-----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, B0JnFs8qGUlUmz6UoK3qDodPbuANvt2Ibt91xtdl4N5IuRsl1vg27wfbtYKiINzv YSKnb4ruLnP5BsATcEIFJg== /in/edgar/work/0000950144-00-013944/0000950144-00-013944.txt : 20001116 0000950144-00-013944.hdr.sgml : 20001116 ACCESSION NUMBER: 0000950144-00-013944 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 12 CONFORMED PERIOD OF REPORT: 20000930 FILED AS OF DATE: 20001114 FILER: COMPANY DATA: COMPANY CONFORMED NAME: APPLICA INC CENTRAL INDEX KEY: 0000217084 STANDARD INDUSTRIAL CLASSIFICATION: [3634 ] IRS NUMBER: 591028301 STATE OF INCORPORATION: FL FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 001-10177 FILM NUMBER: 768929 BUSINESS ADDRESS: STREET 1: 5980 MIAMI LAKES DR CITY: MIAMI LAKES STATE: FL ZIP: 33014 BUSINESS PHONE: 3053622611 MAIL ADDRESS: STREET 1: 5980 MIAMI LAKES DRIVE CITY: MIAMI LAKES STATE: FL ZIP: 33014 FORMER COMPANY: FORMER CONFORMED NAME: WINDMERE DURABLE HOLDINGS INC DATE OF NAME CHANGE: 19970224 FORMER COMPANY: FORMER CONFORMED NAME: WINDMERE CORP DATE OF NAME CHANGE: 19920703 FORMER COMPANY: FORMER CONFORMED NAME: SAVE WAY INDUSTRIES INC DATE OF NAME CHANGE: 19830815 10-Q 1 g65027e10-q.txt APPLICA, INC. 1 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 SEPTEMBER 30, 2000 OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD FROM ____________ TO ____________ COMMISSION FILE NUMBER 1-10177 APPLICA INCORPORATED (EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER) FLORIDA 59-1028301 ------------------------------- ---------------------- (STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER INCORPORATION OR ORGANIZATION) IDENTIFICATION NUMBER) 5980 MIAMI LAKES DRIVE, MIAMI LAKES, FLORIDA 33014 - -------------------------------------------- ------------- (ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE) (305) 362-2611 ---------------------------------------------------- (REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE) ----------------------------------------- FORMER NAME, IF CHANGED SINCE LAST REPORT Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such report(s), and (2) has been subject to such filing requirement for the past 90 days. Yes [X] No [ ] Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date: NUMBER OF SHARES OUTSTANDING CLASS ON NOVEMBER 8, 2000 ----- ---------------------------- Common Stock, $.10 par value 23,035,355 1 2 APPLICA INCORPORATED INDEX PART I. FINANCIAL INFORMATION ITEM 1. Consolidated Statements of Earnings for the Three Months Ended September 30, 2000 and 1999............ 3 Consolidated Statements of Operations for the Nine Months Ended September 30, 2000 and 1999......................... 4 Consolidated Balance Sheets as of September 30, 2000 and December 31, 1999......................................... 5-6 Consolidated Statements of Cash Flows for the Nine Months Ended September 30, 2000 and 1999......................... 7 Notes to Consolidated Financial Statements................ 8-13 ITEM 2. Management's Discussion and Analysis of Financial Condition and Results of Operations................................. 14-20 ITEM 3. Quantitative and Qualitative Disclosures About Market Risk...................................................... 21 PART II. OTHER INFORMATION ITEM 1. Legal Proceedings.................................... 22 ITEM 6. Exhibits and Reports on Form 8-K..................... 22 SIGNATURES............................................................... 23 2 3 PART I - FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS APPLICA INCORPORATED CONSOLIDATED STATEMENTS OF EARNINGS (UNAUDITED) (IN THOUSANDS EXCEPT PER SHARE INFORMATION)
THREE MONTHS ENDED SEPTEMBER 30, ------------------------------------------------------------ 2000 1999 ----------------------------- ----------------------------- Sales and Other Revenues...... $199,397 100.0% $204,229 100.0% Cost of Goods Sold............ 132,649 66.5 135,367 66.3 -------- ----- -------- ----- Gross Profit............. 66,748 33.5 68,862 33.7 Selling, General and Administrative Expenses.. 48,071 24.1 43,623 21.4 -------- ----- -------- ----- Operating Profit......... 18,677 9.4 25,239 12.3 Other (Income) Expense Interest Expense......... 8,160 4.1 7,212 3.5 Interest and Other Income (708) (.4) (580) (.3) -------- ----- -------- ----- 7,452 3.7 6,632 3.2 -------- ----- -------- ----- Earnings before Equity in Net Loss of Joint Ventures and Income Taxes 11,225 5.7 18,607 9.1 Equity in Net Loss of Joint Ventures........ (128) (.1) - - - - -------- ----- -------- ----- Earnings Before Income Taxes............. 11,097 5.6 18,607 9.1 Provision (Benefit) for Income Taxes............. 2,798 1.4 4,634 2.3 -------- ----- -------- ----- Net Earnings.................. $ 8,299 4.2% $ 13,973 6.8% ======== ===== ======== ===== Earnings Per Share - basic.. $ .36 $ .62 ======== ======== Earnings Per Share - diluted $ .35 .59 ======== ========
The accompanying notes are an integral part of these statements. 3 4 APPLICA INCORPORATED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED) (IN THOUSANDS EXCEPT PER SHARE INFORMATION)
NINE MONTHS ENDED SEPTEMBER 30, -------------------------------------------------------- 2000 1999 --------------------------- --------------------------- Sales and Other Revenues...... $517,499 100.0% $472,250 100.0% Cost of Goods Sold............ 354,156 68.4 321,004 68.0 -------- ----- -------- ----- Gross Profit............. 163,343 31.6 151,246 32.0 Selling, General and Administrative Expenses.. 135,936 26.3 125,497 26.6 -------- ----- -------- ----- Operating Profit......... 27,407 5.3 25,749 5.4 Other (Income) Expense Interest Expense......... 22,225 4.3 19,947 4.2 Interest and Other Income (1,673) (.3) (1,604) (.3) -------- ----- -------- ----- 20,552 4.0 18,343 3.9 Earnings before Equity in Net Loss of Joint Ventures and Income Taxes 6,855 1.3 7,406 1.5 Equity in Net Loss of Joint Ventures........ (128) - (12,894) (2.7) -------- ---- -------- ----- Earnings (Loss) Before Income Taxes............. 6,727 1.3 (5,488) (1.2) Provision (Benefit) for Income Taxes............. 1,701 .3 (2,366) (.5) -------- ----- -------- ----- Net Earnings (Loss)........... $ 5,026 1.0% $ (3,122) (.7)% ======== ===== ======== ===== Earnings (Loss) Per Share - basic......................... $ .22 $ (.14) ======== ======== Earnings (Loss) Per Share - diluted....................... $ .21 $ (.14) ======== ========
The accompanying notes are an integral part of these statements. 4 5 APPLICA INCORPORATED CONSOLIDATED BALANCE SHEETS (IN THOUSANDS)
(Unaudited) 9/30/00 12/31/99 ASSETS --------- --------- CURRENT ASSETS Cash & Cash Equivalents...................... $ 9,784 $ 13,768 Accounts and Other Receivables, less allowances of $9,326 and $8,761, respectively......................... 194,424 172,500 Receivables from Affiliates (Note 1)......... 2,837 3,533 Other Receivables............................ - 12,962 Inventories Raw Materials................................ 8,513 9,045 Work-in-process.............................. 22,237 18,547 Finished Goods............................... 194,063 136,114 --------- --------- Total Inventories............................ 224,813 163,706 Prepaid Expenses............................. 9,011 12,703 Refundable Income Taxes...................... 6,647 1,122 Future Income Tax Benefits................... 8,490 8,490 --------- --------- Total Current Assets......................... 456,006 388,784 INVESTMENT IN JOINT VENTURE (NOTE 2)................................ 2,174 2,608 PROPERTY, PLANT & EQUIPMENT - AT COST, less accumulated Depreciation of $81,276 and $69,597, respectively........................ 81,190 75,983 LONG-TERM FUTURE INCOME TAX BENEFITS......... 2,050 2,049 OTHER ASSETS................................. 231,104 243,249 --------- --------- TOTAL ASSETS................................. $ 772,524 $ 712,673 ========= =========
(continued) 5 6 APPLICA INCORPORATED CONSOLIDATED BALANCE SHEETS (CONTINUED) (IN THOUSANDS)
(Unaudited) LIABILITIES 9/30/00 12/31/99 --------- ---------- CURRENT LIABILITIES Notes and acceptances payable......................... $ - $ 898 Current Maturities of Long-Term Debt.................. 18,342 13,587 Accounts Payable and Accrued Expenses................. 94,060 95,103 Income taxes payable.................................. 728 4,723 Deferred Income, current portion...................... 292 585 Other current liabilities............................. - 10,573 --------- --------- Total Current Liabilities............................. 113,422 125,469 LONG-TERM DEBT........................................ 309,036 243,571 DEFERRED INCOME, less current portion................. - 236 SHAREHOLDERS' EQUITY (Note 2) Special Preferred Stock - Authorized 40,000 shares of $.01 par value; none issued........................... - - Common Stock - authorized: 75,000 and 40,000, respectively, shares of $.10 par value; shares outstanding: 23,039 and 22,640, respectively....................... 2,304 2,264 Paid-in Capital....................................... 151,672 149,548 Retained Earnings..................................... 199,708 194,682 Accumulated Other Comprehensive Loss.................. (2,122) (1,601) Note receivable - officer............................. (1,496) (1,496) --------- --------- Total Shareholders' Equity............................ 350,066 343,397 --------- --------- TOTAL LIABILITIES & SHAREHOLDERS' EQUITY.............. $ 772,524 $ 712,673 ========= =========
The accompanying notes are an integral part of these statements. 6 7 APPLICA INCORPORATED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) (IN THOUSANDS)
NINE MONTHS ENDED SEPTEMBER 30, --------------------------------- 2000 1999 ---------------- ---------- Cash flows from operating activities: Net (loss) earnings....................................................... $ 5,026 $ (3,122) Adjustments to reconcile net loss to net cash used in operating activities: Depreciation of property, plant and equipment............................. 14,234 13,108 Amortization of intangible assets......................................... 14,465 12,627 Amortization of deferred income........................................... (529) - Net loss on disposal of fixed assets...................................... - 2,204 Equity in net earnings of joint ventures.................................. 434 371 Write down of investment in joint venture................................. - 12,574 Net change in allowance for losses on accounts receivable................. 565 603 Changes in assets and liabilities Increase in accounts and other receivables................................ (22,489) (32,700) Increase in inventories................................................... (61,107) (10,409) Decrease in prepaid expenses.............................................. 3,692 6,814 (Increase) Decrease in other assets....................................... (2,320) 5,894 Decrease in other receivables............................................. 12,962 - Decrease in accounts payable and accrued expenses......................... (1,043) (2,219) Decrease in current and deferred income taxes............................. (9,521) (9,462) Decrease in other liabilities............................................. (10,573) - Decrease in deferred income............................................... - (1,541) Decrease in other accounts................................................ (521) (289) -------- -------- Net cash used in operating activities...................................................... (56,725) (5,547) Cash flows from investing activities: Additions to property, plant and equipment - net.......................... (19,441) (17,101) Purchase of net assets from joint venture................................. - (15,059) Decrease in receivable accounts and notes from affiliates................................................. 696 2,344 -------- -------- Net cash used in investing activities..................................... (18,745) (29,816) Cash flows from financing activities: Net borrowings under notes and acceptances payable........................ $ (898) $ 28,949 Long-term debt - net...................................................... 70,220 (9,962) Exercise of stock options and warrants.................................... 2,164 1,490 -------- -------- Net cash provided by financing activities................................. 71,486 20,477 Decrease in cash and cash equivalents...................................................... (3,984) (14,886) Cash and cash equivalents at beginning of year............................ 13,768 20,415 -------- -------- Cash and cash equivalents at end of quarter............................... $ 9,784 $ 5,529 ======== ======== SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION Cash paid for: Interest.................................................................. $ 23,332 $ 24,470 Income taxes.............................................................. $ 8,758 $ 5,621
The accompanying notes are an integral part of these statements. 7 8 APPLICA INCORPORATED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 1. SUMMARY OF ACCOUNTING POLICIES INTERIM REPORTING In the opinion of the Company, the accompanying unaudited consolidated financial statements contain all normal recurring adjustments necessary to present fairly the Company's financial position as of September 30, 2000 and the results of its operations and changes in financial position for the interim periods. Results for interim periods should not be considered indicative of results for a full year. Reference should be made to the financial statements contained in the registrant's Annual Report on Form 10-K for the year ended December 31, 1999. RECLASSIFICATIONS Certain prior period amounts have been reclassified for comparability. RECEIVABLES FROM AFFILIATES Receivables from Affiliates include the current portion of receivables due from the Company's joint venture partner and a Company officer. These receivables are due upon demand and bear interest at prevailing market interest rates. DERIVATIVE FINANCIAL INSTRUMENTS The Company uses forward exchange contracts to reduce fluctuations in foreign currency cash flows related to third party raw material and other operating purchases. The terms of the currency instruments used are generally consistent with the timing of the committed or anticipated transactions being hedged. Outstanding at September 30, 2000 was $18,300,000 notional amount in contracts and/or options to purchase foreign currency, forward. There is no significant unrealized gain or loss on these contracts. All contracts have terms of six months or less. The Company uses interest rate derivatives of one to eight years in duration to reduce the impact of changes in interest rates on its floating rate debt. The notional amounts of the agreements are used to measure interest to be paid or received and do not represent the amount of exposure to credit loss. The differential paid or received on the agreements is recognized as an adjustment of interest expense. Outstanding at September 30, 2000, were interest rate swaps on $180,000,000 notional principal amount with a market value of approximately ($1,473,000). The market value represents the amount the Company would have to pay to exit the contracts at September 30, 2000. The Company does not intend to exit the contracts at this time. 2. SHAREHOLDERS' EQUITY EARNINGS PER SHARE Basic shares for the three and nine month periods ended September 30, 2000 were 23,035,355 and 22,917,044, respectively. Basic shares for the three and nine month periods ended September 30, 1999 were 22,478,303 and 22,290,429, respectively. Included in diluted shares are common stock equivalents relating to options of 539,762 and 1,327,338 for the three month periods ended September 30, 2000 and 1999, respectively and 971,795 for the nine month period ended September 30, 2000. All common stock equivalents have been excluded from the per share calculation in the nine month period ended September 30, 1999 as their inclusion would have been anti-dilutive. OTHER On May 9, 2000, the shareholders of the Company voted to change the name of the Company to Applica Incorporated. The name change was effective on May 10, 2000. In addition, the shareholders voted to approve the Second Amended and Restated Articles of Incorporation of the Company, which increases the authorized number of shares of Common Stock from 40,000,000 to 75,000,000 and eliminates the Company's Special Preferred Stock. 8 9 3. COMMITMENTS AND CONTINGENCIES The Company is a defendant in SHERLEIGH ASSOCIATES LLC AND SHERLEIGH ASSOCIATES INC. PROFIT SHARING PLAN, ON THEIR OWN BEHALF AND ON BEHALF OF ALL OTHERS SIMILARLY SITUATED V. WINDMERE-DURABLE HOLDINGS, INC., DAVID M. FRIEDSON, HARRY D. SCHULMAN AND NATIONSBANC MONTGOMERY SECURITIES LLC, 98-2273-CIV-LENARD which was filed in the United States District Court, Southern District of Florida on October 8, 1998. This matter is a class action complaint, which is the consolidation of eight separate class action complaints with substantially similar allegations. By Order dated March 9, 1999, in addition to consolidating the above-referenced cases, the Court provisionally certified the class of plaintiffs who purchased stock between May 12, 1998 and September 22, 1998, and provisionally certified Sherleigh Associates LLC and Sherleigh Associates, Inc. Profit Sharing Plan as lead plaintiff. On June 30, 1999, a consolidated amended class action complaint was filed. The consolidated amended class action complaint alleges violations of the federal securities laws (including Rule 10b-5 promulgated pursuant to the Securities Exchange Act of 1934, as amended) in connection with the acquisition by the Company of certain product categories of the Household Products Group of the Black & Decker Corporation. Among other things, the plaintiffs allege that the Company and certain of its directors and officers, along with NationsBanc Montgomery Securities LLC, provided false information in connection with a public offering of debt and equity securities. The plaintiffs seek, among other relief, to be awarded compensatory damages, rescission rights, unspecified damages and attorneys' fees and costs. The defendants moved to dismiss the consolidated class action complaint, but such motion was denied. Discovery procedures have been initiated. The Company is currently paying the legal expenses of the directors and officers who were named as defendants. Such defendants have agreed to repay the Company for all or any portion of such amounts to which they are ultimately found not to be entitled pursuant to applicable law. Based on the information currently available to the Company, management does not believe that the indemnification of the officers and directors named as defendants in the above-listed matters will have a material adverse effect on the financial condition, results of operations or liquidity of the Company. However, the actual effects of such indemnification on the Company cannot be finally determined until the amount of such indemnification, if any, is fixed. In connection with the Household Products Group acquisition, the Company also received two derivative demands alleging the breach of fiduciary duties by certain of the officers and directors of the Company. An independent committee of the Board of Directors is currently conducting an investigation as to whether such derivative actions are in the best interest of the Company. The Company is subject to other legal proceedings and claims which arise in the ordinary course of its business. In the opinion of management, the amount of ultimate liability, if any, in excess of applicable insurance coverage, is not likely to have a material effect on the financial position of the Company. However, as the outcome of litigation or other claims is difficult to predict, significant changes in the estimated exposures could occur. 4. BUSINESS SEGMENT INFORMATION Effective January 1, 2000, the Company reorganized into three new business units: Consumer Products North America, Consumer Products International and Manufacturing. The information for 1999 has been restated in order to conform to the new presentation. The Consumer Products North America segment distributes kitchen electric, personal care and home environment products under licensed brand names such as Black & Decker, as well as the Windmere and private label brand names. The sales are handled primarily through in house sales representatives to mass merchandisers, specialty retailers and appliance distributors in the United States and Canada. The Consumer Products International segment distributes kitchen electric, personal care and home environment products under the Black & Decker and Windmere brand names. Products are marketed throughout all countries in Latin America except for Brazil. 9 10 The Manufacturing segment includes the Company's operations located in Bao An County, Guangdong Province of the People's Republic of China and in Queretaro, Mexico. The majority of the Company's products are manufactured in these two facilities. Summarized financial information concerning the Company's reportable segments is shown in the following table. Corporate related items, results of insignificant operations and, as it relates to segment profit (loss), income and expense not allocated to reportable segments are included in the reconciliations to consolidated results. Segment information for the three month periods ended September 30, are as follows: (In Thousands)
Consumer Products Consumer North Products America International Manufacturing Total ----------------- ------------- ------------- --------- 2000: Net Sales....................... $ 146,104 $ 24,852 $111,686 $ 282,642 Intersegment net sales.......... - - 95,870 95,870 Operating earnings ............. 3,100 286 15,304 18,690 1999: Net Sales....................... 156,206 21,801 90,087 268,094 Intersegment net sales.......... - - 85,528 85,528 Operating earnings ............. 10,230 175 16,103 26,508
Reconciliation to consolidated amounts:
2000 1999 --------- --------- REVENUES: Total revenues for reportable segments $ 282,642 $ 268,094 Other revenues....................... 12,625 21,663 Eliminations of intersegment revenues (95,870) (85,528) --------- --------- Total consolidated revenues..... $ 199,397 $ 204,229 ========= ========= Operating earnings: Total earnings for reportable $ 18,690 $ 26,508 segments............................. Other earnings (loss)........... 695 (689) Interest expense................ (8,160) (7,212) Equity in net loss of joint ventures (128) - --------- -------- Consolidated earnings before income taxes................................ $ 11,097 $ 18,607 ========= =========
Segment information for the nine month periods ended September 30, are as follows: (In Thousands)
Consumer Products Consumer North Products America International Manufacturing Total ----------------- ------------- ------------- --------- 2000 Net Sales............. $ 380,454 $ 70,552 $307,975 $ 758,981 Intersegment net sales 5,894 - 260,984 266,878 Operating earnings (loss)................ (9,693) (405) 36,881 26,783 1999 Net Sales............. 358,317 55,132 199,388 612,837 Intersegment net sales - - 171,100 171,100 Operating earnings (loss)................ 3,993 (2,415) 26,353 27,931
Reconciliation to consolidated amounts:
2000 1999 ---------- --------- REVENUES: Total revenues for reportable segments $ 758,981 $ 612,837 Other revenues........................ 25,396 30,513 Eliminations of intersegment revenues. (266,878) (171,100) ---------- --------- Total consolidated revenues....... $ 517,499 $ 472,250 ========== ========= Operating earnings (loss) Total earnings (loss) for reportable $ 26,783 $ 27,931 segments.......................... Other earnings (loss)................. 2,297 (578) Interest expense...................... (22,225) (19,947) Equity in net earnings (loss) of joint ventures.............................. (128) (12,894) ----------- --------- Consolidated loss before income taxes. $ (6,727) (5,488) ========== =========
10 11 5. SUBSEQUENT EVENT In November 2000, the Company entered into a relationship with a consumer packaged goods company to develop, manufacture and distribute new products in the mass market. The Company has entered into a joint development agreement for one product and is in the process of reviewing other opportunities. In conjunction with the development arrangement, the Company plans to expand its existing manufacturing capacity, exit various non-strategic product lines, including certain retail personal care items, and reallocate Company resources resulting in non-recurring non-cash charges totaling $30 to $40 million in the fourth quarter of 2000. The Company has amended its Senior Secured Credit Facility to incorporate the capital requirements of the alliance, which includes an increase in allowable capital expenditures by $25.0 million over the next two years and the modification of various covenants. 6. CONDENSED CONSOLIDATING FINANCIAL INFORMATION The following condensed consolidating financial information presents the results of operations, financial position and cash flows of the Company (on a stand alone basis), the guarantor subsidiaries of the Company's Senior Subordinated Notes ("Notes") (on a combined basis), the non-guarantor subsidiaries (on a combined basis) and the eliminations necessary to arrive at the consolidated results of the Company. The results of operations and cash flows presented below assume the guarantor subsidiaries were in place for all periods presented. The Company and subsidiary guarantors have accounted for investments in their respective subsidiaries on an unconsolidated basis using the equity method of accounting. The Subsidiary Guarantors are wholly-owned subsidiaries of the Company and have fully and unconditionally guaranteed the Notes on a joint and several basis. The guarantors include the following: Applica Consumer Products, Inc., Windmere Holdings Corporation, Windmere Holdings Corporation II, Fortune Products, Inc., Bay Books & Tapes, Inc., HP Delaware, Inc., HP Americas, Inc., HPG LLC, HP Intellectual Corp. and WD Delaware, Inc. The Notes contain certain covenants which, among other things, will restrict the ability of the Subsidiary Guarantors to make distributions to the Company. The Company has not presented separate financial statements and other disclosures concerning the guarantors and non-guarantor subsidiaries because it has determined they would not be material to investors. 11 12 NINE MONTHS ENDED SEPTEMBER 30, 2000
APPLICA NON INCORPORATED GUARANTORS GUARANTORS ELIMINATIONS CONSOLIDATED ------------ ---------- ---------- ------------ ------------ STATEMENT OF OPERATIONS Net Sales........................... - 388,646 395,693 (266,840) 517,499 Cost of goods sold.................. - 283,296 337,700 (266,840) 354,156 ------- -------- ------- -------- ------- Gross Profit........................ - 105,350 57,993 - 163,343 Operating Expenses.................. (557) 111,543 24,680 270 135,936 ------- -------- ------- -------- ------- Operating Profit (Loss)............. 557 (6,193) 33,313 (270) 27,407 Other (income) expense, net......... 20,026 615 (89) - 20,552 ------- -------- ------- -------- ------- Earnings (loss) before income taxes and Equity in earnings (loss) of joint Ventures.............. (19,469) (6,808) 33,402 (270) 6,855 Provision (Benefit) for income taxes - 159 7,036 (5,494) 1,701 Equity in net loss of joint ventures....................... 128 - - - 128 ------- -------- ------- ---------- ------- Net earnings (loss)................. (19,597) (6,967) 26,366 5,224 5,026 ======= ======== ======= ========== ======= BALANCE SHEET Cash................................ 10 (2,107) 11,881 - 9,784 Accounts and other receivables...... - 134,648 59,776 - 194,424 Receivables from affiliates......... 21,286 (83,046) 64,597 - 2,837 Inventories......................... - 146,803 78,010 - 224,813 Other current assets................ - 893 11,719 11,536 24,148 ------- -------- ------- ---------- ------- Total current assets........... 21,296 197,191 225,983 11,536 456,006 Investments in joint venture........ 425,900 113,122 70,503 (607,351) 2,174 Property, plant and equipment, net.. - 17,800 63,390 - 81,190 Other assets........................ - 662,333 11,137 (440,316) 233,154 ------- -------- ------- ---------- ------- Total assets................... 447,196 990,446 371,013 (1,036,131) 772,524 ======= ======== ======= ========== ======= LIABILITIES: Accounts payable and accrued expenses 3 31,005 63,052 - 94,060 Current maturities of long term debt 18,342 - - - 18,342 Deferred income, current portion.... - 292 - - 292 Income taxes payable................ - (1,796) 5,511 (2,987) 728 ------ -------- ------- ---------- ------- Total current liabilities...... 18,345 29,501 68,563 (2,987) 113,422 Long term debt...................... 299,154 424,025 19,060 (433,203) 309,036 Deferred income, less current portion - - - - - Deferred income taxes............... - 5,514 2,843 (8,357) - ------- -------- ------- ---------- ------- Total liabilities.............. 317,499 459,040 90,466 (444,547) 422,458 Shareholders' equity................ 129,697 531,406 280,547 (591,584) 350,066 ------- -------- ------- ---------- ------- Total liabilities and shareholders' Equity....................... 447,196 990,446 371,013 (1,036,131) 772,524 ======= ======== ======= ========== ======= Cash Flow Information Net cash provided by (used in) operating Activities............... (19,595) (1,226,564) 26,514 1,163,007 (56,638) Net cash provided by (used in) investing Activities................ (42,710) 1,022,712 (41,016) (957,297) (18,311) Net cash provided by (used in) financing Activities................ 62,311 197,806 17,079 (205,710) 71,486 Effect of exchange rate............. - - (521) - (521) Cash at beginning................... 4 3,939 9,825 - 13,768 Cash at end......................... 10 (2,107) 11,881 - 9,784
12 13 NINE MONTHS ENDED SEPTEMBER 30, 1999
APPLICA NON INCORPORATED GUARANTORS GUARANTORS ELIMINATIONS CONSOLIDATED ------------ ---------- ---------- ------------ ------------ STATEMENT OF OPERATIONS Net Sales........................... - 293,786 271,186 (92,722) 472,250 Cost of goods sold.................. - 185,420 226,347 (90,763) 321,004 ------ ------- ------- -------- ------- Gross Profit........................ - 108,366 44,839 (1,959) 151,246 Operating Expenses.................. (521) 108,457 17,290 271 125,497 ------ ------- ------- -------- ------- Operating Profit (Loss)............. 521 (91) 27,549 (2,230) 25,749 Other (income) expense, net......... 18,670 (1,691) 271 1,093 18,343 ------ ------- ------- -------- ------- Earnings (loss) before income taxes and Equity in earnings (loss) of joint Ventures.............. (18,149) 1,600 27,278 (3,323) 7,406 Provision (Benefit) for income taxes - (3,562) 3,766 (2,570) (2,366) Equity in net earnings (loss) of joint ventures.............. 593 (13,487) - - (12,894) ------- ------- ------- -------- ------- Net earnings (loss)................. (17,556) (8,325) 23,512 (753) (3,122) ======= ======= ======= ======== ======= BALANCE SHEET Cash................................ 6 (3,954) 9,477 - 5,529 Accounts and other receivables...... - 158,404 51,141 (5,529) 204,016 Receivables from affiliates......... 21,390 (39,600) 30,301 (8,847) 3,244 Inventories......................... - 105,281 69,278 10,921 185,480 Other current assets................ - 23,281 6,508 11,536 41,325 ------- ------- ------- -------- ------- Total current assets........... 21,396 243,412 166,705 8,081 439,594 Investments in joint ventures....... 426,413 9,248 70,585 (503,483) 2,763 Property, plant and equipment, net.. - 12,856 65,010 - 77,866 Other assets........................ 0 534,254 11,885 (294,948) 251,191 ------- ------- ------- -------- ------- Total assets................... 447,809 799,770 314,185 (790,350) 771,414 ======= ======= ======= ======== ======= LIABILITIES: Notes payable....................... 0 11,350 0 (11,350) 0 Accounts payable and accrued expenses 1 70,575 65,052 0 135,628 Current maturities of long term debt 10,342 - 0 - 10,342 Deferred income, current portion.... - 689 - - 689 Income taxes payable................ - (1,164) 1,045 1,215 1,096 ------- ------- ------- -------- ------- Total current liabilities...... 10,343 81,450 66,097 (10,135) 147,755 Long term debt...................... 284,195 286,404 5,450 (286,404) 289,645 Deferred income, less current portion - 269 - 783 1,052 Deferred income taxes............... - 16,254 2,969 (8,358) 10,865 ------- ------- ------- -------- ------- Total liabilities.............. 294,538 384,377 74,516 (304,114) 449,317 Shareholders' equity................ 153,271 415,393 239,669 (486,236) 322,097 ------- ------- ------- -------- ------- Total liabilities and shareholders' 447,809 799,770 314,185 (790,350) 771,414 ======= ======= ======= ======== ======= Equity...................... Cash Flow Information Net cash provided by (used in) operating Activities................ (17,555) 66,983 10,870 (65,556) (5,258) Net cash provided by (used in) investing Activities................ (9,474) 35,241 (35,407) (20,176) (29,816) Net cash provided by (used in) financing Activities............... 27,035 (109,261) 16,971 85,732 20,477 Effect of exchange rate............. - - (289) - (289) Cash at beginning................... - 3,083 17,332 - 20,415 Cash at end......................... 6 (3,954) 9,477 - 5,529
13 14 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS This document contains forward-looking statements within the meaning of Section 27A of the Securities Act and Section 21E of the Exchange Act. Such statements are indicated by words or phrases such as "anticipate," "projects," "management believes," "the Company believes," "intends," "expects," and similar words or phrases. Such forward-looking statements are subject to certain risks, uncertainties or assumptions and may be affected by certain other factors. These factors include, but are not limited to: o economic conditions and the retail environment; o the Company's dependence on the timely development and introduction of products; o the acceptance of products by customers and consumers; o competitive products and pricing; o reliance on key customers; o dependence on foreign suppliers and supply and manufacturing constraints; o changes in raw material costs; o cancellation or reduction of orders for products; o the effects of the class action litigation filed by certain shareholders; and o other risks and uncertainties detailed from time to time. Should one or more of these risks, uncertainties or other factors materialize, or should underlying assumptions prove incorrect, actual results, performance, or achievements of the Company may vary materially from any future results, performance or achievements expressed or implied by such forward-looking statements. All subsequent written and oral forward-looking statements attributable to the Company or persons acting on its behalf are expressly qualified in their entirety by the cautionary statements in this paragraph. The Company disclaims any obligation to publicly announce the results of any revisions to any of the forward-looking statements contained herein to reflect future events or developments. The Company, through its subsidiaries, is a leading diversified manufacturer and distributor of a broad range of branded and private label small household appliances, including electric housewares (kitchen and garment care), personal care, and other products. The Company manufactures and markets products under licensed brand names, such as Black & Decker(R), under the Windmere(R) and other Company-owned brand names and under private-label brand names. The Company's customers for such products include mass merchandisers, specialty retailers and appliance distributors primarily in North America, Latin America and the Caribbean. In addition, the Company manufactures products on an OEM basis for other major consumer products companies. The Company also manufactures and markets the LitterMaid(R) self-cleaning cat litter box. In June 2000, the Kmart Corporation exercised its option to terminate its long-term supply contract with the Company for the sale of consumer electronic products under the White-Westinghouse trademark in the United States. The termination will be effective on June 30, 2002. Under the terms of the agreement, Kmart's minimum purchase requirements for the period July 1, 2001 through June 30, 2002 will be reduced to 25% of the original requirements for that period. Management does not believe that the termination of the agreement will have a material effect on the financial condition, results of operations or liquidity of the Company. RESULTS OF OPERATIONS The operating results of the Company expressed as a percentage of sales and other revenues are set forth below:
NINE MONTHS ENDED SEPTEMBER 30, 2000 1999 ---- ---- Net Sales............................. 100.0% 100.0% Cost of goods sold.................... 68.4 68.0 ----- ----- Gross Profit.......................... 31.6 32.0 Selling, general and administrative 26.3 26.6 expenses.............................. Other (income) expense - net.......... 4.0 3.9 Equity in net loss of joint ventures.. -- (2.7) ---- ----- Earnings (loss) before income taxes... 1.3 (1.2) Provision (benefit) for income taxes.. .3 (.5) ---- ---- Net earnings (loss)................... 1.0% (.7)% ===== ====
