AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON SEPTEMBER 30, 1996
REGISTRATION NO. 333-07429
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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AMENDMENT NO. 2
TO
FORM S-4
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
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REMINGTON PRODUCTS COMPANY, L.L.C.
(Exact name of registrant as specified in its charter)
<TABLE>
<S> <C> <C>
DELAWARE 3634 06-1451076
(State or other jurisdiction of (Primary Standard Industrial (I.R.S. Employer
incorporation or organization) Classification Code Number) Identification No.)
</TABLE>
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REMINGTON CAPITAL CORP.
(Exact name of registrant as specified in its charter)
<TABLE>
<S> <C> <C>
DELAWARE 3634 06-1451079
(State or other jurisdiction of (Primary Standard Industrial (I.R.S. Employer
incorporation or organization) Classification Code Number) Identification No.)
</TABLE>
60 MAIN STREET
BRIDGEPORT, CONNECTICUT 06604
TELEPHONE: (203) 367-4400
(Address, including zip code, and telephone number, including
area code, of registrants' principal executive offices)
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ALLEN S. LIPSON
60 MAIN STREET
BRIDGEPORT, CONNECTICUT 06604
TELEPHONE: (203) 367-4400
(Name, address, including zip code, and telephone number,
including area code, of agent for service)
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COPY TO:
CHARLES B. FROMM
KIRKLAND & ELLIS
153 EAST 53RD STREET
NEW YORK, NEW YORK 10022-4675
TELEPHONE: (212) 446-4844
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APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after this Registration Statement becomes effective.
If the securities being registered on this form are being offered in
connection with the formation of a holding company and there is compliance with
General Instruction G, check the following box. / /
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THE REGISTRANTS HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANTS
SHALL FILE A FURTHER AMENDMENT THAT SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.
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<PAGE>
CROSS REFERENCE SHEET
PURSUANT TO ITEM 501(B) OF REGULATION S-K
SHOWING LOCATION IN PROSPECTUS OF INFORMATION
REQUIRED BY ITEMS OF PART I OF FORM S-4
<TABLE><CAPTION>
REGISTRATION STATEMENT
ITEM NUMBER AND CAPTION CAPTION OR LOCATION IN PROSPECTUS
------------------------------------------ ------------------------------------------
<C> <S> <C>
1. Forepart of Registration Statement and
Outside Front Cover Page of Prospectus.... Outside Front Cover Page
2. Inside Front and Outside Back Cover Pages
of Prospectus............................. Inside Front Cover Page; Outside Back
Cover Page
3. Risk Factors, Ratio of Earnings to Fixed
Charges and Other Information............. Prospectus Summary; The Company; Selected
Historical Financial Data; Unaudited Pro
Forma Consolidated Financial Information
4. Terms of the Transaction.................. Outside Front Cover Page; Prospectus
Summary; Description of New Notes; The
Exchange Offer; Certain Federal Income Tax
Consequences
5. Pro Forma Financial Information........... Unaudited Pro Forma Consolidated Financial
Information
6. Material Contracts with the Company Being
Acquired.................................. Inapplicable
7. Additional Information Required........... Inapplicable
8. Interests of Named Experts and Counsel.... Legal Matters; Experts
9. Disclosure of Commission Position on
Indemnification for Securities Act
Liabilities............................... Inapplicable
10. Information with Respect to S-3
Registrants............................... Inapplicable
11. Incorporation of Certain Information by
Reference................................. Inapplicable
12. Information with Respect to S-3 or S-2
Registrants............................... Inapplicable
13. Incorporation of Certain Information by
Reference................................. Inapplicable
14. Information with Respect to Registrants
other than S-3 or S-2 Registrants......... Outside Front Cover Page; Prospectus
Summary; Risk Factors; The Transactions;
Use of Proceeds; Capitalization; Selected
Historical Financial Data; Unaudited Pro
Forma Consolidated Financial Information;
Management's Discussion and Analysis of
Financial Condition and Results of
Operations; Business; Management; Security
Ownership of Certain Beneficial Owners and
Management; Certain Transactions; Limited
Liability Company Agreement; Description
of Senior Credit Agreement
15. Information with Respect to S-3
Companies................................. Inapplicable
16. Information with Respect to S-3 or S-2
Companies................................. Inapplicable
17. Information with Respect to Companies
Other than S-3 or S-2 Companies........... Inapplicable
</TABLE>
<PAGE>
<TABLE><CAPTION>
REGISTRATION STATEMENT
ITEM NUMBER AND CAPTION CAPTION OR LOCATION IN PROSPECTUS
------------------------------------------ ------------------------------------------
<C> <S> <C>
18. Information if Proxies, Consents or
Authorizations are to be Solicited........ Inapplicable
19. Information if Proxies, Consents or
Authorizations are not to be Solicited or
in an Exchange Offer...................... Management; Security Ownership of Certain
Beneficial Owners and Management; Certain
Transactions
</TABLE>
<PAGE>
SUBJECT TO COMPLETION, DATED SEPTEMBER 30, 1996
PROSPECTUS
, 1996
[LOGO]
REMINGTON PRODUCTS COMPANY, L.L.C.
REMINGTON CAPITAL CORP.
OFFER TO EXCHANGE THEIR 11% SERIES B SENIOR SUBORDINATED NOTES DUE 2006
FOR ANY AND ALL OF ITS OUTSTANDING 11% SENIOR SUBORDINATED NOTES DUE 2006
THE EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M., NEW YORK CITY TIME, ON
, 1996, UNLESS EXTENDED.
Remington Products Company, L.L.C., a Delaware limited liability company
("Remington" or the "Company") and Remington Capital Corp., a Delaware
corporation ("Capital" and, together with Remington, the "Issuers"), hereby
offer (the "Exchange Offer"), upon the terms and conditions set forth in this
Prospectus (the "Prospectus") and the accompanying Letter of Transmittal (the
"Letter of Transmittal"), to exchange $1,000 principal amount of its 11% Senior
Subordinated Notes due 2006, Series B (the "New Notes"), registered under the
Securities Act of 1933, as amended (the "Securities Act"), pursuant to a
Registration Statement of which this prospectus is a part, for each $1,000
principal amount of its outstanding 11% Senior Subordinated Notes due 2006 (the
"Old Notes"), of which $130,000,000 principal amount is outstanding. The form
and terms of the New Notes are the same as the form and term of the Old Notes
(which they replace) except that the New Notes will bear a Series B designation
and will have been registered under the Securities Act and, therefore, will not
bear legends restricting their transfer and will not contain certain provisions
relating to an increase in the interest rate which were included in the terms of
the Old Notes in certain circumstances relating to the timing of the Exchange
Offer. The Old Notes and the New Notes are sometimes referred to herein
collectively as the "Notes." The New Notes will evidence the same debt as the
Old Notes (which they replace) and will be issued under and be entitled to the
benefits of the Indenture dated as of May 23, 1996 (the "Indenture") between the
Issuers, and The Bank of New York, as trustee, governing the Notes. See "The
Exchange Offer" and "Description of New Notes."
The Issuers do not have any current plans to issue any significant
indebtedness to which the New Notes would rank senior or pari passu in right of
payment.
The Issuers will be jointly and severally liable for all payments due under
the New Notes. The New Notes will mature on May 15, 2006. Interest on the New
Notes will accrue at the a rate of 11% per annum and will be payable
semi-annually in arrears on May 15 and November 15 of each year, commencing
November 15, 1996.
The New Notes will be redeemable at the option of the Issuers, in whole or
in part, at any time on or after May 15, 2001, at the redemption prices set
forth herein, plus accrued and unpaid interest and Liquidated Damages, if any,
to the redemption date. In addition, on or prior to May 15, 1999, the Issuers
may redeem up to 35% in aggregate principal amount of the Notes at a redemption
price of 111% of the principal amount thereof, plus accrued and unpaid interest
and Liquidated Damages, if any, thereon to the redemption date, with the net
proceeds of one or more public offerings of Capital Stock (as defined) (other
than Disqualified Stock (as defined)) of the Company; provided that at least
$84.5 million in aggregate principal amount of Notes remains outstanding
immediately after each such redemption. The New Notes will not be subject to any
sinking fund requirement. Upon the occurrence of a Change of Control (as
defined), the Issuers will be required to make an offer to repurchase all or any
part (equal to $1,000 or an integral multiple thereof) of each holder's New
Notes at an offer price in cash equal to 101% of the aggregate principal amount
thereof plus accrued and unpaid interest and Liquidated Damages, if any, thereon
to the date of repurchase. There can be no assurance that the Issuers will have
the financial resources to repurchase the New Notes in the event of a Change of
Control. See "Description of New Notes."
The New Notes will be general unsecured obligations of the Issuers,
subordinated in right of payment to all existing and future Senior Debt (as
defined) of the Issuers, including all borrowings of the Company under the
Senior Credit Agreement (as defined). The New Notes are not currently guaranteed
but will be guaranteed on a senior subordinated basis by all newly acquired or
created U.S. Subsidiaries, if any, of the Issuers. Such guarantee shall be a
continuing, absolute, unconditional and joint and several guarantee of payment.
The New Notes will be effectively subordinated to indebtedness of the Company's
subsidiaries (other than Capital and Subsidiaries (as defined), if any,
guaranteeing the New Notes). As of June 29, 1996, the aggregate amount of
outstanding Senior Debt was approximately $30.1 million and the aggregate amount
of additional indebtedness of the Company's subsidiaries (other than Capital)
was $7.3 million. The Indenture (as defined) will permit the Issuers to incur
additional Senior Debt, subject to certain limitations. See "Description of New
Notes."
(Cover continued on following page)
SEE "RISK FACTORS" BEGINNING ON PAGE 13 FOR A DESCRIPTION OF CERTAIN RISKS
TO BE CONSIDERED BY HOLDERS WHO TENDER THEIR OLD NOTES IN THE EXCHANGE OFFER.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE COMMISSION OR
ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS
PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
<PAGE>
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY
OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES
EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES
IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR
TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE.
<PAGE>
(Cover page continued)
Remington is a limited life entity that will continue in existence until
December 31, 2016 or dissolution prior thereto as determined under the LLC
Agreement (as defined). See "Limited Liability Company Agreement."
Capital is a wholly owned subsidiary of the Company that was incorporated
for the sole purpose of serving as a co-issuer of the Notes in order to
facilitate the Initial Offering (as defined). Capital is not expected to have
any substantial operations or assets of any kind and is not expected to have any
revenues. Prospective investors in New Notes should not expect Capital to
participate in servicing the interest and principal obligations on the New
Notes. See "Description of New Notes--Certain Covenants."
The Issuers will accept for exchange any and all Old Notes (as defined)
validly tendered and not withdrawn prior to 5:00 p.m., New York City time on
, 1996, unless extended by the Issuers in their sole discretion (the
"Expiration Date"). Tenders of Old Notes may be withdrawn at any time prior to
5:00 p.m. on the Expiration Date. The Exchange Offer is subject to certain
customary conditions. The Old Notes were sold by the Issuers on May 23, 1996 to
the Initial Purchasers (as defined) in a transaction not registered under the
Securities Act in reliance upon an exemption under the Securities Act (the
"Initial Offering"). The Initial Purchasers subsequently placed the Old Notes
with qualified institutional buyers in reliance upon Rule 144A under the
Securities Act and with a limited number of institutional accredited investors
that agreed to comply with certain transfer restrictions and other conditions.
Accordingly, the Old Notes may not be reoffered, resold or otherwise transferred
in the United States unless registered under the Securities Act or unless an
applicable exemption from the registration requirements of the Securities Act is
available. The New Notes are being offered hereunder in order to satisfy the
obligations of the Issuers under the Registration Rights Agreement (as defined)
entered into by the Issuers in connection with the offering of the Old Notes.
See "The Exchange Offer."
Based on no-action letters issued by the staff of the Securities and
Exchange Commission (the "Commission") to third parties, the Issuers believe the
New Notes issued pursuant to the Exchange Offer may be offered for resale,
resold and otherwise transferred by any holder thereof (other than any such
holder that is an "affiliate" of the Issuers within the meaning of Rule 405
under the Securities Act) without compliance with the registration and
prospectus delivery provisions of the Securities Act provided that such New
Notes are acquired in the ordinary course of such holder's business and such
holder has no arrangement or understanding with any person to participate in the
distribution of such New Notes. See "The Exchange Offer--Resale of the New
Notes." Each broker-dealer (a "Participating Broker-Dealer") that receives New
Notes for its own account pursuant to the Exchange Offer must acknowledge that
it will deliver a prospectus in connection with any resale of such New Notes.
The Letter of Transmittal states that by so acknowledging and by delivering a
prospectus, a participating Broker-Dealer will not be deemed to admit that it is
an "underwriter" within the meaning of the Securities Act. This Prospectus, as
it may be amended or supplemented from time to time, may be used by a
Participating Broker-Dealer in connection with resales of New Notes received in
exchange for Old Notes where such Old Notes were acquired by such Participating
Broker-Dealer as a result of market-making activities or other trading
activities. The Issuers have agreed that, for a period of 180 days after the
Expiration Date, they will make this Prospectus available to any Participating
Broker-Dealer for use in connection with any such resale. See "Plan of
Distribution."
Holders of Old Notes not tendered and accepted in the Exchange Offer will
continue to hold such Old Notes and will be entitled to all the rights and
benefits and will be subject to the limitations applicable thereto under the
Indenture and with respect to transfer under the Securities Act. The Company
will pay all the expenses incurred by it incident to the Exchange Offer. See
"The Exchange Offer."
There has not previously been any public market for the Old Notes or the New
Notes. The Company does not intend to list the New Notes on any securities
exchange or to seek approval for quotation through any automated quotation
system. There can be no assurance that an active market for the New Notes will
develop. See "Risk Factors--Absence of a Public Market Could Adversely Affect
the Value of New Notes." Moreover, to the extent that Old Notes are tendered and
accepted in the Exchange Offer, the trading market for untendered and tendered
but unaccepted Old Notes could be adversely affected.
The New Notes will be available initially only in book-entry form and the
Issuers expect that the New Notes issued pursuant to this Exchange Offer will be
issued in the form of a Global Note (as defined), which will be deposited with,
or on behalf of, The Depository Trust Company (the "Depositary") and registered
in its name or in the name of Cede & Co., its nominee. Beneficial interests in
the Global Note representing the New Notes will be shown on, and transfers
thereof will be effected through, records maintained by the Depositary and its
participants. After the initial issuance of the Global Note, New Notes in
certified form will be issued in exchange for the Global Note only under the
limited circumstances set forth in the Indenture. See "Description of New
Notes--Book-Entry; Delivery and Form."
<PAGE>
AVAILABLE INFORMATION
The Issuers have filed with the Commission a Registration Statement on Form
S-4 (the "Exchange Offer Registration Statement," which term shall encompass all
amendments, exhibits, annexes and schedules thereto) pursuant to the Securities
Act, and the rules and regulations promulgated thereunder, covering the New
Notes being offered hereby. This Prospectus does not contain all the information
set forth in the Exchange Offer Registration Statement. For further information
with respect to the Issuers and the Exchange Offer, reference is made to the
Exchange Offer Registration Statement. Statements made in this Prospectus as to
the contents of any contract, agreement or other document referred to are not
necessarily complete. With respect to each such contract, agreement or other
document filed as an exhibit to the Exchange Offer Registration Statement,
reference is made to the exhibit for a more complete description of the document
or matter involved, and each such statement shall be deemed qualified in its
entirety by such reference. The Exchange Offer Registration Statement, including
the exhibits thereto, can be inspected and copied at the public reference
facilities maintained by the Commission at Room 1024, 450 Fifth Street, N.W.,
Washington, D.C. 20549, at the Regional Offices of the commission at 75 Park
Place, New York, New York 10007 and at Northwestern Atrium Center, 500 West
Madison Street, Suite 1400, Chicago, Illinois 60661. Copies of such materials
can be obtained from the Public Reference Section of the Commission at 450 Fifth
Street, N.W., Washington, D.C. 20549, at prescribed rates. The Commission
maintains a Web site that contains reports, proxy and information statements and
other information regarding registrants that file electronically with the
Commission. The address of such site is http://www.sec.gov.
As a result of the filing of the Exchange Offer Registration Statement with
the Commission, the Issuers will become subject to the informational
requirements of the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), and in accordance therewith will be required to file periodic reports and
other information with the Commission. The obligation of the Issuers to file
periodic reports and other information with the Commission will be suspended if
the New Notes are held of record by fewer than 300 holders as of the beginning
of any fiscal year of the Issuers other than the fiscal year in which the
Exchange Offer Registration Statement is declared effective. The Issuers will
nevertheless be required to continue to file reports with the Commission if the
New Notes are listed on a national securities exchange. The Issuers have agreed
that, whether or not they are required to do so by the rules and regulations of
the Commission, for so long as any of the Notes remain outstanding, they will
furnish to the holders of the Notes, file with the Commission (unless the
Commission will not accept such a filing) and make available to securities
analysts and prospective investors upon request (i) all quarterly and annual
financial information that would be required to be contained in a filing with
the Commission on Forms 10-Q and 10-K if the Issuers were required to file such
forms, including a "Management's Discussion and Analysis of Financial Condition
and Results of Operations" and, with respect to the annual information only, a
report thereon by the Issuers' certified independent accountants and (ii) all
current reports that would be required to be filed with the Commission on Form
8-K if the Issuers were required to file such reports. In addition, for so long
as any of the Notes remain outstanding, the Issuers have agreed to furnish to
the holders of the Notes and to securities analysts and prospective investors,
upon their request the information required to be delivered by Rule 144A(d)(4)
under the Securities Act.
2
<PAGE>
PROSPECTUS SUMMARY
The following summary is qualified in its entirety by the more detailed
information and financial statements, including the notes thereto, appearing
elsewhere in this Prospectus. Market data (including market share data) used
throughout this Prospectus were obtained from internal Company surveys,
independent market research companies and industry publications. Unless
otherwise specified, all market share data contained in this Prospectus are
estimates by the Company measured in units sold. Unless the context otherwise
requires, references in this Prospectus to "Remington" and the "Company" are to
Remington, its subsidiaries and their predecessors, after giving effect to the
Transactions.
THE COMPANY
Remington is one of the world's leading manufacturers and marketers of men's
and women's electrical personal care appliances. The Company designs,
manufactures, markets and distributes on a worldwide basis men's and women's
electric shavers and accessories, women's personal care appliances, men's
electric grooming products, travel products and other small electric consumer
appliances. Products have been sold under the Remington name since the 1840s and
the first Remington electric shavers were introduced in the 1930s. The Company
believes that its strong market position is attributable to the strength of the
Remington brand name, product quality, breadth of products sold, active new
product development and innovation, extensive distribution network and marketing
and manufacturing expertise. In December 1993, Remington acquired the Clairol
personal care appliance business ("Clairol") from Bristol-Myers Squibb Company
(the "Clairol Acquisition"), combining two leaders in their respective
industries.
The Company's two primary product lines, electric shavers and related
accessories and women's personal care appliances, accounted for approximately
44% and 30%, respectively, of the Company's 1995 net sales of $255.3 million.
The Company's service stores and other consumer products, such as men's grooming
products and travel appliances, accounted for the remaining approximately 26% of
1995 net sales. The Company's products are sold in the United States and
internationally in over 85 countries. Remington has built a strong franchise
with both retailers and consumers in the United States and abroad, with the
Company's products sold through mass merchandisers, catalog showrooms, drug
store chains and department stores in addition to the Company's service stores.
Remington's strong brand image coupled with new product innovations has
helped the Company achieve leading market positions in most of its product
lines. In the U.S. men's electric shaver market, the Company has the second
highest market share, estimated at 32% in 1995. In the U.S. women's electric
shaver market, the Company has the leading market position with an estimated
share of 37% in 1995. In the U.S. women's hairsetter market, the Company has the
leading market position, with an estimated 55% share in 1995. Remington has a
leading position in certain international markets in many of its product
categories such as men's and women's electric shavers, hairsetters, hairdryers,
curling irons, curling brushes and home haircut kits.
Prior to the consummation of the Transactions, the Company was operated as
Remington Products Company ("RPC"), a general partnership of which RPI Corp.
(formerly known as Remington Products, Inc.) ("RPI"), a company controlled by
Victor K. Kiam, II, and Remsen Partners ("Remsen"), an entity controlled by
Isaac Perlmutter, were each 50% partners. The Initial Offering was made in
connection with a reorganization of the Company (the "Reorganization") valued at
$226.7 million, pursuant to which, on May 23, 1996 (the "Closing Date"): (i) RPC
made a cash distribution in an amount of $56.9 million to Remsen (less estimated
Excluded Obligations (as defined) of $6.6 million) and $48.0 million to RPI
(less estimated Excluded Obligations of $7.1 million and net of a $10.9 million
reduction pursuant to the Preliminary Working Capital Adjustment (as defined));
(ii) Vestar Shaver Corp. ("Vestar Corp. I") and Vestar Razor Corp. ("Vestar
Corp. II" and, together with Vestar Corp. I, the "Vestar Members"), corporations
controlled by Vestar Equity Partners, L.P. ("Vestar"), purchased
3
<PAGE>
Remsen's interest in the Company for $33.4 million (the "Vestar Investment");
(iii) certain members of senior management (excluding Victor K. Kiam, III) of
the Company (the "Management Investors") acquired an equity interest of $1.1
million (including a cash purchase of $0.86 million and assuming exercise of
certain Management Options (as defined) with an aggregate exercise price of
$0.26 million) in the Company (the "Management Investment"); (iv) the Company
paid Excluded Obligations of approximately $10.7 million; (v) RPI retained an
equity investment in the Company with an implied value of $35.4 million (the
"Kiam Investment" and, collectively with the Vestar Investment and the
Management Investment, the "Equity Investments"); and (vi) RPC was merged with
and into Remington Products Company, L.L.C. The ownership interests of the
members in the Company consist of preferred membership interests (the "Preferred
Equity") and common units (the "Common Units"). The Common Units represent the
common equity of the Company. The Preferred Equity is entitled to a preferred
yield of 12% per annum, compounded quarterly, and to an aggregate liquidation
preference of $62 million (net of any prior repayments of Preferred Equity) plus
any accrued but unpaid preferred yield. The Vestar Investment consists of
Preferred Equity valued at $30.0 million and Common Units valued at $3.4
million, the Kiam Investment consists of Preferred Equity valued at $32.0 milion
and Common Units valued at $3.4 million, and the Management Investment consists
of Common Units valued at $1.1 million (assuming exercise of certain Management
Options).
In addition, as part of the Reorganization, $41.3 million of existing
indebtedness of RPC was refinanced. The funds required to consummate the
Reorganization were provided by the Initial Offering, borrowings under the
SeniorCredit Agreement and the cash proceeds of the Equity Investments. See "Use
of Proceeds" for a table which sets forth the sources and uses of funds for the
Transactions. The Reorganization and the financing thereof is referred toherein
as the "Transactions." Each of the Transactions was consummated on the Closing
Date. The Common Units of the Company are owned 43.0% by the Vestar Members,
43.0% by RPI and 14.0% by the Management Investors (in each case on a fully
diluted basis) and Vestar Corp. I controls the Management Committee (as defined)
and the Management Committee controls the affairs and policies of the Company.
See "The Transactions," "Use of Proceeds," "Management--Directors and Executive
Officers" and "Security Ownership of Certain Beneficial Owners and Management."
GROWTH STRATEGY
The Company's strategy is to achieve further growth in net sales,
profitability and cash flow by: (i) capitalizing on the strength of the
Remington brand name, (ii) expanding international operations, (iii) introducing
new products and innovations to existing products, (iv) continuing to
rationalize manufacturing and overhead costs, and (v) acquiring complementary
businesses and product lines. See "Business--Growth Strategy."
POSSIBLE FUTURE ACQUISITIONS
The Company regularly evaluates acquisition opportunities in its ordinary
course of business and intends to augment its internal growth with acquisitions
of complementary businesses and product lines. The successful acquisition and
assimilation of Clairol provides a model for similar transactions that the
Company expects to pursue in the future. The Company's targets for potential
acquisitions include small electric consumer product companies or brands with
mass distribution potential. Management believes that these acquisitions will
enable the Company to accomplish certain strategic goals, including: (i) the
expansion of the Company's product offerings beyond existing categories, (ii)
the creation of synergies with the Company's existing manufacturing operations
and distribution networks, and (iii) the enhancement or utilization of the
Remington brand name where appropriate. Although the Company is currently not a
party to any agreement with respect to any pending acquisition which management
believes is probable and material to the Company, the Company has engaged in and
continues to engage in evaluations and discussions with respect to potential
acquisitions. See "Risk Factors--Acquisitions and Integration of Additional
Businesses."
The Company's headquarters are located at 60 Main Street, Bridgeport,
Connecticut 06604 and its telephone number is (203) 367-4400.
4
<PAGE>
THE INITIAL OFFERING
<TABLE>
<S> <C>
Notes.................................. The Old Notes were sold by the Issuers on May 23,
1996 to Bear, Stearns & Co. Inc. (the "Initial
Purchaser") pursuant to a Purchase Agreement dated
May 23, 1996 (the "Purchase Agreement"). The
Initial Purchaser subsequently resold the Old Notes
to qualified institutional buyers pursuant to Rule
144A under the Securities Act and to a limited
number of institutional accredited investors that
agreed to comply with certain transfer restrictions
and other conditions.
Registration Rights Agreement.......... Pursuant to the Purchase Agreement, the Issuers and
the Initial Purchaser entered into a Registration
Rights Agreement dated as of May 23, 1996 (the
"Registration Rights Agreement"), which grants the
holder of the Old Notes certain exchange and
registration rights. The Exchange Offer is intended
to satisfy such exchange rights which terminate
upon the consummation of the Exchange Offer.
THE EXCHANGE OFFER
Securities Offered..................... $130,000,000 aggregate principal amount of 11%
Series B Senior Subordinated Notes due 2006 of the
Issuers (the "New Notes").
The Exchange Offer..................... $1,000 principal amount of New Notes in exchange
for each $1,000 principal amount of Old Notes. As
of the date hereof, $130,000,000 aggregate
principal amount of Old Notes are outstanding. The
Issuers will issue the New Notes to holders on or
promptly after the Expiration Date.
Based on an interpretation by the staff of the
Commission set forth in no-action letters issued to
third parties, the Issuers believe that New Notes
issued pursuant to the Exchange Offer in exchange
for Old Notes may be offered for resale, resold and
otherwise transferred by any holder thereof (other
than any such holder which is an "affiliate" of the
Issuers within the meaning of Rule 405 under the
Securities Act) without compliance with the
registration and prospectus delivery provisions of
the Securities Act, provided that such New Notes
are acquired in the ordinary course of such
holder's business and that such holder does not
intend to participate and has no arrangement or
understanding with any person to participate in the
distribution of such New Notes. Each holder
accepting the Exchange Offer is required to
represent to the Issuers in the Letter of
Transmittal that, among other things, the New Notes
will be acquired by
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5
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the holder in the ordinary course of business and
the holder does not intend to participate and has
no arrangement or understanding with any person to
participate in the distribution of such New Notes.
Any Participating Broker-Dealer that acquired Old
Notes for its own account as a result of
market-making activities or other trading
activities may be a statutory underwriter. Each
Participating Broker-Dealer that receives New Notes
for its own account pursuant to the Exchange Offer
must acknowledge that it will deliver a prospectus
in connection with any resale of such New Notes.
The Letter of Transmittal states that by so
acknowledging and by delivering a prospectus, a
Participating Broker-Dealer will not be deemed to
admit that it is an "underwriter" within the
meaning of the Securities Act. This Prospectus, as
it may be amended or supplemented from time to
time, may be used by a Participating Broker-Dealer
in connection with resales of New Notes received in
exchange for Old Notes where such Old Notes were
acquired by such Participating Broker-Dealer as a
result of market-making activities or other trading
activities. The Issuers have agreed that, for a
period of 180 days after the Expiration Date, they
will make this Prospectus available to any
Participating Broker-Dealer for use in connection
with any such resale. See "Plan of Distribution."
Any holder who tenders in the Exchange Offer with
the intention to participate, or for the purpose of
participating, in a distribution of the New Notes
could not rely on the position of the staff of the
Commission enunciated in no-action letters and, in
the absence of an exemption therefrom, must comply
with the registration and prospectus delivery
requirements of the Securities Act in connection
with any resale transaction. Failure to comply with
such requirements in such instance may result in
such holder incurring liability under the
Securities Act for which the holder is not
indemnified by the Issuers.
Expiration Date........................ 5:00 p.m., New York City time, on ,
1996 unless the Exchange Offer is extended, in
which case the term "Expiration Date" means the
latest date and time to which the Exchange Offer is
extended.
Accrued Interest on the New Notes and
the Old Notes.......................... Each New Note will bear interest from its issuance
date. Holders of Old Notes that are accepted for
exchange will receive, in cash, accrued interest
thereon to, but not including, the issuance date of
the New Notes. Such interest will be paid with the
first interest payment on the New Notes. Interest
on the Old Notes accepted for
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exchange will cease to accrue upon issuance of the
New Notes.
Conditions to the Exchange Offer....... The Exchange Offer is subject to certain customary
conditions, which may be waived by the Issuers. See
"The Exchange Offer--Conditions."
Procedures for Tendering Old Notes..... Each holder of Old Notes wishing to accept the
Exchange Offer must complete, sign and date the
accompanying Letter of Transmittal, or a facsimile
thereof, in accordance with the instructions
contained herein and therein, and mail or otherwise
deliver such Letter of Transmittal, or such
facsimile, together with the Old Notes and any
other required documentation to the Exchange Agent
(as defined) at the address set forth herein. By
executing the Letter of Transmittal, each holder
will represent to the Issuers that, among other
things, the New Notes acquired pursuant to the
Exchange Offer are being obtained in the ordinary
course of business of the person receiving such New
Notes, whether or not such person is the holder,
that neither the holder nor any such other person
has any arrangement or understanding with any
person to participate in the distribution of such
New Notes and that neither the holder nor any such
other person is an "affiliate", as defined under
Rule 405 of the Securities Act, of the Company. See
"The Exchange Offer--Purpose and Effect of the
Exchange Offer" and "--Procedures for Tendering."
Untendered Old Notes................... Following the consummation of the Exchange Offer,
holders of Old Notes eligible to participate but
who do not tender their Old Notes will not have any
further exchange rights and such Old Notes will
continue to be subject to certain restrictions on
transfer. Accordingly, the liquidity of the market
for such Old Notes could be adversely affected.
Consequences of Failure to Exchange.... The Old Notes that are not exchanged pursuant to
the Exchange Offer will remain restricted
securities. Accordingly, such Old Notes may be
resold only (i) to the Issuers, (ii) pursuant to
Rule 144A or Rule 144 under the Securities Act or
pursuant to some other exemption under the
Securities Act, (iii) outside the United States to
a foreign person pursuant to the requirements of
Rule 904 under the Securities Act, or (iv) pursuant
to an effective registration statement under the
Securities Act. See "The Exchange
Offer--Consequences of Failure to Exchange."
Shelf Registration Statement........... If any holder of the Old Notes (other than any such
holder which is an "affiliate" of the Issuers
within the meaning of Rule 405 under the Securities
Act) is not eligible under applicable securities
laws to participate in the Exchange Offer, and such
holder has satisfied certain
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conditions relating to the provision of information
to the Issuers for use therein, the Issuers have
agreed to register the Old Notes on a shelf
registration statement (the "Shelf Registration
Statement") and use their best efforts to cause it
to be declared effective by the Commission as
promptly as practical on or after the consummation
of the Exchange Offer. The Issuers have agreed to
maintain the effectiveness of the Shelf
Registration Statement for, under certain
circumstances, a maximum of three years, to cover
resales of the Old Notes held by any such holders.
Special Procedures for Beneficial
Owners................................. Any beneficial owner whose Old Notes are registered
in the name of a broker, dealer, commercial bank,
trust company or other nominee and who wishes to
tender should contact such registered holder
promptly and instruct such registered holder to
tender on such beneficial owner's behalf.
Guaranteed Delivery Procedures......... Holders of Old Notes who wish to tender their Old
Notes and whose Old Notes are not immediately
available or who cannot deliver their Old Notes,
the Letter of Transmittal or any other documents
required by the Letter of Transmittal to the
Exchange Agent (or comply with the procedures for
book-entry transfer) prior to the Expiration Date
must tender their Old Notes according to the
guaranteed delivery procedures set forth in "The
Exchange Offer--Guaranteed Delivery Procedures."
Withdrawal Rights...................... Tenders may be withdrawn at any time prior to 5:00
p.m., New York City time, on the Expiration Date.
Acceptance of Old Notes and Delivery of
New Notes.............................. The Issuers will accept for exchange any and all
Old Notes which are properly tendered in the
Exchange Offer prior to 5:00 p.m., New York City
time, on the Expiration Date. The New Notes issued
pursuant to the Exchange Offer will be delivered
promptly following the Expiration Date. See "The
Exchange Offer--Terms of the Exchange Offer."
Use of Proceeds........................ There will be no cash proceeds to the Issuers from
the exchange pursuant to the Exchange Offer.
Exchange Agent......................... The Bank of New York.
THE NEW NOTES
General................................ The form and terms of the New Notes are the same as
the form and terms of the Old Notes (which they
replace) except that (i) the New Notes bear a
Series B designation, (ii) the New Notes have been
registered under the Securities Act and, therefore,
will not bear legends restricting the transfer
thereof, and (iii) the
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8
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holders of New Notes will not be entitled to
certain rights under the Registration Rights
Agreement, including the provisions providing for
an increase in the interest rate on the Old Notes
in certain circumstances relating to the timing of
the Exchange Offer, which rights will terminate
when the Exchange Offer is consummated. See "The
Exchange Offer--Purpose and Effect of the Exchange
Offer." The New Notes will evidence the same debt
as the Old Notes and will be entitled to the
benefits of the Indenture. See "Description of New
Notes." The Old Notes and the New Notes are
referred to herein collectively as the "Notes."
Securities Offered..................... $130.0 million aggregate principal amount of 11%
Series B Senior Subordinated Notes due 2006.
Issuers................................ The New Notes will be joint and several obligations
of Remington Products Company, L.L.C. and Remington
Capital Corp. Capital is a wholly owned subsidiary
of the Company that was incorporated for the sole
purpose of serving as a co-issuer of the Notes in
order to facilitate the Initial Offering. Capital
is not expected to have any substantial operations
or assets of any kind and is not expected to have
any revenues. Prospective investors in New Notes
should not expect Capital to participate in
servicing the interest and principal obligations on
the New Notes. See "Description of New
Notes--Certain Covenants."
Maturity............................... May 15, 2006.
Interest............................... Interest on the New Notes will accrue from the date
of issuance at the rate of 11% per annum payable
semi-annually on May 15 and November 15, commencing
on November 15, 1996.
Guarantees............................. The New Notes are not currently guaranteed but will
be guaranteed on a senior subordinated basis by all
newly acquired or created U.S. Subsidiaries, if
any, of the Issuers.
Optional Redemption.................... The New Notes will be redeemable at the option of
the Issuers, in whole or in part, at any time on
and after May 15, 2001 at the redemption prices set
forth herein, plus accrued and unpaid interest and
Liquidated Damages, if any, thereon to the
redemption date. In addition, on or prior to May
15, 1999, the Issuers may redeem up to 35% in
aggregate principal amount of the New Notes at a
redemption price of 111% of the principal amount
thereof, plus accrued and unpaid interest and
Liquidated Damages, if any, thereon to the
redemption date, with the net proceeds of one or
more public offerings of Capital Stock (other than
Disqualified Stock) of the Company; provided that
at least $84.5 million in aggregate principal
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9
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amount of Notes remain outstanding immediately
after the occurrence of each such redemption.
Change of Control...................... Upon the occurrence of a Change of Control, the
Issuers will be required to make an offer to
repurchase all or any part (equal to $1,000 or an
integral multiple thereof) of each holder's New
Notes at an offer price in cash equal to 101% of
the aggregate principal amount thereof, plus
accrued and unpaid interest and Liquidated Damages,
if any, thereon to the date of repurchase. The
source of funds for any such purchase will be
dependent upon the Company's available cash or cash
generated from operating or other sources,
including borrowing, sales of assets, sales of
equity or funds provided by a new controlling
person. However, there can be no assurance that
sufficient funds will be available at the time of
any Change of Control to make any required
repurchases of Notes tendered, or that, if
applicable, restrictions in the Senior Credit
Agreement will allow the Company to make such
required repurchases. See "Risk Factors--
Limitations on Change of Control" and "Description
of New Notes--Repurchase at the Option of Holders--
Change of Control."
Ranking................................ The New Notes will be general unsecured obligations
of the Issuers, subordinated in right of payment to
all existing and future Senior Debt of the Issuers,
including all borrowings of the Company under the
Senior Credit Agreement. The New Notes will be
effectively subordinated to indebtedness of the
Company's subsidiaries (other than Capital and
Subsidiaries, if any, guaranteeing the New Notes).
As of June 29, 1996, the aggregate amount of
outstanding Senior Debt was approximately $30.1
million and the aggregate amount of additional
indebtedness of the Company's subsidiaries (other
than Capital) was $7.3 million. See
"Capitalization" and "Description of New Notes."
Covenants.............................. The indenture pursuant to which the New Notes will
be issued (the "Indenture") contains certain
covenants that, among other things, limit the
ability of the Issuers and their Subsidiaries to
incur additional Indebtedness (as defined), pay
dividends or make other distributions, repurchase
Equity Interests (as defined) or subordinated
Indebtedness, create certain liens, enter into
certain transactions with affiliates, sell assets
or enter into certain mergers and consolidations.
See "Description of New Notes--Certain Covenants."
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RISK FACTORS
Prospective investors should be aware of certain special considerations
before tendering Old Notes in exchange for New Notes, including, among other
things, that:
. The Company incurred significant debt in connection with the Transactions;
. The New Notes will be unsecured and subordinated to the prior right of
payment of all existing and future Senior Debt of the Issuers, including
obligations under the Senior Credit Agreement;
. The Senior Credit Agreement requires the Company to maintain specified
financial ratios and tests and limits the Company's ability to incur
additional indebtedness, make acquisitions and make capital expenditures;
. The Company's markets are highly competitive;
. A substantial portion of the Company's finished goods are manufactured for
the Company by overseas suppliers;
. Approximately 25% of the Company's 1995 net sales are derived from the
sale of products manufactured or assembled at the Company's sole
manufacturing facility in Bridgeport, Connecticut;
. The Company believes that its future success will depend in part upon its
ability to continue to make innovations in its existing products and to
develop, manufacture and market new products;
. Sales of the Company's products are highly seasonal;
. The Company's five largest customers account for a significant portion of
the Company's sales;
. A significant amount of the Company's sales and manufacturing are made
outside the United States;
. The Company seeks to acquire other brands and consumer products companies
as part of its long-term strategy;
. The Company is dependent on certain key personnel;
. The Vestar Members control the Management Committee and the affairs and
policies of the Company and circumstances may occur in which the interests
of the Vestar Members, as equity holders, could be in conflict with the
holders of the New Notes; and
. In the event of a Change of Control (as defined), the Issuers will be
required to make an offer for cash to repurchase the New Notes at 101% of
the principal amount therof.
. See "Risk Factors."
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SUMMARY HISTORICAL AND UNAUDITED PRO FORMA FINANCIAL DATA
Set forth below are summary historical and pro forma financial data of the
Company as of the dates and for the periods presented. The summary historical
financial data were derived from the audited consolidated financial statements
of RPC, except for the data for the twelve months ended December 31, 1993 and
the twenty-one weeks ended May 23, 1996 for RPC (Predecessor Company) and the
five weeks ended June 29, 1996 for Remington (Successor Company), which were
derived or calculated from unaudited consolidated financial statements of the
Company. In 1993, the Company changed its fiscal year-end from September 30 to
December 31. Unaudited financial information for the twelve months ended
December 31, 1993 has been provided to facilitate comparisons with the years
ended December 31, 1994 and 1995. The information contained in this table should
be read in conjunction with "Selected Historical and Unaudited Pro Forma
Financial Data," "Unaudited Pro Forma Consolidated Financial Information,"
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" and the Financial Statements and accompanying notes thereto
appearing elsewhere in this Prospectus.
<TABLE><CAPTION>
SUCCESSOR COMPANY
PREDECESSOR COMPANY -------------------------------------------
------------------------------------------------------------ PRO FORMA PRO FORMA
TWELVE MONTHS YEAR ENDED DECEMBER 21 WEEKS TWELVE SIX
ENDED 31, ENDED 5 WEEKS ENDED MONTHS ENDED MONTHS ENDED
DECEMBER 31, ------------------- MAY 23, JUNE 29, DECEMBER 31, JUNE 29,
1993(1) 1994 1995 1996 1996 1995(2) 1996(2)
------------- -------- -------- ---------------------- ------------- ------------ ------------
(DOLLARS IN THOUSANDS)
STATEMENT OF
OPERATIONS DATA:
<S> <C> <C> <C> <C> <C> <C> <C>
Net sales........ $ 161,898 $261,446 $255,323 $ 57,939 $23,457 $255,323 $ 81,396
Gross profit..... 73,103 111,342 112,120 22,554 9,412 113,342 32,440
Operating profit
(loss)........... 7,987 21,228 26,516 (16,951) 1,750 28,779 (6,251)
Interest
expense.......... 4,079 6,414 7,604 2,228 1,931 18,096 9,119
Net income
(loss)........... 3,251 14,725 17,240 (18,191) (263) 9,195 (14,464)
Income (loss)
applicable to
Common Members'
Equity (3)...... $(1,017) $ 1,414 $(18,564)
BALANCE SHEET
DATA (AT PERIOD
END):
Working
capital.......... $ 70,164 $ 62,862 $ 47,223 N/A 75,043
Total assets..... 175,567 160,543 170,922 N/A 184,925
Total debt....... 71,931 55,093 56,990 N/A 160,050
Cumulative
Preferred Equity
Dividend (4).... $ 754 $ 7,781 $ 11,881
Total partners'
capital/members'
equity (deficit)
(5).............. 43,795 59,964 75,945 N/A (4,733)
OTHER DATA AND
RATIOS:
Depreciation and
amortization..... 2,560 4,243 4,938 2,005 343 3,270 1,635
Capital
expenditures..... 3,935 4,356 3,291 1,310 141 3,291 1,451
Cash interest
expense (6)..... 3,367 5,726 6,914 1,966 1,822 17,683 8,854
Ratio of earnings
to fixed charges
(7).............. 1.6x 2.9x 3.0x -- 1.0x 1.4x --
</TABLE>
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- ------------
(1) Balance sheet data includes the assets and liabilities of Clairol that were
acquired on December 23, 1993.
(2) Gives pro forma effect to the Transactions as if it had occurred on January
1, 1995, with respect to the Statement of Operations Data. See "Unaudited
Pro Forma Consolidated Financial Information."
(3) Income (loss) applicable to common capital/member equity is determined by
increasing the net loss or decreasing net income by preferred stock dividend
requirements.
(4) Dividend payments are subject to restrictions set forth in the Indenture.
(5) The fair value of members' capital at June 29, 1996 is $69,742, and consists
of Preferred Equity (as defined) with a liquidation preference of $62,000
and Common Units (as defined) with a value of $7,742, based on the cash paid
by the Vestar Members and the Management Investors for their equity
interests.
(6) Cash interest expense is defined as interest expense less amortization of
debt issuance costs and the original issue discount on the Notes.
(7) Earnings used in computing the ratio of earnings to fixed charges consist of
income before provision for income taxes plus fixed charges. Fixed charges
consist of interest expense, including amortization of debt issuance costs
and the original issue discount on the Notes, a portion of operating lease
rental expense deemed to be representative of the interest factor and
Preferred Equity dividend requirements. Earnings were insufficient to cover
fixed charges by $19,064 and $15,012 for the 21 weeks ended May 23, 1996 and
the pro forma six months ended June 29, 1996, respectively. Due to the
seasonal nature of the Company's business, results to date are not
indicative of annual results; management believes that year end results will
reflect adequate coverage to meet fixed charges.
13
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RISK FACTORS
Prospective investors should consider carefully the following factors as
well as the other information and data included in this Prospectus before
tendering Old Notes in exchange for the New Notes.
SUBSTANTIAL LEVERAGE
The Company incurred significant debt in connection with the Transactions.
At June 29, 1996, the Company had outstanding indebtedness for borrowed money
(including the Old Notes) of approximately $160.1 million. The Company's
leveraged financial position could have important consequences to holders of the
New Notes, including the risks that: (i) a substantial portion of the Company's
cash flow from operations will be dedicated to the payment of interest on the
New Notes and the payment of principal and interest under the Senior Credit
Agreement and other indebtedness; (ii) the Company's leveraged position may
impede its ability to obtain financing in the future for working capital,
capital expenditures and general corporate purposes; and (iii) the Company's
highly leveraged financial position may make it more vulnerable to economic
downturns and may limit its ability to withstand competitive pressures. The
Company believes that, based on its current level of operations, it will have
sufficient capital to carry on its business and will be able to meet its
scheduled debt service requirements. However, there can be no assurance that the
future cash flow of the Company will be sufficient to meet the Company's
obligations and commitments. In addition, the Senior Credit Agreement
contemplates that all borrowings thereunder will become due in 2002. If the
Company is unable to generate sufficient cash flow from operations in the future
to service its indebtedness and to meet its other commitments, the Company will
be required to adopt one or more alternatives, such as refinancing or
restructuring its indebtedness, selling material assets or operations or seeking
to raise additional debt or equity capital. There can be no assurance that any
of these actions could be effected on a timely basis or on satisfactory terms or
that these actions would enable the Company to continue to satisfy its capital
requirements. In addition, the terms of existing or future debt agreements,
including the Indenture and the Senior Credit Agreement, may prohibit the
Company from adopting any of these alternatives. See "Management's Discussion
and Analysis of Financial Condition and Results of Operations--Liquidity and
Capital Resources," "Description of Senior Credit Agreement" and "Description of
New Notes."
SUBORDINATION OF NEW NOTES
The New Notes will be unsecured and subordinated to the prior right of
payment of all existing and future Senior Debt of the Issuers, including
obligations under the Senior Credit Agreement. The indebtedness under the Senior
Credit Agreement will also become due prior to the time the principal
obligations under the New Notes become due. In addition, the New Notes will be
effectively subordinated to all indebtedness of the Issuers' subsidiaries,
through which the Company's foreign operations are conducted. Subject to certain
limitations, the Indenture will permit the Issuers to incur additional Senior
Debt. See "Description of New Notes--Certain Covenants--Incurrence of
Indebtedness." As a result of the subordination provisions contained in the
Indenture, in the event of a liquidation or insolvency, the assets of the
Issuers will be available to pay obligations on the New Notes only after all
Senior Debt has been paid in full, and there may not be sufficient assets
remaining to pay amounts due on any or all of the New Notes then outstanding.
The holders of any indebtedness of the Company's subsidiaries (other than
Capital and Subsidiaries guaranteeing the New Notes, if any) will be entitled to
payment of their indebtedness from the assets of such subsidiaries prior to the
holders of any general unsecured obligations of the Company, including the New
Notes. In addition, subject to the restrictions set forth in the Indenture and
in the Senior Credit Agreement, substantially all of the assets of the Company
and its subsidiaries will or may in the future be pledged to secure other
indebtedness of the Company. See "Description of Senior Credit Agreement" and
"Description of New Notes--Certain Covenants--Liens."
14
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RESTRICTIONS IMPOSED BY THE SENIOR CREDIT AGREEMENT AND THE INDENTURE
The Senior Credit Agreement requires the Company to maintain specified
financial ratios and tests, among other obligations, including an interest
expense coverage ratio, a fixed charge coverage ratio and a funded net
debt-to-EBITDA ratio, each as defined in the Senior Credit Agreement. In
addition, the Senior Credit Agreement restricts, among other things, the
Company's ability to incur additional indebtedness, make acquisitions and make
capital expenditures. A failure to comply with the restrictions contained in the
Senior Credit Agreement could lead to an event of default thereunder which could
result in an acceleration of such indebtedness. Such an acceleration would
constitute an event of default under the Indenture relating to the New Notes. In
addition, the Indenture restricts, among other things, the Company's ability to
incur additional indebtedness, sell assets, make certain payments and dividends
or to merge or consolidate the Company. A failure to comply with the
restrictions in the Indenture could result in an event of default under the
Indenture. See "Description of Senior Credit Agreement" and "Description of New
Notes."
HIGHLY COMPETITIVE MARKETS; COMPETITION
The markets in which the Company competes are highly competitive. The
Company competes with large and established national and multinational
companies, as well as smaller companies, in all of its product lines. Some of
these competitors have, and new competitors may have, substantially greater
resources than the Company. Consequently, there can be no assurance that the
Company will be able to compete effectively in the future. See
"Business--Competition."
DEPENDENCE ON CERTAIN SUPPLIERS
A substantial portion of the Company's finished goods are manufactured for
the Company by suppliers located in China, Japan and Thailand. The Company's
three most significant suppliers of finished goods in 1995 accounted for
approximately 36% of the Company's total cost of sales, with the largest
supplier comprising 18% of the Company's total cost of sales. Any adverse change
in the Company's relationships with these suppliers, the financial condition of
such suppliers, the Company's ability to import outsourced products or the
suppliers' ability to manufacture and deliver outsourced products on a timely
basis would have a material adverse effect on the Company. There can be no
assurance that the Company could quickly or effectively replace any of its
suppliers if the need arose or retrieve tooling and molds possessed by such
suppliers. The Company's dependence on such suppliers could also adversely
affect the Company's ability to react quickly and effectively to changes in the
market for its products. In addition, international manufacturing is subject to
risks including labor unrest, political instability, restrictions on transfer of
funds, domestic and international customs and tariffs, unexpected changes in
regulatory environments, and potentially adverse tax consequences. There can be
no assurance that any of the foregoing factors will not have a material adverse
effect on the Company's ability to increase or maintain its international
importing activities or on its results of operations. See "Risk
Factors--Significant Sales and Manufacturing Outside the United States,"
"Business--Suppliers" and "Business--Competition."
DEPENDENCE ON A SINGLE MANUFACTURING FACILITY
Approximately 25% of the Company's 1995 net sales are derived from the sale
of products manufactured or assembled at the Company's sole manufacturing
facility, which is located in Bridgeport, Connecticut. This manufacturing
facility is subject to the normal hazards that could result in any material
damage to any such facility. Any such damage to this facility, or prolonged
interruption in the operations of this facility for repairs or other reasons,
would have a material adverse effect on the Company's financial position and
results of operations. To date, the Company has not experienced any interruption
in the operations of this facility. See "Business-- Manufacturing Operations"
and "Business--Competition."
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RISKS ASSOCIATED WITH DEVELOPMENT OF NEW PRODUCTS
The Company believes that its future success will depend in part upon its
ability to continue to make innovations in its existing products and to develop,
manufacture and market new products. There can be no assurance that the Company
will be successful in the introduction, marketing and manufacture of any of its
new products or product innovations or that the Company will be able to develop
and introduce in a timely manner new products or innovations to its existing
products which satisfy customer needs or achieve market acceptance. The failure
to develop products and introduce them successfully and in a timely manner could
have a material adverse effect on the Company's financial condition and results
of operations. See "Business--Research and Product Development."
SEASONALITY
Sales of the Company's products are highly seasonal, with a large percentage
of net sales occurring during the Christmas selling season. The Company
typically derives a significant portion of its annual net sales in the fourth
quarter of each year and typically incurs operating losses in the first quarter
of each year. For example, the Company derived in excess of 40% of its annual
net sales in the fourth quarter and incurred operating losses in the first
quarter in each of 1994 and 1995. As a result of this seasonality, the Company's
inventory and working capital needs fluctuate substantially during each year. In
addition, Christmas orders from retailers are often received late in the year,
making forecasting of production schedules and inventory purchases difficult.
Any adverse change in the Company's results of operations in the fourth quarter
would have a material adverse effect on the Company's financial condition and
results of operations. See "Management's Discussion and Analysis of Financial
Condition and Results of Operations--Seasonality."
DEPENDENCE ON CERTAIN CUSTOMERS
Net sales of the Company to its five largest customers accounted for
approximately 36% of its total net sales in 1995. One of these customers,
Wal-Mart, accounted for approximately 16% of the Company's net sales worldwide
during 1995 and for over 31% of the Company's net sales in the United States
(excluding net sales of the Company's service stores). No other customer
accounted for more than 7% of the Company's worldwide net sales in 1995.
Although the Company has long-established relationships with many of its
customers, the Company does not have long-term contracts with any of its
customers. A decrease in business from any of its major customers could have a
material adverse effect on the Company's financial condition and results of
operations. See "Business--United States Distribution" and
"Business--International Operations and Distribution."
