SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
|X| ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 - For the fiscal year ended December 31, 1996.
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.
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(Exact name of registrant as specified in its charter)
Delaware 06-1451079
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(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
60 Main Street, Bridgeport, Connecticut 06604
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(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
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Securities registered pursuant to Section 12(g) of the Act:
11% Series B Senior Subordinated Notes due 2006
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(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 |_|
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. |X|
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PART I
ITEM 1. Business
General
Remington Products Company, L.L.C. (the "Company" or "Remington") is a
major manufacturer and marketer of 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
hairsetters, curling irons and hairdryers, men's electric grooming products,
travel products and other small electric consumer appliances.
The Company is a Delaware limited liability company that will continue in
existence until December 31, 2016 or dissolution prior thereto as determined
under the Company's LLC Agreement.
Prior to May 23, 1996, the Company operated as Remington Products Company
("RPC"), a Delaware general partnership, of which RPI Corp. (formerly known as
Remington Products, Inc.) ("RPI"), a company controlled by Mr. Victor K. Kiam,
II and Remsen Partners ("Remsen"), an entity controlled by Mr. Isaac Perlmutter,
were each 50% partners. On May 23, 1996 (the "Closing Date"), there was a
reorganization of the Company (the "Reorganization"), pursuant to which: (i) RPC
made a cash distribution in an amount of $56.9 million to Remsen (less estimated
excluded obligations of $6.6 million) and $48.0 million to RPI (less estimated
excluded obligations of $7.1 million and net of a $10.9 million reduction
pursuant to the preliminary working capital adjustment); (ii) Vestar Shaver
Corp. ("Vestar Corp. I") and Vestar Razor Corp. ("Vestar Corp. II" and, together
with Vestar Corp. I, the "Vestar Members"), corporations controlled by Vestar
Equity Partners, L.P. ("Vestar"), purchased Remsen's interest in the Company for
$33.4 million (the "Vestar Investment"); (iii) certain members of senior
management of the Company (the "Management Investors") acquired an equity
interest of $1.1 million (including a cash purchase of $0.86 million and
assuming exercise of certain management options with an aggregate exercise price
of $0.26 million) in the Company; (iv) the Company paid estimated excluded
obligations of approximately $10.7 million; (v)
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RPI retained an equity investment in the Company with an implied value of $35.4
million (the "Kiam Investment and, collectively with the Vestar Investment and
the Management Investment, the "Equity Investment"); and (vi) RPC was merged
with and into the Company.
In addition, as part of the Reorganization, $41.3 million of existing
indebtedness of RPC was refinanced. The funds required to consummate the
Reorganization were provided by an initial offering by the Company and its
wholly owned subsidiary, Remington Capital Corp. ("Capital"), of $130 million of
11% Senior Subordinated Notes due 2006 to qualified institutional buyers
pursuant to Rule 144A under the Securities Act of 1933, as amended, borrowings
under a Senior Credit Agreement and the cash proceeds of the Equity Investments.
On November 4, 1996, pursuant to a Registration Statement on Form S-4 under
the Securities Act of 1933, the Company completed an offer to exchange its 11%
Series B Senior Subordinated Notes due 2006 for all of the outstanding 11%
Senior Subordinated Notes due 2006 issued in connection with the reorganization.
Description of Business
Products
Electric Shavers. The Company is a leading distributor of men's and
women's electric shavers. The Company's primary men's electric shaver lines are
the Triple Foil(TM), Dual Foil/XLR(TM) , each with the Micro-Screen(R) cutting
system, and rotary shavers while the primary women's electric shaver lines are
the Ladies' wet/dry, the WER (Women's Electric Razor) and rotary shavers. The
Company also manufactures and distributes electric shaver accessories consisting
of shaver replacement parts (primarily foils and cutters), preshave products and
cleaning agents. Electric shavers accounted for 37%, 44% and 47% of the
Company's total net sales for the years ended December 31, 1996, 1995 and 1994
respectively.
Women's Personal Care Appliances. Remington entered the women's personal
care appliance market in the United States and expanded its presence overseas
through the acquisition in December 1993 of the Clairol personal care appliance
business from Bristol-Myers Squibb Company. These products consist primarily of
hairsetters, hairdryers, make-up mirrors, curling irons and curling brushes. The
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Company's hairsetter products include flocked rollers (both dry and mist) and
Remington Express Set(R) hairsetter, which heats in 90 seconds, the Smart
Setter(R) hairsetter, which incorporates a new proprietary technology that
indicates to users when optimum heat levels have been reached by changing the
color of the rollers. Women's personal care appliances accounted for 35%, 30%
and 27% of the Company's total net sales for the years ended December 31, 1996,
1995 and 1994, respectively.
Men's Grooming Products. Men's grooming products consist of beard and
mustache trimmers, nose hair and ear hair trimmers and home haircut kits.
Other Products. Remington's travel appliances consist of products that
provide personal grooming and other general household functions for domestic and
international travel. These items include travel hairdryers, steamers, irons,
voltage converter/adapter plugs and shavers. In the home health appliance
product category, Remington sells foot spas and back massagers outside the
United States.
Distribution
The Company's products are sold in the United States and internationally
in over 85 countries through mass merchandisers, catalog showrooms, drug store
chains and department stores in addition to the Company's 96 service stores.
In the United States, the Company sells products through mass-merchant
retailers such as Wal-Mart, K-Mart and Target, department stores such as Sears,
catalog showrooms such as Service Merchandise, drug store chains including
Walgreens, Eckerd and Revco, and Remington's own service stores. Throughout the
United States, the Company's products are sold in excess of 10,000 retail
outlets. Wal-Mart accounted for 17%, 16% and 16% of the Company's net sales
during the years ended December 31, 1996, 1995 and 1994. No other customer has
accounted for more than 10% of the Company's net sales during the years ended
December 31, 1996, 1995, and 1994.
Service Stores
Remington opened its first service store in 1981. As of March 15, 1997,
the
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Company owned and operated a chain of 96 service stores with 84 in the United
States, nine in the United Kingdom and three in Australia. During 1996, the
Company opened a total of four permanent and 12 seasonal service stores in the
United States, two permanent stores in the United Kingdom and acquired a chain
of three stores in Australia. The stores in the United States are in many of the
major markets with concentrations on the East Coast and in the major cities of
the South and West. The majority of the stores are located in shopping malls,
outlet malls and in prime locations within large metropolitan areas. The stores
sell and service a variety of Remington and non-Remington shavers, knives,
scissors, clocks, personal care appliances and related products. The service
stores also oversee sales of replacement parts to approximately 300 independent
authorized shaver service dealers across the United States. In 1996, the
Company's service stores generated worldwide net sales of $38.6 million, with
$33.7 million in the U.S. and $4.9 million internationally. Remington products
accounted for approximately 50% of these net sales.
Manufacturing Operations
Remington conducts all in-house manufacturing at its Bridgeport,
Connecticut facility. The Company assembles foil shavers and manufactures foil
cutting systems in Bridgeport using proprietary cutting technology and a series
of specially designed machines. Remington's Bridgeport facility can produce in
excess of 30,000 shavers a day, yet is flexible enough to operate economically
at much lower capacities. The electric shaver business is highly seasonal, with
significant production swings during the course of the year. As a result of such
swings, Remington's manufacturing process has been structured to utilize
temporary workers. As a result of these factors, during peak periods
approximately 30% of Remington's work force (excluding that of the service
stores) is composed of temporary workers.
Suppliers
A substantial portion of the Company's finished goods inventories are
manufactured for the Company by suppliers located in China, Japan and Thailand.
In determining whether to manufacture products in-house or source them from
third party suppliers, the Company balances the potential cost savings in labor,
materials and overhead that a foreign manufacturer can provide with the
flexibility, quality control and protection of confidentiality inherent in
in-house production. While Remington sources a large portion of its materials
and products from third-party suppliers, it continues to manufacture its triple
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foil and certain other shavers in-house and maintains ownership of tools and
molds used by many of its suppliers. The Company's three most significant
suppliers, Izumi Products, Inc. ("Izumi"), Raymond International and Fourace
Industries, Ltd., accounted for approximately 44% of the Company's overall cost
of sales in 1996. These three suppliers' manufacturing facilities are located in
China and Japan. Since purchases by Remington account for a significant portion
of the overall sales of these suppliers, the Company has generally been able to
negotiate favorable purchase terms. Remington has had a relationship with these
suppliers for many years and management considers its present relationships to
be good.
