SECURITIES AND EXCHANGE COMMISSION

FORM 10-Q

Quarterly Report Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934

Commission File Number 1-9608

NEWELL RUBBERMAID INC.

(Exact name of registrant as specified in its charter)

10B Glenlake Parkway, Suite 600
Atlanta, Georgia 30328
(Address of principal executive offices)

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, and (2) has been subject to such filing requirements for the past 90 days.

Yes þ                                                                                  No o

Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act).

Yes þ                                                                                  No o

Number of shares of common stock outstanding (net of treasury shares) as of April 30, 2005: 275.3 million.

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

NEWELL RUBBERMAID INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited)
(Amounts in millions, except per share data)

See Footnotes to Consolidated Financial Statements (Unaudited).

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NEWELL RUBBERMAID INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Amounts in millions)

See Footnotes to Consolidated Financial Statements (Unaudited).

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NEWELL RUBBERMAID INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS (CONTINUED)
(Amounts in millions, except par value)

See Footnotes to Consolidated Financial Statements (Unaudited).

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NEWELL RUBBERMAID INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
(Amounts in millions)

See Footnotes to Consolidated Financial Statements (Unaudited).

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NEWELL RUBBERMAID INC. AND SUBSIDIARIES
FOOTNOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

Footnote 1 – Basis of Presentation

The accompanying unaudited consolidated financial statements of Newell Rubbermaid Inc. (collectively with its subsidiaries, the “Company”) have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission, and do not include all the information and footnotes required by generally accepted accounting principles for complete financial statements. In the opinion of management, the unaudited consolidated financial statements include all adjustments, consisting of only normal recurring accruals, considered necessary for a fair presentation of the financial position and the results of operations. It is suggested that these unaudited consolidated financial statements be read in conjunction with the financial statements and the footnotes thereto included in the Company’s latest Annual Report on Form 10-K.

Seasonal Variations: The Company’s product groups are only moderately affected by seasonal trends. The Cleaning & Organization and Other business segments typically have higher sales in the second half of the year due to retail stocking related to the holiday season; the Tools & Hardware and Home Fashions business segments typically have higher sales in the second and third quarters due to an increased level of do-it-yourself projects completed in the summer months; and the Office Products business segment typically has higher sales in the second and third quarters due to the back-to-school season. Because these seasonal trends are moderate, the Company’s consolidated quarterly sales generally do not fluctuate significantly, unless a significant acquisition is made.

Fair Value of Stock Options: In December 2004, the Financial Accounting Standards Board (“FASB”) issued Statement of Financial Accounting Standards No. 123 (revised) (“SFAS 123(R)”), “Share-Based Payment.” SFAS 123(R) requires all share-based payments to employees, including grants of employee stock options, to be recognized in the financial statements based on their fair values (i.e., pro forma disclosure is no longer an alternative to financial statement recognition). The Statement supersedes Accounting Principles Board Opinion (“APB”) No. 25, “Accounting for Stock Issued to Employees” and will require adoption no later than January 1, 2006. The Company expects to adopt the provisions of the new standard effective January 1, 2006.

As of March 31, 2005, the Company’s stock option plans are accounted for under APB No. 25. As a result, the Company grants fixed stock options under which no compensation cost is recognized. Had compensation cost for the options granted been determined consistent with SFAS 123(R), the Company’s net income and earnings per share would have been reduced to the following pro forma amounts under the Black Scholes method for the three months ended March 31, (in millions, except per share data):

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Reclassifications: Certain amounts in prior years have been reclassified to conform to the current year presentation. See Footnote 2 for a discussion of discontinued operations.

Footnote 2 – Discontinued Operations

On January 12, 2005, the Company entered into an agreement for the intended sale of the Company’s Curver business. The Curver business manufactures and markets plastic products for home storage and garage organization, food storage, laundry, bath, cleaning, closet organization and refuse removal in various countries in Europe. The Company’s European commercial products and other European businesses would not be affected by the sale. The Curver business had 2004 sales of $151.8 million.

The contemplated sale price is $5 million, payable at closing, and a contingent note for $5 million, payable within 12 years. The sales price is subject to reduction for working capital adjustments. There could also be contingent payments received by the Company, up to an aggregate maximum of $25 million, based on the adjusted earnings before interest and taxes of the Curver business for the five years ended December 31, 2009.

The agreement contains customary representations, warranties, covenants and conditions. The agreement also contains indemnification provisions subject to specified limitations as to time and amount. The agreement is subject to termination if the transaction is not completed within four months or, in certain cases, six months.

In connection with this intended transaction, the Company expects to record a total non-cash loss related to the sale of approximately $60 to $80 million, including the $49.1 million loss recorded in the first quarter of 2005. In the first quarter, the Company wrote-off the remaining long-lived assets of the business (primarily property, plant and equipment) and recorded the charge in discontinued operations as a loss on the disposal. The remaining charge is expected to be recorded in the second quarter of 2005 when the deal is expected to close.

The following table summarizes the results of the discontinued operations for the three months ended March 31, (in millions):

The 2005 amounts reflect only the operations of the Curver business, while the 2004 amounts also include businesses sold in 2004 (Panex Brazilian low-end cookware division, European picture frames businesses, U.S. picture frames business (Burnes), Anchor Hocking glassware business, Mirro cookware business and the Little Tikes Commercial Playground Systems business). No amounts related to interest expense have been allocated to discontinued operations.

The following table presents summarized balance sheet information of the discontinued operations (in millions):

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Footnote 3 – Restructuring Costs

In the second quarter of 2004, the Company completed its accounting charges associated with its strategic restructuring plan (the “Plan”) announced on May 3, 2001. The specific objectives of the Plan were to streamline the Company’s supply chain to become the best-cost global provider throughout the Company’s portfolio by reducing worldwide headcount and consolidating duplicative manufacturing facilities. The Company recorded $461.7 million in restructuring charges under the Plan, including $87.4 million in discontinued operations. Under the Plan, the Company exited 84 facilities and reduced headcount by approximately 12,000. The Company expects total annual savings of between $125 and $150 million ($105 to $115 million related to the reduced headcount, $10 to $20 million related to reduced depreciation, and $10 to $15 million related to other cash savings).

Pre-tax restructuring costs consisted of the following for the three months ended March 31, (in millions):

A summary of the Company’s restructuring plan reserves is as follows (in millions):

Restructuring provisions were determined based on estimates prepared at the time the restructuring actions were approved by management, and also include amounts recognized as incurred. Cash paid for restructuring activities was $10.6 million and $15.7 million in the first three months of 2005 and 2004, respectively.

The facility and other exit cost reserves are primarily related to future minimum lease payments on vacated facilities and other closure costs and will require future cash payments.

The following table depicts the changes in accrued restructuring reserves for the three months ended March 31, aggregated by reportable business segment (in millions):

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During the first quarters of 2005 and 2004, the Company reduced its restructuring reserves by approximately $1.0 million and $0.6 million, respectively, primarily as a result of a change in estimate on the amount of proceeds to be received from the sale of fixed assets scheduled for disposal.

Footnote 4 – Inventories

Inventories are stated at the lower of cost or market value. The components of inventories, net of LIFO reserve, were as follows (in millions):

Footnote 5 – Long-term Debt

The following is a summary of long-term debt (in millions):

In February 2005, the Company purchased 550,000 shares of 5.25% convertible preferred securities (“Preferred Securities”) that were issued by a 100%-owned finance subsidiary of the Company and are fully and unconditionally guaranteed by the Company, from a holder for $47.375 per share. In connection with the purchase of these securities, the Company negotiated the early retirement of the corresponding junior convertible subordinated debentures with the financing subsidiary. The Company accounted for this transaction as an extinguishment of debt resulting in a net gain of $1.1 million, which was included in Other (income) expense, net.

