<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934--For the quarter ended March 29, 1997.
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934.
Commission file number 333-07429
Remington Products Company, L.L.C.
(Exact name of registrant as specified in its charter)
Delaware 06-1451079
- ------------------------------- ---------------------------
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
60 Main Street, Bridgeport, Connecticut 06604
- ---------------------------------------- ---------------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (203) 367-4400
Securities registered pursuant to Section 12(b) of the Act:
Title of Each class Name of each exchange on which registered
None None
- ----------------------- -------------------------------------------
Securities registered pursuant to Section 12(g) of the Act:
11% Series B Senior Subordinated Notes due 2006
-----------------------------------------------
(Title of Class)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days. Yes x No
---- -----
<PAGE>
REMINGTON PRODUCTS COMPANY, L.L.C.
QUARTERLY REPORT ON FORM 10-Q
FOR THE QUARTER ENDED MARCH 29, 1997
INDEX
<TABLE>
<CAPTION>
PAGE
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<S> <C> <C>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements (unaudited)
Consolidated Balance Sheets-
March 29, 1997 and December 31, 1996 3
Consolidated Statements of Operations-
For the three months ended March 29, 1997 (Successor)
and March 30, 1996 (Predecessor) 4
Consolidated Statements of Cash Flows-
For the three months ended March 29, 1997 (Successor)
and March 30, 1996 (Predecessor) 5
Notes to Unaudited Consolidated Financial Statements 6
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 7
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K 9
Signature 10
</TABLE>
2
<PAGE>
Remington Products Company, L.L.C.
Consolidated Balance Sheets
(unaudited in thousands)
<TABLE>
<CAPTION>
MARCH 29, DECEMBER 31
1997 1996
------------ --------------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents........................................ $ 2,175 $ 7,199
Accounts receivable, less allowance for doubtful accounts of
$902 in 1997 and $1,340 in 1996................................ 21,477 54,262
Inventories...................................................... 62,798 63,785
Prepaid and other current assets................................. 2,678 4,212
------------ --------------
Total current assets.......................................... 89,128 129,458
Property, plant and equipment, net............................... 14,598 13,982
Intangibles, net................................................. 62,032 62,520
Other assets..................................................... 8,680 8,863
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Total assets.................................................. $174,438 $214,823
------------ --------------
------------ --------------
LIABILITIES AND MEMBERS' DEFICIT
Current Liabilities:
Accounts payable.................................................. $ 6,824 $ 16,414
Short-term borrowings............................................. 107 1,153
Current portion of long-term debt................................. 1,040 1,067
Accrued liabilities............................................... 22,879 32,964
------------ --------------
Total current liabilities..................................... 30,850 51,598
Long-term debt...................................................... 154,256 169,411
Other liabilities................................................... 1,517 1,521
Commitments and contingencies
Members' deficit:
Members' deficit.................................................. (11,361) (7,351)
Cumulative translation adjustment................................. (824) (356)
------------ --------------
Total members' deficit......................................... (12,185) (7,707)
------------ --------------
Total liabilities and members' deficit......................... $174,438 $214,823
------------ --------------
------------ --------------
</TABLE>
See notes to unaudited consolidated financial statements.
3
<PAGE>
Remington Products Company, L.L.C.
Consolidated Statements of Operations
(unaudited in thousands)
<TABLE>
<CAPTION>
Three Months Ended
-------------------------
<S> <C> <C>
March 29, March 30,
1997 1996
----------- ------------
(Successor) (Predecessor)
Net sales.......................................................... $ 36,437 $ 32,697
Cost of sales...................................................... 21,280 18,663
----------- ------------
Gross profit................................................... 15,157 14,034
Selling, general and administrative................................ 14,962 14,440
Amortization of intangibles........................................ 484 406
----------- ------------
Operating loss................................................. (289) (812)
Interest expense................................................... 4,665 1,381
Other expense (income)............................................. (655) (94)
----------- ------------
Loss before income taxes....................................... (4,299) (2,099)
Provision (benefit) for income taxes............................... (289) (71)
----------- ------------
Net loss....................................................... $ (4,010) $ (2,028)
----------- ------------
----------- ------------
Net loss applicable to common units................................ $ (6,008)
-----------
-----------
</TABLE>
See notes to unaudited consolidated financial statements.
4
<PAGE>
Remington Products Company, L.L.C.
Consolidated Statements of Cash Flows
(unaudited in thousands)
<TABLE>
<CAPTION>
Three Months Ended
--------------------------
<S> <C> <C>
March 29, March 30,
1997 1996
----------- -------------
(Successor) (Predecessor)
Cash flows from operating activities:
Net loss......................................................... $ (4,010) $ (2,028)
Adjustment to reconcile net loss to net cash provided by operating
activities:
Depreciation..................................................... 480 891
Amortization of intangibles...................................... 484 406
Amortization of deferred financing fees.......................... 275 156
Deferred income taxes............................................ (339) (165)
Foreign currency forward gain.................................... (1,459) --
Changes in assets and liabilities:
Accounts receivable............................................ 32,785 40,566
Inventories.................................................... 987 (6,307)
Accounts payable............................................... (9,590) (1,976)
Accrued liabilities............................................ (8,630) (15,016)
Other, net..................................................... (1,615) 1,342
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Cash provided by operating activities........................ 9,368 17,869
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Cash flows from investing activities:
Capital expenditures............................................. (1,137) (668)
Proceeds from working capital adjustment......................... 2,500 --
----------- -------------
Cash provided by (used in) investing activities............... 1,363 (668)
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Cash flows from financing activities:
Net repayments under term loan facilities........................ (189) (1,800)
Net repayments under credit facilities........................... (15,466) (15,057)
Other, net....................................................... (100) 951
----------- -------------
Cash used in financing activities............................. (15,755) (15,906)
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Increase (decrease) in cash and cash equivalents................... (5,024) 1,295
Cash and cash equivalents, beginning of period..................... 7,199 6,805
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Cash and cash equivalents, end of period...................... $ 2,175 $ 8,100
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----------- -------------
Supplemental cash flow information:
Interest paid.................................................... $ 710 $ 1,495
Income taxes paid................................................ $ 589 $ 479
</TABLE>
See notes to unaudited consolidated financial statements.
-5-
<PAGE>
Remington Products Company, L.L.C. and Subsidiaries
Notes to (Unaudited) Consolidated Financial Statements
1. Basis of Presentation
Remington Products Company, L.L.C., a Delaware limited liability company,
(the "Company") was formed to acquire the operations of Remington Products
Company and its subsidiaries ("RPC"). The acquisition, which was effective on
May 23, 1996 (the "Closing Date"), was accounted for as a purchase
transaction in accordance with Accounting Principles Board Opinion No. 16,
Business Combinations, and EITF Issue No. 88-16, Basis in Leveraged Buyout
Transactions. The consolidated balance sheets as of March 29, 1997 and
December 31, 1996 and the consolidated results of operations and cash flows
for the three months ended March 29, 1997 include the accounts of Remington
Products Company, L.L.C., the "Successor" company, and its wholly-owned
subsidiaries following the Closing Date. The statements also include results
of operations and cash flows of RPC, the "Predecessor" company, prior to the
Closing Date.
The statements have been prepared by the Company without audit, pursuant
to the rules and regulations of the Securities and Exchange Commission and
according to generally accepted accounting principles, and reflect all
adjustments consisting of normal recurring accruals which, in the opinion of
management, are necessary for a fair statement of the results of the interim
periods presented. These financial statements do not include all disclosures
associated with annual financial statements and, accordingly, should be read
in conjunction with the notes contained in the Company's audited consolidated
financial statements for the year ended December 31, 1996.
2. Inventories
Inventories were comprised of the following (in thousands):
<TABLE>
<CAPTION>
MARCH 29, DECEMBER 31,
1997 1996
----------- ------------
<S> <C> <C>
Finished goods.............................. $ 57,538 $ 59,205
Work in process............................. 5,241 4,556
Raw materials............................... 19 24
----------- ------------
$ 62,798 $ 63,785
----------- ------------
----------- ------------
</TABLE>
3. Income Taxes
Federal income taxes on net earnings of the Company are payable directly
by the members pursuant to the Internal Revenue Code. Accordingly, no
provision has been made for Federal income taxes for the Company. However,
certain state and local jurisdictions do not recognize L.L.C. status for
taxing purposes and require taxes to be paid on net earnings. Furthermore,
earnings of certain foreign operations are taxable under local statutes. In
jurisdictions where L.L.C. status is not recognized or foreign corporate
subsidiaries exist, deferred taxes on income are provided for as temporary
differences between the financial and tax basis of assets and liabilities.
4. 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.
-6-
<PAGE>
ITEM 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations
GENERAL
The Company manufactures and markets men's and women's electrical
personal care appliances. The Company distributes on a worldwide basis men's
and women's electric shavers and accessories, women's personal care
appliances including hair setters, curling irons and hair dryers, men's
electric grooming products, travel products and other small electric consumer
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 branch offices in France and
South Africa. 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.
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 more than 40% of its annual net sales in the fourth
quarter of each year while incurring losses in the first quarter of each
year. As a result of this seasonality, the Company's inventory and working
capital needs fluctuate substantially during the year.
<TABLE>
<CAPTION>
Successor Predecessor
-------------------- --------------------
Three Months Ended Three Months Ended
March 29, 1997 March 30, 1996
-------------------- --------------------
$ % $ %
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
Net Sales:
U.S............................................................. $ 16.0 44.0 $ 14.5 44.3
U.S. service stores............................................. 6.4 17.6 5.6 17.1
International................................................... 14.0 38.4 12.6 38.6
--------- --------- --------- ---------
36.4 100.0 32.7 100.0
Cost of sales..................................................... 21.2 58.5 18.7 57.2
--------- --------- --------- ---------
Gross profit...................................................... 15.2 41.5 14.0 42.8
Selling, general and administrative............................... 15.0 40.9 14.4 44.0
Amortization of intangibles....................................... 0.5 1.4 0.4 1.2
--------- --------- --------- ---------
Operating loss.................................................... (0.3) (0.8) (0.8) (2.4)
Interest expense.................................................. 4.7 12.9 1.4 4.3
Other expense (income)............................................ (0.7) (1.9) (0.1) (0.3)
--------- --------- --------- ---------
Loss before income taxes.......................................... (4.3) (11.8) (2.1) (6.4)
Provision (benefit) for income taxes.............................. (0.3) (0.8) (0.1) (0.3)
--------- --------- --------- ---------
Net loss.......................................................... $ (4.0) (11.0) $ (2.0) (6.1)
--------- --------- --------- ---------
--------- --------- --------- ---------
</TABLE>
-7-
<PAGE>
Results of Operations
FIRST QUARTER ENDED MARCH 1997 VERSUS MARCH 1996
NET SALES. Net sales for the quarter ended March 29, 1997 were $36.4
million compared to $32.7 million for the quarter ended March 30, 1996, an
increase of 11.4%. The increase was a result of strong domestic sales,
including service store operations as well as sales growth across all major
international regions except Canada.
Net sales in the United States increased to $16.0 million in the first
quarter of 1997 from $14.5 million in the first quarter of 1996, a 10.2%
increase. This increase was principally due to an increase in net sales of
personal care products, particularly hair dryers and grooming products, and,
to a lesser extent, an increase in electric shaver sales.
Net sales through the Company's U.S. service stores increased to $6.4
million in the first quarter of 1997 from $5.6 million in the first quarter
of 1996, an increase of 14.3%. The increase is due to a 7.0% increase in same
store sales and incremental sales from the addition of 12 new stores as
compared to the first quarter of 1996.