Research and Product Development
Research and development efforts at Remington allow the Company to
maintain its unique manufacturing strength in cutting systems for shavers. The
Company is currently concentrating its efforts on a new premium line of shavers
including foil improvements and new cutting and trimmer configurations. The
Company also devotes resources to the development of new technology for women's
personal care products, including hairsetters, hairdryers and curling irons.
Patents and Trademarks
The Company owns approximately 180 patent and patent applications for both
design and utility that are maintained in approximately 40 countries. The
Company's patents cover electric shavers, cutting and trimming mechanisms and
women's personal care products such as hairsetters, hairdryers and curling
irons. In addition, the Company maintains over 300 different trade names in
approximately 100 countries covering a variety of products. These trade names
have resulted in the issuance of over 1,300 registered trademarks.
As a result of the common origins of the Company and Remington Arms, the
Remington mark is owned by each company with respect to its principal products
as well as associated products. Thus, the Company owns the Remington mark for
shavers, shaver accessories, grooming products and health care products, while
Remington Arms owns the mark for firearms, sporting goods and products for
industrial use, including industrial hand tools. The terms of a 1986 agreement
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between the Company and Remington Arms provided for their respective rights to
use the Remington trademark on products which are not considered "principal
products of interest" for either company. A separate company, Remington
Licensing Corporation, owns the Remington trademark in the U.S. with respect to
any overlapping uses and the Company and Remington Arms are each licensed to use
the mark in their respective areas of interest. The Company retains the
Remington trademark for nearly all products which it believes can benefit from
the use of the brand name in the Company's distribution channels. The Company
has aggressively enforced its ownership of the Remington brand name.
Competition
The Company believes that the markets for all of its product lines are
highly competitive and that competition for retail sales to consumers is based
on several factors, including brand name recognition, value, quality, price and
availability. Primary competitive factors with respect to selling such products
to retailers are brand reputation, product categories offered, broad coverage
within each product category, support and service in addition to price.
Remington competes with established companies, several of which have
substantially greater resources than those of the Company. There are no
substantial regulatory barriers to entry for new competitors in the electric
personal appliance industry. However, suppliers that are able to maintain, or
increase, the amount of retail shelf space allocated to their respective
products may gain a competitive advantage. The Company believes that the
allocation of space by retailers is influenced by many factors, including brand
name recognition by consumers, product quality and prices, service levels
provided by the supplier and the supplier's ability to support promotions.
The rotary shaver market is significant outside the United States. The
future expansion of sales of the Company's rotary shavers outside the United
States will be affected by, among other factors, the outcome of ongoing legal
actions against Philips Electronics, N.V. ("Philips"). Philips holds patents and
trademarks outside the United States on certain of its shaver designs that
restrict the Company from entering these markets. The Company is currently
challenging such trademarks and patents in the United Kingdom. During 1996, in
Canada, the Company successfully challenged certain of Philips' trademarks.
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Employees
As of December 31, 1996, the Company employed approximately 1,150 people
in the United States and abroad of which approximately 240 were employed
part-time. None of the Company's employees are represented by a union. Remington
believes relations with its employees are good.
Environmental Matters
The Company's manufacturing operations are subject to federal, state and
local environmental laws and regulations. The Company believes it is in
substantial compliance with all such environmental laws which are applicable to
its operations. The Company has reported to the Connecticut Department of
Environmental Protection that it has detected petroleum and solvent compounds in
soil and ground water samples taken from its Bridgeport facility at levels which
may require further investigation or cleanup. In addition to its ongoing program
of environmental compliance, the Company has provided reserves to cover the
anticipated costs of remediation which may be necessary at its Bridgeport
facility. The Company believes that the costs for any remediation activities
which are eventually undertaken would not be material to the Company's financial
position and results of operations.
International Operations and Distribution
Remington's international operations (excluding export sales from the U.S.)
generated approximately 39%, 36% and 33% of the Company's net sales in 1996,
1995 and 1994, respectively. The Company's international network of subsidiaries
and distributors currently extends to over 85 countries worldwide. The Company
markets products throughout Europe, the Middle East, Africa, Asia and a portion
of South America through its subsidiary in the United Kingdom, and distributes
products to Japan, Central America and the remainder of South America from its
United States headquarters. The Company distributes its products directly in the
United Kingdom, Australia, Canada, Germany, France, New Zealand and Ireland. In
all other parts of the world the Company distributes its products through
strategic alliances with local distributors. Remington enjoys leading market
positions in many personal grooming products in the United Kingdom and
Australia, while also having a market presence in Canada. As in the United
States market, the primary asset of the Company's international operations is
the
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Remington brand name.
The Company distributes products internationally through electric product
stores, drug stores, specialized shaver shops, catalog showrooms, department
stores, mail order and television and the Company's service stores. As in the
United States, Remington has established direct relationships with many of the
leading international retailers.
Additional financial information relating to Remington's international
operations is set forth in Note 14 (Geographic Information) of the "Notes to
Consolidated Financial Statements" of the Company appearing elsewhere herein.
ITEM 2. Properties
The Company's executive offices and sole manufacturing facility are
located at 60 Main Street, Bridgeport, Connecticut, 06604. The following is
additional information concerning the principal facilities of the Company.
Facility Function Square Feet
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Bridgeport, CT Headquarters (Owned) 40,000
Bridgeport, CT Manufacturing (Owned) 167,000
Milford, CT Warehouse (Leased) 100,000
Northampton, England Office and Warehouse (Leased) 52,000
In addition to these properties, Remington leases offices and warehouse
space in Canada, United Kingdom, Germany, France, Australia and New Zealand, and
96 service stores, of which 84 are in the United States, nine are in the United
Kingdom and three are in Australia.
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ITEM 3. Legal Proceedings
The Company and Philips are engaged in litigation in the United Kingdom
relating to certain trademarks and designs issued to Philips relating to
Philips' triple head rotary shaver. In these proceedings, Philips alleged
infringement of its trademarks and designs by the Company and the Company
counter-claimed that Philips' trademark and design registrations are invalid.
Related litigation in Canada initiated by the Company with respect to Philips'
trademarks was determined in favor of the Company in 1996. The costs of the U.K.
litigation are, in certain circumstances, shared with Izumi, the Company's
supplier of rotary shavers. Izumi is also pursuing actions against Philips in
Sweden to contest the validity of certain of Philips' trademarks. If such
litigation is determined adversely to the Company or Izumi, the Company's
ability to sell rotary shavers in such countries could be limited or prohibited.
In 1996, the Company's net sales of rotary shavers in Europe were not material.
In October 1996, the Company and its wholly owned United Kingdom
subsidiary ("Remington UK"), settled all litigation with Braun AG, Braun (UK)
Limited and Braun Inc. which was pending in the United Kingdom Patent Court and
the U.S. District Court for the District of Massachusetts. The litigation, which
was commenced against Remington UK in July 1995 and against the Company in
January 1996, alleged that Remington UK infringed several United Kingdom patents
owned by Braun relating to a volumizing attachment and pulsating attachment
packaged with certain hairdryers sold by Remington UK and that the Company
infringed a U.S. patent corresponding to the UK patent relating to the same
volumizing attachment. The settlement, which had no material effect on the
Company's financial position or results of operations, required certain minor
modifications in the volumizing attachment and granted to the Company a license
on the pulsating attachment.
In December 1996, a suit was filed against the Company and Pentalpha
Enterprises, Ltd., in the U.S. District Court for the Eastern District of
California by Dickson Industries Co., Ltd. and Charles W. Howard. The suit
alleges that the Company infringed a patent owned by Mr. Howard, which was
licensed to Dickson, relating to certain curling irons sold by the Company and
manufactured by Pentalpha. Plaintiffs are seeking a temporary injunction to
prohibit the Company from selling the allegedly infringing curling irons and
damages. The parent company of Pentalpha has agreed to indemnify the Company for
all losses and
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expenses arising from the claimed infringement. The Company has denied that the
curling irons in question infringes the patent and intends to defend the action
fully and vigorously.