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Footnote 6 – Employee Benefit and Retirement Plans

The following table presents the components of the Company’s pension (income) expense for the three months ended March 31, (in millions):

Effective December 31, 2004, the Company froze its defined benefit pension plan for its entire non-union U.S. workforce. As a result of this curtailment, the Company reduced its pension obligation by $50.3 million and recorded a curtailment gain related to negative prior service cost of $15.8 million in the first quarter of 2005. In conjunction with this action, the Company offered special termination benefits to certain employees that accepted early retirement. The Company replaced the defined benefit pension plan with an additional defined contribution plan, whereby the Company will make additional contributions to the Company sponsored employee’s profit sharing plan. The new defined contribution plan has a five-year cliff-vesting schedule, but allows credit for service rendered prior to the inception of the defined contribution plan.

The following table presents the components of the Company’s other postretirement benefits expense for the three months ended March 31, (in millions):

Footnote 7 – Income Taxes

In January 2005, the Company reached agreement with the Internal Revenue Service (IRS) relating to the appropriate treatment of a specific transaction reflected on the Company’s 2003 US federal income tax return. The Company requested accelerated review of the transaction under the IRS’ Pre-Filing Agreement Program that resulted in affirmative resolution in late January 2005. A $58.6 million benefit was recorded in income taxes for the three months ended March 31, 2005 related to this issue. The amount was fully reserved as of December 31, 2004.

Footnote 8 – Earnings per Share

The calculation of basic and diluted earnings (loss) per share for the three months ended March 31, is shown below (in millions, except per share data):

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The Company also grants restricted stock awards to directors and certain employees. Generally, these awards are subject to three-year cliff vesting and pay dividends quarterly. As of March 31, 2005, the Company had outstanding restricted stock awards of 0.8 million shares, none of which are vested. Total compensation expense of $1.3 million and $0.7 million was recorded for the three months ended March 31, 2005 and 2004, respectively, related to the restricted shares.

Footnote 9 – Accumulated Other Comprehensive Loss

Accumulated other comprehensive loss encompasses foreign currency translation adjustments, net gains/(losses) on derivative instruments and net minimum pension liability adjustments and is recorded within stockholders’ equity.

The following table displays the components of accumulated other comprehensive loss (in millions):

Total comprehensive income (loss) amounted to the following for the three months ended March 31, (in millions):

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Footnote 10 — Industry Segments

The Company’s reporting segments reflect the Company’s focus on building large consumer brands, promoting organizational integration, achieving operating efficiencies and aligning the businesses with the Company’s strategic account management strategy. The Company reports its results in five reportable segments as follows:

The Company’s segment results are as follows (in millions):

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Geographic Area Information

Footnote 11 – Contingencies

The Company is involved in legal proceedings in the ordinary course of its business. These proceedings include claims for damages arising out of use of the Company’s products, allegations of infringement of intellectual property, commercial disputes and employment related matters, as well as environmental matters. Some of the legal proceedings include claims for punitive as well as compensatory damages, and a few proceedings purport to be class actions.

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Although management of the Company cannot predict the ultimate outcome of these legal proceedings with certainty, it believes that the ultimate resolution of the Company’s legal proceedings, including any amounts it may be required to pay in excess of amounts reserved, will not have a material effect on the Company’s financial statements.

In the normal course of business and as part of its acquisition and divestiture strategy, the Company may provide certain representations and indemnifications related to legal, environmental, product liability, tax or other types of issues. Based on the nature of these representations and indemnifications, it is not possible to predict the maximum potential payments under all of these agreements due to the conditional nature of the Company’s obligations and the unique facts and circumstances involved in each particular agreement. Historically, payments made by the Company under these agreements did not have a material effect on the Company’s business, financial condition or results of operation.

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Item 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Overview

The Company made progress in the first quarter of 2005 toward achieving its previously announced 2005 key objectives. The Company’s key objectives for 2005, and the progress made in the first three months of 2005 toward achieving such priorities, are highlighted below:

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Results of Operations

The following table sets forth for the periods indicated items from the Consolidated Statements of Operations as a percentage of net sales (in millions, except percentages):

Three Months Ended March 31, 2005 vs. Three Months Ended March 31, 2004

Consolidated Operating Results:

Net sales for the three months ended March 31, 2005 (first quarter) were $1,393.6 million, representing a decrease of $97.2 million, or 6.5%, from $1,490.8 million in the comparable quarter of 2004. The decrease resulted from a decline in core sales of $91 million, or 6.1%, and product line rationalization of $60 million, or 4.0%. These were partially offset by favorable foreign currency translation of $24 million, or 1.6% of net sales, and favorable pricing of $30 million, or 2.0% of net sales, for the quarter. Approximately two thirds of the core sales decline occurred in the Cleaning & Organization segment, primarily in the Rubbermaid Home Products business, resulting from the aggressive pricing required to offset resin inflation. The remaining one third of the core sales decline occurred in the European Home Fashion business, primarily due to the soft economic environment in Germany and market share losses to private label suppliers in the opening price point drapery hardware product lines.

Gross margin, as a percentage of net sales, in the first quarter of 2005 was 27.2%, or $378.9 million, versus 27.1%, or $404.4 million, in the comparable quarter of 2004. The increase in gross margin percentage is primarily related to favorable pricing of $30 million, or 2.0% of net sales, and a favorable mix driven by new products and the rationalization of unprofitable product lines. The decrease in the gross margin amount was caused primarily by the decrease in net sales noted above. Raw material inflation of $51 million (primarily in resin and steel) was mostly offset by favorable pricing of $30 million and gross productivity of $18 million in the quarter.

Selling, general and administrative expenses (SG&A) in the first quarter of 2005 were 21.8% of net sales, or $304.0 million, versus 20.1%, or $299.8 million, in the comparable quarter of 2004. The positive impact of the U.S. pension plan curtailment (see Footnote 6 to the Consolidated Financial Statements (Unaudited) for further information) was more than offset by foreign currency and additional investment in the Office Products and Tools & Hardware segments.

The Company recorded pre-tax strategic restructuring charges of $6.2 million in the first quarter of 2005, compared to $21.6 million in the prior year. The 2005 pre-tax charge included $3.4 million of facility and other exit costs, $1.5 million of employee severance and termination benefits and $1.3 million of exited contractual commitments and other restructuring costs. The 2004 pre-tax charge included $13.9 million of facility and other exit costs, $5.4 million of employee severance and termination benefits and $2.3 million of exited contractual commitments and other restructuring costs. See Footnote 3 to the Consolidated Financial Statements (Unaudited) for further information on the restructuring plan.

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Operating income in the first quarter of 2005 was $68.7 million, or 4.9% of net sales, versus $83.0 million, or 5.6%, in the comparable quarter of 2004. The decrease in operating margins was the result of the factors described above.

Net nonoperating expenses in the first quarter of 2005 were 2.0% of net sales, or $28.5 million, versus 2.2% of net sales, or $33.2 million, in the comparable quarter of 2004. The reduction in net nonoperating expenses is mainly attributable to gains recognized in 2005 on the sale of property, plant and equipment. Additionally, net interest expense decreased $0.1 million for the first quarter of 2005 compared to the first quarter of 2004 primarily as a result of cash generated from operations and divestitures which lowered debt and increased cash balances, mostly offset by higher interest rates.

