, membership or limited liability company interest or other equity interests of each Direct Foreign Subsidiary listed on Schedule II opposite such Direct Foreign Subsidiary's name. "DIRECT SUBSIDIARY" means a Subsidiary of the Grantor, the capital stock or other equity interests of which is held directly by the Grantor. "DIRECT SUBSIDIARY INTERCOMPANY AGREEMENT" means all instruments, listed on Schedule I or Schedule II that are owned by the Grantor evidencing Indebtedness owed to the Grantor by its Direct Subsidiaries. "FOREIGN HOLDING COMPANY" means Direct Domestic Subsidiary of the Grantor whose sole assets (exclusive of assets consisting of advances or loans to Grantor or any of its 2 Subsidiaries and assets with an aggregate book value not exceeding $1,000,000) consist primarily of capital stock, membership or limited liability interest or other equity interests of one or more Foreign Subsidiaries or other Foreign Holding Companies. "FOREIGN SUBSIDIARY" means any Subsidiary of the Grantor organized under the laws of any jurisdiction outside the United States. "INDEBTEDNESS" has the meaning set forth in the Credit Agreement. "INDIRECT SUBSIDIARY" means a Subsidiary of the Grantor which is not a Direct Subsidiary. "INDIRECT SUBSIDIARY INTERCOMPANY AGREEMENTS" means all instruments, other than Direct Subsidiary Intercompany Agreements, listed on Schedule I or Schedule II that are owned by the Grantor evidencing Indebtedness owed to the Grantor by its Indirect Subsidiaries. "INVESTMENT PROPERTY" means all "investment property" as such term is defined in Section 9-115 of the Uniform Commercial Code. "INVESTMENTS" has the meaning set forth in the Credit Agreement. "PLEDGED INSTRUMENTS" means (i) the Direct Subsidiary Intercompany Agreement, (ii) the Indirect Subsidiary Intercompany Agreements, and (iii) any instrument required to be pledged to the Administrative Agent pursuant to Section 3(B), Section 3(C) or Section 3(D). "PLEDGED SECURITIES" means the Pledged Instruments and the Pledged Stock. "PLEDGED STOCK" means (i) the Direct Domestic Subsidiary Shares (other than with respect to any Foreign Holding Company), (ii) 66% of (A) the Direct Domestic Subsidiary Shares of any Foreign Holding Company including, without limitation, the Direct Domestic Subsidiary Shares of the Foreign Holding Companies represented by the certificates identified with respect to such companies on Schedule 1 hereto and (B) the Direct Foreign Subsidiary Shares and (iii) any other capital stock, membership or limited liability interest or other equity interests required to be pledged to the Secured Party pursuant to Section 3(B) and Section 3(C). "SECURED INTERCOMPANY OBLIGATIONS" means the obligations of the Grantor to the Parent secured under this Agreement, including without limitation, (i) all principal of and interest (including without limitation, any interest which accrues after or would accrue but for the commencement of any case, proceeding or other action relating to the bankruptcy, insolvency or reorganization of the Grantor, whether or not allowed or allowable as a claim in any such proceeding) on the Coleman Intercompany Note, (ii) all other amounts payable by the Grantor under the Coleman Intercompany Note and (iii) any renewals or extensions of any of the foregoing. 3 "SECURED OBLIGATIONS" means, collectively, the Secured Obligations under and as defined in the Parent Pledge and Security Agreement. "SECURED OBLIGATIONS REPAYMENT DATE" means the date on which all of the following shall have occurred: (A) the payment in full of the Secured Obligations, (B) the termination of the Commitments under and as defined in the Credit Agreement and (C) the expiration or termination of all Letters of Credit issued pursuant to and as defined in the Credit Agreement. "SECURED PARTY" means the Parent; PROVIDED that until the Secured Obligations Repayment Date the Security Interests and the Secured Party's powers, rights, remedies, benefits, protections, authority and functions of the Secured Party have been collaterally assigned by the Parent to the Administrative Agent to the extent set forth in Section 13(B) hereof and the Parent Pledge and Security Agreement. "SECURITY INTERESTS" means the security interests in the Collateral granted hereunder securing the Secured Intercompany Obligations. "SUNBEAM (CANADA)" means Sunbeam Corporation (Canada) Limited. "UNIFORM COMMERCIAL CODE": the Uniform Commercial Code as in effect from time to time in the State of New York. Unless otherwise defined herein, or unless the context otherwise requires, all terms used herein which are defined in the Uniform Commercial Code shall have the meanings therein stated. Section 2. REPRESENTATIONS AND WARRANTIES. The Grantor represents and warrants as follows: (A) TITLE TO PLEDGED SECURITIES. The Grantor owns all of the Pledged Securities, free and clear of any Liens other than the Security Interests. The Pledged Stock includes (i) all of the issued and outstanding capital stock of each Direct Domestic Subsidiary (other than any Foreign Holding Company), (ii) 66% of (x) the issued and outstanding stock of each Direct Foreign Subsidiary and (y) the issued and outstanding capital stock, membership or limited liability company interest or other equity interests of each Foreign Holding Company and (iii) 23% of the issued and outstanding capital stock of Sunbeam (Canada). The Pledged Instruments include all instruments owned by the Grantor evidencing Indebtedness owed to it by the Parent or any of its Subsidiaries (other than any Foreign Holding Company or Foreign Subsidiary). All of the Pledged Stock has been duly authorized and validly issued, and is fully paid and non-assessable, and is subject to no options to purchase or similar rights of any Person. The Grantor is not and will not become a party to or otherwise become bound by any agreement, other than this Agreement and the Coleman Collateral Documents, which restricts in any manner the rights of any present or future holder of any of the Pledged Securities with respect thereto. 4 (B) VALIDITY, PERFECTION AND PRIORITY OF SECURITY INTERESTS. Upon the delivery of the Pledged Instruments and certificates representing the Pledged Stock to the Secured Party in accordance with Section 4 hereof, and the filing of UCC financing statements with the collateral description in the form specified in Exhibit A in the appropriate filing office in the jurisdiction specified on Schedule III, the Secured Party will have valid and perfected security interests in the Collateral subject to no prior Lien other than (i) Permitted Liens under and as defined in the Credit Agreement and (ii) on and after the Coleman Merger Effective Date, the Liens in favor of the Administrative Agent under the Coleman Collateral Documents. Except for the filing of the UCC financing statements described in the immediately preceding sentence, no registration, recordation or filing with any governmental body, agency or official is required in connection with the execution or delivery of this Agreement or necessary for the validity or enforceability hereof or for the perfection or enforcement of the Security Interests. Neither the Grantor nor any of its Subsidiaries has performed or will perform any acts which might prevent the Secured Party from enforcing any of the terms and conditions of this Agreement or which would limit the Secured Party in any such enforcement other than the execution and delivery of the Coleman Collateral Documents. Other than financing statements or other similar or equivalent documents or instruments with respect to the Security Interests, no financing statement, mortgage, security agreement or similar or equivalent document or instrument covering all or any part of the Collateral is on file or of record in any jurisdiction in which such filing or recording would be effective to perfect a Lien on such Collateral. No Collateral is in the possession of any Person (other than the Grantor) asserting any claim thereto or security interest therein, except that (x) the Secured Party or the Administrative Agent as its designee may have possession of Collateral as contemplated hereby and (y) on and after the Coleman Merger Effective Date, the Administrative Agent also may have possession of Collateral in its own right as contemplated by the Coleman Collateral Documents. (C) UCC FILING LOCATIONS. The chief executive office of the Grantor is located at its address set forth on the signature pages hereto. The State of incorporation of the Grantor is the State of Delaware. Under the Uniform Commercial Code as in effect in the State in which such office is located, no local filing is required to perfect a security interest in collateral consisting of accounts, Investment Property or general intangibles. (D) PLEDGED INSTRUMENTS. Each Pledged Instrument and each document and instrument that secures or guarantees payment of such Pledged Instrument constitutes the legal, valid and binding obligation of the maker thereof, enforceable in accordance with its terms, subject to applicable bankruptcy, insolvency, reorganization, moratorium or other laws affecting creditors' rights generally and subject to general principles of equity, regardless of whether considered in a proceeding in equity or at law. As of the date of the grant of the Security Interests in any Pledged Instrument, such Pledged Instrument was not subject to any right of counterclaim or offset whatsoever. Section 3. THE SECURITY INTERESTS. In order to secure the full and punctual payment of the Secured Intercompany Obligations in accordance with the terms thereof, and to 5 secure the payment and performance of all the obligations of the Grantor hereunder and under the Coleman Intercompany Loan Documents: (A) The Grantor hereby assigns and pledges to the Parent, as Secured Party, and grants to the Parent, as Secured Party, security interests in all of the following property of the Grantor (collectively, the "COLLATERAL"): (1) the Pledged Securities, and all organizational documents, together with all of its rights and privileges thereunder, with respect to the Pledged Securities, and all income and profits thereon, and all interest, dividends and other payments and distributions with respect thereto; (2) all Indebtedness now or hereafter owed to the Grantor by the Parent or any of its Subsidiaries (whether or not evidenced by instruments (as defined in the Uniform Commercial Code)); (3) all Investments made by the Grantor in any of its Subsidiaries; (4) all Investment Property; and (5) all proceeds of all or any of the collateral described in clauses (1) through (4) hereof, including without limitation, all dividends or other income from the Investment Property or the Pledged Securities, collections thereon or distributions or payments with respect thereto, and all collateral security and guarantees given by any person with respect to all or any of the collateral described in clauses (1) through (4) hereof. Contemporaneously with the execution and delivery hereof, the Grantor is delivering the Direct Subsidiary Intercompany Agreement, the Indirect Subsidiary Intercompany Agreements and certificates representing the Direct Domestic Subsidiary Shares and the Direct Foreign Subsidiary Shares in pledge hereunder. (B) In the event that at any time any Person becomes a Direct Domestic Subsidiary, or any Direct Domestic Subsidiary issues any additional or substitute shares of capital stock of any class, any membership or limited liability company interest or any other equity interests or any substitute note, or instrument evidencing any other Indebtedness to the Grantor, or the Grantor makes any other Investment in any Direct Domestic Subsidiary, the Grantor will immediately pledge and deposit with the Secured Party certificates representing all such shares, any membership or limited liability company interests or other equity interests and such note or an instrument evidencing such other Indebtedness or other investment as additional security for the Secured Intercompany Obligations. All such shares, interests, notes and instruments constitute Pledged Securities and are subject to all provisions of this Agreement. (C) In the event that at any time any Person becomes a Direct Foreign Subsidiary, or any Direct Foreign Subsidiary issues any additional or substitute shares of 6 capital stock of any class, any membership or limited liability company interest or any other equity interests to the Grantor, the Grantor will immediately pledge and deposit with the Secured Party certificates representing additional shares, membership or limited liability company interests or equity interests sufficient to cause the Secured Party to have a security interest in 66% (but not more than 66%) of all the outstanding capital stock of, membership or limited liability company interests or other equity interests in, such Direct Foreign Subsidiary as additional security for the Secured Intercompany Obligations. All such shares and interests constitute Pledged Securities and are subject to all provisions of this Agreement. (D) In the event that at any time the Parent or any Indirect Subsidiary issues any substitute note or instrument evidencing any other Indebtedness to the Grantor, the Grantor will immediately pledge and deposit with the Secured Party such note or an instrument evidencing such other Indebtedness as additional security for the Secured Intercompany Obligations. All such notes and instruments constitute Pledged Securities and are subject to all provisions of this Agreement. (E) The Security Interests are granted as security only and shall not subject the Secured Party to, or transfer or in any way affect or modify, any obligation or liability of the Grantor or any of its Direct Subsidiaries or Indirect Subsidiaries with respect to any of the Collateral or any transaction in connection therewith. (F) Notwithstanding anything to the contrary herein, Grantor shall not be required to pledge (i) any capital stock, membership or limited liability interest or other equity interests issued by any Foreign Subsidiary or Foreign Holding Company if the aggregate portion of capital stock, membership or limited liability interest or other equity interests of such Person that is Pledged Stock would (x) in the case of Sunbeam (Canada), exceed 66% of the outstanding capital stock, membership or limited liability interest or other equity interests of Sunbeam (Canada) when taken together with the percentage of the outstanding capital stock, membership or limited liability interest or other equity interests of Sunbeam (Canada) pledged to the Administrative Agent under the Pledge and Security Agreements (as defined in the Credit Agreement) or (y) in the case of any other Foreign Subsidiary or Foreign Holding Company, exceed 66% of the outstanding capital stock, membership or limited liability interest or other equity interests of such Person or (ii) any Direct Subsidiary Intercompany Agreement, Indirect Subsidiary Intercompany Agreement or instrument owned by the Grantor evidencing Indebtedness owed to the Grantor by any Foreign Subsidiary or Foreign Holding Company. Section 4. DELIVERY OF PLEDGED SECURITIES. All Pledged Instruments shall be delivered to the Parent by the Grantor pursuant hereto indorsed to the order of the Secured Party, and accompanied by any required transfer tax stamps, all in form and substance satisfactory to the Secured Party. All certificates representing the Pledged Stock delivered to the Parent by the Grantor pursuant hereto shall be in suitable form for transfer by delivery, or shall be accompanied by duly executed instruments of transfer or assignment in blank, with signatures appropriately guaranteed, and accompanied by any required transfer tax stamps, all in form and substance satisfactory to the Parent. It is understood and agreed that, upon its receipt thereof, the 7 Parent will immediately deliver to the Administrative Agent in accordance with Section 13(A) hereof all certificates representing such Pledged Stock in suitable form for transfer by delivery, or accompanied by duly executed instruments of transfer or assignment in blank, and all Pledged Instruments indorsed to the order of the Administrative Agent or in blank. Section 5. FURTHER ASSURANCES. (A) The Grantor agrees that it will from time to time, at its expense and in such manner and form as the Secured Party may require, execute, deliver, file and record any financing statement, specific assignment or other paper and take any other action that may be necessary or desirable, or that the Secured Party may request, in order to create, preserve, perfect, confirm or validate any Security Interest or to enable the Secured Party to exercise and enforce any of its rights, powers or remedies hereunder with respect to any of the Collateral (including without limitation, in the case of Investment Property, taking any actions reasonably deemed necessary to enable the Secured Party to obtain "control" (within the meaning of the applicable Uniform Commercial Code) with respect thereto). The Grantor hereby authorizes the Secured Party to execute and file, to the extent not prohibited by applicable law, in the name of the Grantor or otherwise, Uniform Commercial Code financing statements (which may be carbon, photographic, photostatic or other reproductions of this Agreement or of a financing statement relating to this Agreement) which the Secured Party in its sole discretion may deem necessary or appropriate to further perfect the Security Interests. (B) The Grantor agrees that it will not change (i) its name, identity or corporate structure in any manner unless it shall have given the Secured Party not less than 10 days' prior notice thereof or (ii) the location of its chief executive office unless it shall have given the Secured Party not less than 30 days' prior notice thereof. Section 6. RECORD OWNERSHIP OF PLEDGED STOCK. Upon the