The Company is a party to other lawsuits and administrative proceedings
that arose in the ordinary course of business. Although the final results in
such suits and proceedings cannot be predicted, the Company presently believes
that any liability that may ultimately result will not have a material adverse
effect on the Company's financial position or results of operations.
ITEM 4. Submission of Matters to a Vote of Securities Holders
No matters were submitted to a vote of securities holders.
PART II
ITEM 5. Market for Registrant's Common Equity and Related Stockholder Matters
(a) Market Information
All of the Company's outstanding equity securities are privately held.
(b) Holders
As of March 1, 1997, there were six holders of the common equity
securities of the Company.
(c) Dividends
No cash distributions have been made on the common and preferred equity of
the Company since the Closing Date. Prior to the reorganization, the Company
operated as a general partnership and cash distributions were made to the
partners. In addition, the Company's long-term debt arrangements, which are
discussed in note 7 of the "Notes to Consolidated Financial Statements" of the
Company
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appearing elsewhere herein, significantly restrict the payment of dividends.
(d) Recent Sales of Unregistered Securities
On the Closing Date, in connection with the Reorganization, the Company
issued a total of $62 million 12% Series A Preferred Equity to the Vestar
Members and RPI and 77,420 common units at a price of $100 per unit to the
Vestar Members, RPI and certain Management Investors in private transactions
exempt from registration under Rule 701 of the Securities Act of 1933, as
amended.
Item 6. Selected Financial Data
The following table summarizes selected financial information and should
be read in conjunction with "Management's Discussion and Analysis of Financial
Condition and Results of Operations" and the Financial Statements and
accompanying notes thereto appearing elsewhere herein (in thousands):
<TABLE>
<CAPTION>
Successor Predecessor
--------- ----------------------------------------------------------------------------------------
31 Weeks 21 Weeks Year Ended 3 Months Year 2 Months 10 Months
Ended Ended December 31, Ended Ended Ended Ended
Dec. 31, May 23, --------------------- Dec. 31, Sept. 30 Sept. 30 July 25
1996 1996 1995 1994 1993 1993 1992 1992
--------- -------- -------- -------- -------- -------- -------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Statement of
Operations Data:
Net sales $ 185,286 $ 56,713 $255,323 $261,446 $ 71,152 $156,665 $ 32,456 $ 128,908
Operating income
(loss) 12,508 (16,951) 26,516 21,228 5,459 7,681 4,187 2,294
Interest expense 12,164 2,228 7,604 6,414 1,248 4,066 1,340 8,246
Net income (loss) (3,172) (18,191) 17,240 14,725 4,024 3,021 2,559 (9,531)
Balance Sheet Data
(at period end):
Working capital $ 77,860 N/A $ 47,223 $ 62,862 $ 70,164 $ 46,935 $ 1,603 (59,441)
Total assets (1) 214,823 N/A 170,922 160,543 175,567 107,027 115,679 73,081
Total debt 171,631 N/A 56,990 55,093 71,931 41,743 45,997 62,414
Cumulative Preferred
Equity
Dividend (2) 4,576
</TABLE>
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(1) The significant increase in assets is a result of the acquisition of the
assets and liabilities of Clairol's personal care appliance business in December
1993.
(2) Dividend payments are subject to restrictions by the terms of the Company's
debt agreements.
ITEM 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations
Overview
The Company manufactures and markets men's and women's electrical shavers
and personal care appliances. In addition to its U.S. merchandising and
manufacturing operations, the Company has merchandising subsidiaries in the
United Kingdom, Canada, Germany, Australia and New Zealand and a branch office
in France. The Company markets products throughout Europe, the Middle East,
Africa, Asia and a portion of South America through its subsidiary in the United
Kingdom and distributes products to Japan, Central America and the remainder of
South America from its U.S. headquarters.
In 1995, the Company's prior owners initiated efforts to sell the Company.
The Company received several proposals from interested parties other than Vestar
but was unable to reach a definitive agreement at a price and on terms
acceptable to both RPI and Remsen. The Reorganization represents the culmination
of this sale process. As a result of this sale process, the Predecessor Company
incurred and expensed bonuses, contract termination and closing costs in the
amount of $10.9 million and $0.8 million during 1996 and 1995, respectively.
Results of Operations
The following table sets forth the Company's statement of operations,
including its net sales by its U. S. operations (including export sales from the
U.S.), U.S. service stores, and international operations (including service
stores in Canada, the United Kingdom and Australia) and the Company's results of
operations as a percentage of net sales for the twelve months ended December 31,
1996 and the years ended December 31, 1995 and 1994. To facilitate comparison of
the operating results of the periods set forth below, results of operation for
the twelve months ended December 31, 1996 were obtained by combining, without
adjustment, the results of operations of the predecessor company from January 1,
1996 to May 23, 1996 (the "Predecessor Period") with those of the Company for
the period from May 24, 1996 to December 31, 1996 (the "Successor Period"). The
discussion should be read in connection with the Financial Statements and
accompanying notes thereto appearing elsewhere herein.
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<TABLE>
<CAPTION>
Predecessor and Successor Predecessor
------------------------- -----------
12 Months Ended Year Ended December 31,
December 31, 1996 1995 1994
----------------- ----------------- ------------------
$ % $ % $ %
------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C>
Net Sales:
U.S $113.2 46.7 $131.2 51.4 $143.8 55.0
U.S. service stores 33.7 13.9 32.9 12.9 32.4 12.4
International 95.1 39.4 91.2 35.7 85.2 32.6
------ ------ ------ ------ ------ ------
242.0 100.0 255.3 100.0 261.4 100.0
Cost of sales 152.7 63.1 143.2 56.1 150.1 57.4
------ ------ ------ ------ ------ ------
Gross profit 89.3 36.9 112.1 43.9 111.3 42.6
Selling, general and
administrative 91.9 37.9 83.9 32.9 88.5 33.9
Intangible amortization 1.9 0.8 1.7 0.6 1.6 0.6
------ ------ ------ ------ ------ ------
Operating income (loss) (4.5) (1.8) 26.5 10.4 21.2 8.1
Interest expense 14.4 5.9 7.6 3.0 6.4 2.5
Other expense (income) 0.3 0.1 0.4 0.2 (1.0) 0.4
------ ------ ------ ------ ------ ------
Income (loss) before income
taxes (19.2) (7.9) 18.5 7.2 15.8 6.0
Provision for income
taxes 2.2 0.9 1.3 0.5 1.1 0.4
------ ------ ------ ------ ------ ------
Net income (loss) $(21.4) (8.8) $ 17.2 6.7 $ 14.7 5.6
====== ====== ====== ====== ====== ======
</TABLE>
Twelve Months December 31, 1996 compared to the year ended December 31, 1995
Net Sales. Net sales for the year ended December 31, 1996 were $242.0
million compared to $255.3 million for the previous year, a decrease of 5.0%.
The decrease in net sales in 1996 was due to a decline in net sales in the
United States to $113.2 million in 1996 from $131.1 million in 1995 and was
partially offset by a 4.0% increase in international net sales to $95.1 million
in 1996 from $91.2 million in 1995.
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Net sales in the United States were down 14% primarily as a result of a
decline in hair dryer sales due to competitive pricing and the late arrival of
certain new curling irons which delayed introduction past the key fall season.
In addition, lower average pricing of shaver products and inventory reduction
programs instituted by certain major retailing customers also negatively
impacted sales in 1996.
Net sales through the Company's U.S. service stores increased 2.0% to
$33.7 million in 1996 from $32.9 million in 1995. Same store sales declined 1.2%
from 1995 to 1996. The decrease in same store net sales was due to a decision to
eliminate certain knife product offerings and the impact of five fewer shopping
days in the Thanksgiving to Christmas holiday selling season. Sales increased
overall due to the opening of 4 permanent stores and 12 seasonal stores for a
total of 88 stores open through the 1996 holiday shopping season. The seasonal
stores were operated on a temporary basis with no future lease commitment and 8
were closed before 12/31/96.