International net sales increased to $14.0 million in the first quarter
of 1997 from $12.6 million in the first quarter of 1996, an increase of
11.1%, primarily on the strength of the U. K. and Australian operations. Net
sales in the United Kingdom increased 13.4% in the first quarter of 1997 as a
result of strong personal care product sales and an increase in shaver sales,
while Australia increased 15.5% due mostly to the acquisition of a chain of
three service stores in July 1996. German net sales were slightly ahead of
the prior year quarter despite a weak economy, and Canadian net sales for the
first quarter of 1997 were slightly below their 1996 level.
GROSS PROFIT. Gross profit increased to $15.2 million, or 41.5% of net
sales in the first quarter of 1997, from $14.0 million, or 42.8% of net sales
in the first quarter of 1996. The decrease in the gross margin percentage is
primarily attributable to a negative product mix and the impact of certain
price reductions implemented in the middle of 1996.
SELLING, GENERAL AND ADMINISTRATIVE. Selling, general and administrative
expense increased slightly in real dollars to $15.0 million, but decreased as
a percentage of sales to 40.9% of sales in 1997 as compared to 44.0% of sales
in 1996. The decline as a percentage of sales was driven by reduced
promotional allowances and continued general and administrative expense
controls.
OPERATING LOSS. Operating loss in the first quarter of 1997 was $0.3
million compared to $0.8 million in the first quarter of 1996, primarily from
earnings growth in the domestic business on higher sales.
INTEREST EXPENSE. Interest expense increased to $4.7 million in the
first quarter of 1997 from $1.4 million in the first quarter of 1996. The
increase was due to $3.6 million in interest on the Senior Subordinated
Notes issued in May 1996 which was partially offset by lower rates on the
refinanced term and revolving credit borrowings.
PROVISION FOR INCOME TAXES. The benefit for income taxes was $0.3
million for the first quarter of 1997 compared to a benefit of $0.1 million
for the first quarter of 1996, and is generated primarily by the Company's
U.K. operations.
-8-
<PAGE>
Liquidity and Capital Resources
Net cash from operating activities for the first three months of 1997 was
$9.4 million, or an $8.5 million decrease versus the first three months of
1996. The primary reason for the shortfall versus the prior year was lower
net receivable collections during the quarter as a result of the lower year
end 1996 net sales and resulting receivable balance versus year end 1995.
Despite the increase in interest expense, interest payments of $0.7 million
were actually lower than the first quarter of 1996 due to the scheduled
timing of semi-annual interest payments on the Senior Subordinated Notes.
The Company's operations are not capital intensive. During the first
quarter of 1997 and 1996, the Company's capital expenditures totaled $1.1
million and $0.7 million, respectively. In the first quarter of 1997, the
Company also finalized the working capital adjustment with certain owners of
the Predecessor company which resulted in cash proceeds of $2.5 million.
The Company made scheduled principal payments on term loans of $0.2
million during the first quarter of 1997 and repaid $15.5 million of
borrowings under the Company's revolving credit agreements with cash
generated from operations and available cash as of year end.
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 and $10 million in Term Loans. The Term Loans are repayable
quarterly over six years. The Revolving Credit Facilities are subject to a
borrowing base of 85% of eligible accounts receivable and 60% of eligible
inventory and expire on June 30, 2002. 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.
PART II OTHER INFORMATION
ITEM 6. Exhibits and Reports on Form 8-K
(a) Exhibits
10.1 Second Amendment, dated as of March 20, 1997 to the 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.
10.2 Employment Agreement made as of January 8, 1997 between
Remington and Neil P. DeFeo.
10.3 Option Agreement made as of January 8, 1997 between
Remington and Neil P. DeFeo.
27 Financial Data Schedule.
(b) Reports on Form 8-K
During the quarter ended March 29, 1997, the Registrant did not file any
reports on Form 8-K.
-9-
<PAGE>
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
REMINGTON PRODUCTS COMPANY, L.L.C.
By: /s/ Kris J. Kelley
----------------------------------
Kris J. Kelley, Vice President and
Controller
Date: May 13, 1997
-10-
<PAGE>
Exhibit 10.1
SECOND AMENDMENT
SECOND AMENDMENT, dated as of March 20, 1997 (this "Amendment"), to the
Credit and Guarantee Agreement, dated as of May 23, 1996 (as amended,
supplemented or otherwise modified from time to time, the "Credit
Agreement"), among:
(a) REMINGTON PRODUCTS COMPANY, L.L.C., a Delaware limited
liability company (the "Company");
(b) REMINGTON CONSUMER PRODUCTS LIMITED, a corporation organized
and existing under the laws of the United Kingdom (the "UK
Borrower");
(c) each Acquisition Subsidiary from time to time party thereto
(together with the Company and the UK Borrower, the
"Borrowers");
(d) the Lenders from time to time parties to the Agreement
including the Issuing Bank;
(e) FLEET NATIONAL BANK and BANQUE NATIONALE DE PARIS, as
Co-Documentation Agents (in such capacity, the
"Co-Documentation Agents"); and
(f) THE CHASE MANHATTAN BANK (formerly known as CHEMICAL BANK),
a New York banking corporation, as administrative agent (in
such capacity, the "Agent") for the Lenders hereunder.
W I T N E S S E T H:
WHEREAS, the Borrowers, the Lenders and the Agent are parties to
the Credit
WHEREAS, the Borrowers have requested that the Agent and the
Lenders agree to amend the provisions of subsection 14.16(b) of the Credit
Agreement in the manner set forth herein;
WHEREAS, the Agent and the Lenders are willing to amend such
provisions of the Credit Agreement, but only upon the terms and subject to
the conditions set forth herein;
NOW THEREFORE, in consideration of the premises contained herein,
the parties hereto agree as follows:
1. Defined Terms. Unless otherwise defined herein, capitalized
terms which are used herein shall have the meanings assigned thereto in the
Credit Agreement.
2. Amendment of Subsection 14.16(b): Subsection 14.16(b) of the
Credit Agreement hereby is amended by deleting the matrix of "Periods" and
"Ratios" set forth therein and by substituting therefor the following:
<PAGE>
Period Ratio
------ -----
10/01/96 - 03/31/97 1.85 to 1.0
04/01/97 - 06/30/97 2.30 to 1.0
07/01/97 - 09/30/97 2.55 to 1.0
10/01/97 - 12/31/97 2.75 to 1.0
3. Conditions to Effectiveness. This Amendment shall become
effective on the date upon which the Agent receives counterparts hereof,
executed and delivered by a duly authorized officer of each Borrower and the
Required Lenders.
4. Representations and Warranties. The Borrowers hereby confirm,
reaffirm and restate the representations and warranties set forth in Section
6 of the Credit Agreement; provided that each reference to the Credit
Agreement therein shall be deemed to be a referenced to the Credit Agreement
after giving effect to this Amendment. The Borrowers represent and warrant
that no Default or Event of Default has occurred and is continuing.
5. Continuing Effect of Credit Agreement. This Agreement shall
not constitute a waiver or amendment of any other provision of the Credit
Agreement not expressly referred to herein and shall not be construed as a
waiver or consent to any further or future action on the part of a Borrower
that would require a waiver or consent of the Agent or the Lenders. Except
as expressly amended hereby, the provisions of the Credit Agreement are and
shall remain in full force and effect.
6. Counterparts. This Amendment may be executed by the parties
hereto in any number of counterparts, and all of such counterparts taken
together shall be deemed to constitute one and the same instrument.
7. GOVERNING LAW. THIS AMENDMENT SHALL BE GOVERNED BY, AND
CONSTRUED AND INTERPRETED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW
YORK.
IN WITNESS WHEREOF, the parties hereto have caused this Amendment
to be executed and delivered by their respective duly authorized officers as
of the date first above written.
REMINGTON PRODUCTS COMPANY, L.L.C.
By: /s/ ALEXANDER R. CASTALDI
------------------------------------
Executive Vice President and
Chief Financial Officer
<PAGE>
REMINGTON CONSUMER PRODUCTS
LIMITED
By: /s/ ROBERT WARD
-----------------------------
Title: Finance and Operations
Director and Secretary
THE CHASE MANHATTAN BANK, as
Administrative Agent, as a Lender and
as (or on behalf of) the Issuing Bank.
By: /s/ PETER C. ECKSTEIN
----------------------------------
Title: Vice President
<PAGE>
EMPLOYMENT AGREEMENT (this "Agreement"), made as of January 8, 1997, by
and between Remington Products Company, L.L.C., a Delaware limited liability
(the "Company"), and Neil P. DeFeo, an individual (the "Executive").
WITNESSETH:
-----------
WHEREAS, the Company desires to retain Executive to serve it in the
capacity of President and Chief Executive Officer and to perform services on
its behalf in said position;
NOW, THEREFORE, in consideration of the foregoing and of the mutual
promises and covenants herein contained, the receipt and sufficiency of which
are hereby acknowledged, the parties hereto agree as follows:
1. EMPLOYMENT
The Company agrees to employ Executive and Executive agrees to
serve the Company on the terms and conditions set forth herein.
2. TERM
This Agreement shall be for an initial period of three (3) years
(the "Initial Term"); provided that the term of this Agreement shall be
extended for two years unless six months prior to the third anniversary of
the date hereof, the Company notifies the Executive, or three months prior to
such anniversary, the Executive notifies the Company, that the Agreement will
be terminated at the end of the Initial Term. Successive two-year extensions
occur thereafter in the same manner unless notice of termination is given by
the Company at least six months, or by the Executive at least three months,
prior to the end of the then effective Term. As used herein, "Term" means the
Initial Term and any extensions thereof as provided for in this Section 2.
3. POSITION AND DUTIES
(a) Executive shall serve as Chief Executive Officer and President
of the Company and shall perform such duties and exercise such supervision
and powers over and with regard to the business of the Company customarily
associated with the position of Chief Executive Officer and President, as
well as such duties and services prescribed herein and as may be reasonably
prescribed from time to time by the Management Committee of the Company (the
"Board"). Executive shall perform such duties to the best of his ability and
in a diligent and proper manner. Executive shall be appointed to serve as a
member of the Board during the term of his employment with the Company.
(b) Except during vacations and periods of illness, Executive
shall, during the term of this Agreement, devote all his business time (as
opposed to personal time) and attention to the performance of services for
the Company. The Executive shall cooperate reasonably in any sale of the
Company, IPO or similar transaction. The Executive shall have the right to
serve on other boards of directors, subject to the consent of the Company,
which consent shall not be unreasonably
1
<PAGE>
withheld.
4. COMPENSATION AND RELATED MATTERS
(a) Salary. During the period of Executive's employment hereunder,
the Company shall pay to Executive a salary at a rate of not less than
$300,000 per annum payable in accordance with normal payroll practices of the
Company but not less frequently than monthly. The Executive's salary may be
increased from time to time and, if so increased, shall not thereafter be
decreased during the Term of this Agreement, except that it may be decreased
in connection with a general reduction of salaries of executives, but in no
event to less than $300,000. As used herein, "Base Salary" means Executive's
initial salary hereunder as the same is increased. The salary payments
hereunder shall not in any way limit or reduce any other obligation of the
Company hereunder, and no other compensation, benefit or payment hereunder
shall in any way limit or reduce the obligation of the Company to pay
Executive's Base Salary hereunder.
(b) Deferred Compensation. During the period of the Executive's
employment under this Agreement, the Executive shall accrue deferred
compensation at the rate of $100,000 per year. One twelfth of this amount
shall be deposited monthly in a rabbi trust with terms reasonably acceptable
to the Executive, or such other arrangement as is reasonably satisfactory to
the Executive.