occurrence and during the continuance of any Default, the Secured Party may at any time or from time to time, in its sole discretion, cause any or all of the Pledged Stock to be transferred of record into the name of the Secured Party or its nominee. The Grantor will promptly give to the Secured Party copies of any notices or other communications received by it with respect to Pledged Stock registered in the name of the Grantor and the Secured Party will promptly give to the Grantor copies of any notices and communications received by the Secured Party with respect to Pledged Stock registered in the name of the Secured Party or its nominee. Section 7. RIGHT TO RECEIVE DISTRIBUTIONS ON COLLATERAL. The Secured Party shall have the right to receive and, during the continuance of any Default, to retain as Collateral hereunder all dividends, interest and other payments and distributions made upon or with respect to the Collateral and the Grantor shall take all such action as the Secured Party may deem necessary or appropriate to give effect to such right. All such dividends, interest and other payments and distributions which are received by the Grantor shall be received in trust for the benefit of the Secured Party and, if the Secured Party so directs during the continuance of a Default, shall be segregated from other funds of the Grantor and shall, forthwith upon demand by the Secured Party during the continuance of a Default, be paid over to the Secured Party as 8 Collateral in the same form as received (with any necessary endorsement). After all Defaults have been cured, the Secured Party's right to retain dividends, interest and other payments and distributions under this Section 7 shall cease and the Secured Party shall pay over to the Grantor any such Collateral retained by it during the continuance of a Default. Section 8. RIGHT TO VOTE PLEDGED STOCK. Unless a Default shall have occurred and be continuing, the Grantor shall have the right, from time to time, to vote and to give consents, ratifications and waivers with respect to the Pledged Stock and the Investment Property, and the Secured Party shall, upon receiving a written request from the Grantor accompanied by a certificate signed by its principal financial officer stating that no Default has occurred and is continuing, deliver to the Grantor or as specified in such request such proxies, powers of attorney, consents, ratifications and waivers in respect of any of the Pledged Stock and the Investment Property which is registered in the name of the Secured Party or its nominee as shall be specified in such request and be in form and substance satisfactory to the Secured Party. If a Default shall have occurred and be continuing, the Secured Party shall have the right, to the extent not prohibited by applicable law, to vote and to give consents, ratifications and waivers, and take any other action with respect to any or all of the Pledged Stock with the same force and effect as if the Secured Party were the absolute and sole owner thereof and the Grantor shall take all such action as may be necessary or appropriate to give effect to such right. Section 9. GENERAL AUTHORITY. The Grantor hereby irrevocably appoints the Secured Party its true and lawful attorney, with full power of substitution, in the name of the Grantor, the Secured Party or otherwise, for the sole use and benefit of the Secured Party, but at the expense of the Grantor, to the extent not prohibited by applicable law, to exercise, at any time and from time to time while an Event of Default has occurred and is continuing, all or any of the following powers with respect to all or any of the Collateral: (i) to demand, sue for, collect, receive and give acquittance for any and all monies due or to become due upon or by virtue thereof, (ii) to settle, compromise, compound, prosecute or defend any action or proceeding with respect thereto, (iii) to sell, transfer, assign or otherwise deal in or with the same or the proceeds or avails thereof, as fully and effectually as if the Secured Party were the absolute owner thereof, and (iv) to extend the time of payment of any or all thereof and to make any allowance and other adjustments with reference thereto; PROVIDED that the Secured Party shall give the Grantor not less than ten days' prior notice of the time and place of any sale or other intended disposition of any of the Collateral except any Collateral which is perishable or threatens to decline speedily in value or is of a type customarily sold on a recognized market. Such notice constitutes "REASONABLE NOTIFICATION" within the meaning of Section 9-504(3) of the Uniform Commercial Code. The Grantor hereby ratifies and 9 confirms all that the Secured Party, as said attorney, shall do or cause to be done by virtue of this Section 9 and the other provisions of this Agreement. All powers, authorizations and agencies contained in this Agreement are coupled with an interest and shall be irrevocable until the Secured Intercompany Obligations are paid in full. Section 10. REMEDIES UPON EVENT OF DEFAULT. If any Event of Default shall have occurred and be continuing, the Secured Party may exercise all the rights of a secured party under the Uniform Commercial Code (whether or not in effect in the jurisdiction where such rights are exercised) and, in addition, the Secured Party may, without being required to give any notice, except as herein provided or as may be required by mandatory provisions of law, (i) apply the cash, if any, then held by it as Collateral and (ii) if there shall be no such cash or if such cash shall be insufficient to pay all the Secured Intercompany Obligations in full, sell the Collateral or any part thereof at public or private sale or at any broker's board or on any securities exchange, for cash, upon credit or for future delivery, and at such price or prices as the Secured Party may deem satisfactory. Any Lender or Sunbeam Entity may be the purchaser of any or all of the Collateral so sold at any public sale (or, if the Collateral is of a type customarily sold in a recognized market or is of a type which is the subject of widely distributed standard price quotations, at any private sale). The Secured Party is authorized, in connection with any such sale, if it deems it advisable so to do, (i) to restrict the prospective bidders on or purchasers of any of the Pledged Securities to a limited number of sophisticated investors who will represent and agree that they are purchasing for their own account for investment and not with a view to the distribution or sale of any of such Pledged Securities, (ii) to cause to be placed on certificates for any or all of the Pledged Securities or on any other securities pledged hereunder a legend to the effect that such security has not been registered under the Securities Act of 1933 and may not be disposed of in violation of the provisions of said Act, and (iii) to impose such other limitations or conditions in connection with any such sale as the Secured Party deems necessary or advisable in order to comply with said Act or any other law. The Grantor will execute and deliver such documents and take such other action as the Secured Party deems necessary or advisable in order that any such sale may be made in compliance with law. Upon any such sale the Secured Party shall have the right to deliver, assign and transfer to the purchaser thereof the Collateral so sold. Each purchaser at any such sale shall hold the Collateral so sold absolutely and free from any claim or right of whatsoever kind, including any equity or right of redemption of the Grantor which may be waived, and the Grantor, to the extent permitted by law, hereby specifically waives all rights of redemption, stay or appraisal which it has or may have under any law now existing or hereafter adopted. The notice (if any) of such sale shall (1) in the case of a public sale, state the time and place fixed for such sale, (2) in the case of a sale at a broker's board or on a securities exchange, state the board or exchange at which such sale is to be made and the day on which the Collateral, or the portion thereof so being sold, will first be offered for sale at such board or exchange, and (3) in the case of a private sale, state the day after which such sale may be consummated. Any such public sale shall be held at such time or times within ordinary business hours and at such place or places as the Secured Party may fix in the notice of such sale. At any such sale the Collateral may be sold in one lot as an entirety or in separate parcels, as the Secured Party may determine. The Secured Party shall not be obligated to make any such sale pursuant to any such notice. The Secured Party may, without notice or publication, adjourn any public or private sale or cause the same to be adjourned from time to time by announcement at the time and place fixed for the sale, and such sale may be made at any time or place to which the same 10 may be so adjourned. In the case of any sale of all or any part of the Collateral on credit or for future delivery, the Collateral so sold may be retained by the Secured Party until the selling price is paid by the purchaser thereof, but the Secured Party shall not incur any liability in the case of the failure of such purchaser to take up and pay for the Collateral so sold and, in the case of any such failure, such Collateral may again be sold upon like notice. The Secured Party, instead of exercising the power of sale herein conferred upon it, may proceed by a suit or suits at law or in equity to foreclose the Security Interests and sell the Collateral, or any portion thereof, under a judgment or decree of a court or courts of competent jurisdiction. Section 11. EXPENSES. The Grantor agrees that it will forthwith upon demand pay to the Secured Party: (i) the amount of any taxes which the Secured Party may have been required to pay by reason of the Security Interests or to free any of the Collateral from any Lien thereon, and (ii) the amount of any and all out-of-pocket expenses, including the fees and disbursements of counsel and of any other experts, which the Secured Party may incur in connection with (w) the administration or enforcement of this Agreement, including such expenses as are incurred to preserve the value of the Collateral and the validity, perfection, rank and value of any Security Interest, (x) the collection, sale or other disposition of any of the Collateral, (y) the exercise by the Secured Party of any of the rights conferred upon it hereunder or (z) any Default or Event of Default. Any such amount not paid on demand shall bear interest at the rate applicable to the Coleman Intercompany Note plus 2% and shall be an additional Secured Intercompany Obligation hereunder. Section 12. APPLICATION OF PROCEEDS. Upon the occurrence and during the continuance of an Event of Default, the proceeds of any sale of, or other realization upon, all or any part of the Collateral and any cash held shall be applied by the Secured Party in the following order of priorities: FIRST, to payment of the expenses of such sale or other realization, including reasonable compensation to agents and counsel for the Secured Party, and all expenses, liabilities and advances incurred or made by the Secured Party in connection therewith, and any other unreimbursed expenses for which the Secured Party is to be reimbursed pursuant to Section 11 hereof; SECOND, to the payment of unpaid principal (including all capitalized interest) of the Secured Intercompany Obligations in accordance with the provisions of the Coleman Intercompany Note; THIRD, to the payment of accrued but unpaid interest on the Secured Intercompany Obligations in accordance with the provisions of the Coleman Intercompany Note; 11 FOURTH, to the ratable payment of all other Secured Intercompany Obligations, until all Secured Intercompany Obligations shall have been paid in full; and FINALLY, to payment to the Grantor or its successors or assigns, or as a court of competent jurisdiction may direct, of any surplus then remaining from such proceeds. The Secured Party may make distributions hereunder in cash or in kind or, on a ratable basis, in any combination thereof. Section 13. APPOINTMENT OF ADMINISTRATIVE AGENT AS BAILEE; ASSIGNMENT TO ADMINISTRATIVE AGENT; ACKNOWLEDGMENT OF GRANTOR. (A) In order to further perfect and protect the security interests granted to the Administrative Agent under the Parent Pledge and Security Agreement, including the Parent's pledge thereunder of the Security Interests, the Parent hereby authorizes and appoints the Administrative Agent to hold on the Parent's behalf and as its agent all Collateral granted hereunder for purposes of possession and control under the Uniform Commercial Code or other applicable law. The Administrative Agent, for itself and its successors, hereby accepts such authorization and appointment and the Parent hereby releases the Administrative Agent from any liability whatsoever (other than liability resulting from the Administrative Agent's willful misconduct or gross negligence) in connection with such authorization and appointment. This authorization and appointment are a power coupled with an interest and are irrevocable. It is understood and agreed that the Administrative Agent may also hold collateral for its own benefit. (B) Effective immediately following the grant of the Security Interests in the Collateral pursuant to Section 3 hereof and the foregoing authorization and appointment of the Administrative Agent as its nominee and agent, and as more fully provided in the Parent Pledge and Security Agreement, the Parent pledges and collaterally assigns, until the Secured Obligations Repayment Date, to the Administrative Agent all of its right, title and interest as the Secured Party hereunder, including, without limitation, all of the powers, rights, remedies, benefits, protections, authority and functions (but not the obligations) of the Secured Party hereunder and the Administrative Agent, for itself and its successors, hereby accepts such pledge and collateral assignment. The foregoing pledge and collateral assignment are powers coupled with an interest and shall be irrevocable until the Secured Obligations Repayment Date. In furtherance of such pledge and assignment, the Parent will not exercise any of the rights or remedies under this Agreement without the prior written consent of the Administrative Agent and will exercise any of the powers, rights, remedies, benefits, protections, authority and functions of the Secured Party under this Agreement as directed to do so by the Administrative Agent; PROVIDED that after the occurrence and during the continuance of a Default or an Event of Default, all such powers, rights, remedies, benefits, protections, authority and functions shall be for the sole use and benefit of, and shall be exercised solely by, the Administrative Agent for the benefit of the Lenders and any conflict between the interests of the Lenders and the interests of the Parent hereby is waived by the Parent. (C) The Grantor hereby acknowledges (i) receipt of a copy of the Parent Pledge and Security Agreement; (ii) that pursuant to the Parent Pledge and Security Agreement 12 and this Agreement, the Parent has assigned to the Administrative Agent, as collateral security for the Secured Obligations, all of its right, title and interest in (A) the Secured Intercompany Obligations, (B) the Coleman Intercompany Note and this Agreement and (C) the Security Interests and any other collateral for the Secured Intercompany Obligations now or hereafter granted by the Grantor to or for the benefit of the Parent under this Agreement or any other Coleman Intercompany Loan Document; and (iii) that pursuant to this Agreement and the Parent Pledge and Security Agreement, the Administrative Agent is authorized, in accordance with the terms of this Agreement and the Parent Pledge and Security Agreement, to exercise the powers, rights, remedies, benefits, protections, authority and functions of the Secured Party against the Grantor under this Agreement and otherwise in respect of the Secured Intercompany Obligations. (D) Notwithstanding anything to the contrary contained in this Agreement, the Grantor hereby consents to the foregoing and independently acknowledges and agrees, for the direct benefit of the Administrative Agent and the Lenders, until the Secured Obligations Repayment Date, as follows: (i) the representations and warranties made by the Grantor in this Agreement shall inure to the benefit of the Administrative Agent and the Lenders and each reference in such representations and warranties to the Secured Party shall be deemed to be references to the Administrative Agent for such purpose; (ii) upon the occurrence and continuance of an Event of Default, the Administrative Agent as the assignee and delegee of the Parent and as the Secured Party hereunder shall have the exclusive right to enforce all of the covenants and agreements made by the Grantor under this Agreement and to exercise all of the powers, rights, remedies, benefits, protections, authority and functions of the Secured Party hereunder; (iii) without the prior written consent of the Administrative Agent, the Grantor shall not enter into any amendment, waiver or other modification of the Secured Intercompany Obligations, the Coleman Intercompany Note or the Coleman Intercompany Loan Documents; (iv) the Grantor shall comply with all payment instructions delivered by the Administrative Agent with respect to the Secured Intercompany Obligations, if such instructions are accompanied by a written representation that a Default or an Event of Default has occurred and is continuing; and (v) all of the indemnification, expense reimbursement, authorizations and exculpatory provisions contained in this Agreement in favor of the Secured Party shall also inure to the benefit of the Administrative