International net sales increased 4.0% to $95.1 million in 1996 from $91.3
million in 1995. Most of this increase occurred in Australia which increased
22.4% in 1996 as a result of volume increases across most product lines and the
acquisition of a chain of 3 service stores in July 1996. Net sales in the United
Kingdom increased 5.1% in 1996 due to strong sales of personal care products
which more than offset a modest decline in shaver and accessory sales. These
results were somewhat offset by lower net sales in Germany and Canada due to
continued weakness in the German economy and the bankruptcy of Canada's largest
customer in July 1996.
Gross Profit. Gross profit decreased to $89.3 million, or 36.9% of net
sales, in 1996 from $112.1 million or 43.9% of net sales in 1995. The largest
factor contributing to the decline in margin was the lack of new shaver product
offerings in the U.S., which resulted in reduced selling prices on certain
shaver lines and higher costs associated with promotional gifts. Margins were
down slightly in the United Kingdom, Germany and Canada, but were offset by
strength in Australia. In addition, approximately 2.0% of the gross profit
margin percentage decline is due to inventory valuation adjustments.
Selling, General and Administrative. Selling, general and administrative
expenses increased to $91.9 million in 1996, or 37.9% of net sales, from $83.9
million, or 32.9% of net sales in 1995. The increase was primarily due to the
$10.9 million in non-recurring expenditures related to the Reorganization. In
addition, advertising expenses decreased due to the year to year difference in
new product introductions and selling and marketing expenses increased slightly
due to costs associated with new service stores.
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Operating Income (Loss). Operating income decreased to a loss of $(4.5)
million, or (1.8)% of net sales, in 1996 from income of $26.5 million, or 10.4%
of net sales, in 1995.
Interest Expense. Interest expense increased to $14.4 million in 1996 from
$7.6 million in 1995. Approximately $8.7 million of this increase is due to the
new senior subordinated notes issued May 23, 1996. The remaining difference is
primarily attributable to lower rates on the refinanced term and revolving
credit borrowings.
Provision for Income Taxes. The provision for income taxes was $2.2
million in 1996 as compared to $1.3 million in 1995. The 1996 provision for
foreign income taxes increased by $0.8 million primarily due to the benefit in
1995 from the utilization of foreign net operating loss carryforwards and the
reversal of valuation allowances on foreign deferred tax asset balances.
Year Ended December 31, 1995 compared to Year Ended December 31, 1994
Net Sales. Net sales for the year ended December 31, 1995 were $255.3
million compared to $261.4 million for the previous year, a decrease of 2.3%.
The decrease in net sales in 1995 was due to a decline in net sales in the
United States to $131.2 million in 1995 from $143.8 million in 1994, partially
offset by a 7.0% increase in international net sales to $91.2 million in 1995
from $85.2 million in 1994. The decline in the United States was almost entirely
attributable to a decrease in electric shaver and shaver accessory sales.
Management believes that this decrease was a result of: (I) a decline in the net
sales to certain of the Company's smaller customers due to uncertainty regarding
the Company's ownership status, (ii) a conservative buying policy on the part of
many of the Company's customers who anticipated a disappointing Christmas retail
season, and (iii) a reduction in net sales to Wal-Mart principally due to a
reduction by Wal-Mart in its inventory levels and the consolidation of the
number of its warehouses stocking shavers. Despite these inventory management
initiatives, Wal-Mart point of sale data indicate that retail sales of the
Company's products increased approximately 17% in 1995 from 1994.
Net sales through the Company's U.S. service stores increased to $32.9
million in 1995 from $32.4 million in 1994, an increase of 1.5%. Same store
sales increased 7.1% from 1994 to 1995. The increase in same store net sales was
offset by the closing of six stores with one new store opening in 1995 and the
discontinuation of a direct mail catalog that was distributed in 1994.
16
<PAGE>
International net sales increased 7.0% to $91.2 million in 1995 from $85.2
million in 1994. Most of this increase occurred in the United Kingdom as a
result of the opening of two new service stores in 1995, an increase in net
sales to United Kingdom export markets and the strengthening of the Pound
Sterling relative to the U.S. dollar. Substantial increases in net sales of
women's personal care products and men's grooming products more than offset a
modest decline in shaver and accessory sales.
Gross Profit. Gross profit increased to $112.1 million, or 43.9% of net
sales, in 1995 from $111.3 million, or 42.6% of net sales, in 1994 despite the
decline in worldwide net sales. The increase in gross profit was primarily
attributable to the elimination of certain charges incurred in 1994, including:
(i) a $2.2 million inventory writedown of a discontinued product, (ii)
approximately $1.5 million of air freight expenses incurred due to manufacturing
delays that occurred at a former supplier, and (iii) close-out sales of Clairol
branded products prior to changing the brand name to Remington. These
eliminations were offset in part by a decrease in gross profit due to the
increased percentage of net sales generated by women's personal care products,
which typically sell at lower gross margins than the Company's traditional
shaver products.
Selling, General and Administrative. Selling, general and administrative
expense decreased to $83.9 million, or 32.9% of sales in 1995 from $88.5
million, or 33.9% of sales in 1994. This decrease was primarily attributable to
a $2.9 million reduction in advertising expenditures during the 1995 Christmas
retail season as a result of below-normal purchases by the Company's customers
in anticipation of disappointing Christmas retail sales in the United States.
Decreases in general and administrative expenses were the result of headcount
reductions and purchasing efficiencies on certain services.
Operating Income. Operating income increased to $26.5 million, or 10.4% of
net sales, in 1995 from $21.2 million, or 8.1% of net sales, in 1994.
Interest Expense. Interest expense increased to $7.6 million in 1995 from
$6.4 million in 1994. Approximately $0.8 million of this increase was primarily
due to an increase in interest rates in 1995 from 1994. In addition, average
borrowings increased in 1995 by $4.2 million due to an approximate $13.2 million
increase in average inventories. Average inventories were higher in 1995 due to
the aforementioned decline in net sales which occurred after production
schedules and inventory purchases had been committed.
Provision for Income Taxes. The provision for income taxes was $1.3
million in 1995 as compared to $1.1 million in 1994. The 1995 provision for
foreign income taxes was reduced
17
<PAGE>
by $1.3 million due to utilization of foreign net operating loss carryforwards
and an additional $0.6 million for the reversal of valuation allowances on 1995
foreign deferred tax asset balances. Due to improvements in operating
performance at the Company's United Kingdom subsidiary, management believes such
deferred tax assets are likely to be realized in future periods.
Effects of Changes in Exchange Rates
The Company's results of operations are affected by changes in exchange
rates as the Company prices its products in Europe, Canada and Australia in
local currency. While many of the Company's selling and distribution costs are
also denominated in these currencies, a large portion of the product costs are
U.S. dollar denominated. As a result, a decline in the value of the U.S. dollar
relative to these other currencies can have a favorable effect on the
profitability of the Company and, conversely, an increase in the value of the
U.S. dollar relative to these other currencies can have a negative effect on the
profitability of the Company. The Company takes precautions against these
fluctuations by entering into foreign exchange forward contracts, which, in
effect, lock in the cost for products the Company's foreign subsidiaries
purchase. The Company experienced a $1.5 million unrealized loss as of December
31, 1996 related to marking certain forward contracts to market. This loss was
somewhat offset by realized and unrealized transaction gains.
Liquidity and Capital Resources
During the twelve-month period ended December 31, 1996 and the years ended
1995 and 1994, the Company generated approximately $6.0 million, $0.7 million
and $14.8 million, respectively, in cash from operating activities. The increase
in 1996 net cash flows from operating activities is principally due to a
decrease in receivables of $13.8 million, increases in accounts payable of $6.6
million and accrued liabilities of $9.8 million offset by an increase in
inventory of $10.9 million during 1996 as compared to 1995. The decrease in
receivables and increase in inventories is largely due to the lower sales levels
in 1996.
The Company's operations are not capital intensive. During 1996, 1995 and
1994, the Company purchased property, plant and equipment of $3.7 million, $3.3
million and $4.4 million, respectively. The Company's 1997 capital expenditure
budget is $7.0 million, of which approximately $3.0 million will be used for
purchases of tools and molds for new products.
During 1996, the Company repaid aggregate principal amounts on term loans
of $4.6 million (not including a $2.5 million net reduction in term loans
outstanding as a result of the
18
<PAGE>
Reorganization). During 1995 and 1994, the Company repaid $13.6 million and $3.5
million, respectively, with cash generated from operations or increases in net
borrowings under the Company's revolving credit agreements.