14 15 THREE MONTHS ENDED SEPTEMBER 30, 2000 COMPARED TO THREE MONTHS ENDED SEPTEMBER 30, 1999 SALES AND OTHER REVENUES Sales and other revenues ("Revenues") for the Company decreased by $4.8 million to $199.4 million, a decrease of 2.4% over Revenues for the third quarter of 1999. The change is primarily the result of a $14.5 million decrease in revenues related to electronics inventory liquidated in conjunction with the Newtech asset purchase and a $11.3 million increase in OEM sales.. Also contributing to the net change was a $1.3 million increase in Black & Decker branded kitchen product sales and a $3.7 million decrease in other product sales. A de-emphasis of the Corning brand and elimination of the Fiesta and Campbells brand in conjunction with the Company's restructuring of its sales organization contributed to losses in other branded kitchen sales on top of the already soft retail results. Sales to Walmart accounted for 16.5% and 20.0% of total sales for the 2000 and 1999 periods, respectively. GROSS PROFIT MARGIN Gross profit decreased by $2.1 million. Gross profit margin was 33.5% as a percentage of revenues in 2000 as compared to 33.7% in the 1999 period. The minimal change in the gross profit margin is the result of an increase in raw material costs, primarily oil-based plastic resins partially offset by realized manufacturing cost synergies, productivity gains and a more favorable product mix of distribution sales. There can be no assurance that manufacturing synergies and productivity gains will be able to offset increases in raw material costs in future periods. The Company has taken steps to bring its inventory levels back in line by the end of the year, including reducing production in China and Mexico. The slowdown in production will reduce gross profit margins in the fourth quarter of 2000 as overhead absorption is decreased. SELLING, GENERAL AND ADMINISTRATIVE EXPENSES Selling, general and administrative expenses for the Company increased by $4.4 million in the third quarter of 2000 and increased as a percentage of sales, to 24.1% from 21.4% in the 1999 period. The dollar increase consists primarily of increases in distribution and freight costs of $5.0 million. Additional warehousing and distribution expenses were incurred due to increased finished goods inventory levels and sales volume. Freight expenses increased reflecting the additional sales volume, increase in finished goods inventory and rate increases from the carriers. The impact of the slowdown in production on selling, general and administrative expenses should begin taking effect in the first quarter of 2001. INTEREST EXPENSE Interest expense increased by $948,000 to $8.2 million in 2000. The increase is a result of additional borrowings under the Company's Senior Revolving Credit Facility to meet working capital requirements, primarily associated with the increase in finished goods inventory, as well as due to rising interest rates. TAXES The Company's tax expense is based on the earnings of each of its foreign and domestic operations and it includes such additional U.S. taxes as are applicable to any repatriation of foreign earnings. Foreign earnings, other than in Canada, Mexico and certain other countries in Latin America, are generally taxed at rates lower than in the United States. EARNINGS PER SHARE Basic shares for the three month periods ended September 30, 2000 and 1999 were 23,035,355 and 22,478,303, respectively. Included in diluted shares are common stock equivalents relating to options and warrants of 539,762 and 1,327,338 for the three month periods ended September 30, 2000 and 1999, respectively. 15 16 CONSUMER PRODUCTS NORTH AMERICA ("NORTH AMERICA") North America sales decreased by $10.1 million to $146.1 million in the third quarter of 2000. The change is primarily attributable to a $1.7 million decrease in Black & Decker branded products and a $7.6 million decrease in other branded kitchen electrics. A de-emphasis of the Corning brand and elimination of the Fiesta and Campbells brand in conjunction with the Company's restructuring of its sales organization contributed to losses in other branded kitchen sales on top of the already soft retail results. CONSUMER PRODUCTS INTERNATIONAL ("INTERNATIONAL") Sales for the International segment increased by $3.1 million to $24.9 million or 14% from the 1999 period. The increase is attributed to growth in sales of existing products, as well as the introduction of new products, under the Black & Decker brand name. MANUFACTURING Sales at the Company's manufacturing subsidiaries increased by $21.6 million in the 2000 period to $111.7 million due to a projected increase in Company-wide sales growth and increased OEM sales. Included in 2000 third quarter sales are OEM sales totaling $15.8 million, a $11.3 million increase over the 1999 period. NINE MONTHS ENDED SEPTEMBER 30, 2000 COMPARED TO NINE MONTHS ENDED SEPTEMBER 30, 1999 SALES AND OTHER REVENUES Sales and other revenues ("Revenues") for the Company increased by $45.2 million to $517.5 million, an increase of 9.6% over Revenues for the first nine months of 1999. The change is primarily the result of a $34.7 million increase in Black & Decker and Windmere branded kitchen products. Also contributing to the net increase were increases in OEM sales and professional personal care product sales of $18.7 million and $5.5 million, respectively. The increases were partially offset by a $7.5 million decrease in home environment sales and a $4.9 million decrease in revenues related to electronic products. The decrease in electronic products revenues reflects $17.1 million of electronics inventory liquidated in conjunction with the Newtech asset purchase in 1999. Sales to Walmart accounted for 18.7% and 18.0% of total sales for the 2000 and 1999 periods, respectively. GROSS PROFIT MARGIN Gross profit increased by $12.1 million. Gross profit margin was 31.6% as a percentage of revenues compared to 32.0% in the 1999 period. The minimal change in the gross profit margin is primarily the result of an increase in raw material costs, primarily oil-based resins, partially offset by realized manufacturing cost synergies, productivity gains and a more favorable product mix of distribution sales. There can be no assurance that manufacturing synergies and productivity gains will be able to offset increases in raw material costs in future periods. SELLING, GENERAL AND ADMINISTRATIVE EXPENSES Selling, general and administrative expenses for the Company increased by $10.4 million in the nine month period ended September 30, 2000 yet decreased as a percentage of sales, to 26.3% from 26.6% in the 1999 period. The dollar increase consists primarily of increases in distribution and freight costs of $11.0 million, amortization of $1.8 million of which $1.2 is related to the 1999 Newtech acquisition and $2.2 million in systems related consulting fees, partially offset by a $1.9 million decrease in sales and marketing related expenses including commissions, advertising, promotion and sales materials. Additional warehousing and distribution expenses were incurred due to increased inventory levels and sales volume. Freight expenses increased reflecting both the additional sales volume, increase in finished goods inventory and rate increases from the carriers. EQUITY IN NET LOSS OF JOINT VENTURES In June 1999, the Company wrote down its remaining investment in a joint venture and, therefore, discontinued recording its interest in the joint venture's operations. INTEREST EXPENSE 16 17 Interest expense increased by $2.3 million to $22.2 million in 2000. The increase is a result of additional borrowings under the Company's Senior Revolving Credit Facility to meet working capital requirements, primarily associated with the increase in finished goods inventory, as well as due to rising interest rates. TAXES The Company's tax expense is based on the earnings of each of its foreign and domestic operations and it includes such additional U.S. taxes as are applicable to any repatriation of foreign earnings. Foreign earnings, other than in Canada, Mexico and certain other countries in Latin America, are generally taxed at rates lower than in the United States. EARNINGS PER SHARE Basic shares for the nine month periods ended September 30, 2000 and 1999 were 22,917,044 and 22,290,429, respectively. Included in diluted shares are common stock equivalents relating to options of 971,795 for the nine month period ended September 30, 2000. All common stock equivalents have been excluded from the per share calculation in the nine month period ended September 30, 1999 as their inclusion would have been anti-dilutive. CONSUMER PRODUCTS NORTH AMERICA ("NORTH AMERICA") North America sales increased by $16.2 million or 4.5% to $374.6 million in the first nine months of 2000, excluding $5.9 million in sales to other Company segments. The change is primarily attributable to a $19.3 million increase in Black & Decker and Windmere branded kitchen electrics and $5.5 million in professional personal care product sales, offset by a $7.5 million decrease in home environment product sales. CONSUMER PRODUCTS INTERNATIONAL ("INTERNATIONAL") Sales for the International Segment increased by $15.4 million to $70.6 million or 28.0% from the 1999 period. The increase may be attributed to growth in sales of existing products as well as the introduction of new products, under both the Black & Decker and Windmere brand names. MANUFACTURING Sales at the Company's Manufacturing subsidiaries increased by $108.6 million to $308.0 million in the 2000 period as compared to 1999, primarily as a result of increased Company-wide sales. Included in total sales are OEM sales totaling $47.0 million, a $18.7 million, or 66.2%, increase over the 1999 period. LIQUIDITY AND CAPITAL RESOURCES At September 30, 2000, the Company's working capital was $342.6 million, as compared to $291.8 million at September 30, 1999. At September 30, 2000 and 1999, the Company's current ratio was 4.0 to 1 and 3.0 to 1, respectively, and its quick ratio was 2.0 to 1 and 1.6 to 1, respectively. The change in ratios is primarily the result of the use of the Company's long-term credit facilities to meet short-term working capital requirements. A slowdown in 2000 third quarter sales has resulted in higher than expected inventory levels. Cash balances decreased by $4.0 million for the nine month period ended September 30, 2000. The net cash used in operating activities, which totaled $56.7 million, reflects increased working capital requirements, primarily to finance the increase in finished goods inventories. Higher inventory levels in the first half of the year primarily reflected early production by the Company of certain products due to capacity constraints typically experienced in the back half of the year and the delay by several key retailers of modular sets. In addition, slower than anticipated retail sales in the third quarter caused inventory levels to remain high. The Company is currently taking steps to manage the impact of the increase in inventory levels, including slowing down production in the fourth quarter, in order to reduce the levels by year end. Cash used in investing activities totaled approximately $18.7 million for the period and consists of capital expenditures at the Company's manufacturing facilities. 17 18 Cash provided by financing activities totaled approximately $71.5 million in the period reflecting increased borrowings used to meet working capital requirements, primarily the acquisition and storage of excess finished goods inventories. No provision for U.S. taxes has been made on undistributed earnings of the Company's foreign subsidiaries and joint ventures because management plans to reinvest such earnings in their respective operations or in other foreign operations. Repatriating those earnings or using them in some other manner which would give rise to a U.S. tax liability would reduce after tax earnings and available working capital. Certain of the Company's foreign subsidiaries have approximately $48.9 million in trade finance lines of credit, payable on demand, which are secured by the subsidiaries' tangible and intangible property, and in some cases, a Company guarantee. Outstanding borrowings by the Company's Hong Kong subsidiaries are primarily in U.S. dollars. The Company's primary sources of liquidity are its cash flow from operations and borrowings under its Senior Secured Credit Facilities. The Senior Secured Credit Facilities, as amended, consist of a Senior Secured Revolving Credit Facility, a Tranche A Term Loan and a Tranche B Term Loan. The Company is currently borrowing $118.7 million under the term loan portion of its Senior Secured Credit Facilities. The Senior Secured Revolving Credit Facility as amended, provides for borrowings by the Company of up to $160.0 million. As of November 1, 2000, the Company is borrowing $68.8 million under the Senior Secured Revolving Credit Facility and has approximately $89.2 million available for future cash borrowings, under all its credit facilities. Advances under the Senior Secured Revolving Credit Facility are based upon percentages of outstanding eligible accounts receivable and inventories. In November 2000, the Company entered into a relationship with a consumer packaged goods company to develop, manufacture and distribute new products in the mass market. To date, the Company has entered into a joint development agreement for one product and is in the process of reviewing other opportunities. In conjunction with the development arrangement, the Company will expand its existing manufacturing capacity, exit various non-strategic product lines including certain retail personal care items, and reallocate Company resources resulting in non-recurring non-cash charges totaling $30 to $40 million in the fourth quarter of 2000. The Company has amended its Senior Secured Credit Facility to incorporate the capital requirements of the alliance, which includes an increase in allowable capital expenditures of $25.0 million over the next two years and the modification of certain covenants. The Company's aggregate capital expenditures for the nine months ended September 30, 2000 were $19.4 million. The Company anticipates that the total capital expenditures for 2000 will be approximately $26.0 million, which includes the cost of new tooling. The Company plans to fund those capital expenditures from cash flow from operations and, if necessary, borrowings under the Senior Secured Revolving Credit Facility. At September 30, 2000, debt as a percent of total capitalization was 48.3 percent. The Company's ability to make scheduled payments of principal of, or to pay the interest on, or to refinance, its indebtedness, or to fund planned capital expenditures, product research and development expenses and marketing expenses will depend on its future performance, which, to a certain extent, is subject to general economic, financial, competitive, legislative, regulatory, and international and United States domestic political factors and other factors that are beyond the Company's control. Based upon the current level of operations and anticipated cost savings and revenue growth, management believes that cash flow from operations and available cash, together with available borrowings under the Senior Secured Credit and other facilities, will be adequate to meet the Company's future liquidity needs for at least the next several years. The Company may, however, need to refinance all or a portion of the principal of the indebtedness on or prior to maturity. There can be no assurance that the Company's business will generate sufficient cash flow from operations, that anticipated revenue growth and operating improvements will be realized or that future borrowings will be available under the Senior Secured Credit Facilities in an amount sufficient to enable the Company to service its indebtedness, including the Senior Subordinated Notes, or to fund its other liquidity needs. In addition, there can be no assurance that the Company will be able to effect any such refinancing on commercially reasonable terms or at all. While the Company transacts business predominantly in U.S. dollars and most of its revenues are collected in U.S. dollars, a portion of the Company's costs, such as payroll, rent and indirect operations costs, are denominated in other currencies, such as Chinese renminbi, Hong Kong dollars, Canadian dollars and Mexican pesos. Changes in the relation of these and other currencies to the U.S. dollar will affect the Company's cost of goods sold and operating margins and could result in exchange losses. The impact of future exchange rate fluctuations on the Company's results of operations cannot be accurately predicted. Durable uses the Hong Kong dollar as its functional currency. The Hong Kong dollar has historically been "pegged" to a fixed exchange rate vis-a-vis the U.S. dollar. If the Hong Kong dollar were to be significantly devalued against the U.S. dollar and the exchange rate allowed to fluctuate, the Company could experience significant changes in its currency translation account which would 18 19 impact the Company's future comprehensive income. The Company acquired its Mexican manufacturing facilities and related assets from The Black & Decker Corporation. Because the operations of such facilities are primarily peso-denominated and the revenues derived from products manufactured at such facilities are primarily dollar-denominated, the Company is now subject to fluctuations in the value of the peso. The December 1994 devaluation of the peso had a number of effects on the Mexican economy that adversely affected the financial condition of businesses in Mexico. The devaluation caused the peso value of dollar denominated indebtedness associated with businesses in Mexico to increase significantly, and also greatly increased the rate of inflation, resulting in a sharp rise in nominal interest rates on peso-denominated financing. There can be no assurance that the peso to dollar foreign exchange rate will not be volatile in the future and that financial markets will not have a material adverse effect on the Company's business, financial condition and results of operations. The Company uses interest rate derivatives of one to eight years in duration to reduce the impact of changes in interest rates on its floating rate debt. The notional amounts of the agreements are used to measure interest to be paid or received and do not represent the amount of exposure to credit loss. The differential paid or received on the agreements is recognized as an adjustment of interest expense. Outstanding at September 30, 2000, were interest rate swaps on $160.0 million notional principal amount with a market value of approximately ($1,473,000). The market value represents the amount the Company would have to pay to exit the contracts at September 30, 2000. The Company does not intend to exit the contracts at this time. MANUFACTURING OPERATIONS The Company's products are manufactured primarily at the Company's facilities in China and Mexico. The Company has a significant amount of its assets in China and Mexico, primarily consisting of inventory, equipment and molds. The supply and cost of products, as well as finished products, can be adversely affected, among other reasons, by changes in foreign currency exchange rates, increased import duties, imposition of tariffs, imposition of import quotas, interruptions in sea or air transportation and political or economic changes. The Mexican government exercises significant influence over many aspects of the Mexican economy. Accordingly, the actions of the Mexican government concerning the economy could have a significant effect on private sector entities in general and the Company in particular. In addition, during the 1980s and 1990s, Mexico experienced periods of slow or negative growth, high inflation, significant devaluations of the peso and limited availability of foreign exchange. As a result of the Company's reliance upon manufacturing facilities in Mexico, economic conditions in Mexico could adversely affect the Company's business, financial condition and results of operations. From time to time, the Company explores opportunities to diversify its sourcing and/or production of certain products to other low-cost locations or with other third parties or joint venture partners in order to reduce its dependence on production in China and Mexico and/or reduce its dependence on the Company's existing distribution base. However, at the present time, the Company intends to continue its production in China and Mexico. NEW ACCOUNTING PRONOUNCEMENTS Statement of Financial Accounting Standards (SFAS) 133, Accounting for Derivative Instruments and Hedging Activities, as amended by SFAS 137, Accounting for Derivative Instruments and Hedging Activities -- Deferral of the Effective Date of FASB Statement No. 133, and SFAS 138, Accounting for Certain Derivative Instruments and Certain Hedging Activities, is effective for the Company as of January 1, 2001. The new standards require that an entity recognize all derivatives as either assets or liabilities measured at fair value. The accounting for changes in the fair value of a derivative depends on the use of the derivative. Adoption of these new accounting standards may result in cumulative after-tax reductions in net earnings and other comprehensive income beginning in the first quarter of 2001. The adoption will also impact assets and liabilities recorded on the balance sheet. The Company does not believe that the impact of derivatives currently outstanding will have a material impact on future operations. SEASONALITY The Company's business is highly seasonal, with operating results varying from quarter to quarter. The Company has historically experienced higher revenues in the third and fourth quarters of each fiscal year primarily due to increased demand by customers for products in the late summer for "back-to-school" sales and in the fall for holiday sales. The fourth quarter has now become the Company's largest sales volume quarter. The Company's major sales occur during August through November. Sales are generally 19 20 made on 45 to 90 day terms. Heaviest collections on its open accounts receivable are received from November through March, at which time the Company is in its most liquid state. LEGAL PROCEEDINGS The Company is a defendant in SHERLEIGH ASSOCIATES LLC AND SHERLEIGH ASSOCIATES INC. PROFIT SHARING PLAN, ON THEIR OWN BEHALF AND ON BEHALF OF ALL OTHERS SIMILARLY SITUATED V. WINDMERE-DURABLE HOLDINGS, INC., DAVID M. FRIEDSON, HARRY D. SCHULMAN AND NATIONSBANC MONTGOMERY SECURITIES LLC, 98-2273-CIV-LENARD which was filed in the United States District Court, Southern District of Florida on October 8, 1998. This matter is a class action complaint, which is the consolidation of eight separate class action complaints with substantially similar allegations. By Order dated March 9, 1999, in addition to consolidating the above-referenced cases, the Court provisionally certified the class of plaintiffs who purchased Windmere stock between May 12, 1998 and September 22, 1998, and provisionally certified Sherleigh Associates LLC and Sherleigh Associates, Inc. Profit Sharing Plan as lead plaintiff. On June 30, 1999, a consolidated amended class action complaint was filed. The consolidated amended class action complaint alleges violations of the federal securities laws (including Rule 10b-5 promulgated pursuant to the Securities Exchange Act of 1934, as amended) in connection with the acquisition by the Company of certain product categories of the Household Products Group of the Black & Decker Corporation. Among other things, the plaintiffs allege that the Company and certain of its directors and officers, along with NationsBanc Montgomery Securities LLC, provided false information in connection with a public offering of debt and equity securities. The plaintiffs seek, among other relief, to be awarded compensatory damages, rescission rights, unspecified damages and attorneys' fees and costs. The defendants moved to dismiss the consolidated class action complaint, but such motion was denied. Discovery procedures have been initiated. The Company is currently advancing the legal expenses of the directors and officers who were named as defendants. Such defendants have agreed to repay the Company for all or any portion of such advances to which they are ultimately found not to be entitled pursuant to applicable law. Based on the information currently available to the Company, management does not believe that the indemnification of the officers and directors named as defendants in the above-listed matters will have a material adverse effect on the financial condition, results of operations or liquidity of the Company. However, the actual effects of such indemnification on the Company cannot be finally determined until the amount of such indemnification, if any, is fixed. In connection with the Household Products Group acquisition, the Company also received two derivative demands alleging the breach of the fiduciary duties by certain of the officers and directors of the Company. An independent committee of the Board of Directors is currently conducting an investigation as to whether such derivative actions are in the best interest of the Company. The Company is subject to other legal proceedings and claims which arise in the ordinary course of its business. In the opinion of management, the amount of ultimate liability, if any, in excess of applicable insurance coverage, is not likely to have a material effect on the financial position of the Company. However, as the outcome of litigation or other claims is difficult to predict, significant changes in the estimated exposures could occur. 20 21 ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK The Company's major market risk exposure is to changing interest rates, debt obligations issued at a fixed rate and fluctuations in the currency exchange rates. The Company's policy is to manage interest rate risk through the use of a combination of fixed and floating rate instruments, with respect to both its liquid assets and its debt instruments. Although the Company feels it has mitigated some of its exposure to a rise in interest rates, large increases may have a negative impact on future earnings. The Senior Secured Credit Facilities accrue interest at variable rates; however, the company has purchased interest rate protection for such loans in the form of interest rate swaps and caps. The Company typically maintains a fixed to total debt ratio of approximately 40% - 50%. Fixed-rate debt obligations issued by the Company are not callable until July 31, 2003. The Company is subject to foreign currency exchange rate risk relating to receipts from customers and payments to suppliers in foreign currencies. As a general policy, the Company hedges foreign currency commitments of future payments and receipts by purchasing foreign currency-forward and option contracts. As of June 30, 2000, the notional value of such derivatives was approximately $18.3 million, with no significant unrealized gain or loss. The majority of the Company's receipts and expenditures are contracted in U.S. dollars and the Company does not consider the market risk exposure relating to currency exchange to be material at this time. Extreme volatility in certain currencies could, however, have a negative material impact on future operations. 21 22 PART II - OTHER INFORMATION ITEM 1. LEGAL PROCEEDINGS See "Legal Proceedings" in Part I, Item 2 of this report. ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K. (a) Exhibits: 3.1 Second Amended and Restated Articles of Incorporation of the Company filed with the Florida Secretary of State on May 10, 2000. 10.1 Amendment No. 1 to Amended and Restated Credit Agreement by and among the Company, each of its subsidiaries party thereto, each of the lenders party thereto and Bank of America, N.A. (f/k/a Nationsbank, National Association), as agent for the lenders, dated April 29, 1999. 10.2 Amendment No. 2 to Amended and Restated Credit Agreement by and among the Company, each of its subsidiaries party thereto, each of the lenders party thereto and Bank of America, N.A. (f/k/a Nationsbank, National Association), as agent for the lenders, dated December 29, 1998. 10.3 Amendment No. 3 to Amended and Restated Credit Agreement by and among the Company, each of its subsidiaries party thereto, each of the lenders party thereto and Bank of America, N.A., as agent for the lenders, dated February 17, 2000. 10.4 Amendment No. 4 to Amended and Restated Credit Agreement by and among the Company, each of its subsidiaries party thereto, each of the lenders party thereto and Bank of America, N.A., as agent for the lenders, dated June 30, 2000. 10.5 Amendment No. 5 to Amended and Restated Credit Agreement by and among the Company, each of its subsidiaries party thereto, each of the lenders party thereto and Bank of America, N.A., as agent for the lenders, dated June 30, 2000. 10.6 Amendment No. 6 to Amended and Restated Credit Agreement by and among the Company, each of its subsidiaries party thereto, each of the lenders party thereto and Bank of America, N.A., as agent for the lenders, dated November 9, 2000. 10.7* Employment Agreement dated July 1, 2000 between Applica Consumer Products, Inc. and Michael J. Michienzi, President and General Manager, Sales and Marketing of Applica Consumer Products, Inc. 10.8* Employment Agreement dated July 1, 2000 between Applica Consumer Products, Inc. and Richard J. Gagliano, Senior Vice President, Manufacturing and Engineering of Applica Consumer Products, Inc. 10.9* Employment Agreement dated July 1, 2000 between the Company and Terry L. Polistina, Senior Vice President, Finance and Administration. 27.1 Financial Data Schedule (filed electronically) (b) Reports on Form 8-K: None - ----------- * These exhibits are management contracts or compensatory plans or arrangements. 22 23 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. APPLICA INCORPORATED (Registrant) November 14, 2000 By: /s/ HARRY D. SCHULMAN ________________________________________ Harry D. Schulman CHIEF OPERATING OFFICER, CHIEF FINANCIAL OFFICER AND SECRETARY (Duly authorized to sign on behalf of the Registrant) November 14, 2000 By: /s/ TERRY L. POLISTINA ________________________________________ Terry L. Polistina SENIOR VICE PRESIDENT - FINANCE AND ADMINISTRATION (Duly authorized to sign on behalf of the Registrant) 23 EX-3.1 2 g65027ex3-1.txt SECOND AMDED & RESTD ARTICLES OF INC 5/10/00 1 EXHIBIT 3.1 SECOND AMENDED AND RESTATED ARTICLES OF INCORPORATION OF WINDMERE-DURABLE HOLDINGS, INC. Pursuant to the provisions of Sections 607.1006 and 607.1007 of the Florida Business Corporation Act, the undersigned corporation hereby adopts the following Second Amended and Restated Articles of Incorporation: ARTICLE ONE The name of this corporation shall be: APPLICA INCORPORATED (the "Corporation"). ARTICLE TWO The purpose for which the Corporation is organized is to transact any or all lawful business for which corporations may be incorporated under the laws of the State of Florida. The Corporation shall have all of the general and additional powers and rights now or hereafter conferred upon it by law. ARTICLE THREE The maximum number of shares of stock which the Corporation is authorized to have at any time is 75,000,000 shares of common stock, having a par value of $.10 per share, the consideration for the issuance of which shall be fixed by the Board of Directors. The Corporation shall have the power to issue the whole or any part of the shares of its capital stock as partly paid, subject to calls thereon until the whole thereof shall have been paid in full; this is to be determined by the Board of Directors. All holders of stock shall be entitled to vote the same whether said stock be fully or partially paid unless determined otherwise by the Board of Directors at or before the time of the issuance thereof. ARTICLE FOUR The Corporation shall have permanent and perpetual existence. 2 ARTICLE FIVE The post office address of the principal office of the Corporation shall be 5980 Miami Lakes Drive, Miami Lakes, Florida 33014, but other offices for the transaction of business may be located wherever the Board of Directors may deem necessary or fit. ARTICLE SIX SECTION 1. NUMBER, ELECTION AND TERM OF OFFICE. The business of the Corporation shall be managed by a Board of Directors who need not be shareholders of the Corporation. The number of directors shall be 15, which number may be increased or decreased from time to time by resolution of the majority of the Board of Directors, but shall not be less than seven nor more than 15. The Board of Directors shall be divided into three classes, designated Class I, Class II and Class III, as nearly equal in number as possible. The terms of office of directors of one class shall expire at each annual meeting of shareholders, and in all cases as to each director until his successor shall be elected and shall qualify, or until his earlier resignation, removal from office, death or incapacity. If the number of directors is changed, any increase or decrease in directors shall be apportioned among the classes so as to maintain all classes as equal in number as possible, and any additional director elected to any class shall hold office for a term which shall coincide with the terms of the other directors in such class. No decrease in the number of directors shall shorten the term of any incumbent director. At each annual meeting, the number of directors equal to the number of directors of the class whose term expires at the time of such meeting (or, if different, the number of directors properly nominated and qualified for election) shall be elected to hold office until the third succeeding annual meeting of shareholders after their election. At each annual meeting of shareholders, the nominees receiving the highest number of votes will be elected. SECTION 2. REMOVAL. Any director or the entire Board of Directors may be removed; however, such removal must be for cause and must be approved as set forth in this Section. Except as may otherwise be provided by law, cause for removal shall be construed to exist only if: (a) the director whose removal is proposed has been convicted of a felony by a court of competent jurisdiction; or (b) such director has been adjudicated by a court of competent jurisdiction to be liable for negligence or misconduct in the performance of his duty to the Corporation in a matter of substantial importance to the Corporation and such adjudication is no longer subject to direct appeal. Removal for cause, as defined in (a) and (b) above, must be approved by at least a majority vote of the shares of the Corporation then entitled to vote at an election for that director or by at least a majority of the total number of directors. Any action for the removal of a director must be brought within one year of such conviction or adjudication. 2 3 SECTION 3. VACANCIES. Any vacancies in the Board of Directors resulting from death, resignation, retirement, removal from office, the creation of a new directorship by an increase in the authorized number of directors, or otherwise shall be filled by a majority vote of the directors then in office, though less than a quorum of the entire Board of Directors. Directors so chosen to fill any vacancy shall hold office for a term expiring at the nest Annual Meeting of Shareholders. SECTION 4. AMENDMENT, ALTERATION, REPEAL, ETC. Notwithstanding anything contained in these Articles of Incorporation to the contrary, the affirmative vote of the holders of at least 67% of the shares of the Corporation then entitled to vote in the election of directors shall be required to amend, alter or repeal, or to adopt any provision inconsistent with, this Article Six. ARTICLE SEVEN Upon the election of the Board of Directors by the shareholders, such Board shall manage the business and affairs of the Corporation without the need of further authorization from the shareholders, except as otherwise provided by law. An action of the Board may be rescinded only upon a vote of shareholders having two-thirds (2/3) of the stock of the Corporation which may at any time be actually issued, unless otherwise provided for by the Bylaws. ARTICLE EIGHT No shareholder of the Corporation shall, because of his ownership of stock, have a preemptive or other right to purchase, subscribe for, or take any part of any stock or any part of the notes, debentures, bonds, or other securities convertible into or carrying options or warrants to purchase stock of the Corporation issued, optioned, or sold by it after its incorporation. Any part of the capital stock and any part of the notes, debentures, bonds or other securities convertible into or carrying options or warranties to purchase stock of the Corporation authorized by this Articles of Incorporation or by amended articles, duly filed, may at any time be issued, optioned for sale, and sold or disposed of by the Corporation pursuant to resolution of the Board of Directors to such persons and upon such terms as may to such Board seem proper without first offering such stock or securities or any part thereof to existing shareholders. ARTICLE NINE SECTION 1. (a) In addition to any affirmative vote required by law or these Articles of Incorporation, and except as otherwise expressly provided in paragraph 2 of this Article Nine: (i) any merger or consolidation of the Corporation or any Subsidiary (as hereinafter defined) with (a) any Interested Shareholder (as hereinafter defined) or (b) any other corporation 3 4 (whether or not itself an Interested Shareholder) which is, or after such merger or consolidation would be, an Affiliate or Associate (as hereinafter defined) of an Interested Shareholder; or (ii) any sale, lease, exchange, mortgage, pledge, transfer or other disposition (in one transaction or a series of transactions) to or with any Interested Shareholder or any Affiliate or Associate of any Interested Shareholder of any assets of the Corporation or any Subsidiary having an aggregate Fair Market Value (as hereinafter defined) of $4,000,000 or more; or (iii) the issuance or transfer by the Corporation or any Subsidiary (in one transaction or a series of transactions) of any securities of the Corporation or any Subsidiary to any Interested Shareholder or to any Affiliate or Associate of any Interested Shareholder in exchange for cash, securities or other property (or a combination thereof) having an aggregate Fair Market Value of $4,000,000; or (iv) the adoption of any plan or proposal for the liquidation or dissolution of the Corporation proposed by or on behalf of an Interested Shareholder or any Affiliate or Associate of any Interested Shareholder; or (v) any reclassification of securities (including any reverse stock split), or recapitalization of the corporation, or any merger or consolidation of the Corporation with any of its Subsidiaries or any other transaction (whether or not with or into or otherwise involving an Interested Shareholder) which has the effect, directly or indirectly, of increasing the proportionate share of the outstanding shares of any class of equity or convertible securities of the Corporation or any Subsidiary which is directly or indirectly owned by any Interested Shareholder or any Affiliate or Associate of any of any Interested Shareholder; shall require the affirmative vote of the holders of at least eighty percent (80%) of the then-outstanding shares of capital stock of the Corporation entitled to vote generally in the election of directors, voting together as a single class. Such affirmative vote shall be required notwithstanding the fact that no vote may be required, or that a lesser percentage may be specified, by law or in any agreement with any national securities exchange or otherwise. (b) The term "Business Combination" as used in this Article Nine shall mean any transaction which is referred to in any one or more of clauses (i) through (v) of subparagraph (a) of this paragraph 1. SECTION 2. The provisions of paragraph 1 of this Article Nine shall not be applicable to any particular Business Combination, and such Business Combination shall require only such affirmative vote as is required by law, any other provision of these Articles of Incorporation, any agreement with any national securities exchange or otherwise, but not the vote called for in subparagraph 1(a) of this Article Nine, if all of the conditions specified in EITHER of the following subparagraphs (a) or (b) are met: 4 5 (a) The Business Combination shall have been approved by both (i) a majority of the Continuing Directors (as hereinafter defined), even if the Continuing Directors do not constitute a quorum of the entire Board of Directors, it being understood that this condition shall not be capable of satisfaction unless there is at least one Continuing Director; and (ii) the affirmative vote of the holders of at least fifty-one percent (51%) of the Voting Stock who are Unaffiliated Shareholders (as hereinafter defined). (b) All of the following conditions shall have been met: (i) The consideration to be received by holders of shares of a particular class of outstanding Voting Stock shall be in cash or in the same form as the Interested Shareholder has paid for shares of such class of Voting Stock within the two-year period ending on and including the date on which the Interested Shareholder became an Interested Shareholder (the "Determination Date"). If, within such two-year period, the Interested Shareholder has paid for shares of any class of Voting Stock with varying forms of consideration, the form of consideration to be received per share by holders of shares of such class of Voting Stock shall be either cash or the form used to acquire the largest number of shares of such class of Voting Stock acquired by the Interested Shareholder within such two-year period. (ii) The aggregate amount of (x) the cash and (y) the Fair Market Value, as of the date (the "Consummation Date") of the consummation of the Business Combination, of the consideration other than cash to be received per share by holders of Voting Stock in such Business Combination shall be at least equal to the higher of the following (it being intended that the requirements of this subparagraph (b)(ii) shall be required to be met with respect to all shares of Voting Stock outstanding whether or not the Interested Shareholder or any Affiliate or Associate of such Interested Shareholder has previously acquired any shares of Voting Stock: (A) (if applicable) the highest per share price (including any brokerage commissions, transfer taxes and soliciting dealers' fees) paid by the Interested Shareholder or by any Affiliate or Associate of such Interested Shareholder for any shares of Voting Stock acquired by it within the two-year period immediately prior to the date of the first public announcement of the proposal of the Business Combination (the "Announcement Date") or in the transaction in which it became an Interested Shareholder, whichever is higher; (B) the Fair Market Value per share of Voting Stock on the Announcement Date or on the Determination Date, whichever is higher; or (C) the highest preferential amount per share, if any, to which the holders of shares of such class of Voting Stock are entitled in the event of any voluntary or involuntary liquidation, dissolution or winding up of the corporation. 