The effective tax rate was (116.2%) in the first quarter of 2005 versus 32.5% in the first quarter of 2004. The change in the effective tax rate is primarily related to the $58.6 million income tax benefit recorded in the first quarter of 2005 resulting from the resolution of a tax contingency with the Internal Revenue Service. See Footnote 7 to the Consolidated Financial Statements (Unaudited) for further information.

Income from continuing operations for the first quarter of 2005 was $86.9 million, compared to $33.6 million in the first quarter of 2004. Diluted earnings per share from continuing operations were $0.32 in the first quarter of 2005 compared to $0.12 in the first quarter of 2004.

The loss recognized from discontinued operations for the first quarter of 2005 was $50.3 million, net of tax, compared to $108.5 million, net of tax, in the first quarter of 2004. Diluted loss per share from discontinued operations was $0.18 in the first quarter of 2005 compared to $0.40 in the first quarter of 2004. See Footnote 2 to the Consolidated Financial Statements (Unaudited) for further information.

Net income (loss) for the first quarter of 2005 was $36.6 million, compared to ($74.9) million in the first quarter of 2004. Diluted earnings (loss) per share was $0.13 in the first quarter of 2005 compared to ($0.27) in the first quarter of 2004.

Business Group Operating Results:

Net sales by reportable segment were as follows for the three months ended March 31, (in millions, except percentages):

Operating income by segment was as follows for the three months ended March 31, (in millions, except percentages):

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Cleaning & Organization

Net sales for the first quarter of 2005 were $341.1 million, a decrease of $64.8 million, or 16.0%, from $405.9 million in the first quarter of 2004, driven primarily by the planned low margin product line exits in the Rubbermaid Home Products business and reduced volumes caused by the recent price increase action taken to offset raw material inflation. These factors were partially offset by favorable pricing and foreign currency translation.

Operating income for the first quarter of 2005 was $15.4 million, a decrease of $2.0 million, or 11.5%, from $17.4 million in the first quarter of 2004. The decrease in operating income is the result of higher raw material costs and lost absorption in manufacturing facilities as a result of lower production volumes, partially offset by gross productivity and favorable pricing.

Office Products

Net sales for the first quarter of 2005 and 2004 were $332.8 million. Successful implementation of new products in the writing instruments business (Sharpie® Retractables, Sharpie® Mini permanent markers, Accent® highlighters, Papermate® Flexgrip Elite pens) were offset by sales declines in the European fine writing business and everyday writing business in the United States.

Operating income for the first quarter of 2005 was $33.5 million, an increase of $1.7 million, or 5.3%, from $31.8 million in the first quarter of 2004, as a result of productivity and favorable pricing, partially offset by raw material inflation and increased investment in SG&A.

Tools & Hardware

Net sales for the first quarter of 2005 were $276.4 million, an increase of $2.1 million, or 0.8%, from $274.3 million in the first quarter of 2004, driven by increases in the LENOX and BernzOmatic businesses, partially offset by declines in the Amerock and IRWIN Power Tools Accessories businesses.

Operating income for the first quarter of 2005 was $26.7 million, a decrease of $16.3 million, or 37.9%, from $43.0 million in the first quarter of 2004, driven by restructuring related costs at the Amerock and IRWIN businesses and continued investments in SG&A in the tools business.

Home Fashions

Net sales for the first quarter of 2005 were $198.3 million, a decrease of $28.5 million, or 12.6%, from $226.8 million in the first quarter of 2004, driven by planned product line exits primarily in the Douglas Kane UK business, and core sales declines in the European Home Fashions business, partially offset by favorable foreign currency translation.

Operating (loss) income for the first quarter of 2005 was ($4.5) million, a decrease of $8.4 million, from $3.9 million in the first quarter of 2004. The decrease in operating income was due primarily to lower sales, raw materials inflation and the liquidation of Douglas Kane, partially offset by productivity gains.

Other

Net sales for the first quarter of 2005 were $245.0 million, a decrease of $6.0 million, or 2.4%, from $251.0 million in the first quarter of 2004. The decline is primarily the result of product line exits in the Graco business, partially offset by favorable pricing and foreign currency translation.

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Operating income for the first quarter of 2005 was $13.3 million, a decrease of $2.6 million, or 16.4%, from $15.9 million in the first quarter of 2004, driven primarily by raw material inflation and restructuring related costs in the Graco business, partially offset by favorable pricing and productivity.

Liquidity and Capital Resources

Cash and cash equivalents decreased by $75.8 million and $92.5 million for the three months ended March 31, 2005 and 2004, respectively. The change in cash and cash equivalents is as follows for the three months ended March 31, (in millions):

Sources:

The Company’s primary sources of liquidity and capital resources include cash provided from operations and use of available borrowing facilities.

Cash provided by operating activities for the three months ended March 31, 2005 was $55.5 million compared to a use of $6.7 million for the comparable period of 2004. The increase in cash provided from operating activities was primarily due to improved working capital and lower cash spent for restructuring.

The Company has a $650.0 million five-year Syndicated Revolving Credit Agreement (the “Revolver”) that is scheduled to expire in June 2007. At March 31, 2005, there were no borrowings under the Revolver.

In lieu of borrowings under the Revolver, the Company may issue up to $650.0 million of commercial paper. The Revolver provides the committed backup liquidity required to issue commercial paper. Accordingly, commercial paper may only be issued up to the amount available for borrowing under the Revolver. At March 31, 2005, no commercial paper was outstanding.

The Revolver permits the Company to borrow funds on a variety of interest rate terms. The Revolver requires, among other things, that the Company maintain certain Interest Coverage and Total Indebtedness to Total Capital Ratio, as defined in the agreement. The agreement also limits Subsidiary Indebtedness. As of March 31, 2005, the Company was in compliance with this agreement.

In the first three months of 2005, the Company received proceeds from the issuance of debt of $1.9 million compared to $9.7 million in the year ago period.

In the first three months of 2005, the Company received cash proceeds of $12.9 million related to the sale of businesses and other non-current assets, compared to $16.5 million in the year ago period. See Footnote 2 to the Consolidated Financial Statements (Unaudited) for a discussion of the intended disposal of Curver, expected to be completed in the second quarter.

Uses:

The Company’s primary uses of liquidity and capital resources include acquisitions, payments on notes payable and long-term debt, dividend payments and expenditures for property, plant and equipment.

In the first quarter of 2005, the Company spent $30.3 million associated with an acquisition. The Company did not make any significant acquisitions during 2004, as the priority was the reduction of debt.

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In the first three months of 2005, the Company made payments on notes payable and long-term debt of $31.1 million compared to $17.7 million in the year ago period, including the purchase of 550,000 shares of its Preferred Securities from a holder for $47.375 per share. The Company paid a total of $26.1 million for the purchase of these securities. See Footnote 5 to the Consolidated Financial Statements (Unaudited) for additional information on this transaction.

Cash used for restructuring activities was $10.6 million and $15.7 million in the first three months of 2005 and 2004, respectively. These payments relate primarily to employee termination benefits.

Expenditures for property, plant and equipment were $23.1 million and $36.6 million in the first three months of 2005 and 2004, respectively. The Company is focused on capital spending discipline and expects to spend between $125 and $150 million in 2005.

Aggregate dividends paid were $58.0 million and $57.7 million in the first three months of 2005 and 2004, respectively.