The Company's primary sources of liquidity are funds generated from
operations and borrowings available pursuant to the Senior Credit Agreement. The
Senior Credit Agreement provides for $70 million in Revolving Credit Facilities
and $10 million in Term Loans. The Term Loans are repayable quarterly over six
years. Borrowings under the Revolving Credit Facilities mature in six years. The
Company believes that cash generated from operations and borrowing resources
will be adequate to permit the Company to meet both its debt service
requirements and capital requirements for the next twelve months, although no
assurance can be given in this regard.
Seasonality
Sales of the Company's products are highly seasonal, with a large
percentage of net sales occurring during the Christmas selling season. The
Company typically derives more than 40% of its annual net sales in the fourth
quarter of each year. As a result of this seasonality, the Company's inventory
and working capital needs fluctuate substantially during the year. In addition,
Christmas orders from retailers are often made late in the year, making
forecasting of production schedules and inventory purchases difficult. Any
adverse change in the Company's results of operations in the fourth quarter
would have a material adverse effect on the Company's financial condition and
results of operations.
Inflation
In recent years, inflation has not had a material impact upon the results
of the Company's operations.
ITEM 8. Financial Statements and Supplementary Data
The Company's financial statements and supplementary data are included
elsewhere herein as outlined on page F-1.
ITEM 9. Changes in and Disagreements With Accountants on Accounting and
Financial Disclosure
None
19
<PAGE>
PART III
ITEM 10. Directors and Executive Officers.
The following table sets forth certain information (ages as of March 15,
1997) with respect to individuals who are members of Remington's Management
Committee and each executive officer of the Company.
Name Age Positions and Offices
---- --- ---------------------
Neil P. DeFeo 50 Chief Executive Officer, President and
Director of Remington
Alexander R. Castaldi 46 Executive Vice President and Chief Financial
Officer
Lawrence D. Handler 51 President, Remington Service Stores
Geoffrey L. Hoddinott 53 Vice President, Remington Europe,
Africa & Middle East
H. Graham Kimpton 61 Vice President, Remington Australia
& Asia
Michael A. Linton 40 Vice President, Marketing
Allen S. Lipson 54 Vice President, Administration,
General Counsel and Secretary of
Remington
20
<PAGE>
Jack W. Waller 51 Vice President, Manufacturing
Victor K. Kiam, II 70 Chairman and Director of Remington
Norman W. Alpert 38 Director of Remington
William B. Connell 56 Director of Remington
Victor K. Kiam, III 37 Vice President Corporate
Development and Director of
Remington
Kevin A. Mundt 43 Director of Remington
Arthur J. Nagle 58 Director of Remington
Daniel S. O'Connell 42 Director of Remington
Robert L. Rosner 37 Director of Remington
Neil P. DeFeo has served as President, Chief Executive Officer and a
Director of the Company and President and a director of Capital since January
1997. From 1993 to 1996, Mr. DeFeo was Group Vice President, U.S. Operations for
The Clorox Company. For over 20 years prior to 1993, Mr. DeFeo worked for
Procter & Gamble in various executive positions, including Vice President and
Managing Director, Worldwide Strategic Planning, Laundry and Cleaning Products
from 1990 to 1993.
Alexander R. Castaldi has been the Executive Vice President and Chief
Financial Officer of the Company since November 1996. From 1995 to 1996, Mr
Castaldi was Vice President and Chief Financial Officer of Uniroyal Chemical and
from 1990 to 1995, he was Senior Vice President and Chief Financial Officer of
Kendall International, Inc. Mr Castaldi is a director of Freedom Chemical Inc.
Lawrence D. Handler, has been President, Remington Service Stores, since
21
<PAGE>
June 1996 and was Vice President and Chief Financial Officer of the Service
Stores from January 1995 when he joined the Company until June 1996. From
January 1994 until December 1994, Mr. Handler was a private financial
consultant, specializing in retail operations and from May 1993 until December
1993 he was Vice President and Chief Financial Officer of Terrific Promotions,
Inc. From March 1992 until May 1993, he was Vice President and Controller of
Value Merchants, Inc.
Geoffrey L. Hoddinott is Vice President, Remington Europe, Africa & Middle
East. Mr. Hoddinott has been managing director of the United Kingdom operation
since he joined the Company in November 1981.
H. Graham Kimpton is Vice President, Remington Australia & Asia. Mr.
Kimpton joined the Company in April 1988 and has been managing the
Australian/New Zealand operation since that time.
Michael A. Linton, was appointed Vice President Marketing in March 1997.
Prior to joining the Company, he was with James River Corporation since 1993 as
Marketing Director and most recently as Vice President, General Manager, Towel
and Tissue Category. From 1987 to 1993, Mr. Linton held various positions with
Progressive Insurance Company, including Division General Manager and Assistant
Vice President.
Allen S. Lipson is Vice President, Administration, General Counsel and
Secretary of Remington and has been Secretary and a director of Capital since
May 1996. Mr. Lipson has been the General Counsel of the Company since October
1988.
Jack W. Waller joined Remington in 1993 as Vice President, Manufacturing.
From 1988 to 1993, Mr. Waller was Vice President Operations at Corbin/Russwin, a
Black & Decker company.
Victor K. Kiam, II has served as Chairman since 1979 and served as Chief
Executive Officer of the Company from 1979 to 1996. Mr. Kiam is a director of
Citadel Computer Inc.
Norman W. Alpert has been a Director of Remington since May 1996. Mr.
Alpert is a Managing Director of Vestar Capital Partners and was a founding
partner of Vestar at its inception in 1988. Mr. Alpert is Chairman of the Board
of Directors
22
<PAGE>
of International AirParts Corporation and a director of Aearo Corporation,
Clark-Schwebel, Inc., Prestone Products Corporation and Russell Stanley
Corporation, all companies in which Vestar or its affiliates have a significant
equity interest.
William B. Connell has been a Director of Remington since 1990. Mr.
Connell is currently Chairman of EBD Holdings, Inc., a private venture capital
group. Mr. Connell previously served as Vice Chairman of Whittle Communications,
L.P. from 1992 to 1994 and served as its President and Chief Operating Officer
from 1990 to 1992. In addition to Remington, Mr. Connell is currently a director
of Baldwin Piano & Organ Company, Dolphin Software, Inc., EDB Holdings, Inc. and
New Day Schools, Inc. and is currently a member of the management committee of
College View.
Victor K. Kiam, III is Executive Vice President of RPI Corp. and has been
a Director of Remington since 1992. Mr. Kiam was with the Company since 1986 and
has held a variety of positions in manufacturing, sales and marketing. He was
promoted to Vice President in 1990. Mr. Kiam ceased to be employed by the
Company in May 1996, although he remains an officer. He is the son of Victor K.
Kiam, II.
Kevin A. Mundt has been a Director of Remington since July 1996. Mr. Mundt
is co-founder and has been Managing Director of Corporate Decisions, Inc. since
its inception in 1983. Mr. Mundt is a director of Prestone Products Corporation,
a company in which Vestar or its affiliates have a significant equity interest.
Arthur J. Nagle has been a Director of Remington since May 1996. Mr. Nagle
is a Managing Director of Vestar Capital Partners and was a founding partner of
Vestar at its inception in 1988. Mr. Nagle is a director of Aearo Corporation,
Chart House Enterprises, Inc., Clark-Schwebel, Inc., La Petite Holdings
Corporation, Prestone Products Corporation, Russell-Stanley Corporation and
Super D Drugs, Inc., all companies (other than Chart House Enterprises, Inc.) in
which Vestar or its affiliates have a significant equity interest.
Daniel S. O'Connell has been a Director of Remington since May 1996. Mr.
O'Connell is founder and the Chief Executive Officer of Vestar Capital Partners.
Mr. O'Connell is a director of Anvil Knitwear, Inc., Aearo Corporation,
Clark-Schwebel, Inc., Pinnacle Automation, Inc., Prestone Products Corporation
23
<PAGE>
and Russell-Stanley Corporation, all companies in which Vestar or its affiliates
have a significant equity interest.