5 6 (iii) After such Interested Shareholder has become an Interested Shareholder and prior to the consummation of such Business Combination: (a) there shall have been (I) no failure to declare and pay at the regular rate therefor any full quarterly dividends (whether or not cumulative) on the outstanding shares of any class of the corporation's stock, except as approved by a majority of the Continuing Directors, (II) no reduction in the annual rate of dividends paid on the Common Stock (except as necessary to reflect any subdivision of the Common Stock), except as approved by a majority of the Continuing Directors, and (III) an increase in the annual rate of dividends paid on any class of the corporation's Voting Stock as necessary to reflect any reclassification (including any reverse stock split), recapitalization, reorganization or any similar transaction which has the effect of reducing the number of outstanding shares of the Common Stock, unless the failure to so increase such annual rate is approved by a majority of the Continuing Directors; and (b) such Interested Shareholder shall not have become the beneficial owner of any additional shares of Voting Stock except as part of the transaction which results in such Interested Shareholder becoming an Interested Shareholder. (iv) After such Interested Shareholder has become an Interested Shareholder, such Interested Shareholder shall not have received the benefit, directly or indirectly (except proportionately, solely in such Interested Shareholder's capacity as a shareholder of the corporation), of any loans, advances, guarantees, pledges or other financial assistance or any tax credits or other tax advantages provided by the corporation, whether in anticipation of or in connection with such Business Combination or otherwise. (v) A proxy or information statement describing the proposed Business Combination and complying with the requirements of the Securities Exchange Act of 1934, as amended, and the rules and regulations thereunder (or any subsequent provisions replacing such Act, rules or regulations) shall be mailed to all shareholders of the Corporation at least 30 days prior to the consummation of such Business Combination (whether or not such proxy or information statement is required to be mailed pursuant to such Act or subsequent provisions). (c) For the purposes of this Article Nine: (i) A "person" shall mean any individual, partnership, firm, corporation or other entity. (ii) "Interested Shareholder" shall mean any person (other than the Corporation or any Subsidiary) who or which: (A) is the beneficial owner of more than ten percent of the voting power of the outstanding Voting Stock; or 6 7 (B) is an Affiliate or Associate of the Corporation and at any time within the two-year period immediately prior to the date in question was the beneficial owner of ten percent or more of the voting power of the then outstanding Voting Stock; or (C) is an assignee of or has otherwise succeeded to any shares of the Voting Stock which were at any time within the two-year period immediately prior to the date in question beneficially owned by any Interested Shareholder, if such assignment or succession shall have occurred in the course of a transaction or series of transactions not involving a public offering within the meaning of the Securities Act of 1933, as amended. (iii) "Beneficial Owner" shall have the meaning assigned to such term in Rule 13d-3 of the General Rules and Regulations under the Securities Exchange Act of 1934, as amended, as in effect on January 1, 1984. (iv) For the purposes of determining whether a person is an Interested Shareholder pursuant to subsection (ii) of this subparagraph (c), the number of shares of Voting Stock deemed to be outstanding shall include shares deemed owned through application of subsection (iii) of this subparagraph (c) but shall not include any other shares of Voting Stock which may be issuable pursuant to any agreement, arrangement or understanding, or upon exercise of conversion rights, warrants or options or otherwise. (v) "Affiliate" or "Associate" shall mean the respective meanings ascribed to such terms in Rule 12b-2 of the General Rules and Regulations under the Securities Exchange Act of 1934, as amended, as in effect on January 1, 1984. (vi) "Subsidiary" means any corporation of which a majority of any class of equity security is owned, directly or indirectly, by the Corporation; provided, however, that for the purposes of the definition of Interested Shareholder set forth in subsection (ii) of this subparagraph (c), the term "Subsidiary" shall mean only a corporation of which a majority of each class of equity security is owned, directly or indirectly, by the Corporation. (vii) "Continuing Director" means any member of the Board of Directors of the Corporation who (i) is neither the Interested Shareholder involved in the Business Combination as to which a vote of Continuing Directors is provided hereunder, nor an Affiliate, Associate, employee, agent or nominee of such Interested Shareholder, or the relative of any of the foregoing, and (ii) was either (a) a member of the Board of Directors prior to the time that such Interested Shareholder became an Interested Shareholder, or (b) a successor of a Continuing Director described in clause (a) who is recommended to succeed a Continuing Director by the affirmative vote of a majority of Continuing Directors then on the Board of Directors. 7 8 (viii) "Fair Market Value" means: (a) in the case of stock, the highest closing sale price during the 30-day period immediately preceding the date in question of a share of such stock on the Composite Tape for New York Stock Exchange - Listed Stocks, or, if such stock is not quoted on the Composite Tape, on the New York Stock Exchange, or, if such stock is not listed on such Exchange, on the principal United States securities exchange registered under the Securities Exchange Act of 1934, as amended, on which such stock is listed, or, if such stock is not listed on any such exchange, the highest closing bid quotation with respect to a share of such stock during the 30-day period preceding the date in question on the National Association of Securities Dealers, Inc. Automated Quotations System or any system then in use, or if no such quotations are available, the fair market value on the date in question of a share of such stock as determined by a majority of the Continuing Directors in good faith; and (b) in the case of property other than cash or stock, the fair market value of such property on the date in question is determined by a majority of the Continuing Directors in good faith. (ix) "Unaffiliated Shareholder" means any shareholder of the Corporation who is neither the Interested Shareholder involved in the Business Combination as to which a vote of Unaffiliated Shareholders is provided hereunder, nor an Affiliate, Associate, employee, agent or nominee of such Interested Shareholder, or a relative of any of the foregoing. (x) "Voting Stock" means all outstanding shares of capital stock of the Corporation or another corporation entitled to vote generally in the election of directors, and each reference to a proportion of shares of Voting Stock shall refer to such proportion of the votes entitled to be cast by such shares. (xi) In the event of any Business Combination in which the Corporation survives, the phrase "consideration other than cash to be received" as used in subsection 2(b)(ii) of this Article Nine shall include the shares of Common Stock and/or the shares of any other class of outstanding Voting Stock retained by the holders of such shares. (d) A majority of the Continuing Directors, if any, constitute a majority of the total number of directors (whether or not there exist any vacancies in directorships at the time any such determination as is hereinafter in this subparagraph (d) specified is to be made by the Board) shall have the power and fiduciary duty to all of the shareholders to determine, on the basis of information known to them after reasonable inquiry, all facts necessary to determine compliance with this Article Nine, including, without limitation, (1) whether a person is an Interested Shareholder or an Unaffiliated Shareholder; (2) the number of shares of Voting Stock beneficially owned by any person; (3) whether a person is an Affiliate or Associate of another; (4) whether the applicable conditions set forth in subsection (ii) of subparagraph 2(b) have been met with respect to any Business Combination; and (5) whether the assets 8 9 which are the subject of any Business Combination referred to in subsection (ii) of subparagraph 1(a) have, or the consideration to be received for the issuance or transfer of securities by the Corporation or any Subsidiary in any Business Combination referred to in subsection (iii) in subparagraph 1(a), has an aggregate Fair Market Value of $4,000,000 or more. (e) Nothing contained in this Article Nine shall be construed to relieve any Interested Shareholder from any fiduciary obligation imposed by law. (f) Notwithstanding any other provisions of these Articles of Incorporation or any provision of law which might otherwise permit a lesser vote or no vote, but in addition to any affirmative vote of the holders of any particular class or series of the Voting Stock required by law, these Articles of Incorporation or any Preferred Stock designation, the affirmative vote of the holders of at least 80 percent of the voting power of all of the then outstanding shares of the Voting Stock, voting together as a single class, shall be required to alter, amend or repeal, or to adopt any provisions inconsistent with, this Article Nine. ARTICLE TEN SECTION 1. Any action required or permitted to be taken by the shareholders of the Corporation must be taken at a duly called annual or special meeting of shareholders of the Corporation. No shareholder action may be taken by a consent in writing. SECTION 2. The Corporation shall call a special meeting upon the written request of the Chairman, the President, a majority of the Board of Directors acting with or without a meeting, or the holders of not less than ten percent (10%) of all the shares entitled to vote at the meeting. SECTION 3. Upon request in writing delivered either in person or by registered or certified mail to the Secretary of the Corporation by the persons herein entitled to request the calling of a special meeting of shareholders, the Board of Directors shall fix the Record Date for and the place, date and hour of the meeting, and the Secretary shall give notice of such meeting and the place, day and hour and the purpose or purposes thereof to the shareholders entitled thereto. SECTION 4. Notwithstanding any other provisions of the Articles of Incorporation or the Bylaws of the Corporation (and notwithstanding the fact that some lesser percentage may be specified by law, the Articles of Incorporation or the Bylaws of the Corporation), the provisions of this Article Ten may be altered, amended or repealed, or a conflicting amendment adopted only by the affirmative vote of 80% or more of the voting power of all the shares of common stock of the Corporation entitled to vote generally in the election of directors. 9 EX-10.1 3 g65027ex10-1.txt AMDT #1 TO AMDED & RESTD CREDIT AGRMT 4/29/99 1 EXHIBIT 10.1 AMENDMENT NO. 1 TO AMENDED AND RESTATED CREDIT AGREEMENT THIS AMENDMENT NO. 1 TO AMENDED AND RESTATED CREDIT AGREEMENT (this "Agreement") is made and entered into as of this 29th day of December, 1998 by and between WINDMERE-DURABLE HOLDINGS, INC., a Florida corporation (the "Borrower"), EACH OF THE SUBSIDIARIES OF THE BORROWER SIGNATORY HERETO (collectively, the "Guarantors"), the LENDERS SIGNATORY HERETO (the "Lenders") and NATIONSBANK, NATIONAL ASSOCIATION, a national banking association organized and existing under the laws of the United States, in its capacity as agent for the Lenders (the "Agent"). W I T N E S S E T H: WHEREAS, the Borrower, the Agent and the Lenders have entered into an Amended and Restated Credit Agreement dated as of August 7, 1998 (as amended hereby and as from time to time further amended, supplemented or replaced, the "Credit Agreement"); WHEREAS, the Borrower has requested and the Agent and the Lenders have agreed, subject to the terms and conditions of this Agreement, to amend certain financial covenants contained in the Credit Agreement; NOW, THEREFORE, in consideration of the mutual covenants, promises and conditions herein set forth, it is hereby agreed as follows: 1. DEFINITIONS. The term "Credit Agreement" as used herein and in the Credit Agreement and the other Loan Documents shall mean the Credit Agreement as hereby amended and as from time to time further amended or modified. Unless the context otherwise requires, all capitalized terms used herein without definition shall have the respective meanings provided therefor in the Credit Agreement. 2. AMENDMENT TO CREDIT AGREEMENT. Subject to the terms and conditions set forth herein, the Credit Agreement is hereby amended as follows: (a) The definition of "Applicable Margin" in Section 1.2 of the Credit Agreement is hereby deleted and the following new definition is inserted in replacement thereof: "Applicable Margin" means that percent per annum set forth below, which shall be based upon the Consolidated Leverage Ratio for the period of four consecutive fiscal quarters most recently ended as specified below: 2
Applicable Margin for Applicable Applicable Applicable Margin Eurodollar Margin for Base Margin for Base for Eurodollar Rate Rate Loans Rate Loans that Rate Loans that Loans that are that are are Revolving are Segments of Revolving Loans or Segments of Loans or Term Loan B Consolidated Segments of Term Term Loan B Segments of Term and Term Tier Leverage Ratio Loan A and Term Loan C Loan A Loan C ---------- ------------------ --------------------- ---------------- ------------------ ------------------ I Equal to or less 1.75% 2.75% .75% 1.75% than 4.00 to 1.00 ---------- ------------------ --------------------- ---------------- ------------------ ------------------ II Greater than 2.00% 2.75% 1.00% 1.75% 4.00 to 1.00 and less than or equal to 4.50 to 1.00 ---------- ------------------ --------------------- ---------------- ------------------ ------------------ III Greater than 2.25% 3.00% 1.25% 2.00% 4.50 to 1.00 and less than or equal to 5.00 to 1.00 ---------- ------------------ --------------------- ---------------- ------------------ ------------------ IV Greater than 2.50% 3.00% 1.50% 2.00% 5.00 to 1.00 and less than or equal to 6.00 to 1.00 ---------- ------------------ --------------------- ---------------- ------------------ ------------------ V Greater than 2.75% 3.375 1.50% 2.00% 6.00 to 1.00 ---------- ------------------ --------------------- ---------------- ------------------ ------------------
The Applicable Margin shall be established at the end of each fiscal quarter of the Borrower (each, a "Determination Date"). Any change in the Applicable Margin following each Determination Date shall be determined based upon the computations set forth in the certificate furnished to the Agent pursuant to SECTION 9.1(A) and (B) hereof, subject to review and confirmation of such computations by the Agent, and shall be effective (the "Effective Date") commencing on the first Business Day next following the date such certificate is received (or, if earlier, the date such certificate was required to be delivered) until the first Business Day following the date on which a new certificate is delivered or is required to be delivered, whichever shall first occur; PROVIDED HOWEVER, if the Borrower shall fail to deliver any such certificate within the time period required by SECTION 9.1 hereof, then the Applicable Margin shall be Tier V until the appropriate certificate is so delivered; and PROVIDED FURTHER, that from December 30, 1998 through the Effective Date first occurring after December 31, 1999, the Applicable Margin shall be as set forth in Tier V. (b) Section 3.1 of the Credit Agreement is hereby amended by adding a new clause (d) at the end thereof which shall read as follows: 2 3 (d) LIMITATION ON REVOLVING CREDIT OUTSTANDINGS. In addition to the limitation on Revolving Credit Outstandings set forth elsewhere in this Agreement, the Borrower agrees that from the Closing Date through December 31, 1999 it shall not permit the amount of Revolving Credit Outstandings on any date to exceed $110,000,000; provided that this limitation on Revolving Credit Outstandings shall remain in place on and after December 31, 1999 if and for so long as any Event of Default has occurred and is continuing. If at any time there shall be Revolving Credit Outstandings in excess of $110,000,000, the Borrower shall immediately make such payments and prepayments as shall be necessary to comply with the restriction contained in this section. (c) Section 10.22(b) of the Credit Agreement is hereby deleted and the following new subsection (b) is inserted in replacement thereof: (b) CONSOLIDATED FIXED CHARGE COVERAGE RATIO. Permit Consolidated Fixed Charge Coverage Ratio to be less than the ratio indicated below at any time during the period indicated: Closing Date through March 31, 1999 .80 to 1.00 April 1, 1999 through June 30, 1999 .60 to 1.00 July 1, 1999 through September 30, 1999 .75 to 1.00 October 1, 1999 through September 30, 2000 1.10 to 1.00 October 1, 2000 and thereafter 1.50 to 1.00 (d) Section 10.22(c) of the Credit Agreement is hereby deleted and the following new subsection (c) is inserted in replacement thereof: (c) CONSOLIDATED INTEREST COVERAGE RATIO. Permit Consolidated Interest Coverage Ratio to be less than the ratio indicated below at any time during the period indicated: 3 4 Closing Date through March 31, 1999 1.80 to 1.00 April 1, 1999 through June 30, 1999 1.60 to 1.00 July 1, 1999 through September 30, 1999 1.70 to 1.00 October 1, 1999 through September 30, 2000 2.25 to 1.00 October 1, 2000 and thereafter 3.00 to 1.00 (e) Section 10.22(d) of the Credit Agreement is hereby deleted and the following new subsection (d) is inserted in replacement thereof: (d) CONSOLIDATED LEVERAGE RATIO. Permit Consolidated Leverage Ratio to be greater than the ratio indicated below at any time during the period indicated: April 1, 1999 through September 30, 1999 6.25 to 1.00 October 1, 1999 through March 31, 2000 5.00 to 1.00 April 1, 2000 through September 30, 2000 4.50 to 1.00 October 1, 2000 through June 30, 2001 3.00 to 1.00 July 1, 2001 through September 30, 2001 3.50 to 1.00 October 1, 2001 and thereafter 3.00 to 1.00 4 5 (f) Section 10.22(e) of the Credit Agreement is hereby deleted and the following new subsection (e) is inserted in replacement thereof: (e) CONSOLIDATED EBITDA. Permit Consolidated EBITDA to be less than the amount indicated below at the date indicated: Fourth fiscal quarter end 1998 $36,000,000 First fiscal quarter end 1999 $39,000,000 3. AMENDMENT FEE. The Borrower agrees to pay to the Agent for the benefit of the Lenders signatory hereto on the effective date of this Agreement an amendment fee (the "Amendment Fee") equal to .20% of the aggregate Commitments of the Lenders signatory hereto, which fee shall be earned as of such date and shall be allocated among the Lenders based upon their respective Commitment. 4. BORROWER'S REPRESENTATIONS AND WARRANTIES. The Borrower hereby represents, warrants and certifies that: (a) The representations and warranties made by it in Article VIII of the Credit Agreement (other than Section 8.6(b) to the extent certain material adverse changes in the condition of the Borrower and its Subsidiaries have been disclosed to the Agent and the Lenders) are true on and as of the date hereof before and after giving effect to this Agreement except that the financial statements referred to in Section 8.6(c) shall be those most recently furnished to each Lender pursuant to Section 9.1(a) and (b) of the Credit Agreement; (b) The Borrower and each Guarantor has the power and authority to execute and perform this Agreement and has taken all action required for the lawful execution, delivery and performance thereof. (c) There has been no material adverse change in the condition, financial or otherwise, of the Borrower and its Subsidiaries since the date of the most recent financial reports of the Borrower delivered under Section 9.1 of the Credit Agreement; (d) No event has occurred and no condition exists which, upon the consummation of the transaction contemplated hereby, constituted a Default or an Event of Default on the part of the Borrower under the Credit Agreement or the Notes either immediately or with the lapse of time or the giving of notice, or both. 5. ENTIRE AGREEMENT. This Agreement sets forth the entire understanding and agreement of the parties hereto in relation to the subject matter hereof and supersedes any prior negotiations and agreements among the parties relative to such subject matter. None of the terms or conditions of this Agreement may be changed, modified, waived or canceled orally or otherwise, except by writing, signed by all the parties hereto, specifying such change, modification, waiver or cancellation of such terms or conditions, or of any proceeding or succeeding breach thereof. 5 6 6. FULL FORCE AND EFFECT OF AGREEMENT. Except as hereby specifically amended, modified or supplemented, the Credit Agreement and all of the other Loan Documents are hereby confirmed and ratified in all respects and shall remain in full force and effect according to their respective terms. 7. COUNTERPARTS. This Agreement may be executed in any number of counterparts and all the counterparts taken together shall be deemed to constitute one and the same instrument. 8. ENFORCEABILITY. Should any one or more of the provisions of this Agreement be determined to be illegal or unenforceable as to one or more of the parties hereto, all other provisions nevertheless shall remain effective and binding on the parties hereto. 6 7 IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed by their duly authorized officers, all as of the day and year first above written. BORROWER: WINDMERE-DURABLE HOLDINGS, INC. By: /s/ Cindy Solovci ------------------------------- Name: Cindy Solovci ------------------------------- Title: Treasurer ------------------------------ AGENT: NATIONSBANK, NATIONAL ASSOCIATION, as Agent for the Lenders By: /s/ Andrew M. Airheart ------------------------------- Name: Andrew M. Airheart ------------------------------- Title: Senior Vice President ------------------------------ LENDERS: NATIONSBANK, NATIONAL ASSOCIATION By: /s/ Andrew M. Airheart ------------------------------- Name: Andrew M. Airheart ------------------------------- Title: Senior Vice President ------------------------------ ABN AMRO BANK N.V. By: /s/ Deborah Day Orozco ------------------------------- Name: Deborah Day Orozco ------------------------------- Title: Vice President ------------------------------ By: /s/ Robert Lozano ------------------------------- Name: Robert Lozano ------------------------------- Title: Vice President ------------------------------ 7 8 BANKATLANTIC By: /s/ Ana C. Bolduc ------------------------------- Name: Ana C. Bolduc ------------------------------- Title: Senior Vice President ------------------------------ BANK LEUMI LE-ISRAEL By: /s/ Joseph F. Realini ------------------------------- Name: Joseph F. Realini ------------------------------- Title: Vice President ------------------------------ SCOTIABANC INC. By: /s/ Frank F. Sandler ------------------------------- Name: Frank S. Sandler ------------------------------- Title: Relationship Manager ------------------------------ PARIBAS By: ------------------------------- Name: ------------------------------- Title: ------------------------------ By: ------------------------------- Name: ------------------------------- Title: ------------------------------ BARCLAYS BANK PLC By: /s/ Gregory Roll ------------------------------- Name: Gregory Roll ------------------------------- Title: Vice President ------------------------------ 8 9 BHF-BANK ATKIENGESELLSCHAFT By: ------------------------------- Name: ------------------------------- Title: ------------------------------ CREDITANSTALT CORPORATE FINANCE, INC. By: ------------------------------- Name: ------------------------------- Title: ------------------------------ By: ------------------------------- Name: ------------------------------- Title: ------------------------------ ERSTE BANK NEW YORK By: /s/ Arcinee Hovanessian ------------------------------- Name: Arcinee Hovanessian ------------------------------- Title: Vice President ------------------------------ By: /s/ John S. Runnion ------------------------------- Name: John S. Runnion ------------------------------- Title: First Vice President ------------------------------ FLEET BANK, N.A. By: /s/ Thomas J. Levy ------------------------------- Name: Thomas J. Levy ------------------------------- Title: Vice President ------------------------------ IMPERIAL BANK, A CALIFORNIA BANKING CORPORATION By: /s/ Jamie Hamey ------------------------------- Name: Jamie Hamey ------------------------------- Title: Vice President ------------------------------ 9 10 THE LONG-TERM CREDIT BANK OF JAPAN, LTD. By: /s/ Akihiko Haruyama ------------------------------- Name: Akihiko Haruyama ------------------------------- Title: Head of Southeast Region ------------------------------ THE MITSUBISHI TRUST AND BANKING CORPORATION By: /s/ Toshihiro Hayashi ------------------------------- Name: Toshihiro Hayashi ------------------------------- Title: Senior Vice President ------------------------------ NATIONAL BANK OF CANADA By: /s/ Michael Bloomenfeld ------------------------------- Name: Michael Bloomenfeld ------------------------------- Title: Vice President & Manager ------------------------------ SANWA BUSINESS CREDIT CORPORATION By: /s/ Stanley Kaminski ------------------------------- Name: Stanley Kaminski ------------------------------- Title: Vice President ------------------------------ SUMMIT BANK By: ------------------------------- Name: ------------------------------- Title: ------------------------------ 10 11 USTRUST By: /s/ Thomas F. Macina ------------------------------- Name: Thomas F. Macina ------------------------------- Title: Vice President ------------------------------ ALLIANCE INVESTMENT OPPORTUNITIES FUND, L.L.C. By: ALLIANCE INVESTMENT OPPORTUNITIES MANAGEMENT, L.L.C., as Managing Member By: ALLIANCE CAPITAL MANAGEMENT L.P., as Managing Member By: ALLIANCE CAPITAL MANAGEMENT CORPORATION, as General Partner By: /s/ Sheryl Rothman ------------------------------- Name: Sheryl A. Rothman ------------------------------- Title: Vice President ------------------------------ ALLIANCE CAPITAL MANAGEMENT L.P., as Manager on behalf of ALLIANCE CAPITAL FUNDING, L.L.C. By: ALLIANCE CAPITAL MANAGEMENT CORPORATION, General Partner of Alliance Capital Management L.P. By: /s/ Sheryl Rothman ------------------------------- Name: Sheryl A. Rothman ------------------------------- Title: Vice President ------------------------------ 11 12 BALANCED HIGH-YIELD FUND I LTD By: BHF-BANK AKTIENGESELLSCHAFT, acting through its New York Branch, as attorney-in-fact By: /s/ Steven Alexander ------------------------------- Name: Steven Alexander ------------------------------- Title: Assistant Treasurer ------------------------------ By: /s/ Peter Leibman ------------------------------- Name: Peter Leibman ------------------------------- Title: Assistant Treasurer ------------------------------ BHF-BANK AKTIENGESELLSCHAFT By: /s/ Steven Alexander ------------------------------- Name: Steven Alexander ------------------------------- Title: Assistant Treasurer ------------------------------ By: /s/ Peter Leibman ------------------------------- Name: Peter Leibman ------------------------------- Title: Assistant Treasurer ------------------------------ INDOSUEZ CAPITAL FUNDING III, LIMITED By: INDOSUEZ CAPITAL as Portfolio Advisor By: /s/ Francoise Berthelot ------------------------------- Name: Francoise Berthelot ------------------------------- Title: Vice President ------------------------------ BANK AUSTRIA CREDITANSTALT CORPORATE FINANCE, INC., f.k.a. Creditanstalt Corporate Finance, Inc. By: /s/ Scott Kray ------------------------------- Name: Scott Kray ------------------------------- Title: Vice President ------------------------------ By: /s/ Gary Andresen ------------------------------- Name: Gary Andresen ------------------------------- Title: Associate ------------------------------ 12 13 NATIONSBANC MONTGOMERY SECURITIES LLC By: ------------------------------- Name: ------------------------------- Title: ------------------------------ ARES LEVERAGED INVESTMENT FUND, L.P. By: ARES Management, L.P. By: /s/ Michelle M. Hsu ------------------------------- Name: Michelle Hsu Title: Vice President ARES LEVERAGED INVESTMENT FUND II, L.P. By: ARES Management II, L.P. By: /s/ Michelle M. Hsu ------------------------------- Name: Michelle Hsu Title: Vice President 13 14 THE UNDERSIGNED GUARANTORS HEREBY ACKNOWLEDGE AND CONSENT TO THIS AMENDMENT OF THE CREDIT AGREEMENT AND REAFFIRM THEIR OBLIGATIONS UNDER THE FACILITY GUARANTY THIS ___TH DAY OF DECEMBER, 1998: WINDMERE CORPORATION By: /s/ Cindy Solovei ------------------------------- Name: Cindy Solovei ------------------------------- Title: Secretary/Treasurer ------------------------------ WINDMERE HOLDINGS CORPORATION By: /s/ Cindy Solovei ------------------------------- Name: Cindy Solovei ------------------------------- Title: Secretary ------------------------------ WINDMERE HOLDINGS CORPORATION II By: /s/ Cindy Solovei ------------------------------- Name: Cindy Solovei ------------------------------- Title: Secretary ------------------------------ WINDMERE FAN PRODUCTS, INC. By: /s/ Cindy Solovei ------------------------------- Name: Cindy Solovei ------------------------------- Title: Treasurer ------------------------------ JERDON PRODUCTS, INC. By: /s/ Cindy Solovei ------------------------------- Name: Cindy Solovei ------------------------------- Title: Secretary ------------------------------ 14 15 CONSUMER PRODUCTS AMERICAS, INC. By: /s/ Cindy Solovei ------------------------------- Name: Cindy Solovei ------------------------------- Title: Secretary ------------------------------ EDI MASTERS, INC. By: /s/ Cindy Solovei ------------------------------- Name: Cindy Solovei ------------------------------- Title: Assistant Vice President ------------------------------ WINDMERE INNOVATIVE PET PRODUCTS, INC. By: /s/ Cindy Solovei ------------------------------- Name: Cindy Solovei ------------------------------- Title: Treasurer ------------------------------ BAY BOOKS & TAPES, INC. By: /s/ Cindy Solovei ------------------------------- Name: Cindy Solovei ------------------------------- Title: Secretary ------------------------------ FORTUNE PRODUCTS, INC. By: /s/ Cindy Solovei ------------------------------- Name: Cindy Solovei ------------------------------- Title: Treasurer ------------------------------ HOUSEHOLD PRODUCTS, INC. By: /s/ Cindy Solovei ------------------------------- Name: Cindy Solovei ------------------------------- Title: Secretary and Treasurer ------------------------------ 15 16 HP DELAWARE, INC. By: /s/ Cindy Solovei ------------------------------- Name: Cindy Solovei ------------------------------- Title: Treasurer ------------------------------ HP AMERICAS, INC. By: /s/ Cindy Solovei ------------------------------- Name: Cindy Solovei ------------------------------- Title: Treasurer ------------------------------ HPG LLC By: /s/ Cindy Solovei ------------------------------- Name: Cindy Solovei ------------------------------- Title: Treasurer ------------------------------ HP INTELLECTUAL CORP By: /s/ Cindy Solovei ------------------------------- Name: Cindy Solovei ------------------------------- Title: Secretary and Treasurer ------------------------------ WD DELAWARE, INC. By: /s/ Cindy Solovei ------------------------------- Name: Cindy Solovei ------------------------------- Title: Secretary ------------------------------ WD DELAWARE II, INC. By: /s/ Cindy Solovei ------------------------------- Name: Cindy Solovei ------------------------------- Title: Secretary ------------------------------ 16 EX-10.2 4 g65027ex10-2.txt AMD #2 TO AMD & RESTD CREDIT AGRMT 12/29/98 1 EXHIBIT 10.2 AMENDMENT NO. 2 TO AMENDED AND RESTATED CREDIT AGREEMENT THIS AMENDMENT NO. 2 TO AMENDED AND RESTATED CREDIT AGREEMENT (this "Agreement") is made and entered into as of this 29th day of April, 1999 by and between WINDMERE-DURABLE HOLDINGS, INC., a Florida corporation (the "Borrower"), EACH OF THE SUBSIDIARIES OF THE BORROWER SIGNATORY HERETO (collectively, the "Guarantors"), the LENDERS SIGNATORY HERETO (the "Lenders") and NATIONSBANK, NATIONAL ASSOCIATION, a national banking association organized and existing under the laws of the United States, in its capacity as agent for the Lenders (the "Agent"). W I T N E S S E T H: WHEREAS, the Borrower, the Agent and the Lenders have entered into an Amended and Restated Credit Agreement dated as of August 7, 1998, as amended pursuant to that certain Amendment No. 1 to Amended and Restated Credit Agreement dated as of December 29, 1998 (as amended hereby and as from time to time further amended, supplemented or replaced, the "Credit Agreement"); WHEREAS, the Borrower, the Agent and the Lenders have agreed to amend certain provisions contained in the Credit Agreement; NOW, THEREFORE, in consideration of the mutual covenants, promises and conditions herein set forth, it is hereby agreed as follows: 1. DEFINITIONS. The term "Credit Agreement" as used herein and in the Credit Agreement and the other Loan Documents shall mean the Credit Agreement as hereby amended and as from time to time further amended or modified. Unless the context otherwise requires, all capitalized terms used herein without definition shall have the respective meanings provided therefor in the Credit Agreement. 2. AMENDMENT TO CREDIT AGREEMENT. Section 10.2(g) of the Credit Agreement is hereby deleted and the following new subsection (g) is inserted in replacement thereof: (g) Liens securing Indebtedness permitted under SECTION 10.1(A), (B), (F) OR (I) hereof (subject to compliance with subsection (c) above in connection with purchase money Indebtedness); provided, however, that to the extent any such Indebtedness is incurred by any Foreign Subsidiary, the Liens securing such Indebtedness may be granted by, and may attach only to real or personal property of, the Foreign Subsidiary incurring such Indebtedness. 2 3. ENTIRE AGREEMENT. This Agreement sets forth the entire understanding and agreement of the parties hereto in relation to the subject matter hereof and supersedes any prior negotiations and agreements among the parties relative to such subject matter. None of the terms or conditions of this Agreement may be changed, modified, waived or canceled orally or otherwise, except by writing, signed by all the parties hereto, specifying such change, modification, waiver or cancellation of such terms or conditions, or of any proceeding or succeeding breach thereof. 4. FULL FORCE AND EFFECT OF AGREEMENT. Except as hereby specifically amended, modified or supplemented, the Credit Agreement and all of the other Loan Documents are hereby confirmed and ratified in all respects and shall remain in full force and effect according to their respective terms. 5. COUNTERPARTS. This Agreement may be executed in any number of counterparts and all the counterparts taken together shall be deemed to constitute one and the same instrument. 6. ENFORCEABILITY. Should any one or more of the provisions of this Agreement be determined to be illegal or unenforceable as to one or more of the parties hereto, all other provisions nevertheless shall remain effective and binding on the parties hereto. [Signature pages follow.] 2 3 IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed by their duly authorized officers, all as of the day and year first above written. BORROWER: WINDMERE-DURABLE HOLDINGS, INC. By: /s/ Cindy Solovei ------------------------------- Name: Cindy Solovei ------------------------------- Title: Treasurer ------------------------------ AGENT: NATIONSBANK, NATIONAL ASSOCIATION, as Agent for the Lenders By: /s/ Andrew M. Airheart ------------------------------- Name: Andrew M. Airheart ------------------------------- Title: Senior Vice President ------------------------------ LENDERS: NATIONSBANK, NATIONAL ASSOCIATION By: /s/ Andrew M. Airheart ------------------------------- Name: Andrew M. Airheart ------------------------------- Title: Senior Vice President ------------------------------ ABN AMRO BANK N.V. By: /s/ Deborah Day Orozco ------------------------------- Name: Deborah Day Orozco ------------------------------- Title: Vice President ------------------------------ By: /s/ Boris Espinoza ------------------------------- Name: Boris Espinoza ------------------------------- Title: Officer ------------------------------ 3 4 BANK ATLANTIC By: /s/ Ana C. Bolduc ------------------------------- Name: Ana C. Bolduc ------------------------------- Title: Senior Vice President ------------------------------ BANK LEUMI LE-ISRAEL By: /s/ Joseph F. Realini ------------------------------- Name: Joseph F. Realini ------------------------------- Title: Vice President ------------------------------ SCOTIABANC INC. By: /s/ W. J. Brown ------------------------------- Name: W. J. Brown ------------------------------- Title: Managing Director ------------------------------ PARIBAS By: ------------------------------- Name: ------------------------------- Title: ------------------------------ By: ------------------------------- Name: ------------------------------- Title: ------------------------------ BARCLAYS BANK PLC By: ------------------------------- Name: ------------------------------- Title: ------------------------------ 4 5 ERSTE BANK NEW YORK By: /s/ Arcinee Hovanessian ------------------------------- Name: Arcinee Hovanessian ------------------------------- Title: Vice President ------------------------------- By: /s/ John S. Runnion --------------------------------- Name: John S. Runnion ------------------------------ Title: First Vice President ------------------------------ IMPERIAL BANK, A CALIFORNIA BANKING CORPORATION By: /s/ Ray Vadalma ------------------------------- Name: Ray Vadalma ------------------------------- Title: Senior Vice President ------------------------------ THE LONG-TERM CREDIT BANK OF JAPAN, LTD. By: /s/ Thomas N. Meyer ------------------------------- Name: Thomas N. Meyer ------------------------------- Title: Senior Vice President ------------------------------ THE MITSUBISHI TRUST AND BANKING CORPORATION By: /s/ Beatrice E. Kossodo ------------------------------- Name: Beatrice E. Kossodo ------------------------------- Title: Senior Vice President ------------------------------ NATIONAL BANK OF CANADA By: /s/ Michael Bloomenfeld ------------------------------- Name: Michael Bloomenfeld ------------------------------- Title: Vice President ------------------------------ 5 6 SUMMIT BANK By: /s/ Seiji P. Nakamura ------------------------------- Name: Seiji P. Nakamura ------------------------------- Title: Assistant Vice President ------------------------------ US TRUST By: /s/ Thomas F. Macina ------------------------------- Name: Thomas F. Macina ------------------------------- Title: Vice President ------------------------------ ALLIANCE INVESTMENT OPPORTUNITIES FUND, L.L.C. By: ALLIANCE INVESTMENT OPPORTUNITIES MANAGEMENT, L.L.C., as Managing Member By: ALLIANCE CAPITAL MANAGEMENT L.P., as Managing Member By: ALLIANCE CAPITAL MANAGEMENT CORPORATION, as General Partner By: ------------------------------- Name: ------------------------------- Title: ------------------------------ 6 7 ALLIANCE CAPITAL MANAGEMENT L.P., as Manager on behalf of ALLIANCE CAPITAL FUNDING, L.L.C. By: ALLIANCE CAPITAL MANAGEMENT CORPORATION, General Partner of Alliance Capital Management L.P. By: ------------------------------- Name: ------------------------------- Title: ------------------------------ BALANCED HIGH-YIELD FUND I LTD By: BHF-BANK AKTIENGESELLSCHAFT, acting through its New York Branch, as attorney-in-fact By: /s/ Peter Leibman ------------------------------- Name: Peter Leibman ------------------------------- Title: A.T. ------------------------------ By: /s/ Michael Pellerito ------------------------------- Name: Michael Pellerito ------------------------------- Title: A.V.P. ------------------------------ BHF-BANK AKTIENGESELLSCHAFT By: /s/ Peter Leibman ------------------------------- Name: Peter Leibman ------------------------------- Title: A.T. ------------------------------ By: /s/ Michael Pellerito ------------------------------- Name: Michael Pellerito ------------------------------- Title: A.V.P. ------------------------------ INDOSUEZ CAPITAL FUNDING III, LIMITED By: INDOSUEZ CAPITAL as Portfolio Advisor By: /s/ Melissa Marano ------------------------------- Name: Melissa Marano ------------------------------- Title: Vice President ------------------------------ 7 8 BANK AUSTRIA CREDITANSTALT CORPORATE FINANCE, INC., f.k.a. Creditanstalt Corporate Finance, Inc. By: /s/ Scott Kray ------------------------------- Name: Scott Kray ------------------------------- Title: Vice President ------------------------------ By: /s/ Thomas G. Pierce ------------------------------- Name: Thomas G. Pierce ------------------------------- Title: Senior Associate ------------------------------ NATIONSBANC MONTGOMERY SECURITIES LLC By: ------------------------------- Name: ------------------------------- Title: ------------------------------ ARES LEVERAGED INVESTMENT FUND, L.P. By: ARES Management, L.P. By: /s/ Merritt S. Hooper ------------------------------- Name: Merritt S. Hooper Title: Vice President ARES LEVERAGED INVESTMENT FUND II, L.P. By: ARES Management II, L.P. By: /s/ Merritt S. Hooper ------------------------------- Name: Merritt S. Hooper Title: Vice President 8 9 FLEET BANK, N.A. By: /s/ Thomas J. Levy ------------------------------- Name: Thomas J. Levy ------------------------------- Title: Vice President ------------------------------ FLEET BUSINESS CREDIT CORPORATION By: /s/ Wes Manus ------------------------------- Name: Wes Manus ------------------------------- Title: A.V.P. ------------------------------ CANADIAN IMPERIAL BANK OF COMMERCE By: /s/ K. Volk ------------------------------- Name: Karen Volk ------------------------------- Title: Authorized Signatory ------------------------------ 9 10 OAK MOUNTAIN LIMITED By: Alliance Capital Management, L.P., as Investment Manager By: Alliance Capital Management Corporation, as General Partner By: ------------------------------- Name: ------------------------------- Title: ------------------------------ 10 11 THE UNDERSIGNED GUARANTORS HEREBY ACKNOWLEDGE AND CONSENT TO THIS AMENDMENT OF THE CREDIT AGREEMENT AND REAFFIRM THEIR OBLIGATIONS UNDER THE FACILITY GUARANTY THIS ____ DAY OF APRIL, 1999: WINDMERE CORPORATION By: /s/ Cindy Solovei ------------------------------- Name: Cindy Solovei ------------------------------- Title: Treasurer ------------------------------ WINDMERE HOLDINGS CORPORATION By: /s/ Cindy Solovei ------------------------------- Name: Cindy Solovei ------------------------------- Title: Secretary ------------------------------ WINDMERE HOLDINGS CORPORATION II By: /s/ Cindy Solovei ------------------------------- Name: Cindy Solovei ------------------------------- Title: Secretary ------------------------------ WINDMERE FAN PRODUCTS, INC. By: /s/ Cindy Solovei ------------------------------- Name: Cindy Solovei ------------------------------- Title: Treasurer ------------------------------ JERDON PRODUCTS, INC. By: /s/ Cindy Solovei ------------------------------- Name: Cindy Solovei ------------------------------- Title: Treasurer ------------------------------ 11 12 CONSUMER PRODUCTS AMERICAS, INC. By: /s/ Cindy Solovei ------------------------------- Name: Cindy Solovei ------------------------------- Title: Secretary ------------------------------ EDI MASTERS, INC. By: /s/ Cindy Solovei ------------------------------- Name: Cindy Solovei ------------------------------- Title: Treasurer ------------------------------ WINDMERE INNOVATIVE PET PRODUCTS, INC. By: /s/ Cindy Solovei ------------------------------- Name: Cindy Solovei ------------------------------- Title: Treasurer ------------------------------ BAY BOOKS & TAPES, INC. By: By: /s/ Cindy Solovei ------------------------------- Name: Cindy Solovei ------------------------------- Title: Secretary ------------------------------ FORTUNE PRODUCTS, INC. By: /s/ Cindy Solovei ------------------------------- Name: Cindy Solovei ------------------------------- Title: Secretary ------------------------------ HOUSEHOLD PRODUCTS, INC. By: /s/ Cindy Solovei ------------------------------- Name: Cindy Solovei ------------------------------- Title: Treasurer ------------------------------ 12 13 HP DELAWARE, INC. By: /s/ Cindy Solovei ------------------------------- Name: Cindy Solovei ------------------------------- Title: Treasurer ------------------------------ HP AMERICAS, INC. By: /s/ Cindy Solovei ------------------------------- Name: Cindy Solovei ------------------------------- Title: Treasurer ------------------------------ HPG LLC By: /s/ Cindy Solovei ------------------------------- Name: Cindy Solovei ------------------------------- Title: Treasurer ------------------------------ HP INTELLECTUAL CORP By: /s/ Cindy Solovei ------------------------------- Name: Cindy Solovei ------------------------------- Title: Treasurer ------------------------------ WD DELAWARE, INC. By: /s/ Cindy Solovei ------------------------------- Name: Cindy Solovei ------------------------------- Title: Secretary ------------------------------ WD DELAWARE II, INC. By: /s/ Cindy Solovei ------------------------------- Name: Cindy Solovei ------------------------------- Title: Secretary ------------------------------ 13 EX-10.3 5 g65027ex10-3.txt AMD #3 TO AMDED & RESTD CREDIT AGRMT 2/17/00 1 EXHIBIT 10.3 AMENDMENT NO. 3 TO AMENDED AND RESTATED CREDIT AGREEMENT THIS AMENDMENT NO. 3 TO AMENDED AND RESTATED CREDIT AGREEMENT (this "Agreement") is made and entered into as of this 17th day of February, 2000 by and between WINDMERE-DURABLE HOLDINGS, INC., a Florida corporation (the "Borrower"), EACH OF THE SUBSIDIARIES OF THE BORROWER SIGNATORY HERETO (collectively, the "Guarantors"), the LENDERS SIGNATORY HERETO (the "Lenders") and BANK OF AMERICA, N.A. (D/B/A BANK OF AMERICA, N.A.) (formerly known as NationsBank, National Association), a national banking association organized and existing under the laws of the United States, in its capacity as agent for the Lenders (the "Agent"). W I T N E S S E T H: WHEREAS, the Borrower, the Agent and the Lenders have entered into an Amended and Restated Credit Agreement dated as of August 7, 1998, as amended pursuant to that certain Amendment No. 1 to Amended and Restated Credit Agreement dated as of December 29, 1998 and as amended pursuant to that certain Amendment No. 2 to Amended and Restated Credit Agreement dated as of April 29, 1999 (as amended hereby and as from time to time further amended, supplemented or replaced, the "Credit Agreement"); WHEREAS, the Borrower, the Agent and the Lenders have agreed to amend certain provisions contained in the Credit Agreement; NOW, THEREFORE, in consideration of the mutual covenants, promises and conditions herein set forth, it is hereby agreed as follows: 1. DEFINITIONS. The term "Credit Agreement" as used herein and in the Credit Agreement and the other Loan Documents shall mean the Credit Agreement as hereby amended and as from time to time further amended or modified. Unless the context otherwise requires, all capitalized terms used herein without definition shall have the respective meanings provided therefor in the Credit Agreement. 