SIGNIFICANT SALES AND MANUFACTURING OUTSIDE THE UNITED STATES
In 1995, 35.8% of the Company's net sales were made outside the United
States. The U.S. dollar value of the Company's sales varies with currency
exchange rate fluctuations. Changes in currency exchange rates could have an
adverse effect on the Company's results of operations and its ability to meet
interest and principal obligations on the New Notes. The Company's results of
operations are affected by changes in exchange rates as the Company prices its
products in Europe, Canada and Australia in local currency. While many of the
Company's selling and distribution costs are also denominated in these
currencies, a large portion of the product costs are U.S. dollar denominated.
The Company takes precautions against these fluctuations by entering into
foreign exchange forward contracts, which, in effect, lock in the U.S. dollar
for products the Company's foreign subsidiaries purchase. In addition, a
substantial portion of the Company's finished goods are manufactured for the
Company by suppliers in China, Japan and Thailand. International manufacturing
and sales are subject to risks including labor unrest, political instability,
restrictions on transfers of funds, export duties and quotas, domestic and
international customs and tariffs, unexpected changes in regulatory
environments, difficulty in obtaining distribution and support, and potentially
adverse tax consequences. Although the
16
<PAGE>
products that the Company outsources from China were not included in the list of
products that would have been subject to substantially higher tariffs proposed
by the U.S. government in May 1996, in response to the alleged failure by the
Chinese government to protect U.S. intellectual property rights in China (which
proposal has since been withdrawn), there can be no assurance that future
actions by the U.S. government or the Chinese government will not impair the
ability of the Company to import products from China or elsewhere. There can be
no assurance that any of the foregoing factors will not have a material adverse
effect on the Company's ability to increase or maintain its international sales
or importing activities or on its results of operations. See
"Business--International Operations and Distribution."
ACQUISITIONS AND INTEGRATION OF ADDITIONAL BUSINESSES
As part of its long-term strategy, the Company seeks to acquire other brands
and consumer product companies that can benefit from the Remington brand name
and the Company's manufacturing operations and distribution infrastructure.
Although the Company is currently not a party to any agreement with respect to
any pending acquisition which management believes is probable and material to
the Company, the Company has engaged in and continues to engage in evaluations
and discussions with respect to potential acquisitions. There can be no
assurance that the Company will be able to either identify and acquire
attractive acquisition candidates at prices and on terms favorable to the
Company or succeed at effectively and profitably managing the integration of an
acquired business. See "Business--Growth Strategy--Acquiring Complementary
Businesses and Product Lines."
DEPENDENCE ON KEY PERSONNEL
The Company is dependent on the continued services of its senior management
team. Although the Company believes it could replace key employees in an orderly
fashion should the need arise, the loss of such key personnel could have a
material adverse effect on the Company. The Company does not maintain key-person
insurance for any of its officers, employees or directors. The Company has
entered into change of control agreements with certain members of senior
management. See "Management-- Directors and Executive Officers" and "--Other
Arrangements."
CONTROLLING EQUITYHOLDER
The Vestar Members control the Management Committee and the affairs and
policies of the Company. Circumstances may occur in which the interests of the
Vestar Members, as equity holders of the Company, could be in conflict with the
interests of the holders of the New Notes. In addition, the equity investors may
have an interest in pursuing acquisitions, divestitures or other transactions
that, in their judgment, could enhance their equity investment, even though such
transactions might involve risks to the holders of the New Notes.
LIMITATIONS ON CHANGE OF CONTROL
In the event of a Change of Control, the Issuers will be required to make an
offer for cash to repurchase the New Notes at 101% of the principal amount
thereof, plus accrued and unpaid interest and Liquidated Damages, if any,
thereon to the repurchase date. Certain events involving a Change of Control may
result in an event of default under the Senior Credit Agreement or other
indebtedness of the Company that may be incurred in the future. Moreover, the
exercise by the holders of the New Notes of their right to require the Company
to repurchase the New Notes may cause an event of default under the Senior
Credit Agreement or such other indebtedness, even if the Change of Control does
not. Finally, there can be no assurance that the Company will have the financial
resources necessary to repurchase the New Notes upon a Change of Control. See
"Description of New Notes--Repurchase at the Option of Holders--Change of
Control."
17
<PAGE>
RISK OF FRAUDULENT TRANSFER
Under applicable provisions of the U.S. Bankruptcy Code or comparable
provisions of state fraudulent transfer or conveyance laws, if the Company, at
the time it issued the Old Notes or the New Notes, (i) incurred such
indebtedness with intent to hinder, delay or defraud creditors, or (ii)(a)
received less than reasonably equivalent value or fair consideration for
incurring such indebtedness and (b)(1) was insolvent at the time of incurrence,
(2) was rendered insolvent by reason of such incurrence (and the application of
the proceeds thereof), (3) was engaged or was about to engage in a business or
transaction for which the assets remaining with the Company constituted
unreasonably small capital to carry on its businesses, or (4) intended to incur,
or believed that it would incur, debts beyond its ability to pay such debts as
they mature, then, in each case, a court of competent jurisdiction could void,
in whole or in part, the Old Notes or the New Notes, or, in the alternative,
subordinate the Old Notes or the New Notes to existing and future indebtedness
of the Company. The measure of insolvency for purposes of the foregoing will
vary depending upon the law applied in such case. Generally, however, the
Company would be considered insolvent if the sum of its debts, including
contingent liabilities, was greater than all of its assets at fair valuation or
if the present fair saleable value of its assets was less than the amount that
would be required to pay the probable liability on its existing debts, including
contingent liabilities, as they become absolute and matured.
Management believes that, for purposes of the U.S. Bankruptcy Code and state
fraudulent transfer or conveyance laws, the Old Notes or the New Notes are being
issued without the intent to hinder, delay or defraud creditors and for proper
purposes and in good faith and that the Company, after the issuance of the Old
Notes or the New Notes and the application of the proceeds thereof, will be
solvent, will have sufficient capital for carrying on its business and will be
able to pay its debts as they mature. There can be no assurance, however, that a
court passing on such questions would agree with management's view.
ABSENCE OF A PUBLIC MARKET COULD ADVERSELY AFFECT THE VALUE OF NOTES
The Old Notes were issued to, and the Issuers believe are currently owned
by, a relatively small number of beneficial owners. Prior to the Exchange Offer,
there has not been any public market for the Old Notes. The Old Notes have not
been registered under the Securities Act and will be subject to restrictions on
transferability to the extent that they are not exchanged for New Notes by
holders who are entitled to participate in this Exchange Offer. The holders of
Old Notes (other than any such holder that is an "affiliate" of the Issuers
within the meaning of Rule 405 under the Securities Act) who are not eligible to
participate in the Exchange Offer are entitled to certain registration rights,
and the Issuers are required to file a Shelf Registration Statement with respect
to such Old Notes. The New Notes will constitute a new issue of securities with
no established trading market. The Issuers do not intend to list the New Notes
on any national securities exchange or seek the admission thereof to trading in
the National Association of Securities Dealers Automated Quotation System. The
Initial Purchaser has advised the Issuers that it currently intends to make a
market in the New Notes, but it is not obligated to do so and may discontinue
such market making at any time. In addition, such market making activity will be
subject to the limits imposed by the Securities Act and the Exchange Act and may
be limited during the Exchange Offer and the pendency of the Shelf Registration
Statement. Accordingly, no assurance can be given that an active public or other
market will develop for the New Notes or as to the liquidity of the trading
market for the New Notes. If a trading market does not develop or is not
maintained, holders of the New Notes may experience difficulty in reselling the
New Notes or may be unable to sell them at all. If a market for the New Notes
develops, any such market may be discontinued at any time.
If a public trading market develops for the New Notes, future trading prices
of such securities will depend on many factors including, among other things,
prevailing interest rates, the Company's results of operations and the market
for similar securities. Depending on prevailing interest rates, the market
18
<PAGE>
for similar securities and other factors, including the financial condition of
the Company, the New Notes may trade at a discount from their principal amount.
FAILURE TO FOLLOW EXCHANGE OFFER PROCEDURES COULD ADVERSELY AFFECT HOLDERS
Issuance of the New Notes in exchange for the Old Notes pursuant to the
Exchange Offer will be made only after a timely receipt by the Issuers of such
Old Notes, a properly completed and duly executed Letter of Transmittal and all
other required documents. Therefore, holders of the Old Notes desiring to tender
such Old Notes in exchange for New Notes should allow sufficient time to ensure
timely delivery. The Issuers are under no duty to give notification of defects
or irregularities with respect to the tenders of Old Notes for exchange. Old
Notes that are not tendered or are tendered but not accepted will, following the
consummation of the Exchange Offer, continue to be subject to the existing
restrictions upon transfer thereof, and, upon consummation of the Exchange Offer
certain registration rights under the Registration Rights Agreement will
terminate. In addition, any holder of Old Notes who tenders in the Exchange
Offer for the purpose of participating in a distribution of the New Notes may be
deemed to have received restricted securities, and if so, will be required to
comply with the registration and prospectus delivery requirements of the
Securities Act in connection with any resale transaction. Each broker-dealer
that receives New Notes for its own account in exchange for Old Notes, where
such Old Notes were acquired by such broker-dealer as a result of market-making
activities or other trading activities, must acknowledge that it will deliver a
prospectus in connection with any resale of such New Notes. See "Plan of
Distribution." To the extent that Old Notes are tendered and accepted in the
Exchange Offer, the trading market for untendered and tendered but unaccepted
Old Notes could be adversely affected. See "The Exchange Offer."
THE TRANSACTIONS
THE REORGANIZATION
Prior to the consummation of the Transactions, the Company was operated as
RPC, a general partnership of which RPI, a company controlled by Victor K. Kiam,
II, and Remsen, an entity controlled by Isaac Perlmutter, were each 50%
partners. The Initial Offering was made in connection with the Reorganization
valued at $226.7 million, pursuant to which, on the Closing Date: (i) RPC made a
cash distribution in an amount of $56.9 million to Remsen (less estimated
Excluded Obligations of $6.6 million) and $48.0 million to RPI (less estimated
Excluded Obligations of $7.1 million and net of a $10.9 million reduction (the
"Preliminary Working Capital Adjustment") based upon the estimated level of
working capital at the Closing Date compared to a specified average level of
working capital of $92.7 million (the "Specified Average")); (ii) the Vestar
Members purchased Remsen's interest in the Company for $33.4 million; (iii) the
Management Investors acquired an equity interest of $1.1 million (including a
cash purchase of $0.86 million and assuming exercise of certain Management
Options with an aggregate exercise price of $0.26 million) in the Company; (iv)
the Company paid Excluded Obligations of approximately $10.7 million; (v) RPI
retained an equity investment in the Company with an implied value of $35.4
million; and (vi) RPC was merged with and into Remington Products Company,
L.L.C. The Vestar Investment consists of Preferred Equity valued at $30.0
million and Common Units valued at $3.4 million, the Kiam Investment consists of
Preferred Equity valued at $32.0 million and Common Units valued at $3.4
million, and the Management Investment consists of Common Units valued at $1.1
million (assuming exercise of certain Management Options).
In connection with the Reorganization, existing indebtedness and accrued
interest of RPC of $41.3 million was refinanced and certain other liabilities
and obligations of the Company, Remsen and RPI (the "Excluded Obligations"),
including certain management bonuses, severance payments and investment banking,
legal, accounting and other fees, were paid by the Company and reduced the
amounts distributed to Remsen and RPI. In addition, the amount distributed to
RPI is subject to an adjustment (the "Final Working Capital Adjustment") based
upon the actual level of working capital
19
<PAGE>
(as determined in accordance with the terms of the agreement giving effect to
the Reorganization) at the Closing Date compared to the estimated working
capital at the Closing Date. The funds required to consummate the Reorganization
were provided by the Initial Offering, borrowings under the Senior Credit
Agreement and the cash proceeds of the Equity Investments. See "Use of Proceeds"
for a table which sets forth the sources and uses of funds for the Transactions.
The Common Units of the Company are owned 43.0% by the Vestar Members, 43.0% by
RPI and 14.0% by the Management Investors (in each case on a fully diluted
basis), and Vestar Corp. I controls the Management Committee and the Management
Committee controls the affairs and policies of the Company. See "Use of
Proceeds," "Management--Directors and Executive Officers" and "Security
Ownership of Certain Beneficial Owners and Management."
The following chart depicts the organizational structure and common equity
interests in the Company and Capital (on a fully diluted basis).
VESTAR CORP. I VESTAR CORP. II MANAGEMENT RPI CORP.
INVESTORS
38.7% 4.3% 14.0% 43.0%
REMINGTON PRODUCTS COMPANY, L.L.C. OBLIGOR SENIOR CREDIT
AGREEMENT
100% GUARANTOR OBLIGOR
REMINGTON CAPITAL CORP. OBLIGOR SENIOR
SUBORDINATED
NOTES
THE VESTAR MEMBERS AND VESTAR
The Vestar Members were formed by Vestar to hold the Vestar Investment.
Vestar is an institutional equity fund managed by Vestar Capital Partners.
Founded in 1988, Vestar Capital Partners is a New York-based investment firm
focusing on investing in management buyouts and recapitalizations of middle
market companies. Since 1988, Vestar Capital Partners has organized and invested
in 17 management buyouts and recapitalizations with an aggregate transaction
value exceeding $2.1 billion including transactions involving Anvil Knitwear,
Inc., Cabot Safety Corporation, Celestial Seasonings, Inc., Clark-Schwebel,
Inc., Consolidated Cigar Corporation, Hampshire Chemical Corporation, La Petite
Academy, Inc., MAG Aerospace Industries, Inc., Pinnacle Automation, Inc.,
Prestone Products Corporation, Pyramid Communications, Inc. and Westinghouse Air
Brake Company.
20
<PAGE>
USE OF PROCEEDS
This Exchange Offer is intended to satisfy certain of the Issuers'
obligations under the Purchase Agreement and the Registration Rights Agreement.
The Issuers will not receive any cash proceeds from the issuance of the New
Notes offered hereby. In consideration for issuing the New Notes contemplated in
this Prospectus, the Issuers will receive Old Notes in like principal amount,
the form and terms of which are the same as the forms and terms of the New Notes
(which replace the Old Notes), except as otherwise described herein. The Old
Notes surrendered in exchange for New Notes will be retired and canceled and
cannot be reissued. Accordingly, issuance of the New Notes will not result in
any increase or decrease in the indebtedness of the Issuers. As such, no effect
has been given to the Exchange Offer in the pro forma statements or
capitalization tables.
The net proceeds received by the Company from the Initial Offering, together
with the initial borrowings under the Senior Credit Agreement and the cash
proceeds from the Equity Investments, were used to consummate the Reorganization
and to pay certain fees and expenses in connection therewith.
The following table sets forth the sources and uses of funds for the
Transactions (dollars in millions):
SOURCES:
Senior Credit Agreement:
Revolving Credit Facilities (1)(2)............................ $ 18.0
Term Loans.................................................... 10.0
Senior Subordinated Notes....................................... 129.0
Equity Investments (3).......................................... 69.7
------
Total sources............................................... $226.7
------
------
USES:
Reorganization consideration (1)(4)............................. $170.7
Refinance existing indebtedness and accrued interest (5)........ 41.3
Fees and expenses (6)........................................... 12.1
General corporate purposes...................................... 2.6
------
Total uses.................................................. $226.7
------
------
- ------------
(1) The amount of the distribution to RPI was reduced by the Preliminary Working
Capital Adjustment of $10.9 million and is subject to the Final Working
Capital Adjustment. To the extent the Final Working Capital Adjustment
results in an increased or decreased distribution to RPI, borrowings under
the Revolving Credit Facilities will be correspondingly increased or
decreased. As of May 23, 1996, Remington's estimated level of working
capital (as determined in accordance with the terms of the agreement giving
effect to the Reorganization) was $10.9 million less than the Specified
Average, which resulted in a drawdown under the Revolving Credit Facilities
of $18,024. See "The Transactions."
(2) As of June 29, 1996, the Company had a drawdown on the Revolving Credit
Facilities of $20.1 million (with an expiration date of June 2002 and an
average interest rate of 8.36%) and $21.8 million of additional availability
thereunder.
(3) Consists of Preferred Equity valued at $62.0 million and Common Units valued
at $7.7 million. RPI and the Vestar Members own Preferred Equity valued at
$32.0 million and $30.0 million, respectively, and RPI, the Vestar Members
and the Management Investors own Common Units valued at $3.4 million, $3.4
million and $0.86 million, respectively. In addition to the direct
investment of $0.86 million by certain of the Management Investors, certain
other Management Investors received Management Options to purchase Common
Units having an aggregate exercise price of $0.26 million. See "Unaudited
Pro Forma Financial Information" and "Management-- Management Equity
Participation."
(4) Consists of (i) a distribution by the Company to Remsen equal to $56.9
million (less estimated Excluded Obligations of $6.6 million), (ii) a
payment by the Vestar Members to Remsen equal to $33.4 million to purchase
Remsen's interest in the Company, (iii) a distribution by the Company to
21
<PAGE>
RPI equal to $48.0 million (less estimated Excluded Obligations of $7.1
million and net of a $10.9 million reduction pursuant to the Preliminary
Working Capital Adjustment and subject to the Final Working Capital
Adjustment), (iv) a payment by the Company of Excluded Obligations of
approximately $10.7 million, and (v) an equity investment retained by RPI in
the Company with an implied value of $35.4 million.
(5) Includes $28.5 million borrowed under a revolving credit agreement which
terminates in December 1996 and $12.8 million borrowed under term loans due
through July 1999, which includes accrued interest of $0.3 million.
Borrowings under the revolving credit agreement and the term loans bear
interest at rates ranging from prime plus 0.50% to prime plus 1.75% (prime
was 8.25% on May 23, 1996).
(6) Does not include $13.7 million of estimated Excluded Obligations which
resulted in a reduction in the amounts distributed to Remsen and RPI.
22
<PAGE>
CAPITALIZATION
The following table sets forth the cash and cash equivalents and the
consolidated capitalization of the Company as of May 23, 1996 on an actual basis
and as adjusted to give effect to the Transactions. The information in this
table should be read in conjunction with "Unaudited Pro Forma Consolidated
Financial Information," "Management's Discussion and Analysis of Financial
Condition and Results of Operations" and the Financial Statements and
accompanying notes thereto appearing elsewhere in this Prospectus.
<TABLE><CAPTION>
MAY 23, 1996
-----------------------
ACTUAL AS ADJUSTED
-------- -----------
(DOLLARS IN THOUSANDS)
<S> <C> <C>
Cash and cash equivalents............................................. $ 5,642 $ 5,642
-------- -----------
-------- -----------
Total debt (including current maturities):
Existing debt....................................................... $ 41,311 $ --
Senior Credit Agreement: (1)
Revolving Credit Facilities (2)................................... -- 18,024
Term Loans........................................................ -- 10,000
Acquisition Facility.............................................. -- --
Senior Subordinated Notes........................................... -- 129,026
-------- -----------
Total debt........................................................ 41,311 157,050
-------- -----------
Partners' capital/members' equity (deficit):
Total partners' capital............................................. 57,537 --
Members' equity:
Preferred Equity.................................................. -- 62,000
Common Units...................................................... -- 7,742
-------- -----------
57,537 69,742
Excess of fair value over predecessor basis....................... -- (73,923)
-------- -----------
Total partners' capital/members' equity (deficit)................. 57,537 (4,181)
-------- -----------
Total capitalization.............................................. $ 98,848 $ 152,869
-------- -----------
-------- -----------
</TABLE>
- ------------
(1) The Senior Credit Agreement provides for (i) Revolving Credit Facilities
consisting of $50,000 to the Company and $20,000 to the Company's U.K.
subsidiary, (ii) Term Loans consisting of $5,000 to the Company and $5,000
to the Company's U.K. subsidiary and (iii) an additional $30,000 Acquisition
Facility. As of May 23, 1996, the Company had $28,000 of additional
availability under the Revolving Credit Facilities.
(2) The amount of the distribution to RPI was reduced by the amount of funded
indebtedness of RPC existing as of the Closing Date and is subject to the
Final Working Capital Adjustment. To the extent the Final Working Capital
Adjustment results in an increased or decreased distribution to RPI,
borrowings under the Revolving Credit Facilities will be correspondingly
increased or decreased. As of May 23, 1996, Remington's estimated level of
working capital (as determined in accordance with the terms of the agreement
giving effect to the Reorganization) was $10.9 million less than the
Specified Average, which resulted in a drawdown under the Revolving Credit
Facilities of $18,024. See "The Transactions."
23
<PAGE>
SELECTED HISTORICAL AND UNAUDITED PRO FORMA FINANCIAL DATA
Set forth below are selected historical and pro forma financial data of RPC
(Predecessor Company) and RPC's predecessor and Remington (Successor Company) as
of the dates and for the periods presented. The selected historical financial
data were derived from the audited consolidated financial statements of RPC and
its predecessor, except for Statement of Operations Data and Other Data for the
twelve months ended December 31, 1993, the six months ended July 1, 1995 and 21
weeks ended May 23, 1996 for RPC and 5 weeks ended June 29, 1996 for Remington
and the balance sheet data at June 29, 1996, which were derived from unaudited
consolidated financial statements of RPC and Remington, respectively. In 1993,
the Company changed its fiscal year-end from September 30 to December 31.
Unaudited financial information for the twelve months ended December 31, 1993
has been provided to facilitate comparisons with the years ended December 31,
1994 and 1995. Operating results for the twelve months ended December 31, 1993
includes operating results presented for the three months ended December 31,
1993 and operating results for the period January 1, 1993 to September 30, 1993,
which are also included in the fiscal year ended September 30, 1993. The
information contained in this table should be read in conjunction with
"Management's Discussion and Analysis of Financial Condition and Results of
Operations", the "Unaudited Pro Forma Consolidated Financial Information" and
the Financial Statements and accompanying notes thereto included elsewhere in
this Prospectus.
<TABLE><CAPTION>
REMINGTON PRODUCTS COMPANY
---------------------------------------------------------------------
YEAR
PREDECESSOR(1) ENDED
---------------------------- TWO MONTHS THREE MONTHS DECEMBER
YEAR ENDED TEN MONTHS ENDED YEAR ENDED ENDED TWELVE MONTHS 31,
SEPTEMBER 30, ENDED JULY SEPTEMBER 30, SEPTEMBER 30, DECEMBER 31, ENDED DECEMBER --------
1991 25, 1992 1992 1993 1993(2) 31, 1993(2) 1994
------------- ------------- ------------- ------------- ------------- -------------- --------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Net sales...................... $ 186,030 $ 128,908 $ 32,456 $ 156,665 $ 71,152 $161,898 $261,446
Cost of sales.................. 100,835 70,198 18,079 85,682 39,001 88,795 150,104
------ ------ ------ ------ ------ ------ --------
Gross profit................... 85,195 58,710 14,377 70,983 32,151 73,103 111,342
Operating expenses:
Advertising and promotion..... 25,954 17,990 2,168 21,723 14,401 21,811 35,774
Selling and marketing......... 28,879 22,445 4,450 23,885 7,795 25,288 32,935
General and administrative.... 16,731 15,981 3,473 17,099 4,347 17,422 19,825
Goodwill amortization......... -- -- 99 595 149 595 1,580
------ ------ ------ ------ ------ ------ --------
71,564 56,416 10,190 63,302 26,692 65,116 90,114
------ ------ ------ ------ ------ ------ --------
Operating profit (loss)........ 13,631 2,294 4,187 7,681 5,459 7,987 21,228
Interest expense............... 14,200 8,246 1,340 4,066 1,248 4,079 6,414
Interest income................ -- -- -- (57) (5) (57) (276)
Other expense (income)......... (1,682) 2,874 282 499 1 666 (721)
------ ------ ------ ------ ------ ------ --------
12,518 11,120 1,622 4,508 1,244 4,688 5,417
------ ------ ------ ------ ------ ------ --------
Income (loss) before provision
for income taxes.............. 1,113 (8,826) 2,565 3,173 4,215 3,299 15,811
Provision (benefit) for income
taxes(3)....................... (242) 646 6 152 191 48 1,086
Minority interest.............. 141 59 -- -- -- -- --
------ ------ ------ ------ ------ ------ --------
Net income (loss).............. $ 1,214 $ (9,531) $ 2,559 $ 3,021 $ 4,024 $ 3,251 $ 14,725
------ ------ ------ ------ ------ ------ --------
------ ------ ------ ------ ------ ------ --------
Income (loss) applicable to
Common
Members' Equity(4)............
BALANCE SHEET DATA (AT PERIOD END):
Working capital................ $ (11,959) $ (59,441) $ 1,603 $ 46,935 $ 70,164 $ 70,164 $ 62,862
Total assets................... 102,984 73,081 115,679 107,027 175,567 175,567 160,543
Total debt..................... 81,956 62,414 45,997 41,743 71,931 71,931 55,093
Cumulative Preferred Equity
Dividend(5)....................
Total shareholder's
(deficit)/partners'
capital/members' equity........ (6,177) (15,314) 40,255 39,364 43,795 43,795 59,964
OTHER DATA AND RATIOS:
Depreciation and
amortization................... 1,369 1,197 501 2,283 796 2,560 4,243
Capital expenditures........... 280 201 26 2,887 1,342 3,935 4,356
Ratio of earnings to fixed
charges(6)..................... 1.1x -- 2.6x 1.6x 3.6x 1.6x 2.9x
<CAPTION>
REMINGTON
SIX MONTHS SUCCESSOR PRO FORMA PRO FORMA
ENDED 21 WEEKS COMPANY TWELVE MONTHS SIX MONTHS
JULY 1, ENDED 5 WEEKS ENDED ENDED ENDED
1995 1995 MAY 23, 1996 JUNE 29, 1996 DECEMBER 31, 1995 JUNE 29, 1996
-------- ---------- ------------ ------------- ----------------- -------------
<S> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Net sales...................... $255,323 $ 82,777 $ 57,939 $ 23,457 $ 255,323 $ 81,936
Cost of sales.................. 143,203 47,253 35,385 14,045 141,981 48,956
-------- ---------- ------ ------ ------ ------
Gross profit................... 112,120 35,524 22,554 9,412 113,342 32,440
Operating expenses:
Advertising and promotion..... 33,035 7,876 6,076 2,337 33,035 8,413
Selling and marketing......... 34,150 15,315 12,997 3,430 33,807 16,252
General and administrative.... 16,764 9,262 19,782 1,745 16,097 13,234
Goodwill amortization......... 1,655 820 650 150 1,624 792
-------- ---------- ------ ------ ------ ------
85,604 33,273 39,505 7,662 84,563 38,691
-------- ---------- ------ ------ ------ ------
Operating profit (loss)........ 26,516 2,251 (16,951) 1,750 28,779 (6,251)
Interest expense............... 7,604 3,303 2,228 1,931 18,096 9,119
Interest income................ (341) (234) (127) (46) (341) (173)
Other expense (income)......... 749 272 12 (197) 565 (185)
-------- ---------- ------ ------ ------ ------
8,012 3,341 2,113 1,688 18,320 8,761
-------- ---------- ------ ------ ------ ------
Income (loss) before provision
for income taxes.............. 18,504 (1,090) (19,064) 62 10,459 (15,012)
Provision (benefit) for income
taxes(3)....................... 1,264 3 (873) 325 1,264 (548)
Minority interest.............. -- -- -- -- -- --
-------- ---------- ------ ------ ------ ------
Net income (loss).............. $ 17,240 $ (1,093) $(18,191) $ (263) $ 9,195 $ (14,464)
-------- ---------- ------ ------ ------ ------
-------- ---------- ------ ------ ------ ------
Income (loss) applicable to
Common
Members' Equity(4)............ $ (1,017) $ 1,414 $ (18,564)
BALANCE SHEET DATA (AT PERIOD E
Working capital................ $ 47,223 75,043
Total assets................... 170,922 184,925
Total debt..................... 56,990 160,050
Cumulative Preferred Equity
Dividend(5).................... $ 754 $ 7,781 $ 11,881
Total shareholder's
(deficit)/partners'
capital/members' equity........ 75,945 (4,733)
OTHER DATA AND RATIOS:
Depreciation and
amortization................... 4,938 2,227 2,005 343 3,270 1,635
Capital expenditures........... 3,291 1,671 1,310 141 3,291 1,451
Ratio of earnings to fixed
charges(6)..................... 3.0x -- -- 1.0x 1.4x --
</TABLE>
- ------------
(1) Amounts are not comparable to subsequent periods. See Note 1 to Consolidated
Financial Statements of RPC.
(2) Balance sheet data includes the assets and liabilities of Clairol that were
acquired on December 23, 1993.
(3) As a general partnership and a Subchapter S corporation, respectively, the
Company and its predecessor were not subject to U.S. federal income taxes or
most state income taxes. Instead, such taxes were paid by the Company's
partners and its predecessor's stockholder. In certain years, the Company
made distributions to its partners to reimburse the partners for such tax
liabilities.
(4) Income (loss) applicable to common capital/member equity is determined by
increasing the net loss or decreasing net income by preferred stock dividend
requirements.
(5) Dividend payments are subject to restrictions set forth in the Indenture.
(6) Earnings used in computing the ratio of earnings to fixed charges consist of
income before provision for income taxes plus fixed charges. Fixed charges
consist of interest expense, including amortization of debt issuance costs,
a portion of operating lease rental expense deemed to be representative of
the interest factor and Preferred Equity dividend requirements. Earnings
were insufficient to cover fixed charges by $8,826, $1,090, $19,064 and
$15,012 for the ten months ended July 25, 1992, the six months ended July 1,
1995, and the 21 weeks ended May 23, 1996 for RPC and pro forma six months
ended June 29, 1996 for Remington, respectively. Due to the seasonal nature
of the Company's business, results to date are not indicative of annual
results; management believes that year end results will reflect adequate
coverage to meet fixed charges.
<PAGE>
UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL INFORMATION
The following unaudited pro forma consolidated financial information (the
"Pro Forma Financial Information") of the Company has been derived by the
application of pro forma adjustments to the historical financial statements of
RPC (Predecessor Company) and Remington (Successor Company) for the periods
indicated. The adjustments are described in the accompanying notes.
The Pro Forma Financial Information gives effect to the Transactions as if
the Transactions had occurred as of January 1, 1995. The Pro Forma Financial
Information does not give effect to any transactions other than the Transactions
and those discussed in the accompanying notes. The Pro Forma Financial
Information is provided for informational purposes only and does not purport to
represent Remington's results of operations had the Transactions in fact
occurred on such dates, nor does it purport to be indicative of the results of
operations as of any future date or for any future period.
The Transactions were accounted for using the purchase method of accounting.
The total cost of the Reorganization was allocated to the tangible and
intangible assets acquired and liabilities assumed based upon their respective
fair values, adjusted to reflect their carryover basis, at the time the
Transactions were consummated. The excess of purchase cost over the historical
basis of the net assets acquired has been allocated in the accompanying Pro
Forma Financial Information based upon preliminary appraisal estimates and other
valuation studies which are in process and certain assumptions that management
believes are reasonable. The actual allocation is subject to the finalization of
these studies and the determination of the Final Working Capital Adjustment;
however, management does not expect that differences between the preliminary and
final allocations will have a material impact on the Company's financial
position or income from operations.
The Pro Forma Financial Information and accompanying notes should be read in
conjunction with the Financial Statements and accompanying notes thereto and the
other financial information included elsewhere in this Prospectus.
25
<PAGE>
UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS DATA
<TABLE><CAPTION>
YEAR ENDED DECEMBER 31, 1995
------------------------------------------
RPC COMPANY
HISTORICAL ADJUSTMENTS PRO FORMA
---------- ----------- ---------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Net sales............................................ $ 255,323 $ $ 255,323
Cost of sales........................................ 143,203 (1,222)(a) 141,981
---------- ----------- ---------
Gross profit......................................... 112,120 1,222 113,342
---------- ----------- ---------
Operating expenses:
Advertising and promotion.......................... 33,035 33,035
Selling and marketing.............................. 34,150 (343)(a) 33,807
General and administrative......................... 16,764 (667)(a)(c) 16,097
Amortization of goodwill and other intangibles..... 1,655 (31)(e) 1,624
---------- ----------- ---------
85,604 (1,041) 84,563
---------- ----------- ---------
Operating profit..................................... 26,516 2,263 28,779
Interest expense..................................... 7,604 10,492(f) 18,096
Interest income...................................... (341) (341)
Other expense........................................ 749 (184)(c) 565
---------- ----------- ---------
8,012 10,308 18,320
---------- ----------- ---------
Income before provision for income taxes............. 18,504 (8,045) 10,459
Provision for income taxes........................... 1,264 1,264
---------- ----------- ---------
Net income........................................... $ 17,240 $(8,045) $ 9,195
---------- ----------- ---------
---------- ----------- ---------
Income (loss) applicable to Common Members' Equity
(g).................................................. $ 1,414
---------
---------
</TABLE>
See Notes to Unaudited Pro Forma Consolidated Statement of Operations Data.
26
<PAGE>
<TABLE><CAPTION>
SIX MONTHS ENDED JUNE 29, 1996
----------------------------------------------------------------------
RPC REMINGTON
RPC PREDECESSOR REMINGTON SUCCESSOR
PREDECESSOR COMPANY COMPANY SUCCESSOR COMPANY COMPANY
21 WEEKS ENDED PRO FORMA 5 WEEKS ENDED PRO FORMA
MAY 23, 1996 ADJUSTMENTS MAY 23, 1996 JUNE 29, 1996 JUNE 29, 1996
------------------- ----------- ------------ ----------------- -------------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS
DATA:
Net sales.............. $ 57,939 $ $ 57,939 $23,457 $ 81,396
Cost of sales (b)...... 35,385 (474)(a) 34,911 14,045 48,956
-------- ----------- ------------ ------- -------------
Gross profit........... 22,554 474 23,028 9,412 32,440
-------- ----------- ------------ ------- -------------
Operating expenses:
Advertising........... 6,076 6,076 2,337 8,413
Selling............... 12,997 (175)(a) 12,822 3,430 16,252
Administrative (b).... 19,782 (8,293)( (c)(d) 11,489 1,745 13,234
Amortization of
goodwill & other
intangibles............ 650 (8)(e) 642 150 792
-------- ----------- ------------ ------- -------------
39,505 (8,476) 31,029 7,662 38,691
-------- ----------- ------------ ------- -------------
Operating profit
(loss)................. (16,951) 8,950 (8,001) 1,750 (6,251)
-------- ----------- ------------ ------- -------------
Nonoperating expenses:
Interest expense...... 2,228 4,960(f) 7,188 1,931 9,119
Interest income....... (127) (127) (46) (173)
Other (income)
expense................ 12 12 (197) (185)
-------- ----------- ------------ ------- -------------
2,113 4,960 7,073 1,688 8,761
-------- ----------- ------------ ------- -------------
Income (loss) before
provision (benefit)
for income taxes...... (19,064) 3,990 (15,074) 62 (15,012)
Provision (benefit)
for income taxes.... (873) (873) 325 (548)
-------- ----------- ------------ ------- -------------
Net loss............... $ (18,191) $ 3,990 $(14,201) $ (263) $ (14,464)
-------- ----------- ------------ ------- -------------
-------- ----------- ------------ ------- -------------
Income (loss)
applicable to Common
Members' Equity (g)... $(17,547) $(1,017) $ (18,564)
------------ ------- -------------
------------ ------- -------------
</TABLE>
See Notes to Unaudited Pro Forma Consolidated Statement of Operations Data.
27
<PAGE>
NOTES TO UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF
OPERATIONS DATA
(DOLLARS IN THOUSANDS)
(a) Represents an adjustment to depreciation expense resulting from the
preliminary allocation of the cost of the Reorganization based on the
estimated useful lives (ranging from five to twenty years) of the related
property, plant and equipment as follows:
<TABLE><CAPTION>
YEAR ENDED 21 WEEKS ENDED
DECEMBER 31, 1995 MAY 23, 1996
----------------- --------------
<S> <C> <C>
Cost of Sales:
Historical depreciation............................... $ 2,451 $ 911
Pro forma depreciation................................ $ 1,229 437
------- -------
Net depreciation adjustment......................... $ 1,222 $ 474
------- -------
------- -------
Marketing:
Historical depreciation............................... $ 688 `$ 337
Pro forma depreciation................................ $ 345 $ 162
------- -------
Net depreciation adjustment......................... $ 343 $ 175
------- -------
------- -------
General and Administrative:
Historical depreciation............................... $ 144 $ 107
Pro forma depreciation................................ 72 51
------- -------
Net depreciation adjustment......................... $ 72 $ 56
------- -------
------- -------
</TABLE>
Pro forma depreciation was allocated to cost of sales, marketing and general
and administrative based on the historical depreciation allocations. The
amount of depreciation allocated to cost of sales, marketing and general
administrative represents 75%, 21% and 4%, respectively, of the total pro
forma depreciation.
(b) The write up of first-in first-out cost basis inventory resulted in a $500
non-recurring charge to cost of sales for the five weeks ended June 29, 1996
and is expected to result in an additional charge of approximately $2,300 in
the first year subsequent to the Reorganization. Additionally, included in
the 21 weeks ended May 23, 1996 administrative expenses is a $2,800
non-recurring charge for professional fees incurred in marketing the sale of
the Company. No pro forma adjustments were made to reflect these charges for
the year ended December 31, 1995 or the 21 weeks ended May 23, 1996.
(c) Represents costs and expenses that were eliminated and replaced, in part, by
new consulting and management agreements upon consummation of the
Transactions. See "Certain Transactions." These costs include:
<TABLE><CAPTION>
YEAR ENDED 21 WEEKS ENDED
DECEMBER 31, 1995 MAY 23, 1996
----------------- ----------------
<S> <C> <C>
Elimination of salaries and benefits (1)............... $ 1,301 $555
Elimination of fees paid to affiliates (2)............. 628 38
------- -----
1,929 593
Consulting Agreement (3)............................... (500) (198)
Management Agreement (4)............................... (500) (198)
Costs to replace affiliate services (5)................ (150) (60)
------- -----
Net adjustment....................................... $ 779 $137
------- -----
------- -----
Allocation of net adjustment:
Administrative expenses.............................. $ 595 $137
Other expense, net................................... 184
------- -----
Net adjustment....................................... $ 779 $137
------- -----
------- -----
</TABLE>
28
<PAGE>
- ------------
(1) Represents the elimination of salaries and benefits paid to Victor K. Kiam,
II and Victor K. Kiam, III pursuant to employment agreements that terminated
at the Closing Date. See "Certain Transactions" and "Notes to Unaudited
Consolidated Financial Statements."
(2) Represents costs incurred under consulting and certain other arrangements
with Remsen and its affiliates that terminated as a result of the
Transactions. See "Certain Transactions."
(3) Represents fees payable to RPI pursuant to a Consulting Agreement (as
defined) that the Company entered into at the Closing Date. See "Certain
Transactions."
(4) Represents fees payable to Vestar Capital pursuant to a Management Agreement
(as defined) that the Company entered into at the Closing Date. See "Certain
Transactions."
(5) Represents management's estimate of additional costs to replace certain
services previously provided by affiliates of Remsen.
(d) Represents an adjustment to administrative expenses for $8.1 million in
management bonuses that were paid as a result of the Transactions.
(e) Represents the adjustments to amortization expense resulting from the
preliminary allocation of the cost of the Reorganization based on the
estimated useful lives of the related intangible assets as follows:
Tradenames.............................................. 40 years
Goodwill................................................ 40 years
Patents................................................. 10 years (average)
<TABLE><CAPTION>
YEAR ENDED 21 WEEKS ENDED
DECEMBER 31, 1995 MAY 23, 1996
----------------- ----------------
<S> <C> <C>
Tradenames ($26,534)................................... $ 663 $ 262
Patents ($4,670)....................................... 467 185
Goodwill ($19,701)..................................... 494 195
------- -------
Pro forma amortization................................. 1,624 642
Historical amortization................................ 1,655 650
------- -------
Net adjustment......................................... $ (31) $ (8)
------- -------
------- -------
</TABLE>
The amount of the purchase accounting adjustment allocated to goodwill,
tradenames and patents was $(1,131), $26,534 and $4,670, respectively. The
goodwill and tradenames are being amortized over 40 years and the patents
are being amortized over 10 years on average.
(f) Reflects interest expense based on the pro forma capitalization of the
Company, as follows:
<TABLE><CAPTION>
YEAR ENDED 21 WEEKS ENDED
DECEMBER 31, 1995 MAY 23, 1996
----------------- --------------
<S> <C> <C>
Senior Subordinated Notes............................... $14,300 $ 5,672
Senior Credit Agreement:
Revolving Credit Facilities(1)........................ 1,487 590
Term Loans (1)........................................ 794 324
Commitment fee (2).................................... 410 163
-------- --------------
Cash interest expense (3)............................... 16,991 6,749
Amortization of deferred financing costs and original
issue discount (4).................................... 1,105 439
-------- --------------
Pro forma interest expense.............................. 18,096 7,188
Elimination of historical interest expense.............. (7,604) (2,228)
-------- --------------
Net adjustment........................................ $10,492 $ 4,960
-------- --------------
-------- --------------
</TABLE>
----------------
(1) Pro forma interest expense was calculated based on the interest rate at
closing of 8.25% (in accordance with the Senior Credit Agreement) and
the balance of the outstanding Revolving Credit Facilities and the
scheduled maturities of the Term Loan. The outstanding amounts
borrowed at May 23, 1996 include $18.0 million borrowed under the
Revolving Credit Facility which terminate on June 30, 2002 and $10.0
million borrowed under the Term Loan which matures on June 30, 2002.
The interest rate at May 23, 1996 under the Revolving Credit Facility
and the Term Loan was 8.25% See "Description of Senior Credit
Agreement."
(2) Represents a commitment fee of 0.5% applied to the pro forma average
unused balance of the Revolving Credit Facilities and the Acquisition
Facility.
29
<PAGE>
(3) A change of 0.125% in the interest rate under the Senior Credit
Agreement would result in a change in pro forma interest expense of $208
for the year ended December 31, 1995, and $58 for the 21 weeks ended May
23, 1996.
(4) Deferred financing costs are amortized over the life of the related
debt, six years for the Revolving Credit Facilities and the Term Loans
and ten years for the Notes. The original issue discount on the Notes is
amortized on a straight line basis over the life of the Notes.
(g) Income (loss) applicable to common capital/Members' Equity is determined by
increasing the net loss or decreasing net income by the Preferred Equity
dividend requirements of $7,781, $3,346 and $754 for the pro forma year
ended December 31, 1995, pro forma 21 weeks ended May 23, 1996 and five
weeks ended June 29, 1996, respectively. Dividend payments are subject to
restrictions set forth in the Indenture.
30
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
OVERVIEW
The Company manufactures and markets men's and women's electrical shavers
and personal care appliances. In addition to its U.S. merchandising and
manufacturing operations, the Company has merchandising subsidiaries in the
United Kingdom, Canada, Germany, Australia and New Zealand and a branch office
in France. The Company markets products throughout Europe, the Middle East,
Africa, Asia and a portion of South America through its subsidiary in the United
Kingdom and distributes products to Japan, Central America and the remainder of
South America from its U.S. headquarters.
In 1992, RPI and Remsen established RPC, a partnership in which RPI and
Remsen each own a 50% interest. Subsequent to the formation of RPC, the owners
installed current management who subsequently initiated several actions to
enhance the business and reduce operating expenses. Among the steps taken to
reduce operating expenses were: (i) the reduction of headcount, particularly at
the Company's headquarters in Bridgeport, Connecticut, (ii) the reorganization
of the operations in Canada and the United Kingdom, which included the
elimination of the warehouse in Canada and the reduction of headcount in both
locations, (iii) the elimination of inefficiencies in the Company's
manufacturing processes, and (iv) the review and reduction, where appropriate,
of general and administrative expenses.
In December 1993, the Company acquired the net assets, consisting
principally of accounts receivable and inventories, of the personal care
appliance division of Clairol for approximately $27.3 million. The Clairol
product lines, principally hairsetters, hairdryers, curling irons and curling
brushes, typically sell at lower price points with smaller gross margins than
the Company's traditional electric shaver lines. The acquisition was funded
primarily by a term loan in the amount of $7.5 million and increased borrowings
of $19.8 million under existing revolving credit facilities. Pursuant to the
terms of the Clairol Acquisition, the Company was required to cease using the
Clairol brand name within six months of the closing. In addition, the Company
ceased utilizing the Clairol facilities by the end of 1994. Since the Clairol
Acquisition, substantially all individuals employed by Clairol at the time of
the acquisition are no longer employed by Remington. The integration of Clairol
into Remington was facilitated by the substantially similar customers and
suppliers of each company.
In 1993, the Company's fiscal year was changed from September 30 to December
31. This change was made to correspond with the Company's operating cycle, given
that a large percentage of the Company's sales occur in the period from October
to December. The amounts referred to in this "Management's Discussion and
Analysis of Financial Condition and Results of Operations" for the twelve months
ended December 31, 1993 are presented in order to facilitate comparisons with
the years ended December 31, 1994 and 1995.
In 1995, RPI and Remsen initiated efforts to sell the Company. The Company
received several proposals from interested parties other than Vestar but was
unable to reach a definitive agreement at a price and on terms acceptable to
both RPI and Remsen. The Reorganization represents the culmination of this sale
process. As a result of this sale process, the Company incurred and expensed
approximately $0.8 million of non-recurring costs in 1995. As a result of the
sale and recapitalization of the Company, bonuses, contract termination and
closing costs in the amount of $10.9 million were expensed during 1996.
RESULTS OF OPERATIONS
The following discussion should be read in connection with "Selected
Historical Financial Data" and the Financial Statements and accompanying notes
thereto included elsewhere in this Prospectus.
The following table sets forth the Company's statement of operations,
including its net sales by its U. S. operations (including export sales from the
U.S.), U.S. service stores, and international operations
31
<PAGE>
(including service stores in Canada and the United Kingdom) and the Company's
results of operations as a percentage of net sales for the twelve months ended
December 31, 1993, the years ended December 31, 1994 and 1995 and the six months
ended July 1, 1995 and June 29, 1996. To facilitate comparison of the operating
results of the periods set forth below, results of operation for the six months
ended June 29, 1996 were obtained by combining, without adjustment, the results
of operations of the Company from January 1, 1996 to May 23, 1996 (the
"Predecessor Period") with those of the Company for the period from May 24, 1996
to June 29, 1996 (the "Successor Period"). See columns denoted "Predecessor" and
"Successor" in the Statements of Income for the six months ended June 29, 1996
included in this report.
<TABLE><CAPTION>
TWELVE MONTHS
ENDED YEAR ENDED SIX MONTHS ENDED
DECEMBER 31, DECEMBER 31, ---------------------
-------------- ---------------- JULY 1, JUNE 29,
1993 1994 1995 1995 1996
-------------- ------ ------ -------- ---------
<S> <C> <C> <C> <C> <C>
(DOLLARS IN MILLIONS)
STATEMENT OF OPERATIONS DATA:
Net Sales:
U.S................................. $ 86.9 $143.7 $131.1 $ 39.0 $ 39.6
U.S. service stores................. 28.9 32.4 32.9 13.1 12.4
International....................... 46.1 85.3 91.3 30.7 29.4
------- ------ ------ -------- ---------
161.9 261.4 255.3 82.8 81.4
Cost of sales......................... 88.8 150.1 143.2 47.3 49.4
------- ------ ------ -------- ---------
Gross profit.......................... 73.1 111.3 112.1 35.5 32.0
Operating expenses:
Advertising and promotion........... 21.8 35.8 33.0 7.9 8.4
Selling and marketing............... 25.3 32.9 34.2 15.3 16.4
General and administrative.......... 17.4 19.8 16.8 9.3 21.6
Goodwill amortization............... 0.6 1.6 1.6 0.8 0.8
------- ------ ------ -------- ---------
Operating profit (loss)............... 8.0 21.2 26.5 2.2 (15.2)
Interest expense...................... 4.1 6.4 7.6 3.3 4.2
Interest income....................... (0.1) (0.3) (0.3) (0.3) (0.2)
Other (income) expense................ 0.7 (0.7) 0.7 0.3 (0.2)
------- ------ ------ -------- ---------
Income (loss) before income taxes..... 3.3 15.8 18.5 (1.1) (19.0)
Provision (benefit) for income
taxes................................... -- 1.1 1.3 -- (0.5)
------- ------ ------ -------- ---------
Net income (loss)..................... $ 3.3 $ 14.7 $ 17.2 $ (1.1) $ (18.5)
------- ------ ------ -------- ---------
------- ------ ------ -------- ---------
STATEMENT OF OPERATIONS AS A PERCENTAGE
OF NET SALES:
Net sales............................. 100.0% 100.0% 100.0% 100.0% 100.0%
Cost of sales......................... 54.9 57.4 56.1 57.1 60.7
------- ------ ------ -------- ---------
Gross profit.......................... 45.1 42.6 43.9 42.9 39.3
Operating expenses:
Advertising and promotion........... 13.5 13.7 12.9 9.5 10.3
Selling and marketing............... 15.6 12.6 13.4 18.5 20.1
General and administrative.......... 10.7 7.6 6.6 11.2 26.5
Goodwill amortization............... 0.4 0.6 0.6 1.0 1.0
------- ------ ------ -------- ---------
Operating profit (loss)............... 4.9 8.1 10.4 2.7 (18.6)
Interest expense...................... 2.5 2.5 3.0 4.0 5.2
Interest income....................... (0.1) (0.1) (0.1) (0.4) (0.3)
Other (income) expense................ 0.5 (0.3) 0.3 0.4 (0.3)
------- ------ ------ -------- ---------
Income (loss) before income taxes..... 2.0 6.0 7.2 (1.3) (23.2)
Provision (benefit) for income
taxes................................... -- 0.4 0.5 -- (0.6)
------- ------ ------ -------- ---------
Net income (loss)..................... 2.0% 5.6% 6.7% (1.3)% (22.6)%
------- ------ ------ -------- ---------
------- ------ ------ -------- ---------
</TABLE>
32
<PAGE>
SIX MONTHS ENDED JUNE 29, 1996 COMPARED TO SIX MONTHS ENDED JULY 1, 1995
NET SALES. Net sales for the six months ended June 29, 1996 were $81.4
million compared to $82.8 million for the six months ended July 1, 1995, a
decrease of 1.7% Net sales in the United States increased to $39.6 million in
the first half of 1996 from $39.0 million in the first half of 1995, a 1.5%
increase.
Net sales through the Company's U.S. service stores declined to $12.4
million in the first half of 1996, from $13.1 million in the first half of 1995,
a decrease of 5.3%. Same store sales declined 2.1% from the first half of 1995
to the first half of 1996. The decline in net sales was primarily due to the
closing or renovation of nine stores and the opening of one new store subsequent
to the first half of 1995 and to the discontinuation of a direct mail catalog
that was distributed in the latter part of 1994 which produced net sales in
1995.
International net sales decreased to $29.4 million in the first half of 1996
from $30.7 million in the first half of 1995, a decrease of 4.3%. Most of this
decline occurred as a result of lower net sales in the United Kingdom and
Germany across all product categories and the closing of the branch operation in
Japan in the second quarter of 1995, offset, in part, by higher net sales in
Australia of electric shavers, men's grooming products and home health
appliances.
GROSS PROFIT. Gross profit decreased to $32.0 million, or 39.3% of net
sales, in the first half of 1996, from $35.5 million, or 42.9% of net sales, in
the first half of 1995. This decrease is primarily attributable to an interim
LIFO (Last-in, First-out) charge of $1.7 million, higher sales return provision
of $1.0 million, an inventory purchase accounting adjustment of $0.5 million and
lower absorption of overhead at the Company's Bridgeport manufacturing facility
which operated at lower production rates offset by the capitalization of net
unfavorable manufacturing variances into ending inventory.
ADVERTISING AND PROMOTION. Advertising and promotion expense increased to
$8.4 million in the first half of 1996 from $7.9 million in the first half of
1995 due to higher spending in the U.S.
SELLING AND MARKETING. Selling and marketing expense was $16.4 million in
the first half of 1996 compared to $15.3 million in the first half of 1995 due
to increased commission and promotional costs in Australia and higher costs
associated with the opening of new stores in the United Kingdom accounted for
higher spending in 1996.
GENERAL AND ADMINISTRATIVE. General and administrative expense increased to
$21.6 million in the first half of 1996 from $9.3 million in the first half of
1995. The payment of bonuses, termination of employment agreements and closing
costs associated with the recapitalization of the business accounted for $10.9
million of the increase in cost. In addition, a charge of $1.3 million was taken
related to the bankruptcy of the Company's largest customer in Canada.