Robert L. Rosner has been a Director of Remington since May 1996. Mr.
Rosner is a Managing Director of Vestar Capital Partners and was a founding
partner of Vestar at its inception in 1988. Mr. Rosner is a director of Prestone
Products Corporation and Russell-Stanley Corporation, both companies in which
Vestar or its affiliates have a significant equity interest.
ITEM 11. Executive Compensation
Compensation of Executive Officers
The following Summary Compensation Table includes individual compensation
information for each individual who served in the position of the Company's
Chief Executive Officer ("CEO") during 1996 and each of the four other most
highly compensated executive officers of the Company during each of the years
ended December 31, 1995 and 1996 who were serving as executive officers of the
Company at the end of 1996 (collectively, the "Named Executive Officers") for
services rendered in all capacities to the Company or its subsidiaries during
1996.
<TABLE>
<CAPTION>
Annual Compensation All Other
Name and Principal Position Year Salary ($) Bonus ($)(1) Compensation ($)
- --------------------------- ---- ---------- ------------ ----------------
<S> <C> <C> <C> <C>
F. Peter Cuneo, President, CEO 1996 418,200 -- 6,156(3)
and Director(2) 1995 394,078 225,200 6,156(3)
Victor K. Kiam, II, Chairman(4) 1996 384,600 -- 63,234(5)
1995 1,000,000 -- 109,469(5)
James J. Vatrt ,Pres., Sales 1996 210,900 -- 3,902(7)
& Marketing, North America(6) 1995 196,617 85,920 2,871(7)
Allen S. Lipson, VP, Administration 1996 188,900 -- 5,521(8)
General Counsel & Secretary 1995 175,986 69,756 4,153(8)
Jack W. Waller, VP, Manufacturing 1996 174,100 -- 2,968(9)
1995 163,048 74,316 2,838(9)
</TABLE>
24
<PAGE>
<TABLE>
<S> <C> <C> <C> <C>
Geoffrey L. Hoddinott, VP, Remington 1996 129,600 54,768 13,906(11)
Europe, Asia and Middle East(10) 1995 118,400 68,956 9,440(11)
</TABLE>
- ----------
(1) Bonus amounts shown are those accrued for and paid in or after the end of
the year.
(2) Mr. Cuneo ceased to be employed by the Company in January 1997.
(3) The amounts shown include Company matching contributions to the Company's
401 (k) Employee Savings Plan of $2,250 and 1,925 in 1996 and 1995 and
disability insurance premium payments of $3,906 and $4,231 in 1996 and 1995.
(4) Mr. Kiam relinquished his title of Chief Executive Officer on May 23, 1996.
(5) The amount shown includes insurance and premiums on life and disability
insurance policies of $ 48,069 and $48,068 in 1996 and 1995, medical payments
under an executive medical reimbursement plan of $15,165 and $26,401 in 1996 and
1995 and automobile-related expenses of $35,000 in 1995.
(6) Mr. Vatrt ceased to be employed by the Company in March 1997.
(7) The amounts shown include Company matching contributions to the Company's
401 (k) Employee Savings Plan of $3,145 and $1,925 for 1996 and 1995 and
disability insurance premium payments of $ 757 and $946 for 1996 and 1995.
(8) The amounts shown include Company matching contributions to the Company's
401 (k) Employee Savings Plan of $ 3,738 and $1,925 for 1996 and 1995 and
disability insurance premium payments of $3,738 and $2,228 for 1996 and 1995.
(9) The amounts shown include Company matching contributions to the Company's
401 (k) Employee Savings Plan of $2074 and $1,720 for 1996 and 1995 and
disability insurance premium payments of $895 and $1,118 for 1996 and 1995.
(10) Mr. Hoddinott is employed by the Remington Consumer Products, Ltd., the
Company's wholly-owned subsidiary located in the United Kingdom. (11) The
amounts shown include automobile related expenses of $13,278 and $4,240 in 1996
and 1995 and medical insurance premium payments of $626 and $520 for 1996 and
1995.
Compensation of Directors
Messrs. William B. Connell and Kevin A. Mundt, Directors of the Company,
each receive annual compensation of $20,000 payable quarterly for services in
such capacity. No other Director of the Company receives any compensation for
services in such capacity. Each of the Directors of Remington are reimbursed for
out-of-pocket expenses incurred in connection with attending meetings.
Compensation Committee Interlocks and Insider Participation
25
<PAGE>
The compensation committee of the Management Committee of Remington is
comprised of Messrs. Arthur J. Nagle, Robert L. Rosner and Victor K. Kiam, III.
None of these individuals, other than Mr. Kiam, was an officer of or employed by
the Company. Mr. Kiam was employed by the Company prior to the Reorganization.
Other Arrangements
Change of Control and Severance Arrangements. In June 1995, the Company
entered into change of control agreements with various employees, including
Messrs. Vatrt, Lipson, Waller and Hoddinott, whereby such employees would
receive cash bonuses upon a sale of the Company and would also be entitled to
salary continuation for a specified period if their employment was terminated
within one year after such change of control. The agreements further provide
that any employment agreement then existing between the Company and the employee
would terminate upon the payment of such cash bonus. Pursuant to such
agreements, at the Closing Date, cash payments of $550,411, $452,123, $420,671
and $157,260 were paid to Mr. Vatrt, Mr. Lipson, Mr. Waller and Mr. Hoddinott,
respectively. Messrs. Cuneo, Vatrt, Waller, Lipson, and Hoddinott are each
entitled to 12 months of salary continuation in the event their employment is
involuntarily terminated other than for cause during the 36 months immediately
following the Closing Date.
Cuneo Stock Option. Pursuant to the terms of an employment agreement
between the Company and F. Peter Cuneo dated April 23, 1993, Mr. Cuneo was
employed as the President and Chief Operating Officer of the Company and was
granted by the Company an option to purchase 2.5% of the common equity of the
Company exercisable immediately prior to the sale of the Company or the sale of
more than a 51% equity interest in the Company. The exercise price of the option
was an amount equal to 2.5% of the net worth of the Company as of April 23,
1993. In April 1996, the employment agreement was amended to provide that upon
the consummation of the Reorganization, Mr. Cuneo would receive a cash payment
of $3.35 million in payment of his option and, upon payment of such amount, the
employment agreement would terminate. The cash payment due to Mr. Cuneo on the
Closing Date was paid by the Company and reduced the amount distributed to
Remsen and RPI.
Bonus Plan
The Company has an annual bonus plan (the "Bonus Plan") which is designed
to motivate each employee participant. Approximately 125 employees in the United
States and 125 employees in the international operations participate in the
Bonus Plan. Under the Bonus Plan, each participating employee is assigned a
target bonus award,
26
<PAGE>
representing up to 50% of his or her annual base salary that will be paid if
predetermined performance goals are achieved. Future performance goals for the
various areas of the Company will be established by the Compensation Committee
of the Company.
Management Equity Participation
In connection with the Reorganization, the Company: (i) entered into
management subscription agreements with certain of the Management Investors (the
"Management Subscription Agreements") for the purchase of Common Units, (ii)
issued options for the purchase of Common Units to certain other Management
Investors (the "Management Options"), and (iii) will adopt an Incentive Option
Plan (the "Incentive Option Plan") to provide for the grant of options
("Incentive Options") to purchase the Company's Common Units from time to time.
Purchased Units. On the Closing Date, certain of the Management Investors
purchased an aggregate of $0.86 million of Common Units representing, in the
aggregate, 11.13% of the common equity (10.77% on a fully diluted basis) of the
Company. Upon the termination of employment of the holder, the purchased Common
Units are subject to certain call provisions exercisable by the Company and
certain put provisions exercisable by the holder.
Management Options. In connection with the Reorganization, the Company
granted to certain Management Investors the Management Options to purchase, in
the aggregate, approximately 3.23% of the fully diluted common equity of the
Company at an aggregate exercise price of approximately $0.26 million (the
equivalent per Common Unit subscription price of the purchased Common Units).
The Management Options and the Common Units purchased upon the exercise thereof
are subject to similar rights and restrictions as contained in the Management
Subscription Agreements. The exercise price of the Management Options is $100
per share, the fair market value of the Common Units at the Closing Date. In
November 1996, the Company granted to Mr. Castaldi an option to purchase 1,623
Common Units at $100 per share, subject to substantially the same rights and
restrictions as contained in the Management Subscription Agreements.