2. AMENDMENT TO CREDIT AGREEMENT. Section 10.9 of the Credit Agreement is hereby amended by deleting the dollar figure "$100,000,000" in the third line thereof and inserting in replacement thereof the dollar figure "$200,000,000". 3. ENTIRE AGREEMENT. This Agreement sets forth the entire understanding and agreement of the parties hereto in relation to the subject matter hereof and supersedes any prior 2 negotiations and agreements among the parties relative to such subject matter. None of the terms or conditions of this Agreement may be changed, modified, waived or canceled orally or otherwise, except by writing, signed by all the parties hereto, specifying such change, modification, waiver or cancellation of such terms or conditions, or of any proceeding or succeeding breach thereof. 4. FULL FORCE AND EFFECT OF AGREEMENT. Except as hereby specifically amended, modified or supplemented, the Credit Agreement and all of the other Loan Documents are hereby confirmed and ratified in all respects and shall remain in full force and effect according to their respective terms. 5. COUNTERPARTS. This Agreement may be executed in any number of counterparts and all the counterparts taken together shall be deemed to constitute one and the same instrument. 6. ENFORCEABILITY. Should any one or more of the provisions of this Agreement be determined to be illegal or unenforceable as to one or more of the parties hereto, all other provisions nevertheless shall remain effective and binding on the parties hereto. [Signature pages follow.] 2 3 IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed by their duly authorized officers, all as of the day and year first above written. BORROWER: WINDMERE-DURABLE HOLDINGS, INC. By: /s/ Terry Polistina ------------------------------- Name: Terry Polistina ------------------------------- Title: SVP - Finance ------------------------------ AGENT: BANK OF AMERICA, N.A. (D/B/A BANK OF AMERICA, N.A., as Agent By: /s/ Adam Kaplan ------------------------------- Name: Adam Kaplan ------------------------------- Title: Vice President ------------------------------ LENDERS: BANK OF AMERICA, N.A. (D/B/A/ NATIONSBANK, N.A.) By: /s/ Adam Kaplan ------------------------------- Name: Adam Kaplan ------------------------------- Title: Vice President ------------------------------ ABN AMRO BANK N.V. By: ------------------------------- Name: ------------------------------- Title: ------------------------------ 3 4 BANK ATLANTIC By: /s/ Ana C. Bolduc ------------------------------- Name: Ana C. Bolduc ------------------------------- Title: Senior Vice President ------------------------------ BANK LEUMI LE-ISRAEL By: /s/ Joseph F. Realini ------------------------------- Name: Joseph F. Realini ------------------------------- Title: Vice President ------------------------------ SCOTIABANC INC. By: /s/ Frank F. Sandler ------------------------------- Name: Frank F. Sandler ------------------------------- Title: Director ------------------------------ PARIBAS By: ------------------------------- Name: ------------------------------- Title: ------------------------------ By: ------------------------------- Name: ------------------------------- Title: ------------------------------ BARCLAYS BANK PLC By: /s/ Gregory Roll ------------------------------- Name: Gregory Roll ------------------------------- Title: Vice President ------------------------------ 4 5 ERSTE BANK NEW YORK By: /s/ Arcinee Rovanession ------------------------------- Name: Arcinee Rovanession ------------------------------- Title: Vice President ------------------------------ By: /s/ John S. Runnion ------------------------------- Name: John S. Runnion ------------------------------- Title: First Vice President ------------------------------ IMPERIAL BANK, A CALIFORNIA BANKING CORPORATION By: ------------------------------- Name: ------------------------------- Title: ------------------------------ THE LONG-TERM CREDIT BANK OF JAPAN, LTD. By: ------------------------------- Name: ------------------------------- Title: ------------------------------ THE MITSUBISHI TRUST AND BANKING CORPORATION By: /s/ Toshihiro Hayashi ------------------------------- Name: Toshihiro Hayashi ------------------------------- Title: Senior Vice President ------------------------------ NATIONAL BANK OF CANADA By: /s/ Michael Bloomenfeld ------------------------------- Name: Michael Bloomenfeld ------------------------------- Title: Vice President ------------------------------ 5 6 SUMMIT BANK By: /s/ Timothy E. Doyle ------------------------------- Name: Timothy E. Doyle ------------------------------- Title: VP/Director ------------------------------ CITIZENS BANK OF MASSACHUSETTS (as sucessor to US Trust) By: /s/ Thomas F. Macina ------------------------------- Name: Thomas F. Macina ------------------------------- Title: Vice President ------------------------------ ALLIANCE INVESTMENT OPPORTUNITIES FUND, L.L.C. By: ALLIANCE INVESTMENT OPPORTUNITIES MANAGEMENT, L.L.C., as Managing Member By: ALLIANCE CAPITAL MANAGEMENT L.P., as Managing Member By: ALLIANCE CAPITAL MANAGEMENT CORPORATION, as General Partner By: ------------------------------- Name: ------------------------------- Title: ------------------------------ 6 7 ALLIANCE CAPITAL MANAGEMENT L.P., as Manager on behalf of ALLIANCE CAPITAL FUNDING, L.L.C. By: ALLIANCE CAPITAL MANAGEMENT CORPORATION, General Partner of Alliance Capital Management L.P. By: ------------------------------- Name: ------------------------------- Title: ------------------------------ BALANCED HIGH-YIELD FUND II LTD By: BHF (USA) Capital Corporation, acting through its New York Branch, as attorney-in-fact By: /s/ Dana L. McDougall ------------------------------- Name: Dana L. McDougall ------------------------------- Title: Vice President ------------------------------ By: /s/ Christopher Dugger ------------------------------- Name: Christopher Dugger ------------------------------- Title: Associate ------------------------------ BHF (USA) CAPITAL CORPORATION By: /s/ Dana L. McDougall ------------------------------- Name: Dana L. McDougall ------------------------------- Title: Vice President ------------------------------ By: /s/ Christopher Dugger ------------------------------- Name: Christopher Dugger ------------------------------- Title: Associate ------------------------------ INDOSUEZ CAPITAL FUNDING III, LIMITED By: INDOSUEZ CAPITAL as Portfolio Advisor By: /s/ Melissa Marano ------------------------------- Name: Melissa Marano ------------------------------- Title: Vice President ------------------------------ 7 8 BANK AUSTRIA CREDITANSTALT CORPORATE FINANCE, INC., f.k.a. Creditanstalt Corporate Finance, Inc. By: ------------------------------- Name: ------------------------------- Title: ------------------------------ By: ------------------------------- Name: ------------------------------- Title: ------------------------------ NATIONSBANC MONTGOMERY SECURITIES LLC By: ------------------------------- Name: ------------------------------- Title: ------------------------------ ARES LEVERAGED INVESTMENT FUND, L.P. By: ARES Management, L.P. Its: General Partner By: /s/ Merritt S. Hooper ------------------------------- Name: Merritt S. Hooper Title: Vice President ARES LEVERAGED INVESTMENT FUND II, L.P. By: ARES Management II, L.P. Its: General Partner By: /s/ Merritt S. Hooper ------------------------------- Name: Merritt S. Hooper Title: Vice President ARES III CLO LTD. By: ARES CLO Management, LLC Its: General Partner By: /s/ Merritt S. Hooper ------------------------------- Name: Merritt S. Hooper Title: Vice President 8 9 FLEET BANK, N.A. By: /s/ Thomas J. Levy ------------------------------- Name: Thomas J. Levy ------------------------------- Title: Vice President ------------------------------ FLEET BUSINESS CREDIT CORPORATION By: ------------------------------- Name: ------------------------------- Title: ------------------------------ CANADIAN IMPERIAL BANK OF COMMERCE By: ------------------------------- Name: ------------------------------- Title: ------------------------------ OAK MOUNTAIN LIMITED By: Alliance Capital Management, L.P., as Investment Manager By: Alliance Capital Management Corporation, as General Partner By: ------------------------------- Name: ------------------------------- Title: ------------------------------ 9 10 THE INTERNATIONAL BANK OF MIAMI By: /s/ Caridad Errazquin ------------------------------- Name: Caridad Errazquin ------------------------------- Title: Vice President ------------------------------ DRESDNER BANK LATEINAMERIKA AG, MIAMI AGENCY By: /s/ Carlos Lamourtte ------------------------------- Name: Carlos Lamourtte ------------------------------- Title: Assistant Vice President ------------------------------ By: /s/ F. Huthnance ------------------------------- Name: Frank Huthnance ------------------------------- Title: Vice President ------------------------------ GE CAPITAL COMMERCIAL FINANCE, INC. By: ------------------------------- Name: ------------------------------- Title: ------------------------------ HARCH CAPITAL By: ------------------------------- Name: ------------------------------- Title: ------------------------------ 10 11 THE UNDERSIGNED GUARANTORS HEREBY ACKNOWLEDGE AND CONSENT TO THIS AMENDMENT OF THE CREDIT AGREEMENT AND REAFFIRM THEIR OBLIGATIONS UNDER THE FACILITY GUARANTY THIS 17th DAY OF FERUARY, 2000: WINDMERE CORPORATION By: /s/ Terry Polistina ------------------------------- Name: Terry Polistina ------------------------------- Title: SVP -- Finance ------------------------------ WINDMERE HOLDINGS CORPORATION By: /s/ Terry Polistina ------------------------------- Name: Terry Polistina ------------------------------- Title: SVP -- Finance ------------------------------ WINDMERE HOLDINGS CORPORATION II By: /s/ Terry Polistina ------------------------------- Name: Terry Polistina ------------------------------- Title: SVP -- Finance ------------------------------ WINDMERE FAN PRODUCTS, INC. By: /s/ Terry Polistina ------------------------------- Name: Terry Polistina ------------------------------- Title: SVP -- Finance ------------------------------ JERDON PRODUCTS, INC. By: /s/ Terry Polistina ------------------------------- Name: Terry Polistina ------------------------------- Title: SVP -- Finance ------------------------------ 11 12 CONSUMER PRODUCTS AMERICAS, INC. By: /s/ Terry Polistina ------------------------------- Name: Terry Polistina ------------------------------- Title: SVP -- Finance ------------------------------ EDI MASTERS, INC. By: /s/ Terry Polistina ------------------------------- Name: Terry Polistina ------------------------------- Title: SVP -- Finance ------------------------------ WINDMERE INNOVATIVE PET PRODUCTS, INC. By: /s/ Terry Polistina ------------------------------- Name: Terry Polistina ------------------------------- Title: SVP -- Finance ------------------------------ BAY BOOKS & TAPES, INC. By: /s/ Terry Polistina ------------------------------- Name: Terry Polistina ------------------------------- Title: SVP -- Finance ------------------------------ FORTUNE PRODUCTS, INC. By: /s/ Terry Polistina ------------------------------- Name: Terry Polistina ------------------------------- Title: SVP -- Finance ------------------------------ 12 13 HOUSEHOLD PRODUCTS, INC. By: /s/ Terry Polistina ------------------------------- Name: Terry Polistina ------------------------------- Title: SVP -- Finance ------------------------------ HP DELAWARE, INC. By: /s/ Terry Polistina ------------------------------- Name: Terry Polistina ------------------------------- Title: SVP -- Finance ------------------------------ HP AMERICAS, INC. By: /s/ Terry Polistina ------------------------------- Name: Terry Polistina ------------------------------- Title: SVP -- Finance ------------------------------ HPG LLC By: /s/ Terry Polistina ------------------------------- Name: Terry Polistina ------------------------------- Title: SVP -- Finance ------------------------------ HP INTELLECTUAL CORP By: /s/ Terry Polistina ------------------------------- Name: Terry Polistina ------------------------------- Title: SVP -- Finance ------------------------------ WD DELAWARE, INC. By: /s/ Terry Polistina ------------------------------- Name: Terry Polistina ------------------------------- Title: SVP -- Finance ------------------------------ WD DELAWARE II, INC. By: /s/ Terry Polistina ------------------------------- Name: Terry Polistina ------------------------------- Title: SVP -- Finance ------------------------------ 13 EX-10.4 6 g65027ex10-4.txt AMDT #4 TO AMDED & RESTD CREDIT AGRMT 6/30/00 1 EXHIBIT 10.4 CONSENT AND AMENDMENT NO. 4 TO AMENDED AND RESTATED CREDIT AGREEMENT THIS CONSENT AND AMENDMENT NO. 4 TO AMENDED AND RESTATED CREDIT AGREEMENT (this "Amendment Agreement") is made and entered into as of this 30th day of June, 2000, by and between APPLICA INCORPORATED f/k/a Windmere-Durable Holdings, Inc., a Florida corporation (the "Borrower"), BANK OF AMERICA, N.A., f/k/a NationsBank, National Association, as Agent (the "Agent") and as a Lender, and the other Lenders party thereto (together with the Agent, the "Lenders"). Unless the context requires otherwise, all capitalized terms used herein without definition shall have the respective meanings assigned thereto in the Credit Agreement (as defined below). W I T N E S S E T H: WHEREAS, the Lenders and the Borrower have entered into that certain Amended and Restated Credit Agreement dated as of August 7, 1998 (as heretofore and hereby amended, and as further amended, supplemented or restated from time to time, the "Credit Agreement"); and WHEREAS, the Borrower has undertaken certain corporate reorganizational actions (the "Reorganization") described in the memorandum from Lisa R. Carstarphen, Vice President - Legal Affairs of the Borrower, dated May 19, 2000 attached hereto as Exhibit A (the "Memorandum") and has requested that the Lenders consent to the Reorganization and agree to amend certain provisions of the Credit Agreement and the Loan Documents as a result of the Reorganization; and WHEREAS, the Lenders are willing to consent to the Reorganization and the amendments to the Credit Agreement requested by the Borrower, as more fully set forth herein; and NOW, THEREFORE, in consideration of the premises, the terms, covenants and conditions hereinafter appearing, and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, and intending to be legally bound, the parties hereto agree as follows: 1. CONSENT. Subject to the conditions set forth in Section 4 herein, each Lender signatory hereto hereby consents to the Reorganization. 2. AMENDMENT TO CREDIT AGREEMENT. Subject to the conditions set forth in Section 4 hereof, the Credit Agreement is hereby amended as follows: (a) All references to "Windmere-Durable Holdings, Inc." and "the Borrower" are amended to refer to "Applica Incorporated"; and (b) All references to "Windmere Corporation" are amended to refer to "Applica Consumer Products, Inc." 2 (c) All references to "HP Americas, Inc." are amended to refer to "Applica Americas, Inc." (d) The reference in Schedule 8.4 to the authorized shares of the Borrower is amended from 40,000,000 to 75,000,000. (e) The reference to Newtech Electronics Industries, Inc., together with all related information, shall be deleted from (1) Schedule I to Exhibit C to the Opinion Letter by Greenberg Traurig dated August 7, 1998 (Exhibit O to the Credit Agreement), and (2) Schedule 8.4 to the Credit Agreement. (f) The definition of "Stock Pledge Agreement" in Section 1.2 is hereby deleted in its entirety and the following is inserted in replacement thereof: "Stock Pledge Agreement" means, collectively (or individually as the context may indicate), (i) that certain Stock Pledge Agreement dated as of June 26, 1998 among the Borrower, certain Guarantors and the Agent for the benefit of the Lenders, as amended and restated by that certain Amended and Restated Stock Pledge Agreement dated as of June 30, 2000 among the Borrower, certain Guarantors and the Agent for the benefit of the Lenders, and (ii) any additional Stock Pledge Agreement delivered to the Agent (whether executed individually or jointly and severally with other Subsidiaries), substantially in the form attached hereto as Exhibit G hereto, as each such Stock Pledge Agreement may be amended, supplemented or replaced from time to time. 3. REPRESENTATIONS, WARRANTIES AND COVENANTS. (a) By its execution and delivery hereof, the Borrower certifies that: (i) all of the representations and warranties made by the Borrower in the Credit Agreement and in each of the other Loan Documents are true and correct as of the date hereof as if each of said representations and warranties were set out in full herein and made as of the date of execution and delivery hereof, except that all representations and warranties that refer to the financial statements of the Borrower shall be deemed to refer to the financial statements of the Borrower most recently delivered in accordance with SECTION 9.1 of the Credit Agreement; and (ii) no event has occurred and no condition exists which, upon the consummation of the transaction contemplated hereby, will constitute a Default or an Event of Default on the part of the Borrower under the Credit Agreement or any other Loan Document either immediately or with the lapse of time or the giving of notice, or both; and (iii) set forth on Exhibit A hereto is a correct and complete corporate organizational chart of the Borrower and its Subsidiaries after giving effect to the Reorganization (including those actions set forth under Section 7 of the Memorandum). 2 3 (b) The Borrower further covenants and agrees that the representations and warranties contained in the Credit Agreement and the other Loan Documents, as hereby reaffirmed, and the representations and warranties made herein shall survive the execution and delivery of this Amendment Agreement. 4. CONDITIONS PRECEDENT. The effectiveness of this Amendment Agreement shall be subject to the receipt by the Agent of (a) replacement Revolving Notes, Term Notes and Swing Line Note reflecting the name change of the Borrower from the Borrower, (b) stock certificates and executed stock powers from the Borrower reflecting the name changes and new shareholders described in the Memorandum, (c) an Amended and Restated Stock Pledge Agreement executed by the Borrower and each Subsidiary owning shares of any Domestic Subsidiary after giving effect to the Reorganization, (d) Uniform Commercial Code amendments on form UCC-3 amending all existing financing statements naming "Windmere-Durable Holdings, Inc.", "Windmere Corporation" or "HP Americas, Inc." as Debtors and reflecting the name changes of those entities described in SECTION 2 herein, (e) twenty-six (26) counterparts of this Amendment Agreement duly executed by all signatories hereto, and (f) all fees payable by the Borrower to the Agent and the Lenders on or before the date hereof. 5. EXPENSES. The Borrower agrees to reimburse the Agent and the Lenders for all costs and out-of-pocket expenses, including, without limitation, attorneys' fees and disbursements, incurred in connection with the negotiation, preparation, execution and delivery of this Amendment Agreement. 6. ENTIRE AGREEMENT. This Amendment Agreement sets forth the entire understanding and agreement of the parties hereto in relation to the subject matter hereof and supersedes any prior negotiations and agreements among the parties relative to such subject matter. No promise, condition, representation or warranty, express or implied, not herein set forth shall bind any party hereto, and none of them has relied on any such promise, condition, representation or warranty. Each of the parties hereto acknowledges that, except as set forth in this Amendment Agreement or otherwise expressly stated, no representations, warranties or commitments, express or implied, have been made by any party. None of the terms or conditions of this Amendment Agreement may be changed, modified, waived or canceled orally or otherwise, except by writing, signed by all the parties hereto, specifying such change, modification, waiver or cancellation of such terms or conditions, or of any preceding or succeeding breach thereof. 7. FULL FORCE AND EFFECT OF AGREEMENT. Except as hereby specifically amended, modified or supplemented, the Credit Agreement and all of the other Loan Documents are hereby confirmed and ratified in all respects and shall remain in full force and effect according to their respective terms. 8. GOVERNING LAW. This Amendment Agreement shall in all respects be governed by, and construed in accordance with, the laws of the state of New York. 9. ENFORCEABILITY. Should any one or more of the provisions of this Amendment Agreement be determined to be illegal or unenforceable as to one or more of the parties hereto, all other provisions nevertheless shall remain effective and binding on the parties hereto. 3 4 10. COUNTERPARTS. This Amendment Agreement may be executed in any number of counterparts, each of which shall be deemed to be an original as against any party whose signature appears thereon, and all of which shall together constitute one and the same instrument. [Signature pages follow.] 4 5 IN WITNESS WHEREOF, the Borrower and the Lenders have caused this Amendment Agreement to be duly executed under seal by their duly authorized officers, all as of the day and year first above written. BORROWER: ATTEST: APPLICA INCORPORATED, FORMERLY KNOWN AS WINDMERE-DURABLE HOLDINGS, INC., as Borrower By: /s/ Cindy Solovei - -------------------- ------------------------------- Name: Cindy Solovei - -------------------- ------------------------------- Title: Asst. Vice President - Finance ------------------------------ (CORPORATE SEAL) AGENT: BANK OF AMERICA, N.A., FORMERLY KNOWN AS NATIONSBANK, NATIONAL ASSOCIATION, as Agent By: /s/ Richard M. Starke ------------------------------- Name: Richard M. Starke ------------------------------- Title: M.D. ------------------------------ LENDERS: BANK OF AMERICA, N.A., FORMERLY KNOWN AS NATIONSBANK, NATIONAL ASSOCIATION By: /s/ Richard M. Starke ------------------------------- Name: Richard M. Starke ------------------------------- Title: M.D. ------------------------------ ABN AMRO BANK N.V. By: /s/ Steven L. Hissman ------------------------------- Name: Steven L. Hissman ------------------------------- Title: Vice President ------------------------------ By: /s/ Patrick A. Thom ------------------------------- Name: Patrick A. Thom ------------------------------- Title: Vice President ------------------------------ 5 6 ALLIANCE CAPITAL MANAGEMENT L.P., as Manager on behalf of ALLIANCE CAPITAL FUNDING, L.L.C. By: ALLIANCE CAPITAL MANAGEMENT CORPORATION, General Partner of Alliance Capital Management L.P. By: /s/ Joel Serebransky ------------------------------- Name: Joel Serebransky ------------------------------- Title: Senior Vice President ------------------------------ OAK MOUNTAIN LIMITED By: ALLIANCE CAPITAL MANAGEMENT L.P., as Investment Manager By: ALLIANCE CAPITAL MANAGEMENT CORPORATION, as General Partner By: /s/ Joel Serebransky ------------------------------- Name: Joel Serebransky ------------------------------- Title: Senior Vice President ------------------------------ ARES LEVERAGED INVESTMENT FUND, L.P. By: ARES Management, L.P. Its: General Partner By: /s/ Merritt S. Hooper ------------------------------- Name: ------------------------------- Title: ------------------------------ 6 7 ARES LEVERAGED INVESTMENT FUND II, L.P. By: ARES Management II, L.P. Its: General Partner By: /s/ Merritt S. Hooper ------------------------------- Name: ------------------------------- Title: ------------------------------ ARES III CLO LTD. By: ARES CLO Management, LLC Its: General Partner By: /s/ Merritt S. Hooper ------------------------------- Name: ------------------------------- Title: ------------------------------ BALANCED HIGH-YIELD FUND II LTD By: BHF (USA) Capital Corporation, acting through its New York Branch, as attorney-in-fact By: ------------------------------- Name: ------------------------------- Title: ------------------------------ BHF (USA) CAPITAL CORPORATION By: ------------------------------- Name: ------------------------------- Title: ------------------------------ BANKATLANTIC By: /s/ Ana C. Bolduc ------------------------------- Name: Ana C. Bolduc ------------------------------- Title: Senior Vice President ------------------------------ 7 8 BANK AUSTRIA CREDITANSTALT CORPORATE FINANCE, INC. By: /s/ Robert M. Biringer ------------------------------- Name: Robert M. Biringer ------------------------------- Title: Executive Vice President ------------------------------ By: /s/ William E. McCollum, Jr. --------------------------------- Name: William E. McCollum, Jr. ------------------------------- Title: Vice President ------------------------------ BANK LEUMI LE-ISRAEL B.M. By: /s/ Ofer Koren ------------------------------- Name: Ofer Koren ------------------------------- Title: Senior Vice President ------------------------------ BARCLAYS BANK PLC By: /s/ Gregory Roll ------------------------------- Name: Gregory Roll ------------------------------- Title: Vice President ------------------------------ CIBC (F/K/A CANADIAN IMPERIAL BANK) By: ------------------------------- Name: ------------------------------- Title: ------------------------------ CITIZENS BANK OF MASSACHUSETTS (AS SUCCESSOR TO US TRUST) By: /s/ Thomas F. Macina ------------------------------- Name: Thomas F. Macina ------------------------------- Title: Vice President ------------------------------ 8 9 DRESDNER BANK LATEINAMERIKA AG, MIAMI AGENCY By: /s/ Alan Hills ------------------------------- Name: Alan Hills ------------------------------- Title: VP, CCB-NA ------------------------------ By: /s/ Frank Huthnance ------------------------------- Name: Frank Huthnance ------------------------------- Title: VP, CCB-NA ------------------------------ ERSTE BANK NEW YORK By: /s/ Arcinee Hovanessian ------------------------------- Name: Arcinee Hovanessian ------------------------------- Title: Vice President ------------------------------ By: /s/ Rima Terradista ------------------------------- Name: Rima Terradista ------------------------------- Title: Vice President ------------------------------ FLEET BANK, N.A. By: /s/ Thomas J. Levy ------------------------------- Name: Thomas J. Levy ------------------------------- Title: Vice President ------------------------------ FLEET BUSINESS CREDIT CORPORATION By: /s/ Wes Manus ------------------------------- Name: Wes Manus ------------------------------- Title: Vice President ------------------------------ GENERAL ELECTRIC CAPITAL CORPORATION By: * No longer a Lender in the Facility. ------------------------------- Name: ------------------------------- Title: ------------------------------ HARCH CLO I, LTD. By: /s/ Michael E. Lewitt ------------------------------- Name: Michael E. Lewitt ------------------------------- Title: Authorized Signatory ------------------------------ 9 10 INDOSUEZ CAPITAL FUNDING III, LIMITED By: INDOSUEZ CAPITAL, as Portfolio Advisor By: /s/ Melissa Marano ------------------------------- Name: Melissa Marano ------------------------------- Title: Vice President ------------------------------ INTERNATIONAL BANK OF MIAMI By: /s/ C. Errazquin ------------------------------- Name: Caridad C. Errazquin ------------------------------- Title: Vice President ------------------------------ THE MITSUBISHI TRUST AND BANKING CORPORATION By: /s/ Toshihiro Hayashi ------------------------------- Name: Toshihiro Hayashi ------------------------------- Title: Senior Vice President ------------------------------ NATIONAL BANK OF CANADA By: /s/ Michael Bloomenfeld ------------------------------- Name: Michael Bloomenfeld ------------------------------- Title: Vice President & Manager ------------------------------ By: /s/ Jean Page ------------------------------- Name: Jean Page ------------------------------- Title: Vice President ------------------------------ NATIONAL CITY BANK OF KENTUCKY By: /s/ Todd W. Ethington ------------------------------- Name: Todd W. Ethington ------------------------------- Title: Vice President ------------------------------ 10 11 SCOTIABANC INC. By: /s/ P.M. Brown ------------------------------- Name: P.M. Brown ------------------------------- Title: Director ------------------------------ SUMMIT BANK By: /s/ Seiji P. Nakamura ------------------------------- Name: Seiji P. Nakamura ------------------------------- Title: Vice President ------------------------------ 11 12 THE UNDERSIGNED GUARANTORS HEREBY ACKNOWLEDGE AND CONSENT TO THE CONSENT AND AMENDMENT NO. 4 TO THE AMENDED AND RESTATED CREDIT AGREEMENT AND REAFFIRM THEIR OBLIGATIONS UNDER THE FACILITY GUARANTY THIS 30TH DAY OF JUNE, 2000. APPLICA CONSUMER PRODUCTS, INC. F/K/A WINDMERE CORPORATION By: /s/ Cindy Solovei -------------------------------- Name: Cindy Solovei -------------------------------- Title: Asst. Vice President - Finance ------------------------------- WINDMERE HOLDINGS CORPORATION By: /s/ Cindy Solovei -------------------------------- Name: Cindy Solovei -------------------------------- Title: Asst. Vice President - Finance ------------------------------- WINDMERE HOLDINGS CORPORATION II By: /s/ Cindy Solovei -------------------------------- Name: Cindy Solovei -------------------------------- Title: Asst. Vice President - Finance ------------------------------- BAY BOOKS & TAPES, INC. By: /s/ Cindy Solovei -------------------------------- Name: Cindy Solovei -------------------------------- Title: Asst. Vice President - Finance ------------------------------- FORTUNE PRODUCTS, INC. By: /s/ Cindy Solovei -------------------------------- Name: Cindy Solovei -------------------------------- Title: Asst. Vice President - Finance ------------------------------- 12 13 HP DELAWARE, INC. By: /s/ Cindy Solovei -------------------------------- Name: Cindy Solovei -------------------------------- Title: Asst. Vice President - Finance ------------------------------- APPLICA AMERICAS, INC. F/K/A HP AMERICAS, INC. By: /s/ Cindy Solovei -------------------------------- Name: Cindy Solovei -------------------------------- Title: Asst. Vice President - Finance ------------------------------- HPG LLC By: /s/ Cindy Solovei -------------------------------- Name: Cindy Solovei -------------------------------- Title: Asst. Vice President - Finance ------------------------------- HP INTELLECTUAL CORP By: /s/ Cindy Solovei -------------------------------- Name: Cindy Solovei -------------------------------- Title: Asst. Vice President - Finance ------------------------------- WD DELAWARE, INC. By: /s/ Cindy Solovei -------------------------------- Name: Cindy Solovei -------------------------------- Title: Asst. Vice President - Finance ------------------------------- 13 EX-10.5 7 g65027ex10-5.txt AMD #5 TO AMDED & RESTD CREDIT AGRMT 6/30/00 1 EXHIBIT 10.5 AMENDMENT NO. 5 TO AMENDED AND RESTATED CREDIT AGREEMENT THIS AMENDMENT NO. 5 TO AMENDED AND RESTATED CREDIT AGREEMENT (this "Amendment Agreement") is made and entered into as of this 30th day of June, 2000, by and between APPLICA INCORPORATED, f/k/a Windmere-Durable Holdings, Inc., a Florida corporation (the "Borrower"), BANK OF AMERICA, N.A., f/k/a NationsBank, National Association, as Agent (the "Agent") and as a Lender, and the other Lenders party thereto (together with the Agent, the "Lenders"). Unless the context requires otherwise, all capitalized terms used herein without definition shall have the respective meanings assigned thereto in the Credit Agreement (as defined below). W I T N E S S E T H: WHEREAS, the Lenders and the Borrower have entered into that certain Amended and Restated Credit Agreement dated as of August 7, 1998 (as heretofore and hereby amended, and as further amended, supplemented or restated from time to time, the "Credit Agreement"); and WHEREAS, the Borrower has requested that the Lenders consent to amend certain provisions of the Credit Agreement and the Loan Documents; and WHEREAS, the Lenders are willing to consent to the amendments to the Credit Agreement requested by the Borrower, as more fully set forth herein; and NOW, THEREFORE, in consideration of the premises, the terms, covenants and conditions hereinafter appearing, and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, and intending to be legally bound, the parties hereto agree as follows: 1. AMENDMENT TO CREDIT AGREEMENT. Section 10.22(d) of the Credit Agreement is hereby deleted and the following new subsection (d) is inserted in replacement thereof: (d) CONSOLIDATED LEVERAGE RATIO. Permit Consolidated Leverage Ratio to be greater than the ratio indicated below at any time during the period indicated: April 1, 1999 through September 30, 1999 6.25 to 1.00 October 1, 1999 through March 31, 2000 5.00 to 1.00 April 1, 2000 through September 30, 2000 4.50 to 1.00 October 1, 2000 through December 31, 2000 3.75 to 1.00 January 1, 2001 through June 30, 2001 3.00 to 1.00 July 1, 2001 through September 30, 2001 3.50 to 1.00 October 1, 2001 and thereafter 3.00 to 1.00 2 3. REPRESENTATIONS, WARRANTIES AND COVENANTS. (a) By its execution and delivery hereof, the Borrower certifies that: (i) all of the representations and warranties made by the Borrower in the Credit Agreement and in each of the other Loan Documents are true and correct as of the date hereof as if each of said representations and warranties were set out in full herein and made as of the date of execution and delivery hereof, except that all representations and warranties that refer to the financial statements of the Borrower shall be deemed to refer to the financial statements of the Borrower most recently delivered in accordance with SECTION 9.1 of the Credit Agreement; and (ii) no event has occurred and no condition exists which, upon the consummation of the transaction contemplated hereby, will constitute a Default or an Event of Default on the part of the Borrower under the Credit Agreement or any other Loan Document either immediately or with the lapse of time or the giving of notice, or both. (b) The Borrower further covenants and agrees that the representations and warranties contained in the Credit Agreement and the other Loan Documents, as hereby reaffirmed, and the representations and warranties made herein shall survive the execution and delivery of this Amendment Agreement. 4. EXPENSES. The Borrower agrees to reimburse the Agent and the Lenders for all costs and out-of-pocket expenses, including, without limitation, attorneys' fees and disbursements, incurred in connection with the negotiation, preparation, execution and delivery of this Amendment Agreement. 5. ENTIRE AGREEMENT. This Amendment Agreement sets forth the entire understanding and agreement of the parties hereto in relation to the subject matter hereof and supersedes any prior negotiations and agreements among the parties relative to such subject matter. No promise, condition, representation or warranty, express or implied, not herein set forth shall bind any party hereto, and none of them has relied on any such promise, condition, representation or warranty. Each of the parties hereto acknowledges that, except as set forth in this Amendment Agreement or otherwise expressly stated, no representations, warranties or commitments, express or implied, have been made 2 3 by any party. None of the terms or conditions of this Amendment Agreement may be changed, modified, waived or canceled orally or otherwise, except by writing, signed by all the parties hereto, specifying such change, modification, waiver or cancellation of such terms or conditions, or of any preceding or succeeding breach thereof. 6. FULL FORCE AND EFFECT OF AGREEMENT. Except as hereby specifically amended, modified or supplemented, the Credit Agreement and all of the other Loan Documents are hereby confirmed and ratified in all respects and shall remain in full force and effect according to their respective terms. 7. GOVERNING LAW. This Amendment Agreement shall in all respects be governed by, and construed in accordance with, the laws of the state of New York. 8. ENFORCEABILITY. Should any one or more of the provisions of this Amendment Agreement be determined to be illegal or unenforceable as to one or more of the parties hereto, all other provisions nevertheless shall remain effective and binding on the parties hereto. 9. COUNTERPARTS. This Amendment Agreement may be executed in any number of counterparts, each of which shall be deemed to be an original as against any party whose signature appears thereon, and all of which shall together constitute one and the same instrument. [Signature pages follow.] 