Additional charges of $0.5 million for insurance and property taxes were offset
by general spending reductions.
OPERATING LOSS. Operating loss in the first half of 1996 was $15.2 million
compared to $2.2 million of income in the first half of 1995 for the reasons
described above.
INTEREST EXPENSE. Net interest expense increased to $4.2 million in the
first half of 1996 from $3.3 million in the first half of 1995. Higher debt
costs associated with the recapitalization of the business resulted in the
increase.
PROVISION FOR INCOME TAXES. The benefit for income taxes was $0.5 million
for the first half of 1996 compared to no tax impact for the first half of 1995.
The income tax benefits for foreign operating losses incurred in the United
Kingdom and Canada during 1996 were recognized as realization of the benefit is
likely.
33
<PAGE>
YEAR ENDED DECEMBER 31, 1995 COMPARED TO YEAR ENDED DECEMBER 31, 1994
NET SALES. Net sales for the year ended December 31, 1995 were $255.3
million compared to $261.4 million for the previous year, a decrease of 2.3%.
The decrease in net sales in 1995 was due to a decline in net sales in the
United States to $131.1 million in 1995 from $143.7 million in 1994, partially
offset by a 7.0% increase in international net sales to $91.3 million in 1995
from $85.3 million in 1994. The decline in the United States was almost entirely
attributable to a decrease in electric shaver and shaver accessory sales.
Management believes that this decrease was a result of: (i) a decline in the net
sales to certain of the Company's smaller customers due to uncertainty regarding
the Company's ownership status, (ii) a conservative buying policy on the part of
many of the Company's customers who anticipated a disappointing Christmas retail
season, and (iii) a reduction in net sales to Wal-Mart principally due to a
reduction by Wal-Mart in its inventory levels and the consolidation of the
number of its warehouses stocking shavers. Management believes that Wal-Mart is
not likely to repeat inventory management actions of the same magnitude as in
1995. Despite these inventory management initiatives, Wal-Mart point of sale
data indicate that retail sales of the Company's products increased
approximately 17% in 1995 from 1994.
Net sales through the Company's U.S. service stores increased to $32.9
million in 1995 from $32.4 million in 1994, an increase of 1.5%. Same store
sales increased 7.1% from 1994 to 1995. The increase in same store net sales was
offset by the closing of six stores with one new store opening in 1995 and the
discontinuation of a direct mail catalog that was distributed in 1994.
International net sales increased 7.0% to $91.3 million in 1995 from $85.3
million in 1994. Most of this increase occurred in the United Kingdom as a
result of the opening of two new service stores in 1995, an increase in net
sales to United Kingdom export markets and the strengthening of the Pound
Sterling relative to the U.S. dollar. Substantial increases in net sales of
women's personal care products and men's grooming products more than offset a
modest decline in shaver and accessory sales.
GROSS PROFIT. Gross profit increased to $112.1 million, or 43.9% of net
sales, in 1995 from $111.3 million, or 42.6% of net sales, in 1994 despite the
decline in worldwide net sales. The increase in gross profit was primarily
attributable to the elimination of certain charges incurred in 1994, including:
(i) a $2.2 million inventory writedown of a discontinued product, (ii)
approximately $1.5 million of air freight expenses incurred due to manufacturing
delays that occurred at a former supplier, and (iii) close-out sales of Clairol
branded products prior to changing the brand name to Remington. These
eliminations were offset in part by a decrease in gross profit due to the
increased percentage of net sales generated by women's personal care products,
which typically sell at lower gross margins than the Company's traditional
shaver products.
ADVERTISING AND PROMOTION. Advertising and promotion expense decreased to
$33.0 million in 1995, or 12.9% of net sales, from $35.8 million, or 13.7% of
net sales, in 1994. This decrease was principally attributable to a $2.9 million
reduction in advertising expenditures during the 1995 Christmas retail season as
a result of below normal purchases by the Company's customers in anticipation of
disappointing Christmas retail sales in the United States.
SELLING AND MARKETING. Selling and marketing expense increased to $34.2
million, or 13.4% of net sales, in 1995 from $32.9 million, or 12.6% of net
sales, in 1994. This increase was primarily due to a $1.5 million increase of
costs associated with an increase in the number of service stores in the United
Kingdom and costs associated with the increase in international net sales,
offset by lower selling expenses in the United States due to decreased sales.
GENERAL AND ADMINISTRATIVE. General and administrative expenses decreased to
$16.8 million, or 6.6% of net sales, in 1995 from $19.8 million, or 7.6% of net
sales, in 1994. In the United States, headcount reductions accounted for $1.0
million of this decrease and purchasing efficiencies for insurance and medical
benefits and decreased professional fees generated approximately $1.0 million of
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this decrease. In addition, cost savings in the United Kingdom, principally
related to headcount reductions, and the closing of the Japanese branch office
accounted for $0.8 million of this decrease.
OPERATING PROFIT. Operating profit increased to $26.5 million, or 10.4% of
net sales, in 1995 from $21.2 million, or 8.1% of net sales, in 1994.
INTEREST EXPENSE. Interest expense increased to $7.6 million in 1995 from
$6.4 million in 1994. Approximately $0.8 million of this increase was primarily
due to an increase in interest rates in 1995 from 1994. In addition, average
borrowings increased in 1995 by $4.2 million due to an approximate $13.2 million
increase in average inventories. Average inventories were higher in 1995 due to
the aforementioned decline in net sales which occurred after production
schedules and inventory purchases had been committed.
PROVISION FOR INCOME TAXES. The provision for income taxes was $1.3 million
in 1995 as compared to $1.1 million in 1994. The 1995 provision for foreign
income taxes was reduced by $1.3 million due to utilization of foreign net
operating loss carryforwards and an additional $0.6 million for the reversal of
valuation allowances on 1995 foreign deferred tax asset balances. Due to
improvements in operating performance at the Company's United Kingdom
subsidiary, management believes such deferred tax assets are likely to be
realized in future periods.
YEAR ENDED DECEMBER 31, 1994 COMPARED TO TWELVE MONTHS ENDED DECEMBER 31, 1993
NET SALES. Net sales increased 61.5% to $261.4 million in 1994 from $161.9
million in 1993. An increase in net sales of women's personal care products and
home health appliances, primarily due to the Clairol Acquisition, accounted for
approximately $64.9 million and $10.3 million, respectively, of the increase in
net sales. The remaining $24.3 million increase in net sales was principally
attributable to a $13.5 million increase in net sales of the Triple FoilTM
shaver which was introduced in 1993, a $5.6 million increase in the net sales of
other electric shavers, primarily rotary and Dual FoilTM, in the United States,
a $1.4 million increase in net sales of shaver accessories and a $3.5 million
increase in net sales through the Company's U.S. service stores. Net sales in
the United States (excluding net sales through the Company's U.S. service
stores) increased 65.4% to $143.7 million in 1994 from $86.9 million in 1993.
Net sales through the Company's U.S. service stores increased to $32.4
million in 1994 from $28.9 million in 1993, an increase of 12.1%. This increase
was primarily attributable to a $1.5 million, or 6.8%, increase in same store
sales and a net increase of $1.0 million in net sales as a result of the opening
of five stores and the closing of eight stores. In addition, $0.8 million of
this increase was attributable to net sales resulting from the introduction of a
direct mail catalog in 1994.
International net sales increased 85.0% to $85.3 million in 1994 from $46.1
million in 1993. An increase in net sales of women's personal care products and
health care products, primarily due to the Clairol Acquisition, accounted for
approximately $35.0 million of this increase. The remainder of this increase was
attributable to an increase in net sales of other products, including Triple
FoilTM shavers, of approximately $4.2 million.
GROSS PROFIT. Gross profit increased to $111.3 million, or 42.6% of net
sales, in 1994 from $73.1 million, or 45.1% of net sales, in 1993. Approximately
$25.9 million of the increase was due to the increase in net sales of women's
personal care and health care products, primarily due to the Clairol
Acquisition, with the remainder of the increase primarily due to the increased
sales of shavers and shaver accessories. The decrease in gross profit as a
percentage of net sales was attributable to close-out sales of Clairol branded
inventory, which had to be disposed of by June 30, 1994 under the terms of the
Clairol Acquisition agreement, a $2.2 million write-down of a discontinued
product, and the addition of the lower margin women's personal care Clairol
product line.
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ADVERTISING AND PROMOTION. Advertising and promotion expense increased 64.2%
to $35.8 million, or 13.7% of net sales, in 1994 from $21.8 million, or 13.5% of
net sales, in 1993. This increase was attributable to advertising expenses
associated with the conversion of the Clairol product lines to the Remington
brand name as well as to an increase in shaver advertising.
SELLING AND MARKETING. Selling and marketing expense increased 30.0% to
$32.9 million, or 12.6% of net sales, in 1994 from $25.3 million, or 15.6% of
net sales, in 1993. This increase was attributable to: (i) the Clairol
Acquisition and the resulting increases in direct selling expenses (primarily
sales commissions) and the costs of standardizing the packaging of all products
from both the Clairol and Remington product lines and (ii) a net increase of
$1.4 million through the Company's service stores due to new store openings and
the introduction of a direct mail catalog. The decrease of general and
administrative expense as a percentage of net sales was primarily attributable
to an expense reduction program which included consolidation of redundant
Remington and Clairol functions following the Clairol Acquisition and a
reduction of sales commission rates on sales in the United States.
GENERAL AND ADMINISTRATIVE. General and administrative expense increased
13.8% to $19.8 million, or 7.6% of net sales, in 1994 from $17.4 million, or
10.7% of net sales, in 1993. This decrease in general and administrative expense
as a percentage of net sales was due to the consolidation of the Clairol
operations into the Remington infrastructure as well as a continuation of the
expense reduction program initiated in 1993 with the installation of the current
management team. Included in 1994 expense is an additional provision for
doubtful accounts due to the Clairol Acquisition.
OPERATING PROFIT. Operating profit increased to $21.2 million, or 8.1% of
net sales, in 1994 from $8.0 million, or 4.9% of net sales, in 1993.
INTEREST EXPENSE. Interest expense increased to $6.4 million in 1994 from
$4.1 million in 1993. Borrowings of $27.3 million incurred in connection with
the Clairol Acquisition and an increase in interest rates accounted for this
increase.
PROVISION FOR INCOME TAXES. The 1994 provision for income taxes of $1.1
million consists of foreign and state and local income taxes. During 1993,
foreign income tax provisions were offset by tax benefits recognized by certain
foreign subsidiaries that incurred operating losses.
EFFECTS OF CHANGES IN EXCHANGE RATES
The Company's results of operations are affected by changes in exchange
rates as the Company prices its products in Europe, Canada and Australia in
local currency. While many of the Company's selling and distribution costs are
also denominated in these currencies, a large portion of the product costs are
U.S. dollar denominated. As a result, a decline in the value of the U.S. dollar
relative to these other currencies can have a favorable effect on the
profitability of the Company and, conversely, an increase in the value of the
U.S. dollar relative to these other currencies can have a negative effect on the
profitability of the Company. The Company takes precautions against these
fluctuations by entering into foreign exchange forward contracts, which, in
effect, lock in the U.S. dollar cost for products the Company's foreign
subsidiaries purchase. The net effect of changes in foreign exchange rates and
foreign currency forward contracts of the Company was not material during the
twelve months ended December 31, 1993 or the years ended December 31, 1994 and
1995 or the six-month periods ended June 29, 1996 and July 1, 1995.
LIQUIDITY AND CAPITAL RESOURCES
During 1993, 1994, 1995 and the six-month periods ended July 1, 1995 and
June 29, 1996, the Company generated (used) approximately $10.5 million, $14.8
million, $0.7 million, ($8.8) million and $12.4 million, respectively, in cash
from operating activities. The reduction in 1995 net cash flows from operating
activities is principally due to an increase in receivables of $14.0 million and
a decrease in
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accounts payable of $11.6 million during 1995 as compared to 1994. This increase
in receivables is largely due to a change in the timing of customer receipts,
including $7.7 million received from Wal-Mart, the Company's largest customer,
in the first week of 1996. Accounts payable declined due to the relative timing
of payments of amounts due to suppliers.
In December 1993, the Company acquired the assets, consisting principally of
accounts receivable and inventories, of the personal care appliance division of
Clairol for approximately $27.3 million. The acquisition was funded primarily by
a term loan in the amount of $7.5 million and increased borrowings of $19.8
million under existing revolving credit facilities utilizing the acquired
accounts receivable and inventories as collateral.
The Company's operations are not capital intensive. During 1993, 1994, 1995
and the six-month periods ended July 1, 1995 and June 29, 1996, the Company
purchased property, plant and equipment of $3.9 million, $4.4 million, $3.3
million, $1.7 million and $1.5 million, respectively. The Company's 1996 capital
expenditure budget is $5.0 million, of which approximately $3.0 million will be
used for purchases of tools and molds for new products, approximately $1.0
million will be used for opening 12 service stores and approximately $1.0
million will be used for information and warehouse management systems upgrades.
During 1993, 1994, 1995 and the six-month periods ended July 1, 1995 and
June 29, 1996, the Company repaid aggregate principal amounts on term loans of
$3.6 million, $3.5 million, $13.6 million, $0 and $13.3 million, respectively,
with cash generated from operations, the recapitalization or increases in net
borrowings under the Company's revolving credit agreements.
The Company's primary sources of liquidity are funds generated from
operations and borrowings available pursuant to the Senior Credit Agreement. The
Senior Credit Agreement provides for $70 million in Revolving Credit Facilities,
$10 million in Term Loans and an additional $30 million Acquisition Facility.
The loans under the Senior Credit Agreement bear interest, at the Company's
option, (a) in the case of the Company, at the Base Rate (as defined) plus 1.0%
or LIBOR (as defined) plus 2.25% and (b) in the case of loans to the Company's
U.K. subsidiary, the Sterling Base Rate (as defined) plus 1.0% or the
EuroSterling Rate (as defined) plus 2.25%; provided, however, the interest rates
are subject to reduction if certain requirements of financial performance are
met. The Term Loans are repayable quarterly over six years. Borrowings under the
Revolving Credit Facilities mature in six years. The Company believes that cash
generated from operations and borrowing resources will be adequate to permit the
Company to meet both its debt service requirements and capital requirements for
the next twelve months, although no assurance can be given in this regard. See
"Description of Senior Credit Agreement."
SEASONALITY
Sales of the Company's products are highly seasonal, with a large percentage
of net sales occurring during the Christmas selling season. The Company
typically derives a significant portion of its annual net sales in the fourth
quarter of each year while incurring losses in the first quarter of each year.
For example, the Company derived in excess of 40% of its annual net sales in the
fourth quarter and incurred operating losses in the first quarter in each of
1994 and 1995. As a result of this seasonality, the Company's inventory and
working capital needs fluctuate substantially during each year. In addition,
Christmas orders from retailers are often made late in the year, making
forecasting of production schedules and inventory purchases difficult. Any
adverse change in the Company's results of operations in the fourth quarter
would have a material adverse effect on the Company's financial condition and
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results of operations. The following table shows the Company's net sales by
quarter for each of the past two fiscal years.
<TABLE><CAPTION>
FISCAL QUARTER 1994 1995
- ------------------------------------------ --------------- ---------------
<S> <C> <C> <C> <C>
(DOLLARS IN MILLIONS)
First Quarter............................. $ 39.0 14.9% $ 33.3 13.0%
Second Quarter............................ 54.8 21.0 49.5 19.4
Third Quarter............................. 58.1 22.2 66.5 26.1
Fourth Quarter............................ 109.5 41.9 106.0 41.5
------ ----- ------ -----
$261.4 100.0% $255.3 100.0%
------ ----- ------ -----
------ ----- ------ -----
</TABLE>
INFLATION
In recent years, inflation has not had a material impact upon the results of
the Company's operations.
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BUSINESS
GENERAL
Remington is a major manufacturer and marketer of men's and women's
electrical personal care appliances. The Company designs, manufactures, markets
and distributes on a worldwide basis men's and women's electric shavers and
accessories, women's personal care appliances, men's electric grooming products,
travel products and other small electric consumer appliances. The Company
believes that its strong market position is attributable to the strength of the
Remington brand name, product quality, breadth of products sold, active new
product development and innovation, extensive distribution network and marketing
and manufacturing expertise.
The Company's two primary product lines, electric shavers and related
accessories and women's personal care appliances, accounted for approximately
44% and 30%, respectively, of the Company's 1995 net sales of $255.3 million.
The Company's service stores and other consumer products, such as men's grooming
products and travel appliances, accounted for the remaining approximately 26% of
1995 net sales. The following table sets forth the net sales and percentage of
total net sales during each of the past three years attributable to the
Company's product lines (dollars in millions):
<TABLE><CAPTION>
1993 1994 1995
-------------- -------------- --------------
<S> <C> <C> <C> <C> <C> <C>
$ % $ % $ %
------ ---- ------ ---- ------ ----
Electric shavers and accessories............. $102.7 63% $123.7 47% $111.6 44%
Women's personal care appliances............. 5.8 4% 68.9 27% 76.6 30%
Men's grooming products...................... 18.7 12% 19.0 7% 22.0 9%
Travel appliances............................ 6.8 4% 5.6 2% 5.5 2%
All other sales.............................. 27.9 17% 44.2 17% 39.6 15%
------ ---- ------ ---- ------ ----
$161.9 100% $261.4 100% $255.3 100%
------ ---- ------ ---- ------ ----
------ ---- ------ ---- ------ ----
</TABLE>
The Company's products are sold in the United States and internationally in
over 85 countries. Remington has built a strong franchise with both retailers
and consumers in the United States and abroad, with the Company's products sold
through mass merchandisers, catalog showrooms, drug store chains and department
stores in addition to the Company's 81 service stores.
Remington's strong brand image coupled with new product innovations has
helped the Company achieve leading market positions in most of its product
lines. In the U.S. men's electric shaver market, the Company has the second
highest market share, estimated at 32% in 1995. In the domestic women's electric
shaver market, the Company has the leading market position with an estimated
share of 37% in 1995. In the U.S. women's hairsetter market, the Company has the
leading market share position, with an estimated 55% share in 1995. Remington
has a leading position in certain international markets in many of its product
categories such as men's and women's electric shavers, hairsetters, hairdryers,
curling irons, curling brushes and home haircut kits.
HISTORY
The Company traces its roots back to a family business started in 1816 by
Eliphalet Remington, Jr., a blacksmith turned gunsmith who started E. Remington
and Sons, Inc. This company, among its other achievements, shipped the world's
first commercial typewriter in 1873. The typewriter business was sold in 1886 to
a company which, through a series of divestitures, mergers and consolidations,
became Remington Rand, Inc. and eventually Sperry Rand Corporation ("Sperry
Rand"), while the original gun business became Remington Arms Company, Inc.
("Remington Arms"). Remington Rand, Inc. introduced its first electric shaver to
the United States market in 1937 and demonstrated it at the 1939 New York
World's Fair. In the late 1970s, Sperry Rand, in an effort to focus on its core
businesses, made the strategic decision to divest the Remington shaver business.
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In 1979, Victor K. Kiam, II acquired the assets of the Remington shaver
operations from Sperry Rand. Following the acquisition, Mr. Kiam refocused the
Company's marketing program in an effort to enhance the Remington brand name and
build up the Company's core electric shaver product lines. The success of Mr.
Kiam's efforts resulted in a substantial increase in net sales from $47.4
million in 1980 to $186.0 million in 1991. In 1992, as part of a restructuring
of Mr. Kiam's investments, the Company was reorganized with Remsen, an entity
owned by Mr. Perlmutter, acquiring a 50% interest in the Company.
Subsequent to such restructuring, the owners installed the current
management team who took a number of steps to enhance the Company's business.
Such actions included reducing operating expenses and refocusing the Company's
product development activities. To reduce operating expenses, the Company: (i)
reduced its headcount, particularly at the Company's headquarters in Bridgeport,
Connecticut, (ii) restructured its operations in Canada and the United Kingdom,
which included eliminating a warehouse in Canada and reducing headcount in both
locations, (iii) changed its manufacturing processes to reduce operating costs,
and (iv) reduced, where appropriate, general and administrative expenses.
New product introductions have been an important focus of the Company under
current management. In 1993, the Company introduced the Remington Triple FoilTM
series of men's shavers, which reversed the Company's downward trend in shaver
sales and market share. Other recent new product introductions include the Dual
FoilTM line of shavers for men, the Express SetterTM hairsetter and the Aero
SeriesTM hairdryer in 1994; the Smart SetterTM hairsetter in 1995; and the Dual
FoilTM wet/dry shaver for men and a wet/dry rotary shaver for women in 1996.
In December 1993, Remington acquired the net assets, consisting principally
of accounts receivable and inventories, of the personal care appliance business
of Clairol from Bristol-Myers Squibb Company.
COMPETITIVE STRENGTHS
Remington attributes its growth and profitability to the following
competitive strengths:
PREMIER BRAND NAME. Management believes that the Remington name is among the
strongest brand names in the consumer appliance industry. For over 150 years,
the Remington name has been prominently displayed on many products. The Company
has spent over $300 million on media and cooperative advertising over the last
ten years to establish further global recognition of the Remington brand name.
The Remington brand name has been and continues to be associated with high
quality products recognized for their dependability and value. The December 1993
acquisition and successful conversion of Clairol and its products to the
Remington brand name underscores the adaptability of the Remington brand name to
other consumer product categories.
SIGNIFICANT MARKET SHARES. Remington's brand image has helped the Company
achieve leading market positions in most of its product lines. Remington enjoys
the second largest share of the men's electric shaver market in the United
States, with an estimated 1995 share of 32%, the largest share of the women's
electric shaver market in the United States, with an estimated 1995 share of
37%, and the largest share of the hairsetter market in the United States, with
an estimated 1995 share of 55%. Management believes that in each of the
Company's key international markets, the United Kingdom, Australia and Canada,
Remington has significant shares in each of these categories. See "--Highly
Competitive Markets; Competition."
ACTIVE NEW PRODUCT DEVELOPMENT AND INNOVATION. The Company focuses on new
product innovations and product line extensions. This new product orientation
has enabled Remington to generate approximately 30% of each of its 1994 and 1995
net sales from new products and product line extensions introduced since the
beginning of the preceding year. Product innovation is important as it
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stimulates demand for the Company's products as well as provides the opportunity
to command higher prices and gross margins for these new products. Recent
innovations have included the Triple FoilTM men's shaver and the Smart SetterTM
hairsetter, both of which contain proprietary technology. Other recent new
product introductions include the Dual FoilTM line of shavers for men, the
Express SetterTM hairsetter, the Aero SeriesTM hairdryer and a wet/dry rotary
shaver for women. See "--Research and Product Development."
LARGE INSTALLED BASE. Management believes that the Company's installed base
of electric shavers is in excess of 12 million units in the United States. Based
on warranty card surveys, management believes that Remington's electric shaver
customers have a high degree of brand loyalty and estimates that approximately
50% of the Company's shaver sales are to existing customers. These customers,
during the average four-year life of an electric shaver, also purchase
replacement parts, cleaning agents and pre-shave products. For optimal shaving
performance, the Company recommends that customers replace Remington foils and
cutters every six months and twelve months, respectively. To increase sales of
replacement parts, the Company has recently introduced marketing programs
designed to automatically send replacement parts to its customers by mail.
Remington's shaver accessories business is one of the Company's most predictable
and profitable product lines, generating high gross margins. In addition,
management believes that the domestic electric shaver industry is mature and
largely insensitive to economic cycles. Since 1988, annual U. S. electric shaver
sales have increased from 8.2 million units to an estimated 9.2 million units in
1995. See "--Products."
EXTENSIVE DISTRIBUTION NETWORK. Remington has an extensive distribution
network in the United States and in certain international markets, with products
sold through leading mass-market retailers (Wal-Mart, Kmart and Target), catalog
showrooms (Service Merchandise and Argos (U.K.)), drug store chains (Walgreens,
Eckerd, Revco and Boots (U.K.)) and department stores (Sears and Eatons
(Canada)). The Company's strong relationships with its key customers have
contributed to increased overall retail shelf space during 1995. Shelf facings
are important for presenting the consumer with the breadth of Remington products
available as well as increasing the probability of a sale. The Company also
distributes its products through 81 Company-owned service stores. Management
believes Remington's service stores contribute to the strength of the franchise
by providing direct customer service, a reliable source of customer feedback and
market information regarding the Company's and competitors' products as well as
providing an additional distribution channel for sales. See "--United States
Distribution."
EXPERIENCED SENIOR MANAGEMENT WITH SIGNIFICANT EQUITY OWNERSHIP. Remington's
six members of senior management have an average of approximately 25 years of
consumer products industry experience. The Company believes that its management
team can aggressively develop new products, identify attractive acquisition
candidates and consolidate complementary businesses and product lines into the
Company's existing manufacturing operations and distribution infrastructure,
based upon their demonstrated ability to manage effectively the business. In
connection with the Transactions, the Management Investors acquired an equity
investment of $1.1 million pursuant to the Management Investment and own
approximately 11.13% (14.0% on a fully diluted basis) of the Common Units of the
Company. See "Management--Management Equity Participation."
GROWING INTERNATIONAL OPERATIONS. Remington's international operations
generated 35.8% of the Company's 1995 net sales and represent a significant
future growth opportunity. The international operations have grown significantly
since 1993, increasing from $46.1 million in net sales in 1993 to $91.3 million
in net sales in 1995 while representing 28.5%, 32.6% and 35.8% of the Company's
total net sales in 1993, 1994 and 1995, respectively. The Company's
international network of subsidiaries and distributors extends to over 85
countries worldwide. See "--International Operations and Distribution."
MANUFACTURING AND PROCUREMENT EXPERTISE. Remington manufactures
approximately one-third of its products at its Bridgeport, Connecticut facility
and outsources the remaining approximate two-thirds
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<PAGE>
of its products to overseas suppliers. The Company has over 50 years of
experience in developing, manufacturing and continually enhancing the
proprietary cutting systems used in its shavers. The Company assembles certain
of its foil shavers and manufactures most of its foil cutting systems in
Bridgeport using proprietary cutting system technology and machinery. The
products produced by Remington's overseas suppliers are manufactured to the
Company's specifications using procedures and technology developed jointly by
the Company and such suppliers. See "--Manufacturing Operations" and
"--Suppliers."
GROWTH STRATEGY
The Company's strategy is to achieve further growth in net sales,
profitability and cash flow by: (i) capitalizing on the strength of the
Remington brand name, (ii) expanding international operations, (iii) introducing
new products and innovations to existing products, (iv) continuing to
rationalize manufacturing and overhead costs, and (v) acquiring complementary
businesses and product lines.
CAPITALIZING ON THE STRENGTH OF THE REMINGTON BRAND NAME. The Remington
brand name enjoys worldwide recognition and awareness among retailers and
consumers. The Company will continue to leverage the Remington brand name to
achieve global distribution of new products and product line extensions.
Management believes that consumers would be interested in purchasing small
electric products that bear the Remington brand name but which the Company does
not currently manufacture or distribute. The Company intends to increase its
advertising and promotion activity to broaden further consumer awareness of its
products and to pursue selective opportunities to license the Remington name.
EXPANDING INTERNATIONAL OPERATIONS. The Company intends to expand its global
presence and increase its penetration in markets where it does not currently
enjoy significant market shares by: (i) establishing direct distribution systems
in markets where the Company presently utilizes local distributors and (ii)
establishing distribution channels in countries in which the Company has no
existing distribution network. As part of this strategy, Remington has several
strategic initiatives underway, including opening up and developing distribution
channels in China and increasing the Company's channels of distribution in
Germany and France.
INTRODUCING NEW PRODUCTS AND INNOVATIONS TO EXISTING PRODUCTS. The Company
will continue to introduce new products and make innovations to its existing
products in response to consumer preferences, changing market dynamics and
technological advancements. The Company strives to introduce and market products
with innovative features and concepts not presently available and which the
Company can produce at a reasonable cost and sell at higher prices and gross
margins. For example, in 1995 the Company introduced the Smart SetterTM
hairsetter rollers which, through proprietary technology, change color to
indicate when proper heating has been achieved. The Company has an aggressive
product innovation and product line extension schedule over the next 18 months.
During this period, the Company plans to introduce over 30 new products and
product line extensions, including shavers, hairsetters, hairdryers and curling
irons.
CONTINUING TO RATIONALIZE MANUFACTURING AND OVERHEAD COSTS. The Company has
an operating philosophy that focuses on cost containment. The Company intends to
continue to identify ways in which it can improve its efficiency while
maintaining its strong competitive position. Since 1993, the Company's operating
profit as a percentage of net sales has increased from 4.9% in 1993 to 10.4% in
1995 principally due to cost savings from purchasing efficiencies, headcount
reductions, streamlined management and consolidation of facilities. The Company
utilizes both in-house and third-party manufacturing to optimize its production
efficiency with most of the Company's products being manufactured by suppliers
in Asia, where production costs are lower. See "--Manufacturing Operations" and
"--Suppliers."
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<PAGE>
ACQUIRING COMPLEMENTARY BUSINESSES AND PRODUCT LINES. The Company regularly
evaluates acquisition opportunities in its ordinary course of business and
intends to augment its internal growth with acquisitions of complementary
businesses and product lines. The successful acquisition and assimilation of
Clairol provides a model for similar transactions that the Company expects to
pursue in the future. The Company's targets for potential acquisitions include
small electric consumer product companies or brands with mass distribution
potential. Management believes that these acquisitions will enable the Company
to accomplish certain strategic goals, including: (i) the expansion of the
Company's product offerings beyond existing product categories, (ii) the
creation of synergies with the Company's existing manufacturing operations and
distribution networks, and (iii) the enhancement or utilization of the Remington
brand name where appropriate. Although the Company is currently not a party to
any agreement with respect to any pending acquisition which management believes
is probable and material to the Company, the Company has engaged in and
continues to engage in evaluations and discussions with respect to potential
acquisitions.
PRODUCTS
ELECTRIC SHAVERS. The total United States market for men's electric shavers
grew from $247 million in 1988 to an estimated $392 million in 1995, a compound
annual growth rate of 6.8%. The United States market for women's electric
shavers grew from $54 million in 1988 to an estimated $75 million in 1995, a
compound annual growth rate of 5.2%.
Management believes that Remington markets the broadest line of electric
shavers of any company in the world and enjoys a high level of brand loyalty.
Management believes that Remington is the only company to market and distribute
rotary and foil as well as wet/dry and dry electric shavers for both men and
women.
Men's Electric Shavers. The Company's primary men's electric shaver lines
are the Triple FoilTM, Dual Foil/XLRTM and rotary shavers. The Triple FoilTM
line of shavers was introduced in 1993 to compete directly with Braun GmbH
("Braun"), a subsidiary of Gillette, Inc., in the high-end segment of the global
electric shaver market. Employing patented technology, the Triple FoilTM
contains three parallel cutters, two of which move in the same direction, while
the middle cutter moves in the opposite direction. This mechanism produces an
effective cross cutting motion for a closer shave and allows the user to shave
in hard-to-shave places. In the United States, the Triple FoilTM line of shavers
sells at retail prices from approximately $40 to $100. The Dual FoilTM line of
shavers incorporates technology from the successful Remington XLR line of
shavers. The XLR was originally introduced in 1976 and was made famous by the
Company's advertising slogan "Shaves as close as a blade or your money back(R)."
Remington maintains production of its classic XLR-3000 twin foil model to
satisfy loyal customers who continue to purchase this product.
The Company began commercial marketing and distributing of rotary shavers in
the United States in 1990 to compete directly with Norelco, a subsidiary of
Philips Electronics, N.V. ("Philips"). Remington's rotary shavers sell at retail
prices from approximately $30 to $60 and compete across a broad segment of the
rotary market. Since its introduction, the Company's rotary shaver line has
captured a 15% share of the U.S. rotary shaver market. The Company is in the
process of challenging the validity of Philips' patents and trademarks in other
countries in order to expand Remington's rotary shaver business worldwide. See
"--Legal Proceedings."
Women's Electric Shavers. The Company's primary women's electric shaver
lines are the Ladies' wet/dry, the WER (Women's Electric Razor) and rotary
shavers with the majority of sales coming from its Ladies' wet/dry shaver line.
The Ladies' wet/dry shavers sell at retail prices from approximately $20 to $60
in the United States. The WER electric shaver is used for dry shaving only and
sells at retail prices of approximately $30 in the United States. The Company's
women's rotary shavers sell
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at retail prices from approximately $40 to $50 in the United States. Management
believes that no other company currently sells a rotary shaver for women.
SHAVER ACCESSORIES. Remington's shaver accessories have high profit margins
and limited competition. Electric shaver accessories consist of shaver
replacement parts (primarily foils and cutters), pre-shave products and cleaning
agents. For optimal shaving performance, the Company recommends to its customers
that cutters be replaced every 12 months and foils be replaced every six months.
In addition, the Company has recently introduced marketing programs designed to
automatically send replacement parts to its customers by mail.
WOMEN'S PERSONAL CARE APPLIANCES. Remington entered the women's personal
care appliance market in the United States and expanded its presence overseas
through the Clairol Acquisition. These products consist primarily of
hairsetters, hairdryers, make-up mirrors, curling irons and curling brushes.
Hairsetters. The total U.S. market for hairsetters in 1994 was approximately
$70 million. Remington has the number one position in hairsetters in certain
international markets as well as the leading market share in the United States,
with an estimated 55% share. The Company is in the process of introducing
technically advanced products that management believes will further increase its
leading share of this market. The Company's hairsetter products include flocked
rollers (both dry and mist) and Remington's Express SetterTM hairsetter, which
heats in 90 seconds. In 1995, to expand further its leadership in the hairsetter
market, Remington launched the Smart SetterTM hairsetter, which incorporates a
new proprietary technology that indicates to users when optimum heat levels have
been reached by changing the color of the rollers. In the United States, the
Company's hairsetters sell at retail prices starting at approximately $20 for
conventional wax-filled rollers and increasing to approximately $50 for the
Smart SetterTM. The Company is in the process of expanding this proprietary
color change technology to new products, including curling irons and curling
brushes.
Hairdryers. The total U.S. market for hairdryers in 1994 was approximately
$331 million. The Company has a leading market position in many international
markets and has the leading market position in the United Kingdom and Australia.
The Company has not aggressively attempted to expand its approximate 8% share of
the U.S. market due to intense price competition in this market. The Company's
hairdryer products include the promotional Aero SeriesTM, which sells at retail
prices of approximately $10, and the Remington Maximizer, which sells for
approximately $20.
MEN'S GROOMING PRODUCTS. Men's grooming products consist of beard and
mustache trimmers, nose hair and ear hair trimmers and home haircut kits.
Remington has a leading market position in men's grooming products in the United
Kingdom and Australia.
OTHER PRODUCTS. Remington's travel appliances consist of products that
provide personal grooming and other general household functions for domestic and
international travel. These items include travel hairdryers, steamers, irons,
voltage converter/adapter plugs and shavers. In the home health appliance
product category, Remington sells foot spas and back massagers outside the
United States. In certain international markets, the Company is a market leader
in foot spas.
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<PAGE>
UNITED STATES DISTRIBUTION
Remington's distribution network is one of the Company's competitive
strengths. The Company sells products through mass-merchant retailers such as
Wal-Mart, Kmart and Target, department stores such as Sears, catalog showrooms
such as Service Merchandise, drug store chains including Walgreens, Eckerd and
Revco, and Remington's own service stores. Throughout the United States, the
Company's products are sold in excess of 10,000 retail outlets. Wal-Mart
accounted for 22%, 30% and 31% of the Company's U.S. sales during the years
ended December 31, 1993, 1994 and 1995. In addition, KMart accounted for 12%,
12% and 11% of the Company's U.S. sales during this same time period. No other
distributor has accounted for more than 10% of the Company's sales during the
years ended December 31, 1993, 1994 and 1995.
Remington's distribution network is enhanced by the Company's strong ties
with its major U.S. customers. In 1995, seven of the top ten Remington accounts
were serviced by the Company's in-house sales force, thereby reinforcing the
Company's close relationships with these customers. By maintaining close
relationships with its customers, Remington has been able to gain access to and
expand the number of products within the limited shelf space of leading U.S.
retailers. For example, Remington has the most SKUs of any personal care
appliance manufacturer at Wal-Mart and Service Merchandise. In the United
States, the Company's top five customers accounted for approximately 64% of the
Company's U.S. 1995 net sales, excluding net sales through the Company's service
stores.
The Company's SKU distribution increased substantially in 1995 which
resulted in retailers offering the consumers a wider selection of the Company's
products. For example, in 1994, the Company had a total of 83 men's shaver
product placings carried at its top 25 accounts or an average of 3.3 placements
per account. In 1995, this figure increased approximately 66% to a total of 138
men's shaver product placings at its top 25 accounts or an average of 5.5
shavers per account. Increases in SKU distribution of the Company's other
products ranged from approximately 16% to 176% in 1995. In addition, because the
Company has recently introduced upscale models in both its shaver and hairsetter
product lines, the quality of the listings (measured in terms of higher price
points and profit margins) has also improved. SKU is an indication of the amount
of shelf space allocated by retailers to the Company's products.
INTERNATIONAL OPERATIONS AND DISTRIBUTION
Remington's international operations (excluding export sales from the
Company's U.S. headquarters) generated 32.6% and 35.8% of the Company's net
sales in 1994 and 1995, respectively. The Company's international network of
subsidiaries and distributors currently extends to over 85 countries worldwide.
The Company markets products throughout Europe, the Middle East, Africa, Asia
and a portion of South America through its subsidiary in the United Kingdom, and
distributes products to Japan, Central America and the remainder of South
America from its United States headquarters. The Company distributes its
products directly in the United Kingdom, Australia, Canada, Germany, France, New
Zealand and Ireland. In all other parts of the world the Company distributes its
products through strategic alliances with local distributors. Remington enjoys
leading market positions in many personal grooming products in the United
Kingdom and Australia, while also having a growing market presence in Canada. As
in the United States market, the primary asset of the Company's international
operations is the Remington brand name. The Company has been able to
successfully penetrate market segments for non-shaver products through use of
the Remington brand name on such products. For example, the Company has the
leading market share in the United Kingdom in hairdryers, hairsetters, air
purifiers and flexible stylers. International operations represent a significant
opportunity and a strategic focus for future growth in net sales and
profitability.
The Company distributes products internationally through electric product
stores, drug stores, specialized shaver shops, catalog showrooms, department
stores, mail order and television and the
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Company's service stores. As in the United States, Remington has established
direct relationships with many of the leading international retailers.
SERVICE STORES
Remington opened its first service store in 1981. The Company currently owns
and operates a chain of 81 service stores with 73 in the United States, seven in
the United Kingdom and one in Canada. The stores are in many of the major
markets throughout the United States, with concentrations on the East Coast and
in the major cities of the South and West. The majority of the stores are
located in shopping malls, outlet malls and in prime locations within large
metropolitan areas. The stores sell and service a variety of Remington and
non-Remington shavers, knives, scissors, clocks, personal care appliances and
related products. The service stores also oversee sales of replacement parts to
approximately 400 independent authorized shaver service dealers across the
United States. In 1995 the Company's service stores generated worldwide net
sales of $36.3 million, with $32.9 million in the U.S. and $3.4 million
internationally. Remington products accounted for approximately 50% of these net
sales.
Management believes the Company's service stores are a unique competitive
strength as they provide a source of customer feedback for the Company's
products and a reliable source of market information on the Company's and
competitors' products. Management also believes that the service stores help
generate brand equity and loyalty for Remington products through an efficient
service department and a variety of programs, including a toll-free telephone
number to respond to customer inquiries. In addition, the service stores support
all of Remington's customer service operations, as well as the service of
electric shavers made by the Company's competitors. The Company's service stores
also provide an additional distribution channel for sales of the Company's
products.
MANUFACTURING OPERATIONS
Remington conducts all in-house manufacturing at its Bridgeport, Connecticut
facility. The Company assembles foil shavers and manufactures most of its foil
cutting systems in Bridgeport using proprietary cutting technology and a series
of specially designed machines. The cutting system, which is comprised of a
cutter and a screen, is the most important component of an electric shaver. The
complex process used by the Company to harden, smooth and align its cutting
systems, which includes stamping, heat treating, plating, buffing and grinding,
has been continuously improved over the past 50 years.
Remington's Bridgeport facility can produce in excess of 30,000 shavers a
day, yet is flexible enough to operate economically at much lower capacities.
The electric shaver business is highly seasonal, with significant production
swings during the course of the year. As a result of such swings, Remington's
manufacturing process has been structured to utilize temporary workers. As a
result of these factors, during peak periods approximately 30% of Remington's
work force (excluding that of the service stores) is composed of temporary
workers.
SUPPLIERS
A substantial portion of the Company's finished goods is manufactured for
the Company by suppliers located in China, Japan and Thailand. In determining
whether to manufacture products in-house or source them from third party
suppliers, the Company balances the potential cost savings in labor, materials
and overhead that a foreign manufacturer can provide with the flexibility,
quality control and protection of confidentiality inherent in in-house
production. While Remington sources a large portion of its materials and
products from third-party suppliers, it continues to manufacture most of its
cutting systems (other than for rotary shavers which are manufactured for the
Company by Izumi Products, Inc. ("Izumi")) in-house and maintains ownership of
the tools and molds used by its suppliers. The Company's three most significant
suppliers, Izumi, Raymond International and WIK Far East Ltd., accounted for
approximately 36% of the Company's overall cost of sales in 1995. These three
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suppliers' manufacturing facilities are located in China and Japan. Since
purchases by Remington account for a significant portion of the overall sales of
these suppliers, the Company has generally been able to negotiate favorable
purchase terms. Remington and, prior to its acquisition, Clairol have a
relationship with these suppliers for many years and management considers its
present relationships to be good. Other than rotary shavers, the Company can
either manufacture the presently purchased products in-house or acquire them
from alternative suppliers.
RESEARCH AND PRODUCT DEVELOPMENT
Research and development efforts at Remington allow the Company to maintain
its unique manufacturing strength in cutting systems for shavers. Recent
innovations have included the Triple FoilTM men's shaver which contains
proprietary technology. The Company is currently concentrating its efforts on
foil improvements and new cutting and trimmer configurations. These improvements
will allow the Company to use more efficient motors and circuitry, leading to
cost reductions in the shaver. The Company also devotes resources to the
development of new technology for women's personal care products, including
hairsetters, hairdryers and curling irons. Recent product introductions include
the Express SetterTM and Smart SetterTM hairsetters and the Aero SeriesTM
hairdryer. The Smart SetterTM incorporates new proprietary color change
technology.
The Company has an aggressive product innovation and product line extension
schedule over the next 18 months. During this period, the Company is planning to
introduce over 30 new products and product line extensions, including electric
shavers, hairsetters, hairdryers and curling irons. These new products represent
a substantial growth opportunity for the Company.
COMPETITION
The Company believes that the markets for all of its product lines are
highly competitive and that competition for retail sales to consumers is based
on several factors, including brand name recognition, value, quality, price and
availability. Primary competitive factors with respect to selling such products
to retailers are brand reputation, product categories offered, broad coverage
within each product category, support and service in addition to price.
Remington competes with established companies, several of which have
substantially greater resources than those of the Company. There are no
substantial regulatory barriers to entry for new competitors in the electric
personal appliance industry. However, suppliers that are able to maintain, or
increase, the amount of retail shelf space allocated to their respective
products may gain a competitive advantage. The Company believes that the
allocation of space by retailers is influenced by many factors, including brand
name recognition by consumers, product quality and prices, service levels
provided by the supplier and the supplier's ability to support promotions.
Rotary shaver sales are significant outside the United States. The future
expansion of sales of the Company's rotary shavers outside the United States
will be affected by, among other factors, the outcome of ongoing legal actions
against Philips. Philips holds patents and trademarks outside the United States
on certain of its shaver designs that restrict the Company from entering these
markets. The Company is currently challenging such trademarks and patents in the
United Kingdom. Recently, in Canada, the Company successfully challenged certain
of Philips' trademarks, although Philips has sought leave to appeal this ruling
to the Supreme Court of Canada. See "--Legal Proceedings."
The Company believes that its ability to compete successfully is based on
the worldwide recognition of the Remington brand name, its multiple product
category offerings, its ability to design, develop, procure, manufacture and
market competitively priced products, its broad product coverage within most
product categories, its attention to retailer and consumer needs and its access
to major channels of distribution. There can be no assurance that the Company
will be able to compete successfully against
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current and future sources of competition or that the competitive pressures
faced by the Company will not adversely affect its future profitability or
financial performance. Management believes that Remington enjoys high levels of
brand awareness in many countries. This brand awareness provides the Company
with a competitive advantage when it enters new markets.
PATENTS AND TRADEMARKS
The Company owns approximately 180 patent and patent applications for both
design and utility that are maintained in approximately 40 countries. The
Company's patents cover electric shavers, cutting and trimming mechanisms and
women's personal care products such as hairsetters, hairdryers and curling
irons. In addition, the Company maintains over 300 different trade names in
approximately 100 countries covering a variety of products. These trade names
have resulted in the issuance of over 1,300 registered trademarks.
As a result of the common origins of the Company and Remington Arms, the
Remington mark is owned by each company with respect to its principal products
as well as associated products. Thus, the Company owns the Remington mark for
shavers, shaver accessories, grooming products and health care products, while
Remington Arms owns the mark for firearms, sporting goods and products for
industrial use, including industrial hand tools. Pursuant to the terms of a 1986
agreement between the Company and Remington Arms, their respective rights to use
the Remington trademark on products which are not considered "principal products
of interest" for either company has been specifically provided for. A separate
company, Remington Licensing Corporation, owns the Remington trademark in the
U.S. with respect to any overlapping uses and the Company and Remington Arms are
each licensed to use the mark in their respective areas of interest. The Company
retains the Remington trademark for nearly all products which it believes can
benefit from the use of the brand name in the Company's distribution channels.
The Company has aggressively enforced its ownership of the Remington brand name.
LEGAL PROCEEDINGS
In July 1995, a suit was filed against Remington Consumer Products, Limited,
the Company's wholly owned United Kingdom subsidiary ("Remington U.K."), in the
United Kingdom Patent Court by Braun (UK) Ltd., alleging that Remington U.K.
infringed several United Kingdom patents owned by Braun relating to a volumizing
attachment and a pulsating attachment packaged with certain hairdryers sold by
Remington U.K. In January 1996, the Company was notified that Braun filed a
similar complaint in the U.S. District Court for the District of Massachusetts
against the Company alleging infringement of a U.S. patent corresponding to the
United Kingdom patent owned by Braun relating to the same volumizing attachment.
The U.S. complaint, however, has never been served on the Company. The Company
and Braun have recently reached an agreement to settle both suits relating to
the volumizing attachment on terms which will not have a material effect on the
Company's financial position or results of operations. The Company is presently
awaiting the documentation evidencing such settlement. Discussions concerning
settlement of the remainder of the United Kingdom litigation relating to the
pulsating attachment are continuing, but the outcome of such discussions are not
expected to have any effect upon the Company since the supplier of the
attachment has agreed to indemnify the Company for any damages resulting from
the sale of the attachment in the United Kingdom.
The Company and Philips are engaged in litigation in the United Kingdom
relating to certain trademarks and designs issued to Philips relating to
Philips' triple head rotary shaver. In these proceedings, Philips alleged
infringement of its trademarks and designs by the Company and the Company
counter-claimed that Philips' trademark and design registrations are invalid.
Related litigation in Canada initiated by the Company with respect to Philips'
trademarks was recently determined in favor of the Company, although Philips has
sought leave to appeal this ruling to the Supreme Court of Canada. Philips also
has design registrations in Canada for its triple head rotary shaver which have
not
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been litigated. The costs of the U.K. litigation are, in certain circumstances,
shared with Izumi, the Company's supplier of rotary shavers. Izumi is also
pursuing actions against Philips in several other jurisdictions to contest the
validity of certain of Philips' trademarks. If such litigation is determined
adversely to the Company or Izumi, the Company's ability to sell rotary shavers
in such countries could be limited or prohibited.
The Company is a party to other lawsuits and administrative proceedings that
arose in the ordinary course of business. Although the final results in such
suits and proceedings cannot be predicted, the Company presently believes that
any liability that may ultimately result will not have a material adverse effect
on the Company's financial position or results of operations.
ENVIRONMENTAL MATTERS
The Company's manufacturing operations are subject to federal, state and
local environmental laws and regulations. The Company believes it is in
substantial compliance with all such environmental laws which are applicable to
its operations. The Company has reported to the Connecticut Department of
Environmental Protection that it has detected petroleum and solvent compounds in
soil and ground water samples taken from its Bridgeport facility at levels which
may require further investigation or cleanup. In addition to its ongoing program
of environmental compliance, the Company has provided reserves to cover the
anticipated costs of remediation which may be necessary at its Bridgeport
facility. The Company believes that the costs for any remediation activities
which are eventually undertaken would not be material to the Company's financial
position and results of operations.
PROPERTIES
The Company's executive offices and sole manufacturing facility are located
in Bridgeport, Connecticut. The following is additional information concerning
the principal facilities of the Company.
<TABLE><CAPTION>
FACILITY FUNCTION SQUARE FEET
- --------------------------------------- --------------------------------------- -----------
<S> <C> <C>
Bridgeport, CT Headquarters (Owned) 40,000
Bridgeport, CT Manufacturing (Owned) 167,000
Milford, CT Warehouse (Leased) 100,000
Northampton, England Office and Warehouse (Leased) 52,000
</TABLE>
In addition to these properties, Remington leases offices and warehouse
space in Canada, Germany, France, Australia and New Zealand, and 83 service
stores, of which 75 are in the United States, seven are in the United Kingdom
and one is in Canada.
EMPLOYEES
During the twelve months ended June 29, 1996, the Company employed an
average of 860 people in the United States and 121 people internationally.
During this same period, employees in the United States were classified as
follows: 76 in corporate staff, including general administrative, finance,
marketing, sales, legal and human resources; 434 in manufacturing, including
purchasing, engineering, distribution, warehouse and maintenance; and 350 (of
which 162 were part-time) in the service stores. Remington's manufacturing work
force varies by approximately 300 people between the seasonal high and low
points while the service store work force varies by approximately 75 people
between the seasonal high and low points. The manufacturing work force (other
than engineering, purchasing and manufacturing management) is predominantly
semi-skilled. None of the Company's employees are represented by a union.
Remington believes relations with its employees are good.
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MANAGEMENT
DIRECTORS AND EXECUTIVE OFFICERS
The following table sets forth certain information (ages as of July 31,
1996) with respect to the Persons who are members of Remington's Management
Committee ("Directors"), directors of Capital or executive officers of Remington
or Capital.
<TABLE><CAPTION>
NAME AGE POSITIONS AND OFFICES WITH THE ISSUERS
- ----------------------------- ---- ------------------------------------------------------
<S> <C> <C>
F. Peter Cuneo............... 52 President, Chief Executive Officer and Director of
Remington and President and Director of Capital
James J. Vatrt............... 50 President, Sales & Marketing, North America of
Remington
Jack W. Waller............... 51 Vice President, Manufacturing of Remington
Allen S. Lipson.............. 53 Vice President, Administration, General Counsel and
Secretary of Remington and Secretary and Director of
Capital
H. Graham Kimpton............ 60 Vice President, Remington Australia & Asia of
Remington
Geoffrey L. Hoddinott........ 52 Vice President, Remington Europe, Africa & Middle East
of Remington
Victor K. Kiam, III.......... 36 Vice President, Corporate Development and Director of
Remington
Victor K. Kiam, II........... 69 Chairman and Director of Remington
Norman W. Alpert............. 37 Director of Remington
Arthur J. Nagle.............. 57 Director of Remington
Daniel S. O'Connell.......... 42 Director of Remington
Robert L. Rosner............. 36 Director of Remington
William B. Connell........... 56 Director of Remington
Kevin A. Mundt............... 42 Director of Remington
</TABLE>
F. PETER CUNEO has served as President of Remington since May 1993, Chief
Executive Officer and a Director of Remington since May 1996 and President and a
director of Capital since May 1996. From May 1993 to May 1996, Mr. Cuneo also
served as Chief Operating Officer of Remington. From 1990 to 1993, Mr. Cuneo was
President of the Security Hardware Group of Black & Decker Corporation. From
1976 to 1990, Mr. Cuneo worked for Bristol-Myers Squibb Company, where he was
President of Bristol-Myers Pharmaceutical Group in Canada and President of the
Personal Care Division of Clairol. Previously, he worked for W. R. Grace where
he was Director of Financial Planning & Analysis--Baker Taylor Division.