Agent. (E) In accordance with Section 5(A), and in furtherance of the Grantor's acknowledgments and agreements contained in Section 13(C) and Section 13(D), the Grantor and the Secured Party shall as promptly as practicable after the date hereof execute and deliver to the Administrative Agent an amendment to this Agreement, and such other additional documents and instruments (and cause to be delivered in connection therewith an opinion of counsel), in 13 each case as reasonably requested by, and in form and substance reasonably satisfactory to, the Administrative Agent, pursuant to which the Grantor shall grant directly to the Administrative Agent, for the benefit of the Lenders, security interests in the Collateral to secure the Secured Obligations, PROVIDED that the amount of the Secured Obligations so secured (and any recourse to the Collateral, whether to collect the Secured Obligations or the Secured Intercompany Obligations) shall in no event exceed the amount of the Secured Intercompany Obligations outstanding from time to time. Section 14. EXCULPATORY PROVISIONS (A) The Secured Party is irrevocably authorized to take all such action as is provided to be taken by it as Secured Party hereunder and all other action reasonably incidental thereto. As to any matters not expressly provided for herein (including, without limitation, the timing and methods of realization upon the Collateral) the Secured Party shall act or refrain from acting in accordance with its discretion. (B) Beyond the exercise of reasonable care in the custody thereof, the Secured Party shall have no duty as to any Collateral in its possession or control or in the possession or control of any agent or bailee or any income thereon or as to the preservation of rights against prior parties or any other rights pertaining thereto. The Secured Party shall be deemed to have exercised reasonable care in the custody and preservation of the Collateral in its possession if the Collateral is accorded treatment substantially equal to that which it accords its own property, and shall not be liable or responsible for any loss or damage to any of the Collateral, or for any diminution in the value thereof, by reason of the act or omission of any warehouseman, carrier, forwarding agency, consignee or other agent or bailee selected by the Secured Party in good faith. Neither the Secured Party nor any of its officers, directors, employees or agents shall be liable for failure to demand, collect or realize upon any of the Collateral or for any delay in doing so or shall be under any obligation to sell or otherwise dispose of any Collateral upon the request of the Grantor or any other Person or to take any other action whatsoever with regard to the Collateral or any part thereof. The powers conferred on the Secured Party hereunder are solely to protect the Secured Party's interests in the Collateral and shall not impose any duty upon the Secured Party to exercise any such powers. The Secured Party shall be accountable only for amounts that it actually receives as a result of the exercise of such powers, and neither it nor any of its officers, directors, employees or agents shall be responsible to the Grantor for any act or failure to act hereunder. Section 15. TERMINATION OF SECURITY INTERESTS; RELEASE OF COLLATERAL. (A) Upon the repayment in full of all Secured Intercompany Obligations, the Security Interests shall terminate and all rights to the Collateral shall revert to the Grantor. Prior to such termination of the Security Interests and the Secured Obligations Repayment Date, the Secured Party may release any of the Collateral with the prior written consent of the Lenders. (B) Unless an Event of Default shall have occurred and be continuing, the Secured Party shall upon an Asset Sale or other disposition permitted under the Credit 14 Agreement release the portion of the Collateral so sold (but not any proceeds of such sale). (C) Upon any termination of the Security Interests or release of Collateral in accordance with this Section, the Secured Party will, at the expense of the Grantor, execute and deliver to the Grantor such documents as the Grantor shall reasonably request to evidence the termination of the Security Interests or the release of such Collateral, as the case may be. Section 16. NOTICES. All notices and other communications provided for herein shall be in writing and shall be delivered by hand or overnight courier service, mailed by certified or registered mail or sent by telecopy to the address and telecopy number of such party and the Administrative Agent set forth on the signature pages hereof. Each party shall provide copies of all such notices and other communications in a like manner to the Administrative Agent. Any party hereto and the Administrative Agent may change its address or telecopy number for notices and other communications hereunder by notice to the other parties hereto. All notices and other communications given to any party hereto in accordance with the provisions of this Agreement shall be deemed to have been given on the date of receipt. Section 17. WAIVERS, NON-EXCLUSIVE REMEDIES. No failure on the part of the Secured Party to exercise, and no delay in exercising and no course of dealing with respect to, any right under this Agreement or any other Coleman Intercompany Loan Document shall operate as a waiver thereof; nor shall any single or partial exercise by the Secured Party of any right under this Agreement or any other Coleman Intercompany Loan Document preclude any other or further exercise thereof or the exercise of any other right. The rights in this Agreement and the other Coleman Intercompany Loan Documents are cumulative and are not exclusive of any other remedies provided by law. Section 18. SUCCESSORS AND ASSIGNS. This Agreement is for the benefit of the Secured Party and its successors and assigns (including the Administrative Agent for the benefit of the Lenders pursuant to the Parent Pledge and Security Agreement and Section 13(B) hereof). This Agreement shall be binding on the Grantor and its successors and assigns. Section 19. CHANGES IN WRITING. Neither this Agreement nor any provision hereof may be changed, waived, discharged or terminated orally, but only in writing, signed by the Grantor, the Parent and the Administrative Agent. Section 20. NEW YORK LAW. This Agreement shall be construed in accordance with and governed by the laws of the State of New York, except as otherwise required by mandatory provisions of law and except to the extent that remedies provided by the laws of any jurisdiction other than New York are governed by the laws of such jurisdiction. 15 Section 21. SEVERABILITY. If any provision hereof is invalid or unenforceable in any jurisdiction, then, to the fullest extent permitted by law, (i) the other provisions hereof shall remain in full force and effect in such jurisdiction and shall be liberally construed in favor of the Parent, the Administrative Agent and the Lenders in order to carry out the intentions of the parties hereto as nearly as may be possible; and (ii) the invalidity or unenforceability of any provision hereof in any jurisdiction shall not affect the validity or enforceability of such provision in any other jurisdiction. 16 IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed by their respective authorized officers as of the day and year first above written. THE COLEMAN COMPANY, INC. By Ronald R. Richter ----------------- Name: Ronald R. Richter Title: Vice President & Treasurer Address for Notices: 2381 Executive Center Drive Boca Raton, Florida 33431 Attention: Ms. Gwen Wisler telecopy: (561) 912-4303 SUNBEAM CORPORATION By Bobby Jenkins ------------- Name: Bobby G. Jenkins Title: Executive Vice President Address for Notices: 2381 Executive Center Drive Boca Raton, Florida 33431 Attention: Mr. Bobby Jenkins telecopy: (561) 912-4263 ACKNOWLEDGED AND ACCEPTED: FIRST UNION NATIONAL BANK, as Administrative Agent By T. M. Molitor ------------- Name: T. M. Molitor Title: Senior Vice President Address for Notices: One First Union Center 301 South College Street, DC-5 Charlotte, North Carolina 28288 Attention: Thomas M. Molitor telecopy: (704) 374-3300 EX-4.2 3 EXHIBIT 4.2 INTERCOMPANY SECURITY AGREEMENT SECURITY AGREEMENT (this "AGREEMENT"), dated as of April 15, 1999, between THE COLEMAN COMPANY, INC. (with its successors, the "GRANTOR") and SUNBEAM CORPORATION (the "PARENT"). W I T N E S S E T H : WHEREAS, the Parent and the Grantor are parties to the Credit Agreement, dated as of March 30, 1998 (as amended, supplemented or otherwise modified from time to time, the "CREDIT AGREEMENT"), among the Parent, the subsidiary borrowers referred to therein (including the Grantor, the "SUBSIDIARY BORROWERS"), the lenders party thereto (the "LENDERS"), Morgan Stanley Senior Funding, Inc., as Syndication Agent, Bank of America National Trust and Savings Association, as Documentation Agent, and First Union National Bank, as administrative agent (the "ADMINISTRATIVE AGENT"); WHEREAS, in connection with the Credit Agreement, the Parent executed a Parent Pledge and Security Agreement, dated as of March 30, 1998 (as amended, supplemented or otherwise modified from time to time, the "PARENT PLEDGE AND SECURITY AGREEMENT"), between the Parent and the Administrative Agent, pursuant to which, among other things, all Pledged Instruments (as defined in the Parent Pledge and Security Agreement) in favor of the Parent, including the Coleman Intercompany Note (as hereafter defined), are pledged to the Administrative Agent, for the benefit of the Lenders, to secure the Secured Obligations (as defined in the Parent Pledge and Security Agreement), including without limitation, the obligations of the Parent under the Credit Agreement; WHEREAS, the Grantor has executed an Amended and Restated Subordinated Intercompany Note, dated April 6, 1998 (as amended, supplemented or otherwise modified from time to time, the "COLEMAN INTERCOMPANY NOTE"), in favor of the Parent; WHEREAS, in order to secure its obligations under the Coleman Intercompany Note, the Grantor has agreed to grant a continuing security interest in and to the Collateral (as hereafter defined) to secure the Secured Intercompany Obligations (as hereafter defined); and WHEREAS, pursuant to this Agreement and the Parent Pledge and Security Agreement under which the Coleman Intercompany Note has been pledged to the Administrative Agent, the security interests in the Collateral granted by the Grantor pursuant to this Agreement, including all of the right, title and interest of the Parent, as Secured Party (as hereinafter defined) hereunder, have been pledged and collaterally assigned to the Administrative Agent, for the benefhereunder, have been pledged and collaterally assigned to the Administrative Agent, for the benefit of the Lenders, to secure the Secured Obligations (as hereafter defined) it of the Lenders, to secure the Secured Obligations (as hereafter defined) in accordance with the terms of the Parent Pledge and Security Agreement; NOW, THEREFORE, in consideration of the premises and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows: Section 1. DEFINITIONS. Terms defined in the Coleman Intercompany Note and not otherwise defined herein have, as used herein, the respective meanings provided for therein. The following additional terms, as used herein, have the following respective meanings: "ACCOUNTS" means all "ACCOUNTS" (as defined in the Uniform Commercial Code) now owned or hereafter acquired by the Grantor, and shall also mean and include all accounts receivable, contract rights, book debts, notes, drafts and other obligations or indebtedness owing to the Grantor arising from the sale, lease or exchange of goods or other property by it and/or the performance of services by it (including, without limitation, any such obligation which might be characterized as an account, contract right or general intangible under the Uniform Commercial Code in effect in any jurisdiction) and all of the Grantor's rights in, to and under all purchase orders for goods, services or other property, and all of the Grantor's rights to any goods, services or other property represented by any of the foregoing (including returned or repossessed goods and unpaid sellers' rights of rescission, replevin, reclamation and rights to stoppage in transit) and all monies due to or to become due to the Grantor under all contracts for the sale, lease or exchange of goods or other property and/or the performance of services by it (whether or not yet earned by performance on the part of the Grantor), in each case whether now in existence or hereafter arising or acquired including, without limitation, the right to receive the proceeds of said purchase orders and contracts and all collateral security and guarantees of any kind given by any Person with respect to any of the foregoing. "COLEMAN COLLATERAL DOCUMENTS" has the meaning set forth in the Credit Agreement. "COLEMAN MERGER EFFECTIVE DATE" has the meaning set forth in the Credit Agreement. "COLLATERAL" has the meaning set forth in Section 3. "COPYRIGHT LICENSE" means any written agreement now or hereafter in existence granting to the Grantor any right to publication as to which a Copyright is in existence, including, without limitation, the material license agreements described in Schedule 1 to Exhibit D hereto. "COPYRIGHT SECURITY AGREEMENT" means the Copyright Security Agreement executed and delivered by the Grantor in favor of the Parent, substantially in the form of Exhibit D hereto, as the same may be amended from time to time. "COPYRIGHTS" means all the following: (i) all copyrights under the laws of the United States or any other country, all registrations and recordings thereof, and all applications for copyrights under the laws of the United States or any other country, including, without limitation, registrations, recordings and applications in the United States Copyright Office or in 2 any similar office or agency of the United States or any other country or any political subdivision thereof, including, without limitation, those registered copyrights described in Schedule 1 to Exhibit E hereto, and (ii) all extensions thereof. "DOCUMENTS" means all "DOCUMENTS" (as defined in the Uniform Commercial Code) or other receipts covering, evidencing or representing goods, now owned or hereafter acquired by the Grantor. "EQUIPMENT" means all "EQUIPMENT" (as defined in the Uniform Commercial Code) now owned or hereafter acquired by the Grantor, including without limitation all motor vehicles, trucks, trailers, railcars and barges, and all accessions thereto. "GENERAL INTANGIBLES" means all "general intangibles" (as defined in the Uniform Commercial Code) now owned or hereafter acquired by the Grantor, including, without limitation, (i) all obligations or indebtedness owing to the Grantor (other than Accounts) from whatever source arising, (ii) all Copyrights, Copyright Licenses, Patents, Patent Licenses, Trademarks, Trademark Licenses, rights in intellectual property, goodwill, trade names, service marks, trade secrets, permits and licenses, (iii) all rights or claims in respect of refunds for taxes paid and (iv) all rights in respect of any pension plan or similar arrangement maintained for employees of an ERISA Affiliate (as defined in the Credit Agreement). "INSTRUMENTS" means all "INSTRUMENTS", "CHATTEL PAPER" or "LETTERS OF CREDIT" (each as defined in the Uniform Commercial Code) evidencing, representing, arising from or existing in respect of, relating to, securing or otherwise supporting the payment of, any of the Accounts, including (but not limited to) promissory notes, drafts, bills of exchange and trade acceptances, now owned or hereafter acquired by the Grantor. "INVENTORY" means all "INVENTORY" (as defined in the Uniform Commercial Code), now owned or hereafter acquired by the Grantor, wherever located, and shall also mean and include, without limitation, all raw materials and other materials and supplies, work-in-process and finished goods and any products made or processed therefrom and all substances, if any, commingled therewith or added thereto. "LIEN" has the meaning set forth in the Credit Agreement. "PATENT LICENSE" means any written agreement now or hereafter in existence granting to the Grantor any right to practice any invention on which a Patent is in existence, including, without limitation, the material license agreements described in Schedule 1 to Exhibit B hereto. "PATENT SECURITY AGREEMENT" means the Patent Security Agreement executed and delivered by the Grantor in favor of the Parent, substantially in the form of Exhibit B hereto, as the same may be amended from time to time. "PATENTS" means all of the following: (i) all letters patent of the United States or any other country, all registrations and recordings thereof, and all applications for letters patent 3 of the United States or any other country, including, without limitation, registrations, recordings and applications in the United States Patent and Trademark Office or in any similar office or agency of the United States or any other country or any political subdivision thereof, including, without limitation, those described in Schedule 1 to Exhibit C hereto, and (ii) all reissues, continuations, continuations-in-part or extensions thereof. "PERFECTION CERTIFICATE" means a certificate substantially in the form of Exhibit A, completed and supplemented with the schedules and attachments contemplated thereby to the satisfaction of the Parent, and duly executed by the chief legal officer of the Grantor. "PROCEEDS" means all proceeds of, and all other profits, products, rents or receipts, in whatever form, arising from the collection, sale, lease, exchange, assignment, licensing or other disposition of, or other realization upon, collateral, including without limitation all claims of the Grantor against third parties for loss of, damage to or destruction of, or for proceeds payable under, or unearned premiums with respect to, policies of insurance in respect of, any collateral, and any condemnation or requisition payments with respect to any collateral, in each case whether now existing or hereafter arising. "SECURED INTERCOMPANY OBLIGATIONS" means the obligations of the Grantor to the Parent secured under this Agreement, including without limitation, (i) all principal of and interest (including, without limitation, any interest which accrues after or would accrue but for the commencement of any case, proceeding or other action relating to the bankruptcy, insolvency or reorganization of the Grantor, whether or not allowed or allowable as a claim in any such proceeding) on the Coleman Intercompany Note, (ii) all other amounts payable by the Grantor under the Coleman Intercompany Note and (iii) any renewals or extensions of any of the foregoing. "SECURED OBLIGATIONS" means the Secured Obligations under and as defined in the Parent Pledge and Security Agreement. "SECURED OBLIGATIONS REPAYMENT DATE" means the date on which all of the following shall have occurred: (A) the payment in full of the Secured Obligations, (B) the termination of the Commitments under and as defined in the Credit Agreement and (C) the expiration or termination of all Letters of Credit issued pursuant to and as defined in the Credit Agreement. "SECURED PARTY" means the Parent; PROVIDED that until the Secured Obligations Repayment Date the Security Interests and the Secured Party's power, rights, remedies, benefits, protections, authority and functions as the Secured Party have been collaterally assigned by the Parent to the Administrative Agent to the extent set forth in Section 8(b) hereof and the Parent Pledge and Security Agreement. "SECURITY INTERESTS" means the security interests in the Collateral granted hereunder securing the Secured Intercompany Obligations. 