Retained earnings decreased in the first three months of 2005 by $21.4 million. The reduction in retained earnings is due to cash dividends paid on common stock, offset by the current year net income.

Working capital at March 31, 2005 was $1,155.4 million compared to $1,141.1 million at December 31, 2004. The current ratio at March 31, 2005 was 1.71:1 compared to 1.61:1 at December 31, 2004. The increase in working capital is due to the reduction of income taxes payable and other accrued liabilities, primarily as a result of spending on previously announced restructuring plans.

Total debt to total capitalization (total debt is net of cash and cash equivalents, and total capitalization includes total debt and stockholders’ equity) was .56:1 at March 31, 2005 and .55:1 at December 31, 2004.

In May 2005, the Company expects to declare a quarterly cash dividend of $0.21 per share on the Company’s common stock, payable in the second quarter.

The Company believes that cash provided from operations and available borrowing facilities will continue to provide adequate support for the cash needs of existing businesses on a short-term basis; however, certain events, such as significant acquisitions, could require additional external financing on a long-term basis.

Market Risk

The Company’s market risk is impacted by changes in interest rates, foreign currency exchange rates and certain commodity prices. Pursuant to the Company’s policies, natural hedging techniques and derivative financial instruments may be utilized to reduce the impact of adverse changes in market prices. The Company does not hold or issue derivative instruments for trading purposes.

The Company manages interest rate exposure through its conservative debt ratio target and its mix of fixed and floating rate debt. Interest rate swaps may be used to adjust interest rate exposures when appropriate based on market conditions, and, for qualifying hedges, the interest differential of swaps is included in interest expense.

The Company’s foreign exchange risk management policy emphasizes hedging anticipated intercompany and third party commercial transaction exposures of one-year duration or less. The Company focuses on natural hedging techniques of the following form: 1) offsetting or netting of like foreign currency flows, 2) structuring foreign subsidiary balance sheets with appropriate levels of debt to reduce subsidiary net investments and subsidiary cash flows subject to conversion risk, 3) converting excess foreign currency deposits into U.S. dollars or the relevant functional currency and 4) avoidance of risk by denominating contracts in the appropriate functional currency. In addition, the Company utilizes forward contracts and purchased options to hedge commercial and intercompany transactions. Gains and losses related to qualifying hedges of commercial and intercompany transactions are deferred and included in the basis of the underlying transactions. Derivatives used to hedge intercompany loans are marked to market with the corresponding gains or losses included in the Company’s Consolidated Statements of Operations.

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The Company purchases certain raw materials, including resin, steel and aluminum, which are subject to price volatility caused by unpredictable factors. While future movements of raw material costs are uncertain, a variety of programs, including periodic raw material purchases, purchases of raw materials for future delivery and customer price adjustments help the Company address this risk. Generally, the Company does not use derivatives to manage the volatility related to this risk.

The amounts shown below represent the estimated potential economic loss that the Company could incur from adverse changes in either interest rates or foreign exchange rates using the value-at-risk estimation model. The value-at-risk model uses historical foreign exchange rates and interest rates to estimate the volatility and correlation of these rates in future periods. It estimates a loss in fair market value using statistical modeling techniques that are based on a variance/covariance approach and includes substantially all market risk exposures (specifically excluding equity-method investments). The fair value losses shown in the table below have no impact on results of operations or financial condition, but are shown as an illustration of the impact of potential adverse changes in interest rates. The following table indicates the calculated amounts for the three months ended March 31, (in millions, except percentages):

The 95% confidence interval signifies the Company’s degree of confidence that actual losses would not exceed the estimated losses shown above. The amounts shown here disregard the possibility that interest rates and foreign currency exchange rates could move in the Company’s favor. The value-at-risk model assumes that all movements in these rates will be adverse. Actual experience has shown that gains and losses tend to offset each other over time, and it is highly unlikely that the Company could experience losses such as these over an extended period of time. These amounts should not be considered projections of future losses, because actual results may differ significantly depending upon activity in the global financial markets.

Forward Looking Statements

Forward-looking statements in this Report are made in reliance upon the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Such forward-looking statements may relate to, but are not limited to, information or assumptions about sales (including pricing), income/(loss), earnings per share, return on equity, return on invested capital, capital expenditures, working capital, cash flow, dividends, capital structure, debt to capitalization ratios, interest rates, internal growth rates, restructuring, impairment and other charges, potential losses on divestitures, impact of changes in accounting standards, pending legal proceedings and claims (including environmental matters), future economic performance, operating income improvements, costs and cost savings (including raw material inflation, productivity and streamlining), synergies, management’s plans, goals and objectives for future operations and growth or the assumptions relating to any of the forward-looking statements. The Company cautions that forward-looking statements are not guarantees because there are inherent difficulties in predicting future results. Actual results could differ materially from those expressed or implied in the forward-looking statements. Factors that could cause actual results to differ include, but are not limited to, those matters set forth in this Report and Exhibit 99.1 to this Report.

Item 3. Quantitative and Qualitative Disclosures About Market Risk

The information required by this item is incorporated herein by reference to the section entitled “Market Risk” in the Company’s Management’s Discussion and Analysis of Financial Condition and Results of Operations (Part I, Item 2).

Item 4. Controls and Procedures

As of March 31, 2005, an evaluation was performed by the Company’s management, under the supervision and with the participation of the Company’s chief executive officer and chief financial officer, of the effectiveness of the

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Company’s disclosure controls and procedures. Based on that evaluation, the chief executive officer and the chief financial officer concluded that the Company’s disclosure controls and procedures were effective.

There were no changes in the Company’s internal control over financial reporting that occurred during the quarter ended March 31, 2005 that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

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PART II. OTHER INFORMATION

Item 1. Legal Proceedings

Information required under this Item is contained above in Part I. Financial Information, Item 1 and is incorporated herein by reference.

Item 6. Exhibits

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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.

Exhibit 2.1

SALE AND PURCHASE AGREEMENT

by and among

Newell Rubbermaid Inc.

and

Jardin International Holding BV

Dated as of January 12, 2005

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Exhibits

SALE AND PURCHASE AGREEMENT

     SALE AND PURCHASE AGREEMENT (the “Agreement”), dated as of January 12, 2005, by and among Newell Rubbermaid Inc., a corporation organized under the laws of the state of Delaware (“Parent”) and Jardin International Holding BV, a corporation organized under the laws of The Netherlands (the “Purchaser”).

WITNESSETH:

     WHEREAS, certain Subsidiaries of Parent, as listed in Exhibit A (each an “EHP Subsidiary” and collectively the “EHP Subsidiaries”), are engaged in the manufacturing and marketing, in various countries, of plastic products for home storage and garage organization, food storage, laundry, bath, cleaning, closet organization and refuse removal, such manufacturing and marketing activities representing the European operations of the Home Products business line of the Newell Rubbermaid group (the “EHP Business”);

     WHEREAS, Parent is the ultimate parent company of the EHP Subsidiaries;

     WHEREAS, Parent desires to cause certain of its Subsidiaries to sell the EHP Business;

     WHEREAS, Purchaser has indicated its interest to purchase the EHP Business;

     WHEREAS, during the negotiations preceding the present Agreement, Purchaser and its advisors have been given the opportunity to ask questions and obtain certain answers from Parent about the EHP Business, its operations and its financial status and have received access to certain financial information and documents relating to it;

     WHEREAS, the parties have decided to execute this Agreement, acknowledging that this is an arm’s length transaction, considering the risks relating to the financial status of the Transferred Subsidiaries and the level of the Assumed Liabilities;

     WHEREAS, the acquisition of the EHP Business pursuant to this Agreement shall be made through (i) the sale and purchase of the shares of capital stock owned by such Subsidiaries of Parent (the “Transferred Stock”) of the EHP Subsidiaries listed in Exhibit B hereto (each a “Transferred Subsidiary”, and collectively the “Transferred Subsidiaries”), and (ii) the sale and purchase of the Transferred Assets (as defined in Section 1.3) and the assumption of the Assumed Liabilities (as defined in Section 1.5) from the EHP Subsidiaries listed in Exhibit C hereto (each a “Business Seller”, and collectively the “Business Sellers”), such Transferred Assets and Assumed Liabilities to be transferred and assumed as a going concern (fonds de commerce) all on the terms, subject to the conditions and for the consideration set forth in this Agreement.