401(k) Plan
The Company maintains a savings plan (the "Savings Plan") qualified under
Sections 401 (a) and 401(k) of the Internal Revenue Code. Generally, all
employees of the
27
<PAGE>
Company in the United States who have completed one year of service are eligible
to participate in the Savings Plan. For each employee who elects to participate
in the Savings Plan and makes a contribution thereto, the Company makes a
matching contribution of 40% of the first 5% of annual compensation contributed.
The maximum contribution for any participant for any year is 15% of such
participant's eligible compensation.
UK Pension Plan
Remington Consumer Products, Limited, the Company's wholly owned United
Kingdom subsidiary, maintains a contributory defined benefit pension plan for
all employees. The following table sets forth the estimated annual benefits
payable under the plan at age 65 to persons in specified compensation and
years-of-service classifications, based on straight-life annuity form of
retirement income.
Pension Plan Table
Years of Service
------------------------------------------------------
Remuneration 10 15 20 25
100,000 $20,000 $30,000 $ 40,000 $ 50,000
125,000 25,000 37,500 50,000 62,500
150,000 30,000 45,000 60,000 75,000
175,000 35,000 52,500 70,000 87,500
200,000 40,000 60,000 80,000 100,000
250,000 50,000 75,000 100,000 125,000
300,000 60,000 90,000 120,000 150,000
- ----------
All amounts shown above have been converted to US dollars and are not not
subject to any offsets. The annual benefit under the pension plan is based upon
highest average pension compensation received during any consecutive three years
during the ten years immediately prior to retirement and years of credited
service. Pension compensation for a particular year as used for the calculation
of retirement benefits includes salaries and annual bonuses. As of December 31,
1996, Mr. Hoddinott, the only Named Executive Officer covered under the plan,
had 15 years of credited service .
28
<PAGE>
ITEM 12. Security Ownership of Certain Beneficial Owners and Management
Set forth below is certain information regarding the ownership of the
Preferred Equity and Common Units of Remington by each person known by Remington
to beneficially own 5.0% or more of the outstanding interests of either the
Preferred Equity or Common Units, each Director and Named Executive Officer and
all Directors and executive officers as a group as of March 15, 1997. Except as
indicated below, the address for each of the persons listed below is c/o
Remington Products Company, L.L.C., 60 Main Street, Bridgeport, Connecticut,
06604.
<TABLE>
<CAPTION>
Preferred Equity Common Units
Name Capital (1) Percentage Number Percentage
- ---- ----------- ---------- ------ ----------
<S> <C> <C> <C> <C>
Vestar Equity Partners (2)(3) $30,000,000 48.4% 34,400 44.4%
245 Park Avenue, 41 st Floor
New York, New York 10167
RPI Corp. (3) 32,000,000 51.6% 34,400 44.4%
350 Fifth Avenue, Suite 5408
New York, New York 10 1 18
F. Peter Cuneo (3) 0 0.0% 3,200 4.1%
James J. Vatrt (3) 0 0.0% 1,500 1.9%
Allen S. Lipson (3) 0 0.0% 1,500 1.9%
Jack W. Waller (3) 0 0.0% 1,500 1.9%
Victor K. Kiam, II (3)(4) 32,000,000 51.6% 34,400 44.4%
Norman W. Alpert (5) 30,000,000 48.4% 34,400 44.4%
Arthur J. Nagle (5) 30,000,000 48.4% 34,400 44.4%
Daniel S. O'Connell (5) 30,000,000 48.4% 34,400 44.4%
Robert L. Rosner (5) 30,000,000 48.4% 34,400 44.4%
Directors and executive officers as a group
(12 persons) $62,000,000 100.0% 72,720 93.9%
</TABLE>
- ----------
(1) Amounts, in dollars, represent the capital contribution to the
Preferred Equity beneficially owned by each person and entity set forth
below. The Preferred Equity has not been denominated in units or other
shares.
(2) Vestar's interest in the Company is owned by the Vestar Members, which
are controlled by Vestar. The Vestar Members have assigned a portion of
their interests in the Company to certain coinvestors, although such
co-investors
29
<PAGE>
will not directly hold any Common Units. The general partner of Vestar
is Vestar Associates L.P., a limited partnership whose general partner
is Vestar Associates Corporation ("VAC"). In such capacity, VAC
exercises sole voting and investment power with respect to all of the
equity interests held of record by the Vestar Members. Messrs. Alpert,
Nagle, O'Connell, and Rosner, who are Directors of Remington, are
affiliated with Vestar in the capacities described under Item 10
Directiors and Executive Officers, and are stockholders of VAC.
Individually, no stockholder, director or officer of VAC is deemed to
have or share such voting or investment power within the meaning of
Rule 13d-3 under the Exchange Act. Accordingly, no part of the
Preferred Equity or Common Units is beneficially owned by Messrs.
Alpert, Nagle, O'Connell or Rosner or any other stockholder, director
or officer of VAC.
(3) The Vestar Members, RPI and Messrs. Cuneo, Vatrt, Lipson and Waller
have entered into the LLC Agreement which gives Vestar effective
control over the management of the Company.
(4) Mr. Kiam's interest in the Company is owned by RPI. The shareholders
of RPI are Mr. Kiam and two Kiam family trusts. Mr. Kiam is a trustee
of each of these trusts. Mr. Kiam disclaims beneficial ownership of
the shares of Remington owned by RPI. The address of Mr. Kiam is 11097
Isle Brook Court, West Palm Beach, Florida, 33414.
(5) Messrs. Alpert, Nagle, O'Connell and Rosner are affiliated with Vestar
in the capacities described in Item 10 Directors and Executive
Officers. Ownership of Remington equity interests for these individuals
includes the $30,000,000 of Preferred Equity and 34,440 Common Units
included in the above table beneficially owned by Vestar through the
Vestar Members, of which such persons disclaim beneficial ownership.
Each such person's business address is c/o Vestar Equity Partners,
L.P., 245 Park Avenue, 41st Floor, New York, New York 10167.
ITEM 13. Certain Relationships and Related Transactions
Pursuant to a management agreement (the "Management Agreement") entered
into as of the Closing Date, Vestar Capital Partners ("Vestar Capital") will
receive an annual advisory fee equal to the greater of $500,000 and 1.5% of
EBITDA (as defined in such agreement) of the Company on a consolidated basis for
rendering advisory and consulting services in relation to strategic financial
planning and other affairs of the Company. Vestar Capital will also be paid
reasonable and customary investment banking fees in connection with an initial
public offering, sale of the Company and other financings. In addition, Vestar
Capital received a fee in the amount of $2.0 million from the Company on the
Closing Date. The Management Agreement will be in effect until the tenth
anniversary of the Closing Date, provided that the Management Agreement will
terminate on the earlier to occur of: (i) a qualified public offering or (ii)
the first date that Vestar Capital owns less than 25% of the number of the
Company's Common Units owned by Vestar Capital on the Closing Date, and provided
further that Vestar Capital may terminate the Management Agreement at any time.
Vestar Capital owns, indirectly through Vestar Corp., 44.4% (43.0% on a fully
diluted basis) of the Common Units of the Company and possesses the right to
designate five of the nine individuals who comprise the Management Committee of
the Company.
30
<PAGE>
Pursuant to a consulting and transitional services agreement (the
"Consulting Agreement") entered into as of the Closing Date, RPI will receive an
aggregate annual fee equal to the sum of: (i) the greater of $500,000 and 1.5%
of EBITDA (as defined in such agreement) of the Company on a consolidated basis
and (ii) $250,000 in 1996, 1997 and 1998 if the Company's net revenues or EBITDA
(as defined in such agreement) exceed certain targets in such years, for
rendering advisory and consulting services in relation to strategic financial
planning, product development and evaluation of mergers, acquisitions and
divestitures. The Consulting Agreement will be in effect until the tenth
anniversary of the Closing Date, provided that the Consulting Agreement will
terminate on the earlier to occur of: (i) a qualified public offering or (ii)
the first date that RPI owns less than 25% of the number of the Company's Common
Units owned by RPI on the Closing Date, and provided further that Vestar Capital
may terminate the Consulting Agreement at any time (but only to the extent that
Vestar Capital also terminates similar provisions of the Management Agreement).