(c) Welfare and Retirement Benefits. From and after the date of
this Agreement, Executive shall be entitled to participate in all of the
Company's employee pension plans, welfare benefit plans, tax-deferred savings
plans, or other welfare or retirement benefits or arrangements (including any
insurance or trust arrangements maintained generally for the benefit of the
Company's directors and officers) and in which the executive officers of the
Company are entitled generally to participate (collectively, the "Company
Benefit Plans") on the same basis as other executive employees. The Company
shall provide the Executive with term life insurance in the amount of at
least $500,000 (insurance provided pursuant to the existing Company Benefit
Plan shall count towards the $500,000). The Company shall use its best
efforts to enable the Executive to purchase up to an additional $500,000 in
term life insurance at the Executive's expense.
(d) Bonus/Incentive Compensation. (I) The Board shall (A)
establish performance targets based on profits of the Company and its
consolidated subsidiaries and other reasonable financial criteria at or
around the commencement of each fiscal year and (B) establish a target for
aggregate bonuses for the Company's executives for each fiscal year (the
"Bonus Pool") which may increase or decrease depending upon the extent to
which the performance criteria for such fiscal year are achieved. Executive's
percentage of the Bonus Pool will be set so that Executive will receive a
bonus of not less than $200,000 in the event that the Company achieves 100%
of the criteria established for such year (the "Target Bonus").
(ii) The Executive shall be entitled to options for the
Company's common equity upon the signing of this Agreement, subject to the
terms of the Option Agreement for Neil P. DeFeo entered into simultaneously
with this Agreement. In addition, the Executive is entitled to participate in
a phantom equity plan with the terms set forth on Schedule A attached thereto.
(e) Management Incentive Option Plan. The Board will adopt an
option plan for the Company's senior executives which will enable the
executives (including Executive) to acquire
2
<PAGE>
up to 3% in the aggregate of the common equity of the Company (determined as
of the date the plan is adopted). If not already adopted, the Board will
adopt the plan prior to June 30, 1997. The exercise price for the units of
common equity shall be based on the fair market value of such units at the
time of the grant as determined in good faith by the Board. The plan will
provide for the granting of a portion of the plan options after the
completion of each fiscal year if performance criteria established for such
fiscal year by the Board at the beginning of such year are satisfied. The
allocation of options among the executives under this plan will be
recommended to the Board by the Executive and the compensation committee of
the Company based upon merit and overall contribution to the Company.
(f) Vacations. Executive shall be entitled to the number of paid
vacation days in each calendar year determined in accordance with the
Company's vacation policies but in no event less than four weeks.
(g) Expenses. During the term of Executive's employment
hereunder, Executive shall be entitled to receive prompt reimbursement from
the Company of all reasonable business related expenses incurred by Executive
in performing services hereunder, including all expenses of travel and living
expenses while away from home on business or at the request of, and in the
service of, the Company; provided that such expenses are incurred and
accounted for in accordance with the policies and procedures established by
the Company from time to time.
(h) Certain Benefits. The Company shall furnish Executive with
office space, secretarial assistance and such other facilities and services
as shall be suitable to Executive's position and adequate for the performance
of his duties as set forth in Section 3 hereof.
(I) Relocation Costs. The Company shall reimburse Executive for
reasonable costs related to relocation customarily paid by employers for
comparable senior officers, including, but not limited to, (1) the costs of
moving executive, his family and their property to Connecticut, (2)
transportation and related costs for reasonably required trips by the
Executive's wife to Connecticut to assist in locating a house, (3) the cost
of temporary housing for the Executive from the date hereof until the earlier
to occur of the date that the Executive moves into a permanent residence and
September 1, 1997, (4) reasonable closing costs associated with the sale of
the Executive's existing house and his purchase of a new house, and (5)
reimbursement of any loss on the sale of the Executive's existing house;
provided, however, that the amount payable under item (4) shall not include
more than one and one half points payable in order to obtain a mortgage, and
amounts payable under item (5) shall not exceed $50,000. All amounts paid to
the Executive under this Section 4(I) shall be "grossed up" to reimburse the
Executive for income taxes payable on such amounts, but only to the extent
such amounts are not deductible by the Executive. The Company shall also
provide the Executive with the use of an automobile during such transitional
period.
(j) Initial Attorneys' Fees. The Company shall reimburse the
Executive for all reasonable attorneys' fees and costs incurred by the
Executive in the negotiation and creation of this Agreement and the Option
Agreement for Neil P. DeFeo.
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5. TERMINATION
Executive's employment hereunder may be terminated under the
following circumstances:
(a) Death. Executive's employment hereunder shall terminate upon
his death.
(b) Disability. If Executive is unable to timely and regularly
perform its duties hereunder due to physical or mental illness, injury or
incapacity, as determined by the Board in good faith, based on medical
evidence acceptable to it (a "Disability") and such Disability continues for
a period of six consecutive months, then, notwithstanding the provisions of
Section 2, the Company may terminate Executive's employment hereunder. A
return to work for less than thirty consecutive days during any period of
Disability shall not be deemed to interrupt the running of (and shall be
included in) the aforementioned six-month period.
(c) Cause. The Company may terminate Executive's employment
hereunder at any time for Cause. For purposes of this Agreement, "Cause"
shall mean a termination of employment of the Executive by the Company or any
subsidiary thereof due to (I) the commission by the Executive of an act of
fraud or embezzlement (including the unauthorized disclosure of confidential
or proprietary information of the Employer or any of its subsidiaries which
results in material financial loss to the Company or any of its
subsidiaries), (ii) the commission by Executive of a felony (A) materially
involving the Company or (B) materially affecting the Executive's ability for
a sustained period to perform services in the manner required hereunder,
(iii) the willful misconduct of the Executive as an employee of the Company
or any of its subsidiaries which is reasonably likely to result in material
injury or financial loss to the Company or any of its subsidiaries or, (iv)
the willful failure of the Executive to render services to the Company or any
of its subsidiaries in accordance with the Executive's employment which
failure amounts to a material neglect of the Executive's duties to the
Company or any of its subsidiaries, or (v) a willful material breach of the
covenants in Section 3(a) (but only in the penultimate sentence thereof),
Section 3(b) and Sections 10 or 11 hereof by Executive, which breach is not
cured within thirty (30) days after written notice of such breach is
delivered to Executive. Executive shall not be deemed to have been terminated
for Cause unless the Company shall have given or delivered to Executive (1)
reasonable notice setting forth, in reasonable detail the facts and
circumstances, if any, claimed to provide a basis for termination for Cause
and (2) a reasonable opportunity for Executive, together with his counsel, to
be heard before the Board.
For purposes of determining whether Executive was given "reasonable
notice" and "reasonable opportunity to be heard" in connection with any
determination by the Board as to whether Cause exists, 10 business days
notice of the Board meeting shall be deemed to constitute "reasonable notice"
(without prejudice to the determination of whether some other period would
also constitute "reasonable notice") and the opportunity for Executive and
his counsel to present arguments to the Board at such meeting as to why
Executive believes that no Cause exists shall constitute "reasonable
opportunity to be heard" (without prejudice to the determination of whether
some other forum or method would also constitute a "reasonable opportunity to
be heard").
(d) Termination by Executive for Good Reason. Executive may
voluntarily terminate his employment hereunder at any time for Good Reason.
For purposes of this Agreement,
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"Good Reason" shall mean (I) a material breach of this Agreement by the
Company which has not been cured within thirty (30) days after the Board's
receipt of written notice of such non-compliance from the Executive; (ii) the
assignment to Executive by the Company of duties materially and adversely
inconsistent with Executive's position, duties or responsibilities as in
effect immediately after the date of execution of this Agreement including,
but not limited to, any material reduction in such position, duties or
responsibilities, or a change in Executive's titles or offices, as then in
effect, or any removal of Executive from, or any failure to reelect Executive
to, any of such positions, except in connection with the termination of his
employment pursuant to subsections 5(a), 5(b) or 5(c); (iii) the relocation
of the Company's headquarters to a place more than 30 miles from its present
location without the approval of the Executive; (iv) the occurrence of a
Company Illegal Act; and (v) the occurrence of a Change of Control, provided
that a resignation prior to the 90th day following such Change of Control
shall not be deemed a termination for "Good Reason." A "Company Illegal Act"
shall mean an action taken by the Company with the approval of the Board
after (1) the Executive has notified the Board that he believes that the
proposed action will result in a material violation of federal or state law
that will result in a material penalty for the Company and (2) the Board does
not obtain an opinion of its outside counsel in respect of the proposed
action or it has received an opinion of its outside counsel to the effect
that such action is substantially likely to violate law and result in
material penalty for the Company. A "Change of Control" shall occur when
Vestar Equity Partners. L.P. (l) no longer has the legal right, directly or
indirectly, to control the management of the Company or its successor and (2)
has beneficial ownership (as that term is defined in the Securities Act of
1934), whether held directly or indirectly, of less than 50% of the common
equity interests in the Company or its successor which have the power to
elect the Board, provided that a Change of Control shall not result if such
change in beneficial ownership occurs in connection with or after a public
offering of the common equity interests in the Company or its successor, or a
corporation formed pursuant to Section 10.5 of the Amended and Restated
Limited Liability Company Agreement of the Company which controls the Company
or its successor. Notwithstanding the foregoing, Executive shall be entitled
to elect to terminate his employment for "Good Reason" only if Executive
gives the Company a Notice of Termination notifying the Company of his
election to terminate employment for "Good Reason," within 30 business days
after the occurrence of the event which Executive asserts as the basis for
Executive's right to terminate his employment for "Good Reason."
(e) Termination by Company Without Cause. The Company may at any
time terminate the Executive for any reason and, except for the amounts
payable pursuant to subsection 6(a) hereof, Executive shall have no claim
against the Company under this Agreement or otherwise by reason of such
termination. Termination of Executive's employment pursuant to this
subsection 5(e) shall be deemed to be exclusive of termination under any
other subsection of this Section 5 and of termination of Executive's
employment upon expiration of the Term of this Agreement.
(f) Notice of Termination. Any termination of Executive's
employment by the Company or by Executive (other than termination pursuant to
subsection 5(a) hereof) shall be communicated by written Notice of
Termination to the other party hereto. For purposes of this Agreement, a
"Notice of Termination" shall mean a notice which shall indicate the specific
termination provision in this Agreement relied upon and shall set forth in
reasonable detail the facts and circumstances, if any, claimed to provide a
basis for termination of Executive's employment under the provision so
indicated.
6. COMPENSATION UPON TERMINATION
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(a) If Executive's employment is terminated by the Company
pursuant to subsection 5(e), or if Executive shall terminate his employment
pursuant to subsection 5(d), then Executive shall be entitled to receive the
Salary Severance Benefit and the Bonus Severance Benefit in lieu of any
further salary and bonus or other incentive compensation payments to
Executive for periods subsequent to the date of termination. Executive shall
be entitled to continue to participate in all Company Benefit Plans on the
same basis as the Company's executive employees through the end of the fiscal
year in which such termination occurs, provided that the Company shall
continue to provide, at the Company's expense, COBRA benefits required to be
provided by law after termination of employment.
(b) If Executive's employment terminates for any reason other than
pursuant to subparagraph 5(e) or 5(d), Executive shall receive compensation
and benefits through the end of the calendar month in which termination
occurs (or, if earlier, the end of the Term then in effect) and shall
thereafter receive no other compensation or, except as required by law, any
benefits of any kind whatsoever; it being understood that no bonus shall be
payable for the year in which such termination occurs.
(c) Any sums due pursuant to the provisions of this subsection 6(a)
shall be reduced (1) by any sums payable to Executive pursuant to any
severance or termination pay program maintained by the Company and (2) 75% of
any compensation earned by Executive during the Severance Term.