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     WHEREAS, each of Parent and the Purchaser acknowledges that none of the transactions contemplated by this agreement shall become effective or irreversible until and unless the proposed sale of the Transferred Stock and the Transferred Assets and the assumption of the Assumed Liabilities as a going concern (including liabilities relating to the Business Transferred Employees, as defined in Section 11.18) shall have been notified to the appropriate workers’ councils or similar employees’ representatives, to the extent and in the manner required under applicable laws, all information and consultation processes with such councils or employees’ representatives shall have been duly completed and all necessary opinions of such councils or representatives shall have been received by the Transferred Subsidiaries, Business Sellers and Stock Sellers (as defined in Section 1.2) concerned, and each such Transferred Subsidiary, Business Seller and Stock Seller shall have given due consideration to such opinions in the context of the proposed sale of the Transferred Stock and the Transferred Assets.

     NOW, THEREFORE, in consideration of the premises and the mutual representations, warranties, covenants, agreements and conditions herein contained, the parties hereto agree as follows:

ARTICLE I

SALE AND PURCHASE OF THE ASSETS; ASSUMPTION OF LIABILITIES

Section 1.1 Sale and Purchase of EHP Business

     On the terms and subject to the conditions stated herein, Parent agrees to sell, transfer and deliver to the Purchaser at the Closing (as such term is defined in Section 8.5), and the Purchaser agrees to purchase from Parent at the Closing, the EHP Business, along with substantially all its components which are necessary to operate the EHP Business as further described in this Agreement (including, without limitation, the four real estate properties located in Poland, Luxembourg, Spain and Hungary, around 2,500 molds capable of manufacturing, inter alia, the active Home Products which appear in the EHP commercial catalogs for 2004 and in the stock keeping units item file attached hereto as Schedule 1.1(A), approximately 160 machines (and secondary equipment) capable of producing 170,000 lock power and the equipment located within the automated warehouse, as well as assets listed in Schedule 1.1(B), and except as provided under this Agreement or the Transition Services Agreements (as defined in Section 6.11) and without prejudice to the parties’ rights thereunder.

     The transfer of the EHP Business will be made by way of the transfer of the Transferred Stock and the Transferred Assets.

Section 1.2 Sale and Purchase of the Transferred Stock

     On the terms and subject to the conditions stated herein (including the covenant relating to Secondary Transfers as set forth in Section 6.2(a) of this Agreement), Parent agrees to cause each of its Subsidiaries listed in Exhibit B-I hereto

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(each a “Stock Seller”, and collectively the “Stock Sellers”) to sell, transfer and deliver to the Purchaser at the Closing, and the Purchaser agrees to purchase from the Stock Sellers at the Closing, all shares of Transferred Stock owned by such Stock Sellers.

Section 1.3 Sale and Purchase of the Transferred Assets

     On the terms and subject to the conditions stated herein, Parent agrees to cause the Business Sellers to sell, transfer, convey, assign and deliver to the Purchaser at the Closing, and the Purchaser agrees to purchase from the Business Sellers at the Closing, all of the Business Sellers’ rights and interests in and title to (x) the Assets set forth in Schedule 1.3 hereto and (y) the other Assets primarily relating to or used primarily in the conduct of the EHP Business as the same may exist on the Closing Date (as defined in Section 8.5) (collectively, the “Transferred Assets”), including without limitation and with respect to each respective Business Seller all those items in the following categories to the extent that such Assets conform to the definition of the term “Transferred Assets”:

     (a) All rights of such Business Seller (to the extent not performed on or prior to the Closing Date) under all contracts, leases (including financial lease agreements), understandings, and commitments existing as of the date hereof or which may be entered into by such Business Seller after the date hereof and on or prior to the Closing Date in compliance with Section 6.1 to the extent these agreements are primarily used in the conduct of the EHP Business (each a “Transferred Contract” and collectively the “Transferred Contracts”);

     (b) Title of such Business Seller to all Owned Real Property (as defined in Section 4.8(b)) and all rights and interests of such Business Seller in any Leased Real Property (as defined in Section 4.8(c));

     (c) Subject to compliance with Section 6.12, all inventories of the EHP Business including, without limitation, all finished products which are immediately saleable or ready to be sold and are on hand at the Business Sellers’ plants, in transit, or in such Business Seller’s distribution system, wherever located on the Closing Date, and raw materials, packaging materials and works in process, wherever located on the Closing Date, together with each Business Seller’s right and interest in and title to the spare parts, replacement and component parts, supplies and promotional materials, and any products under development;

     (d) The client base in connection with the EHP Business, together with the right of the Purchaser to represent itself as carrying on the EHP Business as the successor of the Business Seller;

     (e) All customer lists, supplier lists, and other books and records in the possession (or under the control) of the Business Seller (or, to the extent that (i) such books and records are Excluded Assets under Section 1.4(d) and (ii) such books and records include data that concern the EHP Business but any such data is commingled with the data of the Business Seller that does not concern the EHP Business, copies or

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extracts of the relevant portions of all such data that are necessary for the Purchaser to operate the EHP Business as currently conducted as determined by an independent accounting firm jointly designated by Parent and the Purchaser, in accordance with Section 6.2 below) (the “Transferred Books and Records”);

     (f) The rights and interests in the Intellectual Property (as defined in Section 4.11(a)) and all intellectual property (including author’s rights) rights related thereto, whether registered, unregistered or subject to an application or registration as well as any IT licenses for a number of users consistent with the 2004 practice;

     (g) The Business Transferred Employees in compliance with Section 6.5;

     (h) All machinery, material handling equipment and molds, office equipment, furniture and furnishings, vehicles, tools and all other moveable tangible property, wherever located, including any office equipment exclusively assigned to the Business Transferred Employees (including laptop computers, cell phones and related equipment), telephone lines and numbers (whenever possible), and the benefit of services provided for such equipment under the terms of servicing and maintenance contracts with service providers;

     (i) The benefit (insofar as such benefit may lawfully be transferred to or held in trust for the Purchaser and otherwise in accordance with Section 6.13(e) hereof) of all rights and claims of the Business Seller arising at any time out of or in connection with the Transferred Assets or the Assumed Liabilities whether arising from any warranties, conditions, guarantees, indemnities, contracts, agreements or, otherwise, in each case whether express or implied (the “Transferred Claims”);

     (j) The benefit (insofar as such benefit may lawfully be transferred to or held in trust for the Purchaser and otherwise in accordance with Section 6.13(e) hereof) of the Accounts Receivable of the Business Seller, whether or not yet due or payable, outstanding and unpaid on the Closing Date, excluding any Tax refunds reflected on the books of the Business Sellers as of the Closing Date other than any such Tax refunds related to VAT or local Taxes for which, in each case, the Purchaser is responsible pursuant to Article VII;

     (k) The benefit (insofar as such benefit may lawfully be transferred) of licenses, permits, franchises, certificates and approvals issued by any Governmental Authority to the Business Seller (the “Transferred Permits”); and

     (l) Any and all other Assets owned by the Business Seller on the Closing Date (other than Excluded Assets).