4 "SUBSIDIARY BORROWER SECURITY AGREEMENT" means the Subsidiary Borrower Security Agreement, dated as of February 12, 1999, between the Grantor and the Administrative Agent, as the same may be amended from time to time. "TRADEMARK LICENSE" means any written agreement now or hereafter in existence granting to the Grantor any right to use any Trademark, including, without limitation, the material license agreements described in Schedule 1 to Exhibit D hereto. "TRADEMARK SECURITY AGREEMENT" means the Trademark Security Agreement executed and delivered by the Grantor in favor of the Parent, substantially in the form of Exhibit C hereto, as the same may be amended from time to time. "TRADEMARKS" means all of the following: (i) all trademarks, trade names, corporate names, company names, business names, fictitious business names, trade styles, service marks, logos, other source or business identifiers, designs and general intangibles of like nature, now existing or hereafter adopted or acquired, all registrations and recordings hereof, and all applications in connection therewith, including, without limitation, registrations, recordings and applications in the United States Patent and Trademark Office or in any similar office or agency of the United States, any State thereof or any other country or any political subdivision thereof, including, without limitation, those trademark registrations and applications described in Schedule 1 to Exhibit C hereto, and (ii) all reissues, extensions or renewals thereof. "UNIFORM COMMERCIAL CODE" means the Uniform Commercial Code as in effect from time to time in the State of New York; PROVIDED that if by reason of mandatory provisions of law, the perfection or the effect of perfection or non-perfection of the Security Interest in any Collateral is governed by the Uniform Commercial Code as in effect in a jurisdiction other than New York, "UNIFORM COMMERCIAL CODE" means the Uniform Commercial Code as in effect in such other jurisdiction for purposes of the provisions hereof relating to such perfection or effect of perfection or non-perfection. Unless otherwise defined herein, or unless the context otherwise requires, all terms used herein which are defined in the Uniform Commercial Code shall have the meanings therein stated. Section 2. REPRESENTATIONS AND WARRANTIES. The Grantor represents and warrants as follows: (a) The Grantor has good and marketable title to all of the Collateral, free and clear of any Liens, other than (i) Permitted Liens under and as defined in the Credit Agreement and (ii) on and after the Coleman Merger Effective Date, the Liens in favor of the Administrative Agent under the Coleman Collateral Documents. The Grantor has taken all actions necessary under the Uniform Commercial Code to perfect its interest in any Accounts purchased or otherwise acquired by it, as against its assignors and creditors of its assignors. 5 (b) The Grantor has not performed any acts which might prevent the Secured Party from enforcing any of the terms and conditions of this Agreement or which would limit the Secured Party in any such enforcement other than the execution and delivery of the Subsidiary Borrower Security Agreement and the Coleman Collateral Documents. Other than financing statements or other similar or equivalent documents or instruments with respect to (i) the Security Interests, (ii) the Liens granted to the Administrative Agent under the Subsidiary Borrower Security Agreement, (iii) Liens granted to a Subsidiary of the Parent in connection with the Existing Receivables Program and (iv) on and after the Coleman Merger Effective Date, the Liens in favor of the Administrative Agent under the Coleman Collateral Documents, no financing statement, mortgage, security agreement or similar or equivalent document or instrument covering all or any part of the Collateral is on file or of record in any jurisdiction in which such filing or recording would be effective to perfect a Lien on such Collateral. No Collateral is in the possession of any Person (other than the Grantor) asserting any claim thereto or security interest therein, except that (x) the Secured Party or its designee may have possession of Collateral as contemplated hereby and (y) on and after the Coleman Merger Effective Date, the Administrative Agent also may have possession of Collateral in its own right as contemplated by the Coleman Collateral Documents. (c) The information set forth in the Perfection Certificate delivered to the Secured Party prior to the execution of this Agreement is correct and complete. Not later than 60 days following the date of such delivery, the Grantor shall furnish to the Secured Party file search reports from each Uniform Commercial Code filing office set forth in Schedule 7 to its Perfection Certificate confirming the filing information set forth in such Schedule. (d) The Security Interests constitute valid security interests under applicable law securing the Secured Intercompany Obligations. When Uniform Commercial Code financing statements with the collateral description in the form specified in Exhibit B shall have been filed in the offices specified in the Perfection Certificate, the Security Interests shall constitute perfected security interests in the Collateral (except Inventory in transit) to the extent that a security interest therein may be perfected by filing pursuant to the Uniform Commercial Code, prior to all other Liens and rights of others therein other than (i) Permitted Liens under and as defined in the Credit Agreement and (ii) on and after the Coleman Merger Effective Date, the Liens in favor of the Administrative Agent under the Coleman Collateral Documents. With respect to the collateral granted to the Administrative Agent under the Subsidiary Borrower Security Agreement, the Security Interests granted under this Agreement on such collateral shall constitute perfected second priority security interests. To the extent that the federal patent and trademark laws are applicable to the perfection of security interests in patents and trademarks, respectively, when the Patent Security Agreement and the Trademark Security Agreement have been filed with the United States Patent and Trademark Office within 3 months of the date hereof, the Security Interests shall constitute valid and perfected security interests in all right, title and interest of the Grantor in Patents and Trademarks which are the subject of issued U.S. Patents or patent applications or U.S. federal trademark registrations or applications, prior to all other Liens and rights of others 6 therein except for (i) Permitted Encumbrances under and as defined in the Credit Agreement and (ii) on and after the Coleman Merger Effective Date, the Liens in favor of the Administrative Agent. When the Copyright Security Agreement has been filed with the United States Copyright Office, the Security Interests shall constitute valid and perfected security interests in all right, title and interest of the Grantor in Copyrights which are the subject of registrations in the United States Copyright Office, prior to all other Liens and rights of others therein except for (i) Permitted Encumbrances under and as defined in the Credit Agreement and (ii) on and after the Coleman Merger Effective Date, the Liens in favor of the Administrative Agent. (e) The Inventory and Equipment are insured by insurance, with financially sound and reputable insurance companies or through programs of self-insurance (including levels of self-insured retention), in such amounts and against such risks and, in the case of self-insurance, at such levels and in such amounts (including without limitation comprehensive general liability insurance and product liability insurance) as are customarily maintained by companies engaged in the same or similar businesses of the Grantor operating in the same or similar locations, which insurance shall name the Secured Party as the loss payee for the proceeds of any policy relating to such insurance covering damage to tangible property of the Grantor. (f) All Inventory manufactured by the Grantor has or will have been produced in compliance with the applicable requirements of the Fair Labor Standards Act, as amended. Section 3. THE SECURITY INTERESTS. (a) In order to secure the full and punctual payment of the Secured Intercompany Obligations in accordance with the terms thereof, and to secure the payment and performance of all the obligations of the Grantor hereunder and under the Coleman Intercompany Loan Documents, the Grantor hereby assigns and pledges to the Parent, as Secured Party, a continuing security interest in and to all of the following property of the Grantor, whether now owned or existing or hereafter acquired or arising and regardless of where located (all being collectively referred to as the "COLLATERAL"): (i) Accounts; (ii) Inventory; (iii) General Intangibles; (iv) Documents; (v) Instruments; (vi) Equipment; 7 (vii) All books and records (including, without limitation, customer lists, credit files, computer programs, printouts and other computer materials and records) of the Grantor pertaining to any of the Collateral; and (viii) All Proceeds of all or any of the Collateral described in clauses 3(a)(i) through 3(a)(vii) hereof and all collateral security and guarantees given by any Person with respect to all or any of the Collateral described in clauses 3(a)(i) through 3(a)(vii) hereof. (b) The Security Interests are granted as security only and shall not subject the Secured Party to, or transfer or in any way affect or modify, any obligation or liability of the Grantor with respect to any of the Collateral or any transaction in connection therewith. (c) Notwithstanding the foregoing, the Collateral shall not include any contracts or agreements, including without limitation, any Copyright License, Patent License or Trademark License to the extent the inclusion thereof would violate a prohibition on assignment that is effective under relevant law. Section 4. FURTHER ASSURANCES; COVENANTS. (a) The Grantor will not change (i) its name, identity or corporate structure in any manner unless it shall have given the Secured Party not less than 10 days' prior notice thereof and delivered an opinion of counsel with respect thereto in accordance with Section 4(l); (ii) the location of its chief executive office or chief place of business from a location described in its Perfection Certificate to a location not described in its Perfection Certificate unless it shall have given the Secured Party not less than 30 days' prior notice thereof and delivered an opinion of counsel with respect thereto in accordance with Section 4(l); or (iii) the locations where it keeps or holds any Collateral (other than Inventory in transit) or any records relating thereto from a location described in its Perfection Certificate to a location not described in its Perfection Certificate unless it gives the Secured Party notice within 10 days thereof and delivers an opinion of counsel with respect thereto in accordance with Section 4(l). The Grantor shall not in any event change the location of any Collateral if such change would cause the Security Interests in such Collateral to lapse or cease to be perfected. (b) The Grantor will, from time to time, at its expense, execute, deliver, file and record any statement, assignment, instrument, document, agreement or other paper and take any other action (including, without limitation, any filings of financing or continuation statements under the Uniform Commercial Code and any filings with the United States Patent and Trademark Office or the United States Copyright Office) that from time to time may be necessary or desirable, or that the Secured Party may request, in order to create, preserve, perfect, confirm or validate the Security Interests or to enable the Secured Party (including the Administrative Agent as collateral assignee) to obtain the full benefits of this Agreement, or to enable the Secured Party to exercise and enforce any of its rights, powers and remedies hereunder with respect to any of the Collateral; PROVIDED that with respect to foreign intellectual property, the Grantor shall only be required to take such action as is reasonably requested by the Secured Party, taking into account the value of the foreign intellectual property and the expense associated with complying with the foregoing. To the extent permitted by applicable law, the 8 Grantor hereby authorizes the Secured Party to execute and file financing statements or continuation statements without the Grantor's signature appearing thereon. The Grantor agrees that a carbon, photographic, photostatic or other reproduction of this Agreement or of a financing statement is sufficient as a financing statement. The Grantor shall pay the costs of, or incidental to, any recording or filing of any financing or continuation statements concerning the Collateral. (c) If any Collateral is at any time in the possession or control of any warehouseman, bailee or any of the Grantor's agents or processors upon the occurrence and during the continuance of an Event of Default and upon the written request of the Secured Party, the Grantor shall notify such warehouseman, bailee, agent or processor of the Security Interests created hereby and to hold all such Collateral for the Secured Party's account subject to the Secured Party's instructions. (d) The Grantor shall keep full and accurate books and records relating to the Collateral, and stamp or otherwise mark such books and records in such manner as the Secured Party may reasonably require in order to reflect the Security Interests. (e) The Grantor will immediately deliver and pledge each Instrument to the Secured Party, appropriately endorsed to the Secured Party, PROVIDED that so long as no Event of Default shall have occurred and be continuing, the Grantor may retain for collection in the ordinary course any Instruments (other than checks and drafts constituting payments in respect of Accounts, as to which the provisions of Section 4(f) shall apply) received by it in the ordinary course of business and the Secured Party shall, promptly upon request of the Grantor, make appropriate arrangements for making any other Instrument pledged by the Grantor available to it for purposes of presentation, collection or renewal (any such arrangement to be effected, to the extent deemed appropriate to the Secured Party, against trust receipt or like document). (f) The Grantor shall use its best efforts to cause to be collected from its account debtors, as and when due, any and all amounts owing under or on account of each Account (including, without limitation, Accounts which are delinquent, such Accounts to be collected in accordance with lawful collection procedures) and shall apply forthwith upon receipt thereof all such amounts as are so collected to the outstanding balance of such Account. Subject to the rights of the Secured Party hereunder if an Event of Default shall have occurred and be continuing, the Grantor may allow in the ordinary course of business as adjustments to amounts owing under its Accounts (1) an extension or renewal of the time or times of payment, or settlement for less than the total unpaid balance, which the Grantor finds appropriate in accordance with sound business judgment and (2) a refund or credit due as a result of returned or damaged merchandise, all in accordance with the Grantor's ordinary course of business consistent with its historical collection practices. The costs and expenses (including, without limitation, attorneys' fees) of collection, whether incurred by the Grantor or the Secured Party, shall be borne by the Grantor. (g) Upon the occurrence and during the continuance of any Event of Default, upon request of the Secured Party, the Grantor will promptly notify (and the Grantor hereby authorizes the Secured Party so to notify) each account debtor in respect of any Account or Instrument that such Collateral has