(d) For purposes of this Section 6, the following terms shall have
the meaning set forth in this subsection (d). "Severance Term" shall mean in
the case of a termination prior to the first anniversary hereof the two-year
period commencing on the effective date of the termination and in the case of
a termination at any time on or after the first anniversary hereof the
eighteen month period commencing on the effective date of the termination.
"Salary Severance Benefit" shall mean the sum of the salary that would have
been payable and the deferred compensation that would have accrued from the
effective date of termination through the end of the Severance Term based on
the Base Salary in effect on the effective date of the termination. The
"Bonus Severance Benefit" shall mean the sum of (1) 100% of the Annual
Severance Bonus (as defined below) for each fiscal year ending in the
Severance Term plus (2) an amount equal to a pro rata portion of the Annual
Severance Bonus for the fiscal year beginning in but ending after the
Severance Term (based on the number of days of such fiscal year which are
included in the Severance Term); provided, however, that (A) in the event of
a termination before July 1 of any fiscal year the amount payable under the
preceding clause (2) shall not exceed 50% of the Annual Severance Bonus and
(B) in the event of a termination prior to July 1, 1997 the Bonus Severance
Benefit shall be 200% of the Annual Severance Bonus. The "Annual Severance
Bonus" shall be determined as follows. If the termination occurs prior to the
first anniversary hereof, Annual Severance Bonus shall equal the Target
Bonus. If the termination occurs on or after the first anniversary hereof,
the Annual Severance Bonus shall equal the bonus actually payable in respect
of the fiscal year in which the
termination occurs, provided, however, that if the termination occurs in the
first sixth months of the fiscal year, the Annual Severance Bonus shall equal
the bonus payable in respect of the immediately preceding fiscal year.
6
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(e) The Salary Severance Benefit and the Bonus Severance Benefit
shall be paid during the Severance Term in the same manner and on the same
dates that the salary and bonus would have been payable had he not been
terminated, i.e., an amount equal to the Annual Severance Bonus shall be paid
when the bonus would be payable for each of the fiscal year in which
termination occurs and the next succeeding fiscal year, and the pro rata
portion of the Annual Severance Bonus will be paid when the bonus for the last
fiscal year beginning in the Severance Term is paid.
(f) In order to secure its obligations to pay the Salary Severance
Benefit and the Bonus Severance Benefit, the Company shall obtain a letter of
credit on terms reasonably satisfactory to the Executive and the Company
which may be drawn by the Executive in the event of a default in respect of
such payments. A letter of credit shall remain effective for this purpose
until the earnings (before interest, taxes, depreciation and amortization) of
the Company exceed $26,000,000 for the trailing twelve-month period measured
as of the end of any fiscal quarter ending after the date hereof.
(g) In the event that the Company elects not to extend the Term as
provided in Section 2 hereof, the provisions of this Agreement shall
nevertheless continue to apply, except that the Severance Term shall be
twelve months from the date of termination of employment and that the
Executive may terminate his employment at any time with or without Good
Reason. The provisions of Section 10 and 11 shall continue to apply, except
that the Noncompete Period shall expire on the later to occur of the first
anniversary of the date Executive's employment is terminated or the last day
of the Severance Term, whichever is later.
7. ARBITRATION: LEGAL FEES: REIMBURSEMENT OF CERTAIN
EXPENSES
(a) To the extent that the parties are unable to resolve any
disputes arising under this Agreement, then either party may submit the
dispute to binding arbitration in New York City in accordance with the rules
for Employee Dispute Resolution of the American Arbitration Association then
in effect (and the Company will pay all filing fees for commencing such
arbitration). The arbitrators decision shall be made in accordance with such
rules, shall be delivered in writing to the parties and shall be conclusive
and binding upon the parties. Nothing in this Section 7(a) shall obligate the
Company or entitle Executive to submit any claim arising under Section 10 or
11 of this Agreement to arbitration or otherwise limit the Company's rights
under subsection 1 l(d).
(b) The Company shall promptly reimburse Executive for the first
$50,000 of reasonable legal fees and reasonable expenses incurred by
Executive in connection with seeking to obtain or enforce in good faith any
right or benefit provided to Executive by the Company pursuant to or in
accordance with this Agreement and the Option Agreement and for 50% of all
such amounts incurred by Executive in excess of $50,000 up to a maximum of
$100,000 of aggregate benefits paid under this Section 7(b), provided,
however, that notwithstanding the foregoing, the Company shall pay all of the
reasonable expenses incurred by Executive if Executive prevails in such
dispute. In addition, the Company hereby agrees that the amount of any such
legal fees and expenses reimbursed to Executive in connection with obtaining
or enforcing any right or benefit provided to Executive by the Company
pursuant to or in accordance with this Agreement will not be taken into
account by the Company in determining the aggregate compensation paid or
payable to Executive under this Agreement. None of the legal fees or
reasonable expenses paid to Executive by the Company under this Section 7
shall be recoverable. The Company shall bear its own costs and attorneys'
fees in any
7
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arbitration under this Agreement.
8. INDEMNIFICATION
The Company shall indemnify Executive (and his legal representatives
or other successors), unless expressly prohibited by applicable law, against
all losses, claims, damages, liabilities, costs, charges and expenses
whatsoever (including but not limited to all legal fees payable to attorneys
reasonably acceptable to the Company and designated by Executive and any
other expenses and other disbursements incurred in connection with
investigating, preparing to defend or defending any action, suit or
proceeding, including any inquiry or investigation, commenced or threatened,
or in preparing to defend any claim or threatened claim) incurred or
sustained by him or his legal representatives in connection with any action,
suit or proceeding to which he (or his legal representatives or other
successors) may be made a party by reason of his being or having been a
director, officer or employee of the Company including payment of expenses in
advance of the final disposition of the proceeding. The Company further
agrees, upon demand by Executive, promptly to reimburse Executive for, or
pay, any loss, claim, damage, liability or expense, unless expressly
prohibited by applicable law, to which the Company has agreed to indemnify
Executive pursuant to Sections 7 and 8 hereof. If any action, suit or
proceeding is brought or threatened against Executive in respect of which
indemnity may be sought against the Company pursuant to the foregoing,
Executive shall notify the Company promptly in writing as soon as practicable
of the threat or the institution of such action, suit or proceeding. Within
30 days of such notice, the Company shall inform Executive in writing whether
it elects to control and direct the proceedings relating to such action or
claim. If it so elects, the Company shall have the right to direct, control
and supervise Executive's defense of such action, suit or proceeding with
counsel of the Company's choosing. Executive may designate separate counsel,
at his own expense, and shall be entitled to participate in all aspects of
the defense of such action, suit or proceeding. If the Company fails to elect
to control the proceeding, Executive shall direct and control the proceeding
at Company's expense and the Company shall have the right to participate in
all aspects of such defense. Neither Executive nor the Company shall settle
or compromise any such action, suit or proceeding without the written consent
of the other party hereto, which consent may not be unreasonably withheld;
notwithstanding the foregoing, the consent of Executive shall not be required
if such settlement or compromise solely involves the payment of money or
property by the Company or otherwise has no adverse effect on Executive. The
Company shall continue to maintain officers and directors liability insurance
at the levels applicable as of the date hereof, provided that the Company
shall not be required to pay annual premiums that exceed 200% of the annual
premiums in effect as of the date hereof.
9. TAXES
The Company shall deduct from all amounts payable under this
Agreement all federal, state, local and other taxes required by law to be
withheld with respect to such payments.
10. CONFIDENTIALITY
Executive acknowledges that the information, observations and data
obtained by him while employed by the Company concerning the business or
affairs of the Company and its subsidiaries which are not available to the
public, customers, suppliers and competitors of the
8
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Company which are in the nature of trade secrets, are proprietary or the
disclosure of which could reasonably be expected to cause a financial loss to
the Company, or otherwise have a material adverse effect on the Company
("Confidential Information") are the property of the Company or such
subsidiary. Therefore, Executive agrees that he shall not disclose to any
unauthorized person or use for his own account any Confidential Information
without the prior written consent of the Board, unless and to the extent that
the aforementioned matters become generally known to and available for use by
the public other than as a result of Executive's acts or omissions to act.
Executive shall deliver to the Company at the termination of employment, or
at any other time the Company may request, all memoranda, notes, plans,
records, reports, computer tapes and software and other documents and data
(and copies thereof) relating to the Confidential Information, work product
or the business of the Company or any of its subsidiaries which he may then
possess or have under his control.
11. NON-COMPETE. NON-SOLICITATION
(a) Executive agrees that during the Noncompete Period (as defined
below), he shall not directly or indirectly own, manage, control, participate
in, consult with, render services for, or in any manner engage in any
business that competes anywhere in the United States, Canada or anywhere else
in Me world with the businesses of the Company or its subsidiaries as
businesses exist or are in process on the date of the termination of
Executive's employment. Nothing herein shall prohibit Executive from owning
not more than 5% of the outstanding stock of any class of a corporation which
is publicly traded, so long as Executive has no active participation in the
business of such corporation. For purposes of this Agreement, the term
"Noncompete Period" means the period beginning on the date of this Agreement
and ending on the earlier to occur of (1) the first anniversary of the last
day of the Term and (2) the last day of any Severance Term resulting from a
termination of the Executive.
(b) Executive shall not directly or indirectly through another
entity (I) induce or attempt to induce any Senior Executive of the Company or
its subsidiaries to leave the employ of the Company or such subsidiary, or in
any way interfere with the relationship between the Company or its
subsidiaries and any Senior Executive thereof, (ii) hire any person who was a
Senior Executive of the Company or its subsidiaries at any time during
Executive's employment with the Company until the later of the first
anniversary of the termination of the Executive's employment and the six
month anniversary of such Senior Executive's departure from the Company, or
(iii) for the two year period after the termination of his employment with
the Company induce or attempt to induce any customer, supplier, licensee or
other business relation of the Company or its subsidiaries to cease doing
business with the Company or its subsidiaries, or in any way interfere with
the relationship between any such customer, supplier, licensee or business
relation and the Company or its subsidiaries. "Senior Executive" shall mean
any employee of the Company with significant managerial responsibility over
material areas of the business of the Company, including, without limitation,
financial, marketing, sales, distribution or manufacturing.
(b) If, at the time of enforcement of this Section 11, a court or
arbitrator shall hold that the duration, scope or area restrictions stated
herein are unreasonable under circumstances then existing, the parties agree
that the maximum duration, scope or area reasonable under such circumstances
shall be substituted for the stated duration, scope or area and that the
court or arbitrator shall be allowed to revise the restrictions contained
herein to cover the maximum period,
9
<PAGE>
scope and area permitted by law.
(c) In the event of the breach or a threatened breach by Executive,
of any of the provisions of Section 10 or this Section 11, the Company, in
addition and supplementary to other rights and remedies existing in its
favor, may apply to any court of law or equity of competent jurisdiction for
specific performance or injunctive or other relief in order to enforce or
prevent any violations of the provisions hereof (without posting a bond or
other security).
11. SUCCESSORS: BINDING AGREEMENT
(a) This Agreement shall be binding upon and inure to the benefit
of the Company and any successor of the Company, including, any corporation
acquiring directly or indirectly all or substantially all of the membership
Units, business or assets of the Company, whether by merger, restructuring,
reorganization, consolidation, sale or otherwise (and such successor shall
thereafter be deemed the "Company" for the purposes of this Agreement). Each
of the Company's subsidiaries are hereby acknowledged to be third-party
beneficiaries with respect to the provisions of Sections 10 and 11 hereof and
shall be entitled to enforce such provisions as if they were parties hereto.