Section 1.4 Excluded Assets

     The Business Sellers will retain and not transfer, and the Purchaser will not purchase or acquire, the following Assets (collectively, the “Excluded Assets”):

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     (a) Any of the Assets of the Business Sellers which do not primarily relate to and are not used primarily in the conduct of the EHP Business, including the distribution agreement entered into with GEODIS;

     (b) The “Newell”, “Rubbermaid” and “Take Along” terms, trademarks and brands and all intellectual property rights related thereto, whether registered, unregistered or subject to an application for registration;

     (c) All insurance policies except as otherwise expressly provided in this Agreement, including as set forth in Section 6.14;

     (d) Without prejudice to Section 1.3 (e), the following books and records: any books and records that a Business Seller is required by law to retain, any tax reports and returns, the Business Seller’s corporate minute books, any other books and records relating to internal corporate matters, and any other books and records relating to financial relationships with the Business Seller’s lenders or affiliates;

     (e) Any claims, rights and interest in and to any refunds of any Taxes for which Parent is responsible under Article VII hereof;

     (f) All employees of any Business Seller not included in the Business Transferred Employees and any office equipment exclusively assigned to such employees of the Business Seller (including laptop computers, cell phones and related equipment) and the benefit of services provided for such equipment under the terms of servicing and maintenance contracts with service providers; and

     (g) All shared services provided to any Business Seller by Parent or any Affiliate of Parent that is not an EHP Subsidiary, except any services to be furnished pursuant to Section 6.11 hereto or as otherwise expressly provided herein.

Section 1.5 Assumption of the Assumed Liabilities

     At the Closing, Purchaser shall assume, duly and punctually pay, satisfy, discharge, perform or fulfill, in accordance with the respective terms thereof, all of the following Liabilities of each Business Seller (collectively, the “Assumed Liabilities”) to the exclusion of any and all Liabilities held by the Business Seller and not specifically listed below in this Section:

     (a) any and all accounts payable and other Liabilities relating primarily to the EHP Business or the Transferred Assets, including the Transferred Contracts, that exist as of the Closing Date, except, in each case, for (A) Liabilities for Taxes to be paid by any Business Seller under Section 7.1, (B) Liabilities in respect of Employees or Plans (as defined in Section 4.14) except to the extent specifically assumed by the Purchaser pursuant to Section 6.5, and (C) Liabilities in connection with the dispute between Curver SAS and Mr. Bornet as further described in Schedule 4.11(c) ;

     (b) Without prejudice to Section 6.14, any product warranty or liability claims by third-parties arising after the Closing from EHP Business products sold on

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or prior to the Closing Date (which shall specifically exclude any liabilities arising from the sale of non-EHP Business products); and

     (c) Any rebates payable on or after the Closing Date under any distribution or sales contract exclusively related to the conduct of the EHP Business which has been entered into by any Business Seller prior to the Closing Date (the “Rebates”).

     (d) any inter-company indebtedness within the EHP Business that (i) is related to the EHP Business, (ii) is recorded as a payable on the books of the Business Seller and (iii) for which a corresponding receivable is recorded as of the Closing Date on the books of any of the Transferred Subsidiaries or any Business Seller, but only to the extent such receivable is transferred to the Purchaser as part of the Transferred Assets or as part of the Assets of any Transferred Subsidiary.

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ARTICLE II

PURCHASE PRICE

Section 2.1 Components of Purchase Price

     (a) The aggregate consideration for the EHP Business as a whole that the Purchaser will pay to Parent (for subsequent distribution to the Stock Sellers and the Business Sellers under the sole responsibility of Parent) for the sale, transfer and delivery of the Transferred Stock and the Transferred Assets and the assumption of the Assumed Liabilities shall be comprised of:

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the molds included in the Transferred Assets (such molds being referred to as the “Transferred Molds”).

     The Initial Purchase Price is exclusive of any VAT and any transfer taxes in respect of which the provisions of Sections 11.3(b) and (c) shall apply. The Initial Purchase Price shall be paid by the Purchaser to Parent acting for itself and on behalf of the Stock Sellers and the Business Sellers, subject to any additional legal requirements contained in any relevant Local Agreement relating to any direct payments required thereunder or as otherwise agreed by the Purchaser and Parent. The Additional IP and Molds Price, if any, shall be paid by the Purchaser to Parent pursuant to Section 3.2 below.

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ARTICLE III

INITIAL PURCHASE PRICE ADJUSTMENT; IP AND MOLDS ADDITIONAL PRICE

Section 3.1 Initial Purchase Price Adjustment

     (a) As promptly as practicable, but no later than 60 days following the Closing Date, Parent will prepare and deliver or cause to be prepared and delivered to the Purchaser, a statement (the “Financial Certificate”), that sets forth (i) the aggregate amount of Cash of the EHP Business as of the Closing Date (the “Closing Date Cash Position”), (ii) the aggregate amount of the Financial Debt, if any, of the EHP Business as of the Closing Date (the “Closing Date Financial Debt”) and (iii) the Net Working Capital of the EHP Business, giving effect to the Secondary Transfers (as defined in Section 6.2(a)), as of the Closing Date (the “Closing Net Working Capital”). The Closing Date Cash Position and the Closing Date Financial Debt shall be prepared and the Closing Date Net Working Capital shall be determined in accordance with the accounting principles specified in Schedule 3.1(a) hereto (the “Agreed Accounting Principles”), which reflect the principles used in the preparation of the Net Working Capital Position (all as defined in Section 4.6) applied on a consistent basis throughout the periods specified in Section 4.6. The Closing Net Working Capital shall take into account the physical inventory performed in accordance with Section 6.3(c).

     For purposes of this Section 3.1(a), the Purchaser shall cause all the Transferred Subsidiaries and their respective employees to, and shall, (i) assist Parent, the Business Sellers and the Stock Sellers in the preparation of the Financial Certificate and (ii) provide Parent, the Business Sellers and the Stock Sellers and its accountants and advisors reasonable access during normal business hours to such personnel, books and records as may be necessary for the preparation of the Financial Certificate, until the delivery of the Financial Certificate.

     (b) Following receipt of the Financial Certificate, the Purchaser shall have 30 days from the date of such receipt (the “Review Period”) to review such document. In connection with such review, Parent shall grant the Purchaser reasonable access to its records relating to the EHP Business, to the extent retained by Parent or any Business Seller or Stock Seller. If the Purchaser in good faith disagrees with any item or amount shown or reflected in the Financial Certificate, the Purchaser may, on or prior to the last day of the Review Period, deliver a notice to Parent setting forth, in reasonable detail, each disputed item or amount and the basis for the Purchaser’s disagreement therewith, together with supporting calculations (the “Dispute Notice”). If no Dispute Notice is received by Parent on or prior to the last day of the Review Period, the Financial Certificate shall be deemed accepted by the Purchaser.