been assigned to the Secured Party hereunder, and that any 9 payments due or to become due in respect of such Collateral are to be made directly to the Secured Party or its designee. (h) The Grantor shall, (i) as soon as practicable after the date hereof, in the case of any single piece of Equipment in excess of $250,000 now owned constituting goods in which a security interest is perfected by a notation on the certificate of title or similar evidence of the ownership of such goods, and (1) within 10 days of acquiring any other similar Equipment (x) having a value in excess of $250,000 or (y) having a value in excess of $100,000, if the aggregate of all such items owned by the Grantor at any time is greater than $1,000,000, deliver to the Secured Party any and all certificates of title, applications for title or similar evidence of ownership of such Equipment and shall cause the Secured Party to be named as lienholder on any such certificate of title or other evidence of ownership. The Grantor shall promptly inform the Secured Party of any additions to or deletions from the Equipment for any single piece of Equipment in excess of $500,000 and shall not permit any such items to become a fixture to real estate or an accession to other personal property. (i) Without the prior written consent of the Secured Party, the Grantor will not sell, lease, exchange, assign or otherwise dispose of, or grant any option with respect to, any Collateral except that, subject to the rights of the Secured Party hereunder if an Event of Default shall have occurred and be continuing, the Grantor may (x) sell, lease or exchange Inventory and surplus or worn-out Equipment in the ordinary course of business and (y) consummate any Asset Sale or other disposition permitted by the terms of the Credit Agreement. (j) Within 10 days following the execution of this Agreement, the Grantor will cause the Secured Party to be named as an insured party and loss payee on each insurance policy covering risks relating to any of its Inventory and Equipment. The Grantor will deliver to the Secured Party, upon request of the Secured Party, the insurance policies for such insurance or certificates of insurance evidencing such coverage. Each such insurance policy shall include effective waivers by the insurer of all claims for insurance premiums against the Secured Party or the Lenders, provide for coverage to the Secured Party regardless of the breach by the Grantor of any warranty or representation made therein, not be subject to co-insurance, provide that upon the occurrence and during the continuation of an Event of Default, all insurance proceeds in excess of $200,000 per claim shall be adjusted with and payable to the Secured Party and provide that no cancellation, termination or material modification thereof shall be effective until at least 30 days after receipt by the Secured Party of notice thereof. The Grantor hereby appoints the Secured Party as its attorney-in-fact to make proof of loss, claim for insurance and adjustments with insurers, and to execute or endorse all documents, checks or drafts in connection with payments made as a result of any insurance policies. (k) The Grantor will, promptly upon request, provide to the Secured Party all information and evidence it may reasonably request concerning the Collateral to enable the Secured Party to enforce the provisions of this Agreement. (l) In the event the Grantor proposes to take any action contemplated by Section 4(a)(i), 4(a)(ii) or 4(a)(iii), at the request of the Secured Party, the Grantor shall, at the Grantor's cost and expense, and prior to taking any such proposed action cause to be delivered to 10 the Administrative Agent an opinion of counsel, satisfactory to the Administrative Agent, substantially in the form of Exhibit F or otherwise in form and substance, and covering such matters relating to such actions, reasonably satisfactory to the Administrative Agent. (m) The Grantor shall notify the Secured Party immediately if it knows, or has reason to know, that any application or registration relating to any Copyright, Patent or Trademark which is material to the Grantor's business may become abandoned or dedicated, or of any adverse determination or development (including, without limitation, the institution of, or any such determination or development in, any proceeding in the United States Copyright Office, the United States Patent and Trademark Office, or any court) regarding the Grantor's ownership of any Copyright, Patent or Trademark which is material to the Grantor's business, its right to register the same, or to keep and maintain the same. In the event that any material Copyright, Patent, or Trademark is infringed, misappropriated or diluted in any material respect by a third party, the Grantor shall notify the Secured Party promptly after it learns thereof and shall, unless the Grantor shall reasonably determine that any of the following actions would be unsuccessful or not commercially reasonable (without accounting for any liens on the proceeds of any recovery), promptly sue for infringement, misappropriation or dilution and to recover any and all damages for such infringement, misappropriation or dilution, and take such other actions as the Grantor shall reasonably deem appropriate under the circumstances to protect such Copyright, Patent or Trademark. The Grantor will give the Secured Party quarterly notice of its filing of any application for the registration of any Copyright with the United States Copyright Office or any Patent or Trademark with the United States Patent and Trademark Office, or with any similar office or agency in any other country or any political subdivision thereof, either itself or through any agent, employee or licensee. The Grantor will execute and deliver any and all agreements, instruments, documents and papers the Secured Party may reasonably request to evidence the Security Interests in such Copyright, Patent or Trademark and the goodwill and general intangibles of the Grantor relating thereto or represented thereby, and the Grantor hereby constitutes the Secured Party its attorney-in-fact to execute and file all such writings for the foregoing purposes to the extent that the Grantor fails or refuses to do so within 10 days of a request from the Secured Party, all acts of such attorney being hereby ratified and confirmed; such power, being coupled with an interest, shall be irrevocable until the Secured Intercompany Obligations are paid in full. Section 5. GENERAL AUTHORITY. The Grantor hereby irrevocably appoints the Secured Party its true and lawful attorney, with full power of substitution, in the name of the Grantor, the Secured Party or otherwise, for the sole use and benefit of the Secured Party, but at the Grantor's expense, to the extent not prohibited by applicable law, to exercise, at any time and from time to time while an Event of Default has occurred and is continuing and the Secured Party has notified the Grantor of its decision to so exercise, all or any of the following powers with respect to all or any of the Collateral: (a) to demand, sue for, collect, receive and give acquittance for any and all monies due or to become due upon or by virtue thereof, (b) to settle, compromise, compound, prosecute or defend any action or proceeding with respect thereto, 11 (c) to sell, transfer, assign or otherwise deal in or with the same or the proceeds or avails thereof, as fully and effectually as if the Secured Party were the absolute owner thereof, and (d) to extend the time of payment of any or all thereof and to make any allowance and other adjustments with reference thereto; PROVIDED that the Secured Party shall give the Grantor not less than ten days' prior notice of the time and place of any sale or other intended disposition of any of the Collateral, except any Collateral which is perishable or threatens to decline speedily in value or is of a type customarily sold on a recognized market. Such notice constitutes "REASONABLE NOTIFICATION" within the meaning of Section 9-504(3) of the Uniform Commercial Code. The Grantor hereby ratifies and confirms all that the Secured Party, as said attorney, shall do or cause to be done by virtue of this Section 5 and the other provisions of this Agreement. All powers, authorizations and agencies contained in this Agreement are coupled with an interest and shall be irrevocable until the Secured Intercompany Obligations are paid in full. Section 6. REMEDIES UPON EVENT OF DEFAULT. (a) If any Event of Default shall have occurred and be continuing, the Secured Party may exercise all the rights of a secured party under the Uniform Commercial Code (whether or not in effect in the jurisdiction where such rights are exercised) and, in addition, the Secured Party may, without being required to give any notice, except as herein provided or as may be required by mandatory provisions of law, (i) apply the cash, if any, then held by it as Collateral and (ii) if there shall be no such cash or if such cash shall be insufficient to pay all the Secured Intercompany Obligations in full, sell the Collateral or any part thereof at public or private sale, for cash, upon credit or for future delivery, and at such price or prices as the Secured Party may deem satisfactory. Any Lender or Sunbeam Entity may be the purchaser of any or all of the Collateral so sold at any public sale (or, if the Collateral is of a type customarily sold in a recognized market or is of a type which is the subject of widely distributed standard price quotations, at any private sale). The Grantor will execute and deliver such documents and take such other action as the Secured Party deems necessary or advisable in order that any such sale may be made in compliance with law. Upon any such sale the Secured Party shall have the right to deliver, assign and transfer to the purchaser thereof the Collateral so sold. Each purchaser at any such sale shall hold the Collateral so sold absolutely and free from any claim or right of whatsoever kind, including any equity or right of redemption of the Grantor which may be waived, and the Grantor, to the extent permitted by law, hereby specifically waives all rights of redemption, stay or appraisal which it has or may have under any law now existing or hereafter adopted. The notice (if any) of such sale shall (1) in the case of a public sale, state the time and place fixed for such sale, and (2) in the case of a private sale, state the day after which such sale may be consummated. Any such public sale shall be held at such time or times within ordinary business hours and at such place or places as the Secured Party may fix in the notice of such sale. At any such sale the Collateral may be sold in one lot as an entirety or in separate parcels, as the Secured Party may determine. The Secured Party shall not be obligated to make any such sale pursuant to any such notice. The Secured Party may, without notice or publication, adjourn any public or private sale or cause the same to be adjourned from time to time by announcement at the time and place fixed for the sale, and such sale may be made at any time or place to which the same may be so adjourned. In the case of any sale of all or any part of the 12 Collateral on credit or for future delivery, the Collateral so sold may be retained by the Secured Party until the selling price is paid by the purchaser thereof, but the Secured Party shall not incur any liability in the case of the failure of such purchaser to take up and pay for the Collateral so sold and, in the case of any such failure, such Collateral may again be sold upon like notice. The Secured Party, instead of exercising the power of sale herein conferred upon it, may proceed by a suit or suits at law or in equity to foreclose the Security Interests and sell the Collateral, or any portion thereof, under a judgment or decree of a court or courts of competent jurisdiction. (b) For the purpose of enforcing any and all rights and remedies under this Agreement the Secured Party may, at any time when an Event of Default has occurred and is continuing, (i) require the Grantor to, and the Grantor agrees that it will, at the Grantor's expense and upon the request of the Secured Party, forthwith assemble all or any part of the Collateral as directed by the Secured Party and make it available at a place designated by the Secured Party which is, in its opinion, reasonably convenient to the Secured Party and the Grantor, whether at the premises of the Grantor or otherwise, (ii) to the extent permitted by applicable law, enter, with or without process of law and without breach of the peace, any premises where any of the Collateral is or may be located, and without charge or liability to it seize and remove such Collateral from such premises, (iii) have access to and use the Grantor's books and records relating to the Collateral and (iv) prior to the disposition of the Collateral, store or transfer it without charge in or by means of any storage or transportation facility owned or leased by the Grantor, process, repair or recondition it or otherwise prepare it for disposition in any manner and to the extent the Secured Party deems appropriate and, in connection with such preparation and disposition, use without charge any Trademark, trade name, Copyright, Patent or technical process used by the Grantor. The Secured Party may also render any or all of the Collateral unusable at the Grantor's premises and may dispose of such Collateral on such premises without liability for rent or costs. (c) Without limiting the generality of the foregoing, if any Event of Default has occurred and is continuing, (i) the Secured Party may license, or sublicense, whether general, special or otherwise, and whether on an exclusive or non-exclusive basis, any Copyrights, Patents or Trademarks included in the Collateral throughout the world for such term or terms, on such conditions and in such manner as the Secured Party shall in its sole discretion determine; PROVIDED that such licenses and or sublicenses do not violate the terms of any other license to which the Grantor is a party; (ii) the Secured Party may (without assuming any obligations or liability thereunder), at any time and from time to time, enforce (and shall have the exclusive right to enforce) against any licensee or sublicensee all rights and remedies of the Grantor in, to and under any Copyright Licenses, Patent Licenses or Trademark Licenses and take or refrain from taking any action under any thereof, and the Grantor hereby releases the Secured Party from, and agrees to hold the Secured Party free and harmless from and against any claims arising out of, any lawful action so taken or omitted to be taken with respect thereto; and 13 (iii) upon request by the Secured Party, the Grantor will execute and deliver to the Secured Party a power of attorney, in form and substance satisfactory to the Secured Party, for the implementation of any lease, assignment, license, sublicense, grant of option, sale or other disposition of a Copyright, Patent or Trademark. In the event of any such disposition pursuant to this Section, the Grantor shall, upon request, and upon the execution of reasonable confidentiality agreements, supply its know-how and expertise relating to the manufacture and sale of the products bearing Trademarks or the products or services made or rendered in connection with Patents, and its customer lists and other records relating to such Patents or Trademarks and to the distribution of said products, to the Secured Party. Section 7. APPLICATION OF PROCEEDS. (a) Upon the occurrence and during the continuance of an Event of Default, the proceeds of any sale of, or other realization upon, all or any part of the Collateral and any cash held shall be applied by the Secured Party in the following order of priorities: FIRST, to payment of the expenses of such sale or other realization, including reasonable compensation to agents and counsel for the Secured Party, and all expenses, liabilities and advances incurred or made by the Secured Party in connection therewith, and any other unreimbursed expenses for which the Secured Party is to be reimbursed pursuant to Section 11 hereof; SECOND, to the payment of unpaid principal (including all capitalized interest) of the Secured Intercompany Obligations in accordance with the provisions of the Coleman Intercompany Note; THIRD, to the payment of accrued but unpaid interest on the Secured Intercompany Obligations in accordance with the provisions of the Coleman Intercompany Note; FOURTH, to the ratable payment of all other Secured Intercompany Obligations, until all Secured Intercompany Obligations shall have been paid in full; and FINALLY, to payment to the Grantor or its successors or assigns, or as a court of competent jurisdiction may direct, of any surplus then remaining from such proceeds. (b) The Secured Party may make distributions hereunder in cash or in kind or, on a ratable basis, in any combination thereof. Section 8. APPOINTMENT OF ADMINISTRATIVE AGENT AS BAILEE; ASSIGNMENT TO ADMINISTRATIVE AGENT; ACKNOWLEDGEMENT OF GRANTOR. (a) In order to further perfect and protect the security interests granted to the Administrative Agent under the Parent Pledge and Security Agreement, including the Parent's pledge thereunder of the Security Interests, the Parent hereby authorizes and appoints the Administrative Agent to hold on the Parent's behalf and as its agent all Collateral granted 14 hereunder for purposes of possession and control under the Uniform Commercial Code or other applicable law. The Administrative Agent, for itself and its successors, hereby accepts such authorization and appointment and the Parent hereby releases the Administrative Agent from any liability whatsoever (other than liability resulting from the Administrative Agent's willful misconduct or gross negligence) in connection with such authorization