(b) This Agreement and all rights of Executive hereunder shall
inure to the benefit of and be enforceable by Executive's personal or legal
representatives, executors, administrators, successors, heirs, distributees,
devisees and legatees. If Executive should die while any amounts would be
still payable to him hereunder if he had continued to live, all such amounts,
unless otherwise provided herein, shall be paid in accordance with the terms
of this Agreement to Executive's devisee, legates, or other beneficiary or,
if there be no such beneficiary, to Executive's estate.
13. NOTICE
For the purposes of this Agreement, notices, demands and all other
communications provided for in the Agreement shall be in writing and shall be
deemed to have been duly given when hand delivered or (unless otherwise
specified) when mailed by United States certified mail, return receipt
requested, postage prepaid, addressed as follows:
If to Executive:
----------------
Neil P. DeFeo
175 Indian Road
Piedmont, California 94610
If to the Board or the Company:
-------------------------------
Remington Products Company, L.L.C.
c/o Vestar Capital Partners
245 Park Avenue, 41st Floor
New York, New York 10167
Attention: Robert L. Rosner
10
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If to the Company:
------------------
Remington Products Company
60 Main Street
Bridgeport, Connecticut 06604
Attention: General Counsel
or to such other address as any party may have furnished to the others in
writing in accordance herewith, except that notices of change of address
shall be effective only upon receipt.
14. SURVIVORSHIP
The respective rights and obligations of the parties hereunder,
including the rights and obligations set forth in Sections 6, 7, 8, 9, 10 and
11 of this Agreement, shall survive any termination of this Agreement to the
extent necessary to the intended preservation of such rights and obligations.
In addition, the terms of this Agreement shall continue in effect as provided
in Section 6(g).
15. REPRESENTATIONS AND WARRANTIES
The Company represents and warrants that (a) it is fully authorized
and empowered to enter into this Agreement and that the Board has approved
the terms of this Agreement, (b) the execution of this Agreement and the
performance of its obligations under this Agreement will not violate or
result in a breach of the terms of any material agreement to which the
Company is a party or by which it is bound, no approval by any governmental
authority or body is required for it to enter into this Agreement, and (d)
the Agreement is valid, binding and enforceable against the Company in
accordance with its terms, except to the extent affected or limited by
applicable bankruptcy laws or other statutes governing the right of creditors
generally and any regulations or interpretations thereof Executive represents
and warrants that his execution of this Agreement and his performance of his
duties and responsibilities under this Agreement will not violate or result
in a breach of the terms of any material agreement to which he is a party or
by which he is bound.
16. MISCELLANEOUS
The parties hereto agree that this Agreement contains the entire
understanding and agreement between them, and supersedes all prior
understandings and agreements between the parties respecting the employment
by the Company of Executive, and that the provisions of this Agreement may
not be modified, waived or discharged unless such waiver, modification or
discharge is agreed to in writing signed by the parties hereto. No waiver by
either party hereto at any time of any breach by the other party hereto of,
or compliance with, any condition or provision of this Agreement to be
performed by such other party shall be deemed a waiver of similar or
dissimilar provisions or conditions at the same or at any prior or subsequent
time. No agreements or representations, oral or otherwise, express or
implied, with respect to the subject matter hereof have been made by either
party which are not set forth expressly in this Agreement. The validity,
interpretations, construction and performance of this Agreement shall be
governed by the laws of the State of New York without giving effect to the
conflict of laws principles thereof.
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17. VALIDITY
The invalidity or unenforceability of any provision or provisions of
this Agreement shall not affect the validity or enforceability of any other
provision or provisions of this Agreement, which shall remain in full force
and effect.
18. COUNTERPARTS
This Agreement may be executed in one or more counterparts, each of
which shall be deemed to be an original but all of which together will
constitute one and the same instrument.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement
as of the date and the year first above written.
REMINGTON PRODUCTS COMPANY, L.L.C.
/s/ Daniel S. O'Connell
-----------------------
Name:
Title: Director
/s/ Neil P. DeFeo
-----------------
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Schedule A
TERM SHEET
for
PHANTOM EQUITY PLAN
1. Upon the occurrence of a Payment Event, the Executive shall be
entitled to receive the amounts set forth in paragraph 2. A "Payment Event"
means (a) a purchase of Common Units by the Company pursuant to the Option
Agreement on account of a termination of employment or (b) a Company Sale or
an IPO (as each is defined in the Amended and Restated Agreement of Limited
Liability Company for the Company, as in effect on the date hereof).
2. The amounts payable shall equal the Applicable Percentage (as set
forth below) of the "Increase in Common Equity." The Increase in Common
Equity equals the increase in the Value of the Common Equity from negative
$56 million to such value as of the date of determination. The Value of the
Common Equity equals the difference (which may result in a negative number)
of (A) the Enterprise Value of the Company less (B) the sum of (1) the
aggregate unpaid principal amount of funded indebtedness of the Company
(other than amounts set forth in item (2)) plus accrued and unpaid interest,
(2) the average monthly principal balance of any working capital facility of
the Company (for the trailing twelve month period ending as of the last day
of the last month ending before the determination date) and (3) the
outstanding amount of aggregate Unreturned Preferred Capital (including
accrued and unpaid Preferred Yield). The Enterprise Value in the case of a
Company Sale or an IPO shall equal the enterprise value of the Company
implied from the price paid for the equity in the case of a Company Sale or
the net price per common equity unit realized by the Company (i.e., net of
underwriter commissions) in the case of an IPO. In the case of a termination
of employment, the Enterprise Value shall equal the product of multiplying
seven (7) times the 12-month trailing EBITDA of the Company (as determined in
accordance with GAAP consistently applied) as of the last day of the last
fiscal quarter ending prior to the date of determination, which in this case
shall be the date of termination.
The amounts due shall be paid within five (5) business days of the
date the amount due is determined (subject to paragraph 4).
3. The Applicable Percentage shall mean:
(a) 2% of the first $15 million of Increase in Common Equity;
(b) 3% of the next $15 million of Increase in Common Equity;
(c) 4% of the next $26 million in Increase in Common Equity; and
(d) 5% of the next $8 million of Increase in Common Equity.
4. If the Payment Event is due to a purchase of Common Units by the
Company on account of a termination of employment, the amount payable (i.e.,
the percentage of the amount determined under paragraph 3) and the terms of
payment shall be subject to the identical rules applicable to the repurchase
of Common Units under the Option Agreement in connection with a
<PAGE>
termination of employment. If the Payment Event is an IPO, the amount due
hereunder shall be paid in three equal annual installments beginning with the
date of determination, which in the case of an IPO shall be the date that the
IPO is consummated.
<PAGE>
EXECUTION COPY
--------------
OPTION AGREEMENT
for
NEIL P. DEFEO
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THIS OPTION AGREEMENT (this "AGREEMENT") is made as of January 8, 1997
(the "Grant Date"), by and between Remington Products Company, L.L.C., a
Delaware limited liability company (the "Company"), and the individual named on
the signature page hereto (the "Executive").
WHEREAS, on the terms and subject to the conditions hereof, the
Company desires to grant the Executive, and the Executive wishes to acquire,
options to purchase and acquire the number of Common Units of the Company set
forth on SCHEDULE I attached hereto (the "CURRENT OPTIONS"), as hereinafter set
forth; and
WHEREAS, the Company desires to grant to the Executive, and the
Executive wishes to acquire, the options for the number of Common Units listed
on Schedule II based on achievement of the Performance Criteria (the
"PERFORMANCE OPTIONS"); and
WHEREAS, this Agreement is one of several agreements being entered
into by the Company with certain persons who are or will be key employees of the
Company (collectively with the Executive, the "MANAGEMENT OPTION HOLDERS") as
part of a management option plan designed to comply with Rule 701 promulgated
under the Securities Act (as defined below);
NOW, THEREFORE, in order to implement the foregoing and in
consideration of the mutual representations, warranties, covenants and
agreements contained herein, the parties hereto agree as follows:
1. DEFINITIONS.
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"AGREEMENT" shall have the meaning set forth in the preface.
"APPLICABLE PERCENTAGE" shall mean (i) 25% during the one-year period
commencing on the first anniversary of the Grant Date; (ii) 50% during the
one-year period commencing on the second anniversary of the Grant Date; and
(iii) 100% on and after the third anniversary of the Grant Date. The Applicable
Percentage shall be 100% after an IPO Exit Transaction.
"CAUSE" shall mean a termination of employment of the Executive by the
Company or any subsidiary thereof due to (i) the commission by the Executive of
an act of fraud or embezzlement (including the unauthorized disclosure of
confidential or proprietary information of the Company or any of its
subsidiaries which results in material financial loss to the Company or any of
its subsidiaries); (ii) the commission by Executive of a felony which (A)
materially involves the Company or its business or (B) materially affects the
ability of the Executive to render services for a substantial period in
accordance with his employment agreement; (iii) the willful misconduct
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of the Executive as an employee of the Company or any of its subsidiaries which
is reasonably likely to result in material injury or financial loss to the
Company or any of its subsidiaries; (iv) the willful failure of Executive to
render services to the Company or any of its subsidiaries in accordance with
Executive's employment which failure amounts to a material neglect of
Executive's duties to the Company or any of its subsidiaries or (v) a willful
material breach ofthe covenants in Section 3(a) (but only in the penultimate
sentence thereof), Section 3(b) and Sections 10 or 11 of the Employment
Agreement by Executive, which breach is not cured within thirty (30) days after
written notice of such breach is delivered to Executive. The Executive shall not
be deemed to have been terminated for Cause unless the Company shall have given
or delivered to the Executive (I ) reasonable notice setting forth, in
reasonable detail, the facts and circumstances, if any, claimed to provide a
basis for termination for Cause and (2) a reasonable opportunity for Executive,
together with his counsel, to be heard before the Board.
For purposes of determining whether the Executive was given
"reasonable notice" and "reasonable opportunity to be heard" in connection with
any determination by the Board as to whether Cause exists, 10 business days'
notice of the Board meeting shall be deemed to constitute "reasonable notice"
(without prejudice to the determination of whether some other period would also
constitute "reasonable notice") and the opportunity for the Executive and his
counsel to present arguments to the Board at such meeting as to why the
Executive believes that no Cause exists shall constitute "reasonable opportunity
to be heard" (without prejudice to the determination of whether some other forum
or method would also constitute a "reasonable opportunity to be heard").
"COMMON UNITS" shall mean the common units of the Company, together
with any securities issued in exchange therefor.
"COMPANY" shall have the meaning set forth in the preface.
"COST" shall mean, with respect to each of the Common Units, the
exercise price per unit paid by the Executive (as proportionately adjusted for
all subsequent stock splits, stock dividends and other recapitalization).
"CURRENT OPTIONS" shall mean the Options to acquire the number of
Common Units set forth on Schedule 1.
"DISABILITY" shall mean the inability of the Executive to perform the
essential functions of Executive's job, with or without reasonable
accommodation, by reason of a physical or mental infirmity, for a continuous
period of six months. The period of six months shall be deemed continuous unless
Executive returns to work for at least 30 consecutive business days during such
period and performs during such period services at the level and competence that
were performed prior to the beginning of the six-month period. The date of such
Disability (for purposes of determining the Termination Date in the event of
such Disability) shall be on the first day of such six-month period.
"EMPLOYEE" shall mean any employee (as defined in accordance with the
regulations and revenue rulings then applicable under Section 3401 (c) of the
Internal Revenue Code of 1986,
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as amended) of the Company or any of its subsidiaries, and the term
"EMPLOYMENT" shall include service as a part- or full-time Employee to the
Company or any of its subsidiaries.
"EMPLOYMENT AGREEMENT" shall mean that certain Employment Agreement of
even date herewith between the Company and the Executive.