JAMES J. VATRT joined Remington as President, Sales & Marketing, North
America with the acquisition of Clairol in 1993. Mr. Vatrt worked for Clairol
from 1984 to 1993 where he held a variety of positions including: Vice
President, Sales & Marketing--Personal Care; Vice President, Sales &
Administration--Personal Care; and General Manager--Hair Care/Toiletries.
JACK W. WALLER joined Remington in 1993 as Vice President, Manufacturing.
From 1988 to 1993, Mr. Waller was Vice President Operations at Corbin/Russwin, a
Black & Decker company. From 1987 to 1988, Mr. Waller was President & General
Manager of ACME General Corporation, a division of The Stanley Works.
ALLEN S. LIPSON is Vice President, Administration, General Counsel and
Secretary of Remington and has been Secretary and a director of Capital since
May 1996. Mr. Lipson has been with the
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Company since October 1988. From 1977 to 1988, Mr. Lipson was Corporate Counsel
of BIC Corporation.
H. GRAHAM KIMPTON is Vice President, Remington Australia & Asia. Mr. Kimpton
joined the Company in April 1988. Prior to joining Remington, Mr. Kimpton worked
for General Electric Housewares Ltd. and successor organizations from 1967 to
1988. During that time, Mr. Kimpton worked at: Black & Decker Australia Pty.,
Ltd. as Sales & Marketing Director from 1985 to 1988; Rank Electrical Housewares
Pty. Ltd. as Sales & Marketing Director from 1979 to 1985; and General Electric
Housewares Ltd. in several positions including Sales & Marketing Director and
National Sales Manager from 1967 to 1979.
GEOFFREY L. HODDINOTT is Vice President, Remington Europe, Africa & Middle
East. Mr. Hoddinott has been with the Company since November 1981. From 1979 to
1981, Mr. Hoddinott was divisional director of Philips Business Systems in the
United Kingdom. From 1965 to 1979, Mr. Hoddinott worked in other positions at
Philips including Managing Director of the Canadian division and Divisional
Director of the Small Appliances division in the United Kingdom.
VICTOR K. KIAM, III is Vice President of Corporate Development of Remington
and has been a Director of Remington since 1992. Mr. Kiam has been with the
Company since 1986 and has held a variety of positions in manufacturing, sales
and marketing. He was promoted to Vice President in 1990. Mr. Kiam previously
worked as a financial analyst at Drexel Burnham Lambert. He is the son of Victor
K. Kiam, II.
VICTOR K. KIAM, II has served as Chairman since 1979 and served as Chief
Executive Officer of the Company from 1979 to 1996. From 1968 to 1977, Mr. Kiam
was Chairman, President and CEO of Benrus Corporation, a manufacturer of
watches. Mr. Kiam has also had extensive experience in the consumer products
industry. He was employed from 1951 to 1968 at International Latex Corp.
(Playtex) and Lever Brothers Co., where he held a variety of executive positions
within general management, sales and marketing.
NORMAN W. ALPERT has been a Director of Remington since May 1996. Mr. Alpert
is a Managing Director of Vestar Capital Partners and was a founding partner of
Vestar at its inception in 1988. Mr. Alpert is Chairman of the Board of
Directors of International AirParts Corporation and a director of Aearo
Corporation, Clark-Schwebel, Inc., Prestone Products Corporation and Russell
Stanley Corporation, all companies in which Vestar or its affiliates have a
significant equity interest.
ARTHUR J. NAGLE has been a Director of Remington since May 1996. Mr. Nagle
is a Managing Director of Vestar Capital Partners and was a founding partner of
Vestar at its inception in 1988. Mr. Nagle is a director of Aearo Corporation,
Chart House Enterprises, Inc., Clark-Schwebel, Inc., La Petite Holdings
Corporation, Prestone Products Corporation, Russell-Stanley Corporation and
Super D Drugs, Inc., all companies (other than Chart House Enterprises, Inc.) in
which Vestar or its affiliates have a significant equity interest.
DANIEL S. O'CONNELL has been a Director of Remington since May 1996. Mr.
O'Connell is founder and the Chief Executive Officer of Vestar Capital Partners.
Mr. O'Connell is a director of Anvil Knitwear, Inc., Aearo Corporation,
Clark-Schwebel, Inc., Pinnacle Automation, Inc., Prestone Products Corporation
and Russell-Stanley Corporation, all companies in which Vestar or its affiliates
have a significant equity interest.
ROBERT L. ROSNER has been a Director of Remington since May 1996. Mr. Rosner
is a Managing Director of Vestar Capital Partners and was a founding partner of
Vestar at its inception in 1988. Mr. Rosner is a director of Prestone Products
Corporation and Russell-Stanley Corporation, both companies in which Vestar or
its affiliates have a significant equity interest.
WILLIAM B. CONNELL has been a Director of Remington since 1990. Mr. Connell
is currently Chairman of EBD Holdings, Inc., a private venture capital group.
Mr. Connell previously served as
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Vice Chairman of Whittle Communications, L.P. from 1992 to 1994 and served as
its President and Chief Operating Officer from 1990 to 1992. Mr. Connell has
extensive experience in the branded consumer products industry, having held
various executive positions at The Procter & Gamble Company from 1965 to 1989.
In addition to Remington, Mr. Connell is currently a director of Baldwin Piano &
Organ Company, Dolphin Software, Inc., EDB Holdings, Inc. and New Day Schools,
Inc. and is currently a member of the management committee of College View.
KEVIN A. MUNDT has been a Director of Remington since July 1996. Mr. Mundt
is co-founder and has been Managing Director of Corporate Decisions, Inc. since
its inception in 1983. Mr. Mundt is a director of Prestone Products Corporation,
a company in which Vestar or its affiliates have a significant equity interest.
Remington does not currently have a Chief Financial Officer. Remington has
initiated a search to find a new Chief Financial Officer. Until a new Chief
Financial Officer is hired, Remington's finance department is being managed by
Remington's Vice President and Controller with assistance from Vestar Capital
Partners.
COMPENSATION OF DIRECTORS
The Independent Directors of Remington and Capital receive annual
compensation of $20,000 payable quarterly for services in such capacity. Each of
the Directors of Remington and directors of Capital are reimbursed for
out-of-pocket expenses incurred in connection with attending meetings.
COMPENSATION OF EXECUTIVE OFFICERS
The following Summary Compensation Table includes individual compensation
information for the Company's Chief Executive Officer and each of the four other
most highly compensated executive officers of the Company in 1995 who were
serving as executive officers of the Company at the end of 1995 (collectively,
the "Named Executive Officers") for services rendered in all capacities to the
Company during 1995. Currently, Capital does not provide any compensation to its
executive officers for services provided in such capacities.
<TABLE><CAPTION>
ANNUAL COMPENSATION
-------------------------- ALL OTHER
NAME AND PRINCIPAL POSITION WITH REMINGTON SALARY ($) BONUS ($)(1) COMPENSATION ($)
- ------------------------------------------------------- ---------- ------------ ----------------
<S> <C> <C> <C>
Victor K. Kiam, II (2)................................. 1,000,000 -- 109,469(3)
Chairman
F. Peter Cuneo......................................... 394,078 225,200 6,156(4)
Chief Executive Officer, President and Director
James J. Vatrt......................................... 196,617 85,920 2,871(5)
President, Sales & Marketing, North America
Allen S. Lipson........................................ 175,986 69,756 4,153(6)
Vice President, Administration, General Counsel
and Secretary
Jack W. Waller......................................... 163,048 74,316 2,838(7)
Vice President, Manufacturing
</TABLE>
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- ------------
(1) Reflects amounts paid under the Company's Bonus Plan in 1996 with respect to
services rendered in 1995.
(2) Mr. Kiam relinquished his title of Chief Executive Officer on the Closing
Date.
(3) The amount shown includes automobile-related expenses of $35,000, insurance
and premiums on life and disability insurance policies of $48,068 and
medical payments under an executive medical reimbursement plan of $26,401.
(4) The amount shown includes Company matching contributions to the Company's
401(k) Employee Savings Plan of $1,925 and disability insurance premium
payment of $4,231.
(5) The amount shown includes Company matching contributions to the Company's
401(k) Employee Savings Plan of $1,925 and disability insurance premium
payment of $946.
(6) The amount shown includes Company matching contributions to the Company's
401(k) Employee Savings Plan of $1,925 and disability insurance premium
payment of $2,228.
(7) The amount shown includes Company matching contributions to the Company's
401(k) Employee Savings Plan of $1,720 and disability insurance premium
payment of $1,118.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
There is currently no compensation committee of the Management Committee of
Remington or the board of directors of Capital. Currently, the compensation of
Remington's executive officers is determined by the Management Committee. F.
Peter Cuneo and Victor K. Kiam, III are Directors of Remington but do not
participate in any vote regarding their own compensation. Currently, Capital
does not provide any compensation to its executive officers for services
provided in such capacities.
OTHER ARRANGEMENTS
Change of Control and Severance Arrangements. In June 1995, the Company
entered into change of control agreements with various employees, including
Messrs. Vatrt, Lipson and Waller, whereby such employees would receive cash
bonuses upon a sale of the Company and would also be entitled to salary
continuation for a specified period if their employment was terminated within
one year after such change of control. The agreements further provide that any
employment agreement then existing between the Company and the employee would
terminate upon the payment of such cash bonus. Pursuant to such agreements, at
the Closing Date, cash payments of $550,411, $452,123 and $420,671 were paid to
Mr. Vatrt, Mr. Lipson and Mr. Waller, respectively. Messrs. Cuneo, Vatrt,
Waller, Lipson, Kimpton and Hoddinott are each entitled to 12 months of salary
continuation in the event their employment is involuntarily terminated other
than for cause during the 36 months immediately following the Closing Date. The
cash bonus payments due to employees on the Closing Date are Excluded
Obligations which were paid by the Company and reduced the amount of the
distributions to Remsen and RPI. Mr. Vatrt and Mr. Lipson have agreed that up to
5.5% of the cash bonuses paid to them are to be repaid to Remsen and RPI in the
event of certain breaches of representations and warranties in the agreements
giving effect to the Reorganization.
Cuneo Stock Option. Pursuant to the terms of an employment agreement between
the Company and F. Peter Cuneo dated April 23, 1993, Mr. Cuneo was employed as
the President and Chief Operating Officer of the Company and was granted by the
Company an option to purchase 2.5% of the common equity of the Company
exercisable immediately prior to the sale of the Company or the sale of more
than a 51% equity interest in the Company. The exercise price of the option was
an amount equal to 2.5% of the net worth of the Company as of April 23, 1993. In
April 1996, the employment agreement was amended to provide that upon the
consummation of the Transactions, Mr. Cuneo would receive a cash payment of
$3.35 million in payment of his option and, upon payment of such amount, the
employment agreement would terminate. The cash payment due to Mr. Cuneo on the
Closing Date is an Excluded Obligation which was paid by the Company and reduced
the amount distributed to Remsen and RPI. Mr. Cuneo has agreed that up to 5.5%
of such cash payment is to be repaid to
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Remsen and RPI in the event of certain breaches of representations and
warranties in the agreements giving effect to the Reorganization.
BONUS PLAN
The Company has an annual bonus plan (the "Bonus Plan") which is designed to
motivate each employee participant. Approximately 125 employees in the United
States and 75 employees in the international operations participate in the Bonus
Plan. Under the Bonus Plan, each participating employee is assigned a target
bonus award, representing up to 50% of his or her annual base salary that will
be paid if predetermined performance goals are achieved. Future performance
goals for the various areas of the Company will be established by the Management
Committee of the Company.
MANAGEMENT EQUITY PARTICIPATION
In connection with the Transactions, the Company: (i) entered into
management subscription agreements with certain of the Management Investors (the
"Management Subscription Agreements") for the purchase of Common Units, (ii)
issued options for the purchase of Common Units to certain other Management
Investors (the "Management Options"), and (iii) will adopt an Incentive Option
Plan (the "Incentive Option Plan") to provide for the grant of options
("Incentive Options") to purchase the Company's Common Units from time to time.
Purchased Units. On the Closing Date, certain of the Management Investors
purchased an aggregate of $0.86 million of Common Units representing, in the
aggregate, 11.13% of the common equity (10.77% on a fully diluted basis) of the
Company. Upon the termination of employment of the holder, the purchased Common
Units are subject to certain call provisions exercisable by the Company and
certain put provisions exercisable by the holder.
Management Options. The Company granted to certain Management Investors the
Management Options to purchase, in the aggregate, approximately 3.23% of the
fully diluted common equity of the Company at an aggregate exercise price of
approximately $0.26 million (the equivalent per Common Unit subscription price
of the purchased Common Units). The Management Options and the Common Units
purchased upon the exercise thereof are subject to similar rights and
restrictions as contained in the Management Subscription Agreements. The
exercise price of the Management Options is equal to the fair market value of
the Common Units at the Closing Date.
Incentive Option Plan. The Company also intends to grant to the Management
Investors and certain other employees of the Company Incentive Options to
purchase Common Units. These Incentive Options are expected to be granted over
an approximate four-year period based on the Company's achievement of certain
financial targets to be determined by the Management Committee. The Incentive
Options and the Common Units purchased upon the exercise thereof are expected to
be subject to certain vesting schedules and similar rights and restrictions as
contained in the Management Subscription Agreements. The exercise price of the
Incentive Options is expected to be the fair market value of the Common Units at
the time of issuance of such Incentive Options.
401(K) PLAN
The Company maintains a savings plan (the "Savings Plan") qualified under
Sections 401(a) and 401(k) of the Internal Revenue Code. Generally, all
employees of the Company in the United States who have completed one year of
service are eligible to participate in the Savings Plan. For each employee who
elects to participate in the Savings Plan and makes a contribution thereto, the
Company makes a matching contribution of 25% of the first 5% of annual
compensation contributed. The maximum contribution for any participant for any
year is 15% of such participant's eligible compensation.
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SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
All of Capital's issued and outstanding capital stock is owned by Remington.
Set forth below is certain information regarding the ownership of the Preferred
Equity and Common Units of Remington by each person known by Remington to
beneficially own 5.0% or more of the outstanding interests of either the
Preferred Equity or Common Units, each Director and Named Executive Officer and
all Directors and executive officers as a group. Except as indicated below, the
address for each of the persons listed below is c/o Remington Products Company,
L.L.C., 60 Main Street, Bridgeport, Connecticut, 06604.
<TABLE><CAPTION>
PREFERRED EQUITY COMMON UNITS
------------------------- --------------------
NAME CAPITAL (1) PERCENTAGE NUMBER PERCENTAGE
- ------------------------------------------------- ----------- ---------- ------ ----------
<S> <C> <C> <C> <C>
Vestar Equity Partners (2)(3).................... $30,000,000 48.4% 34,400 44.4%
245 Park Avenue, 41st Floor
New York, New York 10167
RPI Corp. (3).................................... 32,000,000 51.6% 34,400 44.4%
350 Fifth Avenue, Suite 5408
New York, New York 10118
F. Peter Cuneo (3)............................... 0 0.0% 3,200 4.1%
James J. Vatrt (3)............................... 0 0.0% 1,500 1.9%
Allen S. Lipson (3).............................. 0 0.0% 1,500 1.9%
Jack W. Waller (3)............................... 0 0.0% 1,500 1.9%
Victor K. Kiam, II (3)(4)........................ 32,000,000 51.6% 34,400 44.4%
Norman W. Alpert (5)............................. 30,000,000 48.4% 34,400 44.4%
Arthur J. Nagle (5).............................. 30,000,000 48.4% 34,400 44.4%
Daniel S. O'Connell (5).......................... 30,000,000 48.4% 34,400 44.4%
Robert L. Rosner (5)............................. 30,000,000 48.4% 34,400 44.4%
Directors and executive officers as a group
(14 persons)................................... $62,000,000 100.0% 77,420 100.0%
</TABLE>
- ------------
(1) Amounts, in dollars, represent the capital contribution to the Preferred
Equity beneficially owned by each person and entity set forth below. The
Preferred Equity has not been denominated in units or other shares.
(2) Vestar's interest in the Company is owned by the Vestar Members, which are
controlled by Vestar. The Vestar Members have assigned a portion of their
interests in the Company to certain co-investors, although such co-investors
will not directly hold any Common Units. The general partner of Vestar is
Vestar Associates L.P., a limited partnership whose general partner is
Vestar Associates Corporation ("VAC"). In such capacity, VAC exercises sole
voting and investment power with respect to all of the equity interests held
of record by the Vestar Members. Messrs. Alpert, Nagle, O'Connell and
Rosner, who are Directors of Remington, are affiliated with Vestar in the
capacities described under "Management--Directors and Executive Officers"
and are stockholders of VAC. Individually, no stockholder, director or
officer of VAC is deemed to have or share such voting or investment power
within the meaning of Rule 13d-3 under the Exchange Act. Accordingly, no
part of the Preferred Equity or Common Units is beneficially owned by
Messrs. Alpert, Nagle, O'Connell or Rosner or any other stockholder,
director or officer of VAC.
(3) The Vestar Members, RPI and Messrs. Cuneo, Vatrt, Lipson and Waller have
entered into the LLC Agreement (as defined), which gives Vestar effective
control over the management of the Company. See "Limited Liability Company
Agreement."
(4) Mr. Kiam's interest in the Company is owned by RPI. The shareholders of RPI
are Mr. Kiam and two Kiam family trusts. Mr. Kiam is a trustee of each of
these trusts. Mr. Kiam disclaims beneficial ownership of the shares of
Remington owned by RPI. The address of Mr. Kiam is 11097 Isle Brook Court,
West Palm Beach, Florida, 33414.
(5) Messrs. Alpert, Nagle, O'Connell and Rosner are affiliated with Vestar in
the capacities described under "Management--Directors and Executive
Officers." Ownership of Remington equity interests for these individuals
includes the $30,000,000 of Preferred Equity and 34,440 Common Units
included in the above table beneficially owned by Vestar through the Vestar
Members, of which such persons disclaim beneficial ownership. Each such
person's business address is c/o Vestar Equity Partners, L.P., 245 Park
Avenue, 41st Floor, New York, New York 10167.
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CERTAIN TRANSACTIONS
Pursuant to a management agreement (the "Management Agreement") entered into
as of the Closing Date, Vestar Capital Partners ("Vestar Capital") will receive
an annual advisory fee equal to the greater of $500,000 and 1.5% of EBITDA (as
defined in such agreement) of the Company on a consolidated basis for rendering
advisory and consulting services in relation to strategic financial planning and
other affairs of the Company. Vestar Capital will also be paid reasonable and
customary investment banking fees in connection with an initial public offering,
sale of the Company and other financings. In addition, Vestar Capital received a
fee in the amount of $2.0 million from the Company on the Closing Date. The
Management Agreement will be in effect until the tenth anniversary of the
Closing Date, provided that the Management Agreement will terminate on the
earlier to occur of: (i) a qualified public offering or (ii) the first date that
Vestar Capital owns less than 25% of the number of the Company's Common Units
owned by Vestar Capital on the Closing Date, and provided further that Vestar
Capital may terminate the Management Agreement at any time. Vestar Capital owns,
indirectly through Vestar Corp., 44.4% (43.0% on a fully diluted basis) of the
Common Units of the Company and possesses the right to designate five of the
nine individuals who comprise the Management Committee of the Company.
Pursuant to a consulting and transitional services agreement (the
"Consulting Agreement") entered into as of the Closing Date, RPI will receive an
aggregate annual fee equal to the sum of: (i) the greater of $500,000 and 1.5%
of EBITDA (as defined in such agreement) of the Company on a consolidated basis
and (ii) $250,000 in 1996, 1997 and 1998 if the Company's net revenues or EBITDA
(as defined in such agreement) exceed certain targets in such years, for
rendering advisory and consulting services in relation to strategic financial
planning, product development and evaluation of mergers, acquisitions and
divestitures. The Consulting Agreement will be in effect until the tenth
anniversary of the Closing Date, provided that the Consulting Agreement will
terminate on the earlier to occur of: (i) a qualified public offering or (ii)
the first date that RPI owns less than 25% of the number of the Company's Common
Units owned by RPI on the Closing Date, and provided further that Vestar Capital
may terminate the Consulting Agreement at any time (but only to the extent that
Vestar Capital also terminates similar provisions of the Management Agreement).
RPI, an entity controlled by the Kiams, owns 44.4% (43.0% on a fully diluted
basis) of the Common Units of the Company and possesses the right to designate
two of the nine individuals who comprise the Management Committee of the
Company.
Pursuant to a Non-Competition Agreement (the "Non-Competition Agreement")
entered into as of the Closing Date between the Company, Vestar Corp. and Victor
K. Kiam, II and Victor K. Kiam, III (the "Kiams"), the Kiams may not compete
with, solicit any customers of, own, manage or operate any business in
competition with or perform any action substantially detrimental to the
Company's businesses. The provisions of the Non-Competition Agreement will apply
during the period the Kiams have a Significant Interest (as defined in the
Non-Competition Agreement) in the Company and thereafter for: (i) five years,
with respect to electric shavers, shaver accessories and men's grooming
products, and (ii) three years, with respect to women's personal care
appliances, home health appliances, travel appliances, environmental products,
dental products and small kitchen appliances. The Non-Competition Agreement
allows the Kiams to continue to market certain competing travel appliance
products developed by an affiliate of the Kiams.
Pursuant to the terms of agreements originally entered into between the
Company and Remington Apparel Corporation ("Remington Apparel") and Remington
Equities in 1984 and with Act II Corporation ("Act II") in 1986, each controlled
by Victor K. Kiam, II, the Company granted a license to Remington Apparel to
permit such company to use the Remington name as part of its corporate name,
granted to Remington Equities a non-exclusive, worldwide license to use the
Remington trademark for apparel products and granted to Act II the exclusive
worldwide license to use the trademark Lady Remington for jewelry products. Each
of these agreements are for terms of two years
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<PAGE>
and renew automatically for consecutive two-year periods unless terminated at
the option of the licensee. The amount of royalties received by the Company
under these license agreements was $10,662 during 1993 and less than $5,000
during each of 1994 and 1995. The Company will continue these arrangements after
the consummation of the Transactions on substantially the same terms and
conditions. The Company, however, will require each of RPI and Remington
Equities to exclude the word "Remington" from their corporate names after the
Closing Date.
Pursuant to a consulting arrangement, the Company paid Remsen fees of
$184,000 in 1995. This arrangement terminated in 1995. The Company does not
intend to obtain such services from Remsen after the Closing Date.
In 1995, the Company entered into a media barter agreement with Tangible
Media, Inc. ("TMI"), a corporation controlled by Isaac Perlmutter, pursuant to
which TMI acquired from the Company a discontinued product line of personal
safety products in exchange for media barter credits with a stated value of $4.3
million which the Company can use to purchase advertising media from TMI over a
three-year period that (subject to certain conditions) has been extended for an
additional year. At the time of the purchase of advertising media, the Company
will pay a portion in cash and the balance with the media barter credits. In
1995, the Company purchased $2.9 million in advertising media from TMI, paying
$2.4 million in cash and $521,000 in barter credits. In addition, TMI has from
time to time provided financial, marketing and security services for the
Company. The Company paid TMI approximately $375,000 in each of 1993, 1994 and
1995 for such services. The Company does not intend to obtain such services from
TMI after the Closing Date.
In November 1994, the Company loaned F. Peter Cuneo, President, Chief
Executive Officer and Director of the Company, the sum of $200,000 in exchange
for a note bearing interest at the rate of 1.75% plus the prime commercial rate
as from time to time announced by CoreStates Bank, N.A. Mr. Cuneo used the
proceeds of this loan to finance the purchase of a house. The total amount owed,
including accrued interest, was repaid on the Closing Date.
Pursuant to the terms of an employment agreement dated August 1992, Victor
K. Kiam, II was employed as Chief Executive Officer of the Company for a period
of five years for an annual salary of $300,000 and an annual talent fee of
$700,000 plus certain health, medical and other specified benefits. In addition,
pursuant to the terms of a separate employment agreement dated August 1992, as
amended, Victor K. Kiam, III was employed as Vice President of the Company for a
period of five years at an annual salary of $100,000 plus other incentive based
compensation. In connection with the Reorganization, the employment agreements
with the Kiams were terminated in exchange for lump sum cash payments to the
Kiams in the aggregate amount of $1.7 million. Such cash payments are Excluded
Obligations and were paid by the Company and reduced the amounts distributed to
Remsen and RPI.
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<PAGE>
LIMITED LIABILITY COMPANY AGREEMENT
The Vestar Members, RPI and certain of the Management Investors
(collectively the "Members") have entered into an Amended and Restated Limited
Liability Company Agreement (the "LLC Agreement"). The Company was organized as
a limited liability company because such an entity would (i) shield the Members
from unlimited liability and (ii) qualify as a pass-through entity for tax
purposes. The LLC Agreement will govern the relative rights and duties of the
Members.
Membership Interests. The ownership interests of the Members in the Company
consist of preferred membership interests (the "Preferred Equity") and common
units (the "Common Units"). The Common Units represent the common equity of the
Company. The Preferred Equity is entitled to a preferred yield of 12% per annum,
compounded quarterly, and to an aggregate liquidation preference of $62 million
(net of any prior repayments of Preferred Equity) plus any accrued but unpaid
preferred yield.
Both the Senior Credit Agreement and the Indenture limit the Company's
ability to pay cash distributions other than distributions sufficient to enable
the Members to pay their income taxes with respect to their shares of Company
income ("Tax Distributions"). Tax Distributions to each Member for a given year
generally will equal the product of an assumed tax rate and the Member's share
of the Company's taxable income for such year. The assumed tax rate for each
Member (i) will not exceed the highest combined marginal (A) federal income tax
rate applicable to an individual for the year in question and (B) state and
local income tax rates applicable to a corporation doing business in Connecticut
for the year in question and (ii) will be calculated taking into account the
deductibility of state and local income taxes for federal income tax purposes.
Except as provided below, when allowed by the terms of the Senior Credit
Agreement and the Indenture, cash distributions in excess of tax distributions
will be paid by the Company in the following manner and order of priority:
First, to the Members holding Preferred Equity until they have received
distributions sufficient to give them a 12% per annum return on their
Preferred Equity (calculated on a daily basis on the balance of Preferred
Equity not previously distributed, but compounded quarterly);
Second, to the Members holding Preferred Equity until they have received
distributions equal to their $62 million preferred capital contributions;
Third, to the Members holding Common Units until they have received
distributions equal to the initial capital contributions previously made by
them with respect to Common Units; and
Fourth, to the Members holding Common Units in proportion to their
holdings of Common Units.
Notwithstanding the foregoing, certain amounts that would otherwise be
distributed to a particular Member under the preceding sentence may instead be
distributed to a different Member to take account of variations among the
Members in the amount of Preferred Equity they previously contributed and the
tax distributions they previously received. However, distribution adjustments
will not increase the total amount distributable to the Members.
Management. The Company is managed by the members acting through a
Management Committee consisting of nine Directors. Five of the Directors will be
designated (and may be removed and replaced) by Vestar Corp. I (the "Vestar
Directors"), two of the Directors will be designated (and may be removed and
replaced) by RPI (the "RPI Directors"), one of the Directors will initially be
the Chief Executive Officer of the Company (the "Management Director"), and one
of the Directors will be independent (the "Independent Director") and will be
mutually agreed upon by Vestar Corp. I and RPI. The Vestar Directors are
initially Norman W. Alpert, Daniel W. Miller, Arthur J. Nagle, Daniel
58
<PAGE>
S. O'Connell and Robert L. Rosner. The RPI Directors are initially Victor K.
Kiam, II and Victor K. Kiam, III. F. Peter Cuneo is the initial Management
Director. William B. Connell is the initial Independent Director.
Although the Management Committee (which is controlled by Vestar Corp. I)
manages and controls the business and affairs of the Company, certain actions
are subject to the approval of the Strategic Decisions Committee of the Company.
The Strategic Decisions Committee consists of four members, consisting of the
Independent Director and the Management Director and one representative
designated by each of the Vestar Members and RPI. If the Company is interested
in either (i) consummating an acquisition which has an aggregate consideration
payable by the Company in excess of $25,000,000, (ii) entering into new material
licensing agreement of the "Remington" trade name, (iii) substantially changing
the Company's advertising format, or (iv) introducing a new product line
unrelated to any current product line of the Company, then such proposal shall
first be referred to the Strategic Decisions Committee. If the Strategic
Decisions Committee recommends by majority vote not to proceed with such
proposal, the Company shall not undertake such proposal at that time. If the
Strategic Decisions Committee approves or is deadlocked on such proposal, then
the Company shall proceed with such proposal only if the Management Committee
approves of such proposal.
Exit Transactions. As further described in the LLC Agreement, Vestar Corp. I
has the right to control the timing and all other aspects of any exit
transaction (i.e., an initial public offering or a sale of the Company). Subject
to certain limitations, Vestar Corp. I has the right to effect a reorganization
of the Company to position it for any such transaction (as so reorganized, the
"Successor"). In addition, Vestar Corp. I has customary "drag-along" rights in
connection with certain sales of membership interests by Vestar Corp. I, and RPI
and the Management Investors have certain "tag-along" rights.
Limited Life Entity and Dissolution. Remington is a limited life entity that
will continue in existence until December 31, 2016 or dissolution prior thereto
as determined under the LLC Agreement. Pursuant to the LLC Agreement, Remington
will be dissolved and its affairs shall be wound up on the first to occur of:
(i) December 31, 2016, (ii) the unanimous vote of the Management Committee,
(iii) the written consent of Vestar Corp. I and Members (including Vestar Corp.
I) holding 75% of interests in Remington, (iv) the incapacity or expulsion of
any Member, or the occurrence of any other event under the Delaware Limited
Liability Company Act that terminates the continued membership of any Member in
Remington, unless a majority in interest of the remaining Members agree in
writing to continue Remington within 90 days thereafter, and (v) the entry of a
decree of judicial dissolution of the Company under Section 18-802 of the
Delaware Limited Liability Company Act. Except as provided in clause (iv) above,
the death, retirement, resignation, expulsion, incapacity, bankruptcy or
dissolution of a Member, or the occurrence of any other event that terminates
the continued membership of a Member in Remington, shall not cause a dissolution
of Remington, and Remington shall continue in existence subject to the terms and
conditions of the LLC Agreement.
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DESCRIPTION OF SENIOR CREDIT AGREEMENT
General. On the Closing Date, the Company entered into a credit agreement
(the "Senior Credit Agreement") with Chemical Bank, as administrative agent,
Fleet National Bank and Banque Nationale de Paris, as co-documentation agents,
and certain other financial institutions (collectively, the "Banks"). Capital is
a guarantor of all obligations under the Senior Credit Agreement.
The Senior Credit Agreement provides for a term loan of $5.0 million to the
Company and $5.0 million to the Company's U.K. subsidiary (the "Term Loans"), a
revolving credit facility of $50.0 million to the Company and $20.0 million to
the Company's U.K. subsidiary (the "Revolving Credit Facilities") and a facility
for additional term loans of up to an aggregate of $30.0 million to the Company,
the Company's U.K. subsidiary and certain other subsidiaries (the "Acquisition
Facility"). On the Closing Date, the Company and its U.K. subsidiary borrowed
$28.0 million under the Senior Credit Agreement, consisting of $10.0 million
under the Term Loans and $18.0 million under the Revolving Credit Facilities.
The initial borrowings under the Senior Credit Agreement, along with the
proceeds of the Offering, were used to finance a portion of the Transactions and
to pay certain fees and expenses related thereto. The undrawn amount under the
Revolving Credit Facilities is available for working capital and general
corporate purposes. The amounts borrowed by the Company's U.K. subsidiary will
be denominated, and repaid, in Pounds Sterling, based upon an initial conversion
rate established by the administrative agent and the Company prior to the
Closing Date.
Security. The obligations of the Company and the Company's U.K. subsidiary
under the Senior Credit Agreement are guaranteed by each of the Company's
domestic subsidiaries and secured by: (i) a first priority security interest in
all of the assets and properties (including, without limitation, accounts
receivable, inventory, real property, machinery, equipment, contracts and
contract rights, trademarks, copyrights, patents, license agreements and general
intangibles) of the Company and each of the Company's domestic subsidiaries
(direct or indirect), whether now owned or hereafter acquired; (ii) a first
priority perfected pledge of the capital stock of the Company's domestic
subsidiaries (direct or indirect), whether now owned or hereafter acquired; and
(iii) a first priority perfected pledge of 65% of the capital stock of foreign
subsidiaries owned by the Company or any of its domestic subsidiaries. In
addition, the obligations of the Company's U.K. subsidiary under the Senior
Credit Agreement are secured by a first priority security interest in all of its
assets and property and are guaranteed by the Company.
Interest. At the Company's option, the interest rates per annum applicable
to the loans under the Senior Credit Agreement will be based upon, (a) in the
case of the Company, the greater of (i) the rate of interest publicly announced
from time to time by Chemical Bank as its prime rate in effect at its principal
office in New York and (ii) the federal funds rate in effect from time to time
plus 0.5% (the "Base Rate"), plus in the case of each of (i) and (ii) 1.0% or a
Eurodollar rate ("LIBOR") plus 2.25% and (b), in the case of loans to the
Company's U.K. subsidiary, the rate of interest publicly announced from time to
time by Chemical Bank as its prime rate (or analogue rate) in effect in its
principal office in London, England (the "Sterling Base Rate") plus 1.0% or a
EuroSterling rate (the "EuroSterling Rate"), plus 2.25%; provided, however, the
interest rates are subject to reduction if certain requirements of financial
performance are met. The Company will be required to maintain specified levels
of interest rate protection.
Maturity. Outstanding loans under the Revolving Credit Facilities and
Acquisition Facility must be repaid on the sixth anniversary of the Closing
Date. The Term Loans will amortize quarterly over six years with amortization
payments totaling $0.40 million in the remainder of 1996, $1.00 million in 1997,
$1.35 million in 1998, $1.50 million in 1999, $1.75 million in 2000, $3.00
million in 2001 and $1.00 million in 2002. A portion of such amortization will
be denominated in Pounds Sterling. Loans made pursuant to the Revolving Credit
Facilities may be borrowed, repaid and reborrowed from time to time until the
sixth anniversary of the Closing Date, subject to the satisfaction of certain
conditions on
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the date of any such borrowing. Loans under the Acquisition Facility will
amortize in equal quarterly installments beginning on the quarter following the
date of borrowing and ending on the maturity date. In addition, the Senior
Credit Agreement provides for mandatory repayments in the event of certain
events (including, without limitation, equity and debt issuances, asset sales
and casualty events).
Conditions to Extension of Credit. The Senior Credit Agreement provides that
the obligation of the Banks to close and make the initial loans at the closing
was subject to the satisfaction of certain conditions customary in transactions
of this type, including, but not limited to, the consummation of the
Reorganization, completion of due diligence of the Company by the Banks, receipt
by the Banks of customary opinions of counsel, corporate documents, financial
statements, environmental audits, the absence of any material adverse change,
the absence of any default or event of default under the Senior Credit Agreement
and certain representations being true. The obligation of the Banks to make
subsequent loans or extend letters of credit after the Closing Date is subject
to the satisfaction of certain customary conditions including the absence of a
default or event of default under the Senior Credit Agreement. The Revolving
Credit Facilities of the Company and the Company's U.K. subsidiary will be
subject to a borrowing base of 85% of eligible accounts for the applicable
borrower and 60% of eligible inventory for the applicable borrower, with an
additional aggregate $10 million over-advance line available for up to five
consecutive months during each period beginning February 1 and ending January
31.
Covenants. The Senior Credit Agreement requires the Company to meet certain
financial tests, including a minimum fixed charge coverage ratio, a minimum
interest expense coverage ratio, a maximum leverage ratio and a limitation on
capital expenditures. The Senior Credit Agreement also contains covenants which,
among other things, will limit the incurrence of additional indebtedness, the
nature of the business of the Company and its subsidiaries, investments, leases
of assets, ownership of subsidiaries, dividends, transactions with affiliates,
asset sales, acquisitions, mergers and consolidations, prepayments of other
indebtedness (including the Old Notes and the New Notes), liens and encumbrances
and other matters customarily restricted in such agreements.
Events of Default. The Senior Credit Agreement contains customary events of
default, including payment defaults, breach of representations and warranties,
covenant defaults, cross-default to certain other indebtedness, certain events
of bankruptcy and insolvency, ERISA violations, judgment defaults, failure of
any guaranty or security agreement supporting the Senior Credit Agreement to be
in full force and effect and change of control of the Company.
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DESCRIPTION OF NEW NOTES
GENERAL
The New Notes offered hereby will be issued as a separate series pursuant to
the Indenture between the Issuers and The Bank of New York, as trustee (the
"Trustee"). See "Notice to Investors." The terms of the New Notes include those
stated in the Indenture and those made part of the Indenture by reference to the
Trust Indenture Act of 1939 (the "Trust Indenture Act"). The form and terms of
the New Notes are the same as the form and terms of the Old Notes (which they
replace) except that (i) the New Notes bear a Series B designation, (ii) the New
Notes have been registered under the Securities Act and, therefore, will not
bear legends restricting the transfer thereof, and (iii) the holders of New
Notes will not be entitled to certain rights under the Registration Rights
Agreement, including the provisions providing for an increase in the interest
rate on the Old Notes in certain circumstances relating to the timing of the
Exchange Offer, which rights will terminate when the Exchange Offer is
consummated. The New Notes are subject to all such terms, and holders of New
Notes are referred to the Indenture and the Trust Indenture Act for a statement
thereof. The following summary of certain provisions of the Indenture does not
purport to be complete and is qualified in its entirety by reference to the
Indenture, including the definitions therein of certain terms used below. A copy
of the Indenture and Registration Rights Agreement is available as set forth
under "--Additional Information." The definitions of certain terms used in the
following summary are set forth below under "--Certain Definitions."
As of the date of the Indenture, all Subsidiaries of each Issuer were
Restricted Subsidiaries. However, under certain circumstances, the Issuers will
be able to designate current or future Subsidiaries as Unrestricted
Subsidiaries. Unrestricted Subsidiaries will not be subject to many of the
restrictive covenants set forth in the Indenture.
Capital is a wholly owned subsidiary of the Company that was incorporated in
Delaware for the purpose of serving as a co-issuer of the Old Notes in order to
facilitate the Initial Offering. Capital will not have any substantial
operations or assets and will not have any revenues. As a result, prospective
investors should not expect Capital to participate in servicing the interest and
principal obligations on the Notes. See "--Certain Covenants."
PRINCIPAL, MATURITY AND INTEREST
The Notes are limited in aggregate principal amount to $130.0 million and
will mature on May 15, 2006. Interest on the Notes will accrue at the rate of
11% per annum and will be payable semi-annually in arrears on May 15 and
November 15, commencing on November 15, 1996, to Holders of record on the
immediately preceding May 1 and November 1. Interest on the Notes will accrue
from the most recent date to which interest has been paid or, if no interest has
been paid, from the date of original issuance. Interest will be computed on the
basis of a 360-day year comprised of twelve 30-day months. Principal of and
premium, interest and Liquidated Damages, if any, on the Notes will be payable
at the office or agency of the Issuers maintained for such purpose or, at the
option of the Issuers, payment of interest and Liquidated Damages may be made by
check mailed to the Holders of the Notes at their respective addresses set forth
in the register of Holders of Notes; provided that all payments with respect to
Notes the Holders of which have given wire transfer instructions to the Company
will be required to be made by wire transfer of immediately available funds to
the accounts specified by the Holders thereof. Until otherwise designated by the
Issuers, the Issuers' office or agency will be the office of the Trustee
maintained for such purpose. The New Notes will be issued in denominations of
$1,000 and integral multiples thereof.
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SUBORDINATION
The payment of principal of, and premium, interest and Liquidated Damages
(if any) on, the Notes will be subordinated in right of payment, as set forth in
the Indenture, to the prior payment in full of all Senior Debt of the Issuers,
whether outstanding on the date of the Indenture or thereafter incurred.
Upon any distribution to creditors of either Issuer in a liquidation or
dissolution of such Issuer or in a bankruptcy, reorganization, insolvency,
receivership or similar proceeding relating to such Issuer or its property, an
assignment for the benefit of creditors or any marshalling of either Issuers'
assets and liabilities, the holders of Senior Debt of such Issuer will be
entitled to receive payment in full of all Obligations due in respect of such
Senior Debt (including interest after the commencement of any such proceeding at
the rate specified in the applicable Senior Debt) before the Holders of Notes
will be entitled to receive any payment with respect to the Notes, and until all
Obligations with respect to Senior Debt of such Issuer are paid in full, any
distribution to which the Holders of Notes would be entitled shall be made to
the holders of such Senior Debt (except that Holders of Notes may receive
securities that are subordinated at least to the same extent as the Notes to
Senior Debt and any securities issued in exchange for Senior Debt and payments
made from the trust described under "--Legal Defeasance and Covenant
Defeasance").
The Issuers also may not make any payment upon or in respect of the Notes
and may not offer to repurchase Notes (except in such subordinated securities or
from the trust described under "--Legal Defeasance and Covenant Defeasance") if
(i) a default in the payment of the principal of, or premium or interest on, or
fees or other amounts owing with respect to, Designated Senior Debt occurs and
is continuing beyond any applicable period of grace or (ii) any other default
occurs and is continuing with respect to Designated Senior Debt that permits
holders of the Designated Senior Debt as to which such default relates to
accelerate its maturity and the Trustee receives a notice of such default (a
"Payment Blockage Notice") from the Issuers or the holders of any Designated
Senior Debt. Payments on the Notes may and shall be resumed (a) in the case of a
payment default, upon the date on which such default is cured or waived and (b)
in case of a nonpayment default, the earlier of the date on which such
nonpayment default is cured or waived or 179 days after the date on which the
applicable Payment Blockage Notice is received, unless the maturity of any
Designated Senior Debt has been accelerated. No new period of payment blockage
may be commenced unless and until 360 days have elapsed since the effectiveness
of the immediately prior Payment Blockage Notice. No nonpayment default that
existed or was continuing on the date of delivery of any Payment Blockage Notice
to the Trustee shall be, or be made, the basis for a subsequent Payment Blockage
Notice.
The Indenture further requires that the Issuers promptly notify holders of
Senior Debt of the receipt of an acceleration notice following an Event of
Default.
As a result of the subordination provisions described above, in the event of
a liquidation or insolvency, Holders of Notes may recover less ratably than
creditors of the Issuers who are holders of Senior Debt. At May 23, 1996, the
principal amount of Senior Debt outstanding was approximately $28.0 million. The
Indenture limits the amount of additional Indebtedness, including Senior Debt,
that the Issuers and their Restricted Subsidiaries can incur. See "--Certain
Covenants--Incurrence of Indebtedness."
OPTIONAL REDEMPTION
The Notes are not redeemable at the Issuers' option prior to May 15, 2001.
Thereafter, the Notes are subject to redemption at the option of the Issuers, in
whole or in part, upon not less than 30 nor more than 60 days' notice, at the
redemption prices (expressed as percentages of principal amount) set forth below
plus accrued and unpaid interest and Liquidated Damages, if any, thereon to the
applicable
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redemption date, if redeemed during the twelve-month period beginning on May 15
of the years indicated below:
YEAR PERCENTAGE
- ----------------------------------------------------------------- ----------
2001............................................................. 105.500%
2002............................................................. 103.667%
2003............................................................. 101.833%
2004 and thereafter.............................................. 100.000%
Notwithstanding the foregoing, on or prior to May 15, 1999, the Issuers may
redeem up to 35% in aggregate principal amount of the Notes originally issued
under the Indenture at a redemption price of 111% of the principal amount
thereof plus accrued and unpaid interest and Liquidated Damages, if any, thereon
to the redemption date with the net proceeds of one or more public offerings of
Capital Stock (other than Disqualified Stock) of the Company; provided that at
least $84.5 million in aggregate principal amount of Notes remain outstanding
immediately after the occurrence of each such redemption; and provided, further,
that notice of each such redemption shall have been given within 30 days after
the date of the closing of any such offering of Capital Stock of the Company.
SELECTION AND NOTICE
If less than all of the Notes are to be redeemed at any time, selection of
Notes for redemption will be made by the Trustee in compliance with the
requirements of the principal national securities exchange, if any, on which the
Notes are listed, or, if the Notes are not so listed, on a pro rata basis, by
lot or by such method as the Trustee shall deem fair and appropriate; provided
that no Notes of $1,000 or less shall be redeemed in part. Notices of redemption
shall be mailed by first class mail at least 30 but not more than 60 days before
the redemption date to each Holder of Notes to be redeemed at its registered
address. If any Note is to be redeemed in part only, the notice of redemption
that relates to such Note shall state the portion of the principal amount
thereof to be redeemed. A new Note in principal amount equal to the unredeemed
portion thereof will be issued in the name of the Holder thereof upon
cancellation of the original Note. On and after the redemption date, interest
ceases to accrue on Notes or portions of them called for redemption.
MANDATORY REDEMPTION
Except as set forth below under "--Repurchase at the Option of Holders," the
Issuers are not required to make mandatory redemption or sinking fund payments
with respect to the Notes.
REPURCHASE AT THE OPTION OF HOLDERS
Change of Control. Upon the occurrence of a Change of Control, the Issuers
are required to make an offer (a "Change of Control Offer") to repurchase all or
any part (equal to $1,000 or an integral multiple thereof) of each Holder's
Notes at an offer price in cash equal to 101% of the aggregate principal amount
thereof plus accrued and unpaid interest and Liquidated Damages, if any, thereon
to the date of purchase (the "Change of Control Payment"). Within 30 days
following any Change of Control, the Issuers will mail a notice to each Holder
describing the transaction that constitutes the Change of Control and offering
to repurchase Notes pursuant to the procedures required by the Indenture and
described in such notice; provided that, prior to complying with the provisions
of this covenant, but in any event within 90 days following a Change of Control,
the Issuers will either repay all outstanding Senior Debt or obtain the
requisite consents, if any, under all agreements governing outstanding Senior
Debt to permit the repurchase of Notes required by this covenant. The Issuers
will comply with the requirements of Rule 14e-1 under the Exchange Act and any
other securities laws and
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regulations thereunder to the extent such laws and regulations are applicable in
connection with the repurchase of the Notes as a result of a Change of Control.
On the Change of Control Payment Date, the Issuers will, to the extent
lawful, (i) accept for payment all Notes or portions thereof properly tendered
pursuant to the Change of Control Offer, (ii) deposit with the Paying Agent an
amount equal to the Change of Control Payment in respect of all Notes or
portions thereof so tendered and (iii) deliver or cause to be delivered to the
Trustee the Notes so accepted together with an Officers' Certificate stating the
aggregate principal amount of Notes or portions thereof being purchased by the
Issuers. The Paying Agent will promptly mail to each Holder of Notes so tendered
the Change of Control Payment for such Notes, and the Trustee will promptly
authenticate and mail (or cause to be transferred by book entry) to each Holder
a new Note equal in principal amount to any unpurchased portion of the Notes
surrendered, if any; provided that each such new Note will be in a principal
amount of $1,000 or an integral multiple thereof. The Issuers will publicly
announce the results of the Change of Control Offer on or as soon as practicable
after the Change of Control Payment Date.
Except as described above with respect to a Change of Control, the Indenture
does not contain provisions that permit the Holders of the Notes to require that
the Issuers repurchase or redeem the Notes in the event of a takeover,
recapitalization or similar transaction.
The occurrence of a Change of Control could result in a default under the
Senior Credit Agreement or other Senior Debt. In addition, the Senior Credit
Agreement or other Senior Debt could restrict the Issuers' ability to repurchase
Notes upon a Change of Control. In the event a Change of Control occurs at a
time when the Issuers are prohibited from repurchasing Notes, the Issuers could
seek the consent of its lenders to the repurchase of Notes or could attempt to
refinance the borrowings that contain such prohibition. If the Issuers do not
obtain such a consent or repay such borrowings, the Issuers will remain
prohibited from repurchasing Notes. In such case, the Issuers' failure to make a
Change of Control Offer or to repurchase Notes tendered in a Change of Control
Offer would constitute an Event of Default under the Indenture, which could, in
turn, constitute a default under the Senior Credit Agreement or other Senior
Debt. In such circumstances, the subordination provisions in the Indenture would
likely restrict payments to the Holders of Notes. See "--Subordination."
Finally, the Issuers' ability to repurchase Notes upon a Change of Control may
be limited by the Issuers' then existing financial resources.
Notwithstanding the foregoing, the Issuers are not required to make a Change
of Control Offer upon a Change of Control if a third party makes the Change of
Control Offer in the manner, at the times and otherwise in compliance with the
requirements set forth in the Indenture applicable to a Change of Control Offer
made by the Issuers and purchases all Notes validly tendered and not withdrawn
under such Change of Control Offer.
Asset Sales. The Indenture provides that the Issuers will not, and will not
permit any of their Restricted Subsidiaries to, engage in an Asset Sale unless
(i) the Issuers or the Restricted Subsidiary, as the case may be, receive (a)
consideration at the time of such Asset Sale at least equal to the fair market
value of the assets or Equity Interests issued or sold or otherwise disposed of
or (b) in the case of a lease of assets, a lease providing for rent and other
consideration which are no less favorable to the Company or the Restricted
Subsidiary, as the case may be, than the then prevailing market conditions (in
the case of either (a) or (b), evidenced by a resolution of the Management
Committee set forth in an Officers' Certificate delivered to the Trustee) and
(ii) at least 75% of the consideration therefor received by the Issuers or such
Restricted Subsidiary is in the form of cash or Cash Equivalents; provided that
the amount of (a) any liabilities (as shown on the Issuers' or such Restricted
Subsidiary's most recent balance sheet) of the Issuers or any Restricted
Subsidiary (other than liabilities that are by their terms subordinated to the
Notes) that are assumed by the transferee of any such assets pursuant to a
customary novation agreement that releases the Issuers or such Restricted
Subsidiary from further
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liability and (b) any notes or other obligations received by the Issuers or such
Restricted Subsidiary from such transferee that are promptly (but in any event,
within 30 days) converted by the Issuers or such Restricted Subsidiary into cash
(to the extent of the cash received) shall be deemed to be cash for purposes of
this provision; and provided, further, that contingent liabilities that are
assumed by the transferee of any such assets shall not be deemed to be the
receipt of consideration if such contingent liabilities are not shown as
liabilities on the Issuers' or such Restricted Subsidiary's most recent balance
sheet.
Within 360 days after the receipt of any Net Proceeds from an Asset Sale,
the Issuers may apply such Net Proceeds (a) to permanently reduce Senior Debt of
the Issuers or long-term Indebtedness of a Restricted Subsidiary of the Company
(and, in either case, to correspondingly reduce commitments with respect
thereto) or (b) to an Investment in another business, the making of a capital
expenditure or the acquisition of other long-term assets, in each case, in
accordance with the provisions of the Indenture. Pending the final application
of any such Net Proceeds, the Issuers may temporarily reduce Senior Debt or
otherwise invest such Net Proceeds in any manner that is not prohibited by the
Indenture. Any Net Proceeds from Asset Sales that are not applied or invested as
provided in the first sentence of this paragraph will be deemed to constitute
"Excess Proceeds." When the aggregate amount of Excess Proceeds exceeds $5.0
million, the Issuers are required to make an offer to all Holders of Notes (an
"Asset Sale Offer") to purchase the maximum principal amount of Notes that may
be purchased out of the Excess Proceeds, at an offer price in cash in an amount
equal to 100% of the principal amount thereof plus accrued and unpaid interest
and Liquidated Damages, if any, thereon to the date of purchase, in accordance
with the procedures set forth in the Indenture. To the extent that the aggregate
amount of Notes tendered pursuant to an Asset Sale Offer is less than the Excess
Proceeds, the Company may use any remaining Excess Proceeds for general
corporate purposes (subject to the restrictions of the Indenture). If the
aggregate principal amount of Notes surrendered by Holders thereof exceeds the
amount of Excess Proceeds, the Trustee shall select the Notes to be purchased on
a pro rata basis. Upon completion of such offer to purchase, the amount of
Excess Proceeds shall be reset at zero.