     (c) If Parent and the Purchaser shall not have resolved all of the issues set forth in the Dispute Notice within 30 days after Parent’s receipt of the Dispute Notice,

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not later than five days thereafter Parent and the Purchaser shall jointly contact, first, the Paris office of Mazard & Guérard, and if such firm is not able to provide the services required hereunder, then Groupe Constantin, and if such firm is not able to provide the services required hereunder, an accounting firm experienced in international transactions as designated by the President of the Paris Commercial Court, acting en référé at the initiative of either Parent of the Purchaser. The independent accounting firm retained by Parent and the Purchaser pursuant to the preceding sentence (the “Accountant”) shall act as an arbitrator (as contemplated by article 1592 of the French Civil Code) to determine, based solely on the written submissions of the Purchaser and Parent, and not by way of an independent review, only those items still in dispute, which items shall be submitted to the Accountant by Parent and the Purchaser within 10 days of the Accountant being retained.

     (d) The Accountant’s determination with respect to each of the disputed items specified in the Dispute Notice shall be made within 30 days of the submission of the items remaining in dispute under the Dispute Notice, and shall be set forth in a report (the “Adjustment Report”), with the revisions, if any, to be made to the Financial Certificate, Closing Date Cash Position, Closing Date Financial Debt, or the Closing Net Working Capital, together with supporting calculations. The fees and expenses of Accountant shall be borne by (i) the Purchaser if application of the provisions of this Section 3.1(d) results in no net adjustment being made or a net adjustment being made in favor of Parent and (ii) by Parent if application of the provisions of this Section 3.1(d) results in a net adjustment being made in favor of the Purchaser. The Adjustment Report shall be final and binding upon Parent and the Purchaser.

     (e) The Initial Purchase Price shall be (i) increased on a dollar-for-dollar basis by the Adjusted Closing Date Cash Position and (ii) decreased on a dollar-for-dollar basis by (A) the Adjusted Closing Date Financial Debt and (B) the amount by which the Adjusted Closing Net Working Capital is less than €34 million (the net amount of such decreases, being the “Adjustment”). The term “Adjusted Closing Date Cash Position” shall mean the Closing Date Cash Position that is set forth in the Adjusted Financial Certificate (as defined below). The term “Adjusted Closing Date Financial Debt” shall mean the Closing Date Financial Debt that is set forth in the Adjusted Financial Certificate. The term “Adjusted Closing Net Working Capital” shall mean the Net Working Capital of the EHP Business the amount of which is set forth on the Adjusted Financial Certificate. The term “Adjusted Financial Certificate” shall mean the definitive Financial Certificate agreed or deemed to have been agreed to by Parent and the Purchaser in accordance with Section 3.1(b) or the definitive Financial Certificate resulting from the determinations made by the Accountant in accordance with Section 3.1(d) (in addition to those items, if any, theretofore agreed to by Parent and the Purchaser).

     (f) Following the delivery of the Adjusted Financial Certificate, if the Adjustment is less than or equal to US$5 million, the amount of the Adjustment, together with interest on the amount of such Adjustment at the rate equal to the three-month Euribor rate (as published by the European Banking Federation on the Closing Date) during the period lasting from the Closing Date until the date of delivery of the

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Adjusted Financial Certificate, shall be applied and set-off against the amount of the Note, which shall be reduced by the amount of such Adjustment without further action by either Parent or the Purchaser.

     If the amount of the Adjustment is greater than US$5 million, the excess above US$5 million shall be applied as follows: (i) up to the first US$2 million (A) one half shall be applied and offset against the first payments due from Purchaser to Parent under Section 3.2 hereof (provided that Parent’s obligation in respect of this one-half portion of the Adjustment shall be limited to the aggregate amount of the Purchaser’s payment obligations arising under Section 3.2) and (B) one half shall be paid by Parent to the Purchaser no more than 30 days after the delivery of the Adjusted Financial Certificate (or after the date on which the Financial Certificate shall be deemed to constitute the Adjusted Financial Certificate); and (ii) any amounts beyond US$2 million shall be paid by Parent to the Purchaser no more than 30 days after the delivery of the Adjusted Financial Certificate (or after the date on which the Financial Certificate shall be deemed to constitute the Adjusted Financial Certificate);

     Any payment under this Section 3.1(f) shall be made by wire transfer of immediately available funds to the account of the Purchaser, such account having been designated in writing at least two Business Days prior to the date on which such payment is scheduled to be made.

     (g) All amounts used or calculated in this Section 3.1 and denominated in currency other than US dollars shall first be determined in such other currency and then translated into US dollars using the prevailing spot rate of exchange on the Closing Date as published by Bloomberg on the Business Day immediately following the Closing Date.

     All payments to be made under this Agreement, unless otherwise specified, shall be made in US dollars.

Section 3.2 Additional IP and Molds Price

     (a) Parent (for subsequent distribution to Rubbermaid BV under the sole responsibility of Parent) shall be entitled to the payment of Additional IP and Molds Price based on the provisions of this Section 3.2, as additional consideration for the Intellectual Property and the Transferred Molds.

     (b) The Additional IP and Molds Price shall be calculated based on the cumulative Adjusted EBIT for the five fiscal years ending December 31, 2005 through December 31, 2009, inclusive (the “Earn Out Period”), it being agreed that (A) the first fiscal year will include only the period from the Closing Date to December 31, 2005, (B) the Adjusted EBIT shall include (i) an adjustment equal to 5% of the combined net sales of the EHP Business to approximate corporate charge expenses, which amount shall be added to the selling, general and administrative expenses incurred by the EHP Business, provided that the Purchaser shall provide a list of items included in such 5% adjustment and shall deliver a certificate stating that such expenses have not already been included in the profit and loss statement of the

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EHP Business and (ii) the profits generated by any of the Purchaser’s Subsidiaries or Affiliates from the use of any Assets of the Transferred Subsidiaries or Transferred Assets, to the extent that such Assets or any right attached thereto have been transferred, leased or licensed, or otherwise made available to such Purchaser’s Subsidiary or Affiliates, at any time during the Earn Out Period, and (C) the aggregate amount to be paid to Parent in connection with such Additional IP and Molds Price shall be capped at US$25 million. The Additional IP and Molds Price payable by the Purchaser to Parent shall amount for each relevant fiscal year to the total of 50% of the cumulative Adjusted EBIT (as determined in accordance with Section 3.2(e) below) generated by the EHP Business from the Closing Date through the end of such fiscal year less amounts previously paid pursuant to this Section 3.2. Payments of the Additional IP and Molds Price that may become due for any relevant fiscal year shall be made not later than three months after the end of such fiscal year (subject to any potential dispute regarding any item of the EHP Business Financial Statements in accordance with Section 3.2(e) below).

     (c) For purposes of this Section 3.2, the Adjusted EBIT for each fiscal year during the Earn Out Period shall be determined on the basis of the audited consolidated financial statements for the EHP Business for the relevant fiscal year (collectively the “EHP Business Financial Statements”), including the consolidated balance sheet of the EHP Business for each such fiscal year and the related consolidated profit and loss statement of the EHP Business for each such fiscal year and all annexes and notes thereto.

     The EHP Business Financial Statements shall be based on IFRS and shall be prepared in accordance with accounting principles to be negotiated in good faith and agreed upon by Parent and the Purchaser no later than June 30, 2005.