"EXECUTIVE" shall have the meaning set forth in the preface.
"EXECUTIVE GROUP" shall have the meaning set forth in Section 4.1 (a).
"EXERCISE PRICE" shall have the meaning set forth in Section 2. 1.
"EXPIRATION DATE" shall have the meaning set forth in Section 2.2.
"FAIR MARKET VALUE" shall mean the average of the closing prices of
the sales of the Company's Common Units on all securities exchanges on which the
Common Units may at the time be listed, or, if there have been no sales on any
such exchange on any day, the average of the highest bid and lowest asked prices
on all such exchanges at the end of such day, or, if on any day the Common Units
are not so listed, the average of the representative bid and asked prices quoted
in the NASDAQ System as of 4:00 p.m., New York time, or, if on any day the
Common Units are not quoted in the NASDAQ System, the average of the highest bid
and lowest asked prices on such day in the domestic over-the-counter market as
reported by the National Quotation Bureau Incorporated, or any similar successor
organization, in each such case averaged over a period of 21 days consisting of
the day as of which the Fair Market Value is being determined and the 20
consecutive business days prior to such day. If at any time the Common Units are
not listed on any securities exchange or quoted in the NASDAQ System or the
over-the-counter market, the Fair Market Value shall be the fair value of the
Common Units determined in good faith by the Management Committee (without
taking into account the lack of liquidity and minority position of the Common
Units subject to repurchase). In the event that the Executive disagrees with the
valuation, he shall provide written notice to the Management Committee within 15
business days of being informed of the valuation. If the Executive and the
Management Committee cannot resolve the differences within 15 business days of
the date that the Executive provides written notice of his objection, the
dispute shall be submitted for resolution pursuant to Section 6. 17.
"FINANCING DEFAULT" shall mean an event which would constitute (or
with notice or lapse of time or both would constitute) an event of default under
any of the following as they may be amended, supplemented or modified from time
to time: (i) the Credit and Guarantee Agreement and Indenture (collectively, the
"SENIOR FINANCING AGREEMENTS") dated on or about the Grant Date among the
Company and the other financial institutions, agents and trustees party thereto,
and any extensions, renewals, refinancingsor refundings thereof in whole or in
part; (ii) any provision of the Company's Limited Liability Company Agreement or
any of its subsidiary's certificate of incorporation or limited liability
company agreement, as the case may be, as in effect on the Grant Date; and (iii)
any of the securities issued pursuant to or whose terms are governed by the
terms of any of the agreements set forth in clauses (i) and (ii) above, and any
extensions, renewals, refinancings or refundings thereof in whole or in part.
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"GOOD REASON" shall have the same meaning as set forth in the
Employment Agreement of even date herewith between the Company and the
Executive.
"GRANT DATE" shall have the meaning set forth in the preface.
"IPO" means the consummation of an initial public offering of Common
Units or common stock of a corporation that is the successor to the Company or
which owns, directly or indirectly, more than 50% of the Common Units of the
Company or its successor.
"IPO EXIT TRANSACTION" means the first date after an IPO, on which
Vestar and its affiliates (not including employees of the general partner of
Vestar) own less than 10% of the Common Units or of the outstanding common stock
of a corporation that is the successor to the Company or which controls the
Company or its successor.
"LIMITED LIABILITY COMPANV AGREEMENT" shall mean the Amended and
Restated Limited Liability Company Agreement of the Company, dated as of May 16,
1996, by and between RPI Corp. (formerly Remington Products, Inc.), a Delaware
corporation ("RPI"), Vestar Shaver Corp., a Delaware corporation ("Shaver"),
Vestar Razor Corp., a Delaware corporation ("Razor"), and the individuals listed
as management members on Schedule A thereto, as the same may be amended from
time to time.
"MANAGEMENT COMMITTEE" shall mean the Company's Management Committee
or any board of directors or similar governing body of a successor to the
Company.
"MANAGEMENT OPTION HOLDERS" shall have the meaning set forth in the
preface.
"OPTIONS" shall mean the Current Options and the Performance Options.
"PERFORMANCE CRITERIA" shall mean the criteria set forth on Schedule
III attached hereto.
"PERFORMANCE OPTIONS" shall mean the option to acquire the number of
Units set forth on Schedule II hereto.
"PERMITTED TRANSFEREE" means any transferee of Common Units pursuant
to clauses (f) or (g) of the definition of "Exempt Employee Transfer" as defined
in the Securityholders Agreement.
"PERSON" shall mean any individual, corporation, partnership, limited
liability company, trust, joint stock company, business trust, unincorporated
association, joint venture, governmental authority or other entity of any nature
whatsoever.
"PUBLIC OFFERING" shall mean a registered public offering of the
Company's Common Units.
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"REORGANIZATION" means the consummation of the transactions
contemplated by the Reorganization Agreement dated as of May 1, 1996, by and
among RPI, Victor K. Kiam, II, Vestar/Remington Corp., a Delaware corporation
("VESTAR CORP.") and Vestar Equity Partners, L.P., a Delaware limited
partnership ("Vestar").
"RETIREMENT" shall mean the Executive's retirement as an employee of
the Company or any of its subsidiaries on or after reaching age 60 or such
earlier age as may be otherwise determined by the Management Committee after at
least four years employment with the Company after the Grant Date.
SALE OF THE COMPANV" shall mean a Company Sale, as that term is
defined in the Limited Liability Company Agreement.
SECURITIES ACT" shall mean the Securities Act of 1933, as amended, and
all rules and regulations promulgated thereunder, as the same may be amended
from time to time.
"SECURITYHOLDERS AGREEMENT" shall mean the Securityholders Agreement
dated as of May 23, 1996 among Shaver, Razor, Vestar, RPI, Victor K. Kiam, II
and other equity holders of the Company.
"TERMINATION DATE" means the date upon which Executive's employment
with the Company and its subsidiaries is terminated.
GRANT OF OPTIONS.
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2.1 CONFIRMATION OF GRANT: OPTION PRICE. Pursuant to the terms and
subject to the conditions set forth in this Agreement, the Company hereby
evidences and confirms the grant to the Executive, effective on the Grant Date,
of the Options to purchase from the Company the number of Common Units set forth
in SCHEDULE I (in the case of the Current Options) and SCHEDULE II (in the case
of the Performance Options) attached hereto at an exercise price per unit (the
EXERCISE PRICE") and for an aggregate exercise price set forth in SCHEDULE I (in
the case of the Current Options) and Schedule II (in the case of the Performance
Options) attached hereto. Within six months of the Grant Date, the Company and
the Executive shall establish a three-year strategic plan for the Company for
the three fiscal years commencing with the 1997 fiscal year, which plan will
establish financial goals to be achieved by the Company at the end of the three
year period (the "Performance Criteria"). When agreed to, the Performance
Criteria shall be set forth on Schedule III and attached hereto. If the
Executive exercises the Options, the Executive must exercise the Options for all
of the Common Units subject thereto.
2.2 EXPIRATION DATE. The Options shall terminate on the tenth
anniversary of the Grant Date; PROVIDED, HOWEVER, that if the Executive's
Employment with the Company is terminated for any reason, the Options shall
terminate on the 90th day following the Termination Date unless the Management
Committee otherwise specifies a later date (such tenth anniversary of the Grant
Date or earlier date as specified in the proviso is referred to as the
"Expiration Date"). The Options may be exercised, subject to the terms of this
Agreement, only (a) in connection with a Sale of the
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Company, (b) after the effectiveness of a public offering of the Common Units
pursuant to an underwritten offering registered under the Securities Act and (c)
at any time during the 90-day period preceding the Expiration Date. At 5:00 p.m.
(New York time) on the Expiration Date, unexercised Options shall be canceled
and of no further force and effect. Notwithstanding the foregoing, the
Management Committee may require that the Options be exercised in connection
with any Sale of the Company or, if not so exercised, provide that the Options
terminate.
2.3 EXERCISE AND PAYMENT. The Executive may exercise the Options by
delivering written notice of exercise to the Company, which notice must (x)
contain the representations and warranties set forth in Section 3.2 and (y) be
accompanied by the aggregate Exercise Price for the Common Units subject to the
Option in the form of cashier's check, certified check or wire transfer of
immediately available funds; PROVIDED that the Options may not be exercised by
the Executive unless, to the extent applicable, all of the following conditions
are met:
(a) Legal counsel for the Company must be satisfied at the time
of exercise that the issuance of Common Units upon exercise will be in
compliance with the Securities Act and other applicable United States federal,
state, local and foreign laws; and
(b) the Executive must execute the Limited Liability Company
Agreement and Securityholders Agreement.
The number of Common Units that may be acquired pursuant to the exercise of the
Performance Options shall be limited as set forth on Schedule III based on the
achievement of the Performance Criteria. The Management Committee may impose
such additional procedural requirements to exercise of the Options as it may
deem necessary or advisable in connection therewith.
INVESTMENT REPRESENTATIONS AND COVENANTS OF THE EXECUTIVE.
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3.1 OPTIONS AND COMMON UNITS UNREGISTERED. The Executive acknowledges
and represents that Executive has been advised by the Company that:
(a) the Options and the Common Units have not been registered under
the Securities Act;
(b) any Common Units issued upon exercise of the Option must be held
indefinitely and the Executive must continue to bear the economic risk of such
investment in the Common Units unless the offer and sale of such Common Units is
subsequently registered under the Securities Act and all applicable state
securities laws or an exemption from such registration is available;
(c) there is no established market for the Options and the Common
Units and it is not anticipated that there will be any public market for the
Options or the Common Units in the foreseeable future;
(d) a restrictive legend in the form set forth below shall be placed
on the certificates representing the Options and the Common Units acquired on
exercise thereof:
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"THE SECURITIES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO CERTAIN
REPURCHASE RIGHTS AND OTHER PROVISIONS SET FORTH IN AN OPTION
AGREEMENT BETWEEN THE ISSUER AND NEIL P. DEFEO DATED AS OF JANUARY 8,
1997, AS AMENDED AND MODIFIED FROM TIME TO TIME, A COPY OF WHICH MAY
BE OBTAINED BY THE HOLDER HEREOF AT THE ISSUER'S PRINCIPAL PLACE OF
BUSINESS WITHOUT CHARGE";
(e) a notation shall be made in the appropriate records of the Company
indicating that the Options and the Common Units are subject to restrictions on
transfer and, if the Company should at some time in the future engage the
services of a securities transfer agent, appropriate stop-transfer instructions
will be issued to such transfer agent with respect to the Options and the Common
Units acquired on exercise thereof;
(f) upon exercise of the Options the Executive must, if applicable,
execute and deliver the Limited Liability Company Agreement, Securityholders
Agreement and, if requested by the Management Committee, the Members Pledge
Agreement (all of which the Executive has had access to and understands the
contents of), and become subject to the terms thereof; and
(g) the exercise of the Options, and becoming a member of the Company,
may subject the Executive to taxation in the various jurisdictions where the
Company conducts business.