and appointment. This authorization and appointment are a power coupled with an interest and are irrevocable. It is understood and agreed that the Administrative Agent may also hold Collateral for its own benefit. (b) Effective immediately following the grant of the Security Interests pursuant to Section 3 hereof and the foregoing authorization and appointment of the Administrative Agent as its nominee and agent, and as more fully provided in the Parent Pledge and Security Agreement, the Parent pledges and collaterally assigns, until the Secured Obligations Repayment Date, to the Administrative Agent all of its right, title and interest as the Secured Party hereunder, including, without limitation, all of the powers, rights, remedies, benefits, protections, authority and functions (but not the obligations) of the Secured Party hereunder and the Administrative Agent, for itself and its successors, hereby accepts such pledge and collateral assignment. The foregoing pledge and collateral assignment are powers coupled with an interest and shall be irrevocable until the Secured Obligations Repayment Date. In furtherance of such pledge and collateral assignment, the Parent will not exercise any rights or remedies under this Agreement without the prior written consent of the Administrative Agent and will exercise any of such powers, rights, remedies, benefits, protections, authority and functions of the Secured Party under this Agreement as directed to do so by the Administrative Agent; PROVIDED that after the occurrence and during the continuance of a Default or an Event of Default, all such powers, rights, remedies, benefits, protections, authority and functions shall be for the sole use and benefit of, and shall be exercised solely by, the Administrative Agent for the benefit of the Lenders and any conflict between the interests of the Lenders and the interests of the Parent is hereby waived by the Parent. (c) The Grantor hereby acknowledges (i) receipt of a copy of the Parent Pledge and Security Agreement; (ii) that pursuant to the Parent Pledge and Security Agreement and this Agreement, the Parent has assigned to the Administrative Agent, as collateral security for the Secured Obligations, all of its right, title and interest in (A) the Secured Intercompany Obligations, (B) the Coleman Intercompany Note and this Agreement and (C) the Security Interests and any other collateral for the Secured Intercompany Obligations now or hereafter granted by the Grantor to or for the benefit of the Parent under this Agreement or any other Coleman Intercompany Loan Document; and (iii) that pursuant to this Agreement and the Parent Pledge and Security Agreement, the Administrative Agent is authorized, in accordance with the terms of this Agreement and the Parent Pledge and Security Agreement, to exercise the powers, rights, remedies, benefits, protections, authority and functions of the Secured Party against the Grantor under this Agreement and otherwise in respect of the Secured Intercompany Obligations. (d) Notwithstanding anything to the contrary contained in this Agreement, the Grantor hereby consents to the foregoing and independently acknowledges and agrees, for the direct benefit of the Administrative Agent and the Lenders, until the Secured Obligations Repayment Date, as follows: 15 (i) the representations and warranties made by the Grantor in this Agreement shall inure to the benefit of the Administrative Agent and the Lenders and each reference in such representations and warranties to the Secured Party shall be deemed to be references to the Administrative Agent for such purpose; (ii) upon the occurrence and continuance of an Event of Default, the Administrative Agent shall have the exclusive right to enforce , in the name and stead of the Parent, all of the covenants and agreements made by the Grantor under this Agreement and to exercise all of the powers, rights, remedies, benefits, protections, authority and functions of the Secured Party hereunder; (iii) without the prior written consent of the Administrative Agent, the Grantor shall not enter into any amendment, waiver or other modification of the Secured Intercompany Obligations, the Coleman Intercompany Note or the Coleman Intercompany Loan Documents; (iv) the Grantor shall comply with all payment instructions delivered by the Administrative Agent with respect to the Secured Intercompany Obligations, if such instructions are accompanied by a written representation that a Default or an Event of Default has occurred and is continuing; and (v) all of the indemnification, expense reimbursement, authorizations and exculpatory provisions contained in this Agreement in favor of the Secured Party shall also inure to the benefit of the Administrative Agent. (e) In accordance with Section 4(b), and in furtherance of the Grantor's acknowledgments and agreements contained in Section 8(c) and Section 8(d), the Grantor and the Secured Party shall as promptly as practicable after the date hereof execute and deliver to the Administrative Agent an amendment to this Agreement, and such other additional documents and instruments (and cause to be delivered in connection therewith an opinion of counsel), in each case as reasonably requested by, and in form and substance reasonably satisfactory to, the Administrative Agent, pursuant to which the Grantor shall grant directly to the Administrative Agent, for the benefit of the Lenders, security interests in the Collateral to secure the Secured Obligations, PROVIDED that the amount of the Secured Obligations so secured (and any recourse to the Collateral, whether to collect the Secured Obligations or the Secured Intercompany Obligations) shall in no event exceed the amount of the Secured Intercompany Obligations outstanding from time to time. Section 9. EXCULPATORY PROVISIONS (a) The Secured Party is irrevocably authorized to take all such action as is provided to be taken by it as Secured Party hereunder and all other action reasonable incidental thereto. As to any matters not expressly provided for herein (including, without limitation, the timing and methods of realization upon the Collateral) the Secured Party shall act or refrain from acting in accordance with its discretion. 16 (b) Beyond the exercise of reasonable care in the custody thereof, the Secured Party shall have no duty as to any Collateral in its possession or control or in the possession or control of any agent or bailee or any income thereon or as to the preservation of rights against prior parties or any other rights pertaining thereto. The Secured Party shall be deemed to have exercised reasonable care in the custody and preservation of the Collateral in its possession if the Collateral is accorded treatment substantially equal to that which it accords its own property, and shall not be liable or responsible for any loss or damage to any of the Collateral, or for any diminution in the value thereof, by reason of the act or omission of any warehouseman, carrier, forwarding agency, consignee or other agent or bailee selected by the Secured Party in good faith. Neither the Secured Party nor any of its officers, directors, employees or agents shall be liable for failure to demand, collect or realize upon any of the Collateral or for any delay in doing so or shall be under any obligation to sell or otherwise dispose of any Collateral upon the request of the Grantor or any other Person or to take any other action whatsoever with regard to the Collateral or any part thereof. The powers conferred on the Secured Party hereunder are solely to protect the Secured Party's interests in the Collateral and shall not impose any duty upon the Secured Party to exercise any such powers. The Secured Party shall be accountable only for amounts that it actually receives as a result of the exercise of such powers, and neither it nor any of its officers, directors, employees or agents shall be responsible to the Grantor for any act or failure to act hereunder. Section 10. EXPENSES. In the event that any Grantor fails to comply with the provisions of this Agreement, such that the value of any Collateral or the validity, perfection, rank or value of any Security Interest is thereby diminished or potentially diminished or put at risk, the Secured Party may, but shall not be required to, effect such compliance on behalf of the Grantor, and the Grantor shall reimburse the Secured Party for the costs thereof on demand. All insurance expenses and all expenses of protecting, storing, warehousing, appraising, insuring, handling, maintaining, and shipping the Collateral, any and all excise, property, sales, and use taxes imposed by any state, federal, or local authority on any of the Collateral, or in respect of periodic appraisals and inspections of the Collateral to the extent the same may be requested by the Secured Party from time to time, or in respect of the sale or other disposition thereof, shall be borne and paid by the Grantor; and if the Grantor fails to promptly pay any portion thereof when due, the Secured Party may, at its option, but shall not be required to, pay the same and charge the Grantor's account therefor, and the Grantor agrees to reimburse the Secured Party therefor on demand. All sums so paid or incurred by the Secured Party for any of the foregoing and any and all other sums for which the Grantor may become liable hereunder and all costs and expenses (including attorneys' fees, legal expenses and court costs) reasonably incurred by the Secured Party in enforcing or protecting the Security Interests or any of their rights or remedies under this Agreement, shall, together with interest thereon until paid at the rate applicable to the Coleman Intercompany Note plus 2%, be additional Secured Obligations hereunder. Section 11. TERMINATION OF SECURITY INTERESTS; RELEASE OF COLLATERAL. (a) Upon the repayment in full of all Secured Intercompany Obligations, the Security Interests shall terminate and all rights to the Collateral shall revert to the Grantor. (b) Upon the consummation of any sale or exchange of Collateral permitted by clause (x) of Section 4(i), the Security Interests created hereby in the Collateral subject to such 17 sale or exchange (but not in any Proceeds arising from such sale or exchange) shall cease immediately without any further action on the part of the Secured Party. (c) Except as provided otherwise in the Credit Agreement, upon the consummation of any Asset Sale or other disposition permitted by the terms of the Credit Agreement, the Secured Party shall release the Collateral (but not any Proceeds thereof) sold pursuant to such Asset Sale or other disposition. (d) Other than the releases of Collateral effected by subsection (b) or permitted pursuant to subsection (c), prior to the Secured Obligations Repayment Date, the Secured Party shall not release any of the Collateral without the prior written consent of the Administrative Agent and the Lenders. (e) Upon any termination of the Security Interests or release of Collateral in accordance with this Section, the Secured Party will, at the expense of the Grantor, execute and deliver to the Grantor such documents as the Grantor shall reasonably request to evidence the termination of the Security Interests or the release of such Collateral, as the case may be. Section 12. NOTICES. All notices and other communications provided for herein shall be in writing and shall be delivered by hand or overnight courier service, mailed by certified or registered mail or sent by telecopy to the address and telecopy number of such party and the Administrative Agent set forth on the signature pages hereof. Each Party shall provide copies of all such notices and other communications in a like manner to the Administrative Agent. Any party hereto and the Administrative Agent may change its address or telecopy number for notices and other communications hereunder by notice to the other parties hereto and the Administrative Agent. All notices and other communications given to any party hereto in accordance with the provisions of this Agreement shall be deemed to have been given on the date of receipt. Section 13. WAIVERS, NON-EXCLUSIVE REMEDIES. No failure on the part of the Secured Party to exercise, and no delay in exercising and no course of dealing with respect to, any right under this Agreement or any other Coleman Intercompany Loan Document shall operate as a waiver thereof; nor shall any single or partial exercise by the Secured Party of any right under this Agreement or any other Coleman Intercompany Loan Document preclude any other or further exercise thereof or the exercise of any other right. The rights in this Agreement and the Coleman Intercompany Loan Documents are cumulative and are not exclusive of any other remedies provided by law. Section 14. SUCCESSORS AND ASSIGNS. This Agreement is for the benefit of the Parent and its successors and assigns (including the Administrative Agent for the benefit of the Lenders pursuant to the Parent Pledge and Security Agreement and Section 8 hereof). This Agreement shall be binding on the Grantor and its successors and assigns. Section 15. CHANGES IN WRITING. Neither this Agreement nor any provision hereof may be changed, waived, discharged or terminated orally, but only in writing, signed by the Grantor, the Parent and the Administrative Agent. 18 Section 16. NEW YORK LAW. This Agreement shall be construed in accordance with and governed by the laws of the State of New York, except as otherwise required by mandatory provisions of law and except to the extent that remedies provided by the laws of any jurisdiction other than New York are governed by the laws of such jurisdiction. Section 17. SEVERABILITY. If any provision hereof is invalid or unenforceable in any jurisdiction, then, to the fullest extent permitted by law, (i) the other provisions hereof shall remain in full force and effect in such jurisdiction and shall be liberally construed in favor of the Parent, the Administrative Agent and the Lenders in order to carry out the intentions of the parties hereto as nearly as may be possible; and (ii) the invalidity or unenforceability of any provision hereof in any jurisdiction shall not affect the validity or enforceability of such provision in any other jurisdiction. 19 IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed by their respective authorized officers as of the day and year first above written. THE COLEMAN COMPANY, INC. By /s/ Ronald R. Richter --------------------- Name: Ronald R. Richter Title: Vice President & Treasurer Address for Notices: 2381 Executive Center Drive Boca Raton, Florida 33431 Attention: Ms. Gwen Wisler telecopy: (561) 912-4303 SUNBEAM CORPORATION By /s/ Bobby Jenkins --------------------- Name: Bobby G. Jenkins Title: Executive Vice President Address for Notices: 2381 Executive Center Drive Boca Raton, Florida 33431 Attention: Mr. Bobby Jenkins telecopy: (561) 912-4263 ACKNOWLEDGED AND AGREED: FIRST UNION NATIONAL BANK, as Administrative Agent By /s/ T. M. Molitor ----------------- Name: T. M. Molitor Title: Senior Vice President Address for Notices: One First Union Center 301 South College Street, DC-5 Charlotte, North Carolina 28288 Attention: Thomas M. Molitor telecopy: (704) 374-3300 EXHIBIT A PERFECTION CERTIFICATE The undersigned, the chief legal officer of THE COLEMAN COMPANY, INC., a Delaware corporation (the "GRANTOR"), hereby certifies with reference to the Intercompany Security Agreement dated as of April __, 1999 between the Grantor and SUNBEAM CORPORATION, (terms defined therein being used herein as therein defined), to each Secured Party, the Administrative Agent and each Lender as follows: 1. NAMES. (a) The exact company name of the Grantor as it appears in its certificate of incorporation or certificate of formation is as follows: (b) Set forth below is each other company name the Grantor has had within the past five years, together with the date of the relevant change: (c) Except as set forth in Schedule 1, the Grantor has not changed its identity or company structure in any way within the past five years. [Changes in identity or company structure would include mergers, consolidations and acquisitions, as well as any change in the form, nature or jurisdiction of organization. If any such change has occurred, include in Schedule 1 the information required by paragraphs 1, 2 and 3 of this certificate as to each acquiree or constituent party to a merger or consolidation.] (d) The following is a list of all other names (including trade names or similar appellations) used by the Grantor or any of its divisions or other business units at any time during the past five years: 2. Current Locations. (a) The chief executive office of the Grantor is located at the following address: MAILING ADDRESS COUNTY STATE (b) The following are all the locations where the Grantor maintains any books or records relating to any Accounts: MAILING ADDRESS COUNTY STATE (c) The following are all the places of business of the Grantor not identified above: MAILING ADDRESS COUNTY STATE (d) The following are all the locations where the Grantor maintains any Inventory not identified above: MAILING ADDRESS COUNTY STATE (e) The following are the names and addresses of all Persons other than the Grantor which have possession of any of the Grantor's Inventory: MAILING ADDRESS COUNTY STATE 3. PRIOR LOCATIONS. (a) Set forth below is the information required by subparagraphs 2(a), 2(b) and 2(c) above with respect to each location or place of business maintained by the Grantor at any time during the past five years: (b) Set forth below is the information required by subparagraphs 2(d) and 2(e) above with respect to each location or bailee where or with whom Inventory has been lodged at any time during the past four months: 4. UNUSUAL TRANSACTIONS. Except as set forth in Schedule 4, all Accounts have been originated by the Grantor and all Inventory and Equipment has been acquired by the Grantor in the ordinary course of its business. 5. FILE SEARCH REPORTS. Attached hereto as Schedule 5(A) is a true copy of a file search report conducted by [Lexis] in each jurisdiction identified in paragraph 2 or 3 above with respect to each name set forth in paragraph 1 above. Attached hereto as Schedule 5(B) is a 2 true copy of each financing statement or other filing identified in such file search reports as supplied to us by [Lexis]. 6. UNIFORM COMMERCIAL CODE FILINGS. A duly signed financing statement on Form UCC-1 in substantially the form of Schedule 6(A) hereto will be duly filed in the Uniform Commercial Code filing office in each jurisdiction identified in paragraph 2 hereof. 7. SCHEDULE OF FILINGS. Within 30 days of the date hereof a schedule in the form of Schedule 7 hereto setting forth filing information with respect to the filings described in paragraph 6 above will be delivered to the Secured Party. 8. FILING FEES. All filing fees and taxes payable in connection with the filings described in paragraph 6 above have been or will be paid. IN WITNESS WHEREOF, we have hereunto set our hands this __ day of April, 1999. THE COLEMAN COMPANY, INC. By Name: Title: 3 EXHIBIT B DESCRIPTION OF COLLATERAL EXHIBIT A TO UCC FINANCING STATEMENT DEBTOR: SECURED PARTY: ASSIGNEE: The Coleman Company, Inc. Sunbeam Corporation First Union National Bank, as 2381 Executive Center Drive 2381 Executive Center Drive Administrative Agent Boca Raton, Florida 33431 Boca Raton, Florida 33431 One First Union Center 301 South College Street, DC-5 Charlotte, North Carolina 28288