     (d) As soon as practicable after the end of each relevant fiscal year, but (A) in no event later than March 31 of the following year, the Purchaser shall prepare and deliver the unaudited financial statements for the EHP Business (the “EHP Unaudited Financial Statements”) for such fiscal year to Parent and (B) in no event later than September 30 of the following year, the Purchaser shall prepare and deliver the EHP Business Financial Statements for such fiscal year to Parent. The Purchaser shall deliver the EHP Unaudited Financial Statements and EHP Business Financial Statements for the respective entities as each is finalized. Simultaneously with the delivery of the last EHP Business Financial Statements to Parent, the Purchaser will deliver to Parent a report from its statutory auditors indicating the amount of the Adjusted EBIT generated by the EHP Business for the fiscal year covered by such EHP Business Financial Statements and the cumulative Adjusted EBIT since the beginning of the Earn Out Period (the “Adjusted EBIT Report”). The said statutory auditors shall prepare its report in accordance with this Agreement. For the purposes of this Section 3.2, in each fiscal year during the Earn Out Period, the Purchaser shall provide, and shall cause all of the Transferred Subsidiaries and their respective employees to, provide to the respective accountants and advisors appointed by Parent, the Business Sellers and the Stock Sellers (subject to confidentiality agreements to be signed by these accountants and advisors) reasonable access during normal business hours to the books, records and the financial officers of the entities conducting the

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EHP Business, beginning upon Parent’s receipt of the EHP Unaudited Financial Statements for each such entity and until, for each relevant fiscal year, the earlier of (i) the date that the Purchaser and Parent reach agreement on the EHP Unaudited Financial Statements or EHP Business Financial Statements and the Adjusted EBIT Report, as the case may be, for such fiscal year or (ii) the end of the 30-day period referred to in Section 3.2(e).

     (e) In the event that Parent in good faith disagrees with any item in the EHP Business Financial Statements or the Adjusted EBIT Report, Parent shall, within 30 days of the delivery of all EHP Business Financial Statements or the Adjusted EBIT Report, whichever is later, deliver a written notice of such disagreement to the Purchaser, specifying in reasonable detail the amount by which and the reasons why Parent believes particular line items in such EHP Business Financial Statements contain errors or were not prepared in accordance with the accounting principles applied as set forth in Section 3.2(a) and setting forth Parent’s proposed adjustments.

     Thereafter, the Purchaser and Parent shall resolve such disagreement in the manner set forth in Sections 3.1(c) and (d), except that the fees and expenses of the Accountant shall be borne by Parent if application of the provisions of this Section 3.2(e) results in no net adjustment being made and by the Purchaser if application of the provisions of this Section 3.2(e) results in a net adjustment being made in favor of Parent.

     (f) Any payment that may become due from the Purchaser to Parent (on behalf of the Stock Sellers and the Business Sellers) under this Section 3.2 shall be made on (i) the date that is 30 days after the date on which all EHP Unaudited Financial Statements have been delivered to Parent if Parent notifies the Purchaser in writing that it has no disagreement with such EHP Unaudited Financial Statements or (ii) if Parent does not deliver such notice, the earlier of (A) the date that is 30 days after the date on which all EHP Business Financial Statements and the Adjusted EBIT Report have been delivered to Parent if no notice of disagreement is delivered pursuant to Section 3.2(e), (B) the date that is 10 days after the date that the Purchaser and Parent reach agreement on the EHP Business Financial Statements and the Adjusted EBIT Report pursuant to Section 3.2(e), or (C) the date that is 10 days after the date of delivery of the report of the Accountant to Parent and the Purchaser.

     Notwithstanding the foregoing, in the event any payment is made pursuant to clause (i) above, if there is a discrepancy between the EHP Unaudited Financial Statements and the EHP Business Financial Statements that results in different payment being due to Parent, the difference will be paid by one party to the other within 10 days of the earliest to occur of the events specified in clause (ii) above.

     (g) Any payment under this Section 3.2 shall be made by wire transfer of immediately available funds to the account of Parent, such account having been designated by Parent in writing at least two Business Days prior to the date on which such payment is scheduled to be made. All amounts used or calculated in this Section 3.2 and denominated in currency other than US dollars shall first be determined in such other currency and then translated into US dollars using the prevailing spot rate

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of exchange in effect on the day which is three Business Days before the date of each relevant wire transfer, as published by Bloomberg on the immediately following Business Day.

     (h) From the Closing Date until the payment in full of the Additional IP and Molds Price, the Purchaser will maintain a set of financial records for the EHP Business separate and distinct from the Purchaser and the Purchaser’s other activities (unless the Purchaser operates only the EHP Business).

     (i) No Affiliate of Purchaser that is acquiring Transferred Assets and/or assuming Assumed Liabilities shall have on the Closing Date any operational activity or material Assets or Liabilities (the “Purchaser EHP Entities”) other than those acquired pursuant to this Agreement. Should the Purchaser desire to undertake any reorganization as a result of which (A) any material operational activity, material Asset or liability of any of the Purchaser EHP Entities is transferred to any Affiliate of Purchaser other than those reflected in the EHP Business Financial Statements or any third parties, (B) any Purchaser EHP Entity engages in any material operational activity or acquires material Assets or assumes Liabilities other than those relating primarily to the conduct of the EHP Business, it shall give Parent prompt notice thereof. In the event that such reorganization would potentially have a negative impact on the Adjusted EBIT, Parent and the Purchaser shall meet to discuss in good faith appropriate adjustments to the Purchaser’s obligations under this Section 3.2.

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ARTICLE IV

REPRESENTATIONS AND WARRANTIES OF THE SELLERS

     Unless the context otherwise requires, specific references in this Article IV to the Business Sellers or to a Business Seller shall be deemed to refer to each or such Business Seller only in connection with the conduct of each or such Business Seller’s portion of the EHP Business and only with respect to its Transferred Assets and/or Assumed Liabilities, and not to any unrelated business, activity, Asset or Liability of such Business Seller.

     As of the date hereof and as of the Closing Date, Parent hereby represents and warrants, for its own account and on behalf of each of the Stock Sellers and the Business Sellers, as the case may be, to the Purchaser as follows:

Section 4.1 Authorization, Validity and Execution of the Agreement

     Parent has the requisite corporate power and authority to execute and deliver this Agreement and all Ancillary Documents, to perform its obligations hereunder and thereunder and to consummate or cause the Stock Sellers and the Business Sellers to consummate the transactions to be consummated by Parent or each such Stock Seller or Business Seller as contemplated hereunder and thereunder. Each Stock Seller and Business Seller has (or will have on the Closing Date) the requisite corporate power and authority to execute and deliver the Ancillary Documents and any other document to which it may be party in consummating the transactions to be consummated by such Stock Seller or Business Seller hereunder and to perform its obligations under this Agreement and under the applicable Ancillary Documents.

     The execution, delivery and performance of this Agreement and all Ancillary Documents by Parent, the Stock Sellers and the Business Sellers, and the consummation of the transactions contemplated hereby and thereby by Parent, the Stock Sellers and the Business Sellers, have been or as of the Closing Date shall have been duly authorized and approved by the respective boards of management, supervisory boards, boards of directors or other managing bodies of Parent, the Stock Sellers and the Business Sellers, and, as of the Closing Date, no other corporate or stockholder action on the part of Parent or its stockholders shall be necessary to authorize the execution, delivery and performance of this Agreement and all Ancillary Documents by Parent and the consummation of the transactions contemplated hereby and thereby by Parent.

     This Agreement and all Ancillary Documents executed or to be executed by Parent will, when duly executed, and assuming the due execution of such agreement by the other parties thereto, constitute valid and binding obligations of Parent (or, with respect to obligations assumed under this Agreement or any Ancillary Document on behalf of the Business Sellers and the Stock Sellers, of such Business Sellers and such Stock Sellers), enforceable against Parent or, as the case may be, against such Stock Sellers or Business Sellers in accordance with their terms, except to the extent that

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