CERTAIN COVENANTS
Restricted Payments. The Indenture provides that the Issuers will not, and
will not permit any of their Restricted Subsidiaries to, directly or indirectly,
(i) declare or pay any dividend or make any other payment or distribution on
account of the Company's Equity Interests (including, without limitation, any
payment in connection with any merger or consolidation involving the Company) or
to any direct or indirect holder of the Company's Equity Interests in its
capacity as such, other than dividends or distributions payable in Equity
Interests (other than Disqualified Stock) of the Company or dividends or
distributions payable to the Company or any Wholly Owned Restricted Subsidiary
of the Company; (ii) purchase, redeem or otherwise acquire or retire for value
any Equity Interests of the Company or any direct or indirect parent of the
Company, other than any such Equity Interests owned by the Company or any Wholly
Owned Restricted Subsidiary of the Company; (iii) make any principal payment on,
or purchase, redeem, defease or otherwise acquire or retire for value any
Indebtedness that is subordinated to the Notes, except at final maturity or
scheduled sinking fund payments set forth in the original documentation
governing such Indebtedness; or (iv) make any Restricted Investment (all such
payments and other actions set forth in clauses (i) through (iv) above being
collectively referred to as "Restricted Payments"), unless, at the time of and
after giving effect to such Restricted Payment:
(a) no Default or Event of Default shall have occurred and be continuing
or would occur as a consequence thereof;
(b) the Fixed Charge Coverage Ratio of the Company for the Company's
most recently ended four full fiscal quarters for which internal financial
statements are available immediately preceding the date on which such
Restricted Payment is made, calculated on a pro forma basis as if such
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Restricted Payment had been made at the beginning of such four-quarter
period, would have been more than 2.0 to 1; and
(c) such Restricted Payment, together with the aggregate of all other
Restricted Payments made by the Issuers and their Restricted Subsidiaries
after the date of the Indenture (including Restricted Payments permitted by
clause (vi) of the next succeeding paragraph but excluding the Restricted
Payments permitted by clauses (i)-(v) and (vii) of the next succeeding
paragraph), is less than the sum of (i) 50% of the Consolidated Net Income
of the Company for the period (taken as one accounting period) from July 1,
1996 to the end of the Company's most recently ended fiscal quarter for
which internal financial statements are available at the time of such
Restricted Payment (or, if such Consolidated Net Income for such period is a
deficit, less 100% of such deficit), plus (ii) 100% of the aggregate net
cash proceeds, or the fair market value of assets (as determined in good
faith by the Management Committee), received by the Company from capital
contributions or the issue or sale after the date of the Indenture of Equity
Interests of the Company or of debt securities of the Company that have been
converted into such Equity Interests (other than Equity Interests (or
convertible debt securities) sold to a Subsidiary of the Company and other
than Disqualified Stock or debt securities that have been converted into
Disqualified Stock), plus (iii) 100% of the net cash proceeds received by
the Company from a distribution by, or from the sale or other liquidation
of, any Restricted Investment or Unrestricted Subsidiary.
The foregoing provisions do not prohibit (i) the payment of any dividend or
other distribution within 60 days after the date of declaration thereof, if at
said date of declaration such payment would have complied with the provisions of
the Indenture; (ii) the making of any Restricted Investment or the redemption,
repurchase, retirement or other acquisition of any Equity Interests of the
Company in exchange for, or out of the proceeds of, a substantially concurrent
capital contribution or sale (other than to a Subsidiary of the Company) of
other Equity Interests of the Company (other than any Disqualified Stock);
provided that the amount of any such net cash proceeds that are utilized for any
such redemption, repurchase, retirement or other acquisition shall be excluded
from clause (c) of the preceding paragraph; (iii) the defeasance, redemption or
repurchase of subordinated Indebtedness with the net cash proceeds from an
incurrence of Permitted Refinancing Indebtedness or a substantially concurrent
capital contribution or sale (other than to a Subsidiary of the Company) of
Equity Interests of the Company (other than Disqualified Stock); provided that
the amount of any such net cash proceeds that are utilized for any such
redemption, repurchase, retirement or other acquisition shall be excluded from
clause (c) of the preceding paragraph; (iv) so long as the Company is treated as
a partnership for United States federal income tax purposes, distributions to
members of the Company in an amount not to exceed the Tax Amount for such
period; (v) the payment of fees to (a) Vestar and its Affiliates pursuant to the
Management Agreement as in effect on the date of the Indenture; provided no such
payment in excess of $500,000 shall be permitted in any fiscal year if at the
time of such payment a Default in the payment of principal of, or interest,
premium or Liquidated Damages (if any) on, the Notes shall have occurred and be
continuing, and (b) RPI and its Affiliates pursuant to the Consulting Agreement
as in effect on the date of the Indenture; provided no such payment in excess of
$500,000 shall be permitted in any fiscal year if at the time of such payment a
Default in the payment of principal of, or interest, premium or Liquidated
Damages (if any) on, the Notes shall have occurred and be continuing; (vi) so
long as no Default or Event of Default has occurred and is continuing, the
repurchase, redemption or other acquisition or retirement for value of any
Equity Interests of the Company held by any member of the Company's or any of
its Subsidiaries' management (other than an Affiliate of Vestar or RPI) upon the
death, disability or termination of employment of such member of management
pursuant to a management equity subscription agreement or option agreement;
provided that the aggregate price paid for all such Equity Interests shall not
exceed $500,000 in any fiscal year, plus any amount available for such payments
hereunder since the date of the Indenture which have not been used for such
purpose, plus the cash proceeds received by the Company from any subsequent
reissuance of such Equity Interests to members of management of the Company or
any of its
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Subsidiaries; and (vii) so long as no Default or Event of Default has occurred
and is continuing, Restricted Investments in an aggregate amount not to exceed
$10.0 million.
The Management Committee may designate any Restricted Subsidiary, other than
Capital, to be an Unrestricted Subsidiary if such designation would not cause a
Default. For purposes of making such determination, all outstanding Investments
by the Issuers and their Restricted Subsidiaries (except to the extent repaid in
cash) in the Subsidiary so designated will be deemed to be Restricted Payments
at the time of such designation and will reduce the amount available for
Restricted Payments under the first paragraph of this covenant. All such
outstanding Investments will be deemed to constitute Investments in an amount
equal to the greatest of (i) the net book value of such Investments at the time
of such designation, (ii) the fair market value of such Investments at the time
of such designation and (iii) the original fair market value of such Investments
at the time they were made. Such designation will only be permitted if such
Restricted Payment would be permitted at such time and if such Restricted
Subsidiary otherwise meets the definition of an Unrestricted Subsidiary.
The amount of all Restricted Payments (other than cash) shall be the fair
market value (evidenced by a resolution of the Management Committee set forth in
an Officers' Certificate delivered to the Trustee) on the date of the Restricted
Payment of the asset(s) proposed to be transferred by the Company or such
Subsidiary, as the case may be, pursuant to the Restricted Payment. Not later
than the date of making any Restricted Payment, the Company shall deliver to the
Trustee an Officers' Certificate stating that such Restricted Payment is
permitted and setting forth the basis upon which the calculations required by
this covenant were computed, which calculations may be based upon the Company's
latest available financial statements.
Incurrence of Indebtedness. The Indenture provides that the Issuers will
not, and will not permit any of their Subsidiaries to, directly or indirectly,
create, incur, issue, assume, guaranty or otherwise become directly or
indirectly liable, contingently or otherwise, with respect to (collectively,
"incur") any Indebtedness (including Acquired Debt) and will not permit any of
their Restricted Subsidiaries to issue any preferred stock; provided, however,
that, so long as no Default or Event of Default has occurred and is continuing,
the Issuers and any of their Restricted Subsidiaries may incur Indebtedness
(including Acquired Debt) and the Issuers' Restricted Subsidiaries may issue
preferred stock if the Fixed Charge Coverage Ratio for the Company's most
recently ended four full fiscal quarters for which internal financial statements
are available immediately preceding the date on which such additional
Indebtedness is incurred or such preferred stock is issued would have been at
least 2.0 to 1, determined on a pro forma basis (including a pro forma
application of the net proceeds therefrom), as if the additional Indebtedness
had been incurred or the preferred stock had been issued at the beginning of
such four-quarter period; provided, further, however, that the amount of such
Indebtedness, together with any Indebtedness incurred pursuant to clause (i)
below, that is incurred by Restricted Subsidiaries of the Issuers that are not
Guarantors shall not exceed the sum of $15.0 million plus, with respect to each
such Restricted Subsidiary, the Subsidiary Debt Limit.
The foregoing provisions will not apply to:
(i) the incurrence by the Issuers and their Restricted Subsidiaries of
Indebtedness pursuant to bank lines of credit (including revolving and term
loans) in an amount not to exceed the greater of (a) $110.0 million at any
time outstanding, less the aggregate amount of all permanent reductions
thereto pursuant to the covenant described under "--Repurchase at the Option
of Holders--Asset Sales," and (b) the Borrowing Base of the Company;
provided that, in either case, the aggregate amount of such Indebtedness,
together with any Indebtedness incurred pursuant to the preceding paragraph,
that is incurred by Restricted Subsidiaries of the Company that are not
Guarantors shall not exceed the sum of $15.0 million plus, with respect to
each such Restricted Subsidiary, the Subsidiary Debt Limit;
(ii) the incurrence by the Issuers and their Subsidiaries of Existing
Indebtedness;
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(iii) the incurrence by the Issuers of Indebtedness represented by the
Notes and the Indenture;
(iv) the incurrence by the Issuers or any of their Restricted
Subsidiaries of Indebtedness represented by Capital Lease Obligations,
mortgage financings or purchase money obligations, in each case incurred for
the purpose of financing all or any part of the purchase price or cost of
construction or improvement of property, plant or equipment used in the
business of the Issuers or such Restricted Subsidiary, in an aggregate
principal amount not to exceed $10.0 million at any time outstanding;
provided that the aggregate amount of such Indebtedness that is incurred by
Restricted Subsidiaries of the Company that are not Guarantors shall not
exceed $5.0 million at any one time outstanding;
(v) the incurrence of intercompany Indebtedness between or among the
Issuers and any of their Wholly Owned Restricted Subsidiaries; provided that
any subsequent issuance or transfer of Equity Interests that results in any
such Indebtedness being held by a Person other than an Issuer or a Wholly
Owned Restricted Subsidiary of an Issuer, or any sale or other transfer of
any such Indebtedness to a Person that is not either an Issuer or a Wholly
Owned Restricted Subsidiary of an Issuer, shall be deemed to constitute an
incurrence of such Indebtedness by the Issuers or such Restricted
Subsidiary, as the case may be;
(vi) the incurrence by the Issuers or any of their Restricted
Subsidiaries of Hedging Obligations that are incurred for the purpose of
fixing or hedging interest rate risk with respect to any floating rate
Indebtedness that is permitted by the terms of the Indenture to be
outstanding or for the purpose of fixing or hedging any currency exchange
rate risk;
(vii) the incurrence by the Issuers or any of their Restricted
Subsidiaries of Indebtedness arising from indemnification, purchase price
adjustment or similar obligations, or from guarantees, letters of credit,
surety bonds or performance bonds securing the performance by the Company or
any of its Restricted Subsidiaries of any such obligations, pursuant to
agreements relating to the disposition of any business, assets or Subsidiary
of the Company;
(viii) the incurrence by the Company of Indebtedness to members of
management of the Company or any of its Restricted Subsidiaries in
connection with the repurchase of Equity Interests of the Company in an
amount not to exceed $2.5 million at any one time outstanding; provided that
(a) the instrument pursuant to which such Indebtedness is incurred expressly
states that such Indebtedness is subordinated in right of payment to the
Notes at least to the extent that the Notes are subordinated to Senior Debt
of the Company and (b) such Indebtedness has a Weighted Average Life to
Maturity greater than the Weighted Average Life to Maturity of the Notes;
(ix) the incurrence by the Issuers and their Restricted Subsidiaries of
Indebtedness and the issuance by the Issuers' Restricted Subsidiaries of
preferred stock (in addition to any other Indebtedness and preferred stock
permitted by any other clauses of this paragraph) in an amount not to exceed
$10.0 million at any one time outstanding;
(x) the incurrence by the Issuers or any of their Restricted
Subsidiaries of Permitted Refinancing Indebtedness in exchange for, or the
net proceeds of which are used to extend, refinance, renew, replace, defease
or refund Indebtedness that was permitted by the Indenture to be incurred;
and
(xi) the incurrence by the Issuers' Unrestricted Subsidiaries of
Non-Recourse Debt; provided that if any such Indebtedness ceases to be
Non-Recourse Debt of an Unrestricted Subsidiary, such event shall be deemed
to constitute an incurrence of Indebtedness by a Restricted Subsidiary of
the Issuers.
Liens. The Indenture provides that the Issuers will not, and will not permit
any of their Restricted Subsidiaries to, directly or indirectly, create, incur,
assume or suffer to exist any Lien on any asset now
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owned or hereafter acquired, or any income or profits therefrom or assign or
convey any right to receive income therefrom, except Permitted Liens.
Dividend and Other Payment Restrictions Affecting Subsidiaries. The
Indenture provides that the Issuers will not, and will not permit any of their
Restricted Subsidiaries to, directly or indirectly, create or otherwise cause or
suffer to exist or become effective any encumbrance or restriction on the
ability of any Restricted Subsidiary to (i)(a) pay dividends or make any other
distributions to the Issuers or any of their Restricted Subsidiaries on its
Capital Stock or with respect to any other interest or participation in, or
measured by, its profits, or (b) pay any indebtedness owed to the Issuers or any
of their Restricted Subsidiaries, (ii) make loans or advances to the Issuers or
any of their Restricted Subsidiaries or (iii) transfer any of its properties or
assets to the Issuers or any of their Restricted Subsidiaries, except for such
encumbrances or restrictions existing under or by reason of (a) the Senior
Credit Agreement as in effect on the date of the Indenture, and any amendments,
modifications, restatements, renewals, supplements, refundings, replacements or
refinancings thereof that contain restrictions that are no more restrictive than
those contained in the Senior Credit Agreement as in effect on the date of the
Indenture, (b) agreements existing and as in effect on the date of the
Indenture, (c) any instrument governing Indebtedness permitted to be incurred
pursuant to the terms of the Indenture, (d) applicable law, (e) any instrument
governing Indebtedness or Capital Stock of a Person acquired by the Issuers or
any of their Restricted Subsidiaries as in effect at the time of such
acquisition (except to the extent such Indebtedness was incurred in connection
with or in contemplation of such acquisition), which encumbrance or restriction
is not applicable to any Person, or the properties or assets of any Person,
other than the Person, or the property or assets of the Person, so acquired, (f)
customary non-assignment provisions in leases or other agreements entered into
in the ordinary course of business, (g) purchase money obligations for property
acquired in the ordinary course of business that impose restrictions of the
nature described in clause (iii) above on the property so acquired, (h) any
restriction or encumbrance contained in contracts for the sale of assets
permitted by the Indenture; provided that such restrictions relate only to the
assets being sold pursuant to such contracts and (i) Permitted Refinancing
Indebtedness; provided that the restrictions contained in the agreements
governing such Permitted Refinancing Indebtedness are no more restrictive than
those contained in the agreements governing the Indebtedness being refinanced.
Merger, Consolidation, or Sale of Assets. The Indenture provides that
neither Issuer may consolidate or merge with or into (whether or not such Issuer
is the surviving entity), or sell, assign, transfer, lease, convey or otherwise
dispose of all or substantially all of its properties or assets in one or more
related transactions, to another corporation, Person or entity, unless (i) such
Issuer is the surviving entity or the entity or the Person formed by or
surviving any such consolidation or merger (if other than such Issuer) or to
which such sale, assignment, transfer, lease, conveyance or other disposition
shall have been made is a corporation organized or existing under the laws of
the United States, any state thereof or the District of Columbia; (ii) the
entity or Person formed by or surviving any such consolidation or merger (if
other than such Issuer) or the entity or Person to which such sale, assignment,
transfer, lease, conveyance or other disposition shall have been made assumes
all the obligations of such Issuer under the Notes and the Indenture pursuant to
a supplemental indenture in a form reasonably satisfactory to the Trustee; (iii)
immediately after such transaction, no Default or Event of Default exists; and
(iv) except in the case of (a) a merger of such Issuer with or into a Wholly
Owned Restricted Subsidiary of such Issuer or (b) a merger of the Company with
and into a newly formed corporation that (1) prior to such merger, has no
liabilities or (2) owns 100% of the Capital Stock of the Company and conducts no
business other than holding such Capital Stock, in either case, for the purpose
of reorganizing the Company as or into a corporation, such Issuer or the entity
or Person formed by or surviving any such consolidation or merger (if other than
such Issuer) or to which such sale, assignment, transfer, lease, conveyance or
other disposition shall have been made (A) will have Consolidated Net Worth
immediately after the transaction equal to or greater than the Consolidated Net
Worth of such Issuer immediately preceding the transaction and (B) will, at the
time of such transaction and after giving pro forma effect thereto as if such
transaction had occurred at the
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beginning of the applicable four-quarter period, be permitted to incur at least
$1.00 of additional Indebtedness pursuant to the Fixed Charge Coverage Ratio
test set forth in the first paragraph of the covenant described above under the
caption "--Incurrence of Indebtedness."
Transactions with Affiliates. The Indenture provides that neither Issuer
will, and will not permit any of its Restricted Subsidiaries to, make any
payment to, or sell, lease, transfer or otherwise dispose of any of its
properties or assets to, or purchase any property or assets from, or enter into
or make or amend any contract, agreement, understanding, loan, advance or
guarantee with, or for the benefit of, any Affiliate (each of the foregoing, an
"Affiliate Transaction"), unless (i) such Affiliate Transaction is on terms that
are no less favorable to such Issuer or the relevant Restricted Subsidiary than
those that would have been obtained in a comparable transaction with an
unrelated Person and (ii) such Issuer delivers to the Trustee (a) with respect
to any Affiliate Transaction or series of related Affiliate Transactions
involving aggregate consideration in excess of $1.0 million, a resolution of the
Management Committee set forth in an Officers' Certificate certifying that such
Affiliate Transaction complies with clause (i) above and that such Affiliate
Transaction has been approved by a majority of the disinterested members of the
Management Committee and (b) with respect to any Affiliate Transaction or series
of related Affiliate Transactions involving aggregate consideration in excess of
$5.0 million, an opinion as to the fairness to the Company of such Affiliate
Transaction from a financial point of view issued by an accounting, appraisal or
investment banking firm of national standing; provided that (1) any compensation
paid to, indemnity provided on behalf of, or employment agreement entered into
with, any officer or director of the Issuers or any of their Restricted
Subsidiaries in the ordinary course of business, (2) transactions between or
among the Issuers and their Restricted Subsidiaries and (3) Restricted Payments
and Permitted Investments that are permitted by the provisions of the Indenture
described above under the caption "--Restricted Payments," in each case, shall
not be deemed Affiliate Transactions.
Limitation on Other Senior Subordinated Debt. The Indenture provides that
the Issuers will not, and will not permit any Guarantor to, incur, create,
issue, assume, guarantee or otherwise become liable for any Indebtedness that is
subordinate or junior in right of payment to any Senior Debt of the Issuers or
such Guarantor, as the case may be, and senior in any respect in right of
payment to the Notes or the Guarantees thereof by the Guarantors.
Subsidiary Guarantees. The Indenture provides that if the Issuers or any of
their Subsidiaries shall acquire or create another Subsidiary after the date of
the Indenture or designate an Unrestricted Subsidiary to be a Restricted
Subsidiary, then such Subsidiary shall execute a Guarantee and deliver an
Opinion of Counsel in accordance with the terms of the Indenture, pursuant to
which such Subsidiary shall become a Guarantor, on a senior subordinated basis
(pursuant to subordination provisions substantially similar to those described
above under the caption "--Subordination"), of the Issuers' payment obligations
under the Notes and the Indenture; provided, that this covenant shall not apply
to any Subsidiary (i) that is incorporated in any jurisdiction outside the
United States or (ii) that has been properly designated as an Unrestricted
Subsidiary in accordance with the Indenture for so long as it continues to
constitute an Unrestricted Subsidiary. Such Guarantee shall be a continuing,
absolute, unconditional and joint and several guarantee of payment. Upon the
creation or acquisition of any Subsidiary after the date of the Indenture or the
designation of an Unrestricted Subsidiary as a Restricted Subsidiary, the
Issuers will deliver to the Trustee an Opinion of Counsel to the effect that the
provisions of this covenant have been complied with and that the Guarantee of
the Guarantor constitutes a legally valid and binding obligation of such
Guarantor, enforceable against such Guarantor in accordance with its terms.
The Indenture provides that, in the event of a sale or other disposition of
all of the assets of any Guarantor, by way of merger, consolidation or
otherwise, or a sale or other disposition of all of the capital stock of any
Guarantor, then such Guarantor (in the event of a sale or other disposition, by
way of such a merger, consolidation or otherwise, of all of the capital stock of
such Guarantor) or the corporation acquiring the property (in the event of a
sale or other disposition of all of the assets of such
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Guarantor) will be released and relieved of any obligations under its Subsidiary
Guarantee; provided that the Net Proceeds of such sale or other disposition are
applied in accordance with the applicable provisions of the Indenture. In
addition, the Indenture provides that, in the event the Management Committee
designates a Guarantor to be an Unrestricted Subsidiary, then such Guarantor
will be released and relieved of any obligations under its Guarantee; provided
that such designation is conducted in accordance with the applicable provisions
of the Indenture.
ACTIVITIES OF INTELLECTUAL PROPERTY SUBSIDIARIES
The Indenture provides that, for so long as the Company's Subsidiaries
holding Remington's intellectual property are Restricted Subsidiaries of the
Company and not Subsidiary Guarantors, the Company will not permit such
Subsidiaries to engage in any material operations, other than owning the
intellectual property relating to the business of the Company and its Restricted
Subsidiaries and licensing such intellectual property to the Company and its
Restricted Subsidiaries.
RESTRICTIONS ON ACTIVITIES OF CAPITAL
The Indenture provides that Capital may not hold any material assets, become
liable for any material obligations or engage in any significant business
activities; provided that Capital may be a co-obligor or guarantor with respect
to Indebtedness if the Company is a primary obligor of such Indebtedness and the
net proceeds of such Indebtedness are retained by the Company or loaned to one
or more of the Company's Restricted Subsidiaries other than Capital.
PAYMENTS FOR CONSENT
The Indenture provides that the Issuers will not, and will not permit any of
their Restricted Subsidiaries to, directly or indirectly, pay or cause to be
paid any consideration, whether by way of interest, fee or otherwise, to any
Holder of any Notes for or as an inducement to any consent, waiver or amendment
of any of the terms or provisions of the Indenture or the Notes unless such
consideration is offered to be paid or is paid to all Holders of the Notes that
consent, waive or agree to amend in the time frame set forth in the solicitation
documents relating to such consent, waiver or agreement.
REPORTS
The Indenture provides that, whether or not required by the rules and
regulations of the Commission, so long as any Notes are outstanding, the Issuers
will furnish to the Trustee and the Holders of Notes (i) all quarterly and
annual financial information that would be required to be contained in a filing
with the Commission on Forms 10-Q and 10-K if the Issuers were required to file
such forms, including a "Management's Discussion and Analysis of Financial
Condition and Results of Operations" that describes the financial position and
results of operations of the Company and its Restricted Subsidiaries and, with
respect to the annual information only, a report thereon by the Issuers'
certified independent accountants and (ii) all current reports that would be
required to be filed with the Commission on Form 8-K if the Issuers were
required to file such reports. In addition, whether or not required by the rules
and regulations of the Commission, the Issuers will file a copy of all such
information and reports with the Commission for public availability (unless the
Commission will not accept such a filing) and make such information available to
securities analysts and prospective investors upon request. In addition, the
Issuers have agreed that, for so long as any Notes remain outstanding, the
Issuers will furnish to the Holders and to securities analysts and prospective
investors, upon their request, the information required to be delivered pursuant
to Rule 144A(d)(4) under the Securities Act.
EVENTS OF DEFAULT AND REMEDIES
The Indenture provides that each of the following constitutes an Event of
Default: (i) default for 30 days in the payment when due of interest or
Liquidated Damages on the Notes (whether or not
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prohibited by the subordination provisions of the Indenture); (ii) default in
payment when due of the principal of or premium, if any, on the Notes (whether
or not prohibited by the subordination provisions of the Indenture); (iii)
failure by the Issuers to comply with the provisions described under the
captions "--Repurchase at the Option of Holders--Change of Control,"
"--Repurchase at the Option of Holders--Asset Sales," "--Certain
Covenants--Restricted Payments" or "--Certain Covenants-- Incurrence of
Indebtedness;" (iv) failure by the Issuers for 30 days after notice to comply
with any of their other agreements in the Indenture or the Notes; (v) default
under any mortgage, indenture or instrument under which there may be issued or
by which there may be secured or evidenced any Indebtedness for money borrowed
by the Issuers or any of their Restricted Subsidiaries (or the payment of which
is guaranteed by the Issuers or any of their Restricted Subsidiaries), whether
such Indebtedness or guarantee now exists, or is created after the date of the
Indenture, which default (a) is caused by a failure to pay principal of, or
premium, if any, or interest, on such Indebtedness prior to the expiration of
the grace period provided in such Indebtedness on the date of such default (a
"Payment Default") or (b) results in the acceleration of such Indebtedness prior
to its express maturity and, in each case, the principal amount of any such
Indebtedness, together with the principal amount of any other such Indebtedness
under which there has been a Payment Default or the maturity of which has been
so accelerated, aggregates $5.0 million or more; (vi) failure by the Issuers or
any of their Restricted Subsidiaries to pay final non-appealable judgments
aggregating in excess of $5.0 million, which judgments are not paid, discharged
or stayed for a period of 60 days; (vii) any Guarantee of a Guarantor shall be
held in a judicial proceeding to be unenforceable or invalid or shall cease for
any reason to be in full force and effect, or any Guarantor, or any Person
acting on behalf of any Guarantor, shall deny or disaffirm its obligations under
its Guarantee; and (viii) certain events of bankruptcy or insolvency with
respect to either Issuer, any Significant Subsidiary of either Issuer, or any
group of Subsidiaries of either Issuer that, considered together, would
constitute a Significant Subsidiary of either Issuer.
If any Event of Default occurs and is continuing, the Trustee or the Holders
of at least 25% in principal amount of the then outstanding Notes may declare
all the Notes to be due and payable five days after delivering a notice of
acceleration to the Company and to the agent for the lenders under the Senior
Credit Agreement (provided, that the Notes shall become due and payable
immediately if any Senior Debt has been or is accelerated following delivery of
a notice of acceleration). Notwithstanding the foregoing, in the case of an
Event of Default arising from certain events of bankruptcy or insolvency, all
outstanding Notes will become due and payable without further action or notice.
Holders of the Notes may not enforce the Indenture or the Notes except as
provided in the Indenture. Subject to certain limitations, Holders of a majority
in principal amount of the then outstanding Notes may direct the Trustee in its
exercise of any trust or power. The Trustee may withhold from Holders of the
Notes notice of any continuing Default or Event of Default (except a Default or
Event of Default relating to the payment of principal or interest) if it
determines that withholding notice is in their interest.
In the case of any Event of Default occurring by reason of any willful
action (or inaction) taken (or not taken) by or on behalf of the Issuers with
the intention of avoiding payment of the premium that the Issuers would have had
to pay if the Issuers then had elected to redeem the Notes pursuant to the
optional redemption provisions of the Indenture, an equivalent premium shall
also become and be immediately due and payable to the extent permitted by law
upon the acceleration of the Notes. If an Event of Default occurs prior to May
15, 2001 by reason of any willful action (or inaction) taken (or not taken) by
or on behalf of the Company with the intention of avoiding the prohibition on
redemption of the Notes prior to such date, then the premium specified in the
Indenture shall also become immediately due and payable to the extent permitted
by law upon the acceleration of the Notes.
The Holders of a majority in aggregate principal amount of the Notes then
outstanding by notice to the Trustee may on behalf of the Holders of all of the
Notes waive any existing Default or Event of Default and its consequences under
the Indenture except a continuing Default or Event of Default in the payment of
the principal of, or premium, interest or Liquidated Damages (if any) on, the
Notes.
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The Issuers are required to deliver to the Trustee annually a statement
regarding compliance with the Indenture, and the Issuers are required, upon
becoming aware of any Default or Event of Default, to deliver to the Trustee a
statement specifying such Default or Event of Default.
NO PERSONAL LIABILITY OF DIRECTORS, OFFICERS, EMPLOYEES, PARTNERS AND
STOCKHOLDERS
No director, officer, employee, incorporator, partner or stockholder of the
Issuers, as such, will have any liability for any obligations of the Issuers
under the Notes or the Indenture or for any claim based on, in respect of, or by
reason of, such obligations or their creation. Each Holder of Notes by accepting
a Note waives and releases all such liability. The waiver and release are part
of the consideration for issuance of the Notes. Such waiver may not be effective
to waive liabilities under the federal securities laws and it is the view of the
Commission that such a waiver is against public policy.
LEGAL DEFEASANCE AND COVENANT DEFEASANCE
The Issuers may, at their option and at any time, elect to have all of their
obligations discharged with respect to the outstanding Notes ("Legal
Defeasance") except for (i) the rights of Holders of outstanding Notes to
receive payments in respect of the principal of, and premium, interest and
Liquidated Damages (if any) on, the Notes when such payments are due from the
trust referred to below, (ii) the Issuers' obligations with respect to the Notes
concerning issuing temporary Notes, registration of Notes, mutilated, destroyed,
lost or stolen Notes and the maintenance of an office or agency for payment and
money for security payments held in trust, (iii) the rights, powers, trusts,
duties and immunities of the Trustee, and the Issuers' obligations in connection
therewith and (iv) the Legal Defeasance provisions of the Indenture. In
addition, the Issuers may, at their option and at any time, elect to have the
obligations of the Issuers released with respect to certain covenants that are
described in the Indenture ("Covenant Defeasance") and thereafter any omission
to comply with such obligations shall not constitute a Default or Event of
Default with respect to the Notes. In the event Covenant Defeasance occurs,
certain events (not including non-payment, bankruptcy, receivership,
rehabilitation and insolvency events) described under "Events of Default" will
no longer constitute an Event of Default with respect to the Notes.
In order to exercise either Legal Defeasance or Covenant Defeasance, (i) the
Issuers must irrevocably deposit with the Trustee, in trust, for the benefit of
the Holders of the Notes, cash in U.S. dollars, non-callable Government
Securities, or a combination thereof, in such amounts as will be sufficient,
without reinvestment, in the opinion of a nationally recognized firm of
independent public accountants, to pay the principal of, and premium, interest
and Liquidated Damages (if any) on, the outstanding Notes on the stated maturity
or on the applicable redemption date, as the case may be, and the Issuers must
specify whether the Notes are being defeased to maturity or to a particular
redemption date; (ii) in the case of Legal Defeasance, the Issuers shall have
delivered to the Trustee an Opinion of Counsel in the United States reasonably
acceptable to the Trustee confirming that (a) the Issuers have received from, or
there has been published by, the Internal Revenue Service a ruling or (b) since
the date of the Indenture, there has been a change in the applicable federal
income tax law, in either case to the effect that, and based thereon such
Opinion of Counsel shall confirm that, the Holders of the outstanding Notes will
not recognize income, gain or loss for federal income tax purposes as a result
of such Legal Defeasance and will be subject to federal income tax on the same
amounts, in the same manner and at the same times as would have been the case if
such Legal Defeasance had not occurred; (iii) in the case of Covenant
Defeasance, the Issuers shall have delivered to the Trustee an Opinion of
Counsel in the United States reasonably acceptable to the Trustee confirming
that the Holders of the outstanding Notes will not recognize income, gain or
loss for federal income tax purposes as a result of such Covenant Defeasance and
will be subject to federal income tax on the same amounts, in the same manner
and at the same times as would have been the case if such Covenant Defeasance
had not occurred; (iv) no Default or Event of Default shall have occurred and be
continuing on the date of such deposit (other than a Default or Event of Default
resulting from the borrowing of funds to be applied to such deposit) or insofar
as Events of Default from bankruptcy or insolvency events are concerned, at any
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time in the period ending on the 91st day after the date of deposit; (v) such
Legal Defeasance or Covenant Defeasance will not result in a breach or violation
of, or constitute a default under any material agreement or instrument (other
than the Indenture) to which the Issuers or any of their Subsidiaries is a party
or by which the Issuers or any of their Subsidiaries is bound; (vi) the Issuers
shall have delivered to the Trustee an Opinion of Counsel to the effect that
after the 91st day following the deposit, the trust funds will not be subject to
the effect of any applicable bankruptcy, insolvency, reorganization or similar
laws affecting creditors' rights generally; (vii) the Company shall have
delivered to the Trustee an Officers' Certificate stating that the deposit was
not made by the Issuers with the intent of preferring the Holders of Notes over
the other creditors of the Issuers with the intent of defeating, hindering,
delaying or defrauding creditors of the Issuers or others; and (viii) the
Issuers shall have delivered to the Trustee an Officers' Certificate and an
Opinion of Counsel, each stating that all conditions precedent provided for
relating to the Legal Defeasance or the Covenant Defeasance have been complied
with.
TRANSFER AND EXCHANGE
A Holder may transfer or exchange Notes in accordance with the Indenture.
The Registrar and the Trustee may require a Holder, among other things, to
furnish appropriate endorsements and transfer documents and the Issuers may
require a Holder to pay any taxes and fees required by law or permitted by the
Indenture. The Issuers are not required to transfer or exchange any Note
selected for redemption. Also, the Issuers are not required to transfer or
exchange any Note for a period of 15 days before a selection of Notes to be
redeemed.
The registered Holder of a Note will be treated as the owner of it for all
purposes.
AMENDMENT, SUPPLEMENT AND WAIVER
Except as provided in the next two succeeding paragraphs, the Indenture or
the Notes may be amended or supplemented with the consent of the Holders of at
least a majority in principal amount of the Notes then outstanding (including,
without limitation, consents obtained in connection with a purchase of, or
tender offer or exchange offer for, Notes), and any existing default or
compliance with any provision of the Indenture or the Notes may be waived with
the consent of the Holders of a majority in principal amount of the then
outstanding Notes (including consents obtained in connection with a tender offer
or exchange offer for Notes).
Without the consent of each Holder affected, an amendment or waiver may not
(with respect to any Notes held by a non-consenting Holder): (i) reduce the
principal amount of Notes whose Holders must consent to an amendment, supplement
or waiver, (ii) reduce the principal of or change the fixed maturity of any Note
or alter the provisions with respect to the redemption of the Notes (other than
provisions relating to the covenants described above under the caption
"--Certain Covenants--Repurchase at the Option of Holders"), (iii) reduce the
rate of or change the time for payment of interest on any Note, (iv) waive a
Default or Event of Default in the payment of principal of, or premium, interest
or Liquidated Damages (if any) on, the Notes (except a rescission of
acceleration of the Notes by the Holders of at least a majority in aggregate
principal amount of the Notes and a waiver of the payment default that resulted
from such acceleration), (v) make any Note payable in money other than that
stated in the Notes, (vi) make any change in the provisions of the Indenture
relating to waivers of past Defaults or the rights of Holders of Notes to
receive payments of principal of, or premium, interest or Liquidated Damages (if
any) on, the Notes, (vii) waive a redemption payment with respect to any Note
(other than a payment required by one of the covenants described above under the
caption "--Certain Covenants--Repurchase at the Option of Holders") or (viii)
make any change in the foregoing amendment and waiver provisions. In addition,
any amendment to the provisions of Article 10 of the Indenture (which relate to
subordination) requires the consent of the Holders of at least 75% in aggregate
principal amount of the Notes then outstanding if such amendment would adversely
affect the rights of Holders of Senior Subordinated Notes.
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Notwithstanding the foregoing, without the consent of any Holder of Notes,
the Issuers and the Trustee may amend or supplement the Indenture or the Notes
to cure any ambiguity, defect or inconsistency, to provide for uncertificated
Notes in addition to or in place of certificated Notes, to provide for the
assumption of the Issuers' obligations to Holders of Notes in the case of a
merger or consolidation, to make any change that would provide any additional
rights or benefits to the Holders of Notes or that does not adversely affect the
legal rights under the Indenture of any such Holder, or to comply with
requirements of the Commission in order to effect or maintain the qualification
of the Indenture under the Trust Indenture Act.
CONCERNING THE TRUSTEE
The Indenture contains certain limitations on the rights of the Trustee,
should it become a creditor of the Issuers, to obtain payment of claims in
certain cases, or to realize on certain property received in respect of any such
claim as security or otherwise. The Trustee will be permitted to engage in other
transactions; however, if it acquires any conflicting interest it must eliminate
such conflict within 90 days, apply to the Commission for permission to continue
or resign.
The Holders of a majority in principal amount of the then outstanding Notes
will have the right to direct the time, method and place of conducting any
proceeding for exercising any remedy available to the Trustee, subject to
certain exceptions. The Indenture provides that in case an Event of Default
shall occur (which shall not be cured), the Trustee will be required, in the
exercise of its power, to use the degree of care of a prudent man in the conduct
of his own affairs. Subject to such provisions, the Trustee will be under no
obligation to exercise any of its rights or powers under the Indenture at the
request of any Holder of Notes, unless such Holder shall have offered to the
Trustee security and indemnity satisfactory to it against any loss, liability or
expense.
ADDITIONAL INFORMATION
Anyone who receives this Prospectus may obtain a copy of the Indenture
without charge by writing to Remington Products Company, 60 Main Street,
Bridgeport, Connecticut 06604, Attention: General Counsel.
BOOK-ENTRY, DELIVERY AND FORM
The Notes to be resold as set forth herein will initially be issued in the
form of one Global Note (the "Global Note"). The Global Note will be deposited
on the date of the closing of the sale of the Notes offered hereby (the "Closing
Date") with, or on behalf of, the Depositary and registered in the name of Cede
& Co., as nominee of the Depositary (such nominee being referred to herein as
the "Global Note Holder").
Notes that are issued as described below under "--Certificated Securities"
will be issued in the form of registered definitive certificates (the
"Certificated Securities"). Upon the transfer of Certificated Securities, such
Certificated Securities may, unless the Global Note has previously been
exchanged for Certificated Securities, be exchanged for an interest in the
Global Note representing the principal amount of Notes being transferred.
The Depositary is a limited-purpose trust company that was created to hold
securities for its participating organizations (collectively, the "Participants"
or the "Depositary's Participants") and to facilitate the clearance and
settlement of transactions in such securities between Participants through
electronic book-entry changes in accounts of its Participants. The Depositary's
Participants include securities brokers and dealers (including the Initial
Purchaser), banks and trust companies, clearing corporations and certain other
organizations. Access to the Depositary's system is also available to other
entities such as banks, brokers, dealers and trust companies (collectively, the
"Indirect Participants" or the "Depositary's Indirect Participants") that clear
through or maintain a custodial relationship with a
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Participant, either directly or indirectly. Persons who are not Participants may
beneficially own securities held by or on behalf of the Depositary only through
the Depositary's Participants or the Depositary's Indirect Participants.
The Issuers expect that pursuant to procedures established by the Depositary
(i) upon deposit of the Global Note, the Depositary will credit the accounts of
Participants designated by the Initial Purchaser with portions of the principal
amount of the Global Note and (ii) ownership of the Notes evidenced by the
Global Note will be shown on, and the transfer of ownership thereof will be
effected only through, records maintained by the Depositary (with respect to the
interests of the Depositary's Participants), the Depositary's Participants and
the Depositary's Indirect Participants. Prospective purchasers are advised that
the laws of some states require that certain persons take physical delivery in
definitive form of securities that they own. Consequently, the ability to
transfer Notes evidenced by the Global Note will be limited to such extent. For
certain other restrictions on the transferability of the Notes, see "Notice to
Investors."
So long as the Global Note Holder is the registered owner of any Notes, the
Global Note Holder will be considered the sole Holder under the Indenture of any
Notes evidenced by the Global Note. Beneficial owners of Notes evidenced by the
Global Note will not be considered the owners or Holders thereof under the
Indenture for any purpose, including with respect to the giving of any
directions, instructions or approvals to the Trustee thereunder. Neither the
Company nor the Trustee will have any responsibility or liability for any aspect
of the records of the Depositary or for maintaining, supervising or reviewing
any records of the Depositary relating to the Notes.
Payments in respect of the principal of, and premium, interest and
Liquidated Damages (if any) on, any Notes registered in the name of the Global
Note Holder on the applicable record date will be payable by the Trustee to or
at the direction of the Global Note Holder in its capacity as the registered
Holder under the Indenture. Under the terms of the Indenture, the Issuers and
the Trustee may treat the persons in whose names Notes, including the Global
Note, are registered as the owners thereof for the purpose of receiving such
payments. Consequently, neither the Issuers nor the Trustee has or will have any
responsibility or liability for the payment of such amounts to beneficial owners
of Notes. The Issuers believe, however, that it is currently the policy of the
Depositary to immediately credit the accounts of the relevant Participants with
such payments, in amounts proportionate to their respective holdings of
beneficial interests in the relevant security as shown on the records of the
Depositary. Payments by the Depositary's Participants and the Depositary's
Indirect Participants to the beneficial owners of Notes will be governed by
standing instructions and customary practice and will be the responsibility of
the Depositary's Participants or the Depositary's Indirect Participants.
CERTIFICATED SECURITIES
Subject to certain conditions, any person having a beneficial interest in
the Global Note may, upon request to the Trustee, exchange such beneficial
interest for Notes in the form of Certificated Securities. Upon any such
issuance, the Trustee is required to register such Certificated Securities in
the name of, and cause the same to be delivered to, such person or persons (or
the nominee of any thereof). All such certificated Notes would be subject to the
legend requirements described herein under "Notice to Investors." In addition,
if (i) the Issuers notify the Trustee in writing that the Depositary is no
longer willing or able to act as a depositary and the Issuers are unable to
locate a qualified successor within 90 days or (ii) the Issuers, at their
option, notify the Trustee in writing that they elect to cause the issuance of
Notes in the form of Certificated Securities under the Indenture, then, upon
surrender by the Global Note Holder of its Global Note, Notes in such form will
be issued to each person that the Global Note Holder and the Depositary identify
as being the beneficial owner of the related Notes.
Neither the Issuers nor the Trustee will be liable for any delay by the
Global Note Holder or the Depositary in identifying the beneficial owners of
Notes and the Issuers and the Trustee may
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conclusively rely on, and will be protected in relying on, instructions from the
Global Note Holder or the Depositary for all purposes.
SAME-DAY SETTLEMENT AND PAYMENT
The Indenture requires that payments in respect of the Notes represented by
the Global Note (including principal, premium, interest and Liquidated Damages,
if any) be made by wire transfer of immediately available funds to the accounts
specified by the Global Note Holder. With respect to Certificated Securities,
the Issuers will make all payments of principal, premium, interest and
Liquidated Damages, if any, by wire transfer of immediately available funds to
the accounts specified by the Holders thereof or, if no such account is
specified, by mailing a check to each such Holder's registered address.
Secondary trading in long-term notes and debentures of corporate issuers is
generally settled in clearing-house or next-day funds. In contrast, the Notes
represented by the Global Note are expected to be eligible to trade in the
Depositary's Same-Day Funds Settlement System, and any permitted secondary
market trading activity in such Notes will, therefore, be required by the
Depositary to be settled in immediately available funds. The Issuers expect that
secondary trading in the Certificated Securities will also be settled in
immediately available funds.
CERTAIN DEFINITIONS
Set forth below are certain defined terms used in the Indenture. Reference
is made to the Indenture for a full disclosure of all such terms, as well as any
other capitalized terms used herein for which no definition is provided.
"Acquired Debt" means, with respect to any specified Person, (i)
Indebtedness of any other Person existing at the time such other Person is
merged with or into or became a Restricted Subsidiary of such specified Person,
including, without limitation, Indebtedness incurred in connection with, or in
contemplation of, such other Person merging with or into or becoming a
Restricted Subsidiary of such specified Person, and (ii) Indebtedness secured by
a Lien encumbering any asset acquired by such specified Person.
"Acquisition Debt" means, with respect to any Person, the aggregate of the
amount of Indebtedness incurred and the liquidation preference of preferred
stock issued by such Person and its Restricted Subsidiaries to finance or in
contemplation of the acquisition of the assets of any business, the acquisition
of such Person or the acquisition of any other Person that becomes a Restricted
Subsidiary of such Person (whether accomplished by asset purchase, merger or
stock purchase); provided that such acquisition constitutes a Permitted
Investment; and provided, further, that Acquisition Debt shall include
Indebtedness incurred and preferred stock issued as interest on or dividends
with respect to Acquisition Debt.
"Affiliate" of any specified Person means any other Person directly or
indirectly controlling or controlled by or under direct or indirect common
control with such specified Person. For purposes of this definition, "control"
(including, with correlative meanings, the terms "controlling," "controlled by"
and "under common control with"), as used with respect to any Person, shall mean
the possession, directly or indirectly, of the power to direct or cause the
direction of the management or policies of such Person, whether through the
ownership of voting securities, by agreement or otherwise; provided that
Beneficial Ownership of 10% or more of the voting securities of a Person shall
be deemed to be control.
"Asset Sale" means (i) the sale, lease, conveyance or other disposition of
any assets (including, without limitation, by way of a sale and leaseback)
(provided that the sale, lease, conveyance or other disposition of all or
substantially all of the assets of the Issuers and their Restricted Subsidiaries
taken as a whole will be governed by the provisions of the Indenture described
above under the caption "--Change of Control" and/or the provisions described
above under the caption "--Merger, Consolidation or Sale of Assets" and not by
the provisions of the Asset Sale covenant), and (ii) the issue or sale by
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the Issuers or any of their Subsidiaries of Equity Interests of any of the
Issuers' Subsidiaries, in the case of either clause (i) or (ii), whether in a
single transaction or a series of related transactions for net proceeds in
excess of $1.0 million. Notwithstanding the foregoing, the following will be
deemed not to be Asset Sales: (i) the sale of inventory or obsolete equipment in
the ordinary course of business, (ii) the surrender or waiver of contract rights
or the settlement, release or surrender of contract, tort or other claims of any
kind, (iii) the grant in the ordinary course of business of, or lapse of, any
license of patents, trademarks and other similar intellectual property, (iv) a
transfer of assets by the Issuers to a Wholly Owned Restricted Subsidiary or by
a Wholly Owned Restricted Subsidiary to the Issuers or to another Wholly Owned
Restricted Subsidiary, (v) an issuance of Equity Interests by a Wholly Owned
Restricted Subsidiary to the Issuers or to another Wholly Owned Restricted
Subsidiary and (vi) a Permitted Investment or a Restricted Payment that is
permitted by the covenant described above under the caption "--Restricted
Payments."
"Beneficial Owner" (including, with correlative meanings, "Beneficially
Owned" and "Beneficial Ownership") means, with respect to any Capital Stock, a
"person," as such term is used in Section 13(d)(3) of the Exchange Act, that is
a "beneficial owner," as such term is defined in Rule 13d-3 and Rule 13d-5 under
the Exchange Act, of such Capital Stock.
"Borrowing Base" means, with respect to any Person as of any date, an amount
equal to the sum of (i) 85% of the face amount of Eligible Accounts Receivable
of such Person and its Restricted Subsidiaries and (ii) 60% of the book value
(calculated on a first-in, first-out basis) of Eligible Inventory of such Person
and its Restricted Subsidiaries, in each case, determined as of the end of the
most recently completed month preceding such date for which internal financial
statements are available.
"Capital Lease Obligation" means, at the time any determination thereof is
to be made, the amount of the liability in respect of a capital lease that would
at such time be required to be capitalized on a balance sheet in accordance with
GAAP.
"Capital Stock" means (i) in the case of a corporation, corporate stock,
(ii) in the case of an association or business entity, any and all shares,
interests, participations, rights or other equivalents (however designated) of
corporate stock, (iii) in the case of a partnership, partnership interests
(whether general or limited) and (iv) any other interest or participation that
confers on a Person the right to receive a share of the profits and losses of,
or distributions of assets of, the issuing Person.
"Cash Equivalents" means (i) United States dollars, (ii) securities issued
or directly and fully guaranteed or insured by the United States government or
any agency or instrumentality thereof having maturities of not more than six
months from the date of acquisition, (iii) certificates of deposit and
eurodollar time deposits with maturities of six months or less from the date of
acquisition, bankers' acceptances with maturities not exceeding six months and
overnight bank deposits, in each case with any domestic commercial bank having
capital and surplus in excess of $500 million and a Keefe Bank Watch Rating of
"B" or better, (iv) repurchase obligations with a term of not more than seven
days for underlying securities of the types described in clauses (ii) and (iii)
above entered into with any financial institution meeting the qualifications
specified in clause (iii) above and (v) commercial paper having the highest
rating obtainable from Moody's Investors Service, Inc. or Standard & Poor's
Corporation and in each case maturing within six months after the date of
acquisition.
"Change of Control" means the occurrence of any of the following: (i) the
sale, lease, transfer, conveyance or other disposition (other than by way of
merger or consolidation), in one or a series of related transactions, of all or
substantially all of the assets of the Company and its Restricted Subsidiaries,
taken as a whole, to any "person" (as such term is used in Section 13(d)(3) of
the Exchange Act) other than the Principal, (ii) the adoption of a plan relating
to the liquidation or dissolution of the Company, (iii) prior to the
consummation of an Initial Public Offering, the consummation of any transaction
(including, without limitation, any merger or consolidation) the result of which
is that (a) the Principal ceases to have sufficient voting power (including,
without limitation, by
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contractual arrangement) to elect a majority of the members of the Management
Committee or (b) the Principal sells, grants an option to sell, pledges or
otherwise disposes of more than 20% of the amount of its Investment in the
Company as of the Closing Date (other than in connection with an Initial Public
Offering and sales or other dispositions of Capital Stock that do not result in
the Principal no longer Beneficially Owning such Capital Stock), (iv) following
the consummation of an Initial Public Offering, the Company becomes aware (by
way of a report or other filing with the Commission or otherwise) that any
"person" (as such term is used in Section 13(d)(3) of the Exchange Act), other
than the Principal, has become the Beneficial Owner, directly or indirectly, of
(a) more than 35% of the voting power of the voting Capital Stock of the Company
and (b) more of the voting power of the voting Capital Stock of the Company than
is Beneficially Owned by the Principal, (v) the first day on which the Company
fails to own 100% of the issued and outstanding Equity Interests of Capital,
other than by reason of a merger of Capital with and into a corporate successor
to the Company, and (vi) the first day on which more than one-third of the
members of the Management Committee are not Continuing Members; provided,
however, that the Principal shall be deemed to be the Beneficial Owner of the
voting power of voting Capital Stock if (a) the Principal retains the right (by
contractual arrangement or otherwise) to vote such Capital Stock and (b) the
Principal Beneficially Owns at least 10% of the common Equity Interests of the
Company (excluding Capital Stock the Principal may be deemed to Beneficially Own
solely because it has the contractual right to vote such Capital Stock).
"Consolidated Cash Flow" means, with respect to any Person for any period,
the Consolidated Net Income of such Person for such period plus, to the extent
deducted in computing Consolidated Net Income, (i) an amount equal to any
extraordinary loss plus any net loss realized in connection with an Asset Sale,
(ii) provision for taxes based on income or profits or the Tax Amount of such
Person and its Restricted Subsidiaries for such period, (iii) consolidated
interest expense of such Person and its Restricted Subsidiaries for such period,
whether paid or accrued and whether or not capitalized (including, without
limitation, amortization of original issue discount, non-cash interest payments,
the interest component of any deferred payment obligations, the interest
component of all payments associated with Capital Lease Obligations,
commissions, discounts and other fees and charges incurred in respect of letter
of credit or bankers' acceptance financings, and net payments (if any) pursuant
to Hedging Obligations) and (iv) depreciation and amortization (including
amortization of goodwill and other intangibles but excluding amortization of
prepaid cash expenses that were paid in a prior period), other non-cash charges
(excluding any such non-cash charge to the extent that it represents an accrual
of or reserve for cash charges in any future period or amortization of a prepaid
cash expense that was paid in a prior period) and Excluded Obligations of such
Person and its Restricted Subsidiaries for such period, in each case, on a
consolidated basis and determined in accordance with GAAP. Notwithstanding the
foregoing, the provision for taxes on the income or profits of, and the
depreciation and amortization, other non-cash charges and Excluded Obligations
of, a Restricted Subsidiary of the referent Person shall be added to
Consolidated Net Income to compute Consolidated Cash Flow only to the extent
(and in same proportion) that the Net Income of such Restricted Subsidiary was
included in calculating the Consolidated Net Income of such Person and only if a
corresponding amount would be permitted at the date of determination to be
dividended to the Issuers by such Restricted Subsidiary without prior
governmental approval (that has not been obtained), and without direct or
indirect restriction pursuant to the terms of its charter and all agreements,
instruments, judgments, decrees, orders, statutes, rules and governmental
regulations applicable to such Restricted Subsidiary or its stockholders.