3.2 ADDITIONAL INVESTMENT REPRESENTATIONS. Upon each exercise of the
Options, the Executive shall represent and warrant that:
(a) the Executive's financial situation is such that Executive can
afford to bear the economic risk of holding the Common Units for an indefinite
period of time, has adequate means for providing for Executive's current needs
and personal contingencies, and can afford to suffer a complete loss of
Executive's investment in the Common Units;
(b) the Executive's knowledge and experience in financial and business
matters are such that Executive is capable of evaluating the merits and risks of
the investment in the Common Units;
(c) the Executive understands that the Common Units are a speculative
investment which involves a high degree of risk of loss of Executive's
investment therein, there are substantial restrictions on the transferability of
the Common Units, and, on the date of Executive's exercise of the Options and
for an indefinite period thereafter, there may be no public market for the
Common Units and, accordingly, it may not be possible for the Executive to
liquidate Executive's investment in case of emergency, if at all;
(d) the terms of this Agreement provide that in the event that the
Executive ceases
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to be an Employee, the Company has the right to repurchase the Common Units
issued upon exercise of the Options at a price which may be less than the Fair
Market Value of such Common Units;
(e) the Executive understands and has taken cognizance of all the risk
factors related to the purchase of the Common Units, and, other than as set
forth in this Agreement, no representations or warranties have been made to the
Executive or Executive's representatives concerning the Common Units or the
Company or their prospects or other matters;
(f) the Executive has been given the opportunity to examine all
documents and to ask questions of, and to receive answers from, the Company and
its representatives concerning the Company and its subsidiaries, the
Reorganization, the Securityholders Agreement, the Company's Amended and
Restated Limited Liability Company Agreement and the terms and conditions of the
purchase of the Common Units and to obtain any additional information which the
Executive deems necessary; and
(g) all information which the Executive has provided to the Company
and Executive's representatives concerning the Executive and Executive's
financial position is complete and correct as of the date of this Agreement.
CERTAIN SALES UPON TERMINATION OF EMPLOYMENT.
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4.1 PUT OPTION.
(a) If the Executive's Employment terminates due to Disability, death
or Retirement (such date of termination, the "Put Date"), in either case prior
to the earlier of a Public Offering or the fifth anniversary of the Grant Date,
each of the Executive and the Executive's Permitted Transferees (hereinafter
sometimes collectively referred to as the "EXECUTIVE GROUP") shall have the
right, subject to the provisions of Section 5 hereof, for 90 days following the
Put Date (or, if the Options are exercised after the Put Date, 90 days following
the date of such exercise), to sell to the Company, and the Company shall be
required to purchase (subject to the provisions of Section 5 hereof), on one
occasion from each member of the Executive Group, all (but not less than all) of
the Common Units then held by the Executive Group at a price per Common Unit
equal to the greater of Fair Market Value (measured as of the Termination Date)
or Cost for the Applicable Percentage (measured as of the Termination Date) of
the Common Units and (y) Cost for the remainder of the Common Units: PROVIDED
that in any case the Management Committee shall have the right, in its sole
discretion, to increase any of the foregoing purchase prices.
(b) If the Executive Group desires to exercise its option to require
the Company to repurchase Common Units obtained upon exercise of the Option
pursuant to Section 4.1 (a), the members of the Executive Group shall send one
written notice to the Company setting forth such members' intention to
collectively sell all of their Common Units within the applicable 90-day period
described above, which notice shall be signed by each member of the Executive
Group. Subject to the provisions of Section 5. 1, the closing of the purchase
shall take place at the
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principal office of the Company on a date specified by the Company no later than
the 60th day after the giving of such notice.
4.2 CALL OPTIONS.
(a) Upon termination of the Executive's Employment, the Company shall
have the right and option to purchase, for a period of 90 days following the
Termination Date (or, if the Options are exercised after the Termination Date,
90 days following the date of such exercise), and each member of the Executive
Group shall be required to sell to the Company, any or all of the Common Units
obtained upon exercise of the Options then held by each member of the Executive
Group at a price per Common Unit as follows:
(i) if the Executive's Employment is terminated at any time due to
Disability, death or Retirement, the purchase price shall be (x) the greater of
Fair Market Value (measured as of the Termination Date) or Cost for the
Applicable Percentage (measured as of the Termination Date) of the Common Units
being purchased and (y) the average of the Fair Market Value (measured as of the
Termination Date) and Cost for the remainder of the Common Units being
purchased;
(ii) if the Executive's Employment is terminated by the Company at any
time without Cause or by the Executive for Good Reason, the purchase price shall
be (x) the greater of Fair Market Value (measured as of the Termination Date) or
Cost for the Applicable Percentage (measured as of the Termination Date) of the
Option Units being purchased and (y) Cost for the remainder of the Common Units
being purchased;
(iii) if after the third anniversary of the Grant Date the Executive's
Employment is terminated for any reason other than (A) Disability, (B) death,
(C) Retirement, (D) termination by the Company with or without Cause or (E)
termination by the Executive for Good Reason, the purchase price shall be the
Fair Market Value (measured as of the Termination Date) of the Common Units
being purchased;
(iv) if the Executive's Employment is terminated prior to the third
anniversary of the Grant Date by the Executive for any reason other than (A)
Disability, (B) death, (C) Retirement, or (D) Good Reason, the purchase price
shall be the Cost of the Common Units; and
(v) if the Executive's Employment is terminated for Cause (A) on or
prior to the third anniversary hereof, the purchase price shall be the Cost of
the Common Units and (B) subsequent to the third anniversary hereof, the
purchase price shall be the Fair Market Value of the Common Units; PROVIDED,
HOWEVER, that if ( I ) the termination is due to the acts described in items (i)
and (ii)(A) of the definition of Cause ("COMPANY CAUSE") or the Executive is
found to have committed acts of Company Cause prior to the third anniversary
hereof, and (2) the termination occurs on or prior to the fifth anniversary
hereof, the purchase price shall be the Cost of the Common Units; and
PROVIDED FURTHER that, in any case, the Management Committee shall have the
right, in its sole
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discretion, to increase any purchase price set forth above and, PROVIDED
FURTHER, that if the Executive elects to contest a Board determination of Fair
Market Value, the date of purchase shall be deferred until such value is
determined pursuant to Section 6.17 hereof
(b) If the Company desires to exercise its option to purchase any
Common Units pursuant to this Section 4.2, the Company shall, not later than end
of the applicable 90 day period referred to above, send written notice to each
member of the Executive Group of its intention to purchase the Common Units,
specifying the number of Common Units to be purchased (the "CALL NOTICE").
Subject to the provisions of Section 5, the closing of the purchase shall take
place at the principal office of the Company on a date specified by the Company
no later than the 60th day after the giving of the Call Notice.
4.3 OBLIGATION TO SELL SEVERAL. In the event there is more than one member
of the Executive Group, the failure of any one member thereof to perform its
obligations hereunder shall not excuse or affect the obligations of any other
member thereof, and the closing of the purchases from such other members by the
Company shall not excuse, or constitute a waiver of its rights against, the
defaulting member.
CERTAIN LIMITATIONS ON THE COMPANV'S OBLIGATIONS TO PURCHASE COMMON UNITS.
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5.1 DEFERRAL OF PURCHASES.
(a) Notwithstanding anything to the contrary contained herein, the
Company shall not be obligated to purchase any Common Units at any time pursuant
to Section 4, regardless of whether it has delivered a notice of its election to
purchase any such Common Units, (i) to the extent that the purchase of such
Common Units (together with any other purchases of Common Units pursuant to
Section 4 of other management Option Agreements or the Management Common Unit
Subscription Agreements) would result (A) in a violation of any law, statute,
rule, regulation, order, writ, injunction, decree or judgment promulgated or
entered by any federal, state, local or foreign court or governmental authority
applicable to the Company or any of its subsidiaries or any of its or their
material property (which violation is material to the Company, its directors or
members or the repurchase of units) or (B) after giving effect thereto, in a
Financing Default, or (ii) if immediately prior to such purchase there exists a
Financing Default which prohibits such purchase. The Company shall within
fifteen days of learning of any such fact so notify the members of the Executive
Group that it is not obligated to purchase units hereunder.
(b) Notwithstanding anything to the contrary contained in Section 4,
any Common Units which a member of the Executive Group has elected to sell to
the Company or which the Company has elected to purchase from members of the
Executive Group, but which in accordance with Section 5.1(a) are not purchased
at the applicable time provided in Section 4, shall to the extent then owned by
the Executive Group be purchased by the Company on or prior to the fifteenth day
after such date or dates that (after taking into account any purchases to be
made at such time pursuant to the agreements with other Management Option
Holders) it is no longer prohibited from purchasing such units under Section 5.1
(a), and the Company shall give
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the members of the Executive Group five days prior notice of any such purchase.
5.2 PAYMENT FOR COMMON UNITS. If at any time the Company elects or is
required to purchase any Common Units pursuant to Section 4, the Company shall
pay the purchase price for the Common Units it purchases (i) first, by the
cancellation of any indebtedness, if any, owing from the Executive to the
Company or any of its subsidiaries (which indebtedness shall be applied pro rata
against the proceeds receivable by each member of the Executive Group receiving
consideration in such repurchase) and (ii) then, by the Company's delivery of a
check or wire transfer of immediately available funds for the remainder of the
purchase price, if any, against delivery of the certificates or other
instruments representing the Common Units so purchased, duly endorsed; PROVIDED
that if any of the conditions set forth in Section 5.1(a) exists which prohibits
such cash payment, the portion of the cash payment so prohibited may be made, to
the extent such payment is not prohibited, by the Company's delivery of an
unsecured subordinated promissory note (which shall be subordinated and subject
in right of payment only to the prior payment of any debt outstanding under the
Senior Financing Agreements and any modifications, renewals, extensions,
replacements and refunding of all such indebtedness) of the Company (a
"Repurchase Note") in a principal amount equal to the balance of the purchase
price, payable in up to five equal annual installments commencing on the first
anniversary of the issuance thereof and bearing interest payable annually at the
publicly announced prime rate of Chase Bank, on the date of issuance and each
June 30 and December 31 thereafter; and, PROVIDED FURTHER, that in the case of a
purchase pursuant to either ( 1 ) Section 4.1(a) or (2) any of Sections
4.2(a)(iv) or 4.2(a)(v), the Company may elect to deliver a Repurchase Note in a
principal amount equal to all or a portion of the cash purchase price (in lieu
of paying such portion of the purchase price in cash), which Repurchase Note
shall mature on the fifth anniversary of its issuance, require principal
payments to be made in five equal, annual installments and bear interest payable
annually at the publicly announced prime rate of Chase Bank on the date of
issuance and each June 30 and December 31 thereafter. The Company shall have the
right set forth in clause (i) of the first sentence of this Section 5.2 whether
or not the member of the Executive Group selling such Option Units is an obliger
of the Company.
6. MISCELLANEOUS.
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6.1 TAX WITHHOLDING. Whenever Common Units are to be issued pursuant
to the exercise of an Option or any cash payment is to be made hereunder or
under the Limited Liability Company Agreement, the Company shall have the power
to withhold, or require the Executive to remit to the Company in cash or offset
against any amounts otherwise payable Executive, an amount sufficient to satisfy
all Federal, state, local and foreign withholding tax requirements relating to
such transaction, and the Company may defer payment of cash or issuance of
Common Units until such requirements are satisfied.
6.2 TRANSFERS TO PERMITTED TRANSFEREES. The Executive may transfer
Options only upon his death pursuant to applicable laws of descent and
distribution and may transfer Common Units only as contemplated by the Limited
Liability Agreement and the Securityholders Agreement. Prior to any transfer of
Common Units, the Executive shall deliver to the Company a written agreement of
the proposed transferee (a) evidencing such Person's
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undertaking to be bound by the terms of this Agreement and (b) acknowledging
that Common Units transferred to such Person will continue to be Common Units
for purposes of this Agreement in the hands of such Person. Any transfer or
attempted transfer of Common Units in violation of any provision of this
Agreement, the Limited Liability Agreement or the Securityholders Agreement
shall be void, and the Company shall not record such transfer on its books or
treat any purported transferee of such Common Units as the owner of such Common
Units for any purpose.