All of the following property now owned or at any time hereafter acquired by the Debtor or in which the Debtor now has or at any time in the future may acquire any right, title or interest (collectively, the "COLLATERAL"): 1. Accounts; 2. Inventory; 3. General Intangibles; 4. Documents; 5. Instruments; 6. Equipment; 7. the Pledged Securities, and all organizational documents, together with all of its rights and privileges thereunder, with respect to the Pledged Securities, and all income and profits thereon, and all interest, dividends and other payments and distributions with respect thereto; 8. all indebtedness now or hereafter owed to the Debtor by any of its Subsidiaries (whether or not evidenced by Instruments); 9. all investments made by the Debtor in any of its Subsidiaries; 10. all Investment Property; 11. all books and records (including, without limitation, customer lists, credit files, computer programs, printouts and other computer materials and records) of the Debtor pertaining to any of the Collateral; and 12. all Proceeds of all or any of the collateral described in clauses 1 through 11 hereof, including without limitation, all dividends or other income from the Investment Property or the Pledged Securities, collections thereon or distributions or payments with respect thereto, and all collateral security and guarantees given by any Person with respect to all or any of the collateral described in clauses 1 through 11 hereof. As used herein, the following terms shall have the following meanings: "ACCOUNTS " means all "ACCOUNTS" (as defined in the Uniform Commercial Code) now owned or hereafter acquired by the Debtor, and shall also mean and include all accounts receivable, contract rights, book debts, notes, drafts and other obligations or indebtedness owing 2 to the Debtor arising from the sale, lease or exchange of goods or other property by it and/or the performance of services by it (including, without limitation, any such obligation which might be characterized as an account, contract right or general intangible under the Uniform Commercial Code in effect in any jurisdiction) and all of the Debtor's rights in, to and under all purchase orders for goods, services or other property, and all of the Debtor's rights to any goods, services or other property represented by any of the foregoing (including returned or repossessed goods and unpaid sellers' rights of rescission, replevin, reclamation and rights to stoppage in transit) and all monies due to or to become due to the Debtor under all contracts for the sale, lease or exchange of goods or other property and/or the performance of services by it (whether or not yet earned by performance on the part of the Debtor), in each case whether now in existence or hereafter arising or acquired including, without limitation, the right to receive the proceeds of said purchase orders and contracts and all collateral security and guarantees of any kind given by any Person with respect to any of the foregoing. "COPYRIGHT LICENSE" means any written agreement now or hereafter in existence granting to the Debtor any right to publication as to which a Copyright is in existence. "COPYRIGHTS" means all the following: (i) all copyrights under the laws of the United States or any other country, all registrations and recordings thereof, and all applications for copyrights under the laws of the United States or any other country, including, without limitation, registrations, recordings and applications in the United States Copyright Office or in any similar office or agency of the United States or any other country or any political subdivision thereof and (ii) all extensions thereof. "DOCUMENTS" means all "DOCUMENTS" (as defined in the Uniform Commercial Code) or other receipts covering, evidencing or representing goods, now owned or hereafter acquired by the Debtor. "EQUIPMENT" means all "EQUIPMENT" (as defined in the Uniform Commercial Code) now owned or hereafter acquired by the Debtor, including without limitation all motor vehicles, trucks, trailers, railcars and barges, and all accessions thereto. "GENERAL INTANGIBLE" means all "general intangibles" (as defined in the Uniform Commercial Code) now owned or hereafter acquired by the Debtor, including, without limitation, (i) all obligations or indebtedness owing to the Debtor (other than Accounts) from whatever source arising, (ii) all Copyrights, Copyright Licenses, Patents, Patent Licenses, Trademarks, Trademark Licenses, rights in intellectual property, goodwill, trade names, service marks, trade secrets, permits and licenses, (iii) all rights or claims in respect of refunds for taxes paid and (iv) all rights in respect of any pension plan or similar arrangement maintained for employees. "GOVERNMENTAL AUTHORITY" means the government of the United States of America, any other nation or any political subdivision thereof, whether state or local, and any agency, authority, instrumentality, regulatory body, court, central bank or other entity exercising executive, legislative, judicial, taxing, regulatory or administrative powers or functions of or pertaining to government. "INSTRUMENTS" means all "INSTRUMENTS", "CHATTEL PAPER" or "LETTERS OF CREDIT" (each as defined in the Uniform Commercial Code) evidencing, representing, arising from or existing in respect of, relating to, securing or otherwise supporting the payment of, any of the Accounts, including (but not limited to) promissory notes, drafts, bills of exchange and trade acceptances, now owned or hereafter acquired by the Debtor. "INTERCOMPANY PLEDGE AND SECURITY AGREEMENT" means the Intercompany Pledge and Security Agreement, dated as of April 15, 1999, between the Debtor and the Secured Party, as amended, supplemented or otherwise modified from time to time. 3 "INVENTORY" means all "INVENTORY" (as defined in the Uniform Commercial Code), now owned or hereafter acquired by the Debtor, wherever located, and shall also mean and include, without limitation, all raw materials and other materials and supplies, work-in-process and finished goods and any products made or processed therefrom and all substances, if any, commingled therewith or added thereto. "INVESTMENT PROPERTY" means all "INVESTMENT PROPERTY" as such term is defined in Section 9-115 of the Uniform Commercial Code. "PATENT LICENSE" means any written agreement now or hereafter in existence granting to the Debtor any right to practice any invention on which a Patent is in existence. "PATENTS" means all of the following: (i) all letters patent of the United States or any other country, all registrations and recordings thereof, and all applications for letters patent of the United States or any other country, including, without limitation, registrations, recordings and applications in the United States Patent and Trademark Office or in any similar office or agency of the United States or any other country or any political subdivision thereof, and (ii) all reissues, continuations, continuations-in-part or extensions thereof. "PERSON" means any natural person, corporation, limited liability company, trust, joint venture, association, company, partnership, Governmental Authority or other entity. "PLEDGED INSTRUMENTS" means any instrument pledged or required to be pledged to the Secured Party pursuant to the Intercompany Pledge and Security Agreement. "PLEDGED SECURITIES" means the Pledged Instruments and the Pledged Stock. "PLEDGED STOCK" means any capital stock, membership or limited liability interest or other equity interests required to be pledged to the Secured Party pursuant to the Intercompany Pledge and Security Agreement. "PROCEEDS" means all proceeds of, and all other profits, products, rents or receipts, in whatever form, arising from the collection, sale, lease, exchange, assignment, licensing or other disposition of, or other realization upon, collateral, including without limitation all claims of the Debtor against third parties for loss of, damage to or destruction of, or for proceeds payable under, or unearned premiums with respect to, policies of insurance in respect of, any collateral, and any condemnation or requisition payments with respect to any collateral, in each case whether now existing or hereafter arising. "SUBSIDIARY" means any subsidiary of the Debtor. "TRADEMARK LICENSE" means any written agreement now or hereafter in existence granting to the Debtor any right to use any Trademark. "TRADEMARKS" means all of the following: (i) all trademarks, trade names, corporate names, company names, business names, fictitious business names, trade styles, service marks, logos, other source or business identifiers, designs and general intangibles of like nature, now existing or hereafter adopted or acquired, all registrations and recordings hereof, and all applications in connection therewith, including, without limitation, registrations, recordings and applications in the United States Patent and Trademark Office or in any similar office or agency of the United States, any State thereof or any other country or any political subdivision thereof, and (ii) all reissues, extensions or renewals thereof. "UNIFORM COMMERCIAL CODE" means the Uniform Commercial Code as in effect from time to time in the State of New York. EXHIBIT C PATENT SECURITY AGREEMENT (PATENTS, PATENT APPLICATIONS AND PATENT LICENSES) WHEREAS, THE COLEMAN COMPANY (the "GRANTOR"), owns, or in the case of licenses, is party to, the Patent Collateral (as defined below); WHEREAS, the Grantor has executed an Amended and Restated Subordinated Intercompany Note, dated April 6, 1998, as amended, in favor of Sunbeam Corporation (the "COLEMAN INTERCOMPANY NOTE"); WHEREAS, pursuant to the terms of an Intercompany Security Agreement, dated as of the date hereof (as such agreement may be further amended from time to time, the "SECURITY AGREEMENT"; unless otherwise specifically defined herein, each term used herein which is defined in the Security Agreement has the meaning assigned to such term in the Security Agreement), between the Grantor and Sunbeam Corporation, together with its successors and assigns, the "GRANTEE"), the Grantor has granted to the Grantee, a continuing security interest in substantially all the assets of the Grantor, including all right, title and interest of the Grantor in, to and under the Patent Collateral (as defined herein), whether now owned or existing or hereafter acquired or arising, to secure the Secured Intercompany Obligations, including without limitation, the obligations of the Grantor under the Coleman Intercompany Note; WHEREAS, pursuant to the Security Agreement and the Parent Pledge and Security Agreement under which the Coleman Intercompany Note has been pledged to the Administrative Agent, the Security Interests in the Collateral granted by the Grantor pursuant to this Agreement and the Security Agreement, including all of the Grantee's right, title and interest as Secured Party, have been collaterally assigned to the Administrative Agent, for the benefit of the Lenders, to secure the Secured Obligations in accordance with the terms of the Parent Pledge and Security Agreement; NOW, THEREFORE, for good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, in order to secure the full and punctual payment of the Secured Intercompany Obligations in accordance with the terms thereof and to secure the performance of all the obligations of the Grantor hereunder and under the Coleman Intercompany Loan Documents, the Grantor hereby grants the Grantee, a continuing security interest in all of the Grantor's right, title and interest in and to all of the following (all of the following items or types of property being herein collectively referred to as the "PATENT COLLATERAL"), whether now owned or existing or hereafter acquired or arising: (i) each Patent owned by Grantors, including, without limitation, each Patent referred to in Schedule 1 hereto; (ii) each Patent License, including, without limitation, each Patent License identified in Schedule 1 hereto; and (iii) all proceeds of and revenues from the foregoing, including, without limitation, all proceeds of and revenues from any claim by the Grantor against third parties for past, present or future infringement of any Patent owned by the Grantor, including, without limitation, any Patent referred to in Schedule 1 hereto (including, without limitation, any such Patent issuing from any application referred to in Schedule I hereto), and all rights and benefits of the Grantor under any Patent License, including, without limitation, any Patent License identified in Schedule 1 hereto. The Grantor hereby irrevocably constitutes and appoints Grantee and any officer or agent thereof, with full power of substitution, as its true and lawful attorney-in-fact with full power and authority in the name of the Grantor or in its name, from time to time, in the Grantee's discretion, so long as any Event of Default has occurred and is continuing, to take with respect to the Patent Collateral any and all appropriate action which the Grantor might take with respect to the Patent Collateral and to execute any and all documents and instruments which may be necessary or desirable to carry out the terms of this Patent Security Agreement and to accomplish the purposes hereof. Except to the extent permitted by the Credit Agreement, the Grantor agrees not to sell, license, exchange, assign or otherwise transfer or dispose of, or grant any rights with respect to, or mortgage or otherwise encumber, any of the Patent Collateral, except (i) for licenses issued to contract manufacturers in the ordinary course of business and (ii) to the extent such activities would not adversely effect the value of the Patent Collateral taken as a whole. The foregoing security interest is granted in conjunction with the security interests granted to the Grantee pursuant to the Security Agreement. The Grantor does hereby further acknowledge and affirm that the rights and remedies of the Grantee with respect to the security interest in the Patent Collateral granted hereby are more fully set forth in the Security Agreement, the terms and provisions of which are incorporated by reference herein as if fully set forth herein. The Grantor hereby further acknowledges and agrees that all of the Grantee's right, title and interest as Grantee under this Agreement and as "Secured Party" under the Security Agreement, and all of the Collateral granted pursuant to the Coleman Intercompany Collateral Documents, have been collaterally assigned by the Grantee pursuant to the Parent Pledge and Security Agreement to the Administrative Agent, for the benefit of the Lenders and that contemporaneously herewith the Grantee shall execute and deliver a separate patent security agreement in the form attached as Exhibit A hereto in favor of the Administrative Agent to further evidence such collateral assignment. 