"Consolidated Net Income" means, with respect to any Person for any period,
the aggregate of the Net Income of such Person and its Restricted Subsidiaries
for such period, on a consolidated basis, determined in accordance with GAAP;
provided that (i) the Net Income (but not loss) of any Person that is not a
Restricted Subsidiary or that is accounted for by the equity method of
accounting shall be included only to the extent of the amount of dividends or
distributions paid in cash to the referent Person or a Wholly Owned Restricted
Subsidiary thereof, (ii) the Net Income of any Restricted Subsidiary shall be
excluded to the extent that the declaration or payment of dividends or similar
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distributions by such Restricted Subsidiary of such Net Income is not at the
date of determination permitted without any prior governmental approval (that
has not been obtained) or, directly or indirectly, by operation of the terms of
its charter or any agreement, instrument, judgment, decree, order, statute, rule
or governmental regulation applicable to such Restricted Subsidiary or its
stockholders, (iii) the Net Income of any Person acquired in a pooling of
interests transaction for any period prior to the date of such acquisition shall
be excluded, (iv) the cumulative effect of a change in accounting principles
shall be excluded and (v) the Net Income of any Unrestricted Subsidiary shall be
excluded, whether or not distributed to the Issuers or their Restricted
Subsidiaries.
"Consolidated Net Worth" means, with respect to any Person, the amount by
which the total assets of such Person and its Restricted Subsidiaries exceed the
sum of (i) the total liabilities of such Person and its Restricted Subsidiaries
plus (ii) any Disqualified Stock of such Person and its Restricted Subsidiaries
(other than any such Disqualified Stock issued to such Person or any of its
Restricted Subsidiaries), in each case determined in accordance with GAAP.
"Continuing Member" means, as of any date of determination, any member of
the Management Committee who (i) was a member of the Management Committee on the
date of the Indenture or (ii) was nominated for election to the Management
Committee with the approval of at least a majority of the Continuing Members who
were members of the Management Committee at the time of such nomination or
election.
"Default" means any event that is or with the passage of time or the giving
of notice or both would be an Event of Default.
"Designated Senior Debt" means (i) Indebtedness under the Senior Credit
Agreement and (ii) any other Senior Debt permitted to be incurred by the Issuers
under the terms of the Indenture the principal amount of which is $25.0 million
or more and that has been designated by the Management Committee as "Designated
Senior Debt."
"Disqualified Stock" means any Capital Stock that, by its terms (or by the
terms of any security into which it is convertible or for which it is
exchangeable), or upon the happening of any event, matures or is mandatorily
redeemable, pursuant to a sinking fund obligation or otherwise, or redeemable at
the option of the Holder thereof, in whole or in part, on or prior to the date
that is 91 days after the date on which the Notes mature.
"Equity Interests" means Capital Stock and all warrants, options or other
rights to acquire Capital Stock (but excluding any debt security that is
convertible into, or exchangeable for, Capital Stock).
"Excluded Obligations" means the obligations of the Company listed on Annex
A to the Indenture that will reduce the amounts of the distributions to Remsen
and RPI.
"Existing Indebtedness" means Indebtedness of the Issuers and their
Restricted Subsidiaries in existence on the date of the Indenture, until such
amounts are repaid.
"Fixed Charge Coverage Ratio" means with respect to any Person for any
period, the ratio of the Consolidated Cash Flow of such Person for such period
to the Fixed Charges of such Person for such period; provided, however, that (i)
in the event that such Person or any of its Restricted Subsidiaries incurs,
assumes, Guarantees or redeems any Indebtedness (other than revolving credit
borrowings) or issues or redeems any preferred stock subsequent to the
commencement of the period for which the Fixed Charge Coverage Ratio is being
calculated but prior to the date on which the event for which the calculation of
the Fixed Charge Coverage Ratio is made (the "Calculation Date"), then the Fixed
Charge Coverage Ratio shall be calculated giving pro forma effect to such
incurrence, assumption, Guarantee or redemption of Indebtedness, or such
issuance or redemption of preferred stock, as if the same had occurred at the
beginning of the applicable four-quarter reference period; (ii) in the event
that such Person or any of its Restricted Subsidiaries makes any acquisitions or
dispositions (including Asset
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Sales), including through mergers or consolidations and including any related
financing transactions, during the four-quarter reference period or subsequent
to such reference period and on or prior to the Calculation Date, then the Fixed
Charge Coverage Ratio shall be calculated giving pro forma effect to such
acquisitions or dispositions (including, without limitation, any cost savings or
other reductions and any additional expenses accounted for on an annualized
basis which, in the good faith estimate of the Management Committee, will be
eliminated or realized within six months after the date of such transaction), as
if the same had occurred at the beginning of the applicable four-quarter
reference period, and, in the case of acquisitions, Consolidated Cash Flow for
such reference period shall be calculated without giving effect to clause (iii)
of the proviso set forth in the definition of Consolidated Net Income; (iii) the
Consolidated Cash Flow attributable to discontinued operations, as determined in
accordance with GAAP, and operations or businesses disposed of prior to the
Calculation Date, shall be excluded; and (iv) the Fixed Charges attributable to
discontinued operations, as determined in accordance with GAAP, and operations
or businesses disposed of prior to the Calculation Date, shall be excluded, but
only to the extent that the obligations giving rise to such Fixed Charges will
not be obligations of the referent Person or any of its Restricted Subsidiaries
following the Calculation Date.
"Fixed Charges" means, with respect to any Person for any period, the sum of
(without duplication) (i) the consolidated interest expense of such Person and
its Restricted Subsidiaries for such period, whether paid or accrued (including,
without limitation, amortization of original issue discount, non-cash interest
payments, the interest component of any deferred payment obligations, the
interest component of all payments associated with Capital Lease Obligations,
commissions, discounts and other fees and charges incurred in respect of letter
of credit or bankers' acceptance financings, and net payments (if any) pursuant
to Hedging Obligations, but excluding all other amortization of debt issuance
costs) and (ii) the consolidated interest expense of such Person and its
Restricted Subsidiaries that was capitalized during such period and (iii) any
interest expense on Indebtedness of another Person that is Guaranteed by such
Person or one of its Restricted Subsidiaries or secured by a Lien on assets of
such Person or one of its Restricted Subsidiaries (whether or not such Guarantee
or Lien is called upon) and (iv) the product of (a) all cash dividend payments
or other distributions (and non-cash dividend payments in the case of a Person
that is a Restricted Subsidiary) on any series of preferred equity of such
Person (other than payments to such Person and its Wholly Owned Restricted
Subsidiaries), times (b) a fraction, the numerator of which is one and the
denominator of which is one minus the then current combined federal, state and
local statutory tax rate of such Person (or, in the case of a Person that is a
partnership, the combined federal, state and local tax rate to which such Person
would be subject if it were a Delaware corporation), expressed as a decimal, in
each case, on a consolidated basis and in accordance with GAAP.
"GAAP" means generally accepted accounting principles set forth in the
opinions and pronouncements of the Accounting Principles Board of the American
Institute of Certified Public Accountants and statements and pronouncements of
the Financial Accounting Standards Board or in such other statements by such
other entity as have been approved by a significant segment of the accounting
profession, which are in effect on the date of the Indenture.
"Guarantee" means a guarantee (other than by endorsement of negotiable
instruments for collection in the ordinary course of business), direct or
indirect, in any manner (including, without limitation, letters of credit and
reimbursement agreements in respect thereof), of all or any part of any
Indebtedness.
"Guarantor" means each Subsidiary that executes a Guarantee of the Issuers'
payment obligations under the Notes and the Indenture in accordance with the
provisions of the Indenture, and their respective successors and assigns.
"Hedging Obligations" means, with respect to any Person, the obligations of
such Person under (i) interest and currency rate swap agreements, interest rate
cap agreements and interest rate collar agreements and (ii) other agreements or
arrangements designed to protect such Person against fluctuations in interest or
currency exchange rates.
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"Indebtedness" means, with respect to any Person, any indebtedness of such
Person, whether or not contingent, in respect of borrowed money or evidenced by
bonds, notes, debentures or similar instruments or letters of credit (or
reimbursement agreements in respect thereof) or banker's acceptances or
representing Capital Lease Obligations or the balance deferred and unpaid of the
purchase price of any property or representing any Hedging Obligations, except
any such balance that constitutes an accrued expense or trade payable, if and to
the extent any of the foregoing indebtedness (other than letters of credit and
Hedging Obligations) would appear as a liability upon a balance sheet of such
Person prepared in accordance with GAAP, as well as all indebtedness of others
secured by a Lien on any asset of such Person (whether or not such indebtedness
is assumed by such Person) and, to the extent not otherwise included, the
Guarantee by such Person of any indebtedness of any other Person.
"Initial Public Offering" means an underwritten public offering of common
Capital Stock of the Company registered under Securities Act (other than a
public offering registered on Form S-8 under the Securities Act) that results in
net proceeds of at least $25.0 million to the Company.
"Investments" means, with respect to any Person, all investments by such
Person in other Persons in the forms of direct or indirect loans (including
guarantees of Indebtedness or other obligations), advances (other than advances
to customers in the ordinary course of business that are recorded as accounts
receivable in accordance with GAAP) or capital contributions (excluding
commission, travel, relocation and similar advances to officers and employees
made in the ordinary course of business), purchases or other acquisitions for
consideration of Indebtedness, Equity Interests or other securities, together
with all items that are or would be classified as investments on a balance sheet
prepared in accordance with GAAP; provided that an acquisition of assets, Equity
Interests or other securities by the Issuers or any of their Restricted
Subsidiaries for consideration consisting of Equity Interests (other than
Disqualified Stock) of the Company shall not be deemed to be an Investment. If
the Issuers or any of their Restricted Subsidiaries sells or otherwise disposes
of any Equity Interests of any Restricted Subsidiary of the Issuers such that,
after giving effect to any such sale or disposition, such Person is no longer a
Restricted Subsidiary of either Issuer, the Issuers shall be deemed to have made
an Investment on the date of any such sale or disposition equal to the fair
market value of the Equity Interests of such Restricted Subsidiary not sold or
disposed of.
"Lien" means, with respect to any asset, any mortgage, lien, pledge, charge,
security interest or encumbrance of any kind in respect of such asset, whether
or not filed, recorded or otherwise perfected under applicable law (including
any conditional sale or other title retention agreement, any lease in the nature
thereof, any option or other agreement to sell or give a security interest in
and any filing of or agreement to give any financing statement under the Uniform
Commercial Code (or equivalent statutes) of any jurisdiction).
"Management Committee" means (i) for so long as the Company is a limited
liability company, the committee appointed pursuant to Section 6.1 of the LLC
Agreement, and (ii) otherwise the board of directors of the Company.
"Net Income" means, with respect to any Person for any period, (i) the net
income (loss) of such Person for such period, determined in accordance with GAAP
and before any reduction in respect of preferred stock dividends, excluding,
however, (a) any gain (but not loss), together with any related provision for
taxes or Tax Distributions on such gain (but not loss), realized in connection
with (1) any Asset Sale (including, without limitation, dispositions pursuant to
sale and leaseback transactions) or (2) the disposition of any securities by
such Person or any of its Restricted Subsidiaries or the extinguishment of any
Indebtedness of such Person or any of its Restricted Subsidiaries and (b) any
extraordinary or nonrecurring gain (but not loss), together with any related
provision for taxes or Tax Distributions on such extraordinary or nonrecurring
gain (but not loss), less (ii) in the case of any Person that is treated as a
partnership for United States federal or state income tax purposes, the Tax
Amount of such Person for such period.
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"Net Proceeds" means the aggregate cash proceeds received by the Issuers or
any of their Restricted Subsidiaries in respect of any Asset Sale (including,
without limitation, any cash received upon the sale or other disposition of any
non-cash consideration received in any Asset Sale), net of the direct costs
relating to such Asset Sale (including, without limitation, legal, accounting
and investment banking fees, and sales commissions), any relocation expenses
incurred as a result thereof, any taxes or Tax Distributions paid or payable by
the Issuers or any of their Restricted Subsidiaries as a result thereof (after
taking into account any available tax credits or deductions and any tax sharing
arrangements), any purchase money obligations relating to the assets comprising
such Asset Sale (to the extent repaid with the proceeds thereof) and any reserve
for adjustment in respect of the sale price of such asset or assets established
in accordance with GAAP.
"Non-Recourse Debt" means Indebtedness (i) as to which neither the Issuers
nor any of their Restricted Subsidiaries (a) provides credit support of any kind
(including any undertaking, agreement or instrument that would constitute
Indebtedness), (b) is directly or indirectly liable (as a guarantor or
otherwise), or (c) constitutes the lender, (ii) no default with respect to which
(including any rights that the holders thereof may have to take enforcement
action against an Unrestricted Subsidiary) would permit (upon notice, lapse of
time or both) any holder of any other Indebtedness of the Issuers or any of
their Restricted Subsidiaries to declare a default on such other Indebtedness or
cause the payment thereof to be accelerated or payable prior to its stated
maturity and (iii) as to which the lenders have been notified in writing that
they will not have any recourse to the stock or assets of the Issuers or any of
their Restricted Subsidiaries.
"Obligations" means any principal, interest, penalties, fees,
indemnifications, reimbursements, damages and other liabilities payable under
the documentation governing any Indebtedness.
"Permitted Investments" means (i) any Investment in the Issuers or in a
Wholly Owned Restricted Subsidiary of the Issuers; (ii) any Investment in Cash
Equivalents; (iii) any Investment by the Issuers or any of their Restricted
Subsidiaries in a Person if, as a result of such Investment, (a) such Person
becomes a Wholly Owned Restricted Subsidiary of the Company or (b) such Person
is merged, consolidated or amalgamated with or into, or transfers or conveys
substantially all of its assets to, or is liquidated into, the Company or a
Wholly Owned Restricted Subsidiary of the Company; (iv) any Restricted
Investment made as a result of the receipt of non-cash consideration from an
Asset Sale that was made pursuant to and in compliance with the covenant
described above under the caption "--Repurchase at the Option of Holders--Asset
Sales"; (v) advances and loans to employees of the Company and its Restricted
Subsidiaries in the ordinary course of business; (vi) Investments acquired by
the Company or any of its Restricted Subsidiaries (a) in exchange for any other
Investment or accounts receivable held by the Company or such Restricted
Subsidiary in connection with or as a result of a bankruptcy, workout,
reorganization or recapitalization of the issuer of such Investment or accounts
receivable or (b) as a result of a foreclosure by the Company or such Restricted
Subsidiary or other transfer of title with respect to any secured Investment in
default; and (vii) any Hedging Obligation.
"Permitted Liens" means (i) Liens securing Senior Debt and Indebtedness of
Restricted Subsidiaries that is permitted to be incurred pursuant to the
Indenture; (ii) Liens securing Indebtedness that is pari passu in right of
payment with the Notes; provided that the Notes are equally and ratably secured,
(iii) Liens in favor of the Issuers or any of their Restricted Subsidiaries;
(iv) Liens on property of a Person existing at the time such Person is merged
into or consolidated with the Issuers or any of their Restricted Subsidiaries;
provided that such Liens were in existence prior to the contemplation of such
merger or consolidation and do not extend to any assets other than those of the
Person merged into or consolidated with the Issuers or any such Restricted
Subsidiary; (v) Liens on property existing at the time of acquisition thereof by
the Issuers or any of their Restricted Subsidiaries; provided that such Liens
were in existence prior to the contemplation of such acquisition; (vi) Liens to
secure the performance of statutory obligations, surety or appeal bonds,
performance bonds or other obligations of
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a like nature incurred in the ordinary course of business; (vii) Liens to secure
Indebtedness (including Capital Lease Obligations) permitted by clause (iv) of
the second paragraph of the covenant entitled "Incurrence of Indebtedness"
covering only the assets acquired with such Indebtedness; (viii) Liens existing
on the date of the Indenture; (ix) Liens for taxes, assessments or governmental
charges or claims that are not yet delinquent or that are being contested in
good faith by appropriate proceedings promptly instituted and diligently
concluded; provided that any reserve or other appropriate provision as shall be
required in conformity with GAAP shall have been made therefor; (x) Liens of
landlords or of mortgagees of landlords arising by operation of law; provided
that the rental payments secured thereby are not yet due and payable; (xi) Liens
incurred or deposits made in the ordinary course of business in connection with
workers' compensation, unemployment insurance and other types of social
security; (xii) easements, rights-of-way, restrictions, minor defects or
irregularities in title and other similar charges or encumbrances not
interfering in any material respect with the business of the Company or any of
its Restricted Subsidiaries; (xiii) judgement or attachment Liens not giving
rise to an Event of Default; (xiv) Liens arising out of the purchase,
consignment, shipment or storage of inventory or other goods in the ordinary
course of business; (xv) any interest or title of a lessor in property subject
to any Capital Lease Obligation or other lease; (xvi) Liens arising from filing
Uniform Commercial Code financing statements regarding leases; and (xvii) Liens
incurred in the ordinary course of business of the Issuers or any of their
Restricted Subsidiaries that (a) are not incurred in connection with the
borrowing of money or the obtaining of advances or credit (other than trade
credit in the ordinary course of business) and (b) do not in the aggregate
materially detract from the value of the property or materially impair the use
thereof in the operation of business by the Issuers or any such Restricted
Subsidiary.
"Permitted Refinancing Indebtedness" means any Indebtedness of the Issuers
or any of their Restricted Subsidiaries issued in exchange for, or the net
proceeds of which are used to extend, refinance, renew, replace, defease or
refund other Indebtedness of the Issuers or any such Restricted Subsidiary;
provided that: (i) the principal amount (or accreted value, if applicable) of
such Permitted Refinancing Indebtedness does not exceed the principal amount (or
accreted value, if applicable) of the Indebtedness so extended, refinanced,
renewed, replaced, defeased or refunded (plus the amount of reasonable expenses
incurred in connection therewith); (ii) such Permitted Refinancing Indebtedness
has a final maturity date no earlier than the final maturity date of, and has a
Weighted Average Life to Maturity equal to or greater than the Weighted Average
Life to Maturity of, the Indebtedness being extended, refinanced, renewed,
replaced, defeased or refunded; (iii) if the Indebtedness being extended,
refinanced, renewed, replaced, defeased or refunded is subordinated in right of
payment to the Notes, such Permitted Refinancing Indebtedness has a final
maturity date later than the final maturity date of, and is subordinated in
right of payment to, the Notes on terms at least as favorable to the Holders of
Notes as those contained in the documentation governing the Indebtedness being
extended, refinanced, renewed, replaced, defeased or refunded; and (iv) such
Indebtedness is incurred only by the Issuer or the Restricted Subsidiary that is
the obligor on the Indebtedness being extended, refinanced, renewed, replaced,
defeased or refunded.
"Principal" means Vestar Equity Partners, L.P.
"Restricted Investment" means an Investment other than a Permitted
Investment.
"Restricted Subsidiary" of a Person means any Subsidiary of such Person that
is not an Unrestricted Subsidiary.
"Senior Credit Agreement" means the Senior Credit Agreement, to be dated May
23, 1996, among the Company, Fleet National Bank and Banque Nationale de Paris,
as Co-Documentation Agents, and Chemical Bank, as Administrative Agent, and any
amendments, modifications, restatements, renewals, supplements, refundings,
replacements or refinancings thereof.
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"Senior Debt" means (i) Indebtedness under the Senior Credit Agreement and
(ii) any other Indebtedness permitted to be incurred by the Issuers under the
terms of the Indenture, unless the instrument under which such Indebtedness is
incurred expressly provides that it is subordinated in right of payment to any
Senior Debt of the Issuers. Notwithstanding anything to the contrary in the
foregoing, Senior Debt will not include (a) any liability for federal, state,
local or other taxes owed or owing by the Issuers, (b) any Indebtedness of the
Issuers to any of their Subsidiaries or other Affiliates, (c) any trade payables
or (d) any Indebtedness that is incurred in violation of the Indenture.
"Significant Subsidiary" means any Restricted Subsidiary that would be a
"significant subsidiary" as defined in Article 1, Rule 1-02 of Regulation S-X,
promulgated pursuant to the Act, as such Regulation is in effect on the date
hereof.
"Subsidiary" means, with respect to any Person, (i) any corporation,
association or other business entity of which more than 50% of the total voting
power of shares of Capital Stock entitled (without regard to the occurrence of
any contingency) to vote in the election of directors, managers or trustees
thereof is at the time owned or controlled, directly or indirectly, by such
Person or one or more of the other Subsidiaries of such Person (or a combination
thereof) and (ii) any partnership (a) the sole general partner or the managing
general partner of which is such Person or a Subsidiary of such Person or (b)
the only general partners of which are such Person or of one or more
Subsidiaries of such Person (or any combination thereof).
"Subsidiary Debt Limit" means, with respect to any Restricted Subsidiary
that is not a Guarantor, the sum of (i) the Borrowing Base of such Restricted
Subsidiary, plus (ii) the amount of Acquired Debt of such Restricted Subsidiary
(excluding Indebtedness incurred in connection with or in contemplation of the
merger or acquisition of such Restricted Subsidiary with or by the Company or
any of its Restricted Subsidiaries), plus (iii) Acquisition Debt of such
Restricted Subsidiary.
"Tax Amount" means, with respect to any period, the amount of distributions
in respect of taxes for such period required pursuant to Section 5.5 of the LLC
Agreement as in effect on the date of the Indenture.
"Tax Distribution" means a distribution in respect of taxes to the partners
of the Company pursuant to clause (iv) of the second paragraph of the covenant
entitled "Restricted Payments."
"Unrestricted Subsidiary" means any Subsidiary, other than Capital, that is
designated by the Management Committee as an Unrestricted Subsidiary pursuant to
a Board Resolution, but only to the extent that such Subsidiary (i) has no
Indebtedness other than Non-Recourse Debt, (ii) is not party to any agreement,
contract, arrangement or understanding with the Issuers or any of their
Restricted Subsidiaries unless the terms of any such agreement, contract,
arrangement or understanding are no less favorable to the Issuers or such
Restricted Subsidiary than those that might be obtained at the time from Persons
who are not Affiliates of the Issuers, (iii) is a Person with respect to which
neither the Issuers nor any of their Restricted Subsidiaries has any direct or
indirect obligation (a) to subscribe for additional Equity Interests or (b) to
maintain or preserve such Person's financial condition or to cause such Person
to achieve any specified levels of operating results, (iv) is not a guarantor
of, and is not otherwise directly or indirectly providing credit support for,
any Indebtedness of the Issuers or any of their Restricted Subsidiaries and (v)
has at least one director on its board of directors that is not a director or
executive officer of the Issuers or any of their Restricted Subsidiaries and has
at least one executive officer that is not a director or executive officer of
the Issuers or any of their Restricted Subsidiaries. Any such designation by the
Management Committee shall be evidenced to the Trustee by filing with the
Trustee a certified copy of the Board Resolution giving effect to such
designation and an Officers' Certificate certifying that such designation
complied with the foregoing conditions and was permitted by the covenant
described above under the caption "--Certain Covenants--Restricted Payments."
If, at any time, any Unrestricted Subsidiary would fail to meet the foregoing
requirements as an Unrestricted Subsidiary, it shall thereafter cease to be an
Unrestricted Subsidiary for purposes of
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the Indenture and any Indebtedness of such Subsidiary shall be deemed to be
incurred by a Restricted Subsidiary of the Issuers as of such date (and, if such
Indebtedness is not permitted to be incurred as of such date under the covenant
described under the caption "Incurrence of Indebtedness," the Issuers shall be
in default of such covenant). The Management Committee may at any time designate
any Unrestricted Subsidiary to be a Restricted Subsidiary; provided that such
designation shall be deemed to be an incurrence of Indebtedness by a Restricted
Subsidiary of the Issuers of any outstanding Indebtedness of such Unrestricted
Subsidiary and such designation shall only be permitted if (i) such Indebtedness
is permitted under the covenant described under the caption "--Certain
Covenants-- Incurrence of Indebtedness" and (ii) no Default or Event of Default
would be in existence following such designation.
"Weighted Average Life to Maturity" means, when applied to any Indebtedness
at any date, the number of years obtained by dividing (i) the sum of the
products obtained by multiplying (a) the amount of each then remaining
installment, sinking fund, serial maturity or other required payments of
principal, including payment at final maturity, in respect thereof, by (b) the
number of years (calculated to the nearest one-twelfth) that will elapse between
such date and the making of such payment, by (ii) the then outstanding principal
amount of such Indebtedness.
"Wholly Owned Restricted Subsidiary" of any Person means a Restricted
Subsidiary of such Person all of the outstanding common Capital Stock or other
common ownership interests of which (other than directors' qualifying shares)
shall at the time be owned by such Person and the Wholly Owned Restricted
Subsidiaries of such Person.
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THE EXCHANGE OFFER
PURPOSE AND EFFECT OF THE EXCHANGE OFFER
The Old Notes were originally sold by the Issuers on May 23, 1996 to the
Initial Purchaser pursuant to the Purchase Agreement. The Initial Purchaser
subsequently resold the Old Notes to qualified institutional buyers in reliance
on Rule 144A under the Securities Act and to a limited number of institutional
accredited investors that agreed to comply with certain transfer restrictions
and other conditions. In connection with the Transactions, the Initial Purchaser
provided financial advisory services to Remington Products Company, L.L.C., for
which it received customary fees. In addition, certain affiliates of the Initial
Purchaser made an investment in the Vestar Members. As a condition to the
Purchase Agreement, the Issuers entered into the Registration Rights Agreement
with the Initial Purchaser (the "Registration Rights Agreement") pursuant to
which the Issuers have agreed, for the benefit of the holders of the Old Notes,
at the Issuers' cost, to use their best efforts to (i) file the Exchange Offer
Registration Statement within 45 days after the date of the original issue of
the Old Notes with the Commission with respect to the Exchange Offer for the New
Notes, (ii) use their best efforts to cause the Exchange Offer Registration
Statement to be declared effective under the Securities Act within 120 days
after the Closing Date. Upon the Exchange Offer Registration Statement being
declared effective, the Issuers will offer the New Notes in exchange for
surrender of the Old Notes. The Issuers will keep the Exchange Offer open for
not less than 20 calendar days (or longer if required by applicable law) after
the date on which notice of the Exchange Offer is mailed to the holders of the
Old Notes. For each Old Note surrendered to the Issuers pursuant to the Exchange
Offer, the holder of such Old Note will receive a New Note having a principal
amount equal to that of the surrendered Old Note. Interest on each Old Note will
accrue from the last interest payment date on which interest was paid on the Old
Note surrendered in exchange therefor or, if no interest has been paid on such
Old Note, from the date of its original issue. Interest on each New Note will
accrue from the date of its original issue.
Under existing interpretations of the staff of the Commission contained in
several no-action letters to third parties, the New Notes would in general be
freely tradeable after the Exchange Offer without further registration under the
Securities Act. However, any purchaser of Old Notes who is an "affiliate" of the
Issuers or who intends to participate in the Exchange Offer for the purpose of
distributing the New Notes (i) will not be able to rely on the interpretation of
the staff of the Commission, (ii) will not be able to tender its Old Notes in
the Exchange Offer and (iii) must comply with the registration and prospectus
delivery requirements of the Securities Act in connection with any sale or
transfer of the Old Notes, unless such sale or transfer is made pursuant to an
exemption from such requirements.
As contemplated by these no-action letters and the Registration Rights
Agreement, each holder accepting the Exchange Offer is required to represent to
the Issuers in the Letter of Transmittal that (i) the New Notes are to be
acquired by the holder or the person receiving such New Notes, whether or not
such person is the holder, in the ordinary course of business, (ii) the holder
or any such other person (other than a broker-dealer referred to in the next
sentence) is not engaging and does not intend to engage, in the distribution of
the New Notes, (iii) the holder or any such other person has no arrangement or
understanding with any person to participate in the distribution of the New
Notes, (iv) neither the holder nor any such other person is an "affiliate" of
the Issuers within the meaning of Rule 405 under the Securities Act, and (v) the
holder or any such other person acknowledges that if such holder or any other
person participates in the Exchange Offer for the purpose of distributing the
New Notes it must comply with the registration and prospectus delivery
requirements of the Securities Act in connection with any resale of the New
Notes and cannot rely on those no-action letters. As indicated above, each
Participating Broker-Dealer that receives a New Note for its own account in
exchange for Old Notes must acknowledge that it (i) acquired the Old Notes for
its own account as a result of market-making activities or other trading
activities, (ii) has not entered into any arrangement or understanding with the
Issuers or any "affiliate" of the Issuers (within the meaning of Rule 405 under
the Securities Act) to distribute the New Notes to be received in the Exchange
Offer and (iii) will
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deliver a prospectus meeting the requirements of the Securities Act in
connection with any resale of such New Notes. For a description of the
procedures for resales by Participating Broker-Dealers, see "Plan of
Distribution."
In the event that changes in the law or the applicable interpretations of
the staff of the Commission do not permit the Issuers to effect such an Exchange
Offer, or if for any other reason the Exchange Offer is not consummated or if
any holder of the Old Notes (other than an "affiliate" of the Issuers or the
Initial Purchaser) is not eligible to participate in the Exchange Offer, the
Issuers will (a) file the Shelf Registration Statement Registration Statement
covering resales of the Old Notes, (b) use their reasonable best efforts to
cause the Shelf Registration Statement Registration Statement to be declared
effective under the Securities Act, and (c) use their reasonable best efforts to
keep effective the Shelf Registration Statement until the earlier of three years
after its effective date and such time as all of the applicable Old Notes have
been sold thereunder. The Issuers will, in the event of the filing of the Shelf
Registration Statement, provide to each applicable holder of the Old Notes
copies of the prospectus which is a part of the Shelf Registration Statement,
notify each such holder when the Shelf Registration Statement has become
effective and take certain other actions as are required to permit unrestricted
resale of the Old Notes. A holder of the Old Notes that sells such Old Notes
pursuant to the Shelf Registration Statement permit generally will be required
to be named as a selling security holder in the related prospectus and to
deliver a prospectus to purchasers, will be subject to certain of the civil
liability provisions under the Securities Act in connection with such sales and
will be bound by the provisions of the Registration Rights Agreement which are
applicable to such a holder (including certain indemnification obligations). In
addition, each holder of the Old Notes will be required to deliver information
to be used in connection with the Shelf Registration Statement and to provide
comments on the Shelf Registration Statement within the time periods set forth
in the Registration Rights Agreement in order to have their Old Notes included
in the Shelf Registration Statement and to benefit from the provisions set forth
in the following paragraph.
The Registration Rights Agreement provides that (i) the Issuers will file an
Exchange Offer Registration Statement with the Commission on or prior to 45 days
after the Closing Date, (ii) the Issuers will use their best efforts to have the
Exchange Offer Registration Statement declared effective by the Commission on or
prior to 120 days after the Closing Date, (iii) unless the Exchange Offer would
not be permitted by applicable law or Commission policy, the Issuers will
commence the Exchange Offer and use their best efforts to issue on or prior to
30 business days after the date on which the Exchange Offer Registration
Statement was declared effective by the Commission (the "Exchange Offer
Effectiveness Date"), New Notes in exchange for all Old Notes tendered prior
thereto in the Exchange Offer and (iv) if obligated to file the Shelf
Registration Statement, the Issuers will use their best efforts to file the
Shelf Registration Statement with the Commission on or prior to 60 days after
such filing obligation arises (and in any event within 120 days after the
Closing Date) and to cause the Shelf Registration Statement to be declared
effective by the Commission on or prior to 90 days after such obligation arises.
If (a) the Issuers fail to file any of the Registration Statements required by
the Registration Rights Agreement on or before the date specified for such
filing, (b) any of such Registration Statements is not declared effective by the
Commission on or prior to the date specified for such effectiveness (the
"Effectiveness Target Date"), or (c) the Issuers fail to Consummate the Exchange
Offer within 30 business days of the Effectiveness Target Date with respect to
the Exchange Offer Registration Statement, or (d) the Shelf Registration
Statement or the Exchange Offer Registration Statement is declared effective but
thereafter ceases to be effective or usable in connection with resales of
Transfer Restricted Securities during the period specified in the Registration
Rights Agreement (each such event referred to in clauses (a) through (d) above a
"Registration Default"), then the Issuers will pay Liquidated Damages to each
Holder of Old Notes, with respect to the first 90-day period immediately
following the occurrence of such Registration Default in an amount equal to $.05
per week per $1,000 principal amount of Old Notes held by such Holder. The
amount of the Liquidated Damages will increase by an additional $.05 per week
per $1,000 principal amount of Old Notes with
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respect to each subsequent 90-day period until all Registration Defaults have
been cured, up to a maximum amount of Liquidated Damages of $.40 per week per
$1,000 principal amount of Old Notes. All accrued Liquidated Damages will be
paid by the Issuers on each Damages Payment Date to the Global Note Holder by
wire transfer of immediately available funds or by federal funds check and to
Holders of Certificated Securities by wire transfer to the accounts specified by
them or by mailing checks to their registered addresses if no such accounts have
been specified. Following the cure of all Registration Defaults, the accrual of
Liquidated Damages will cease.
Holders of Old Notes will be required to make certain representations to the
Issuers (as described in the Registration Rights Agreement) in order to
participate in the Exchange Offer and will be required to deliver information to
be used in connection with the Shelf Registration Statement and to provide
comments on the Shelf Registration Statement within the time periods set forth
in the Registration Rights Agreement in order to have their Old Notes included
in the Shelf Registration Statement and benefit from the provisions regarding
Liquidated Damages set forth above.
The summary herein of certain provisions of the Registration Rights
Agreement does not purport to be complete and is subject to, and is qualified in
its entirety by, all the provisions of the Registration Rights Agreement, a copy
of which is filed as an exhibit to the Exchange Offer Registration Statement of
which this Prospectus is a part.
Following the consummation of the Exchange Offer, holders of the Old Notes
who were eligible to participate in the Exchange Offer but who did not tender
their Old Notes will not have any further registration rights and such Old Notes
will continue to be subject to certain restrictions on transfer. Accordingly,
the liquidity of the market for such Old Notes could be adversely affected.
TERMS OF THE EXCHANGE OFFER
Upon the terms and subject to the conditions set forth in this Prospectus
and in the Letter of Transmittal, the Issuers will accept any and all Old Notes
validly tendered and not withdrawn prior to 5:00 p.m., New York City time, on
the Expiration Date. The Issuers will issue $1,000 principal amount of New Notes
in exchange for each $1,000 principal amount of outstanding Old Notes accepted
in the Exchange Offer. Holders may tender some or all of their Old Notes
pursuant to the Exchange Offer. However, Old Notes may be tendered only in
integral multiples of $1,000.
The form and terms of the New Notes are the same as the form and terms of
the Old Notes except that (i) the New Notes bear a Series B designation and a
different CUSIP Number from the Old Notes, (ii) the New Notes have been
registered under the Securities Act and hence will not bear legends restricting
the transfer thereof and (iii) the holders of the New Notes will not be entitled
to certain rights under the Registration Rights Agreement, including the
provisions providing for an increase in the interest rate on the Old Notes in
certain circumstances relating to the timing of the Exchange Offer, all of which
rights will terminate when the Exchange Offer is terminated. The New Notes will
evidence the same debt as the Old Notes and will be entitled to the benefits of
the Indenture.
As of the date of this Prospectus, $130,000,000 aggregate principal amount
of Old Notes were outstanding. The Issuers have fixed the close of business on
, 1996 as the record date for the Exchange Offer for purposes of
determining the persons to whom this Prospectus and the Letter of Transmittal
will be mailed initially.
Holders of Old Notes do not have any appraisal or dissenters' rights under
the General Corporation Law of Delaware, the Limited Liability Company Act of
Delaware or the Indenture in connection with the Exchange Offer. The Issuers
intend to conduct the Exchange Offer in accordance with the applicable
requirements of the Exchange Act and the rules and regulations of the Commission
thereunder.
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The Issuers shall be deemed to have accepted validly tendered Old Notes
when, as and if the Issuers have given oral or written notice thereof to the
Exchange Agent. The Exchange Agent will act as agent for the tendering holders
for the purpose of receiving the New Notes from the Issuers.
If any tendered Old Notes are not accepted for exchange because of an
invalid tender, the occurrence of certain other events set forth herein or
otherwise, the certificates for any such unaccepted Old Notes will be returned,
without expense, to the tendering holder thereof as promptly as practicable
after the Expiration Date.
Holders who tender Old Notes in the Exchange Offer will not be required to
pay brokerage commissions or fees or, subject to the instructions in the Letter
of Transmittal, transfer taxes with respect to the exchange of Old Notes
pursuant to the Exchange Offer. The Issuers will pay all charges and expenses,
other than transfer taxes in certain circumstances, in connection with the
Exchange Offer. See "--Fees and Expenses."
EXPIRATION DATE; EXTENSIONS; AMENDMENTS
The term "Expiration Date" shall mean 5:00 p.m., New York City time, on
1996, unless the Issuers, in their sole discretion, extend the Exchange
Offer, in which case the term "Expiration Date" shall mean the latest date and
time to which the Exchange Offer is extended.
In order to extend the Exchange Offer, the Issuers will notify the Exchange
Agent of any extension by oral or written notice and will mail to the registered
holders an announcement thereof, each prior to 9:00 a.m., New York City time, on
the next business day after the previously scheduled expiration date.
The Issuers reserve the right, in their sole discretion, (i) to delay
accepting any Old Notes, to extend the Exchange Offer or to terminate the
Exchange Offer if any of the conditions set forth below under "--Conditions"
shall not have been satisfied, by giving oral or written notice of such delay,
extension or termination to the Exchange Agent or (ii) to amend the terms of the
Exchange Offer in any manner. Any such delay in acceptance, extension,
termination or amendment will be followed as promptly as practicable by oral or
written notice thereof to the registered holders.
INTEREST ON THE NEW NOTES
The New Notes will bear interest from their date of issuance. Holders of Old
Notes that are accepted for exchange will receive, in cash, accrued interest
thereon to, but not including, the date of issuance of the New Notes. Such
interest will be paid with the first interest payment on the New Notes on
November 15, 1996. Interest on the Old Notes accepted for exchange will cease to
accrue upon issuance of the New Notes.
Interest on the New Notes is payable semi-annually on each May 15 and
November 15, commencing on November 15, 1996.
PROCEDURES FOR TENDERING
Only a holder of Old Notes may tender such Old Notes in the Exchange Offer.
To tender in the Exchange Offer, a holder must complete, sign and date the
Letter of Transmittal, or a facsimile thereof, have the signatures thereon
guaranteed if required by the Letter of Transmittal, and mail or otherwise
deliver such Letter of Transmittal or such facsimile, together with the Old
Notes and any other required documents, to the Exchange Agent prior to 5:00
p.m., New York City time, on the Expiration Date. To be tendered effectively,
the Old Notes, Letter of Transmittal and other required documents must be
completed and received by the Exchange Agent at the address set forth below
under "Exchange Agent" prior to 5:00 p.m., New York City time, on the Expiration
Date. Delivery of the Old Notes may be made
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by book-entry transfer in accordance with the procedures described below.
Confirmation of such book-entry transfer must be received by the Exchange Agent
prior to the Expiration Date.
By executing the Letter of Transmittal, each holder will make to the Issuers
the representations set forth above in the third paragraph under the heading
"--Purpose and Effect of the Exchange Offer."
The tender by a holder and the acceptance thereof by the Issuers will
constitute agreement between such holder and the Issuers in accordance with the
terms and subject to the conditions set forth herein and in the Letter of
Transmittal.
THE METHOD OF DELIVERY OF OLD NOTES AND THE LETTER OF TRANSMITTAL AND ALL
OTHER REQUIRED DOCUMENTS TO THE EXCHANGE AGENT IS AT THE ELECTION AND SOLE RISK
OF THE HOLDER. AS AN ALTERNATIVE TO DELIVERY BY MAIL, HOLDERS MAY WISH TO
CONSIDER OVERNIGHT OR HAND DELIVERY SERVICE. IN ALL CASES, SUFFICIENT TIME
SHOULD BE ALLOWED TO ASSURE DELIVERY TO THE EXCHANGE AGENT BEFORE THE EXPIRATION
DATE. NO LETTER OF TRANSMITTAL OR OLD NOTES SHOULD BE SENT TO THE ISSUERS.
HOLDERS MAY REQUEST THEIR RESPECTIVE BROKERS, DEALERS, COMMERCIAL BANKS, TRUST
COMPANIES OR NOMINEES TO EFFECT THE ABOVE TRANSACTIONS FOR SUCH HOLDERS.
Any beneficial owner whose Old Notes are registered in the name of a broker,
dealer, commercial bank, trust company or other nominee and who wishes to tender
should contact the registered holder promptly and instruct such registered
holder to tender on such beneficial owner's behalf. See "Instructions to
Registered Holder and/or Book-Entry Transfer Facility Participant from
Beneficial Owner" included with the Letter of Transmittal.
Signatures on a Letter of Transmittal or a notice of withdrawal, as the case
may be, must be guaranteed by an Eligible Institution (as defined below) unless
the Old Notes tendered pursuant thereto are tendered (i) by a registered holder
who has not completed the box entitled "Special Registration Instructions" or
"Special Delivery Instructions" on the Letter of Transmittal or (ii) for the
account of an Eligible Institution. In the event that signatures on a Letter of
Transmittal or a notice of withdrawal, as the case may be, are required to be
guaranteed, such guarantee must be by a member firm of the Medallion System (an
"Eligible Institution").
If the Letter of Transmittal is signed by a person other than the registered
holder of any Old Notes listed therein, such Old Notes must be endorsed or
accompanied by a properly completed bond power, signed by such registered holder
as such registered holder's name appears on such Old Notes with the signature
thereon guaranteed by an Eligible Institution.
If the Letter of Transmittal or any Old Notes or bond powers are signed by
trustees, executors, administrators, guardians, attorneys-in-fact, offices of
corporations or others acting in a fiduciary or representative capacity, such
persons should so indicate when signing, and evidence satisfactory to the
Issuers of their authority to so act must be submitted with the Letter of
Transmittal.
The Issuers understand that the Exchange Agent will make a request promptly
after the date of this Prospectus to establish accounts with respect to the Old
Notes at the book-entry transfer facility, The Depository Trust Company (the
"Book-Entry Transfer Facility"), for the purpose of facilitating the Exchange
Offer, and subject to the establishment thereof, any financial institution that
is a participant in the Book-Entry Transfer Facility's system may make
book-entry delivery of Old Notes by causing such Book-Entry Transfer Facility to
transfer such Old Notes into the Exchange Agent's account with respect to the
Old Notes in accordance with the Book-Entry Transfer Facility's procedures for
such transfer. Although delivery of the Old Notes may be effected through
book-entry transfer into the Exchange Agent's account at the Book-Entry Transfer
Facility, an appropriate Letter of Transmittal properly completed and duly
executed with any required signature guarantee and all other required
92
<PAGE>
documents must in each case be transmitted to and received or confirmed by the
Exchange Agent at its address set forth below on or prior to the Expiration
Date, or, if the guaranteed delivery procedures described below are complied
with, within the time period provided under such procedures. Delivery of
documents to the Book-Entry Transfer Facility does not constitute delivery to
the Exchange Agent.
All questions as to the validity, form, eligibility (including time of
receipt), acceptance of tendered Old Notes and withdrawal of tendered Old Notes
will be determined by the Issuers in their sole discretion, which determination
will be final and binding. The Issuers reserve the absolute right to reject any
and all Old Notes not properly tendered or any Old Notes the Issuers' acceptance
of which would, in the opinion of counsel for the Issuers, be unlawful. The
Issuers also reserve the right in their sole discretion to waive any defects,
irregularities or conditions of tender as to particular Old Notes. The Issuers'
interpretation of the terms and conditions of the Exchange Offer (including the
instructions in the Letter of Transmittal) will be final and binding on all
parties. Unless waived, any defects or irregularities in connection with tenders
of Old Notes must be cured within such time as the Issuer shall determine.
Although the Issuers intend to notify holders of defects or irregularities with
respect to tenders of Old Notes, neither the Issuer, the Exchange Agent nor any
other person shall incur any liability for failure to give such notification.
Tenders of Old Notes will not be deemed to have been made until such defects or
irregularities have been cured or waived. Any Old Notes received by the Exchange
Agent that are not properly tendered and as to which the defects or
irregularities have not been cured or waived will be returned by the Exchange
Agent to the tendering holders, unless otherwise provided in the Letter of
Transmittal, as soon as practicable following the Expiration Date.
GUARANTEED DELIVERY PROCEDURES
Holders who wish to tender their Old Notes and (i) whose Old Notes are not
immediately available, (ii) who cannot deliver their Old Notes, the Letter of
Transmittal or any other required documents to the Exchange Agent or (iii) who
cannot complete the procedures for book-entry transfer, prior to the Expiration
Date, may effect a tender if:
(a) the tender is made through an Eligible Institution;
(b) prior to the Expiration Date, the Exchange Agent receives from such
Eligible Institution a properly completed and duly executed Notice of
Guaranteed Delivery (by facsimile transmission, mail or hand delivery)
setting forth the name and address of the holder, the certificate number(s)
of such Old Notes and the principal amount of Old Notes tendered, stating
that the tender is being made thereby and guaranteeing that, within five New
York Stock Exchange trading days after the Expiration Date, the Letter of
Transmittal (or facsimile thereof) together with the certificate(s)
representing the Old Notes (or a confirmation of book-entry transfer of such
Notes into the Exchange Agent's account at the Book-Entry Transfer
Facility), and any other documents required by the Letter of Transmittal
will be deposited by the Eligible Institution with the Exchange Agent; and
(c) such properly completed and executed Letter of Transmittal (of
facsimile thereof), as well as the certificate(s) representing all tendered
Old Notes in proper form for transfer (or a confirmation of book-entry
transfer of such Old Notes into the Exchange Agent's account at the
Book-Entry Transfer Facility), and all other documents required by the
Letter of Transmittal are received by the Exchange Agent upon five New York
Stock Exchange trading days after the Expiration Date.
Upon request to the Exchange Agent, a Notice of Guaranteed Delivery will be
sent to holders who wish to tender their Old Notes according to the guaranteed
delivery procedures set forth above.
93
<PAGE>
WITHDRAWAL OF TENDERS
Except as otherwise provided herein, tenders of Old Notes may be withdrawn
at any time prior to 5:00 p.m., New York City time, on the Expiration Date.
To withdraw a tender of Old Notes in the Exchange Offer, a telegram, telex,
letter or facsimile transmission notice of withdrawal must be received by the
Exchange Agent at its address set forth herein prior to 5:00 p.m., New York City
time, on the Expiration Date. Any such notice of withdrawal must (i) specify the
name of the person having deposited the Old Notes to be withdrawn (the
"Depositor"), (ii) identify the Old Notes to be withdrawn (including the
certificate number(s) and principal amount of such Old Notes, or, in the case of
Old Notes transferred by book-entry transfer, the name and number of the account
at the Book-Entry Transfer Facility to be credited), (iii) be signed by the
holder in the same manner as the original signature on the Letter of Transmittal
by which such Old Notes were tendered (including any required signature
guarantees) or be accompanied by documents of transfer sufficient to have the
Trustee with respect to the Old Notes register the transfer of such Old Notes
into the name of the person withdrawing the tender and (iv) specify the name in
which any such Old Notes are to be registered, if different from that of the
Depositor. All questions as to the validity, form and eligibility (including
time of receipt) of such notices will be determined by the Issuers, whose
determination shall be final and binding on all parties. Any Old Notes so
withdrawn will be deemed not to have been validly tendered for purposes of the
Exchange Offer and no New Notes will be issued with respect thereto unless the
Old Notes so withdrawn are validly retendered. Any Old Notes which have been
tendered but which are not accepted for exchange will be returned to the holder
thereof without cost to such holder as soon as practicable after withdrawal,
rejection of tender or termination of the Exchange Offer. Properly withdrawn Old
Notes may be retendered by following one of the procedures described above under
"--Procedures for Tendering" at any time prior to the Expiration Date.
CONDITIONS
Notwithstanding any other term of the Exchange Offer, the Issuers shall not
be required to accept for exchange, or exchange New Notes for, any Old Notes,
and may terminate or amend the Exchange Offer as provided herein before the
acceptance of such Old Notes, if:
(a) any action or proceeding is instituted or threatened in any court or
by or before any governmental agency with respect to the Exchange Offer
which, in the reasonable judgment of the Issuers, might materially impair
the ability of the Issuers to proceed with the Exchange Offer or any
material adverse development has occurred in any existing action or
proceeding with respect to the Issuers or any of their subsidiaries; or
(b) any law, statute, rule, regulation or interpretation by the staff of
the Commission is proposed, adopted or enacted, which, in the reasonable
judgment of the Issuers, might materially impair the ability of the Issuers
to proceed with the Exchange Offer or materially impair the contemplated
benefits of the Exchange Offer to the Issuers; or
(c) any governmental approval has not been obtained, which approval the
Issuers shall, in their reasonable discretion, deem necessary for the
consummation of the Exchange Offer as contemplated hereby.
If the Issuers determine in their reasonable discretion that any of the
conditions are not satisfied, the Issuers may (i) refuse to accept any Old Notes
and return all tendered Old Notes to the tendering holders, (ii) extend the
Exchange Offer and retain all Old Notes tendered prior to the expiration of the
Exchange Offer, subject, however, to the rights of holders to withdraw such Old
Notes (see "--Withdrawal of Tenders") or (iii) waive such unsatisfied conditions
with respect to the Exchange Offer and accept all properly tendered Old Notes
which have not been withdrawn.
94
<PAGE>
EXCHANGE AGENT
The Bank of New York has been appointed as Exchange Agent for the Exchange
Offer. Questions and requests for assistance, requests for additional copies of
this Prospectus or of the Letter of Transmittal and requests for Notice of
Guaranteed Delivery should be directed to the Exchange Agent addressed as
follows:
By Mail: Overnight Courier:
The Bank of New York The Bank of New York
Reorganization Section Reorganization Section
101 Barclay Street 101 Barclay Street
7 East 7 East
New York, New York 10286 New York, New York 10286
Attention: Enrique Lopez Attention: Enrique Lopez
(registered or certified mail recommended)
By Hand: Facsimile Transmission:
The Bank of New York (212) 571-3080
Reorganization Section (For Eligible Institutions Only)
101 Barclay Street Attention: Enrique Lopez
7 East
New York, New York 10286
Attention: Enrique Lopez
Confirm by Telephone:
(212) 815-2742
DELIVERY TO AN ADDRESS OTHER THAN SET FORTH ABOVE WILL NOT
CONSTITUTE A VALID DELIVERY.
FEES AND EXPENSES
The expenses of soliciting tenders will be borne by the Issuers. The
principal solicitation is being made by mail; however, additional solicitation
may be made by telegraph, telecopy, telephone or in person by officers and
regular employees of the Company and its affiliates.
The Company has not retained any dealer-manager in connection with the
Exchange Offer and will not make any payments to brokers, dealers, or others
soliciting acceptances of the Exchange Offer. The Company, however, will pay the
Exchange Agent reasonable and customary fees for its services and will reimburse
it for its reasonable out-of-pocket expenses in connection therewith.
The cash expenses to be incurred in connection with the Exchange Offer will
be paid by the Issuers. Such expenses include fees and expenses of the Exchange
Agent and Trustee, accounting and legal fees and printing costs, among others.
ACCOUNTING TREATMENT
The New Notes will be recorded at the same carrying value as the Old Notes,
which is face value, as reflected in the Company's accounting records on the
date of exchange. Accordingly, no gain or loss for accounting purposes will be
recognized by the Company. The expenses of the Exchange Offer will be expensed
over the term of the New Notes.
95
<PAGE>
CONSEQUENCES OF FAILURE TO EXCHANGE
The Old Notes that are not exchanged for New Notes pursuant to the Exchange
Offer will remain restricted securities. Accordingly, such Old Notes may be
resold only (i) to the Issuers (upon redemption thereof or otherwise), (ii) so
long as the Old Notes are eligible for resale pursuant to Rule 144A, to a person
inside the United States whom the seller reasonably believes is a qualified
institutional buyer within the meaning of Rule 144A under the Securities Act in
a transaction meeting the requirements of Rule 144A, in accordance with Rule 144
under the Securities Act, or pursuant to another exemption from the registration
requirements of the Securities Act (and based upon an opinion of counsel
reasonably acceptable to the Issuers), (iii) outside the United States to a
foreign person in a transaction meeting the requirements of Rule 904 under the
Securities Act, or (iv) pursuant to an effective registration statement under
the Securities Act, in each case in accordance with any applicable securities
laws of any state of the United States.