3 4 IN WITNESS WHEREOF, the Borrower and the Lenders have caused this Amendment Agreement to be duly executed under seal by their duly authorized officers, all as of the day and year first above written. BORROWER: APPLICA INCORPORATED, FORMERLY KNOWN AS WINDMERE-DURABLE HOLDINGS, INC., as Borrower By: /s/ Terry Polistina ----------------------------------- Name: Terry Polistina ----------------------------------- Title: S.V.P. - Finance & Administration ---------------------------------- AGENT: BANK OF AMERICA, N.A., FORMERLY KNOWN AS NATIONSBANK, NATIONAL ASSOCIATION, as Agent By: /s/ Adam Kaplan ----------------------------------- Name: Adam Kaplan ----------------------------------- Title: Vice President ---------------------------------- LENDERS: BANK OF AMERICA, N.A., FORMERLY KNOWN AS NATIONSBANK, NATIONAL ASSOCIATION By: /s/ Adam Kaplan ----------------------------------- Name: Adam Kaplan ----------------------------------- Title: Vice President ---------------------------------- ABN AMRO BANK N.V. By: ----------------------------------- Name: ----------------------------------- Title: ---------------------------------- 4 5 ALLIANCE CAPITAL MANAGEMENT L.P., as Manager on behalf of ALLIANCE CAPITAL FUNDING, L.L.C. By: ALLIANCE CAPITAL MANAGEMENT CORPORATION, General Partner of Alliance Capital Management L.P. By: /s/ James E. Kennedy ------------------------------- Name: James E. Kennedy ------------------------------- Title: Senior Vice President ------------------------------ OAK MOUNTAIN LIMITED By: ALLIANCE CAPITAL MANAGEMENT L.P., as Investment Manager By: ALLIANCE CAPITAL MANAGEMENT CORPORATION, as General Partner By: /s/ Joel Serebransky ------------------------------- Name: Joel Serebransky ------------------------------- Title: Senior Vice President ------------------------------ ARES LEVERAGED INVESTMENT FUND, L.P. By: ARES Management, L.P. Its: General Partner By: /s/ David A. Sachs ------------------------------- Name: David A. Sachs ------------------------------- Title: Vice President ------------------------------ 5 6 ARES LEVERAGED INVESTMENT FUND II, L.P. By: ARES Management II, L.P. Its: General Partner By: /s/ David A. Sachs ------------------------------- Name: David A. Sachs ------------------------------- Title: Vice President ------------------------------ ARES III CLO LTD. By: ARES CLO Management, LLC Its: General Partner By: /s/ David A. Sachs ------------------------------- Name: David A. Sachs ------------------------------- Title: Vice President ------------------------------ BALANCED HIGH-YIELD FUND II LTD By: BHF (USA) Capital Corporation, acting through its New York Branch, as attorney-in-fact By: /s/ Richard Cameron ------------------------------- Name: Richard Cameron ------------------------------- Title: Vice President ------------------------------ By: /s/ Thomas J. Seito ------------------------------- Name: Thomas J. Seito ------------------------------- Title: Vice President ------------------------------ BHF (USA) CAPITAL CORPORATION By: /s/ Richard Cameron ------------------------------- Name: Richard Cameron ------------------------------- Title: Vice President ------------------------------ By: /s/ Thomas J. Seito ------------------------------- Name: Thomas J. Seito ------------------------------- Title: Vice President ------------------------------ BANKATLANTIC By: /s/ Arthur L. Bigelow ------------------------------- Name: Arthur L. Bigelow ------------------------------- Title: President - Broward County ------------------------------ 6 7 BANK AUSTRIA CREDITANSTALT CORPORATE FINANCE, INC. By: ------------------------------- Name: ------------------------------- Title: ------------------------------ BANK LEUMI LE-ISRAEL B.M. By: /s/ Joseph F. Kealini ------------------------------- Name: Joseph F. Kealini ------------------------------- Title: Vice President ------------------------------ BARCLAYS BANK PLC By: /s/ Gregory Roll ------------------------------- Name: Gregory Roll ------------------------------- Title: Vice President ------------------------------ CIBC (F/K/A CANADIAN IMPERIAL BANK) By: ------------------------------- Name: ------------------------------- Title: ------------------------------ CITIZENS BANK OF MASSACHUSETTS (AS SUCCESSOR TO US TRUST) By: ------------------------------- Name: ------------------------------- Title: ------------------------------ 7 8 DRESDNER BANK LATEINAMERIKA AG, MIAMI AGENCY By: /s/ Alan Hills ------------------------------- Name: Alan Hills ------------------------------- Title: Vice President, CCB-NA ------------------------------ By: /s/ Carlos Lamourtte ------------------------------- Name: Carlos Lamourtte ------------------------------- Title: A.V.P., CCB-NA ------------------------------ ERSTE BANK NEW YORK By: /s/ Arcinee Hovanessian ------------------------------- Name: Arcinee Hovanessian ------------------------------- Title: Vice President ------------------------------ By: /s/ John S. Runnion ------------------------------- Name: John S. Runnion ------------------------------- Title: First Vice President ------------------------------ FLEET BANK, N.A. By: /s/ Thomas J. Levy ------------------------------- Name: Thomas J. Levy ------------------------------- Title: Vice President ------------------------------ FLEET BUSINESS CREDIT CORPORATION By: /s/ Wes Manus ------------------------------- Name: Wes Manus ------------------------------- Title: Vice President ------------------------------ GENERAL ELECTRIC CAPITAL CORPORATION By: ------------------------------- Name: ------------------------------- Title: ------------------------------ HARCH CLO I, LTD. By: /s/ Michael E. Lewitt ------------------------------- Name: Michael E. Lewitt ------------------------------- Title: Authorized Signatory ------------------------------ 8 9 INDOSUEZ CAPITAL FUNDING III, LIMITED By: INDOSUEZ CAPITAL, as Portfolio Advisor By: /s/ Melissa Marano ------------------------------- Name: Melissa Marano ------------------------------- Title: Vice President ------------------------------ INTERNATIONAL BANK OF MIAMI By: ------------------------------- Name: ------------------------------- Title: ------------------------------ THE MITSUBISHI TRUST AND BANKING CORPORATION By: /s/ Toshihiro Hayashi ------------------------------- Name: Toshihiro Hayashi ------------------------------- Title: Senior Vice President ------------------------------ NATIONAL BANK OF CANADA By: /s/ Michael Bloomenfeld ------------------------------- Name: Michael Bloomenfeld ------------------------------- Title: VP & Manager ------------------------------ By: /s/ Jean Page ------------------------------- Name: Jean Page ------------------------------- Title: Vice President ------------------------------ NATIONAL CITY BANK OF KENTUCKY By: /s/ Tom Gurbach ------------------------------- Name: Tom Gurbach ------------------------------- Title: Vice President ------------------------------ 9 10 SCOTIABANC INC. By: /s/ Frank F. Sandler ------------------------------- Name: Frank F. Sandler ------------------------------- Title: Director ------------------------------ SUMMIT BANK By: ------------------------------- Name: ------------------------------- Title: ------------------------------ SUNTRUST BANK By: /s/ W. David Wisdom ------------------------------- Name: W. David Wisdom ------------------------------- Title: Vice President ------------------------------ 10 11 THE UNDERSIGNED GUARANTORS HEREBY ACKNOWLEDGE AND CONSENT TO THE CONSENT AND AMENDMENT NO. 4 TO THE AMENDED AND RESTATED CREDIT AGREEMENT AND REAFFIRM THEIR OBLIGATIONS UNDER THE FACILITY GUARANTY THIS 30TH DAY OF JUNE, 2000. APPLICA CONSUMER PRODUCTS, INC. f/k/a WINDMERE CORPORATION By: /s/ Lisa R. Carstarphen ------------------------------- Name: Lisa R. Carstarphen ------------------------------- Title: Assistant Secretary ------------------------------ WINDMERE HOLDINGS CORPORATION By: /s/ Lisa R. Carstarphen ------------------------------- Name: Lisa R. Carstarphen ------------------------------- Title: Secretary ------------------------------ WINDMERE HOLDINGS CORPORATION II By: /s/ Lisa R. Carstarphen ------------------------------- Name: Lisa R. Carstarphen ------------------------------- Title: Secretary ------------------------------ BAY BOOKS & TAPES, INC. By: /s/ Lisa R. Carstarphen ------------------------------- Name: Lisa R. Carstarphen ------------------------------- Title: Secretary ------------------------------ FORTUNE PRODUCTS, INC. By: /s/ Lisa R. Carstarphen ------------------------------- Name: Lisa R. Carstarphen ------------------------------- Title: Secretary ------------------------------ 11 12 HP DELAWARE, INC. By: /s/ Lisa R. Carstarphen ------------------------------- Name: Lisa R. Carstarphen ------------------------------- Title: Secretary ------------------------------ APPLICA AMERICAS, INC. f/k/a HP AMERICAS, INC. By: /s/ Lisa R. Carstarphen ------------------------------- Name: Lisa R. Carstarphen ------------------------------- Title: Secretary ------------------------------ HPG LLC By: /s/ Lisa R. Carstarphen ------------------------------- Name: Lisa R. Carstarphen ------------------------------- Title: Secretary ------------------------------ HP INTELLECTUAL CORP By: /s/ Lisa R. Carstarphen ------------------------------- Name: Lisa R. Carstarphen ------------------------------- Title: Secretary ------------------------------ WD DELAWARE, INC. By: /s/ Lisa R. Carstarphen ------------------------------- Name: Lisa R. Carstarphen ------------------------------- Title: Secretary ------------------------------ 12 EX-10.6 8 g65027ex10-6.txt AMD #6 TO AMDED & RESTD CREDIT AGRMT 11/00 1 Exhibit 10.6 AMENDMENT NO. 6 TO AMENDED AND RESTATED CREDIT AGREEMENT THIS AMENDMENT NO. 6 TO AMENDED AND RESTATED CREDIT AGREEMENT (this "Amendment Agreement") is made and entered into as of this 9th day of November, 2000, by and between APPLICA INCORPORATED, f/k/a Windmere-Durable Holdings, Inc., a Florida corporation (the "Borrower"), BANK OF AMERICA, N.A., f/k/a NationsBank, National Association, as Agent (the "Agent") and as a Lender, and the other Lenders party thereto (together with the Agent, the "Lenders"). Unless the context requires otherwise, all capitalized terms used herein without definition shall have the respective meanings assigned thereto in the Credit Agreement (as defined below). W I T N E S S E T H: WHEREAS, the Lenders and the Borrower have entered into that certain Amended and Restated Credit Agreement dated as of August 7, 1998 (as heretofore and hereby amended, and as further amended, supplemented or restated from time to time, the "Credit Agreement"); and WHEREAS, the Borrower has requested that the Lenders agree to amend certain provisions of the Credit Agreement and the Loan Documents; and WHEREAS, the Lenders are willing to agree to the amendments to the Credit Agreement requested by the Borrower, as more fully set forth herein; and NOW, THEREFORE, in consideration of the premises, the terms, covenants and conditions hereinafter appearing, and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, and intending to be legally bound, the parties hereto agree as follows: 1. AMENDMENT TO CREDIT AGREEMENT. (a) The definition of "Consolidated Fixed Charge Coverage Ratio" in Section 1.2 of the Credit Agreement is deleted and the following new definition is inserted in replacement thereof: "Consolidated Fixed Charge Ratio" means, with respect to the Borrower and its Subsidiaries for the Applicable Period, the ratio of (i) Consolidated EBITDA for such period to (ii) Consolidated Fixed Charges for such period. (b) The definition of "Consolidated Net Income" in Section 1.2 of the Credit Agreement is amended by adding the following new proviso at the end thereof: ; and provided further, however, that there shall be added back to Consolidated Net Income, through the third fiscal quarter 2001, the amount of that certain one-time restructuring charge of up to $40,000,000 incurred in the fourth fiscal quarter 2000 in connection with the exiting of certain non-core businesses of the Borrower; 2 (c) The definition of "Hedging Obligation" in Section 1.2 of the Credit Agreement is amended by adding the following new language at the end thereof: For purposes of any computation hereunder, each Hedging Obligation shall be valued at the Hedge Value thereof. (d) The definition of "Indebtedness" in Section 1.2 of the Credit Agreement is amended by adding the following new language at the end thereof: or Hedging Obligations with a negative Hedge Value to the extent included in the calculation of Consolidated Net Income. (e) Section 1.2 of the Credit Agreement is amended by adding the following new definition in alphabetical position: "Hedge Value" means, with respect to each contract, instrument or other arrangement creating a Hedging Obligation, the net obligations of the Borrower or any Subsidiary thereunder equal to the termination value thereof as determined in accordance with its provisions (if such Hedging Obligation has been terminated) or the mark to market value thereof as determined on the basis of available quotations from any recognized dealer in, or from Bloomberg or other similar service providing market quotations for, the applicable Hedging Obligation (if such Hedging Obligation has not been terminated). (f) Section 10.9 of the Credit Agreement is hereby deleted and the following new Section 10.9 is inserted in replacement thereof. 10.9 HEDGING OBLIGATIONS. Incur or permit to exist any Hedging Obligations or enter into any agreements, arrangements, devices or instruments relating to Hedging Obligations, except for Hedging Obligations in an aggregate amount of less than $300,000,000 entered into in the ordinary course of business which are not for speculative or investment purposes. (g) Section 10.22 of the Credit Agreement is hereby deleted and the following new Section 10.22 is inserted in replacement thereof: 10.22. FINANCIAL COVENANTS. (a) CONSOLIDATED NET WORTH. Permit at any time Consolidated Net Worth to be less than $295,000,000, such amount to be increased as at the first day of each fiscal quarter, beginning with the fiscal quarter beginning January 1, 2001, by an amount equal to (a) seventy-five percent (75%) of Consolidated Net Income during the immediately preceding 2 3 fiscal quarter, plus (b) one hundred percent (100%) of the Net Proceeds of any Equity Offering consummated during the immediately preceding fiscal quarter; PROVIDED, HOWEVER, in no event shall the Consolidated Net Worth requirement be decreased as a result of a net loss of the Borrower and its Subsidiaries (i.e., negative Consolidated Net Income) for any fiscal quarter. Any increase calculated pursuant hereto shall be determined based upon financial statements delivered in accordance with SECTION 9.1(a) AND (b) hereof; PROVIDED, HOWEVER such increase shall be deemed effective as of the first day of the fiscal quarter in which such financial statements are delivered or required to be delivered, if earlier. (b) CONSOLIDATED FIXED CHARGE COVERAGE RATIO. Permit Consolidated Fixed Charge Coverage Ratio to be less than the ratio indicated below at any time during the period indicated: Closing Date through March 30, 2002 1.50 to 1.00 March 31, 2002 and thereafter 1.75 to 1.00 (c) CONSOLIDATED INTEREST COVERAGE RATIO. Permit Consolidated Interest Coverage Ratio to be less than the ratio indicated below at any time during the period indicated: Closing Date through March 30, 2003 2.50 to 1.00 March 31, 2003 and thereafter 3.00 to 1.00 (d) CONSOLIDATED LEVERAGE RATIO. Permit Consolidated Leverage Ratio to be greater than the ratio indicated below at any time during the period indicated: Closing Date through March 30, 2002 4.35 to 1.00 March 31, 2002 through through March 30, 2003 3.75 to 1.00 March 31, 2003 and thereafter 3.25 to 1.00 (e) TOTAL INDEBTEDNESS. Permit the aggregate amount of Indebtedness owing by the Borrower and its Subsidiaries on a consolidated basis, less the outstanding amount of the Subordinated Notes, to exceed $335,000,000 at any time. 3 4 (f) CAPITAL EXPENDITURES. Make or become committed to make Capital Expenditures, which exceed in the aggregate in any Fiscal Year of the Borrower described below (on a noncumulative basis, with the effect that amounts not expended in any Fiscal Year may not be carried forward to a subsequent period, provided, however, that amounts not expended in Fiscal Year 2001 MAY be carried Forward and expended in Fiscal Year 2002 only), the amount set forth opposite each such period: Fiscal Year Ending: Capital Expenditures Not to Exceed: ------------------- ----------------------------------- December 31, 2000 $28,000,000 December 31, 2001 $50,000,000 December 31, 2002 $30,000,000 December 31, 2003 and each Fiscal Year thereafter $30,000,000 (h) Section 13.9 of the Credit Agreement is hereby deleted and the following new Section 13.9 is inserted in replacement thereof: 13.9. CONFIDENTIALITY. The Agent and each Lender (each, a "Lending Party") agrees to keep confidential any information furnished or made available to it by the Borrower, any Guarantor or any of their Subsidiaries or Affiliates (each, a "Disclosing Party) that is marked as confidential or, with respect to verbal information, explicitly identified as confidential when furnished ("Confidential Information"). (a) For purposes of this Agreement, the term "Confidential Information" shall not include information that (i) is in the Lending Party's possession prior to it being provided by or on behalf of the Disclosing Party, provided that such information is not known by the Lending Party to be subject to another confidentiality agreement with, or other legal or contractual obligation of confidentiality to, a Disclosing Party (ii) is or becomes publicly available (other than through a breach of this Agreement by any Lending Party), or (iii) becomes available to the Lending Party on a non-confidential basis, provided that the source of such information was not known by the Lending Party to be bound by a confidentiality agreement or other legal or contractual obligation of confidentiality with respect to such information. (b) Notwithstanding the foregoing, a Lending Party may disclose Confidential Information to: (1) any governmental agency or regulatory body having or reasonably claiming to have authority to regulate or oversee any aspect of the Lending Party's business in connection with the exercise of such authority or claimed authority; 4 5 (2) the extent necessary or appropriate to effect or preserve the Lending Party's security (if any) hereunder or to enforce any right or remedy provided pursuant to this Agreement or in connection with any claims asserted by or against the Lending Party or the Borrower or any other person or entity involved herewith; (3) its directors, officers, employees, attorneys, accountants, and auditors (collectively, the "REPRESENTATIVES") whom it reasonably determines need to know such information; and the Lending Party agrees inform the Representatives to whom it discloses Confidential Information of the confidential nature of the Confidential Information; and (4) any bank or financial institution or other entity to which the Lending Party has sold or desires to sell an interest or participation in the Facilities, provided that any such recipient of such Confidential Information agrees in writing to keep such Confidential Information confidential as specified in this Section 13.9; PROVIDED, HOWEVER, in the event a Lending Party is requested or required (by interrogatory, court order, subpoena, administrative proceeding, civil investigatory demand, or any similar legal process) to disclose any of the Confidential Information, the Lending Party, in the absence of a protective order, may disclose such information without liability. The Lending Party, however, shall, to the extent permitted by law and as promptly as practicable, notify the Disclosing Party and the Borrower prior to such disclosure by the Lending Party so that the Disclosing Party may seek at its sole expense a protective order or other appropriate remedy. (c) Each Lending Party acknowledges that, under certain circumstances, the United States securities laws may prohibit a person who has received material, non-public information from an issuer from purchasing or selling securities of such issuer or from communicating such information to any other person under circumstances in which it is reasonably foreseeable that such other person is likely to purchase or sell such securities. Each Lending Party further acknowledges that certain Confidential Information could be considered material non-public information and agrees that it will not, and it will use reasonable efforts to ensure that its Representatives will not, trade in the securities of the Borrower on the basis of such information or communicate such information to any other person under circumstances in which it is reasonably foreseeable that such other person is likely to purchase or sell such securities. (d) This Section 13.9 shall survive the termination of this Agreement. 5 6 2. REPRESENTATIONS, WARRANTIES AND COVENANTS. (a) By its execution and delivery hereof, the Borrower certifies that: (i) all of the representations and warranties made by the Borrower in the Credit Agreement and in each of the other Loan Documents are true and correct as of the date hereof as if each of said representations and warranties were set out in full herein and made as of the date of execution and delivery hereof, except that all representations and warranties that refer to the financial statements of the Borrower shall be deemed to refer to the financial statements of the Borrower most recently delivered in accordance with SECTION 9.1 of the Credit Agreement; and (ii) no event has occurred and no condition exists which, upon the consummation of the transaction contemplated hereby, will constitute a Default or an Event of Default on the part of the Borrower under the Credit Agreement or any other Loan Document either immediately or with the lapse of time or the giving of notice, or both. (b) The Borrower further covenants and agrees that the representations and warranties contained in the Credit Agreement and the other Loan Documents, as hereby reaffirmed, and the representations and warranties made herein shall survive the execution and delivery of this Amendment Agreement. 3. AMENDMENT FEE. The Borrower agrees to pay to the Agent for the benefit of each Lender signatory hereto on the effective date of this Agreement an amendment fee (the "Amendment Fee") equal to .20% of the aggregate amount of the Total Revolving Credit Commitment and the Total Term Loan Commitment which fee shall be earned as of such date and shall be allocated pro rata among the Lenders signatory hereto based upon their respective Applicable Commitment Percentages. 4. EXPENSES. The Borrower agrees to reimburse the Agent and the Lenders for all costs and out-of-pocket expenses, including, without limitation, attorneys' fees and disbursements, incurred in connection with the negotiation, preparation, execution and delivery of this Amendment Agreement. 5. ENTIRE AGREEMENT. This Amendment Agreement sets forth the entire understanding and agreement of the parties hereto in relation to the subject matter hereof and supersedes any prior negotiations and agreements among the parties relative to such subject matter. No promise, condition, representation or warranty, express or implied, not herein set forth shall bind any party hereto, and none of them has relied on any such promise, condition, representation or warranty. Each of the parties hereto acknowledges that, except as set forth in this Amendment Agreement or otherwise expressly stated, no representations, warranties or commitments, express or implied, have been made by any party. None of the terms or conditions of this Amendment Agreement may be changed, modified, waived or canceled orally or otherwise, except by writing, signed by all the parties hereto, specifying such change, modification, waiver or cancellation of such terms or conditions, or of any preceding or succeeding breach thereof. 6 7 6. FULL FORCE AND EFFECT OF AGREEMENT. Except as hereby specifically amended, modified or supplemented, the Credit Agreement and all of the other Loan Documents are hereby confirmed and ratified in all respects and shall remain in full force and effect according to their respective terms. 7. GOVERNING LAW. This Amendment Agreement shall in all respects be governed by, and construed in accordance with, the laws of the state of New York. 8. ENFORCEABILITY. Should any one or more of the provisions of this Amendment Agreement be determined to be illegal or unenforceable as to one or more of the parties hereto, all other provisions nevertheless shall remain effective and binding on the parties hereto. 9. COUNTERPARTS. This Amendment Agreement may be executed in any number of counterparts, each of which shall be deemed to be an original as against any party whose signature appears thereon, and all of which shall together constitute one and the same instrument. [Signature pages follow.] 7 8 IN WITNESS WHEREOF, the Borrower and the Lenders have caused this Amendment Agreement to be duly executed under seal by their duly authorized officers, all as of the day and year first above written. BORROWER: APPLICA INCORPORATED, FORMERLY KNOWN AS WINDMERE-DURABLE HOLDINGS, INC., as Borrower By: /s/ Terry Polistina ----------------------------------------- Name: Terry Polistina --------------------------------------- Title: S.V.P. -- Finance and Administration -------------------------------------- AGENT: BANK OF AMERICA, N.A., FORMERLY KNOWN AS NATIONSBANK, NATIONAL ASSOCIATION, as Agent By: /s/ Adam Kaplan ----------------------------------------- Name: Adam Kaplan --------------------------------------- Title: Vice President -------------------------------------- LENDERS: BANK OF AMERICA, N.A., FORMERLY KNOWN AS NATIONSBANK, NATIONAL ASSOCIATION By: /s/ Adam Kaplan ----------------------------------------- Name: Adam Kaplan --------------------------------------- Title: Vice President -------------------------------------- 8 9 ALLIANCE CAPITAL MANAGEMENT L.P., as Manager on behalf of ALLIANCE CAPITAL FUNDING, L.L.C. By: ALLIANCE CAPITAL MANAGEMENT CORPORATION, General Partner of Alliance Capital Management L.P. By: /s/ James E. Kennedy, Jr. ----------------------------------------- Name: James E. Kennedy, Jr. --------------------------------------- Title: Senior Vice President -------------------------------------- ARES LEVERAGED INVESTMENT FUND, L.P. By: ARES Management, L.P. Its: General Partner By: signature illegible ----------------------------------------- Name: --------------------------------------- Title: -------------------------------------- ARES LEVERAGED INVESTMENT FUND II, L.P. By: ARES Management II, L.P. Its: General Partner By: signature illegible ----------------------------------------- Name: --------------------------------------- Title: -------------------------------------- ARES III CLO LTD. By: ARES CLO Management, LLC Its: General Partner By: signature illegible ----------------------------------------- Name: --------------------------------------- Title: -------------------------------------- 9 10 BALANCED HIGH-YIELD FUND II LTD By: BHF (USA) Capital Corporation, acting through its New York Branch, as attorney-in-fact By: /s/ Christopher J. Rivzzi ----------------------------------------- Name: Christopher J. Rivzzi --------------------------------------- Title: Vice President -------------------------------------- By: /s/ Lisa Moraglia ----------------------------------------- Name: Lisa Moraglia --------------------------------------- Title: Portfolio Manager -------------------------------------- BHF (USA) CAPITAL CORPORATION By: /s/ Christopher J. Rivzzi ----------------------------------------- Name: Christopher J. Rivzzi --------------------------------------- Title: Vice President -------------------------------------- By: /s/ Lisa Moraglia ----------------------------------------- Name: Lisa Moraglia --------------------------------------- Title: Portfolio Manager -------------------------------------- BANKATLANTIC By: /s/ Marcia K. Snyder ----------------------------------------- Name: Marcia K. Snyder --------------------------------------- Title: Executive Vice President -------------------------------------- BANK AUSTRIA CREDITANSTALT CORPORATE FINANCE, INC. By: /s/ Scott Kram ----------------------------------------- Name: Scott Kram --------------------------------------- Title: SVP -------------------------------------- By: /s/ Gary Andresen ----------------------------------------- Name: Gary Andresen --------------------------------------- Title: VP -------------------------------------- 10 11 BANK LEUMI LE-ISRAEL B.M. By: /s/ Joseph F. Realini ----------------------------------------- Name: Joseph F. Realini --------------------------------------- Title: V.P. -------------------------------------- BARCLAYS BANK PLC By: /s/ Gregory Roll ----------------------------------------- Name: Gregory Roll --------------------------------------- Title: Associate Director -------------------------------------- CITIZENS BANK OF MASSACHUSETTS (AS SUCCESSOR TO US TRUST) By: /s/ Stephen M. Curran ----------------------------------------- Name: Stephen M. Curran --------------------------------------- Title: Vice President -------------------------------------- DRESDNER BANK LATEINAMERIKA AG, Miami Agency By: /s/ Carlos Lamourtte ----------------------------------------- Name: Carlos Lamourtte --------------------------------------- Title: Assistant Vice President -------------------------------------- By: /s/ Frank Huthnance ----------------------------------------- Name: Frank Huthnance --------------------------------------- Title: Vice President -------------------------------------- 11 12 ERSTE BANK NEW YORK By: /s/ Arcinee Hovanessian ----------------------------------------- Name: Arcinee Hovanessian --------------------------------------- Title: Vice President -------------------------------------- By: /s/ John S. Runnion ----------------------------------------- Name: John S. Runnion --------------------------------------- Title: First Vice President -------------------------------------- FLEET NATIONAL BANK (SUCCESSOR BY MERGER TO FLEET BANK, N.A.) By: /s/ Thomas J. Levy ----------------------------------------- Name: Thomas J. Levy --------------------------------------- Title: Vice President -------------------------------------- FLEET BUSINESS CREDIT CORPORATION By: ----------------------------------------- Name: --------------------------------------- Title: -------------------------------------- HARCH CLO I, LTD. By: /s/ Michael E. Lewitt ----------------------------------------- Name: Michael E. Lewitt --------------------------------------- Title: Authorized Signatory -------------------------------------- INDOSUEZ CAPITAL FUNDING III, LIMITED By: INDOSUEZ CAPITAL, as Portfolio Advisor By: /s/ Melissa Marano ----------------------------------------- Name: Melissa Marano --------------------------------------- Title: Vice President -------------------------------------- 12 13 INTERNATIONAL BANK OF MIAMI By: /s/ Caridad Errazquin ----------------------------------------- Name: Caridad Errazquin --------------------------------------- Title: Vice President -------------------------------------- THE MITSUBISHI TRUST AND BANKING CORPORATION By: ----------------------------------------- Name: --------------------------------------- Title: -------------------------------------- MONUMENT CAPITAL By: Alliance Capital Management L.P., as Investment Manager By: Alliance Capital Management Corporation, as General Partner By: /s/ James E. Kennedy, Jr. ----------------------------------------- Name: James E. Kennedy, Jr. --------------------------------------- Title: Senior Vice President -------------------------------------- NATIONAL BANK OF CANADA By: /s/ Jay S. Stein ----------------------------------------- Name: Jay S. Stein --------------------------------------- Title: Vice President -------------------------------------- By: /s/ Michael Bloomenfeld ----------------------------------------- Name: Michael Bloomenfeld --------------------------------------- Title: Vice President and Manager -------------------------------------- NATIONAL CITY BANK OF KENTUCKY By: /s/ Peter W. Richer ----------------------------------------- Name: Peter W. Richer --------------------------------------- Title: Vice-President -------------------------------------- SCOTIABANC INC. By: /s/ Frank Sandler ----------------------------------------- Name: Frank Sandler --------------------------------------- Title: Director -------------------------------------- SUNTRUST BANK By: ----------------------------------------- Name: --------------------------------------- Title: -------------------------------------- 13 14 THE UNDERSIGNED GUARANTORS HEREBY ACKNOWLEDGE AND CONSENT TO THE CONSENT AND AMENDMENT NO. 6 TO THE AMENDED AND RESTATED CREDIT AGREEMENT AND REAFFIRM THEIR OBLIGATIONS UNDER THE FACILITY GUARANTY THIS 9TH DAY OF NOVEMBER, 2000. APPLICA CONSUMER PRODUCTS, INC. f/k/a WINDMERE CORPORATION By: /s/ Cindy Solovei ------------------------------------ Name: Cindy Solovei ------------------------------------ Title: Treasurer ----------------------------------- WINDMERE HOLDINGS CORPORATION By: /s/ Cindy Solovei ------------------------------------ Name: Cindy Solovei ------------------------------------ Title: Treasurer ----------------------------------- WINDMERE HOLDINGS CORPORATION II By: /s/ Cindy Solovei ------------------------------------ Name: Cindy Solovei ------------------------------------ Title: Treasurer ----------------------------------- BAY BOOKS & TAPES, INC. By: /s/ Cindy Solovei ------------------------------------ Name: Cindy Solovei ------------------------------------ Title: Treasurer ----------------------------------- FORTUNE PRODUCTS, INC. By: /s/ Cindy Solovei ------------------------------------ Name: Cindy Solovei ------------------------------------ Title: Treasurer ----------------------------------- 14 15 HP DELAWARE, INC. By: /s/ Cindy Solovei ------------------------------------ Name: Cindy Solovei ------------------------------------ Title: Treasurer ----------------------------------- HP AMERICAS, INC. By: /s/ Cindy Solovei ------------------------------------ Name: Cindy Solovei ------------------------------------ Title: Treasurer ----------------------------------- HPG LLC By: /s/ Cindy Solovei ------------------------------------ Name: Cindy Solovei ------------------------------------ Title: Treasurer ----------------------------------- HP INTELLECTUAL CORP By: /s/ Cindy Solovei ------------------------------------ Name: Cindy Solovei ------------------------------------ Title: Treasurer ----------------------------------- WD DELAWARE, INC. By: /s/ Cindy Solovei ------------------------------------ Name: Cindy Solovei ------------------------------------ Title: Treasurer ----------------------------------- 15 EX-10.7 9 g65027ex10-7.txt EMPLOYMENT AGREEMENT - MICHAEL J. MICHIENZI 7/1/00 1 EXHIBIT 10.7 EMPLOYMENT AGREEMENT THIS EMPLOYMENT AGREEMENT (the "Agreement") is executed this 1st day of July, 2000, by and between Applica Consumer Products, Inc., a Florida corporation (the "Company"), and Michael J. Michienzi, an individual residing in the State of Connecticut (the "Employee"). RECITALS: A. The Executive is currently employed as the President and General Manager, Sales and Marketing of the Company. B. The Executive possesses intimate knowledge of the business and affairs of the Company and its subsidiaries, their policies, methods and personnel. C. The Company recognizes that the Executive has contributed to the growth and success of the Company, and desires to assure the Company of the Executive's continued employment and to compensate him therefor. D. The Board of Directors of the Company (the "Board") has determined that this Agreement will reinforce and encourage the Executive's continued attention and dedication to the Company and its subsidiaries. E. The Executive is willing to make his services available to the Company on the terms and conditions hereinafter set forth. AGREEMENT Therefore, in consideration of the premises, mutual covenants and agreements of the parties contained herein, and other good and valuable consideration, the receipt and adequacy of which is hereby acknowledged, the Company and the Employee hereby agree as follows: 1. EMPLOYMENT. Commencing on the date hereof, the Company shall employ the Employee and the Employee shall accept employment by the Company, upon the terms and conditions set forth in this Agreement. 2. TERM. The term of employment (the "Term") of this Agreement shall begin on the date hereof and, except as otherwise provided in Sections 7, 8, 9 and 10 below, shall end on June 30, 2003. The Term shall automatically renew for successive one year terms, unless sooner terminated as provided herein or unless either party gives notice at least 60 days prior to the end of the Term that such party does not intend to renew the Term. 2 3. DUTIES. The Employee will have such duties as are assigned or delegated to the Employee by the President and Chief Executive Officer and the Chief Operating Officer and will initially serve as the President and General Manager, Sales and Marketing of the Company. The Employee will devote his entire business time, attention, skill, and energy exclusively to the business of the Company, will use his best efforts to promote the success of the Company, and will cooperate fully with the Board in the advancement of the best interests of the Company. 4. COMPENSATION. During the Term, the Company shall compensate Employee as follows: (a) SALARY. The Company shall pay Employee an annual salary of $309,322 (the "Annual Base Salary"), to be distributed in equal periodic installments according to the Company's customary payroll practices. Nothing contained herein shall be construed to prevent the Company from increasing Employee's Annual Base Salary more often than annually or by a higher amount than required by the Index (as defined below). The Annual Base Salary will increase progressively for each of the ensuing twelve month periods during the Term by an amount at least equal to the percentage increase in the United States Consumer Price Index for all urban consumers (CPI-U), U.S. City Average - All Items, published by the Bureau of Labor Statistics, United States Department of Labor (the "Index") for the previous calendar year. If at any time required for the determination of the Annual Base Salary adjustment as above described, the Index is no longer published or issued, the parties shall use such other index as is then generally recognized or accepted for similar determinations of purchasing power. (b) ANNUAL BONUS. The Employee shall be entitled to receive incentive compensation (the "Incentive Compensation") for each year during the Term as set forth below: (i) PERFORMANCE BONUS. At the beginning of each calendar year during the Term, the Board (or the Compensation Committee thereof) shall establish target goals for (A) earnings before interest, taxes, depreciation and amortization ("EBITDA") of the Company and (B) the Employee's personal performance (collectively, the "Performance Goals"). The Employee shall be entitled to an annual bonus (the "Performance Bonus") based 50% on the achievement of the Performance Goal set forth in (A) above and 50% on the achievement of the Performance Goal set forth in (B) above. Such Performance Bonus shall be equal to a percentage of his Annual Base Salary to be determined as follows:
AGGREGATE PERCENTAGE OF BONUS AS PERCENTAGE PERFORMANCE GOALS ACHIEVED OF ANNUAL BASE SALARY -------------------------- --------------------- 75% - 79% (Threshold Performance) 20% 80% - 84% 23% 85% - 89% 26% 90% - 94% 29% 95% - 99% 32% 100% - 104% (Target Performance) 35% 105% - 109% 38% 110% - 114% 41% 115% - 119% 44% 120% - 124% 47% 125% and above (Maximum Performance) 50%
2 3 (ii) SYNERGY BONUS. At the beginning of each of the calendar years, the Board (or the Compensation Committee thereof) shall establish target goals for the synergies to be attained as a result of the integration of the Household Products Business (the "Synergy Goals"). Not later than 90 days after the end of each such year in which the portion of the Synergy Goals achieved are at least equal to 75%, the Employee shall be paid a cash bonus (the "Synergy Bonus") equal to a percentage of his Annual Base Salary to be determined as follows:
AGGREGATE PERCENTAGE OF BONUS AS PERCENTAGE SYNERGY GOALS ACHIEVED OF ANNUAL BASE SALARY ---------------------- --------------------- 75% - 79% (Threshold Performance) 5% 80% - 84% 7% 85% - 89% 9% 90% - 94% 11% 95% - 99% 13% 100% - 104% (Target Performance) 15% 105% - 109% 17% 110% - 114% 19% 115% - 119% 21% 120% - 124% 23% 125% and above (Maximum Performance) 25%