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6.3 RECAPITALIZATIONS. EXCHANGES. ETC.. AFFECTING COMMON UNITS. The
number, class and Exercise Price of any outstanding Options (and the number of
Common Units subject to outstanding Options) shall be adjusted by the Management
Committee if, in its good faith judgment, it shall deem such an adjustment to be
necessary or appropriate to reflect any transaction involving the Common Units
having the same effect as a stock dividend, stock split, stock issuance or
reverse stock split or any combination, recapitalization, reclassification,
merger, consolidation or other reorganization. The provisions of this Agreement
shall apply, to the full extent set forth herein with respect to Options, to
Common Units, to any and all equity interests or options to acquire equity
interests of the Company or any successor or assign of the Company (whether by
merger, consolidation, sale of assets or otherwise) which may be issued in
respect of, in exchange for, or in substitution of the Common Units, by reason
of any stock dividend, stock split, stock issuance, reverse stock split,
combination, recapitalization, reclassification, merger, consolidation or
otherwise. Nothing contained in this Agreement shall prohibit or restrict the
Company from reorganizing into a corporation or other entity or otherwise
recapitalizing in connection with a Sale of the Company or Public Offering of
the Company's equity interests. Each member of the Executive Group shall
cooperate with, and take all actions requested by, the Company in effecting such
a reorganization. In the event that the Company is reorganized as a corporation
(or the interests in the Company are transferred to a corporation) (a
"REORGANIZATION"), the Executive shall cooperate with such Reorganization. In
the event of a Reorganization, the Company's successor or its new parent entity
may substitute an option to purchase its stock (with substantially equivalent
economic terms as this Agreement) for this Agreement, and the Executive will
execute such documents as are required to evidence such substitution.
6.4 REQUIREMENTS OF LAW. The issuance of Common Units shall be
subject to all applicable laws, rules and regulations and to such approvals by
any governmental agencies or national securities exchanges or quotation systems
as may be required. The Company will be under no obligation to issue, sell or
transfer any Common Units upon the Executive's election to exercise any Options
granted hereunder if such issuance, sale or transfer would, in the reasonable
opinion of the Company, result in a violation of applicable law, including the
federal securities laws and any commercially reasonable efforts to obtain the
approvals referred to in this Section 6.4 and otherwise to permit any such
issuance, sale or transfer of Common Units to comply with applicable law, it
being expressly understood, however, that the Company shall not have any
obligation to register the Common Units or otherwise take any other action to
make available any exemption from the registration requirements of any federal
or state securities law to permit the issuance, sale or transfer of such Common
Units.
6.5 EXECUTIVE'S EMPLOYMENT BY THE COMPANY. Nothing contained in
this Agreement shall be deemed to obligate the Company or any subsidiary of the
Company to employ the Executive in any capacity whatsoever or to prohibit or
restrict the Company (or any such subsidiary) from terminating the employment of
the Executive at any time or for any reason whatsoever, with or without Cause.
6.6 NO RIGHTS AS EQUITY HOLDER. Except as otherwise required by
law, the Executive shall not have any rights as an equity holder with respect to
any Common Units until
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<PAGE>
such time as the Common Units have been so issued.
6.7 ADMINISTRATION BV MANAGEMENT COMMITTEE. This Option Agreement
shall be administered by the Management Committee, which shall have full power
and authority to construe and administer this Agreement as it may deem
advisable.
6.8 BINDING EFFECT. The provisions of this Agreement shall be binding
upon and accrue to the benefit of the parties hereto and their respective heirs,
legal representatives, successors and assigns; PROVIDED, HOWEVER, that no
transferee shall derive any rights under this Agreement unless and until such
transferee has executed and delivered to the Company a valid undertaking and
becomes bound by the terms of this Agreement.
6.9 AMENDMENT: WAIVER. This Agreement may be amended only by a
written instrument signed by the parties hereto. No waiver by any party hereto
of any of the provisions hereof shall be effective unless set forth in a writing
executed by the party so waiving.
6.10 GOVERNING LAW. This Agreement shall be governed by and
construed and enforced in accordance with the laws of the State of New York
without regard to the conflicts of law principles thereof.
6.11 JURISDICTION. Any suit, action or proceeding with respect to
this Agreement, or any judgment entered by any court in respect of any thereof,
shall be brought in any court of competent jurisdiction in the State of New
York, and each of the Company and the members of the Executive Group hereby
submits to the exclusive jurisdiction of such courts for the purpose of any such
suit, action, proceeding or judgment. Each of the members of the Executive Group
and the Company hereby irrevocably waives any objections which it may now or
hereafter have to the laying of the venue of any suit, action or proceeding
arising out of or relating to this Agreement brought in any court of competent
jurisdiction in the State of New York, and hereby further irrevocably waives any
claim that any such suit, action or proceeding brought in any such court has
been brought in any inconvenient forum.
6.12 NOTICES. All notices and other communications hereunder shall be
in writing and shall be deemed to have been duly given when personally
delivered, telecopied (with confirmation of receipt), two days after deposit
with a reputable overnight delivery service (charges prepaid) and three days
after deposit in the U.S. Mail (postage prepaid and return receipt requested) to
the address set forth below or such other address as the recipient party has
previously delivered notice to the sending party.
(a) If to the Company:
Remington Products Company, L.L.C.
60 Main Street
Bridgeport, CT 06604
Attention: Allen S. Lipson
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<PAGE>
Telecopy: 203-366-7707
and
Remington Products Company, L.L.C.
c/o Vestar Equity Partners, L.P.
245 Park Avenue, 41 st Floor
New York, NY 10167
Attention: Robert L. Rosner
Telecopy: 212-808-4922
with a copy to:
Kirkland & Ellis
655 Fifteenth Street, N.W.
Washington,D.C. 20005-5793
Attention: Jack M. Feder
Telecopy: 202-879-5200
(b) If to the Executive, to the address as shown on the equity interest
register of
6.13 INTEGRATION. This Agreement and the documents referred to herein
or delivered pursuant hereto which form a part hereof contain the entire
understanding of the parties with respect to the subject matter hereof and
thereof. There are no restrictions, agreements, promises, representations,
warranties, covenants or undertakings with respect to the subject matter hereof
other than those expressly set forth herein and therein. This Agreement
supersedes all prior agreements and understandings between the parties with
respect to such subject matter.
6.14 COUNTERPARTS. This Agreement may be executed in separate
counterparts, and by different parties on separate counterparts each of which
shall be deemed an original, but all of which shall constitute one and the same
instrument.
6.15 INJUNCTIVE RELIEF. The Executive and Executive's Permitted
Transferees each acknowledges and agrees that a violation of any of the terms of
this Agreement will cause the Company irreparable injury for which adequate
remedy at law is not available. Accordingly, it is agreed that the Company shall
be entitled to an injunction, restraining order or other equitable relief to
prevent breaches of the provisions of this Agreement and to enforce specifically
the terms and provisions hereof in any court of competent jurisdiction in the
United States or any state thereof' in addition to any other remedy to which it
may be entitled at law or equity.
6.16 RIGHTS CUMULATIVE: WAIVER. The rights and remedies of the
Executive and the Company under this Agreement shall be cumulative and not
exclusive of any rights or remedies which either would otherwise have hereunder
or at law or in equity or by statute, and no failure or delay by either party in
exercising any right or remedy shall impair any such right or
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<PAGE>
remedy shall impair any such right or remedy or operate as a waiver of such
right or remedy, nor shall any single or partial exercise of any power or right
preclude such party's other or further exercise or the exercise of any other
power or right. The waiver by any party hereto of a breach of any provision of
this Agreement shall not operate or be construed as a waiver of any preceding or
succeeding breach and no failure by either party to exercise any right or
privilege hereunder shall be deemed a waiver of such party's rights or
privileges hereunder or shall be deemed a waiver of such party's rights to
exercise the same at any subsequent time or times hereunder.
6.17 ARBITRATION. (a) To the extent that the parties are unable
to resolve any disputes arising under this Agreement, other than disputes
relating to the fair market value of Common Units, then either party may submit
the dispute to binding arbitration in New York City in accordance with the rules
for Employee Dispute Resolution of the American Arbitration Association then in
effect (and the Company will pay all filing fees for commencing such
arbitration). The arbitrator's decision shall be made in accordance with such
rules, shall be delivered in writing to the parties and shall be conclusive and
binding upon the parties.
(b) Disputes relating to the Fair Market Value of Common Units shall
be submitted promptly to an investment banker from a nationally prominent
investment banking firm mutually acceptable to the Executive and the Company who
shall decide the Fair Market Value of the Common Units in accordance with the
definition of Fair Market Value herein. The costs of retaining the investment
banker shall be paid by the party whose valuation is furthest away from the
value as determined by the investment banker, provided that if the difference
between the value as so determined and the average of the values advocated by
the two parties is less than 5% of such average value, the costs shall be split
evenly by the Executive and the Company.
IN WITNESS WHEREOF, the parties have executed this Option Agreement as
of the date first above written.
REMINGTON PRODUCTS COMPANY, L.L.C.
By: /s/ Dainiel S. O'Connell
------------------------------
/s/ Neil P. DeFeo
------------------------------
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<PAGE>
SCHEDULE II
-----------
Performance Options
AGGREGATE
NUMBER OF OPTIONS EXERCISE PRICE EXERCISE PRICE
----------------- -------------- --------------
Common Units equaling 2% The same price per Common $160,000
of the Common Units on a Unit paid at the original
fully-diluted basis* closing
*The maximum number of Common Units to be acquired under the Performance Options
shall be adjusted at the first anniversary of the Grant Date so that the number
will be 2% of the Common Units on a fully-diluted basis on that date taking into
account (1) any issuances of options or Common Units to executives who become
employed by the Company and (2) repurchases (or cancellations) of options or
Common Units from executives whose employment with the Company is terminated, in
each case prior to the first anniversary of the Grant Date. Any other changes in
ownership of the Common Units shall be ignored for purposes of the adjustment.
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<PAGE>
SCHEDULE I
Current Options
AGGREGATE
NUMBER OF OPTIONS EXERCISE PRICE EXERCISE PRICE
----------------- -------------- --------------
Common Units equaling 5% The same price per Common $400,000
of the Common Units on a Unit paid at the original
fully-diluted basis* closing
* The maximum number of Common Units to be acquired under the Current Options
shall be adjusted at the first anniversary of the Grant Date so that the number
will be 5% of the Common Units on a fully-diluted basis on that date taking into
account (1) any issuances of options or Common Units to executives who become
employed by the Company and (2) repurchases (or cancellations) of options or
Common Units from executives whose employment with the Company is terminated, in
each case prior to the first anniversary of the Grant Date. Any other changes in
ownership of the Common Units shall be ignored for purposes of the adjustment.
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<PAGE>
SCHEDULE III
Performance Criteria
-19-
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
unaudited financial statements of the Company for the three months ended
March 29, 1997, and is qualified in its entirety by reference to such
financial statements.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> MAR-29-1997
<CASH> 2,175
<SECURITIES> 0
<RECEIVABLES> 21,477
<ALLOWANCES> 902
<INVENTORY> 62,798
<CURRENT-ASSETS> 89,128
<PP&E> 14,598
<DEPRECIATION> 1,690
<TOTAL-ASSETS> 174,438
<CURRENT-LIABILITIES> 30,850
<BONDS> 154,256
0
0
<COMMON> 0
<OTHER-SE> (12,185)
<TOTAL-LIABILITY-AND-EQUITY> 174,438
<SALES> 36,437
<TOTAL-REVENUES> 36,437
<CGS> 21,280
<TOTAL-COSTS> 21,280
<OTHER-EXPENSES> 15,446
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 4,665
<INCOME-PRETAX> (4,299)
<INCOME-TAX> (289)
<INCOME-CONTINUING> (4,010)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (4,010)
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