RESALE OF THE NEW NOTES
With respect to resales of New Notes, based on interpretations by the staff
of the Commission set forth in no-action letters issued to third parties, the
Company believes that a holder or other person who receives New Notes, whether
or not such person is the holder (other than a person that is an "affiliate" of
the Issuers within the meaning of Rule 405 under the Securities Act) who
receives New Notes in exchange for Old Notes in the ordinary course of business
and who is not participating, does not intend to participate, and has no
arrangement or understanding with any person to participate, in the distribution
of the New Notes, will be allowed to resell the New Notes to the public without
further registration under the Securities Act and without delivering to the
purchasers of the New Notes a prospectus that satisfies the requirements of
Section 10 of the Securities Act. However, if any holder acquires New Notes in
the Exchange Offer for the purpose of distributing or participating in a
distribution of the New Notes, such holder cannot rely on the position of the
staff of the Commission enunciated in such no-action letters or any similar
interpretive letters, and must comply with the registration and prospectus
delivery requirements of the Securities Act in connection with any resale
transaction, unless an exemption from registration is otherwise available.
Further, each Participating Broker-Dealer that receives New Notes for its own
account in exchange for Old Notes, where such Old Notes were acquired by such
Participating Broker-Dealer as a result of market-making activities or other
trading activities, must acknowledge that it will deliver a prospectus in
connection with any resale of such New Notes.
As contemplated by these no-action letters and the Registration Rights
Agreement, each holder accepting the Exchange Offer is required to represent to
the Company in the Letter of Transmittal that (i) the New Notes are to be
acquired by the holder or the person receiving such New Notes, whether or not
such person is the holder, in the ordinary course of business, (ii) the holder
or any such other person (other than a broker-dealer referred to in the next
sentence) is not engaging and does not intend to engage, in the distribution of
the New Notes, (iii) the holder or any such other person has no arrangement or
understanding with any person to participate in the distribution of the New
Notes, (iv) neither the holder nor any such other person is an "affiliate" of
the Issuers within the meaning of Rule 405 under the Securities Act, and (v) the
holder or any such other person acknowledges that if such holder or other person
participates in the Exchange Offer for the purpose of distributing the New Notes
it must comply with the registration and prospectus delivery requirements of the
Securities Act in connection with any resale of the New Notes and cannot rely on
those no-action letters. As indicated above, each Participating Broker-Dealer
that receives a New Note for its own account in exchange for Old Notes must
acknowledge that it will deliver a prospectus in connection with any resale of
such New Notes. For a description of the procedures for such resales by
Participating Broker-Dealers, see "Plan of Distribution."
96
<PAGE>
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
The following discussion is based upon current provisions of the Internal
Revenue Code of 1986, as amended, applicable Treasury regulations, judicial
authority and administrative rulings and practice. There can be no assurance
that the Internal Revenue Service (the "Service") will not take a contrary view,
and no ruling from the Service has been or will be sought. Legislative, judicial
or administrative changes or interpretations may be forthcoming that could alter
or modify the statements and conditions set forth herein. Any such changes or
interpretations may or may not be retroactive and could affect the tax
consequences to holders. Certain holders (including insurance companies,
tax-exempt organizations, financial institutions, broker-dealers, foreign
corporations and persons who are not citizens or residents of the United States)
may be subject to special rules not discussed below. The Issuers recommend that
each holder consult such holder's own tax advisor as to the particular tax
consequences of exchanging such holder's Old Notes for New Notes, including the
applicability and effect of any state, local or foreign tax laws.
The Issuers believe that the exchange of Old Notes for New Notes pursuant to
the Exchange Offer will not be treated as an "exchange" for federal income tax
purposes because the New Notes will not be considered to differ materially in
kind or extent from the Old Notes. Rather, the New Notes received by a holder
will be treated as a continuation of the Old Notes in the hands of such holder.
As a result, there will be no federal income tax consequences to holders
exchanging Old Notes for New Notes pursuant to the Exchange Offer.
PLAN OF DISTRIBUTION
Each Participating Broker-Dealer that receives New Notes for its own account
pursuant to the Exchange Offer must acknowledge that it will deliver a
prospectus in connection with any resale of such New Notes. This Prospectus, as
it may be amended or supplemented from time to time, may be used by a
Participating Broker-Dealer in connection with resales of New Notes received in
exchange for Old Notes where such Old Notes were acquired as a result of
market-making activities or other trading activities. The Issuers have agreed
that for a period of 180 days after the Expiration Date, they will make this
Prospectus, as amended or supplemented, available to any Participating
Broker-Dealer for use in connection with any such resale. In addition, until
, 1996 (90 days after the commencement of the Exchange Offer), all
dealers effecting transactions in the New Notes, whether or not participating in
this distribution, may be required to deliver a prospectus.
The Issuers will not receive any proceeds from any sales of the New Notes by
Participating Broker Dealers. New Notes received by Participating Broker-Dealers
for their own account pursuant to the Exchange Offer may be sold from time to
time in one or more transactions in the over-the-counter market, in negotiated
transactions, through the writing of options on the New Notes or a combination
of such methods of resale, at market prices prevailing at the time of resale, at
prices related to such prevailing market prices or negotiated prices. Any such
resale may be made directly to purchasers or to or through brokers or dealers
who may receive compensation in the form of commissions or concessions from any
such Participating Broker-Dealer and/or the purchasers of any such New Notes.
Any Participating Broker-Dealer that resells the New Notes that were received by
it for its own account pursuant to the Exchange Offer and any broker or dealer
that participates in a distribution of such New Notes may be deemed to be an
"underwriter" within the meaning of the Securities Act and any profit on any
such resale of New Notes and any commissions or concessions received by any such
persons may be deemed to be underwriting compensation under the Securities Act.
The Letter of Transmittal states that by acknowledging that it will deliver and
by delivering a prospectus, a Participating Broker-Dealer will not be deemed to
admit that it is an "underwriter" within the meaning of the Securities Act.
97
<PAGE>
For a period of 180 days after the Expiration Date the Issuers will promptly
send additional copies of this Prospectus and any amendment or supplement to
this Prospectus to any Participating Broker-Dealer that requests such documents
in the Letter of Transmittal.
LEGAL MATTERS
The validity of the issuance of the New Notes will be passed upon for the
Company by Kirkland & Ellis, New York, New York. Certain partners of Kirkland &
Ellis have invested in the Vestar Members.
EXPERTS
The consolidated financial statements of Remington Products Company and its
subsidiaries as of December 31, 1994 and 1995 and for the year ended September
30, 1993, the three months ended December 31, 1993 and the years ended December
31, 1994 and 1995 included in this Prospectus have been audited by Coopers &
Lybrand L.L.P., independent auditors, as stated in their report appearing herein
and have been so included in reliance upon the report of such firm given upon
their authority as experts in accounting and auditing.
The consolidated balance sheet of Remington Products Company, L.L.C. and
Remington Capital Corp., its wholly owned subsidiary as of May 16, 1996 has been
audited by Deloitte & Touche LLP, independent auditors, as stated in their
report appearing herein and has been so included in reliance upon the report of
such firm given upon their authority as experts in accounting and auditing.
98
<PAGE>
INDEX TO FINANCIAL STATEMENTS
<TABLE><CAPTION>
PAGES
----------
<S> <C>
CONSOLIDATED FINANCIAL STATEMENTS OF REMINGTON PRODUCTS COMPANY AND SUBSIDIARIES
Report of Independent Accountants............................................ F-2
Consolidated Balance Sheets as of December 31, 1994 and 1995................. F-3
Consolidated Statements of Operations for the year ended September 30, 1993,
three months ended December 31, 1993 and the years ended December 31, 1994
and 1995................................................................... F-4
Consolidated Statements of Total Partners' Capital for the year ended
September 30, 1993, three months ended December 31, 1993 and the years
ended December 31, 1994 and 1995........................................... F-5
Consolidated Statements of Cash Flows for the year ended September 30, 1993,
three months ended December 31, 1993 and the years ended December 31, 1994
and 1995................................................................... F-6
Notes to Consolidated Financial Statements................................... F-7
CONSOLIDATED FINANCIAL STATEMENTS OF REMINGTON PRODUCTS COMPANY, L.L.C. AND
REMINGTON CAPITAL CORP., ITS WHOLLY OWNED SUBSIDIARY
Independent Auditors' Report................................................. F-18
Consolidated Balance Sheet as of May 16, 1996................................ F-19
Notes to Consolidated Balance Sheet.......................................... F-20
Unaudited Consolidated Balance Sheet as of June 29, 1996..................... F-22
Unaudited Consolidated Statements of Operations for the six months ended July
1, 1995, the 21 weeks ended May 23, 1996 and the five weeks ended June 29,
1996....................................................................... F-23
Unaudited Consolidated Statements of Cash Flows for the six months ended July
1, 1995, the 21 weeks ended May 23, 1996 and the five weeks ended June 29,
1996....................................................................... F-24
Notes to Unaudited Consolidated Financial Statements......................... F-25
</TABLE>
F-1
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Management Committee of
REMINGTON PRODUCTS COMPANY:
We have audited the accompanying consolidated balance sheets of Remington
Products Company and Subsidiaries (the "Company") as of December 31, 1994 and
1995, and the related consolidated statements of operations, total partners'
capital and cash flows for the year ended September 30, 1993, the three months
ended December 31, 1993 and the years ended December 31, 1994 and 1995. These
financial statements are the responsibility of management of the Company. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the consolidated financial position of Remington
Products Company and Subsidiaries as of December 31, 1994 and 1995, and the
consolidated results of their operations and their cash flows for the year ended
September 30, 1993, the three months ended December 31, 1993 and the years ended
December 31, 1994 and 1995, in conformity with generally accepted accounting
principles.
COOPERS & LYBRAND L.L.P.
Stamford, Connecticut
March 4, 1996.
F-2
<PAGE>
REMINGTON PRODUCTS COMPANY AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 1994 AND 1995
(DOLLARS IN THOUSANDS)
<TABLE><CAPTION>
1994 1995
-------- --------
<S> <C> <C>
ASSETS:
Current assets:
Cash and cash equivalents............................................ $ 7,622 $ 6,804
Accounts receivable, net of allowance for doubtful accounts of $1,461
and $1,366 and allowances for cash discounts, returns and claims of
$7,917 and $7,852, at December 31, 1994 and 1995, respectively..... 55,451 69,414
Inventory............................................................ 56,255 53,739
Deferred income taxes................................................ -- 792
Prepaid expenses..................................................... 1,484 3,061
-------- --------
Total current assets............................................. 120,812 133,810
Property, plant and equipment, net..................................... 14,653 14,544
Goodwill, net of accumulated amortization of $2,423 and $4,078......... 23,012 21,082
Other assets........................................................... 2,066 1,486
-------- --------
Total assets..................................................... $160,543 $170,922
-------- --------
-------- --------
LIABILITIES AND PARTNERS' CAPITAL:
Current liabilities:
Short-term debt and current portion of long-term debt................ $ 14,490 $ 50,440
Trade accounts payable............................................... 21,445 9,835
Accrued advertising and promotion expenses........................... 9,549 11,338
Accrued compensation and other expenses.............................. 11,709 10,897
Income and other taxes payable....................................... 757 4,077
-------- --------
Total current liabilities........................................ 57,950 86,587
Long-term debt......................................................... 40,603 6,550
Other noncurrent liabilities........................................... 2,026 1,840
-------- --------
Total liabilities................................................ 100,579 94,977
-------- --------
Commitments and contingencies (Note 7)................................. -- --
Partners' capital:
Partners' capital.................................................... 59,496 76,736
Cumulative translation adjustment.................................... 468 (791)
-------- --------
Total partners' capital.......................................... 59,964 75,945
-------- --------
Total liabilities and partners' capital.......................... $160,543 $170,922
-------- --------
-------- --------
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
F-3
<PAGE>
REMINGTON PRODUCTS COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE YEAR ENDED SEPTEMBER 30, 1993,
THREE MONTHS ENDED DECEMBER 31, 1993
AND YEARS ENDED DECEMBER 31, 1994 AND 1995
(DOLLARS IN THOUSANDS)
<TABLE><CAPTION>
THREE YEAR ENDED
YEAR ENDED MONTHS ENDED DECEMBER 31,
SEPTEMBER 30, DECEMBER 31, --------------------
1993 1993 1994 1995
------------- ------------ -------- --------
<S> <C> <C> <C> <C>
Net sales.................................... $ 156,665 $ 71,152 $261,446 $255,323
Cost of sales................................ 85,682 39,001 150,104 143,203
------------- ------------ -------- --------
Gross profit........................... 70,983 32,151 111,342 112,120
------------- ------------ -------- --------
Operating expenses:
Advertising and promotion.................. 21,723 14,401 35,774 33,035
Selling and marketing...................... 23,885 7,795 32,935 34,150
General and administrative................. 17,099 4,347 19,825 16,764
Goodwill amortization...................... 595 149 1,580 1,655
------------- ------------ -------- --------
63,302 26,692 90,114 85,604
------------- ------------ -------- --------
Operating profit....................... 7,681 5,459 21,228 26,516
Other (income) expense:
Interest expense........................... 4,066 1,248 6,414 7,604
Interest income............................ (57) (5) (276) (341)
Other, net................................. 499 1 (721) 749
------------- ------------ -------- --------
4,508 1,244 5,417 8,012
------------- ------------ -------- --------
Income before provision for income
taxes........................................ 3,173 4,215 15,811 18,504
Provision for income taxes................... 152 191 1,086 1,264
------------- ------------ -------- --------
Net income............................. $ 3,021 $ 4,024 $ 14,725 $ 17,240
------------- ------------ -------- --------
------------- ------------ -------- --------
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
F-4
<PAGE>
REMINGTON PRODUCTS COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF TOTAL PARTNERS' CAPITAL
FOR THE YEAR ENDED SEPTEMBER 30, 1993,
THREE MONTHS ENDED DECEMBER 31, 1993
AND YEARS ENDED DECEMBER 31, 1994 AND 1995
(DOLLARS IN THOUSANDS)
<TABLE><CAPTION>
THREE YEAR ENDED
YEAR ENDED MONTHS ENDED DECEMBER 31,
SEPTEMBER 30, DECEMBER 31, ------------------
1993 1993 1994 1995
------------- ------------ ------- -------
<S> <C> <C> <C> <C>
Total Partners' capital, beginning of period... $40,255 $ 39,364 $43,795 $59,964
Net income................................... 3,021 4,024 14,725 17,240
Partners' distribution....................... (2,698) (1,000) (401) --
Partners' contribution....................... -- 1,000 -- --
Change in cumulative translation
adjustment..................................... (1,214) 407 1,845 (1,259)
------------- ------------ ------- -------
Total Partners' capital, end of period......... $39,364 $ 43,795 $59,964 $75,945
------------- ------------ ------- -------
------------- ------------ ------- -------
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
F-5
<PAGE>
REMINGTON PRODUCTS COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEAR ENDED SEPTEMBER 30, 1993,
THREE MONTHS ENDED DECEMBER 31, 1993
AND YEARS ENDED DECEMBER 31, 1994 AND 1995
(DOLLARS IN THOUSANDS)
<TABLE><CAPTION>
THREE YEAR ENDED
YEAR ENDED MONTHS ENDED DECEMBER 31,
SEPTEMBER 30, DECEMBER 31, ------------------
1993 1993 1994 1995
------------- ------------ ------- -------
<S> <C> <C> <C> <C>
Cash flows from operating activities:
Net income....................................... $ 3,021 $ 4,024 $14,725 $17,240
Adjustment to reconcile net income to net cash
provided by (used in) operating activities:
Depreciation and goodwill amortization......... 2,283 796 4,243 4,938
Amortization of deferred financing costs....... 661 211 688 690
Deferred income taxes.......................... -- -- -- (735)
Changes in assets and liabilities:
Receivables.................................. 5,776 (6,916) 8,446 (13,955)
Inventory.................................... 2,842 4,041 (3,578) 299
Prepaid expenses............................. 13 (37) 2,031 183
Trade accounts payable....................... (4,792) (1,117) (604) (11,605)
Accrued expenses and other current
liabilities....................................... 1,501 7,570 (10,966) 3,579
Other, net................................... (418) 244 (160) 19
------ ------------ ------- -------
Net cash provided by operating
activities........................................ 10,887 8,816 14,825 653
------ ------------ ------- -------
Cash flows from investing activities:
Purchase of Clairol Appliance Division........... -- (36,540) -- --
Proceeds from receivable from Bristol-Meyers
Squibb Company................................. -- -- 9,260 --
Capital expenditures............................. (2,887) (1,342) (4,356) (3,291)
------ ------------ ------- -------
Net cash provided by (used in) investing
activities........................................ (2,887) (37,882) 4,904 (3,291)
------ ------------ ------- -------
Cash flows from financing activities:
Proceeds from term loans......................... -- 7,500 -- --
Partners' distributions.......................... (2,698) (1,000) (401) --
Partners' contribution........................... -- 1,000 -- --
Repayment of term loans.......................... (3,406) (825) (3,475) (13,550)
Net borrowings (repayments) under revolving
credit agreements.............................. (848) 23,475 (13,569) 14,965
Other, net....................................... 14 301 319 354
------ ------------ ------- -------
Net cash provided by (used in) financing
activities........................................ (6,938) 30,451 (17,126) 1,769
------ ------------ ------- -------
Effect of exchange rate changes on cash
balances.......................................... 118 19 4 51
------ ------------ ------- -------
Increase (decrease) in cash and cash
equivalents....................................... 1,180 1,404 2,607 (818)
Cash and cash equivalents, beginning of year...... 2,431 3,611 5,015 7,622
------ ------------ ------- -------
Cash and cash equivalents, end of year....... $ 3,611 $ 5,015 $ 7,622 $ 6,804
------ ------------ ------- -------
------ ------------ ------- -------
Supplemental cash flow information:
Cash paid during the year for:
Interest....................................... $ 4,135 $ 878 $ 5,244 $ 6,936
Income taxes................................... $ 436 $ 719 $ 995 $ 1,073
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
F-6
<PAGE>
REMINGTON PRODUCTS COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS)
1. BACKGROUND AND BASIS OF PRESENTATION
On August 18, 1992, Remington Products, Inc. ("RPI") and Remsen Partners
("Remsen"), pursuant to the terms of Joint Venture and Partnership Agreements,
established Remington Products Company ("RPC"), a partnership in which RPI and
Remsen each own a fifty percent interest and whose purpose is to own and operate
the manufacturing, merchandising and service store operations contributed by RPI
to RPC.
RPC manufactures and markets electrical personal care appliances. RPC has
manufacturing and merchandising operations in the United States and
merchandising subsidiaries in the United Kingdom, Canada, Germany, Australia and
New Zealand and a branch operation in France. A branch operation in Japan was
closed during 1995. RPC also sells directly to the consumer through its service
stores.
RPI's net assets contributed to RPC were recorded at $19,720, which was
equivalent to the cash contributed by Remsen to the venture for its fifty
percent interest. Accordingly, the assets and liabilities contributed by RPI
were recorded at their estimated fair values in the balance sheet and the excess
of the aggregate fair value over the fair value of tangible assets and
liabilities contributed has been recorded as goodwill, which is being amortized
over 30 years.
The Joint Venture and Partnership Agreements provide for, among other
things, a management committee, allocations of net profit or loss based upon
respective partnership interests and allocation of proceeds upon occurrence of a
capital transaction, as defined, such as debt refinancing or sale of property
not in the ordinary course of business.
On December 23, 1993, RPC completed the purchase of substantially all the
assets and assumed certain liabilities of the worldwide personal appliance
division of Clairol from Bristol-Meyers Squibb Company. The price was determined
based upon a formula related to the net assets of the acquired appliance
division and resulted in a net cash cost of $27,280. Approximately $9,260 of an
initial purchase deposit of $36,540 was refunded to RPC in January 1994, based
upon the aforementioned formula. RPC has recorded goodwill of approximately
$7,100, which is being amortized over 10 years.
During 1993, RPC elected to change its fiscal year-end from September 30 to
December 31.
2. SUMMARY OF ACCOUNTING POLICIES
A summary of the significant accounting policies applied in the preparation
of the accompanying consolidated financial statements follows:
General:
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported assets and liabilities and disclosure of
contingent assets and liabilities at the dates of the financial statements and
the reported amounts of revenue and expenses during the reporting periods. Such
estimates include reserves for sales returns, claims and bad debts to record
accounts receivable at net realizable value, inventory valuation reserves and
accruals for advertising and promotion programs. Actual results for future
periods could differ from those estimates.
F-7
<PAGE>
REMINGTON PRODUCTS COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(DOLLARS IN THOUSANDS)
2. SUMMARY OF ACCOUNTING POLICIES--(CONTINUED)
Principles of Consolidation:
RPC consolidates the accounts of all subsidiaries. All intercompany
transactions and balances have been eliminated.
Translation of Foreign Currencies:
RPC considers the functional currency for substantially all of its foreign
operations to be the local currency. Assets and liabilities of these
subsidiaries are translated at the exchange rate in effect at each balance sheet
date. Income statement accounts are translated at the weighted average exchange
rate for the period. Translation adjustments arising from the use of differing
exchange rates from period to period are included in the cumulative translation
adjustment account in partners' capital. Foreign currency transaction gains and
losses are recognized in earnings.
Cash and Cash Equivalents:
All highly liquid debt instruments purchased with a maturity of three months
from their date of acquisition or less are considered cash equivalents.
Inventory:
Domestic manufactured inventory is stated at the lower of cost or market,
with cost determined by the last-in, first-out (LIFO) method. The inventories of
foreign subsidiaries and purchased product for resale by the merchandising and
service store operations are valued at the lower of cost or market utilizing the
first-in, first-out (FIFO) method. Approximately 24% and 28% of the consolidated
inventory is accounted for under the LIFO method as of December 31, 1994 and
1995, respectively.
Property, Plant and Equipment:
Property, plant and equipment is carried at cost, net of accumulated
depreciation. Depreciation is provided for in amounts sufficient to relate the
cost of depreciable assets to operations over their estimated service lives,
principally on a straight-line basis. Leasehold improvements are amortized over
the lesser of the lease term or the estimated useful lives of the improvements.
The cost and related accumulated depreciation of property and equipment are
removed from the accounts upon retirement or other disposition; any resulting
gain or loss is reflected in earnings.
Goodwill:
Goodwill is being amortized on a straight-line basis over periods of ten to
thirty years. The Company periodically evaluates the recoverability of goodwill
and measures the amount of impairment, if any, by assessing projected
undiscounted cash flows related to the goodwill.
Revenue Recognition:
The Company recognizes revenue from product sales at the time of shipment.
The Company has established programs which enable certain of its customers to
return product. The effect of these programs is estimated, and current period
sales are reduced accordingly.
F-8
<PAGE>
REMINGTON PRODUCTS COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(DOLLARS IN THOUSANDS)
2. SUMMARY OF ACCOUNTING POLICIES--(CONTINUED)
Advertising and Promotion Costs:
Cost incurred for media advertising are expensed by the Company in the
period that the advertising is first run. Costs incurred under the Company's
cooperative advertising programs with customers and other promotion costs are
expensed when related Company revenues are recognized.
Pre-opening Costs for Service Stores:
Costs incurred prior to the opening of a service store (excluding leasehold
improvements) are expensed as incurred.
Product Warranty Costs:
The Company provides by a charge to income an amount it estimates will be
needed to cover future warranty obligations for products sold.
Income Taxes:
In jurisdictions where Partnership status is not recognized or foreign
corporate subsidiaries exist, deferred taxes on income are provided for
temporary differences between the financial and tax bases of assets and
liabilities.
Recently Issued Accounting Standards:
In March 1995, Statement of Financial Accounting Standards No. 121,
"Accounting for the Impairment of Long-Lived Assets and Long-Lived Assets to be
Disposed Of," ("FAS No. 121") was issued, effective January 1, 1996. FAS No. 121
requires that in the event certain facts and circumstances indicate an asset may
be impaired, an evaluation of recoverability must be performed to determine
whether or not the carrying amount of the asset is required to be written down.
The Company does not expect the adoption of this statement to have a material
effect on its financial condition or results of operations.
3. INVENTORY
Inventory at December 31, 1994 and 1995 is comprised of:
1994 1995
------- -------
Raw materials........................................... $ 14 $ 38
Work in process......................................... 7,296 7,177
Finished goods.......................................... 49,435 46,874
------- -------
Inventory at FIFO cost, which approximates replacement
cost.................................................... 56,745 54,089
Less, Amount to reduce domestic manufactured inventories
to LIFO cost............................................ (490) (350)
------- -------
$56,255 $53,739
------- -------
------- -------
There were no significant profits from liquidations of LIFO inventories in
any period presented.
F-9
<PAGE>
REMINGTON PRODUCTS COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(DOLLARS IN THOUSANDS)
3. INVENTORY--(CONTINUED)
A substantial portion of the Company's finished goods are manufactured for
the Company by suppliers located in China, Japan and Thailand. The Company's
three most significant suppliers of finished goods in the year ended September
30, 1993, three months ended December 31, 1993 and years ended December 31, 1994
and 1995 accounted for approximately 36%, 17%, 56% and 36%, respectively, of the
Company's total cost of sales, with the largest supplier comprising
approximately 19%, 8%, 27% and 18%, respectively, of the Company's total cost of
sales. Any adverse change in the Company's relationships with these suppliers,
the financial condition of such suppliers, the Company's ability to import
outsourced products or the suppliers' ability to manufacture and deliver
outsourced products on a timely basis would have a material adverse effect on
the Company.
4. PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment at December 31, 1994 and 1995 is as follows:
1994 1995
------- -------
Land and building....................................... $ 6,249 $ 6,263
Leasehold improvements.................................. 1,834 1,945
Machinery and equipment................................. 3,994 4,571
Tooling................................................. 4,368 6,226
Furniture, fixtures and other........................... 2,330 2,302
------- -------
18,775 21,307
Less, Accumulated depreciation.......................... (4,122) (6,763)
------- -------
$14,653 $14,544
------- -------
------- -------
Depreciation expense was $1,688, $647, $2,663 and $3,283 for the year ended
September 30, 1993, the three months ended December 31, 1993 and the years ended
December 31, 1994 and 1995, respectively.
5. DEBT
Details of debt outstanding at December 31, 1994 and 1995 are as follows:
<TABLE><CAPTION>
1994 1995
-------- --------
<S> <C> <C>
$55,000 revolving credit agreement due December 23, 1996, interest at
prime plus 1.75%....................................................... $ 23,353 $ 39,252
Term loan due December 31, 1996, interest at prime plus 1.25% from July
1, 1994 and prime plus 2.75% for the period January 1, 1994 through
June 30, 1994, due in quarterly installments through December 31,
1996................................................................... 17,050 7,000
Term loan due July 1, 1999, interest at prime plus 0.5%, due in
quarterly installments through July 1, 1999.......................... 12,750 9,250
Remington Products Australia Pty Ltd., 2,500 A$ revolving line of
credit which matures October 31, 1996, collateralized by assets of
the subsidiary and guaranteed by the Company, interest at 5.1% per
annum.................................................................. 1,940 1,488
-------- --------
55,093 56,990
Less, Short-term debt and current portion of long-term debt............ (14,490) (50,440)
-------- --------
$ 40,603 $ 6,550
-------- --------
-------- --------
</TABLE>
F-10
<PAGE>
REMINGTON PRODUCTS COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(DOLLARS IN THOUSANDS)
5. DEBT--(CONTINUED)
In August, 1992 concurrent with the formation of the joint venture, RPC
entered into an Intercreditor Agreement with a consortium of banks consisting of
a three-year revolving credit facility, three-year term loan and an eight-year
term loan guaranteed by the Connecticut Development Authority (the
"Agreements"). Each of the facilities is collateralized by security interests in
all assets of RPC. The term loan due 1999 includes personal guarantees of up to
$3,000 by the two partners of RPC.
Borrowings under the revolving credit agreement are subject to a maximum
borrowing capacity equal to a formula amount based upon inventory and
receivables, which assets also collateralize the borrowings. Approximately
$10,848 is available under the revolving credit agreement at December 31, 1995.
The revolving credit agreement can be extended for an additional year at the
Company's option. The Company is evaluating other sources of long-term financing
and has not elected to exercise this option. Consequently, the amounts
outstanding under the revolving credit agreement have been presented as current
portion of long-term debt.
Annual required maturities on RPC's term loans for the next four years
are: 1996--$9,700; 1997--$1,583; 1998--$3,334; and 1999--$1,633. These
maturities reflect estimated cash prepayment requirements based on the Company's
cash flow, as defined in the term loan agreements.
The Agreements contain, among other provisions and covenants, the following:
(1) limitations on capital expenditures, dividends, distributions, stock
purchases, partner fees and distributions; (2) maintenance of levels of
consolidated net worth as defined in the Agreements; and (3) achievement of
various financial ratios.
6. INCOME TAXES
Federal income taxes on net earnings of RPC are payable directly by the
partners pursuant to the Internal Revenue Code. Accordingly, no provision has
been made for Federal income taxes for RPC. However, certain state and local
jurisdictions do not recognize partnership status for taxing purposes and
require taxes be paid on net earnings. Furthermore, earnings of certain foreign
operations are taxable under local statutes. Foreign pretax earnings were $241,
$407, $3,232 and $7,632 for the year ended September 30, 1993, the three months
ended December 31, 1993 and the years ended December 31, 1994 and 1995,
respectively.
The provision for income taxes consists of the following:
<TABLE><CAPTION>
THREE YEAR ENDED
YEAR ENDED MONTHS ENDED DECEMBER 31,
SEPTEMBER 30, DECEMBER 31, ----------------
1993 1993 1994 1995
------------- ------------ ------ ------
<S> <C> <C> <C> <C>
Current:
State and local................................ $ 30 $ 35 $ 19 $ 40
Foreign........................................ 122 156 1,067 1,959
Deferred:
Foreign........................................ -- -- -- (735)
----- ----- ------ ------
Total...................................... $ 152 $191 $1,086 $1,264
----- ----- ------ ------
----- ----- ------ ------
</TABLE>
F-11
<PAGE>
REMINGTON PRODUCTS COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(DOLLARS IN THOUSANDS)
6. INCOME TAXES--(CONTINUED)
<TABLE><CAPTION>
THREE YEAR ENDED
YEAR ENDED MONTHS ENDED DECEMBER 31,
SEPTEMBER 30, DECEMBER 31, ----------------
1993 1993 1994 1995
------------- ------------ ------ ------
<S> <C> <C> <C> <C>
Income taxes computed at statutory U.S. Federal
income tax rate.................................. $ 1,079 $1,433 $5,534 $6,476
Partnership status for U.S. Federal income tax
purposes......................................... (997) (1,317) (4,403) (3,805)
State and local income taxes..................... 30 35 19 40
Adjustment for foreign income tax rates.......... 40 57 (33) 506
Utilization of foreign net operating loss
carryforwards.................................... -- (17) (31) (1,340)
Recognition of foreign deferred tax asset........ -- -- -- (613)
------------- ------------ ------ ------
Income taxes as reported......................... $ 152 $ 191 $1,086 $1,264
------------- ------------ ------ ------
------------- ------------ ------ ------
</TABLE>
Deferred tax accounts of the foreign subsidiaries as of December 31, 1994
and 1995 comprise the following:
1994 1995
------ ----
Short Term:
Deferred tax assets:
Loss carryforwards...................................... $1,340 $--
Deductible interest..................................... 277 624
Lease costs............................................. 278 153
Other................................................... 26 15
------ ----
Short-term deferred tax assets...................... 1,921 792
------ ----
Long Term:
Deferred tax assets:
Fixed asset depreciation................................ 69 136
Deferred tax liability:
Pension surplus......................................... (42) (40)
------ ----
Long-term deferred tax assets....................... 27 96
------ ----
Deferred tax assets, net............................ 1,948 888
Valuation allowance......................................... (1,948) --
------ ----
Net deferred tax assets..................................... $ -- $888
------ ----
------ ----
The valuation allowance decreased by $20 in 1994. The valuation allowance
decreased by $1,948 in 1995, of which approximately $613 represents a change in
estimated realizability of deferred tax assets. No valuation allowance was
established at December 31, 1995 based upon Management's belief that the
deferred tax assets are more likely than not to be realized.
In 1995, goodwill was reduced by the recognition of an additional $153 of
net deferred tax assets.
As of December 31, 1995, the Company has no foreign operating loss
carryforwards.
F-12
<PAGE>
REMINGTON PRODUCTS COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(DOLLARS IN THOUSANDS)
7. COMMITMENTS AND CONTINGENCIES
RPC is liable under the terms of noncancelable leases of real estate and
equipment for minimum annual rent payments as follows:
1996............................................................. $ 3,782
1997............................................................. 2,079
1998............................................................. 1,583
1999............................................................. 1,281
2000............................................................. 904
2001 and thereafter.............................................. 2,853
-------
$12,482
-------
-------
Rent expense was $4,687, $1,135, $5,605 and $5,469 for the year ended
September 30, 1993, the three months ended December 31, 1993 and the years ended
December 31, 1994 and 1995, respectively.
The majority of the leases contain escalation clauses which provide for
increases in base rentals to recover future increases in certain operating
costs. The future minimum rental payments shown above include base rentals with
known escalations. Lease agreements frequently include renewal options and
require that RPC pay for utilities, taxes, insurance and maintenance expenses.
RPC is involved in legal and administrative proceedings and claims of
various types. While any litigation contains an element of uncertainty,
management believes that the outcome of each such proceeding or claim which is
pending or known to be threatened, or all of them combined, will not have a
material adverse effect on RPC's consolidated financial position or results of
operations.
8. EMPLOYEE BENEFIT PLANS
Profit Sharing Plan and Trust:
On March 4, 1993, the Management Committee of RPC terminated the Remington
Products, Inc. Profit Sharing Plan and Trust (the "Plan") effective March 31,
1993 and has since received approval from the Internal Revenue Service. The Plan
is in the process of being liquidated.
Savings Accumulation Plan:
RPC has a savings accumulation plan (the "Plan") under Section 401(k) of the
Internal Revenue Code covering substantially all regular employees. The Plan is
subject to the provisions of ERISA and has been updated for subsequent
amendments. The Plan allows for employees to defer up to the lesser of 15% of
their annual earnings or within limitations, as adjusted by Section 402(g)(5) of
the Code on a pre-tax basis through voluntary contributions to the plan. The
Plan provides for contributions in an amount equal to 25% of their employees'
contributions up to a maximum of 5% of their total salary. RPC's matching
contributions were $86, $27, $114 and $104 for the year ended September 30,
1993, the three months ended December 31, 1993 and the years ended December 31,
1994 and 1995, respectively.
F-13
<PAGE>
REMINGTON PRODUCTS COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(DOLLARS IN THOUSANDS)
9. FINANCIAL INSTRUMENTS AND CREDIT RISK
Concentration of Credit Risk:
RPC sells a significant portion of its products to major mass-merchandising
service stores. A mass-merchandising retail chain, Wal-Mart, accounted for 13%,
15%, 16% and 16% of sales for the year ended September 30, 1993, the three
months ended December 31, 1993 and the years ended December 31, 1994 and 1995,
respectively, and 6%, 2%, 11% and 16% of outstanding accounts receivable for the
year ended September 30, 1993, and years ended December 31, 1993, 1994 and 1995,
respectively. Another mass-merchandising retail chain, Kmart, accounted for 15%,
11%, 6% and 6% of sales for the year ended September 30, 1993, the three months
ended December 31, 1993 and the years ended December 31, 1994 and 1995,
respectively, and 2%, 12%, 2% and 1% of outstanding accounts receivable for the
year ended September 30, 1993 and December 31, 1993, 1994 and 1995,
respectively.
RPC maintains cash balances at various domestic financial institutions.
Accounts at each domestic institution are Federally insured up to $100. Bank
balances exceeding insurance limits aggregate approximately $3,367 and $2,646 in
the U.S. and $5,967 and $5,339 in the U.K. at December 31, 1994 and 1995,
respectively.
Interest Rate CAP Agreement:
The Company entered into interest rate CAP agreements with a lender to
reduce the impact of increases in interest rates on its floating-rate long-term
debt. At December 31, 1994, the Company had one interest-rate cap agreement
outstanding with a notional principal amount of $20,000 at a rate of 10%.
Unamortized cost of this agreement was $90 at December 31, 1994. There are no
outstanding interest rate CAP agreements at December 31, 1995.
Foreign Currency Exposure Management:
As a result of having various foreign operations, foreign currency exchange
rate fluctuations against the U.S. dollar can have a significant effect on
reported income and financial condition of the Company.
The Company has entered into foreign currency forward contracts to mitigate
the effect of fluctuating foreign currencies on intercompany transactions and
balances between U.S. and foreign operations. Realized and unrealized gains and
losses on such contracts are recognized in income as an offset to gains or
losses on the underlying intercompany transactions. At December 31, 1994,
forward contracts to sell 15.8 million U.K. Pounds Sterling were outstanding,
all of which matured in 1995. At December 31, 1995, forward contracts to sell
9.6 million U.K. Pounds Sterling and 3.0 million German Marks were outstanding
and mature at various dates through June 30, 1996.
RPC does not hold or issue derivatives for trading purposes and is not a
party to leveraged derivative transactions.
Fair Value of Financial Instruments:
At December 31, 1995, the estimated fair value of foreign currency forward
contracts does not differ materially from the carrying amount.
At December 31, 1995, the amounts recorded as short-term debt, current
portion of long-term debt and long-term debt approximates the fair value of such
debt.
F-14
<PAGE>
REMINGTON PRODUCTS COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(DOLLARS IN THOUSANDS)
10. RELATED PARTY TRANSACTIONS
RPC utilizes various consultants (principally in its computer and service
store operations) from an entity controlled by one of RPC's partners. RPC is
billed based upon a prearranged hourly amount and was charged $339, $119, $375
and $381 for related services during the year ended September 30, 1993, the
three months ended December 31, 1993 and the years ended December 31, 1994 and
1995, respectively. Fees paid to an entity controlled by the other RPC partner
amounted to $54 for transportation services and reimbursement of the partner's
expenses during the year ended December 31, 1995.
RPC acquired certain products for resale in its service stores from
companies owned by each of RPC's partners. Such purchases aggregated
approximately $85, $54, $45 and $94 during the year ended September 30, 1993,
the three months ended December 31, 1993 and the years ended December 31, 1994
and 1995, respectively.
Included in accounts receivable is $27 owed by a partner and related
affiliates at December 31, 1994 and 1995, respectively. Included in other assets
is $200 owed by an officer at December 31, 1994 and 1995, respectively.
During January 1995, RPC entered into a barter transaction with an entity
controlled by one of RPC's partners. RPC exchanged inventory with a cost of
$4,275 for barter credits that can be used to pay for media advertising at a
predetermined rate of cash and barter credits. The transaction resulted in the
recording in 1994 of an inventory writedown of $2,137 to reduce the bartered
inventory to its net realizable value and prepaid advertising of $2,138,
representing management's estimate of the net realizable value of the inventory
exchanged. During 1995, RPC incurred $2,948 for media advertising purchased
through the related entity, of which $521 represented utilization of the barter
credits. The remaining barter credits expire in January, 1998.
In 1995, RPC paid $984 of costs incurred on behalf of the partners.
Approximately $800 of such costs relate to various change in ownership
transactions, which were not completed. The remaining $184 represents payments
to one of RPC's partners. These costs are reflected in Other, net, in the
consolidated statements of operations.
In addition, RPC paid fees to firms of certain members of the management
committee aggregating to $693, $16 and $60 for the year ended September 30,
1993, the three months ended December 31, 1993 and the year ended December 31,
1994.
11. GEOGRAPHIC INFORMATION
The Company operates in one industry segment, the manufacture and marketing
of electrical personal care appliances. The Company sells its products
principally through mass merchandisers and its own service stores in the United
States and also has merchandising operations in Europe (principally U.K. and
Germany) and other countries (principally Canada and Australia).
F-15
<PAGE>
REMINGTON PRODUCTS COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(DOLLARS IN THOUSANDS)
11. GEOGRAPHIC INFORMATION--(CONTINUED)
Information by geographical location is as follows:
<TABLE><CAPTION>
THREE YEAR ENDED
YEAR ENDED MONTHS ENDED DECEMBER 31,
SEPTEMBER 30, DECEMBER 31, --------------------
1993(A) 1993(A) 1994 1995
------------- ------------ -------- --------
<S> <C> <C> <C> <C>
Net sales:
United States.............................. $ 126,514 $ 59,989 $187,536 $173,174
Europe..................................... 23,097 9,356 59,171 64,560
Other geographic regions................... 21,467 8,663 27,459 28,955
Intercompany............................... (14,413) (6,856) (12,700) (11,366)
------------- ------------ -------- --------
$ 156,665 $ 71,152 $261,466 $255,323
------------- ------------ -------- --------
------------- ------------ -------- --------
Operating profit:
United States.............................. $ 7,066 $ 4,484 $ 17,225 $ 18,402
Europe..................................... 138 237 1,267 4,914
Other geographic regions................... 477 738 2,736 3,200
------------- ------------ -------- --------
$ 7,681 $ 5,459 $ 21,228 $ 26,516
------------- ------------ -------- --------
------------- ------------ -------- --------
Identifiable assets:
United States.............................. $ 83,327 $122,114 $ 99,486 $106,606
Europe..................................... 10,911 35,868 40,898 45,366
Other geographic regions................... 12,789 17,585 20,159 18,950
------------- ------------ -------- --------
$ 107,027 $175,567 $160,543 $170,922
------------- ------------ -------- --------
------------- ------------ -------- --------
</TABLE>
Intercompany sales of U.S. manufactured product to foreign merchandising
operations are recorded at amounts above cost, as established between the
related companies. Export sales to unaffiliated customers are not significant.
Indentfiable assets in the United States include assets of RPC's corporate
headquarters, which are not significant.
(a) Amounts do not include operating results for the worldwide appliance
division of Clairol, which was acquired on December 23, 1993 (see Note 1).
12. OTHER INCOME STATEMENT DATA
Included in the caption Interest expense in the Consolidated Statements of
Operations is the amortization of deferred financing costs of $661, $211, $688
and $690 for the year ended September 30, 1993, the three months ended December
31, 1993 and the years ended December 31, 1994 and 1995, respectively.
Included in the caption Administrative expense in the Consolidated
Statements of Operations are new product development costs of $2,065, $167,
$1,624 and $1,859 for the year ended September 30, 1993, the three months ended
December 31, 1993 and the years ended December 31, 1994 and 1995, respectively.
Included in the caption Cost of Sales in the Consolidated Statements of
Operations is nonrecurring air freight expenses of approximately $1,500 for the
year ended December 31, 1994. These costs were
F-16
<PAGE>
REMINGTON PRODUCTS COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(DOLLARS IN THOUSANDS)
12. OTHER INCOME STATEMENT DATA--(CONTINUED)
incurred due to third party manufacturing delays in supplying product to its
United Kingdom operations.
The components of Other, net in the Consolidated Statements of Operations
are as follows:
<TABLE><CAPTION>
THREE YEAR ENDED
YEAR ENDED MONTHS ENDED DECEMBER 31,
SEPTEMBER 30, DECEMBER 31, -------------
1993 1993 1994 1995
------------- ------------ ----- ----
<S> <C> <C> <C> <C>
Partners' expenses--change in ownership
transactions........................................ -$- -$- $-- $800
(Gain) loss on foreign currency, net................ 395 (98) (605) (166)
Other............................................... 104 99 (116) 115
----- ----- ----- ----
$ 499 $ 1 $(721) $749
----- ----- ----- ----
----- ----- ----- ----
</TABLE>
F-17
<PAGE>
INDEPENDENT AUDITORS' REPORT
Remington Products Company, L.L.C.
We have audited the accompanying consolidated balance sheet of Remington
Products Company, L.L.C. and Remington Capital Corp., its wholly owned
subsidiary, as of May 16, 1996. This consolidated balance sheet is the
responsibility of the Company's management. Our responsibility is to express an
opinion on this consolidated balance sheet based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the consolidated balance sheet is free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the consolidated balance sheet. An
audit also includes assessing the accounting principles used and the significant
estimates made by management, as well as evaluating the overall consolidated
balance sheet presentation. We believe that our audit provides a reasonable
basis for our opinion.
In our opinion, such consolidated balance sheet presents fairly, in all
material respects, the consolidated financial position of Remington Products
Company, L.L.C. and Remington Capital Corp., its wholly owned subsidiary, as of
May 16, 1996 in conformity with generally accepted accounting principles.
DELOITTE & TOUCHE LLP
Stamford, Connecticut
May 16, 1996
F-18
<PAGE>
REMINGTON PRODUCTS COMPANY, L.L.C.
AND REMINGTON CAPITAL CORP., ITS WHOLLY OWNED SUBSIDIARY
CONSOLIDATED BALANCE SHEET
MAY 16, 1996
ASSETS
Cash................................................................ $100
----
----
MEMBERS' EQUITY
Common Units........................................................ $100
----
----
See Notes to Consolidated Balance Sheet.
F-19
<PAGE>
REMINGTON PRODUCTS COMPANY, L.L.C.
AND REMINGTON CAPITAL CORP., ITS WHOLLY OWNED SUBSIDIARY
NOTES TO CONSOLIDATED BALANCE SHEET
MAY 16, 1996
1. ORGANIZATION
Remington Products Company, L.L.C. ("Remington, L.L.C."), a Delaware limited
liability company, and its wholly owned subsidiary Remington Capital Corp.
("Capital"), a Delaware corporation (together, the "Company"), were formed by
Vestar Shaver Corp. ("Vestar Corp. I") and Remington Products Inc. ("RPI") to
acquire (the "Proposed Reorganization") the operations of Remington Products
Company and its subsidiaries ("RPC"). In May 1996, Vestar Razor Corp. ("Vestar
Corp. II") was formed to hold an interest in Remington L.L.C. Vestar Corp. I and
Vestar Corp. II (together, the "Vestar Members") are wholly owned by Vestar
Equity Partners, L.P.
2. PRINCIPLES OF CONSOLIDATION
The consolidated balance sheet includes the accounts of Remington, L.L.C.
and Capital after elimination of all intercompany accounts. Remington, L.L.C.
has no assets other than its investment in Capital and $25 in cash. Capital has
no assets other than $75 in cash and conducts no operations. Capital was
established solely to act as a co-issuer with Remington, L.L.C. of senior
subordinated notes as part of the financing for the Proposed Reorganization.
3. THE PROPOSED REORGANIZATION
RPC is a general partnership, jointly owned and controlled by RPI and Remsen
Partners ("Remsen"). In connection with the reorganization of RPC the following
transactions are expected to occur: (i) RPC will make cash payments to Remsen
and RPI totalling $157.1 million (less the amount of certain excluded
obligations and funded indebtedness at closing and subject to a working capital
adjustment); (ii) the Vestar Members will purchase Remsen's interest in RPC for
$33.4 million in cash; (iii) certain members of senior management of RPC will
acquire an equity interest in Remington, L.L.C. for $1.12 million (including a
cash purchase of $0.86 million and assuming exercise of certain management
options with an aggregate exercise price of $0.26 million); (iv) RPI will retain
an equity investment in the Company with an implied value of $35.4 million, and
(v) RPC will be merged with and into Remington, L.L.C. In addition existing
indebtedness of RPC will be refinanced.
The Limited Liability Company Agreement permits the issuance of 12% Series A
Preferred Equity with an aggregate liquidation preference of $62.0 million.
Following the Proposed Reorganization, RPI will have a $35.4 million equity
interest in the Company ($32.0 million in Series A Preferred Equity) and the
Vestar Members will have a $33.4 million equity interest in the Company ($30.0
million in Series A Preferred Equity). The Company's common equity will be owned
44.43% by the Vestar Members, 44.43% by RPI, and 11.13% by management (43.0%,
43.0% and 14.0%, respectively, on a fully diluted basis). Vestar Corp. I will
control the Management Committee and the affairs and policies of the Company.
4. FINANCING ARRANGEMENTS
The Company expects to obtain financing to consummate the Proposed
Reorganization, refinance existing indebtedness of RPC and pay related fees and
expenses from the following sources: (i) the sale of senior subordinated notes
with an aggregate principal amount of $130.0 million; (ii) borrowings under a
bank credit agreement, which will provide for $10.0 million in term loans, $70.0
million in revolving credit facilities, and up to an additional $30.0 million in
an acquisition facility; and (iii) cash equity purchases by the Vestar Members
and management of approximately $33.4 million and $0.86 million, respectively.
F-20
<PAGE>
REMINGTON PRODUCTS COMPANY, L.L.C.
AND REMINGTON CAPITAL CORP., ITS WHOLLY OWNED SUBSIDIARY
NOTES TO CONSOLIDATED BALANCE SHEET--(CONTINUED)
MAY 16, 1996
5. SUBSEQUENT EVENT (UNAUDITED)
On May 23, 1996, the Reorganization was consummated. The actual transaction
amounts did not differ significantly from the Proposed Reorganization. (See Note
3).
F-21
<PAGE>
REMINGTON PRODUCTS COMPANY, L.L.C. AND SUBSIDIARIES
UNAUDITED CONSOLIDATED BALANCE SHEET
JUNE 29, 1996
(DOLLARS IN THOUSANDS)
<TABLE><CAPTION>
JUNE 29,
1996
-----------
(SUCCESSOR)
<S> <C>
ASSETS:
Current assets:
Cash and cash equivalents...................................................... $ 2,402
Accounts receivable, net of allowance for doubtful accounts of $2,505 and
allowances for cash discounts, returns and claims of $4,214.................. 31,869
Inventory...................................................................... 65,392
Deferred income taxes.......................................................... 1,107
Prepaid expenses............................................................... 3,004
-----------
Total current assets....................................................... 103,774
Property, plant and equipment, net............................................... 14,376
Intangibles, net of accumulated amortization of $150............................. 50,755
Other assets, net of accumulated amortization of $100............................ 16,020
-----------
Total assets............................................................... $ 184,925
-----------
-----------
LIABILITIES AND MEMBERS' DEFICIT:
Current liabilities:
Short-term debt and current portion of long-term debt.......................... $ 1,000
Trade accounts payable......................................................... 11,517
Accrued advertising and promotion expenses..................................... 6,188
Accrued compensation and other expenses........................................ 9,271
Income and other taxes payable................................................. 755
-----------
Total current liabilities.................................................. 28,731
Long-term debt................................................................... 159,050
Other noncurrent liabilities..................................................... 1,877
-----------
Total liabilities.......................................................... 189,658
-----------
Commitments and contingencies (Note 11)
Members' Deficit:
Members' deficit............................................................... (4,442)
Cumulative translation adjustment.............................................. (291)
-----------
Total Members' deficit..................................................... (4,733)
-----------
Total liabilities and Members' deficit..................................... $ 184,925
-----------
-----------
</TABLE>
The accompanying notes are an integral part of the unaudited consolidated
financial statements.
F-22
<PAGE>
REMINGTON PRODUCTS COMPANY, L.L.C. AND SUBSIDIARIES
UNAUDITED CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE SIX MONTHS ENDED JULY 1, 1995,
THE 21 WEEKS ENDED MAY 23, 1996
AND THE FIVE WEEKS ENDED JUNE 29, 1996
(DOLLARS IN THOUSANDS)
<TABLE><CAPTION>
SIX MONTHS 21 WEEKS FIVE WEEKS
ENDED ENDED ENDED
JULY 1, 1995 MAY 23, 1996 JUNE 29, 1996
(PREDECESSOR) (SUCCESSOR)
<S> <C> <C> <C>
Net sales.............................................. $ 82,777 $ 57,939 $23,457
Cost of sales.......................................... 47,253 35,385 14,045
------------ ------------ -------------
Gross profit..................................... 35,524 22,554 9,412
Operating expenses:
Advertising and promotion............................ 7,876 6,076 2,337
Selling and marketing................................ 15,315 12,997 3,430
General and administrative........................... 9,262 19,782 1,745
Goodwill amortization................................ 820 650 150
------------ ------------ -------------
33,273 39,505 7,662
------------ ------------ -------------
Operating profit (loss).......................... 2,251 (16,951) 1,750
Other (income) expense:
Interest expense..................................... 3,303 2,228 1,931
Interest income...................................... (234) (127) (46)
Other, net........................................... 272 12 (197)
------------ ------------ -------------
3,341 2,113 1,688
------------ ------------ -------------
Income (loss) before provision (benefit) for
income taxes................................... (1,090) (19,064) 62
Provision (benefit) for income taxes................... 3 (873) 325
------------ ------------ -------------
Net loss......................................... $ (1,093) $(18,191) $ (263)
------------ ------------ -------------
------------ ------------ -------------
Net loss applicable to Common Members' Equity.... $(1,017)
<CAPTION>
</TABLE>
The accompanying notes are an integral part of the unaudited consolidated
financial statements.