(iii) CUMULATIVE SYNERGY BONUS. If the Company achieves $45 million in certain cumulative synergies resulting from the integration of the Household Products business into Applica (the "Cumulative Synergy Goals") on or before December 31, 2001, the Company shall establish a bonus pool in an amount equal to 30% of the aggregate Annual Base Salaries of all employees entitled to a cumulative synergy bonus. Upon the achievement of the Cumulative Synergy Goals, the Employee shall be entitled to receive a one-time cash bonus (the "Cumulative Synergy Bonus") to be paid in the first quarter of 2002, if the Employee is employed with the Company. The amount of the Cumulative Synergy Bonus shall be determined in the sole discretion of the Board (or the Compensation Committee, as applicable). 5. EXPENSE REIMBURSEMENT AND OTHER BENEFITS. (a) REIMBURSEMENT OF EXPENSES. During the term of Employee's employment hereunder, the Company, upon the submission of proper substantiation, including copies of all relevant invoices, receipts or other evidence reasonably requested by the Company, by the Employee, shall reimburse the Employee for all 3 4 reasonable expenses actually paid or incurred by the Employee in the course of and pursuant to the business of the Company. (b) EMPLOYEE BENEFITS. Employee shall participate in the Company's Group Health and Hospitalization Plan, Group Life Insurance Plan, Group Disability Insurance Plan and all other insurances, or insurance plans (collectively, the "Welfare Benefits"), and employee benefits and bonuses covering Company senior executive officers as are now or may in the future be in effect, subject to applicable eligibility requirements. Additionally, the Company shall provide the Employee with life insurance in an amount equal to five times his Annual Base Salary. During the Term, the Company shall pay for tax preparation for the Employee on an annual basis up to a maximum of 1% of Annual Base Salary and for the Employee's annual dues in a country club. (c) STOCK OPTIONS. During the Term of this Agreement, the Executive shall be eligible to be granted options to acquire shares of the Common Stock of Applica Incorporated ("Applica") under (and therefore subject to all terms and conditions of) the Applica stock option plans as then in effect, and all rules and regulations of the Securities and Exchange Commission applicable to stock option plans. Such options will contain such restrictions as required by the Board of Applica or the applicable committee of such Board charged with administration of the stock option plan. The number of shares of Common Stock subject to the stock options shall be adjusted for any subsequent stock splits, stock dividends or similar recapitalizations of the Applica Common Stock which results in an increase or decrease of the number of shares of outstanding Common Stock of Applica. The number of options and terms and conditions of options shall be determined in the sole discretion of the Board of Applica, or applicable committee thereof, and shall be based on several factors, including the performance of the Company on a consolidated basis. (d) AUTOMOBILE. During the Term, the Company shall provide Employee with an automobile allowance of $975 monthly. (e) VACATION. During the Term, the Employee will be entitled to four weeks' paid vacation for each year. The Employee will also be entitled to the paid holidays and other paid leave set forth in Company's policies. Vacation days and holidays during any fiscal year that are not used by the Employee during such fiscal year may not be carried over and used in any subsequent fiscal year. 6. RESTRICTIONS. (a) NON-COMPETITION. During the Term and for a one year period after the termination of the Term for any reason, the Employee shall not, directly or indirectly, engage or invest in, own, manage, operate, finance, control, or participate in any manner in the ownership, management, operation, financing, or control of, be employed by, associated with, or in any manner connected with, lend his name or any similar name to, lend his credit to or render services or advice to, purchase product from or distribute on behalf of (whether as an employee, officer, director, partner, agent, security holder, creditor, consultant or otherwise), any person or entity that directly or indirectly (or through any affiliated entity) engages in competition with the 4 5 Company (for this purpose, any business that engages in the manufacture or distribution of products similar to those products manufactured or distributed by the Company at the time of termination of the Agreement shall be deemed to be in competition with the Company); provided that such provision shall not apply to the Employee's ownership of Common Stock of Applica or the acquisition by the Employee, solely as an investment, of any issuer that is registered under Section 12(b) or 12(g) of the Securities Exchange Act of 1934, as amended, and that are listed or admitted for trading on any United States national securities exchange or that are quoted on the National Association of Securities Dealers Automated Quotations System, or any similar system or automated dissemination of quotations of securities prices in common use, so long as the Employee does not control, acquire a controlling interest in or become a member of a group which exercises direct or indirect control or, more than one percent of any class of capital stock of such corporation. (b) NONDISCLOSURE. During the Term and after the termination of the Term for any reason, the Employee shall not at any time divulge, communicate, use to the detriment of the Company or for the benefit of any other person or persons, or misuse in any way, any Confidential Information (as hereinafter defined) pertaining to the business of the Company. Any Confidential Information or data now or hereafter acquired by the Employee with respect to the business of the Company shall be deemed a valuable, special and unique asset of the Company that is received by the Employee in confidence and as a fiduciary, and Employee shall remain a fiduciary to the Company with respect to all of such information. For purposes of this Agreement, "Confidential Information" means information disclosed to the Employee or known by the Employee as a consequence of or through his employment by the Company (including information conceived, originated, discovered or developed by the Employee) prior to or after the date hereof, and not generally known, about the Company or its business. Confidential Information shall include, but not be limited to, any and all: (i) trade secrets and data concerning the past, current and planned business, strategy, operations and affairs of the Company, data, know-how, compositions, processes, designs, sketches, photographs, graphs, drawings, samples, inventions and ideas, past, current, and planned research and development, customer lists, client lists, agent lists, current and anticipated customer and client requirements, price lists, commission information, market studies, business plans, computer software and programs (including object code and source code), computer software and database technologies, systems, concepts, ideas, designs, methods and information relating directly or indirectly to the Company; (ii) information concerning the past, current and planned business, strategy, operations and affairs of the Company, which includes historical financial statements, financial projections and budgets, historical and projected income, capital spending budgets and plans, the names and backgrounds of key personnel, suppliers, distributors, manufacturers, customers and clients, and any and all information relating to contracts and agreements with such persons, however documented; and 5 6 (iii) notes, analysis, compilations, studies, summaries, and other material prepared by or for the Company containing or based, in whole or in part, on any information included in the foregoing. Notwithstanding the foregoing, nothing herein shall be deemed to restrict the Employee from disclosing Confidential Information to the extent required by law; provided, however, that the Employee provides prior notice of such disclosure to the Company and provides the Company with a reasonable opportunity to prevent, limit or protect such disclosure. None of the foregoing obligations and restrictions apply to any Confidential Information that the Employee demonstrates was or became generally available to the public other than as a result of disclosure by the Employee. (c) NONSOLICITATION OF EMPLOYEES AND CLIENTS. During the Term and for a one year period after the termination of the Term for any reason, the Employee shall not, directly or indirectly, for himself or for any other person, firm, corporation, partnership, association or other entity, other than in connection with the performance of Employee's duties under this Agreement, (a) employ or attempt to employ or enter into any contractual arrangement with any employee or former employee of the Company, unless such employee or former employee has not been employed by the Company for a period in excess of six months, (b) call on or solicit any of the actual or targeted prospective customers or clients of the Company on behalf of any person or entity in connection with any business competitive with the business of the Company, (c) make known the names and addresses of such customers or clients or any information relating in any manner to the Company's trade or business relationships with such customers or clients (unless the Employee can demonstrate that such information was or became generally available to the public other than as a result of a disclosure by the Employee) and/or (d) interfere with the Company's relationship with any person, including employees, consultants, contractors, suppliers, distributors, clients, or customers of Company. (d) OWNERSHIP OF DEVELOPMENTS. All copyrights, patents, trade secrets, or other intellectual property rights associated with any ideas, concepts, techniques, inventions, processes, or works of authorship developed or created by Employee during the course of performing work for the Company or its customers (collectively, the "Work Product") shall belong exclusively to the Company and shall, to the extent possible, be considered a work made by the Employee for hire for the Company within the meaning of Title 17 of the United States Code. To the extent the Work Product may not be considered work made by the Employee for hire for the Company, the Employee agrees to assign, and automatically assign at the time of creation of the Work Product, without any requirement of further consideration, any right, title, or interest the Employee may have in such Work Product. Upon the request of the Company, the Employee shall take such further actions, including execution and delivery of instruments of conveyance, as may be appropriate to give full and proper effect to such assignment. (e) BOOKS AND RECORDS. All books, records, and accounts relating in any manner to the customers of the Company, whether prepared by the Employee or otherwise coming into the Employee's possession, shall be the exclusive property of the Company and shall be returned immediately to the Company on termination of the Employee's employment hereunder or on the Company's request at any time. The Employee will not remove from the Company's premises any other proprietary or confidential document, agreement, record, 6 7 notebook, plan, model, component, device, or computer software or code, whether embodied in a disk or in any other form (collectively, the "Proprietary Items"). The Employee recognizes that, as between the Company and the Employee, all of the Proprietary Items, whether or not developed by the Employee, are the exclusive property of the Company. Upon termination of this Agreement by either party, or upon the request of the Company during the term of this Agreement, the Employee will promptly return to the Company all of the Proprietary Items in the Employee's possession or subject to the Employee's control, and the Employee shall not retain any copies or other physical embodiment of any of the Proprietary Items. (f) DEFINITION OF COMPANY. Solely for purposes of this Section 6, the term "Company" shall mean Applica, along with its current direct and indirect subsidiaries, any existing or future subsidiaries of Applica that are operating during the time periods described herein and any other entities that directly or indirectly, through one or more intermediaries, control, are controlled by or are under common control with Applica during the periods described herein. (g) ACKNOWLEDGMENT BY EMPLOYEE. The Employee acknowledges and confirms that (a) the restrictive covenants contained in this Section 6 are reasonably necessary to protect the legitimate business interests of the Company, and (b) the restrictions contained in this Section 6 (including without limitation the length of the term of the provisions of this Section 6) are not overbroad, overlong, or unfair and are not the result of overreaching, duress or coercion of any kind. The Employee further acknowledges and confirms that his full, uninhibited and faithful observance of each of the covenants contained in this Section 6 will not cause him any undue hardship, financial or otherwise, and that enforcement of each of the covenants contained herein will not impair his ability to obtain employment commensurate with his abilities and on terms fully acceptable to him or otherwise to obtain income required for the comfortable support of him and his family and the satisfaction of the needs of his creditors. The Employee acknowledges and confirms that his special knowledge of the business of the Company is such as would cause the Company serious injury or loss if he were to use such ability and knowledge to the benefit of a competitor or were to compete with the Company in violation of the terms of this Section 6. The Employee further acknowledges that the restrictions contained in this Section 6 are intended to be, and shall be, for the benefit of and shall be enforceable by, the Company's successors and assigns. (h) REFORMATION BY COURT. In the event that a court of competent jurisdiction shall determine that any provision of this Section 6 is invalid or more restrictive than permitted under the governing law of such jurisdiction, then only as to enforcement of this Section 6 within the jurisdiction of such court, such provision shall be interpreted and enforced as if it provided for the maximum restriction permitted under such governing law. (i) EXTENSION OF TIME. If the Employee shall be in violation of any provision of this Section 6, then each time limitation set forth in this Section 6 shall be extended for a period of time equal to the period of time during which such violation or violations occur. If the Company seeks injunctive 7 8 relief from such violation in any court, then the covenants set forth in this Section 6 shall be extended for a period of time equal to the pendency of such proceeding including all appeals by the Employee. (j) SURVIVAL. The provisions of this Section 6 shall survive the termination of this Agreement, as applicable. (k) INJUNCTIVE RELIEF. The Employee acknowledges that the injury that would be suffered by the Company as a result of a breach of any provision of this Section 6 would be irreparable and that an award of monetary damages for such a breach would be an inadequate remedy. Consequently, the Employee consents to, and the Company will have the right (in addition to any other rights it may have) to request, the issuance of a temporary restraining order or a preliminary or permanent injunction to prohibit or restrain any breach or threatened breach or otherwise to specifically enforce any provision of this Section 6, or to maintain the status quo pending the outcome of any proceeding which may be initiated. The Company will not be obligated to post bond or other security in seeking such relief. 7. TERMINATION FOR CAUSE. (a) The Company shall have the right to terminate the Term and the Employee's employment hereunder for Cause (as defined below). Upon any termination pursuant to this Section 7, the Company shall pay to the Employee any unpaid Annual Base Salary through the effective date of termination specified in such notice. The Company shall have no further liability hereunder (other than for reimbursement for reasonable business expenses incurred prior to the date of termination, subject, however, to the provisions of Section 5(a)). (b) For purposes hereof, the term "Cause" shall mean: (i) the Employee's failure to perform his duties hereunder; (ii) the Employee's failure to adhere to any written policy of the Company if such failure to adhere has or is likely to have an adverse effect on the business, operations or prospects the Company; (iii) the appropriation (or attempted appropriation) of a business opportunity of the Company, including attempting to secure or securing any personal profit in connection with any transaction entered into on behalf the Company; (iv) the misappropriation (or attempted misappropriation) of any of the Company's funds or property; (v) the conviction of, the indictment for (or its procedural equivalent), or the entering of a guilty plea or plea of no contest with respect to, a felony, the equivalent thereof, or any other crime with respect to which imprisonment is a possible punishment; (vi) the commission by the Employee of any act which shocks, insults and offends the community and ridicules public morals and decency, or (vii) any gross or willful improper conduct of the Employee resulting in loss to the Company, damage to the Company's reputation or theft from the Company. 8. TERMINATION WITHOUT CAUSE. At any time the Company shall have the right to terminate the Term and the Employee's employment hereunder by written notice to the Employee. Upon any termination pursuant to this Section 8 (that is not a termination under any of Sections 7, 9, or 10), the Company shall pay to the Employee a lump sum equal to the sum of (A) the Annual Base Salary at the 8 9 date of termination multiplied by 2.5, and (B) the product of the sum of the Performance Bonus for the prior year multiplied by 2.5. The Company shall also continue to pay the premiums for the same or substantially similar Welfare Benefits for 24 months. Further, any Applica stock option granted to Employee shall be exercisable immediately and the Applica stock acquired pursuant to such exercise may be sold by Employee subject to no restrictions by the Company whatsoever (other than those imposed by federal and state securities laws). The Company shall have no further liability hereunder (other than for reimbursement for reasonable business expenses incurred prior to the date of termination, subject, however, to the provisions of Section 5(a)). 9. TERMINATION BY EMPLOYEE. (a) The Employee shall at all times have the right, upon 60 days written notice to the Company, to terminate the Term and his employment hereunder. (b) Upon any termination pursuant to this Section 9 by the Employee without Good Reason (as defined below), the Company shall pay to the Employee any unpaid Annual Base Salary through the effective date of termination specified in such notice. The Company shall have no further liability hereunder (other than for reimbursement for reasonable business expenses incurred prior to the date of termination, subject, however, to the provisions of Section 5(a)). (c) Upon any termination pursuant to this Section 9 by the Employee for Good Reason, the Company shall pay to the Employee the same amounts that would have been payable by the Company to the Employee under Section 8 of this Agreement if the Employee's employment had been terminated by the Company without Cause. The Company shall have no further liability hereunder (other than for reimbursement for reasonable business expenses incurred prior to the date of termination, subject, however, to the provisions of Section 5(a)). (d) For purposes of this Agreement, "Good Reason" shall mean any failure by the Company to comply with any of the material provisions of Section 4 of this Agreement, other than an isolated, insubstantial and inadvertent failure not occurring in bad faith and which is remedied by the Company promptly after receipt of notice thereof given by the Employee. 10. CHANGE IN CONTROL. (a) In the event that (i) a Change in Control (as defined in paragraph (b) of this Section 10) in Applica shall occur during the Term, and (ii) prior to the earlier of the expiration of the Term and one year after the date of the Change in Control, the Term and Employee's employment with the Company is terminated by the Company without Cause, as defined in Section 7(b) or the Employee terminates the Term and his employment for Good Reason, as defined in Section 9(d), the Company shall (1) pay to the Employee any unpaid Annual Base Salary through the effective date of termination, (2) pay to the Employee the Incentive Compensation, if any, not yet paid to the Employee for any year prior to such termination, at such time as the Incentive Compensation 9 10 otherwise would have been payable to the Employee, (3) at the time of such termination, pay to the Employee a lump sum equal to the sum of (A) the Annual Base Salary at the date of termination multiplied by 2.5, and (B) the product of the sum of the Performance Bonus for the prior year multiplied by 2.5. The Company shall also continue to pay the premiums for the same or substantially similar Welfare Benefits for 24 months. Further, any Applica stock option granted to Employee shall be exercisable immediately and the Applica stock acquired pursuant to such exercise may be sold by Employee subject to no restrictions by Applica whatsoever (other than those imposed by federal and state securities laws). The Company shall have no further liability hereunder (other than for reimbursement for reasonable business expenses incurred prior to the date of termination, subject, however, to the provisions of Section 5(a)). (b) For purposes of this Agreement, the term "Change in Control" shall mean: (i) Approval by the shareholders of Applica of (x) a reorganization, merger, consolidation or other form of corporate transaction or series of transactions, in each case, with respect to which persons who were the shareholders of Applica immediately prior to such reorganization, merger or consolidation or other transaction do not, immediately thereafter, own more than 50% of the combined voting power entitled to vote generally in the election of directors of the reorganized, merged or consolidated company's then outstanding voting securities, or (y) a liquidation or dissolution of Applica or (z) the sale of all or substantially all of the assets of Applica (unless such reorganization, merger, consolidation or other corporate transaction, liquidation, dissolution or sale is subsequently abandoned); or (ii) Individuals who, as of the date hereof, constitute the Board of Directors of Applica (as of the date hereof the "Incumbent Board") cease for any reason to constitute at least a majority of the Board, provided that any person becoming a director subsequent to the date hereof whose election, or nomination for election by Applica's shareholders, was approved by a vote of at least a majority of the directors then comprising the Incumbent Board (other than an election or nomination of an individual whose initial assumption of office is in connection with an actual or threatened election contest relating to the election of the Directors of Applica, as such terms are used in Rule 14a-11 of Regulation 14A promulgated under the Securities Exchange Act) shall be, for purposes of this Agreement, considered as though such person were a member of the Incumbent Board; or (iii) The acquisition (other than from Applica) by any person, entity or "group", within the meaning of Section 13(d)(3) or 14(d)(2) of the Securities Exchange Act (excluding, for this purpose, Applica or its subsidiaries, or any employee benefit plan of Applica or its subsidiaries) which acquires beneficial ownership (within the meaning of Rule 13d-3 promulgated under the Securities Exchange Act), of 20% or more of either the then outstanding shares of Applica's Common Stock or the combined voting power of Applica's then outstanding voting securities entitled to vote generally in the election of directors. 10 11 (c) The payments made pursuant to paragraph (a) above shall be in lieu of any and all compensation due to Employee for the years that would otherwise be remaining in the Term. Upon receipt of said lump sum payment, this Agreement and all rights and duties of the parties shall be terminated, except as follows. In consideration for such lump sum payment and for the right to terminate under the conditions set forth above, Employee agrees to consult with the Company (or its successors), and its officers if requested to do so for a period of at least two years from the date of such termination. However, Employee shall be required to devote only such part of his time to such services as Employee believes reasonable in Employee's sole discretion, and the time and date such services are offered shall be determined by Employee so long as that time and date is within a reasonable period of time after the request. It is expressly agreed that the Company's rights to avail itself of the advice and consultation services of Employee shall at all times be exercised in a reasonable manner, that adequate notice shall be given to Employee in such events, and that non-compliance with any such request by Employee for good reason, including, but not limited to, ill health or prior commitments, shall not constitute a breach or violation of this Agreement. Employee agrees that, except for reimbursement of all reasonable expenses incurred by him with respect to such consultation and advisory services, payable as such consultation and advisory services are rendered, he shall not be entitled to any further compensation. It is understood that in furnishing any advisory and consulting services provided herein, Employee shall not be an employee of the Company but shall act in the capacity of independent contractor. 11. WAIVERS. It is understood that either party may waive the strict performance of any covenant or agreement made herein; however, any waiver made by a party hereto must be duly made in writing in order to be considered a waiver, and the waiver of one covenant or agreement shall not be considered a waiver of any other covenant or agreement unless specifically in writing as aforementioned. 12. SAVINGS PROVISIONS. The invalidity, in whole or in part, of any covenant or restriction, or any section, subsection, sentence, clause, phrase or word, or other provisions of this Agreement, as the same may be amended from time to time shall not affect the validity of the remaining portions thereof. 13. GOVERNING LAW. This Agreement shall be construed in accordance with and governed by the laws of the State of Florida without giving effect to its choice of law provision. 14. NOTICES. If either party desires to give notice to the other in connection with any of the terms and provisions of this Agreement, said notice must be in writing and shall be deemed given when (a) delivered by hand (with written confirmation of receipt), (b) sent by facsimile (with written confirmation of receipt), provided that a copy is mailed by registered mail, return receipt requested, or (c) when received by the addressee, if sent by a nationally recognized overnight delivery service (receipt requested), in each case addressed to the party for whom it is intended as follows (or such other addresses as either party may designated by notice to the other party): If to the Company: Applica Consumer Products, Inc. 5980 Miami Lakes Drive Miami Lakes, Florida 33014 Attn: David M. Friedson, President and CEO If to Employee: At the most recent home address of Employee on the official records of the Company 11 12 15. DEFAULT. In the event either party defaults in the performance of its obligations under this Agreement, the non-defaulting party may, after giving 30 days notice to the defaulting party to provide a reasonable opportunity to cure such default, proceed to protect its rights by suit in equity, action at law, or, where specifically provided for herein, by arbitration, to enforce performance under this Agreement or to recover damages for breach thereof, including all costs and attorneys' fees, whether settled out of court, arbitrated, or tried (at both trial and appellate levels). 16. SECTION 162(m) LIMITS. Notwithstanding any other provision of this Agreement, if and to the extent that any remuneration payable by the Company or Applica to the Employee for any year would exceed the maximum amount of such remuneration that Applica or the Company may deduct for that year by reason of Section 162(m) of the Code, payment of the portion of the remuneration for that year that would not be so deductible under Section 162(m) shall, in the sole discretion of the Board, be deferred so that it shall become payable at such time or times as the Board reasonably determines that it would be deductible by Applica or the Company under Section 162(m), with interest at the "short-term applicable federal rate" as such term is defined in Section 1274(d) of the Code. 17. CERTAIN ADDITIONAL PAYMENTS BY THE COMPANY. (a) Anything in this Agreement to the contrary notwithstanding, in the event it shall be determined that any payment, distribution or other action by the Company to or for the benefit of the Employee (whether paid or payable or distributed or distributable pursuant to the terms of this Agreement or otherwise, but determined without regard to any additional payments required under this Section 17) (a "Payment") would be subject to an excise tax imposed by Section 4999 of the Internal Revenue Code of 1986, as amended (the "Code"), or any interest or penalties are incurred by the Employee with respect to any such excise tax (such excise tax, together with any such interest and penalties, are hereinafter collectively referred to as the "Excise Tax"), the Company shall make a payment to the Employee (a "Gross-Up Payment") in an amount equal to the Excise Tax imposed upon the Payments. (b) Subject to the provisions of paragraph (c) of this Section 17, all determinations required to be made under this Section 17, including whether and when a Gross-Up Payment is required and the amount of such Gross-Up Payment and the assumptions to be utilized in arriving at such determination, shall be made by Grant Thornton LLP, or such other independent public accounting firm regularly engaged by Applica from time to time (the "Accounting Firm"), which shall provide detailed supporting calculations both to the Company and the Employee within 20 business days of the receipt of notice from the Employee that 12 13 there has been a Payment, or such earlier time as is requested by the Company. In the event that the Accounting Firm is serving as accountant or auditor for the individual, entity or group effecting the Change of Control, Applica shall appoint another nationally recognized accounting firm to make the determinations required hereunder (which accounting firm shall then be referred to as the Accounting Firm hereunder). All fees and expenses of the Accounting Firm shall be borne solely by the Company. Any Gross-Up Payment, as determined pursuant to this Section 17, shall be paid by the Company to the Employee within five days of the receipt of the Accounting Firm's determination. If the Accounting Firm determines that no Excise Tax is payable by the Employee, it shall furnish the Employee with a written opinion that failure to report the Excise Tax on the Employee's applicable federal income tax return would not result in the imposition of a negligence or similar penalty. Any determination by the Accounting Firm shall be binding upon the Company and the Employee. As a result of the uncertainty in the application of Section 4999 of the Code at the time of the initial determination by the Accounting Firm hereunder, it is possible that Gross-Up Payments which will not have been made by the Company should have been made ("Underpayment"), consistent with the calculations required to be made hereunder. In the event that Applica exhausts its remedies pursuant to Section 17 and the Employee thereafter is required to make a payment of any Excise Tax, the Accounting Firm shall determine the amount of the Underpayment that has occurred and any such Underpayment shall be promptly paid by the Company to or for the benefit of the Employee. (c) The Employee shall notify the Company in writing of any claim by the Internal Revenue Service that, if successful, would require the payment by the Company of the Gross-Up Payment. Such notification shall be given as soon as practicable but no later than five business days after the Employee is informed in writing of such claim and shall apprise Applica of the nature of such claim and the date on which such claim is requested to be paid. The Employee shall not pay such claim prior to the expiration of the 30-day period following the date on which it gives such notice to the Company (or such shorter period ending on the date that any payment of taxes with respect to such claim is due). If the Company notifies the Employee in writing prior to the expiration of such period that it desires to contest such claim, the Employee shall: (i) give the Company any information reasonably requested by Applica relating to such claim, (ii) take such action in connection with contesting such claim as the Company shall reasonably request in writing from time to time, including, without limitation, accepting legal representation with respect to such claim by an attorney reasonably selected by the Company, (iii) cooperate with the Company in good faith in order effectively to contest such claim, and (iv) permit the Company to participate in any proceedings relating to such claim; 13 14 provided, however, that the Company shall bear and pay directly all costs and expenses (including additional interest and penalties) incurred in connection with such contest and shall indemnify and hold the Employee harmless, on an after-tax basis, for any Excise Tax or income tax (including interest and penalties with respect thereto) imposed as a result of such representation and payment of costs and expenses. Without limitation on the foregoing provisions of this Section 17(c), the Company shall control all proceedings taken in connection with such contest and, at its sole option, may pursue or forego any and all administrative appeals, proceedings, hearings and conferences with the taxing authority in respect of such claim and may, at its sole option, either direct the Employee to pay the tax claimed and sue for a refund or contest the claim in any permissible manner, and the Employee agrees to prosecute such contest to a determination before any administrative tribunal, in a court of initial jurisdiction and in one or more appellate courts, as Applica shall determine; provided, however, that if the Company directs the Employee to pay such claim and sue for a refund, the Company shall advance the amount of such payment to the Employee, on an interest-free basis and shall indemnify and hold the Employee harmless, on an after-tax basis, from any Excise Tax or income tax (including interest or penalties with respect thereto) imposed with respect to such advance or with respect to any imputed income with respect to such advance; and further provided that any extension of the statute of limitations relating to payment of taxes for the taxable year of the Employee with respect to which such contested amount is claimed to be due is limited solely to such contested amount. Furthermore, the Company's control of the contest shall be limited to issues with respect to which a Gross-Up Payment would be payable hereunder and the Employee shall be entitled to settle or contest, as the case may be, any other issue raised by the Internal Revenue Service or any other taxing authority. (d) If, after the receipt by the Employee of an amount advanced by the Company pursuant to Section 17(c), the Employee becomes entitled to receive any refund with respect to such claim, the Employee shall (subject to the Company's complying with the requirements of Section 17(c)) promptly pay to the Company the amount of such refund (together with any interest paid or credited thereon after taxes applicable thereto). If, after the receipt by the Employee of an amount advanced by the Company pursuant to Section 17(c), a determination is made that the Employee shall not be entitled to any refund with respect to such claim and the Company does not notify the Employee in writing of its intent to contest such denial of refund prior to the expiration of 30 days after such determination, then such advance shall be forgiven and shall not be required to be repaid and the amount of such advance shall offset, to the extent thereof, the amount of Gross-Up Payment required to be paid. 18. NO THIRD PARTY BENEFICIARY. Nothing expressed or implied in this Agreement is intended, or shall be construed, to confer upon or give any person, other than Applica, the parties hereto and their respective heirs, personal representatives, legal representatives, successors and assigns, any rights or remedies under or by reason of this Agreement. 19. WAIVER OF JURY TRIAL. ALL PARTIES KNOWINGLY WAIVE THEIR RIGHTS TO REQUEST A TRIAL BY JURY IN ANY LITIGATION IN ANY COURT OF LAW, TRIBUNAL OR LEGAL PROCEEDING INVOLVING THE PARTIES HERETO OR ANY DISPUTES ARISING OUT OF OR RELATED TO THIS AGREEMENT. 14 15 IN WITNESS WHEREOF, the Company, by its appropriate officer, signed this Agreement and Employee has signed this Agreement, as of the day and year first above written. APPLICA CONSUMER PRODUCTS, INC. By: /s/ Harry D. Schulman ------------------------------- Name: Harry D. Schulman Its: Chief Operating Officer EMPLOYEE /s/ Michael J. Michienzi ------------------------------------ Michael J. Michienzi 15 EX-10.8 10 g65027ex10-8.txt EMPLOYMENT AGREEMENT - RICHARD J. GAGLIANO 7/1/00 1 EXHIBIT 10.8 EMPLOYMENT AGREEMENT THIS EMPLOYMENT AGREEMENT (the "Agreement") is executed this 1st day of July, 2000, by and between Applica Consumer Products, Inc., a Florida corporation (the "Company"), and Richard J. Gagliano, an individual residing in the State of Connecticut (the "Employee"). RECITALS: A. The Executive is currently employed as the Senior Vice President - Manufacturing and Engineering of the Company. B. The Executive possesses intimate knowledge of the business and affairs of the Company and its subsidiaries, their policies, methods and personnel. C. The Company recognizes that the Executive has contributed to the growth and success of the Company, and desires to assure the Company of the Executive's continued employment and to compensate him therefor. D. The Board of Directors of the Company (the "Board") has determined that this Agreement will reinforce and encourage the Executive's continued attention and dedication to the Company and its subsidiaries. E. The Executive is willing to make his services available to the Company on the terms and conditions hereinafter set forth. AGREEMENT Therefore, in consideration of the premises, mutual covenants and agreements of the parties contained herein, and other good and valuable consideration, the receipt and adequacy of which is hereby acknowledged, the Company and the Employee hereby agree as follows: 1. EMPLOYMENT. Commencing on the date hereof, the Company shall employ the Employee and the Employee shall accept employment by the Company, upon the terms and conditions set forth in this Agreement. 2. TERM. The term of employment (the "Term") of this Agreement shall begin on the date hereof and, except as otherwise provided in Sections 7, 8, 9 and 10 below, shall end on June 30, 2003. The Term shall automatically renew for successive one year terms, unless sooner terminated as provided herein or unless either party gives notice at least 60 days prior to the end of the Term that such party does not intend to renew the Term. 2 3. DUTIES. The Employee will have such duties as are assigned or delegated to the Employee by the President and Chief Executive Officer and the Chief Operating Officer and will initially serve as the Senior Vice President - Manufacturing and Engineering of the Company. The Employee will devote his entire business time, attention, skill, and energy exclusively to the business of the Company, will use his best efforts to promote the success of the Company, and will cooperate fully with the Board in the advancement of the best interests of the Company. 4. COMPENSATION. During the Term, the Company shall compensate Employee as follows: (a) SALARY. The Company shall pay Employee an annual salary of $257,790 (the "Annual Base Salary"), to be distributed in equal periodic installments according to the Company's customary payroll practices. Nothing contained herein shall be construed to prevent the Company from increasing Employee's Annual Base Salary more often than annually or by a higher amount than required by the Index (as defined below). The Annual Base Salary will increase progressively for each of the ensuing twelve month periods during the Term by an amount at least equal to the percentage increase in the United States Consumer Price Index for all urban consumers (CPI-U), U.S. City Average - All Items, published by the Bureau of Labor Statistics, United States Department of Labor (the "Index") for the previous calendar year. If at any time required for the determination of the Annual Base Salary adjustment as above described, the Index is no longer published or issued, the parties shall use such other index as is then generally recognized or accepted for similar determinations of purchasing power. (b) ANNUAL BONUS. The Employee shall be entitled to receive incentive compensation (the "Incentive Compensation") for each year during the Term as set forth below: (i) PERFORMANCE BONUS. At the beginning of each calendar year during the Term, the Board (or the Compensation Committee thereof) shall establish target goals for (A) earnings before interest, taxes, depreciation and amortization ("EBITDA") of the Company and (B) the Employee's personal performance (collectively, the "Performance Goals"). The Employee shall be entitled to an annual bonus (the "Performance Bonus") based 50% on the achievement of the Performance Goal set forth in (A) above and 50% on the achievement of the Performance Goal set forth in (B) above. Such Performance Bonus shall be equal to a percentage of his Annual Base Salary to be determined as follows:
AGGREGATE PERCENTAGE OF BONUS AS PERCENTAGE PERFORMANCE GOALS ACHIEVED OF ANNUAL BASE SALARY -------------------------- --------------------- 75% - 79% (Threshold Performance) 15% 80% - 84% 18% 85% - 89% 21% 90% - 94% 24% 95% - 99% 27% 100% - 104% (Target Performance) 30% 105% - 109% 33% 110% - 114% 36% 115% - 119% 39% 120% - 124% 42% 125% and above (Maximum Performance) 45%
2 3 (ii) SYNERGY BONUS. At the beginning of each of the calendar years, the Board (or the Compensation Committee thereof) shall establish target goals for the synergies to be attained as a result of the integration of the Household Products Business (the "Synergy Goals"). Not later than 90 days after the end of each such year in which the portion of the Synergy Goals achieved are at least equal to 75%, the Employee shall be paid a cash bonus (the "Synergy Bonus") equal to a percentage of his Annual Base Salary to be determined as follows:
AGGREGATE PERCENTAGE OF BONUS AS PERCENTAGE SYNERGY GOALS ACHIEVED OF ANNUAL BASE SALARY ---------------------- --------------------- 75% - 79% (Threshold Performance) 5% 80% - 84% 7% 85% - 89% 9% 90% - 94% 11% 95% - 99% 13% 100% - 104% (Target Performance) 15% 105% - 109% 17% 110% - 114% 19% 115% - 119% 21% 120% - 124% 23% 125% and above (Maximum Performance) 25%
(iii) CUMULATIVE SYNERGY BONUS. If the Company achieves $45 million in certain cumulative synergies resulting from the integration of the Household Products business into Applica (the "Cumulative Synergy Goals") on or before December 31, 2001, the Company shall establish a bonus pool in an amount equal to 30% of the aggregate Annual Base Salaries of all employees entitled to a cumulative synergy bonus. Upon the achievement of the Cumulative Synergy Goals, the Employee shall be entitled to receive a one-time cash bonus (the "Cumulative Synergy Bonus") to be paid in the first quarter of 2002, if the Employee is employed with the Company. The amount of the Cumulative Synergy Bonus shall be determined in the sole discretion of the Board (or the Compensation Committee, as applicable). 5. EXPENSE REIMBURSEMENT AND OTHER BENEFITS. (a) REIMBURSEMENT OF EXPENSES. During the term of Employee's employment hereunder, the Company, upon the submission of proper substantiation, including copies of all relevant invoices, receipts or other evidence reasonably requested by the Company, by the Employee, shall reimburse the Employee for all 3 4 reasonable expenses actually paid or incurred by the Employee in the course of and pursuant to the business of the Company. (b) EMPLOYEE BENEFITS. Employee shall participate in the Company's Group Health and Hospitalization Plan, Group Life Insurance Plan, Group Disability Insurance Plan and all other insurances, or insurance plans (collectively, the "Welfare Benefits"), and employee benefits and bonuses covering Company senior executive officers as are now or may in the future be in effect, subject to applicable eligibility requirements. Additionally, the Company shall provide the Employee with life insurance in an amount equal to five times his Annual Base Salary. During the Term, the Company shall pay for tax preparation for the Employee on an annual basis up to a maximum of 1% of Annual Base Salary. (c) STOCK OPTIONS. During the Term of this Agreement, the Executive shall be eligible to be granted options to acquire shares of the Common Stock of Applica Incorporated ("Applica") under (and therefore subject to all terms and conditions of) the Applica stock option plans as then in effect, and all rules and regulations of the Securities and Exchange Commission applicable to stock option plans. Such options will contain such restrictions as required by the Board of Applica or the applicable committee of such Board charged with administration of the stock option plan. The number of shares of Common Stock subject to the stock options shall be adjusted for any subsequent stock splits, stock dividends or similar recapitalizations of the Applica Common Stock which results in an increase or decrease of the number of shares of outstanding Common Stock of Applica. The number of options and terms and conditions of options shall be determined in the sole discretion of the Board of Applica, or applicable committee thereof, and shall be based on several factors, including the performance of the Company on a consolidated basis. (d) AUTOMOBILE. During the Term, the Company shall provide Employee with an automobile allowance of $975 monthly. (e) VACATION. During the Term, the Employee will be entitled to three weeks' paid vacation for each year. The Employee will also be entitled to the paid holidays and other paid leave set forth in Company's policies. Vacation days and holidays during any fiscal year that are not used by the Employee during such fiscal year may not be carried over and used in any subsequent fiscal year. 6. RESTRICTIONS. (a) NON-COMPETITION. During the Term and for a one year period after the termination of the Term for any reason, the Employee shall not, directly or indirectly, engage or invest in, own, manage, operate, finance, control, or participate in any manner in the ownership, management, operation, financing, or control of, be employed by, associated with, or in any manner connected with, lend his name or any similar name to, lend his credit to or render services or advice to, purchase product from or distribute on behalf of (whether as an employee, officer, director, partner, agent, security holder, creditor, consultant or otherwise), any person or entity that directly or indirectly (or through any affiliated entity) engages in competition with the Company (for this purpose, any business that engages in the manufacture or distribution of products similar to those products manufactured or distributed by the Company at the time of termination of the Agreement shall be deemed to be 4 5 in competition with the Company); provided that such provision shall not apply to the Employee's ownership of Common Stock of Applica or the acquisition by the Employee, solely as an investment, of any issuer that is registered under Section 12(b) or 12(g) of the Securities Exchange Act of 1934, as amended, and that are listed or admitted for trading on any United States national securities exchange or that are quoted on the National Association of Securities Dealers Automated Quotations System, or any similar system or automated dissemination of quotations of securities prices in common use, so long as the Employee does not control, acquire a controlling interest in or become a member of a group which exercises direct or indirect control or, more than one percent of any class of capital stock of such corporation. (b) NONDISCLOSURE. During the Term and after the termination of the Term for any reason, the Employee shall not at any time divulge, communicate, use to the detriment of the Company or for the benefit of any other person or persons, or misuse in any way, any Confidential Information (as hereinafter defined) pertaining to the business of the Company. Any Confidential Information or data now or hereafter acquired by the Employee with respect to the business of the Company shall be deemed a valuable, special and unique asset of the Company that is received by the Employee in confidence and as a fiduciary, and Employee shall remain a fiduciary to the Company with respect to all of such information. For purposes of this Agreement, "Confidential Information" means information disclosed to the Employee or known by the Employee as a consequence of or through his employment by the Company (including information conceived, originated, discovered or developed by the Employee) prior to or after the date hereof, and not generally known, about the Company or its business. Confidential Information shall include, but not be limited to, any and all: (i) trade secrets and data concerning the past, current and planned business, strategy, operations and affairs of the Company, data, know-how, compositions, processes, designs, sketches, photographs, graphs, drawings, samples, inventions and ideas, past, current, and planned research and development, customer lists, client lists, agent lists, current and anticipated customer and client requirements, price lists, commission information, market studies, business plans, computer software and programs (including object code and source code), computer software and database technologies, systems, concepts, ideas, designs, methods and information relating directly or indirectly to the Company; (ii) information concerning the past, current and planned business, strategy, operations and affairs of the Company, which includes historical financial statements, financial projections and budgets, historical and projected income, capital spending budgets and plans, the names and backgrounds of key personnel, suppliers, distributors, manufacturers, customers and clients, and any and all information relating to contracts and agreements with such persons, however documented; and 5 6 (iii) notes, analysis, compilations, studies, summaries, and other material prepared by or for the Company containing or based, in whole or in part, on any information included in the foregoing. Notwithstanding the foregoing, nothing herein shall be deemed to restrict the Employee from disclosing Confidential Information to the extent required by law; provided, however, that the Employee provides prior notice of such disclosure to the Company and provides the Company with a reasonable opportunity to prevent, limit or protect such disclosure. None of the foregoing obligations and restrictions apply to any Confidential Information that the Employee demonstrates was or became generally available to the public other than as a result of disclosure by the Employee. (c) NONSOLICITATION OF EMPLOYEES AND CLIENTS. During the Term and for a one year period after the termination of the Term for any reason, the Employee shall not, directly or indirectly, for himself or for any other person, firm, corporation, partnership, association or other entity, other than in connection with the performance of Employee's duties under this Agreement, (a) employ or attempt to employ or enter into any contractual arrangement with any employee or former employee of the Company, unless such employee or former employee has not been employed by the Company for a period in excess of six months, (b) call on or solicit any of the actual or targeted prospective customers or clients of the Company on behalf of any person or entity in connection with any business competitive with the business of the Company, (c) make known the names and addresses of such customers or clients or any information relating in any manner to the Company's trade or business relationships with such customers or clients (unless the Employee can demonstrate that such information was or became generally available to the public other than as a result of a disclosure by the Employee) and/or (d) interfere with the Company's relationship with any person, including employees, consultants, contractors, suppliers, distributors, clients, or customers of Company. (d) OWNERSHIP OF DEVELOPMENTS. All copyrights, patents, trade secrets, or other intellectual property rights associated with any ideas, concepts, techniques, inventions, processes, or works of authorship developed or created by Employee during the course of performing work for the Company or its customers (collectively, the "Work Product") shall belong exclusively to the Company and shall, to the extent possible, be considered a work made by the Employee for hire for the Company within the meaning of Title 17 of the United States Code. To the extent the Work Product may not be considered work made by the Employee for hire for the Company, the Employee agrees to assign, and automatically assign at the time of creation of the Work Product, without any requirement of further consideration, any right, title, or interest the Employee may have in such Work Product. Upon the request of the Company, the Employee shall take such further actions, including execution and delivery of instruments of conveyance, as may be appropriate to give full and proper effect to such assignment. (e) BOOKS AND RECORDS. All books, records, and accounts relating in any manner to the customers of the Company, whether prepared by the Employee or otherwise coming into the Employee's possession, shall be the exclusive property of the Company and shall be returned immediately to the Company on termination of the Employee's employment hereunder or on the Company's request at any time. The Employee will not remove from the Company's 6 7 premises any other proprietary or confidential document, agreement, record, notebook, plan, model, component, device, or computer software or code, whether embodied in a disk or in any other form (collectively, the "Proprietary Items"). The Employee recognizes that, as between the Company and the Employee, all of the Proprietary Items, whether or not developed by the Employee, are the exclusive property of the Company. Upon termination of this Agreement by either party, or upon the request of the Company during the term of this Agreement, the Employee will promptly return to the Company all of the Proprietary Items in the Employee's possession or subject to the Employee's control, and the Employee shall not retain any copies or other physical embodiment of any of the Proprietary Items. (f) DEFINITION OF COMPANY. Solely for purposes of this Section 6, the term "Company" shall mean Applica, along with its current direct and indirect subsidiaries, any existing or future subsidiaries of Applica that are operating during the time periods described herein and any other entities that directly or indirectly, through one or more intermediaries, control, are controlled by or are under common control with Applica during the periods described herein. (g) ACKNOWLEDGMENT BY EMPLOYEE. The Employee acknowledges and confirms that (a) the restrictive covenants contained in this Section 6 are reasonably necessary to protect the legitimate business interests of the Company, and (b) the restrictions contained in this Section 6 (including without limitation the length of the term of the provisions of this Section 6) are not overbroad, overlong, or unfair and are not the result of overreaching, duress or coercion of any kind. The Employee further acknowledges and confirms that his full, uninhibited and faithful observance of each of the covenants contained in this Section 6 will not cause him any undue hardship, financial or otherwise, and that enforcement of each of the covenants contained herein will not impair his ability to obtain employment commensurate with his abilities and on terms fully acceptable to him or otherwise to obtain income required for the comfortable support of him and his family and the satisfaction of the needs of his creditors. The Employee acknowledges and confirms that his special knowledge of the business of the Company is such as would cause the Company serious injury or loss if he were to use such ability and knowledge to the benefit of a competitor or were to compete with the Company in violation of the terms of this Section 6. The Employee further acknowledges that the restrictions contained in this Section 6 are intended to be, and shall be, for the benefit of and shall be enforceable by, the Company's successors and assigns. (h) REFORMATION BY COURT. In the event that a court of competent jurisdiction shall determine that any provision of this Section 6 is invalid or more restrictive than permitted under the governing law of such jurisdiction, then only as to enforcement of this Section 6 within the jurisdiction of such court, such provision shall be interpreted and enforced as if it provided for the maximum restriction permitted under such governing law. (i) EXTENSION OF TIME. If the Employee shall be in violation of any provision of this Section 6, then each time limitation set forth in this Section 6 shall be extended for a period of time equal to the period of time during which such violation or violations occur. If the Company seeks injunctive 7 8 relief from such violation in any court, then the covenants set forth in this Section 6 shall be extended for a period of time equal to the pendency of such proceeding including all appeals by the Employee. (j) SURVIVAL. The provisions of this Section 6 shall survive the termination of this Agreement, as applicable. (k) INJUNCTIVE RELIEF. The Employee acknowledges that the injury that would be suffered by the Company as a result of a breach of any provision of this Section 6 would be irreparable and that an award of monetary damages for such a breach would be an inadequate remedy. Consequently, the Employee consents to, and the Company will have the right (in addition to any other rights it may have) to request, the issuance of a temporary restraining order or a preliminary or permanent injunction to prohibit or restrain any breach or threatened breach or otherwise to specifically enforce any provision of this Section 6, or to maintain the status quo pending the outcome of any proceeding which may be initiated. The Company will not be obligated to post bond or other security in seeking such relief. 7. TERMINATION FOR CAUSE. (a) The Company shall have the right to terminate the Term and the Employee's employment hereunder for Cause (as defined below). Upon any termination pursuant to this Section 7, the Company shall pay to the Employee any unpaid Annual Base Salary through the effective date of termination specified in such notice. The Company shall have no further liability hereunder (other than for reimbursement for reasonable business expenses incurred prior to the date of termination, subject, however, to the provisions of Section 5(a)). (b) For purposes hereof, the term "Cause" shall mean: (i) the Employee's failure to perform his duties hereunder; (ii) the Employee's failure to adhere to any written policy of the Company if such failure to adhere has or is likely to have an adverse effect on the business, operations or prospects the Company; (iii) the appropriation (or attempted appropriation) of a business opportunity of the Company, including attempting to secure or securing any personal profit in connection with any transaction entered into on behalf the Company; (iv) the misappropriation (or attempted misappropriation) of any of the Company's funds or property; (v) the conviction of, the indictment for (or its procedural equivalent), or the entering of a guilty plea or plea of no contest with respect to, a felony, the equivalent thereof, or any other crime with respect to which imprisonment is a possible punishment; (vi) the commission by the Employee of any act which shocks, insults and offends the community and ridicules public morals and decency, or (vii) any gross or willful improper conduct of the Employee resulting in loss to the Company, damage to the Company's reputation or theft from the Company. 8. TERMINATION WITHOUT CAUSE. At any time the Company shall have the right to terminate the Term and the Employee's employment hereunder by written notice to the Employee. Upon any termination pursuant to this Section 8 (that is not a termination under any of Sections 7, 9, or 10), the Company shall pay to the Employee a lump sum equal to the sum of (A) the Annual Base Salary at the date of termination multiplied by 2.5, and (B) the product of the sum of the Performance Bonus for the prior year multiplied by 2.5. The Company shall also continue to pay the premiums for the same or substantially similar Welfare Benefits for 24 months. Further, any Applica stock option granted to Employee shall be exercisable immediately and the Applica stock acquired pursuant to such 8 9 exercise may be sold by Employee subject to no restrictions by the Company whatsoever (other than those imposed by federal and state securities laws). The Company shall have no further liability hereunder (other than for reimbursement for reasonable business expenses incurred prior to the date of termination, subject, however, to the provisions of Section 5(a)). 9. TERMINATION BY EMPLOYEE. (a) The Employee shall at all times have the right, upon 60 days written notice to the Company, to terminate the Term and his employment hereunder. (b) Upon any termination pursuant to this Section 9 by the Employee without Good Reason (as defined below), the Company shall pay to the Employee any unpaid Annual Base Salary through the effective date of termination specified in such notice. The Company shall have no further liability hereunder (other than for reimbursement for reasonable business expenses incurred prior to the date of termination, subject, however, to the provisions of Section 5(a)). (c) Upon any termination pursuant to this Section 9 by the Employee for Good Reason, the Company shall pay to the Employee the same amounts that would have been payable by the Company to the Employee under Section 8 of this Agreement if the Employee's employment had been terminated by the Company without Cause. The Company shall have no further liability hereunder (other than for reimbursement for reasonable business expenses incurred prior to the date of termination, subject, however, to the provisions of Section 5(a)). (d) For purposes of this Agreement, "Good Reason" shall mean any failure by the Company to comply with any of the material provisions of Section 4 of this Agreement, other than an isolated, insubstantial and inadvertent failure not occurring in bad faith and which is remedied by the Company promptly after receipt of notice thereof given by the Employee. 10. CHANGE IN CONTROL. (a) In the event that (i) a Change in Control (as defined in paragraph (b) of this Section 10) in Applica shall occur during the Term, and (ii) prior to the earlier of the expiration of the Term and one year after the date of the Change in Control, the Term and Employee's employment with the Company is terminated by the Company without Cause, as defined in Section 7(b) or the Employee terminates the Term and his employment for Good Reason, as defined in Section 9(d), the Company shall (1) pay to the Employee any unpaid Annual Base Salary through the effective date of termination, (2) pay to the Employee the Incentive Compensation, if any, not yet paid to the Employee for any year prior to such termination, at such time as the Incentive Compensation otherwise would have been payable to the Employee, (3) at the time of such 9 10 termination, pay to the Employee a lump sum equal to the sum of (A) the Annual Base Salary at the date of termination multiplied by 2.5, and (B) the product of the sum of the Performance Bonus for the prior year multiplied by 2.5. The Company shall also continue to pay the premiums for the same or substantially similar Welfare Benefits for 24 months. Further, any Applica stock option granted to Employee shall be exercisable immediately and the Applica stock acquired pursuant to such exercise may be sold by Employee subject to no restrictions by Applica whatsoever (other than those imposed by federal and state securities laws). The Company shall have no further liability hereunder (other than for reimbursement for reasonable business expenses incurred prior to the date of termination, subject, however, to the provisions of Section 5(a)). (b) For purposes of this Agreement, the term "Change in Control" shall mean: (i) Approval by the shareholders of Applica of (x) a reorganization, merger, consolidation or other form of corporate transaction or series of transactions, in each case, with respect to which persons who were the shareholders of Applica immediately prior to such reorganization, merger or consolidation or other transaction do not, immediately thereafter, own more than 50% of the combined voting power entitled to vote generally in the election of directors of the reorganized, merged or consolidated company's then outstanding voting securities, or (y) a liquidation or dissolution of Applica or (z) the sale of all or substantially all of the assets of Applica (unless such reorganization, merger, consolidation or other corporate transaction, liquidation, dissolution or sale is subsequently abandoned); or (ii) Individuals who, as of the date hereof, constitute the Board of Directors of Applica (as of the date hereof the "Incumbent Board") cease for any reason to constitute at least a majority of the Board, provided that any person becoming a director subsequent to the date hereof whose election, or nomination for election by Applica's shareholders, was approved by a vote of at least a majority of the directors then comprising the Incumbent Board (other than an election or nomination of an individual whose initial assumption of office is in connection with an actual or threatened election contest relating to the election of the Directors of Applica, as such terms are used in Rule 14a-11 of Regulation 14A promulgated under the Securities Exchange Act) shall be, for purposes of this Agreement, considered as though such person were a member of the Incumbent Board; or (iii) The acquisition (other than from Applica) by any person, entity or "group", within the meaning of Section 13(d)(3) or 14(d)(2) of the Securities Exchange Act (excluding, for this purpose, Applica or its subsidiaries, or any employee benefit plan of Applica or its subsidiaries) which acquires beneficial ownership (within the meaning of Rule 13d-3 promulgated under the Securities Exchange Act), of 20% or more of either the then outstanding shares of Applica's Common Stock or the combined voting power of Applica's then outstanding voting securities entitled to vote generally in the election of directors. 10 11 (c) The payments made pursuant to paragraph (a) above shall be in lieu of any and all compensation due to Employee for the years that would otherwise be remaining in the Term. Upon receipt of said lump sum payment, this Agreement and all rights and duties of the parties shall be terminated, except as follows. In consideration for such lump sum payment and for the right to terminate under the conditions set forth above, Employee agrees to consult with the Company (or its successors), and its officers if requested to do so for a period of at least two years from the date of such termination. However, Employee shall be required to devote only such part of his time to such services as Employee believes reasonable in Employee's sole discretion, and the time and date such services are offered shall be determined by Employee so long as that time and date is within a reasonable period of time after the request. It is expressly agreed that the Company's rights to avail itself of the advice and consultation services of Employee shall at all times be exercised in a reasonable manner, that adequate notice shall be given to Employee in such events, and that non-compliance with any such request by Employee for good reason, including, but not limited to, ill health or prior commitments, shall not constitute a breach or violation of this Agreement. Employee agrees that, except for reimbursement of all reasonable expenses incurred by him with respect to such consultation and advisory services, payable as such consultation and advisory services are rendered, he shall not be entitled to any further compensation. It is understood that in furnishing any advisory and consulting services provided herein, Employee shall not be an employee of the Company but shall act in the capacity of independent contractor. 11. WAIVERS. It is understood that either party may waive the strict performance of any covenant or agreement made herein; however, any waiver made by a party hereto must be duly made in writing in order to be considered a waiver, and the waiver of one covenant or agreement shall not be considered a waiver of any other covenant or agreement unless specifically in writing as aforementioned. 12. SAVINGS PROVISIONS. The invalidity, in whole or in part, of any covenant or restriction, or any section, subsection, sentence, clause, phrase or word, or other provisions of this Agreement, as the same may be amended from time to time shall not affect the validity of the remaining portions thereof. 13. GOVERNING LAW. This Agreement shall be construed in accordance with and governed by the laws of the State of Florida without giving effect to its choice of law provision. 14. NOTICES. If either party desires to give notice to the other in connection with any of the terms and provisions of this Agreement, said notice must be in writing and shall be deemed given when (a) delivered by hand (with written confirmation of receipt), (b) sent by facsimile (with written confirmation of receipt), provided that a copy is mailed by registered mail, return receipt requested, or (c) when received by the addressee, if sent by a nationally recognized overnight delivery service (receipt requested), in each case addressed to the party for whom it is intended as follows (or such other addresses as either party may designated by notice to the other party): If to the Company: Applica Consumer Products, Inc. 5980 Miami Lakes Drive Miami Lakes, Florida 33014 Attn: David M. Friedson, President and CEO If to Employee: At the most recent home address of Employee on the official records of the Company 11 12 15. DEFAULT. In the event either party defaults in the performance of its obligations under this Agreement, the non-defaulting party may, after giving 30 days notice to the defaulting party to provide a reasonable opportunity to cure such default, proceed to protect its rights by suit in equity, action at law, or, where specifically provided for herein, by arbitration, to enforce performance under this Agreement or to recover damages for breach thereof, including all costs and attorneys' fees, whether settled out of court, arbitrated, or tried (at both trial and appellate levels). 16. SECTION 162(m) LIMITS. Notwithstanding any other provision of this Agreement, if and to the extent that any remuneration payable by the Company or Applica to the Employee for any year would exceed the maximum amount of such remuneration that Applica or the Company may deduct for that year by reason of Section 162(m) of the Code, payment of the portion of the remuneration for that year that would not be so deductible under Section 162(m) shall, in the sole discretion of the Board, be deferred so that it shall become payable at such time or times as the Board reasonably determines that it would be deductible by Applica or the Company under Section 162(m), with interest at the "short-term applicable federal rate" as such term is defined in Section 1274(d) of the Code. 17. CERTAIN ADDITIONAL PAYMENTS BY THE COMPANY. (a) Anything in this Agreement to the contrary notwithstanding, in the event it shall be determined that any payment, distribution or other action by the Company to or for the benefit of the Employee (whether paid or payable or distributed or distributable pursuant to the terms of this Agreement or otherwise, but determined without regard to any additional payments required under this Section 17) (a "Payment") would be subject to an excise tax imposed by Section 4999 of the Internal Revenue Code of 1986, as amended (the "Code"), or any interest or penalties are incurred by the Employee with respect to any such excise tax (such excise tax, together with any such interest and penalties, are hereinafter collectively referred to as the "Excise Tax"), the Company shall make a payment to the Employee (a "Gross-Up Payment") in an amount equal to the Excise Tax imposed upon the Payments. (b) Subject to the provisions of paragraph (c) of this Section 17, all determinations required to be made under this Section 17, including whether and when a Gross-Up Payment is required and the amount of such Gross-Up Payment and the assumptions to be utilized in arriving at such determination, shall be made by Grant Thornton LLP, or such other independent public accounting firm regularly engaged by Applica from time to time (the "Accounting Firm"), which shall provide detailed supporting calculations both to the Company and the Employee within 20 business days of the receipt of notice from the Employee that there has been a Payment, or such earlier time as is requested by the Company. In the event that the Accounting Firm is serving as accountant or auditor for the individual, entity or group effecting the Change of Control, Applica shall appoint another nationally recognized accounting firm to make the determinations required hereunder (which accounting firm shall then be referred to as the 12 13 Accounting Firm hereunder). All fees and expenses of the Accounting Firm shall be borne solely by the Company. Any Gross-Up Payment, as determined pursuant to this Section 17, shall be paid by the Company to the Employee within five days of the receipt of the Accounting Firm's determination. If the Accounting Firm determines that no Excise Tax is payable by the Employee, it shall furnish the Employee with a written opinion that failure to report the Excise Tax on the Employee's applicable federal income tax return would not result in the imposition of a negligence or similar penalty. Any determination by the Accounting Firm shall be binding upon the Company and the Employee. As a result of the uncertainty in the application of Section 4999 of the Code at the time of the initial determination by the Accounting Firm hereunder, it is possible that Gross-Up Payments which will not have been made by the Company should have been made ("Underpayment"), consistent with the calculations required to be made hereunder. In the event that Applica exhausts its remedies pursuant to Section 17 and the Employee thereafter is required to make a payment of any Excise Tax, the Accounting Firm shall determine the amount of the Underpayment that has occurred and any such Underpayment shall be promptly paid by the Company to or for the benefit of the Employee. (c) The Employee shall notify the Company in writing of any claim by the Internal Revenue Service that, if successful, would require the payment by the Company of the Gross-Up Payment. Such notification shall be given as soon as practicable but no later than five business days after the Employee is informed in writing of such claim and shall apprise Applica of the nature of such claim and the date on which such claim is requested to be paid. The Employee shall not pay such claim prior to the expiration of the 30-day period following the date on which it gives such notice to the Company (or such shorter period ending on the date that any payment of taxes with respect to such claim is due). If the Company notifies the Employee in writing prior to the expiration of such period that it desires to contest such claim, the Employee shall: (i) give the Company any information reasonably requested by Applica relating to such claim, (ii) take such action in connection with contesting such claim as the Company shall reasonably request in writing from time to time, including, without limitation, accepting legal representation with respect to such claim by an attorney reasonably selected by the Company, (iii) cooperate with the Company in good faith in order effectively to contest such claim, and (iv) permit the Company to participate in any proceedings relating to such claim; 13 14 provided, however, that the Company shall bear and pay directly all costs and expenses (including additional interest and penalties) incurred in connection with such contest and shall indemnify and hold the Employee harmless, on an after-tax basis, for any Excise Tax or income tax (including interest and penalties with respect thereto) imposed as a result of such representation and payment of costs and expenses. Without limitation on the foregoing provisions of this Section 17(c), the Company shall control all proceedings taken in connection with such contest and, at its sole option, may pursue or forego any and all administrative appeals, proceedings, hearings and conferences with the taxing authority in respect of such claim and may, at its sole option, either direct the Employee to pay the tax claimed and sue for a refund or contest the claim in any permissible manner, and the Employee agrees to prosecute such contest to a determination before any administrative tribunal, in a court of initial jurisdiction and in one or more appellate courts, as Applica shall determine; provided, however, that if the Company directs the Employee to pay such claim and sue for a refund, the Company shall advance the amount of such payment to the Employee, on an interest-free basis and shall indemnify and hold the Employee harmless, on an after-tax basis, from any Excise Tax or income tax (including interest or penalties with respect thereto) imposed with respect to such advance or with respect to any imputed income with respect to such advance; and further provided that any extension of the statute of limitations relating to payment of taxes for the taxable year of the Employee with respect to which such contested amount is claimed to be due is limited solely to such contested amount. Furthermore, the Company's control of the contest shall be limited to issues with respect to which a Gross-Up Payment would be payable hereunder and the Employee shall be entitled to settle or contest, as the case may be, any other issue raised by the Internal Revenue Service or any other taxing authority. (d) If, after the receipt by the Employee of an amount advanced by the Company pursuant to Section 17(c), the Employee becomes entitled to receive any refund with respect to such claim, the Employee shall (subject to the Company's complying with the requirements of Section 17(c)) promptly pay to the Company the amount of such refund (together with any interest paid or credited thereon after taxes applicable thereto). If, after the receipt by the Employee of an amount advanced by the Company pursuant to Section 17(c), a determination is made that the Employee shall not be entitled to any refund with respect to such claim and the Company does not notify the Employee in writing of its intent to contest such denial of refund prior to the expiration of 30 days after such determination, then such advance shall be forgiven and shall not be required to be repaid and the amount of such advance shall offset, to the extent thereof, the amount of Gross-Up Payment required to be paid. 18. NO THIRD PARTY BENEFICIARY. Nothing expressed or implied in this Agreement is intended, or shall be construed, to confer upon or give any person, other than Applica, the parties hereto and their respective heirs, personal representatives, legal representatives, successors and assigns, any rights or remedies under or by reason of this Agreement. 19. WAIVER OF JURY TRIAL. ALL PARTIES KNOWINGLY WAIVE THEIR RIGHTS TO REQUEST A TRIAL BY JURY IN ANY LITIGATION IN ANY COURT OF LAW, TRIBUNAL OR LEGAL PROCEEDING INVOLVING THE PARTIES HERETO OR ANY DISPUTES ARISING OUT OF OR RELATED TO THIS AGREEMENT. 14 15 IN WITNESS WHEREOF, the Company, by its appropriate officer, signed this Agreement and Employee has signed this Agreement, as of the day and year first above written. APPLICA CONSUMER PRODUCTS, INC. By: /s/ Harry D. Schulman ------------------------------- Name: Harry D. Schulman Its: Chief Operating Officer EMPLOYEE /s/ Richard J. Gagliano ------------------------------------ Richard J. Gagliano 15 EX-10.9 11 g65027ex10-9.txt EMPLOYMENT AGREEMENT - TERRY L. POLISTINA 7/1/00 1 EXHIBIT 10.9 EMPLOYMENT AGREEMENT THIS EMPLOYMENT AGREEMENT (the "Agreement") is effective as of the 1st day of July, 2000, by and between Applica Incorporated, a Florida corporation with its principal place of business at 5980 Miami Lakes Drive, Miami Lakes, Florida (the "Company"), and Terry L. Polistina, an individual residing in the State of Florida (the "Employee"). RECITALS: A. The Employee is currently employed as the Senior Vice President - Finance and Administration of the Company. B. The Employee possesses intimate knowledge of the business and affairs of the Company and its subsidiaries, their policies, methods and personnel. C. The Company recognizes that the Employee has contributed to the growth and success of the Company and its subsidiaries, and desires to assure the Company and its subsidiaries of the Employee's continued employment and to compensate him therefor. D. The Board of Directors of the Company (the "Board") has determined that this Agreement will reinforce and encourage the Employee's continued attention and dedication to the Company and its subsidiaries. E. The Employee is willing to make his services available to the Company on the terms and conditions hereinafter set forth. AGREEMENT Therefore, in consideration of the premises, mutual covenants and agreements of the parties contained herein, and other good and valuable consideration, the receipt and adequacy of which is hereby acknowledged, the Company and the Employee hereby agree as follows: 1. EMPLOYMENT. Commencing on the date hereof, the Company shall employ the Employee and the Employee shall accept employment by the Company, upon the terms and conditions set forth in this Agreement. 2. TERM. The term of employment (the "Term") of this Agreement shall begin on the date hereof and, except as otherwise provided in Sections 7, 8, 9 and 10 below, shall end on June 30, 2003. The Term shall automatically renew for successive one year terms, unless sooner terminated as provided herein or unless either party gives notice at least 60 days prior to the end of the Term that such party does not intend to renew the Term. 2 3. DUTIES. The Employee will have such duties as are assigned or delegated to the Employee by the Board, the President and Chief Executive Officer or the Chief Operating Officer of the Company, and will initially serve as the Senior Vice President - Finance and Administration of the Company. The Employee will devote his entire business time, attention, skill, and energy exclusively to the business of the Company and its subsidiaries, will use his best efforts to promote the success of the Company and its subsidiaries, and will cooperate fully with the Board in the advancement of the best interests of the Company and its subsidiaries. 4. COMPENSATION. During the Term, the Company shall compensate Employee as follows: (a) SALARY. The Company shall pay Employee an annual salary of $195,000 (the "Annual Base Salary"), to be distributed in equal periodic installments according to the Company's customary payroll practices. The Annual Base Salary will increase progressively for each of the ensuing twelve month periods during the Term by an amount at least equal to the percentage increase in the United States Consumer Price Index for all urban consumers (CPI-U), U.S. City Average - All Items, published by the Bureau of Labor Statistics, United States Department of Labor (the "Index") for the previous calendar year. If at any time required for the determination of the Annual Base Salary adjustment as above described, the Index is no longer published or issued, the parties shall use such other index as is then generally recognized or accepted for similar determinations of purchasing power. Nothing contained herein shall be construed to prevent the Company from increasing Employee's Annual Base Salary more often than annually or by a higher amount than required by the Index. (b) ANNUAL BONUS. The Employee shall be entitled to receive incentive compensation (the "Incentive Compensation") for each year during the Term as set forth below: (i) PERFORMANCE BONUS. At the beginning of each calendar year during the Term, the Board (or the Compensation Committee thereof) shall establish target goals for (A) earnings before interest, taxes, depreciation and amortization ("EBITDA") of the Company on a consolidated basis and (B) the Employee's personal performance (collectively, the "Performance Goals"). The Employee shall be entitled to an annual bonus (the "Performance Bonus") based 50% on the achievement of the Performance Goal set forth in (A) above and 50% on the achievement of the Performance Goal set forth in (B) above, it being understood that a pro rata Performance Bonus may be earned by the Employee as set forth below in any year in which either Performance Goal is met. Such Performance Bonus shall be equal to a percentage of his Annual Base Salary to be determined as follows:
AGGREGATE PERCENTAGE OF BONUS AS PERCENTAGE PERFORMANCE GOALS ACHIEVED OF ANNUAL BASE SALARY -------------------------- --------------------- 75% - 79% (Threshold Performance) 15% 80% - 84% 18% 85% - 89% 21% 90% - 94% 24% 95% - 99% 27% 100% - 104% (Target Performance) 30% 105% - 109% 33% 110% - 114% 36% 115% - 119% 39% 120% - 124% 42% 125% and above (Maximum Performance) 45%
2 3 (ii) SYNERGY BONUS. At the beginning of each of the calendar years, the Board (or the Compensation Committee thereof) shall establish target goals for the synergies to be attained as a result of the integration of the Household Products Business (the "Synergy Goals"). Not later than 90 days after the end of each such year in which the portion of the Synergy Goals achieved are at least equal to 75%, the Employee shall be paid a cash bonus (the "Synergy Bonus") equal to a percentage of his Annual Base Salary to be determined as follows:
AGGREGATE PERCENTAGE OF BONUS AS PERCENTAGE SYNERGY GOALS ACHIEVED OF ANNUAL BASE SALARY ---------------------- --------------------- 75% - 79% (Threshold Performance) 5% 80% - 84% 7% 85% - 89% 9% 90% - 94% 11% 95% - 99% 13% 100% - 104% (Target Performance) 15% 105% - 109% 17% 110% - 114% 19% 115% - 119% 21% 120% - 124% 23% 125% and above (Maximum Performance) 25%
5. EXPENSE REIMBURSEMENT AND OTHER BENEFITS. (a) REIMBURSEMENT OF EXPENSES. During the term of Employee's employment hereunder, the Company, upon the submission of proper substantiation, including copies of all relevant invoices, receipts or other evidence reasonably requested by the Company, by the Employee, shall reimburse the Employee for all reasonable expenses actually paid or incurred by the Employee in the course of and pursuant to the business of the Company. (b) EXECUTIVE BENEFITS. Employee shall participate in the Company's Group Health and Hospitalization Plan, Group Life Insurance Plan, Group Disability Insurance Plan and all other insurances, or insurance plans (collectively, the "Welfare Benefits"), and Employee benefits and bonuses covering the Company senior executive officers as are now or may in the future be in effect, subject to applicable eligibility requirements. 3 4 (c) STOCK OPTIONS. During the Term of this Agreement, the Employee shall be eligible to be granted options to acquire shares of the Company Common Stock under (and therefore subject to all terms and conditions of) the Company stock option plans as then in effect, and all rules and regulations of the Securities and Exchange Commission applicable to stock option plans. Such options will contain such restrictions as required by the Board or the applicable committee of the Board charged with administration of the stock option plan. The number of shares of Common Stock subject to the stock options shall be adjusted for any subsequent stock splits, stock dividends or similar recapitalizations of the Company's Common Stock which results in an increase or decrease of the number of shares of outstanding Common Stock of the Company. The number of options and terms and conditions of options shall be determined in the sole discretion of the Board, or applicable committee thereof, and shall be based on several factors, including the performance of the Company on a consolidated basis. (d) AUTOMOBILE. During the Term, the Company shall provide Employee with an automobile allowance of $900 monthly. (e) VACATION. During the Term, the Employee will be entitled to three weeks' paid vacation for each year. The Employee will also be entitled to the paid holidays and other paid leave set forth in the Company's policies. Vacation days and holidays during any fiscal year that are not used by the Employee during such fiscal year may not be carried over and used in any subsequent fiscal year. 6. RESTRICTIONS. (a) NON-COMPETITION. During the Term and for a one year period after the termination of the Term for any reason, the Employee shall not, directly or indirectly, engage or invest in, own, manage, operate, finance, control, or participate in any manner in the ownership, management, operation, financing, or control of, be employed by, associated with, or in any manner connected with, lend his name or any similar name to, lend his credit to or render services or advice to, purchase product from or distribute on behalf of (whether as an employee, officer, director, partner, agent, security holder, creditor, consultant or otherwise), any person or entity that directly or indirectly (or through any affiliated entity) engages in competition with the Company (for this purpose, any business that engages in the manufacture or distribution of products similar to those products manufactured or distributed by the Company at the time of termination of the Agreement shall be deemed to be in competition with the Company); provided that such provision shall not apply to the Employee's ownership of Common Stock of Applica or the acquisition by the Employee, solely as an investment, of any issuer that is registered under Section 12(b) or 12(g) of the Securities Exchange Act of 1934, as amended, and that are listed or admitted for trading on any United States national securities exchange or that are quoted on the National Association of Securities Dealers Automated Quotations System, or any similar system or automated dissemination of quotations of securities prices in common use, so long as the Employee does not control, acquire a controlling interest in or become a member of a group which exercises direct or indirect control or, more than one percent of any class of capital stock of such corporation. 4 5 (b) NONDISCLOSURE. During the Term and after the termination of the Term for any reason, the Employee shall not at any time divulge, communicate, use to the detriment of the Company or for the benefit of any other person or persons, or misuse in any way, any Confidential Information (as hereinafter defined) pertaining to the business of the Company. Any Confidential Information or data now or hereafter acquired by the Employee with respect to the business of the Company shall be deemed a valuable, special and unique asset of the Company that is received by the Employee in confidence and as a fiduciary, and Employee shall remain a fiduciary to the Company with respect to all of such information. For purposes of this Agreement, "Confidential Information" means information disclosed to the Employee or known by the Employee as a consequence of or through his employment by the Company (including information conceived, originated, discovered or developed by the Employee) prior to or after the date hereof, and not generally known, about the Company or its business. Confidential Information shall include, but not be limited to, any and all: (i) trade secrets and data concerning the past, current and planned business, strategy, operations and affairs of the Company, data, know-how, compositions, processes, designs, sketches, photographs, graphs, drawings, samples, inventions and ideas, past, current, and planned research and development, customer lists, client lists, agent lists, current and anticipated customer and client requirements, price lists, commission information, market studies, business plans, computer software and programs (including object code and source code), computer software and database technologies, systems, concepts, ideas, designs, methods and information relating directly or indirectly to the Company; (ii) information concerning the past, current and planned business, strategy, operations and affairs of the Company, which includes historical financial statements, financial projections and budgets, historical and projected income, capital spending budgets and plans, the names and backgrounds of key personnel, suppliers, distributors, manufacturers, customers and clients, and any and all information relating to contracts and agreements with such persons, however documented; and (iii) notes, analysis, compilations, studies, summaries, and other material prepared by or for the Company containing or based, in whole or in part, on any information included in the foregoing. Notwithstanding the foregoing, nothing herein shall be deemed to restrict the Employee from disclosing Confidential Information to the extent required by law; provided, however, that the Employee provides prior notice of such disclosure to the Company and provides the Company with a reasonable opportunity to prevent, limit or protect such disclosure. None of the foregoing obligations and restrictions apply to any Confidential Information that the Employee demonstrates was or became generally available to the public other than as a result of disclosure by the Employee. (c) NONSOLICITATION OF EMPLOYEES AND CLIENTS. During the Term and for a one year period after the termination of the Term for any reason, the Employee shall not, directly or indirectly, for himself or for any other person, firm, corporation, partnership, association or other entity, other than in 5 6 connection with the performance of Employee's duties under this Agreement, (a) employ or attempt to employ or enter into any contractual arrangement with any employee or former employee of the Company, unless such employee or former employee has not been employed by the Company for a period in excess of six months, (b) call on or solicit any of the actual or targeted prospective customers or clients of the Company on behalf of any person or entity in connection with any business competitive with the business of the Company, (c) make known the names and addresses of such customers or clients or any information relating in any manner to the Company's trade or business relationships with such customers or clients (unless the Employee can demonstrate that such information was or became generally available to the public other than as a result of a disclosure by the Employee) and/or (d) interfere with the Company's relationship with any person, including employees, consultants, contractors, suppliers, distributors, clients, or customers of Company. (d) OWNERSHIP OF DEVELOPMENTS. All copyrights, patents, trade secrets, or other intellectual property rights associated with any ideas, concepts, techniques, inventions, processes, or works of authorship developed or created by Employee during the course of performing work for the Company or its customers (collectively, the "Work Product") shall belong exclusively to the Company and shall, to the extent possible, be considered a work made by the Employee for hire for the Company within the meaning of Title 17 of the United States Code. To the extent the Work Product may not be considered work made by the Employee for hire for the Company, the Employee agrees to assign, and automatically assign at the time of creation of the Work Product, without any requirement of further consideration, any right, title, or interest the Employee may have in such Work Product. Upon the request of the Company, the Employee shall take such further actions, including execution and delivery of instruments of conveyance, as may be appropriate to give full and proper effect to such assignment. (e) BOOKS AND RECORDS. All books, records, and accounts relating in any manner to the customers of the Company, whether prepared by the Employee or otherwise coming into the Employee's possession, shall be the exclusive property of the Company and shall be returned immediately to the Company on termination of the Employee's employment hereunder or on the Company's request at any time. The Employee will not remove from the Company's premises any other proprietary or confidential document, agreement, record, notebook, plan, model, component, device, or computer software or code, whether embodied in a disk or in any other form (collectively, the "Proprietary Items"). The Employee recognizes that, as between the Company and the Employee, all of the Proprietary Items, whether or not developed by the Employee, are the exclusive property of the Company. Upon termination of this Agreement by either party, or upon the request of the Company during the term of this Agreement, the Employee will promptly return to the Company all of the Proprietary Items in the Employee's possession or subject to the Employee's control, and the Employee shall not retain any copies or other physical embodiment of any of the Proprietary Items. (f) DEFINITION OF COMPANY. Solely for purposes of this Section 6, the term "Company" shall mean Applica, along with its current direct and indirect subsidiaries, any existing or future subsidiaries of Applica that are operating during the time periods described herein and any other entities that 6 7 directly or indirectly, through one or more intermediaries, control, are controlled by or are under common control with Applica during the periods described herein. (g) ACKNOWLEDGMENT BY EMPLOYEE. The Employee acknowledges and confirms that (a) the restrictive covenants contained in this Section 6 are reasonably necessary to protect the legitimate business interests of the Company, and (b) the restrictions contained in this Section 6 (including without limitation the length of the term of the provisions of this Section 6) are not overbroad, overlong, or unfair and are not the result of overreaching, duress or coercion of any kind. The Employee further acknowledges and confirms that his full, uninhibited and faithful observance of each of the covenants contained in this Section 6 will not cause him any undue hardship, financial or otherwise, and that enforcement of each of the covenants contained herein will not impair his ability to obtain employment commensurate with his abilities and on terms fully acceptable to him or otherwise to obtain income required for the comfortable support of him and his family and the satisfaction of the needs of his creditors. The Employee acknowledges and confirms that his special knowledge of the business of the Company is such as would cause the Company serious injury or loss if he were to use such ability and knowledge to the benefit of a competitor or were to compete with the Company in violation of the terms of this Section 6. The Employee further acknowledges that the restrictions contained in this Section 6 are intended to be, and shall be, for the benefit of and shall be enforceable by, the Company's successors and assigns. (h) REFORMATION BY COURT. In the event that a court of competent jurisdiction shall determine that any provision of this Section 6 is invalid or more restrictive than permitted under the governing law of such jurisdiction, then only as to enforcement of this Section 6 within the jurisdiction of such court, such provision shall be interpreted and enforced as if it provided for the maximum restriction permitted under such governing law. (i) EXTENSION OF TIME. If the Employee shall be in violation of any provision of this Section 6, then each time limitation set forth in this Section 6 shall be extended for a period of time equal to the period of time during which such violation or violations occur. If the Company seeks injunctive relief from such violation in any court, then the covenants set forth in this Section 6 shall be extended for a period of time equal to the pendency of such proceeding including all appeals by the Employee. (j) SURVIVAL. The provisions of this Section 6 shall survive the termination of this Agreement, as applicable. (k) INJUNCTIVE RELIEF. The Employee acknowledges that the injury that would be suffered by the Company as a result of a breach of any provision of this Section 6 would be irreparable and that an award of monetary damages for such a breach would be an inadequate remedy. Consequently, the Employee consents to, and the Company will have the right (in addition to any 7 8 other rights it may have) to request, the issuance of a temporary restraining order or a preliminary or permanent injunction to prohibit or restrain any breach or threatened breach or otherwise to specifically enforce any provision of this Section 6, or to maintain the status quo pending the outcome of any proceeding which may be initiated. The Company will not be obligated to post bond or other security in seeking such relief. 7. TERMINATION FOR CAUSE. (a) The Company shall have the right to terminate the Term and the Employee's employment hereunder for Cause (as defined below). Upon any termination pursuant to this Section 7, the Company shall pay to the Employee any unpaid Annual Base Salary through the effective date of termination specified in such notice. The Company shall have no further liability hereunder (other than for reimbursement for reasonable business expenses incurred prior to the date of termination, subject, however, to the provisions of Section 5(a)). (b) For purposes hereof, the term "Cause" shall mean: (i) the Employee's failure to perform his duties hereunder; (ii) the Employee's failure to adhere to any written policy of the Company if such failure to adhere has or is likely to have an adverse effect on the business, operations or prospects the Company; (iii) the appropriation (or attempted appropriation) of a business opportunity of the Company, including attempting to secure or securing any personal profit in connection with any transaction entered into on behalf the Company; (iv) the misappropriation (or attempted misappropriation) of any of the Company's funds or property; (v) the conviction of, the indictment for (or its procedural equivalent), or the entering of a guilty plea or plea of no contest with respect to, a felony, the equivalent thereof, or any other crime with respect to which imprisonment is a possible punishment; (vi) the commission by the Employee of any act which shocks, insults and offends the community and ridicules public morals and decency, or (vii) any gross or willful improper conduct of the Employee resulting in loss to the Company, damage to the Company's reputation or theft from the Company. 8. TERMINATION WITHOUT CAUSE. At any time the Company shall have the right to terminate the Term and the Employee's employment hereunder by written notice to the Employee. Upon any termination pursuant to this Section 8 (that is not a termination under any of Sections 7, 9, or 10), the Company shall pay to the Employee a lump sum equal to the sum of (A) the Annual Base Salary at the date of termination multiplied by 1.5, and (B) the product of the sum of the Performance Bonus for the prior year multiplied by 1.5. The Company shall also continue to pay the premiums for the same or substantially similar Welfare Benefits for 12 months. Further, any Applica stock option granted to Employee shall be exercisable immediately and the Applica stock acquired pursuant to such exercise may be sold by Employee subject to no restrictions by the Company whatsoever (other than those imposed by federal and state securities laws). The Company shall have no further liability hereunder (other than for reimbursement for reasonable business expenses incurred prior to the date of termination, subject, however, to the provisions of Section 5(a)). 8 9 9. TERMINATION BY EMPLOYEE. (a) The Employee shall at all times have the right, upon 60 days written notice to the Company, to terminate the Term and his employment hereunder. (b) Upon any termination pursuant to this Section 9 by the Employee without Good Reason (as defined below), the Company shall pay to the Employee any unpaid Annual Base Salary through the effective date of termination specified in such notice. The Company shall have no further liability hereunder (other than for reimbursement for reasonable business expenses incurred prior to the date of termination, subject, however, to the provisions of Section 5(a)). (c) Upon any termination pursuant to this Section 9 by the Employee for Good Reason, the Company shall pay to the Employee the same amounts that would have been payable by the Company to the Employee under Section 8 of this Agreement if the Employee's employment had been terminated by the Company without Cause. The Company shall have no further liability hereunder (other than for reimbursement for reasonable business expenses incurred prior to the date of termination, subject, however, to the provisions of Section 5(a)). (d) For purposes of this Agreement, "Good Reason" shall mean any failure by the Company to comply with any of the material provisions of Section 4 of this Agreement, other than an isolated, insubstantial and inadvertent failure not occurring in bad faith and which is remedied by the Company promptly after receipt of notice thereof given by the Employee. 10. CHANGE IN CONTROL. (a) In the event that (i) a Change in Control (as defined in paragraph (b) of this Section 10) in the Company shall occur during the Term, and (ii) prior to the earlier of the expiration of the Term and one year after the date of the Change in Control, the Term and Employee's employment with the Company is terminated by the Company without Cause, as defined in Section 7(b) or the Employee terminates the Term and his employment for Good Reason, as defined in Section 9(d), the Company shall (1) pay to the Employee any unpaid Annual Base Salary through the effective date of termination, (2) pay to the Employee the Incentive Compensation, if any, not yet paid to the Employee for any year prior to such termination, at such time as the Incentive Compensation otherwise would have been payable to the Employee, (3) at the time of such termination, pay to the Employee a lump sum equal to the sum of (A) the Annual Base Salary at the date of termination multiplied by 1.5, and (B) the product of the sum of the Performance Bonus for the prior year multiplied by 1.5. The Company shall also continue to pay the premiums for the same or substantially similar Welfare Benefits for 12 months. Further, any Company stock option granted to Employee shall be exercisable immediately and the Company stock acquired pursuant to such exercise may be sold by Employee subject to no restrictions by Company whatsoever (other than those imposed by federal and state securities laws). The Company shall have no further liability hereunder (other than for reimbursement for reasonable business expenses incurred prior to the date of termination, subject, however, to the provisions of Section 5(a)). 9 10 (b) For purposes of this Agreement, the term "Change in Control" shall mean: (i) Approval by the shareholders of the Company of (x) a reorganization, merger, consolidation or other form of corporate transaction or series of transactions, in each case, with respect to which persons who were the shareholders of the Company immediately prior to such reorganization, merger or consolidation or other transaction do not, immediately thereafter, own more than 50% of the combined voting power entitled to vote generally in the election of directors of the reorganized, merged or consolidated company's then outstanding voting securities, or (y) a liquidation or dissolution of the Company or (z) the sale of all or substantially all of the assets of the Company (unless such reorganization, merger, consolidation or other corporate transaction, liquidation, dissolution or sale is subsequently abandoned); or (ii) Individuals who, as of the date hereof, constitute the Board of Directors of the Company (as of the date hereof the "Incumbent Board") cease for any reason to constitute at least a majority of the Board, provided that any person becoming a director subsequent to the date hereof whose election, or nomination for election by the Company's shareholders, was approved by a vote of at least a majority of the directors then comprising the Incumbent Board (other than an election or nomination of an individual whose initial assumption of office is in connection with an actual or threatened election contest relating to the election of the Directors of the Company, as such terms are used in Rule 14a-11 of Regulation 14A promulgated under the Securities Exchange Act) shall be, for purposes of this Agreement, considered as though such person were a member of the Incumbent Board; or (iii) The acquisition (other than from the Company) by any person, entity or "group", within the meaning of Section 13(d)(3) or 14(d)(2) of the Securities Exchange Act (excluding, for this purpose, the Company or its subsidiaries, or any employee benefit plan of the Company or its subsidiaries) which acquires beneficial ownership (within the meaning of Rule 13d-3 promulgated under the Securities Exchange Act), of 20% or more of either the then outstanding shares of the Company 's Common Stock or the combined voting power of the Company 's then outstanding voting securities entitled to vote generally in the election of directors. (c) The payments made pursuant to paragraph (a) above shall be in lieu of any and all compensation due to Employee for the years that would otherwise be remaining in the Term. Upon receipt of said lump sum payment, this Agreement and all rights and duties of the parties shall be terminated, except as follows. In consideration for such lump sum payment and for the right to terminate under the conditions set forth above, Employee agrees to consult with the Company (or its successors), and its officers if requested to do so for a period of at least two years from the date of such termination. However, Employee shall be required to devote only such part of his time to such services as Employee believes reasonable in Employee's sole discretion, and the time and date such services are offered shall be determined by Employee so long as that time and date is within a reasonable period of time after the request. It is expressly agreed that the Company's rights to avail itself of the advice and consultation services of Employee shall at all times be exercised in a 10 11 reasonable manner, that adequate notice shall be given to Employee in such events, and that non-compliance with any such request by Employee for good reason, including, but not limited to, ill health or prior commitments, shall not constitute a breach or violation of this Agreement. Employee agrees that, except for reimbursement of all reasonable expenses incurred by him with respect to such consultation and advisory services, payable as such consultation and advisory services are rendered, he shall not be entitled to any further compensation. It is understood that in furnishing any advisory and consulting services provided herein, Employee shall not be an employee of the Company but shall act in the capacity of independent contractor. 11. WAIVERS. It is understood that either party may waive the strict performance of any covenant or agreement made herein; however, any waiver made by a party hereto must be duly made in writing in order to be considered a waiver, and the waiver of one covenant or agreement shall not be considered a waiver of any other covenant or agreement unless specifically in writing as aforementioned. 12. SAVINGS PROVISIONS. The invalidity, in whole or in part, of any covenant or restriction, or any section, subsection, sentence, clause, phrase or word, or other provisions of this Agreement, as the same may be amended from time to time shall not affect the validity of the remaining portions thereof. 13. GOVERNING LAW. This Agreement shall be construed in accordance with and governed by the laws of the State of Florida without giving effect to its choice of law provision. 14. NOTICES. If either party desires to give notice to the other in connection with any of the terms and provisions of this Agreement, said notice must be in writing and shall be deemed given when (a) delivered by hand (with written confirmation of receipt), (b) sent by facsimile (with written confirmation of receipt), provided that a copy is mailed by registered mail, return receipt requested, or (c) when received by the addressee, if sent by a nationally recognized overnight delivery service (receipt requested), in each case addressed to the party for whom it is intended as follows (or such other addresses as either party may designated by notice to the other party): If to the Company: Applica Incorporated 5980 Miami Lakes Drive Miami Lakes, Florida 33014 Attn: David M. Friedson, President and CEO If to Employee: At the most recent home address of Employee on the official records of the Company 15. DEFAULT. In the event either party defaults in the performance of its obligations under this Agreement, the non-defaulting party may, after giving 30 days notice to the defaulting party to provide a reasonable opportunity to cure such default, proceed to protect its rights by suit in equity, action at 11 12 law, or, where specifically provided for herein, by arbitration, to enforce performance under this Agreement or to recover damages for breach thereof, including all costs and attorneys' fees, whether settled out of court, arbitrated, or tried (at both trial and appellate levels). 16. SECTION 162(m) LIMITS. Notwithstanding any other provision of this Agreement, if and to the extent that any remuneration payable by the Company to the Employee for any year would exceed the maximum amount of such remuneration that the Company may deduct for that year by reason of Section 162(m) of the Code, payment of the portion of the remuneration for that year that would not be so deductible under Section 162(m) shall, in the sole discretion of the Board, be deferred so that it shall become payable at such time or times as the Board reasonably determines that it would be deductible by the Company under Section 162(m), with interest at the "short-term applicable federal rate" as such term is defined in Section 1274(d) of the Code. 17. CERTAIN ADDITIONAL PAYMENTS BY THE COMPANY. (a) Anything in this Agreement to the contrary notwithstanding, in the event it shall be determined that any payment, distribution or other action by the Company to or for the benefit of the Employee (whether paid or payable or distributed or distributable pursuant to the terms of this Agreement or otherwise, but determined without regard to any additional payments required under this Section 17) (a "Payment") would be subject to an excise tax imposed by Section 4999 of the Internal Revenue Code of 1986, as amended (the "Code"), or any interest or penalties are incurred by the Employee with respect to any such excise tax (such excise tax, together with any such interest and penalties, are hereinafter collectively referred to as the "Excise Tax"), the Company shall make a payment to the Employee (a "Gross-Up Payment") in an amount equal to the Excise Tax imposed upon the Payments. (b) Subject to the provisions of paragraph (c) of this Section 17, all determinations required to be made under this Section 17, including whether and when a Gross-Up Payment is required and the amount of such Gross-Up Payment and the assumptions to be utilized in arriving at such determination, shall be made by Grant Thornton LLP, or such other independent public accounting firm regularly engaged by the Company from time to time (the "Accounting Firm"), which shall provide detailed supporting calculations both to the Company and the Employee within 20 business days of the receipt of notice from the Employee that there has been a Payment, or such earlier time as is requested by the Company. In the event that the Accounting Firm is serving as accountant or auditor for the individual, entity or group effecting the Change of Control, the Company shall appoint another nationally recognized accounting firm to make the determinations required hereunder (which accounting firm shall then be referred to as the Accounting Firm hereunder). All fees and expenses of the Accounting Firm shall be borne solely by the Company. Any Gross-Up Payment, as determined pursuant to this Section 17, shall be paid by the Company to the Employee within 12 13 five days of the receipt of the Accounting Firm's determination. If the Accounting Firm determines that no Excise Tax is payable by the Employee, it shall furnish the Employee with a written opinion that failure to report the Excise Tax on the Employee's applicable federal income tax return would not result in the imposition of a negligence or similar penalty. Any determination by the Accounting Firm shall be binding upon the Company and the Employee. As a result of the uncertainty in the application of Section 4999 of the Code at the time of the initial determination by the Accounting Firm hereunder, it is possible that Gross-Up Payments which will not have been made by the Company should have been made ("Underpayment"), consistent with the calculations required to be made hereunder. In the event that the Company exhausts its remedies pursuant to Section 17 and the Employee thereafter is required to make a payment of any Excise Tax, the Accounting Firm shall determine the amount of the Underpayment that has occurred and any such Underpayment shall be promptly paid by the Company to or for the benefit of the Employee. (c) The Employee shall notify the Company in writing of any claim by the Internal Revenue Service that, if successful, would require the payment by the Company of the Gross-Up Payment. Such notification shall be given as soon as practicable but no later than five business days after the Employee is informed in writing of such claim and shall apprise the Company of the nature of such claim and the date on which such claim is requested to be paid. The Employee shall not pay such claim prior to the expiration of the 30-day period following the date on which it gives such notice to the Company (or such shorter period ending on the date that any payment of taxes with respect to such claim is due). If the Company notifies the Employee in writing prior to the expiration of such period that it desires to contest such claim, the Employee shall: (i) give the Company any information reasonably requested by the Company relating to such claim, (ii) take such action in connection with contesting such claim as the Company shall reasonably request in writing from time to time, including, without limitation, accepting legal representation with respect to such claim by an attorney reasonably selected by the Company, (iii) cooperate with the Company in good faith in order effectively to contest such claim, and (iv) permit the Company to participate in any proceedings relating to such claim; provided, however, that the Company shall bear and pay directly all costs and expenses (including additional interest and penalties) incurred in connection with such contest and shall indemnify and hold the Employee harmless, on an after-tax basis, for any Excise Tax or income tax (including interest and penalties with respect thereto) imposed as a result of such representation and payment of costs and expenses. Without limitation on the foregoing provisions of this Section 17(c), the Company shall control all proceedings taken in connection with such contest and, at its sole option, may pursue or forego any and all administrative appeals, proceedings, hearings and conferences with the taxing authority in respect of such claim and may, at its sole option, either direct the Employee to pay the tax claimed and sue for a refund or contest the claim in any permissible manner, and the Employee agrees to prosecute such contest to a determination before any administrative tribunal, in a court of 13 14 initial jurisdiction and in one or more appellate courts, as the Company shall determine; provided, however, that if the Company directs the Employee to pay such claim and sue for a refund, the Company shall advance the amount of such payment to the Employee, on an interest-free basis and shall indemnify and hold the Employee harmless, on an after-tax basis, from any Excise Tax or income tax (including interest or penalties with respect thereto) imposed with respect to such advance or with respect to any imputed income with respect to such advance; and further provided that any extension of the statute of limitations relating to payment of taxes for the taxable year of the Employee with respect to which such contested amount is claimed to be due is limited solely to such contested amount. Furthermore, the Company's control of the contest shall be limited to issues with respect to which a Gross-Up Payment would be payable hereunder and the Employee shall be entitled to settle or contest, as the case may be, any other issue raised by the Internal Revenue Service or any other taxing authority. (d) If, after the receipt by the Employee of an amount advanced by the Company pursuant to Section 17(c), the Employee becomes entitled to receive any refund with respect to such claim, the Employee shall (subject to the Company's complying with the requirements of Section 17(c)) promptly pay to the Company the amount of such refund (together with any interest paid or credited thereon after taxes applicable thereto). If, after the receipt by the Employee of an amount advanced by the Company pursuant to Section 17(c), a determination is made that the Employee shall not be entitled to any refund with respect to such claim and the Company does not notify the Employee in writing of its intent to contest such denial of refund prior to the expiration of 30 days after such determination, then such advance shall be forgiven and shall not be required to be repaid and the amount of such advance shall offset, to the extent thereof, the amount of Gross-Up Payment required to be paid. 18. NO THIRD PARTY BENEFICIARY. Nothing expressed or implied in this Agreement is intended, or shall be construed, to confer upon or give any person, other than the Company, the parties hereto and their respective heirs, personal representatives, legal representatives, successors and assigns, any rights or remedies under or by reason of this Agreement. 19. WAIVER OF JURY TRIAL. ALL PARTIES KNOWINGLY WAIVE THEIR RIGHTS TO REQUEST A TRIAL BY JURY IN ANY LITIGATION IN ANY COURT OF LAW, TRIBUNAL OR LEGAL PROCEEDING INVOLVING THE PARTIES HERETO OR ANY DISPUTES ARISING OUT OF OR RELATED TO THIS AGREEMENT. 14 15 IN WITNESS WHEREOF, the Company, by its appropriate officer, signed this Agreement and Employee has signed this Agreement, as of the day and year first above written. APPLICA INCORPORATED By: /s/ Harry D. Schulman ------------------------------- Name: Harry D. Schulman Its: Chief Operating Officer EMPLOYEE /s/ Terry L. Polistina ------------------------------------- Terry L. Polistina 15 EX-27.1 12 g65027ex27-1.txt FINANCIAL DATA SCHEDULE
5 1,000 9-MOS DEC-31-2000 JAN-01-2000 SEP-30-2000 9,784 0 203,750 9,326 224,813 456,006 162,466 81,276 772,524 113,422 130,000 0 0 2,304 347,762 772,524 517,499 517,499 354,156 135,936 0 1,608 22,225 6,727 1,701 5,026 0 0 0 5,026 0.22 0.21
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