2 IN WITNESS WHEREOF, the Grantor has caused this Patent Security Agreement to be duly executed by its officer thereunto duly authorized as of the ____ day of April, 1999. THE COLEMAN COMPANY, INC. By ---------------------------- Name: Title: ACKNOWLEDGED AND AGREED: SUNBEAM CORPORATION, as Secured Party By ---------------------------- Name: Title: STATE OF NEW YORK ) ) ss.: COUNTY OF NEW YORK ) I, ______________________, a Notary Public in and for said County, in the State aforesaid, DO HEREBY CERTIFY, that ______________________, _______________ of THE COLEMAN COMPANY, INC., personally known to me to be the same person whose name is subscribed to the foregoing instrument as such _________________, appeared before me this day in person and acknowledged that (s)he signed, executed and delivered the said instrument as her/his own free and voluntary act and as the free and voluntary act of said Company, for the uses and purposes therein set forth being duly authorized so to do. GIVEN under my hand and Notarial Seal this ___ day of April, 1999. [Seal] Signature of notary public My Commission expires __________ EXHIBIT D TRADEMARK SECURITY AGREEMENT (TRADEMARKS, TRADEMARK REGISTRATIONS, TRADEMARK APPLICATIONS AND TRADEMARK LICENSES) WHEREAS, THE COLEMAN COMPANY, INC. (the "GRANTOR"), owns, or in the case of licenses, is party to, the Trademark Collateral (as defined below); WHEREAS, the Grantor has executed an Amended and Restated Subordinated Intercompany Note, dated April 6, 1998, as amended, in favor of Sunbeam Corporation ("COLEMAN INTERCOMPANY NOTE"); WHEREAS, pursuant to the terms of an Intercompany Security Agreement, dated as of the date hereof (as such agreement may be further amended from time to time, the "SECURITY AGREEMENT"; unless otherwise specifically defined herein, each term used herein which is defined in the Security Agreement has the meaning assigned to such term in the Security Agreement), between the Grantor and Sunbeam Corporation, together with its successors and assigns, the "GRANTEE"), the Grantor has granted to the Grantee, a continuing security interest in substantially all the assets of the Grantor, including all right, title and interest of the Grantor in, to and under the Trademark Collateral (as defined herein), whether now owned or existing or hereafter acquired or arising, to secure the Secured Intercompany Obligations, including without limitation, the obligations of the Grantor under the Coleman Intercompany Note; WHEREAS, pursuant to the Security Agreement and the Parent Pledge and Security Agreement under which the Coleman Intercompany Note has been pledged to the Administrative Agent, the Security Interests in the Collateral granted by the Grantor pursuant to this Agreement and the Security Agreement, including all of the Grantee's right, title and interest as Secured Party, have been collaterally assigned to the Administrative Agent, for the benefit of the Lenders, to secure the Secured Obligations in accordance with the terms of the Parent Pledge and Security Agreement; NOW, THEREFORE, for good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, in order to secure the full and punctual payment of the Secured Intercompany Obligations in accordance with the terms thereof and to secure the performance of all the obligations of the Grantor hereunder and under the Coleman Intercompany Loan Documents, the Grantor hereby grants the Grantee, a continuing security interest in all of the Grantor's right, title and interest in and to all of the following (all of the following items or types of property being herein collectively referred to as the "TRADEMARK COLLATERAL"), whether now owned or existing or hereafter acquired or arising: (i) each Trademark owned by the Grantor, including, without limitation, each Trademark registration and application referred to in Schedule 1 hereto, and all of the goodwill of the business connected with the use of, or symbolized by, each Trademark; (ii) each Trademark License including, without limitation, each Trademark License identified in Schedule 1 hereto; and (iii) all proceeds of and revenues from the foregoing, including, without limitation, all proceeds of and revenues from any claim by the Grantor against third parties for past, present or future unfair competition with, or violation of intellectual property rights in connection with or injury to, or infringement or dilution of, any Trademark owned by the Grantor, or for injury to the goodwill associated with any such Trademark, including, without limitation, any Trademark referred to in Schedule 1 hereto, and all rights and benefits of the Grantor under any Trademark License, including, without limitation, any Trademark License identified in Schedule 1 hereto. The Grantor hereby irrevocably constitutes and appoints the Grantee and any officer or agent thereof, with full power of substitution, as its true and lawful attorney-in-fact with full power and authority in the name of the Grantor or in its name, from time to time, in the Grantee's discretion, so long as any Event of Default has occurred and is continuing, to take with respect to the Trademark Collateral any and all appropriate action which the Grantor might take with respect to the Trademark Collateral and to execute any and all documents and instruments which may be necessary or desirable to carry out the terms of this Trademark Security Agreement and to accomplish the purposes hereof. Except to the extent permitted by the Credit Agreement, the Grantor agrees not to sell, license, exchange, assign or otherwise transfer or dispose of, or grant any rights with respect to, or mortgage or otherwise encumber, any of the foregoing Trademark Collateral except for (i) licenses issued to contract manufacturers in the ordinary course of business and (ii) to the extent such activities would not adversely affect the value of the Trademark Collateral taken as a whole. The foregoing security interest is granted in conjunction with the security interests granted to the Grantee pursuant to the Security Agreement. The Grantor does hereby further acknowledge and affirm that the rights and remedies of the Grantee with respect to the security interest in the Trademark Collateral granted hereby are more fully set forth in the Security Agreement, the terms and provisions of which are incorporated by reference herein as if fully set forth herein. The Grantor hereby further acknowledges and agrees that all of the Grantee's right, title and interest as Grantee under this Agreement and as Secured Party under the Security Agreement, and all of the Collateral granted pursuant to the Coleman Intercompany Collateral Documents, have been collaterally assigned by the Grantee pursuant to the Parent Pledge and Security Agreement to the Administrative Agent, for the benefit of the Lenders and that contemporaneously herewith the Grantee shall execute and deliver a separate trademark security agreement in the form attached as Exhibit A hereto in favor of the Administrative Agent to further evidence such collateral assignment. 2 IN WITNESS WHEREOF, the Grantor has caused this Trademark Security Agreement to be duly executed by its officer thereunto duly authorized as of the ____ day of April, 1999. THE COLEMAN COMPANY, INC. By Name: Title: ACKNOWLEDGED AND AGREED: SUNBEAM CORPORATION, as Secured Party By ----------------------------------- Name: Title: STATE OF NEW YORK ) ) ss.: COUNTY OF NEW YORK ) I, ______________________, a Notary Public in and for said County, in the State aforesaid, DO HEREBY CERTIFY, that _________________________, _______________ of THE COLEMAN COMPANY, INC., personally known to me to be the same person whose name is subscribed to the foregoing instrument as such _________________, appeared before me this day in person and acknowledged that (s)he signed, executed and delivered the said instrument as her/his own free and voluntary act and as the free and voluntary act of said Company, for the uses and purposes therein set forth being duly authorized so to do. GIVEN under my hand and Notarial Seal this ___ day of April, 1999. [Seal] Signature of notary public My Commission expires __________ EXHIBIT E COPYRIGHT SECURITY AGREEMENT (COPYRIGHTS, COPYRIGHT REGISTRATIONS, COPYRIGHT APPLICATIONS AND COPYRIGHT LICENSES) WHEREAS, THE COLEMAN COMPANY, INC. (the "GRANTOR"), owns, or in the case of licenses, is party to, the Copyright Collateral (as defined below); WHEREAS, the Grantor has executed an Amended and Restated Subordinated Intercompany Note, dated April 6, 1998, as amended, in favor of Sunbeam Corporation ("COLEMAN INTERCOMPANY NOTE"); WHEREAS, pursuant to the terms of an Intercompany Security Agreement, dated as of the date hereof (as such agreement may be further amended from time to time, the "SECURITY AGREEMENT"; unless otherwise specifically defined herein, each term used herein which is defined in the Security Agreement has the meaning assigned to such term in the Security Agreement), between the Grantor and Sunbeam Corporation, together with its successors and assigns, the "GRANTEE"), the Grantor has granted to the Grantee, a continuing security interest in substantially all the assets of the Grantor, including all right, title and interest of the Grantor in, to and under the Copyright Collateral (as defined herein), whether now owned or existing or hereafter acquired or arising, to secure the Secured Intercompany Obligations, including without limitation, the obligations of the Grantor under the Coleman Intercompany Note; WHEREAS, pursuant to the Security Agreement and the Parent Pledge and Security Agreement under which the Coleman Intercompany Note has been pledged to the Administrative Agent, the security interests in the Collateral granted by the Grantor pursuant to this Agreement and the Security Agreement, including all of the Grantee's right, title and interest as Secured Party have been collaterally assigned to the Administrative Agent, for the benefit of the Lenders, to secure the Secured Obligations in accordance with the terms of the Parent Pledge and Security Agreement; NOW, THEREFORE, for good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, in order to secure the full and punctual payment of the Secured Intercompany Obligations in accordance with the terms thereof and to secure the performance of all the obligations of the Grantor hereunder and under the Coleman Intercompany Loan Documents, the Grantor hereby grants the Grantee, a continuing security interest in all of the Grantor's right, title and interest in and to all of the following (all of the following items or types of property being herein collectively referred to as the "COPYRIGHT COLLATERAL"), whether now owned or existing or hereafter acquired or arising: (i) each Copyright owned by the Grantor, including, without limitation, each Copyright registration or application therefor referred to in Schedule 1 hereto; (ii) each Copyright Licenses, including, without limitation, each Copyright License identified in Schedule 1 hereto; and (iii) all proceeds of and revenues from, accounts and general intangibles arising out of, the foregoing, including, without limitation, all proceeds of and revenues from any claim by the Grantor against third parties for past, present or future infringement of any Copyright, including, without limitation, any Copyright owned by the Grantor referred to in Schedule 1 annexed hereto, and all rights and benefits of the Grantor under any Copyright License, including, without limitation, any Copyright License identified in Schedule 1 hereto. The Grantor hereby irrevocably constitutes and appoints the Grantee and any officer or agent thereof, with full power of substitution, as its true and lawful attorney-in-fact with full power and authority in the name of the Grantor or in its name, from time to time, in the Grantee's discretion, so long as any Event of Default has occurred and is continuing, to take with respect to the Copyright Collateral any and all appropriate action which the Grantor might take with respect to the Copyright Collateral and to execute any and all documents and instruments which may be necessary or desirable to carry out the terms of this Copyright Security Agreement and to accomplish the purposes hereof. Except to the extent permitted by the Credit Agreement, the Grantor agrees not to sell, license, exchange, assign or otherwise transfer or dispose of, or grant any rights with respect to, or mortgage or otherwise encumber, any of the foregoing Copyright Collateral, except (i) with respect to the issuance of copyright licenses and (ii) to the extent such activities would not adversely affect the value of the Copyright Collateral taken as a whole. The foregoing security interest is granted in conjunction with the security interests granted to the Grantee pursuant to the Security Agreement. The Grantor does hereby further acknowledge and affirm that the rights and remedies of the Grantee with respect to the security interest in the Copyright Collateral granted hereby are more fully set forth in the Security Agreement, the terms and provisions of which are incorporated by reference herein as if fully set forth herein. The Grantor hereby further acknowledges and agrees that all of the Grantee's right, title and interest as Grantee under this Agreement and as "Secured Party" under the Security Agreement, and all of the Collateral granted pursuant to the Coleman Intercompany Collateral Documents, have been collaterally assigned by the Grantee pursuant to the Parent Pledge and Security Agreement to the Administrative Agent, for the benefit of the Lenders and that contemporaneously herewith the Grantee shall execute and deliver a separate copyright security agreement in the form attached as Exhibit A hereto in favor of the Administrative Agent to further evidence such collateral assignment. 2 IN WITNESS WHEREOF, the Grantor has caused this Copyright Security Agreement to be duly executed by its officer thereunto duly authorized as of the _____ day of April, 1999. THE COLEMAN COMPANY, INC. By Name: Title: ACKNOWLEDGED AND AGREED: SUNBEAM CORPORATION, as Secured Party By -------------------------------- Name: Title: STATE OF NEW YORK ) ) ss.: COUNTY OF NEW YORK ) I, ______________________, a Notary Public in and for said County, in the State aforesaid, DO HEREBY CERTIFY, that _________________________, _______________ of THE COLEMAN COMPANY, INC., personally known to me to be the same person whose name is subscribed to the foregoing instrument as such _________________, appeared before me this day in person and acknowledged that (s)he signed, executed and delivered the said instrument as her/his own free and voluntary act and as the free and voluntary act of said Company, for the uses and purposes therein set forth being duly authorized so to do. GIVEN under my hand and Notarial Seal this ___ day of April, 1999. [Seal] Signature of notary public My Commission expires __________ EXHIBIT F OPINION OF COUNSEL FOR GRANTOR * * * * 1. The Security Agreement creates a valid security interest, for the benefit of the Secured Party, in all Collateral (as defined in the Intercompany Security Agreement) to the extent the Uniform Commercial Code, the United States Copyright Act (the "CA"), the United States Patent Act (the "PA") or the United States Trademark Act (the "TA") is applicable thereto (the "SECURITY INTEREST"). 2. Uniform Commercial Code financing statements and amendments thereto (collectively, the "FINANCING STATEMENTS") have been filed in the filing offices listed in Schedule 7 to the Perfection Certificate (the "FILING JURISDICTIONS"), which are all of the offices in which filings are required to perfect the Security Interest, to the extent the Security Interest may be perfected by filing under the Uniform Commercial Code, and no further filing or recording of any document or instrument or other action will be required so to perfect the Security Interest, except that (i) continuation statements with respect to each Financing Statement must be filed within six months prior to the last day of each consecutive five-year period beginning on the filing date; (ii) additional filings may be necessary if the Grantor changes its name, identity or company structure or the jurisdiction in which its places of business, its chief executive office or the Collateral are located; and (iii) we express no opinion on the perfection of, or need for further filing or recording to perfect, the Security Interest in goods now or hereafter located in any jurisdiction other than the Filing Jurisdictions. 3. Based solely upon our review of the search report dated ______ of [search firm], a copy of which is attached hereto, there are (a) no Uniform Commercial Code financing statements which name the Grantor as debtor or seller and cover any of the Collateral, other than the Financing Statements and the financing statements with respect to (i) Permitted Liens annexed as Schedule 5(A) to the Perfection Certificate, (ii) the Liens granted to the Administrative Agent under the Subsidiary Borrower Security Agreement and (iii) Liens granted to a Subsidiary of the Parent in connection with the Existing Receivables program, listed in the available records in the Uniform Commercial Code filing offices set forth in paragraphs 2 and 3 of the Perfection Certificate, which include all of the offices prescribed under the Uniform Commercial Code as the offices in which filings should have been made to perfect security interests in the Collateral; and (b) no notices of the filing of any federal tax lien (filed pursuant to Section 6323 of the Internal Revenue Code) or any lien of the Pension Benefit Guaranty Corporation (filed pursuant to Section 4068 of ERISA) covering any of the Collateral listed in the available records in the Uniform Commercial Code filing office in state of Grantor's chief executive office, which is the only office having files which must be searched in order to fully determine the existence of notices of the filing of federal tax liens (filed pursuant to Section 6323 of the Internal Revenue Code) and liens of the Pension Benefit Guaranty Corporation (filed pursuant to Section 4068 of ERISA) on the Collateral. 4. The Security Interest validly secures the payment of all future loans made by the Parent to the Grantor pursuant to the Coleman Intercompany Note after the date hereof, whether or not at the time such loans are made an Event of Default or any event not within the control of the Parent has relieved or may relieve the Parent from their obligations to make such loans, and is perfected to the extent set forth in paragraph 2 above with respect to such future loans. Insofar as the priority thereof is governed by the Uniform Commercial Code, the Security Interest has the same priority with respect to such future loans as it does with respect to loans made on the date hereof. 2 EX-27 4 EXHIBIT 27
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS AS FILED IN THE COMPANY'S FORM 10-Q FOR THE QUARTER ENDED MARCH 31, 1999 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 1,000 3-MOS DEC-31-1999 JAN-01-1999 MAR-31-1999 18,508 0 230,129 8,695 253,409 540,297 266,641 125,613 992,232 266,989 435 0 0 558 234,164 992,232 280,451 280,690 198,371 198,371 0 1,892 7,575 11,351 4,540 6,741 0 0 0 6,741 0.12 0.12
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