F-23
<PAGE>
REMINGTON PRODUCTS COMPANY, L.L.C. AND SUBSIDIARIES
UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE SIX MONTHS ENDED JULY 1, 1995, THE 21 WEEKS ENDED MAY 23, 1996,
AND THE FIVE WEEKS ENDED JUNE 29, 1996
(DOLLARS IN THOUSANDS)
<TABLE><CAPTION>
SIX MONTHS ENDED 21 WEEKS ENDED FIVE WEEKS ENDED
JULY 1, 1995 MAY 23, 1996 JUNE 29, 1996
---------------- -------------- ----------------
(PREDECESSOR) (SUCCESSOR)
<S> <C> <C> <C>
Operating Activities:
Net loss.................................... $ (1,093) $(18,191) $ (263)
Adjustment to reconcile net income to net
cash provided by (used in) operating
activities:
Depreciation and amortization............. 2,227 2,005 343
Amortization of deferred financing
costs......................................... 356 262 100
Amortization of inventory step up......... 0 0 492
Deferred income tax provision............. 0 (561) 245
Changes in assets and liabilities:
Accounts receivable....................... 21,994 41,043 (3,698)
Inventories............................... (17,242) (8,339) 46
Prepaid expenses.......................... (2,390) (158) 215
Accounts payable.......................... (4,311) 1,187 495
Accrued expenses and other current
liabilities................................... (7,211) (933) 1,838
Other..................................... (1,082) 0 (3,750)
-------- -------------- ----------------
Net cash provided by (used in) operating
activities.................................... (8,752) 16,315 (3,937)
-------- -------------- ----------------
Investing Activities:
Capital expenditures........................ (1,671) (1,310) (141)
Payment for purchase of company, net........ 0 0 (138,037)
-------- -------------- ----------------
Net cash used in investing activities... (1,671) (1,310) (138,178)
-------- -------------- ----------------
Financing Activities:
Proceeds from sale of senior subordinated
notes......................................... 34,987 129,026
Borrowings under term loan facility......... 10,700
Borrowings under revolving credit
facility...................................... 18,350
Investment by Vestar........................ 33,440
Equity purchased by management.............. 862
Repayment of management loan................ 200
Borrowing (repayment) of old term loan...... 3,537 3,600 (12,650)
Borrowing (repayment) of old revolving
loans......................................... 759 (12,353) (28,661)
Payment of old acquisition fees............. (12,101)
-------- -------------- ----------------
Net cash provided by (used in) financing
activities.................................... 4,296 (15,953) 139,166
-------- -------------- ----------------
Effect of exchange rate changes on cash
balance....................................... (583) (214) (291)
-------- -------------- ----------------
Decrease in Cash and Cash Equivalents......... (6,710) (1,162) (3,240)
Cash and Cash Equivalents, Beginning of
Period........................................ 7,622 6,804 5,642
-------- -------------- ----------------
Cash and Cash Equivalents, End of Period...... $ 912 $ 5,642 $ 2,402
-------- -------------- ----------------
-------- -------------- ----------------
Supplemental Cash Flow Information:
Interest paid............................... $ 3,191 $ 1,874 $ 253
Income taxes paid........................... $ 370 $ 440 $ 752
</TABLE>
The accompanying notes are an integral part of the unaudited consolidated
financial statements.
F-24
<PAGE>
REMINGTON PRODUCTS COMPANY, L.L.C. AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS)
(UNAUDITED)
1. INTERIM FINANCIAL INFORMATION
The accompanying unaudited consolidated financial statements have been
preprared in accordance with generally accepted accounting principles for
interim financial information and, accordingly, certain information and footnote
disclosures required for complete financial statements prepared in accordance
with generally accepted accounting principles have been omitted. In management's
opinion, the accompanying unaudited consolidated financial statements include
all adjustments (consisting of normal recurring adjustments) necessary for a
fair presentation of the results of operations, financial position and cash
flows for each period shown. The results for interim periods are not necessarily
indicative of financial results for the full year.
2. ORGANIZATION
Remington Products Company, L.L.C. ("Remington, L.L.C."), a Delaware limited
liability company, and its wholly owned subsidiary Remington Capital Corp.
("Capital"), a Delaware Corporation (together, the "Company"), were formed by
Vestar Shaver Corp. ("Vestar Corp. I") and RPI Corp. (formerly known as
Remington Products, Inc. ("RPI") to acquire (the "Reorganization") the
operations of Remington Products Company and its subsidiaries ("RPC"). In May
1996, Vestar Razor Corp. ("Vestar Corp. II") was formed to hold an interest in
Remington L.L.C. Vestar Corp. I and Vestar Corp. II (together, the "Vestar
Members") are wholly owned by Vestar Equity Partners, L.P.
3. PRINCIPLES OF CONSOLIDATION
The consolidated balance sheet as of June 29, 1996 includes the accounts of
Remington, L.L.C. and Capital, the successor Company following the change in
ownership (see Note 2) and the consolidated results of operations and cash flows
include the accounts for the successor Company for the period from May 24, 1996
to June 29, 1996 after elimination of all intercompany accounts. Remington,
L.L.C. owns all the assets of RPC and its investment in Capital. Capital has no
assets and conducts no operations. Capital was established solely to act as a
co-issuer with Remington, L.L.C. of senior subordinated notes as part of the
financing for the Reorganization. The statements also include the results of
operations and cash flows of RPC, the predecessor company, prior to the change
in ownership.
4. THE REORGANIZATION
RPC was a general partnership, jointly owned and controlled by RPI and
Remsen Partners ("Remsen"). As a result of the reorganization of RPC, the
following transactions occurred: (i) RPC made cash payments to Remsen and RPI
totalling $157.1 million (less the amount of certain excluded obligations and
funded indebtness at closing and subject to a Working Capital Adjustment), (ii)
the Vestar Members purchased Remsen's interest in RPC for $33.4 million in cash;
(iii) certain members of senior management of RPC acquired an equity interest in
Remington, L.L.C. for $1.12 million (including a cash purchase of $0.86 million
and assuming exercise of certain management options with an aggregate exercise
price of $0.26 million), (iv) RPC retained an equity investment in the Company
with an implied value of $35.4 million, and (v) RPC merged with and into
Remington, L.L.C. In addition, existing indebtedness of RPC was refinanced.
F-25
<PAGE>
REMINGTON PRODUCTS COMPANY, L.L.C. AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(DOLLARS IN THOUSANDS)
(UNAUDITED)
4. THE REORGANIZATION--(CONTINUED)
The Limited Liability Company Agreement permitted the issuance of 12% Series
A Preferred Equity with an aggregate liquidation preference of $62.0 million. As
a result of the Reorganization, RPI has a $35.4 million equity interest in the
Company ($32.0 million in Series A Preferred Equity) and the Vestar Members have
a $33.4 million equity interest in the Company ($30.0 million in Series A
Preferred Equity). The Company's Common Units are owned 44.43% by the Vestar
Members, 44.43% by RPI, and 11.13% by management (43.0%, 43.0% and 14.0%,
respectively, on a fully diluted basis). Vestar Corp. I controls the Management
Committee and the affairs and policies of the Company.
The Reorganization has been accounted for as a purchase transaction
effective as of May 23, 1996, in accordance with Accounting Principles Board
Opinion No. 16, Business Combinations, and EITF Issue No. 88-16, Basis in
Leveraged Buyout Transactions, and accordingly, the consolidated financial
statements for the periods subsequent to May 23, 1996 reflect the purchase
price, including transaction costs, allocated to tangible and intangible assets
acquired and liabilities assumed, based on their estimated fair values as of May
23, 1996, which may be revised at a later date. The valuation of assets and
liabilities acquired reflect carryover basis for the percentage ownership
retained by RPC.
The Reorganization reflects the following adjustments (amounts are subject
to change based upon the determination of the Final Working Capital Adjustment
and finalization of certain valuation studies).
Cash payments and distributions (1)............................. $138,400
Implied fair value of equity interests issued to RPI (2)........ 35,440
Direct acquisition costs........................................ 3,630
--------
Total consideration and direct acquisition costs............ 177,470
Less RPC's historical cost of net assets acquired (3)........... (71,244)
--------
Excess of consideration paid over RPC's historical cost......... 106,226
Less excess of fair value over predecessor basis (4)............ (73,923)
--------
32,303
Debt issuance costs............................................. 8,471
--------
Net adjustment.............................................. $ 40,774
--------
--------
Preliminary allocation of net adjustment (5):
Inventory................................................... 2,842
Goodwill.................................................... (1,131)
Tradenames.................................................. 26,534
Patents..................................................... 4,670
Other assets (6)............................................ 7,859
--------
$ 40,774
--------
--------
F-26
<PAGE>
REMINGTON PRODUCTS COMPANY, L.L.C. AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(DOLLARS IN THOUSANDS)
(UNAUDITED)
4. THE REORGANIZATION--(CONTINUED)
(Footnotes for preceding page)
- ------------
(1) Consists of cash payments to Remsen and RPI of $90,351 and $48,049 (net of
the Preliminary Working Capital Adjustment), respectively, which, in each
case, are reduced by certain Excluded Obligations that will be paid by the
Company.
(2) The fair value of equity interests issued to RPI consists of Preferred
Equity with a liquidation preference of $32,000 and Common Units with a fair
value of $3,440, based on the cash paid by the Vestar Members and certain
Management Investors for their respective equity interests. RPI's
predecessor basis in RPC was $8,208.
(3) Represents historical total partners' capital of RPC adjusted to reflect
$13,708 of Excluded Obligations included on the June 29, 1996 consolidated
balance sheet.
(4) Represents adjustments to decrease the fair value of the interests retained
by RPI and certain Management Investors to reflect their carryover basis in
such interests.
(5) Represents the adjustments required to record the preliminary allocation of
the excess of the consideration paid over RPC's historical basis in the net
assets acquired, adjusted to reflect their carryover basis. The acquired
assets are recorded 53.07% at fair value (for the common equity interest
acquired by the Vestar Members and certain of the Management Investors) and
46.93% at carryover basis (for the residual common equity interests retained
by RPI and certain of the Management Investors). The Company has not yet
received the final results of appraisals and other valuation studies which
are in process. However, management does not expect that differences between
the preliminary and final allocations will have a material impact on the
Company's financial position or income from operations.
(6) Represents debt issuance costs of $8,471 net of a $612 write-off of deferred
financing costs related to existing debt being repaid.
5. INVENTORIES
Inventories at June 29, 1996 are comprised of:
Raw materials.................................................... $ 30
Work in process.................................................. 6,531
Finished goods................................................... 58,831
-------
Inventory at FIFO cost, which approximates replacement cost...... 65,392
Less, Amount to reduce domestic manufactured inventories to LIFO
cost............................................................. --
-------
$65,392
-------
-------
6. INCOME TAXES
A tax benefit is recognized for interim period losses of foreign
subsidiaries only when carryback of such losses is possible or when management
believes realization is more likely than not through offset against income of
subsequent interim periods.
F-27
<PAGE>
REMINGTON PRODUCTS COMPANY, L.L.C. AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(DOLLARS IN THOUSANDS)
(UNAUDITED)
7. PROPERTY, PLANT AND EQUIPMENT, NET
Property, plant and equipment at June 29, 1996 is as follows:
JUNE 29,
1996
-----------
(SUCCESSOR)
Land, building and improvements.................................. $ 6,701
Machinery and equipment.......................................... 3,448
Tooling.......................................................... 3,128
Funiture, fixtures and other..................................... 1,292
-----------
14,569
Less: Accumulated depreciation................................... (193)
-----------
$14,376
-----------
-----------
Depreciation expense was $1,548 and $1,407 for the six months ended June 29,
1996 and July 1, 1995, respectively.
8. INTANGIBLE ASSETS, NET
JUNE 29,
1996
-----------
(SUCCESSOR)
Goodwill......................................................... $19,701
Tradename........................................................ 26,534
Patents.......................................................... 4,670
Less: Accumulated amortization................................... (150)
-----------
$50,755
-----------
-----------
Effective January 1, 1996, the Company adopted the provisions of Statement
of Financial Accounting Standards No. 121, "Accounting for the Impairment of
Long-Lived Assets and Long-Lived Assets to be Disposed of." The adoption of this
standard did not have a material effect on the 1996 financial statements.
9. OTHER ASSETS, NET
JUNE 29
1996
-----------
(SUCCESSOR)
Deferred financing costs......................................... $ 8,471
Less: Accumulated amortization................................... (100)
-----------
8,371
Debt Discount.................................................... 964
Other............................................................ 6,685
-----------
$16,020
-----------
-----------
F-28
<PAGE>
REMINGTON PRODUCTS COMPANY, L.L.C. AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(DOLLARS IN THOUSANDS)
(UNAUDITED)
10. DEBT (SUCCESSOR)
Details of debt outstanding at June 29, 1996 are as follows:
JUNE 29,
1996
-----------
(SUCCESSOR)
$70,000 revolving credit facility due June 30, 2002............. $ 20,050
Term loan due June 30, 2002..................................... 10,000
11% Series B Senior Subordinated Notes due May 15, 2002......... 130,000
-----------
160,050
Less: Current portion of long-term debt......................... (1,000)
-----------
Long-term debt.................................................. $ 159,050
-----------
-----------
On the Closing Date, the Company entered into a credit agreement (the
"Senior Credit Agreement") with a consortium of banks. The Senior Credit
Agreement provides for a term loan of $5.0 million to the Company and $5.0
million to the Company's U.K. subsidiary (the "Term Loans"), a revolving credit
facility of $50.0 million to the Company and $20.0 million to the Company's U.K.
subsidiary (the "Revolving Credit Facilities") and a facility for additional
term loans of up to an aggregate of $30.0 million to the Company, the Company's
U.K. subsidiary and certain other subsidiaries (the "Acquisition Facility"). The
internal borrowings under the Senior Credit Agreement, along with the proceeds
of the Senior Subordinated Notes and the Equity Contribution, were used to repay
the debt of the Predecessor Company.
The obligations under the Senior Credit Agreement are guaranteed by each of
the Company's domestic subsidiaries and secured by their assets and properties
and pledge of the capital stock.
At the Company's option, the interest rates per annum applicable to the
loans under the Senior Credit Agreement will be based upon (a) in the case of
the Company, a Eurodollar rate ("LIBOR") plus 2.25% or the greater of (i) the
prime rate plus 1.0% and (ii) the federal funds rate plus 1.5% and (b) in the
case of loans to the Company's U.K. subsidiary, a EuroSterling Rate (the
"EuroSterling Rate") plus 2.25% or the Sterling Base Rate plus 1.0%; provided,
however, the interest rates are subject to reduction if certain requirements of
financial performance are met.
Outstanding loans under the Revolving Credit Facilities and Acquisition
Facility must be repaid on the sixth anniversary of the Closing Date. The Term
Loans will amortize quarterly over six years with amortization payments totaling
$0.40 million in the remainder of 1996, $1.00 million in 1997, $1.35 million in
1998, $1.50 million in 1999, $1.75 million in 2000, $3.00 million in 2001 and
$1.00 million in 2002.
The Revolving Credit Facilities of the Company and Company's U.K. subsidiary
will be subject to a borrowing base of 85% of eligible accounts receivable and
60% of eligible inventory for the applicable borrower, with an additional
aggregate $10 million over-advance line available for up to five consecutive
months during each period beginning February 1 and ending January 31.
The Senior Credit Agreement requires the Company to meet certain financial
tests. The Senior Credit Agreement also contains covenants which, among other
things, will limit the incurrence of additional indebtedness, investments,
dividends, transactions with affiliates, asset sales, acquisitions and mergers.
F-29
<PAGE>
REMINGTON PRODUCTS COMPANY, L.L.C. AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(DOLLARS IN THOUSANDS)
(UNAUDITED)
11. COMMITMENTS AND CONTINGENCIES
The Company is involved in legal and administrative proceedings and claims
of various types. While any litigation contains an element of uncertainty,
management believes that the outcome of each such proceeding or claim which is
pending or known to be threatened, or all of them combined, will not have a
material adverse effect on the Company's consolidated financial position or
results of operations.
12. OTHER INCOME STATEMENT DATA
Included in the caption General and Administrative in the Consolidated
Statements of Operations for the six months ended June 29, 1996, are
nonrecurring charges of approximately $10,900, reflecting the payment of
bonuses, termination of certain employment agreements and closing costs
associated with the recapitalization of the business, and $1,300 of an
additional provision for doubtful accounts related to the bankruptcy of the
Company's largest customer in Canada.
Net Loss applicable to Common Members' Equity is determined by increasing
the net loss or decreasing net income by Preferred Equity dividend requirements.
13. MEMBERS' DEFICIT
Members' deficit for the period from May 23, 1996 to June 29, 1996
(successor) is as follows:
<TABLE><CAPTION>
EXCESS OF
FAIR VALUE
PREFERRED COMMON OVER ACCUMULATED
EQUITY UNITS PREDECESSOR BASIS DEFICIT TOTAL
--------- ------ ----------------- ----------- --------
<S> <C> <C> <C> <C> <C>
Issuance of Preferred Equity........ $ 62,000 $ 62,000
Issuance of Common Units............ $7,742 7,742
Excess of fair value over
Predecessor basis................. $ (73,921) (73,921)
--------- ------ -------- ----------- --------
Balance--May 23, 1996............... $ 62,000 $7,742 $ (73,921) (4,179)
Preferred Equity Dividends(1)....... 754 $ (754)
Net loss............................ (263) (263)
--------- ------ -------- ----------- --------
Balance--June 29, 1996.............. $ 62,754 $7,742 $ (73,921) $(1,017) $ (4,442)
--------- ------ -------- ----------- --------
--------- ------ -------- ----------- --------
</TABLE>
- ------------
(1) Represents 12% cumulative Preferred Equity with a liquidation preference of
$62,000.
F-30
<PAGE>
- ---------------------------------------- --------------------------------------
- ---------------------------------------- --------------------------------------
NO DEALER, SALESPERSON OR OTHER
INDIVIDUAL HAS BEEN AUTHORIZED TO GIVE
ANY INFORMATION OR MAKE ANY
REPRESENTATION NOT CONTAINED IN THIS [LOGO]
PROSPECTUS IN CONNECTION WITH THE
OFFER MADE BY THIS PROSPECTUS. IF
GIVEN OR MADE, SUCH INFORMATION OR $130,000,000
REPRESENTATIONS MUST NOT BE RELIED
UPON AS HAVING BEEN AUTHORIZED BY THE
ISSUERS. THIS PROSPECTUS DOES NOT
CONSTITUTE AN OFFER OR A SOLICITATION
IN ANY JURISDICTION WHERE, OR TO ANY
PERSON TO WHOM, IT IS UNLAWFUL TO MAKE
SUCH AN OFFER OR SOLICITATION. NEITHER REMINGTON PRODUCTS
THE DELIVERY OF THIS PROSPECTUS NOR COMPANY, L.L.C.
ANY SALE MADE HEREUNDER SHALL, UNDER
ANY CIRCUMSTANCES, CREATE AN
IMPLICATION THAT THERE HAS NOT BEEN REMINGTON CAPITAL CORP.
ANY CHANGE IN THE FACTS SET FORTH IN
THIS PROSPECTUS OR IN THE AFFAIRS OF
THE ISSUERS SINCE THE DATE HEREOF.
-------------------
TABLE OF CONTENTS
PAGE
-----
Available Information............... 2
Prospectus Summary.................. 3
Risk Factors........................ 13
The Transactions.................... 18
Use of Proceeds..................... 20 -------------------
Capitalization...................... 22
Selected Historical Financial PROSPECTUS
Data................................ 23
Unaudited Pro Forma Consolidated -------------------
Financial Information............... 24
Management's Discussion and Analysis
of Financial Condition and Results
of Operations....................... 29
Business............................ 37
Management.......................... 48
Security Ownership of Certain
Beneficial Owners and
Management........................ 53 OFFER TO EXCHANGE THEIR
Certain Transactions................ 54 11% SERIES B SENIOR
Limited Liability Company SUBORDINATED NOTES
Agreement........................... 56 DUE 2006
Description of Senior Credit FOR ANY AND ALL OF THEIR
Agreement........................... 58 OUTSTANDING 11%
Description of New Notes............ 60 SENIOR SUBORDINATED NOTES
The Exchange Offer.................. 86 DUE 2006
Certain Federal Income Tax
Consequences........................ 95
Plan of Distribution................ 95
Legal Matters....................... 96
Experts............................. 96
Index to Financial Statements....... F-1
-------------------
, 1996
UNTIL , 1996 (90 DAYS AFTER
THE COMMENCEMENT OF THE EXCHANGE OFFER), ALL
DEALERS EFFECTING TRANSACTIONS IN THE
REGISTERED SECURITIES, WHETHER OR NOT
PARTICIPATING IN THIS DISTRIBUTION, MAY BE
REQUIRED TO DELIVER A PROSPECTUS. THIS
DELIVERY REQUIREMENT IS IN ADDITION TO THE
OBLIGATION OF DEALERS TO DELIVER A PROSPECTUS
WHEN ACTING AS UNDERWRITERS AND WITH RESPECT
TO THEIR UNSOLD ALLOTMENTS OR SUBSCRIPTIONS.
- ---------------------------------------- --------------------------------------
- ---------------------------------------- --------------------------------------
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
REMINGTON. Remington is a limited liability company organized under the laws
of the State of Delaware. Section 18-108 of the Delaware Limited Liability
Company Act provides that, subject to such standards and restrictions, if any,
as are set forth in its limited liability company agreement, a limited liability
company may, and shall have the power to, indemnify and hold harmless any member
or manager or other person from and against any and all claims and demands
whatsoever.
Article VII of Remington's Amended and Restated Limited Liability Company
Agreement ("Article VII") provides, among other things, that each natural
person, partnership (whether general or limited), limited liability company,
trust, estate, association, corporation, custodian, nominee or any other
individual or entity in its own or any representative capacity (a "Person") who
was or is made a party or is threatened to be made a party to or is involved in
any threatened, pending or completed action, suit or proceeding, whether civil,
criminal, administrative or arbitrative (a "Proceeding"), or any appeal in such
a Proceeding or any inquiry or investigation that could lead to such a
Proceeding, by reason of the fact that he, or a Person of which he is the legal
representative, is or was a member, officer or Director shall be indemnified by
Remington to the fullest extent permitted by applicable law, as the same exists
or may hereafter be amended (but, in the case of any such amendment, only to the
extent that such amendment permits Remington to provide broader indemnification
rights than said law permitted Remington to provide prior to such amendment)
against judgments, penalties (including excise and similar taxes and punitive
damages), fines, settlements and reasonable expenses (including, without
limitation, reasonable attorneys' fees) actually incurred by such Person in
connection with such Proceeding, appeal, inquiry or investigation, and
indemnification under Article VII shall continue as to a Person who has ceased
to serve in the capacity which initially entitled such Person to indemnity
hereunder.
Article VII also provides that the right to indemnification conferred in
Article VII shall include the right to be paid or reimbursed by Remington the
reasonable expenses incurred by a Person of the type entitled to be indemnified
under Article VII who was, is or is threatened to be, made a named defendant or
respondent in a Proceeding in advance of the final disposition of the Proceeding
and without any determination as to the Person's ultimate entitlement to
indemnification; provided, however, that the payment of such expenses incurred
by any such Person in advance of the final disposition of a Proceeding shall be
made only upon delivery to Remington of a written affirmation by such Person of
his or her good faith belief that he has met the standard of conduct necessary
for indemnification under Article VII and a written undertaking, by or on behalf
of such Person, to repay all amounts so advanced if it shall ultimately be
determined that such indemnified Person is not entitled to be indemnified under
Article VII or otherwise.
Article VII also provides that Remington may purchase and maintain
insurance, at its expense, to protect itself and any Director, member, officer
or agent of Remington who is or was serving at the request of Remington as a
manager, representative, director, officer, partner, venturer, proprietor,
trustee, employee, agent or similar functionary of another foreign or domestic
limited liability company, corporation, partnership, joint venture, sole
pro-prietorship, trust, employee benefit plan or other enterprise against any
expense, liability or loss, whether or not Remington would have the power to
indemnify such Person against such expense, liability or loss under Article VII.
Remington maintains and has in effect insurance policies covering all of its
Directors and officers against certain liabilities for actions taken in such
capacities, including liabilities under the Securities Act of 1933.
II-1
<PAGE>
CAPITAL. Capital is incorporated under the laws of the State of Delaware.
Section 145 of the General Corporation Law of the State of Delaware, inter alia,
("Section 145") provides that a Delaware corporation may indemnify any persons
who were, are or are threatened to be made, parties to any threatened, pending
or completed action, suit or proceeding, whether civil, criminal, administrative
or investigative (other than an action by or in the right of such corporation),
by reason of the fact that such person is or was an officer, director, employee
or agent of such corporation, or is or was serving at the request of such
corporation as a director, officer employee or agent of another corporation or
enterprise. The indemnity may include expenses (including attorneys' fees),
judgments, fines and amounts paid in settlement actually and reasonably incurred
by such person in connection with such action, suit or proceeding, provided such
person acted in good faith and in a manner he reasonably believed to be in or
not opposed to the corporation's best interests and, with respect to any
criminal action or proceeding, had no reasonable cause to believe that his
conduct was illegal. A Delaware corporation may indemnify any persons who are,
were or are threatened to be made, a party to any threatened, pending or
completed action or suit by or in the right of the corporation by reasons of the
fact that such person was a director, officer, employee or agent of such
corporation, or is or was serving at the request of such corporation as a
director, officer, employee or agent of another corporation or enterprise. The
indemnity may include expenses (including attorneys' fees) actually and
reasonably incurred by such person in connection with the defense or settlement
of such action or suit, provided such person acted in good faith and in a manner
he reasonably believed to be in or not opposed to the corporation's best
interests, provided that no indemnification is permitted without judicial
approval if the officer, director, employee or agent is adjudged to be liable to
the corporation. Where an officer, director, employee or agent is successful on
the merits or otherwise in the defense of any action referred to above, the
corporation must indemnify him against the expenses which such officer or
director has actually and reasonably incurred.
Capital's Certificate of Incorporation provides that, to the fullest extent
permitted by the General Corporation Law of the State of Delaware as the same
exists or may hereafter be amended, a director of Capital shall not be liable to
Capital or its stockholders for monetary damages for a breach of fiduciary duty
as a director.
Article V of the By-laws of Capital ("Article V") provides, among other
things, that each person who was or is made a party or is threatened to be made
a party to or is involved in any action, suit or proceeding, whether civil,
criminal, administrative or investigative, by reason of the fact that he or a
person of whom he is the legal representative, is or was a director or officer,
of the corporation or is or was serving at the request of Capital as a director,
officer, employee, fiduciary, or agent of another corporation or of a
partnership, joint venture, trust or other enterprise, including service with
respect to employee benefit plans, whether the basis of such proceeding is
alleged action in an official capacity as a director, officer, employee,
fiduciary or agent or in any other capacity while serving as a director,
officer, employee, fiduciary or agent, shall be indemnified and held harmless by
Capital to the fullest extent which it is empowered to do so by the General
Corporation Law of the State of Delaware, as the same exists or may hereafter be
amended (but, in the case of any such amendment, only to the extent that such
amendment permits Capital to provide broader indemnification rights than said
law permitted the corporation to provide prior to such amendment) against all
expense, liability and loss (including attorneys' fees actually and reasonably
incurred by such person in connection with such proceeding and such
indemnification shall inure to the benefit of his or her heirs, executors and
administrators; provided, however, that, Capital shall indemnify any such person
seeking indemnification in connection with a proceeding initiated by such person
only if such proceeding was authorized by the board of directors of Capital.
Article V also provides that persons who are not covered by the foregoing
provisions of Article V and who are or were employees or agents of Capital, or
who are or were serving at the request of Capital as employees or agents of
another corporation, partnership, joint venture, trust or other enterprise, may
be indemnified to the extent authorized at any time or from time to time by the
board of directors.
II-2
<PAGE>
Section 145 further authorizes a corporation to purchase and maintain
insurance on behalf of any person who is or was a director, officer, employee or
agent of the corporation, or is or was serving at the request of the corporation
as a director, officer, employee or agent of another corporation or enterprise,
against any liability asserted against him and incurred by him in any such
capacity, arising out of his status as such, whether or not the corporation
would otherwise have the power to indemnify him under Section 145.
Article V further provides that Capital may purchase and maintain insurance
on its own behalf and on behalf of any person who is or was a director, officer,
employee, fiduciary, or agent of Capital or was serving at the request of
Capital as a director, officer, employee or agent of another corporation,
partnership, joint venture, trust or other enterprise against any liability
asserted against him or her and incurred by him or her in any such capacity,
whether or not Capital would have the power to indemnify such person against
such liability under Article V.
All of Capital's directors and officers are covered by insurance policies
maintained and held in effect by Remington against certain liabilities for
actions taken in such capacities, including liabilities under the Securities Act
of 1933.
ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
(A) EXHIBITS.
<TABLE>
<C> <S>
3.1 Amended and Restated Limited Liability Company Agreement dated as of May 16, 1996 by
and among Vestar Shaver Corp. (formerly Vestar/Remington Corp.) ("Vestar Corp. I"),
Vestar Razor Corp. ("Vestar Corp. II" and, together with Vestar Corp. I, the "Vestar
Members"), RPI Corp. (formerly known as Remington Products, Inc.) ("RPI"), and
certain members of senior management of the Company.*
3.2 Certificate of Formation of Remington Products Company, L.L.C. ("Remington").*
3.3 Certificate of Incorporation of Remington Capital Corp. ("Capital").*
3.4 By-laws of Capital.*
4.1 Indenture dated as of May 23, 1996 between Remington, Capital and The Bank of New
York, as trustee.*
4.2 Forms of 11% Senior Subordinated Notes and Series B 11% Senior Subordinated Notes.*
4.3 Purchase Agreement dated May 16, 1996 between Remington, Capital and Bear, Stearns &
Co. Inc.*
4.4 Registration Rights Agreement dated as of May 23, 1996 between Remington, Capital
and Bear, Stearns & Co. Inc.*
5.1 Opinion and consent of Kirkland & Ellis.*
10.1 Credit and Guarantee Agreement dated as of May 23, 1996 among Remington, certain of
its subsidiaries, various lending institutions, Fleet National Bank and Banque
Nationale de Paris, as co-documentation agents, and Chemical Bank, as administrative
agent (the "Agent").*
10.2 Company Security Agreement dated as of May 23, 1996 made by Remington in favor of
the Agent.*
10.3 Form of Subsidiaries Security Agreement dated as of May 23, 1996 made by each of
Capital, Remington Corporation, L.L.C. ("IP Subsidiary") and Remington Rand
Corporation ("Rand") in favor of the Agent.*
10.4 Conditional Assignment of and Security Interest in Patent Rights (United States)
dated as of May 23, 1996 made by IP Subsidiary in favor of the Agent.*
10.5 Conditional Assignment of and Security Interest in Patent Rights (United Kingdom)
dated as of May 23, 1996 made by IP Subsidiary in favor of the Agent.*
10.6 Conditional Assignment of and Security Interest in Trademark Rights (United States)
dated as of May 23, 1996 made by IP Subsidiary in favor of the Agent.*
10.7 Conditional Assignment of and Security Interest in Trademark Rights (United Kingdom)
dated as of May 23, 1996 made by IP Subsidiary in favor of the Agent.*
10.8 Members Limited Recourse Pledge Agreement dated as of May 23, 1996 made by Remington
in favor of the Agent.*
</TABLE>
II-3
<PAGE>
<TABLE>
<C> <S>
10.9 Company Pledge Agreement dated as of May 23, 1996 made by Remington in favor of the
Agent.*
10.10 Subsidiaries Pledge Agreement dated as of May 23, 1996 made by Rand in favor of the
Agent.*
10.11 Subsidiaries Guarantee dated as of May 23, 1996 made by Capital, IP subsidiary and
Rand in favor of the Agent.*
10.12 Purchase Agreement dated as of May 1, 1996 by and among Vestar Corp I., Remington,
Remsen, Isaac Perlmutter, RPI and Victor K. Kiam, II.*
10.13 Agreement and Plan of Merger dated as of May 23, 1996 between Remington Products
Company and Remington.*
10.14 Securityholders Agreement dated as of May 16, 1996 among the Vestar Members, Vestar
Equity Partners, L.P. ("Vestar"), RPI, Victor K. Kiam, II and the other parties
signatory thereto.*
10.15 Management Agreement dated as of May 23, 1996 between Remington and Vestar Capital
Partners.*
10.16 Consulting and Transitional Services Agreement dated as of May 23, 1996 between
Remington and RPI.*
10.17 Form of Management Common Units Subscription Agreement dated as of May 23, 1996 by
and between Remington and each of F. Peter Cuneo, James J. Vatrt, Jack W. Waller,
Allen S. Lipson, H. Graham Kimpton and Geoffrey L. Hoddinott.*
10.18 Form of Option Agreement dated as of May 23, 1996 by and between Remington and
certain members of senior management of the Company.*
10.19 Form of Executive Severance Agreement dated as of May 23, 1996 by and between
Remington or certain of its subsidiaries and each of F. Peter Cuneo, James J. Vatrt,
Jack W. Waller, Allen S. Lipson, H. Graham Kimpton and Geoffrey L. Hoddinott.*
10.20 Non-Competition Agreement dated as of May 23, 1996 among Victor K. Kiam, II, Victor
K. Kiam, III, Remington and the Vestar Members.*
10.21 License Agreement made May 23, 1996 by and between IP Subsidiary and Act II Jewelry,
Inc.*
10.22 License Agreement made May 23, 1996 by and between IP Subsidiary and VKK Equities
Corporation.*
10.23 Tradename Agreement made May 23, 1996 by and between IP Subsidiary and Remington
Apparel Company, Inc.*
10.24 License Agreement dated as of May 23, 1996 by and between Remington and IP
Subsidiary.*
10.25 Bonus Plan.*
12.1 Statement Regarding Computation of Ratios of Earnings to Fixed Charges.
21.1 Subsidiaries of Remington and Capital.*
23.1 Consent of Deloitte & Touche LLP.
23.2 Consent of Coopers & Lybrand L.L.P.
23.3 Consent of Kirkland & Ellis (included in Exhibit 5.1).
24.1 Powers of Attorney.*
25.1 Statement of Eligibility of Trustee on Form T-1.*
27.1 Financial Data Schedule.*
99.1 Form of Letter of Transmittal.*
99.2 Form of Notice of Guaranteed Delivery.*
99.3 Form of Tender Instructions.*
</TABLE>
- ------------
* Filed previously
(B) FINANCIAL STATEMENT SCHEDULES.
Schedule II--Remington Products Company--Valuation and Qualifying Accounts.
II-4
<PAGE>
ITEM 22. UNDERTAKINGS.
The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being made, a
post-effective amendment to this registration statement;
(i) To include any prospectus required by Section 10(a)(3) of the
Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events arising after the
effective date of the registration statement (or the most recent post-effective
amendment thereof) which individually or in the aggregate, represent a
fundamental change in the information set forth in the registration statement;
(iii) To include any material information with respect to the plan of
distribution not previously disclosed in the registration statement or any
material change to such information in the registration statement;
(2) That, for the purpose of determining any liability under the Securities
Act of 1933, each such post-effective amendment shall be deemed to be a new
registration statement relating to the securities offered therein, and the
offering of such securities at the time shall be deemed to be the initial bona
fide offering thereof;
(3) To remove from registration by means of a post-effective amendment any
of the securities being registered which remain unsold at the termination of the
offering; and
(4) The undersigned registrant hereby undertakes as follows: that prior to
any public reoffering of the securities registered hereunder through use of a
prospectus which is a part of this registration statement, by any person or
party who is deemed to be an underwriter within the meaning of Rule 145(c), the
issuer undertakes that such reoffering prospectus will contain the information
called for by the applicable registration form with respect to reofferings by
persons who may be deemed underwriters, in addition to the information called
for by the other items of the applicable form.
(5) The registrant undertakes that every prospectus: (i) that is filed
pursuant to paragraph (1) immediately preceding, or (ii) that purports to meet
the requirements of Section 10(a)(3) of the Act and is used in connection with
an offering of securities subject to Rule 415, will be filed as a part of an
amendment to the registration statement and will not be used until such
amendment is effective, and that, for purposes of determining any liability
under the Securities Act of 1933, each such post-effective amendment shall be
deemed to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed to be
the initial bona fide offering thereof.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 (the "Securities Act") may be permitted to directors, officers and
controlling persons of the registrant pursuant to the provisions described under
Item 20 or otherwise, the registrant has been advised that in the opinion of the
Securities and Exchange Commission such indemnification is against public policy
as expressed in the Securities Act and is, therefore, unenforceable. In the
event that a claim for indemnification against such liabilities (other than the
payment by the registrant of expenses incurred or paid by a director, officer or
controlling person of the registrant in the successful defense of any action,
suit or proceeding) is asserted by such director, officer or controlling person
in connection with the securities being registered, the registrant will, unless
in the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the
Securities Act and will be governed by the final adjudication of such issue.
II-5
<PAGE>
(6) For purposes of determining any liability under the Securities Act of
1933, the information omitted from the form of prospectus filed as part of this
registration statement in reliance upon Rule 430A and contained in a form of
prospectus filed by the registrant pursuant to Rule 424(b)(1) or (4) or 497(h)
under the Securities Act shall be deemed to be part of this registration
statement as of the time it was declared effective.
(7) For the purpose of determining any liability under the Securities Act of
1933, each post-effective amendment that contains a form of prospectus shall be
deemed to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed to be
the initial bona fide offering thereof.
(8) The undersigned registrant hereby undertakes to respond to requests for
information that is incorporated by reference into the prospectus pursuant to
Item 4, 10(b), 11, or 13 of this form, within one business day of receipt of
such request, and to send the incorporated documents by first class mail or
other equally prompt means. This includes information contained in documents
filed subsequent to the effective date of the registration statement through the
date of responding to the request.
(9) The undersigned registrant hereby undertakes to supply by means of a
post-effective amendment all information concerning a transaction, and the
company being acquired involved therein, that was not the subject of and
included in the registration statement when it became effective.
II-6
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, Remington
Products Company, L.L.C., has duly caused this Amendment No. 2 to Registration
Statement on Form S-4 to be signed on its behalf by the undersigned, thereunto
duly authorized, in the City of Bridgeport, State of Connecticut, on September
30, 1996.
REMINGTON PRODUCTS COMPANY, L.L.C.
By: /s/ F. PETER CUNEO
..................................
F. Peter Cuneo
President and Chief Executive
Officer
Pursuant to the requirements of the Securities Act of 1933, this Amendment
No. 2 to Registration Statement on Form S-4 has been signed on September 30,
1996 by the following persons in the capacities indicated:
<TABLE><CAPTION>
SIGNATURE CAPACITY
- ---------------------------------- --------------------------------------------------------
<S> <C>
/s/ F. PETER CUNEO Chief Executive Officer, President and Director
.................................. (Principal Executive Officer)
F. Peter Cuneo
/s/ MICHAEL STANTON Vice President and Controller
.................................. (Principal Financial and Accounting Officer)
Michael Stanton
* Vice President, Corporate Development and Director
..................................
Victor K. Kiam, III
* Chairman and Director
..................................
Victor K. Kiam, II
* Director
..................................
Norman W. Alpert
* Director
..................................
Arthur J. Nagle
* Director
..................................
Daniel S. O'Connell
* Director
..................................
Robert L. Rosner
* Director
..................................
William B. Connell
.................................. Director
Kevin A. Mundt
</TABLE>
*By: /s/ ALLEN S. LIPSON
.......................................
Allen S. Lipson, as Attorney-in-Fact
II-7
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, Remington
Capital Corp. has duly caused this Amendment No. 2 to Registration Statement on
Form S-4 to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Bridgeport, State of Connecticut, on September 30,
1996.
REMINGTON CAPITAL CORP.
By: /s/ F. PETER CUNEO
..................................
F. Peter Cuneo
President
Pursuant to the requirements of the Securities Act of 1933, this Amendment
No. 2 to Registration Statement on Form S-4 has been signed by the following
persons on September 30, 1996 in the capacities indicated:
<TABLE><CAPTION>
SIGNATURE CAPACITY
- ---------------------------------- --------------------------------------------------------
<S> <C>
/s/ F. PETER CUNEO President and Director
.................................. (Principal Executive, Financial
F. Peter Cuneo and Accounting Officer)
/s/ ALLEN S. LIPSON Secretary and Director
..................................
Allen S. Lipson
</TABLE>
II-8
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Management Committee of
REMINGTON PRODUCTS COMPANY:
In connection with our audits of the consolidated financial statements of
Remington Products Company and Subsidiaries as of December 31, 1994 and 1995,
and for the year ended September 30, 1993, the three months ended December 31,
1993 and the years ended December 31, 1994 and 1995, which financial statements
are included in the Prospectus, we have also audited the financial statement
schedule listed in item 21(b) herein.
In our opinion, this financial statement schedule, when considered in
relation to the basic financial statements taken as a whole, presents fairly, in
all material respects, the information required to be included therein.
COOPERS & LYBRAND L.L.P.
Stamford, Connecticut
March 4, 1996
S-1
<PAGE>
REMINGTON PRODUCTS COMPANY
SCHEDULE II--VALUATION & QUALIFYING ACCOUNTS
(DOLLARS IN THOUSANDS)
<TABLE><CAPTION>
ADDITIONS
BALANCE AT CHARGED TO BALANCE AT
BEGINNING COSTS AND END OF
OF PERIOD EXPENSES DEDUCTIONS PERIOD
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
DECEMBER 31, 1995 (12 MONTHS)
Allowance for doubtful accounts.................... $1,461 $ 159 $ 254 $1,366
Allowance for cash discounts and returns........... 7,917 16,075 16,660 7,852
DECEMBER 31, 1994 (12 MONTHS)
Allowance for doubtful accounts.................... 451 1,336 326 1,461
Allowance for cash discounts and returns........... 5,795 18,977 16,855 7,917
DECEMBER 31, 1993 (3 MONTHS)
Allowance for doubtful accounts.................... 277 171 (3) 451
Allowance for cash discounts and returns........... 3,967 3,524 1,696 5,795
SEPTEMBER 30, 1993 (12 MONTHS)
Allowance for doubtful accounts.................... 220 477 420 277
Allowance for cash discounts and returns........... 3,730 7,983 7,746 3,967
</TABLE>
S-2
<PAGE>
REMINGTON PRODUCTS COMPANY L.L.C.
REMINGTON CAPITAL CORP.
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT PAGE
NUMBER ITEM NO.
- ------ ------------------------------------------------------------------------------ ----
<C> <S> <C>
3.1 Amended and Restated Limited Liability Company Agreement dated as of May 16,
1996 by and among Vestar Shaver Corp. (formerly Vestar/Remington Corp.)
("Vestar Corp. I"), Vestar Razor Corp. ("Vestar Corp. II" and, together with
Vestar Corp. I, the "Vestar Members"), RPI Corp. (formerly known as Remington
Products, Inc.) ("RPI"), and certain members of senior management of the
Company.*
3.2 Certificate of Formation of Remington Products Company, L.L.C. ("Remington").*
3.3 Certificate of Incorporation of Remington Capital Corp. ("Capital").*
3.4 By-laws of Capital.*
4.1 Indenture dated as of May 23, 1996 between Remington, Capital and The Bank of
New York, as trustee.*
4.2 Forms of 11% Senior Subordinated Notes and Series B 11% Senior Subordinated
Notes.*
4.3 Purchase Agreement dated May 16, 1996 between Remington, Capital and Bear,
Stearns & Co. Inc.*
4.4 Registration Rights Agreement dated as of May 23, 1996 between Remington,
Capital and Bear, Stearns & Co. Inc.*
5.1 Opinion and consent of Kirkland & Ellis.*
10.1 Credit and Guarantee Agreement dated as of May 23, 1996 among Remington,
certain of its subsidiaries, various lending institutions, Fleet National Bank
and Banque Nationale de Paris, as co-documentation agents, and Chemical Bank,
as administrative agent (the "Agent").*
10.2 Company Security Agreement dated as of May 23, 1996 made by Remington in favor
of the Agent.*
10.3 Form of Subsidiaries Security Agreement dated as of May 23, 1996 made by each
of Capital, Remington Corporation, L.L.C. ("IP Subsidiary") and Remington Rand
Corporation ("Rand") in favor of the Agent.*
10.4 Conditional Assignment of and Security Interest in Patent Rights (United
States) dated as of May 23, 1996 made by IP Subsidiary in favor of the Agent.*
10.5 Conditional Assignment of and Security Interest in Patent Rights (United
Kingdom) dated as of May 23, 1996 made by IP Subsidiary in favor of the
Agent.*
10.6 Conditional Assignment of and Security Interest in Trademark Rights (United
States) dated as of May 23, 1996 made by IP Subsidiary in favor of the Agent.*
10.7 Conditional Assignment of and Security Interest in Trademark Rights (United
Kingdom) dated as of May 23, 1996 made by IP Subsidiary in favor of the
Agent.*
10.8 Members Limited Recourse Pledge Agreement dated as of May 23, 1996 made by
Remington in favor of the Agent.*
10.9 Company Pledge Agreement dated as of May 23, 1996 made by Remington in favor
of the Agent.*
10.10 Subsidiaries Pledge Agreement dated as of May 23, 1996 made by Rand in favor
of the Agent.*
</TABLE>
<PAGE>
<TABLE><CAPTION>
EXHIBIT PAGE
NUMBER ITEM NO.
- ------ ------------------------------------------------------------------------------ ----
<C> <S> <C>
10.11 Subsidiaries Guarantee dated as of May 23, 1996 made by Capital, IP subsidiary
and Rand in favor of the Agent.*
10.12 Purchase Agreement dated as of May 1, 1996 by and among Vestar Corp I.,
Remington, Remsen, Isaac Perlmutter, RPI and Victor K. Kiam, II.*
10.13 Agreement and Plan of Merger dated as of May 23, 1996 between Remington
Products Company and Remington.*
10.14 Securityholders Agreement dated as of May 16, 1996 among the Vestar Members,
Vestar Equity Partners, L.P. ("Vestar"), RPI, Victor K. Kiam, II and the other
parties signatory thereto.*
10.15 Management Agreement dated as of May 23, 1996 between Remington and Vestar
Capital Partners.*
10.16 Consulting and Transitional Services Agreement dated as of May 23, 1996
between Remington and RPI.*
10.17 Form of Management Common Units Subscription Agreement dated as of May 23,
1996 by and between Remington and each of F. Peter Cuneo, James J. Vatrt, Jack
W. Waller, Allen S. Lipson, H. Graham Kimpton and Geoffrey L. Hoddinott.*
10.18 Form of Option Agreement dated as of May 23, 1996 by and between Remington and
certain members of senior management of the Company.*
10.19 Form of Executive Severance Agreement dated as of May 23, 1996 by and between
Remington or certain of its subsidiaries and each of F. Peter Cuneo, James J.
Vatrt, Jack W. Waller, Allen S. Lipson, H. Graham Kimpton and Geoffrey L.
Hoddinott.*
10.20 Non-Competition Agreement dated as of May 23, 1996 among Victor K. Kiam, II,
Victor K. Kiam, III, Remington and the Vestar Members.*
10.21 License Agreement made May 23, 1996 by and between IP Subsidiary and Act II
Jewelry, Inc.*
10.22 License Agreement made May 23, 1996 by and between IP Subsidiary and VKK
Equities Corporation.*
10.23 Tradename Agreement made May 23, 1996 by and between IP Subsidiary and
Remington Apparel Company, Inc.*
10.24 License Agreement dated as of May 23, 1996 by and between Remington and IP
Subsidiary.*
10.25 Bonus Plan.*
12.1 Statement Regarding Computation of Ratios of Earnings to Fixed Charges.
21.1 Subsidiaries of Remington and Capital.*
23.1 Consent of Deloitte & Touche LLP.
23.2 Consent of Coopers & Lybrand L.L.P.
23.3 Consent of Kirkland & Ellis (included in Exhibit 5.1).
24.1 Powers of Attorney.*
25.1 Statement of Eligibility of Trustee on Form T-1.*
27.1 Financial Data Schedule.*
99.1 Form of Letter of Transmittal.*
99.2 Form of Notice of Guaranteed Delivery.*
99.3 Form of Tender Instructions.*
</TABLE>
- ------------
* Filed previously
EXHIBIT 12.1
STATEMENT OF COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES
<TABLE><CAPTION>
Predecessor (1) Remington Products Company
----------------------- ----------------------------------------------------------
Two Months Three Months Twelve Months
Year Ended Ten Months Ended Year Ended Ended Ended
September 30, Ended September 30, September 30, December 31, December 31,
1991 July 25, 1992 1992 1993 1993 1993
------- -------- ------- ------- ------- -------
(dollars in thousands)
<S> <C> <C> <C> <C> <C> <C>
Earnings:
- --------
Income (loss) before provision
for income taxes $ 1,113 $ (8,826) $ 2,565 $ 3,173 $ 4,215 $ 3,299
Plus:
Interest expense 14,200 8,246 1,340 4,066 1,248 4,079
Portion of rents representative of the
interest factor 1,670 1,324 264 1,562 378 1,570
------- -------- ------- ------- ------- -------
Earnings as adjusted $16,983 $ 744 $ 4,169 $ 8,801 $ 5,841 $ 8,948
======= ======== ======= ======= ======= =======
Fixed charges:
- -------------
Interest expense $14,200 $ 8,246 $ 1,340 $ 4,066 $ 1,248 $ 4,079
Portion of rents representative of the
interest factor 1,670 1,324 264 1,562 378 1,570
------- -------- ------- ------- ------- -------
Fixed charges $15,870 $ 9,570 $ 1,604 $ 5,628 $ 1,626 $ 5,649
------- -------- ------- ------- ------- -------
Ratio of earnings to fixed charges (2) 1.1 x - 2.6 x 1.6 x 3.6 x 1.6 x
- ------------------------------------------
<CAPTION>
Remington
Remington Products Company Successor Company
------------------------------------------------------------- ------------------
Year Ended
December 31,
------------------------- Six Months Ended 21 Weeks Ended 5 Weeks Ended
1994 1995 July 1, 1995 May 23,1996 June 29, 1996
-------- -------- ---------------- -------------- ------------------
(dollars in thousands)
<S> <C> <C> <C> <C> <C>
Earnings:
- --------
Income (loss) before provision
for income taxes $ 15,811 $ 18,504 $ (1,090) $(19,064) $ 62
Plus:
Interest expense 6,414 7,604 3,303 2,228 1,931
Portion of rents representative of the
interest factor 1,868 1,823 878 687 176
Preferred equity dividends - - - - 754
-------- -------- -------- -------- -------
Earnings as adjusted $ 24,093 $ 27,931 $ 3,091 $(16,149) $ 2,923
======== ======== ======== ======== =======
Fixed charges:
- -------------
Interest expense $ 6,414 $ 7,604 $ 3,303 $ 2,228 $ 1,931
Portion of rents representative of the
interest factor 1,868 1,823 878 687 176
Preferred equity dividends - - - - 754
-------- -------- -------- -------- -------
Fixed charges $ 8,282 $ 9,427 $ 4,181 $ 2,915 $ 2,861
-------- -------- -------- -------- -------
Ratio of earnings to fixed charges (2) 2.9 x 3.0 x - - 1.0 x
- ------------------------------------------
</TABLE>
(1) Amounts are not comparable to subsequent periods. Nee Note 1 to
Consolidated Financial Statements of Remington Products Company.
(2) Earnings used in computing the ratio of earnings to fixed charges consist of
income before provision for income taxes plus fixed charges. Fixed charges
consist of interest expense, including amortization of debt issuance costs and
the original issue discount on the Notes, a portion of operating lease
rental expense deemed to be representative of the interest factor and
preferred equity dividend requirements. Earnings were insufficient to cover
fixed charges by $8,826, $1,090 and $19,064 for the ten months ended July
25, 1992, the six months ended July 1, 1995 and the 21 weeks ended May 23,
1996, respectively
Exhibit 23.1
INDEPENDENT AUDITORS' CONSENT
We consent to the use in this Amendment No. 2 to the Registration Statement
No. 333-07429 of Remington Products Company, L.L.C. and Remington Capital Corp.,
its wholly-owned subsidiary, on Form S-4 of our report dated May 16, 1996,
appearing in the Prospectus which is part of such Registration Statement.
We also consent to the reference to us under the heading "Experts" in the
Prospectus which is part of this Registration Statement.
/s/ Deloitte & Touche LLP
Stamford, Connecticut
September 30, 1996
Exhibit 23.2
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the inclusion in this registration statement on Form S-4
(File No. 333-07429) of our reports dated March 4, 1996 on our audits of
the financial statements and financial statement schedule of
Remington Products Company. We also consent to the reference to our
firm under the caption "Experts".
/s/ COOPERS & LYBRAND L.L.P.
Stamford, Connecticut
September 30, 1996