RPI, an entity controlled by the Kiams, owns 44.4% (43.0% on a fully diluted
basis) of the Common Units of the Company and possesses the right to designate
two of the nine individuals who comprise the Management Committee of the
Company.
Pursuant to a Non-Competition Agreement (the "Non-Competition Agreement")
entered into as of the Closing Date between the Company, Vestar Corp. and Victor
K. Kiam, II and Victor K. Kiam, III (the "Kiams"), the Kiams may not compete
with, solicit any customers of, own, manage or operate any business in
competition with or perform any action substantially detrimental to the
Company's businesses. The provisions of the Non-Competition Agreement will apply
during the period the Kiams have a Significant Interest (as defined in the
Non-Competition Agreement) in the Company and thereafter for: (i) five years,
with respect to electric shavers, shaver accessories and men's grooming
products, and (ii) three years, with respect to women's personal care
appliances, home health appliances, travel appliances, environmental products,
dental products and small kitchen appliances. The Non-Competition Agreement
allows the Kiams to continue to market certain competing travel appliance
products developed by an affiliate of the Kiams.
Pursuant to the terms of agreements originally entered into between the
Company and Remington Apparel Corporation ("Remington Apparel") and Remington
Equities in 1984 and with Act II Corporation ("Act II") in 1986, each controlled
by Victor K. Kiam, II, the Company granted a license to Remington Apparel to
permit such company to use the Remington name as part of its corporate name,
granted to Remington Equities a non-exclusive, worldwide license to use the
Remington trademark for apparel products and granted to Act II the exclusive
worldwide license to use the trademark Lady Remington for jewelry products. Each
of these agreements are for terms of two years and renew automatically for
consecutive two-year periods unless terminated at the option of the licensee.
The amount of royalties received by the
31
<PAGE>
Company under these license agreements was less than $5,000 during each of 1996,
1995 and 1994. The Company continued these arrangements after the consummation
of the Reorganization on substantially the same terms and conditions. The
Company, however, required each of RPI and Remington Equities to exclude the
word "Remington" from their corporate names after the Closing Date.
In 1995, the Company entered into a media barter agreement with Tangible
Media, Inc. ("TMI"), a corporation controlled by Isaac Perlmutter, pursuant to
which TMI acquired from the Company a discontinued product line of personal
safety products in exchange for media barter credits with a stated value of $4.3
million which the Company can use to purchase advertising media from TMI over a
three-year period that (subject to certain conditions) has been extended for an
additional year. At the time of the purchase of advertising media, the Company
will pay a portion in cash and the balance with the media barter credits. During
the period January 1, 1996 to the Closing Date, the Company purchased $0.3
million in advertising media from TMI, paying $0.2 million in cash and $0.1
million in barter credits. In addition, during 1996, TMI provided financial,
marketing and security services for the Company for which the Company paid TMI
of less than $0.1 million.
In November 1994, the Company loaned F. Peter Cuneo, President, Chief
Executive Officer and Director of the Company until January 1997, the sum of
$200,000 in exchange for a note bearing interest at the rate of 1.75% plus the
prime commercial rate as from time to time announced by CoreStates Bank, N.A.
Mr. Cuneo used the proceeds of this loan to finance the purchase of a house. The
total amount owed, including accrued interest, was repaid on the Closing Date.
Pursuant to the terms of an employment agreement dated August 1992, Victor
K. Kiam, II was employed as Chief Executive Officer of the Company for a period
of five years for an annual salary of $300,000 and an annual talent fee of
$700,000 plus certain health, medical and other specified benefits. In addition,
pursuant to the terms of a separate employment agreement dated August 1992, as
amended, Victor K. Kiam, III was employed as Vice President of the Company for a
period of five years at an annual salary of $100,000 plus other incentive based
compensation. In connection with the Reorganization, the employment agreements
with the Kiams were terminated in exchange for lump sum cash payments to the
Kiams in the aggregate amount of $1.7 million. Such cash payments were paid by
the Company and reduced the amounts distributed to Remsen and RPI.
32
<PAGE>
PART IV
ITEM 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K
(a) 1. Financial Statements
2. Financial Statement Schedule
3. Exhibits
3.1 Amended and Restated Limited Liability Company Agreement dated
as of May 16, 1996, by and among Vestar Shaver Corp. (formerly
Vestar/Remington Corp.) ("Vestar Corp. I"), Vestar Razor Corp.
("Vestar Corp. II" and, together with Vestar Corp. I, the
"Vestar Members"), RPI Corp. (formerly known as Remington
Products, Inc.)("RPI"), and certain members of senior
management of the Company is incorporated herein by reference
to Registration Statement on Form S-4(File Number 333-07429).
3.2 Certificate of Formation of Remington Products Company, L.L.C.
("Remington") is incorporated herein by reference to
Registration Statement on Form S-4(File Number 333-07429).
4.1 Indenture dated as of May 23, 1996 between Remington,
Remington Capital Corp. ("Capital") and The Bank of New York,
as trustee is incorporated herein by reference to Registration
Statement on Form S-4(File Number 333-07429).
4.2 Form of 11% Series B Senior Subordinated Notes is incorporated
herein by reference to Registration Statement on Form S-4(File
Number 333-07429).
4.3 Purchase Agreement dated May 16, 1996 between Remington,
Capital and Bear, Sterns & Co. Inc. is incorporated herein by
reference to Registration Statement on Form S-4(File Number
333- 07429).
33
<PAGE>
4.4 Registration Rights Agreement dated as of May 23, 1996 between
Remington, Capital and Bear Stearns & Co. Inc. is incorporated
herein by reference to Registration Statement on Form S-4(File
Number 333-07429).
10.1 Credit and Guarantee Agreement dated as of May 23, 1996 among
Remington, certain of its subsidiaries, varius lending
institutions, Fleet National Bank and Banque Nationale de
Paris, as co-documentation agents, and Chemical Bank, as
administrative agent (the "Agent") is incorporated herein by
reference to Registration Statement on Form S-4(File Number
333-07429)..
10.2 Company Security Agreement dated as of May 23, 1996 made by
Remington in favor of the Agent is incorporated herein by
reference to Registration Statement on Form S-4(File Number
333-07429).
10.3 Form of Subsidiaries Security Agreement dated as of May 23,
1996 made by each of Capital, Remington Corporation, L.L.C.
("IP Subsidiary") and Remington Rand Corporation ("Rand") in
favor of the Agent is incorporated herein by reference to
Registration Statement on Form S-4(File Number 333-07429).
10.4 Conditional Assignment of and Security Interest in Patent
Rights (United States) dated as of May 23, 1996 made by IP
Subsidiary in favor of the Agent is incorporated herein by
reference to Registration Statement on Form S-4(File Number
333-07429).
10.5 Conditional Assignment of and Security Interest in Patent
Rights (United Kingdom) dated as of May 23, 1996 made by IP
Subsidiary in favor of the Agent is incorporated herein by
reference to Registration Statement on Form S-4(File Number
333-07429).
10.6 Conditional Assignment of and Security Interest in Trademark
Rights (United States) dated as of May 23, 1996 made by IP
Subsidiary in favor of the Agent is incorporated herein by
reference to Registration Statement on Form S-4(File Number
333-07429).
10.7 Conditional Assignment of and Security Interest in Trademark
Rights
34
<PAGE>
(United Kingdom) dated as of May 23, 1996 made by IP
Subsidiary in favor of the Agent is incorporated herein by
reference to Registration Statement on Form S-4(File Number
333-07429).
10.8 Members Limited Recourse Pledge Agreement dated as of May 23,
1996 made by Remington in favor of the Agent is incorporated
herein by reference to Registration Statement on Form S-4(File
Number 333-07429).
10.9 Company Pledge Agreement dated as of May 23, 1996 made by
Remington in favor of the Agent is incorporated herein by
reference to Registration Statement on Form S-4(File Number
333-07429).
10.10 Subsidiaries Pledge Agreement dated as of May 23, 1996 made by
Rand in favor of the Agent is incorporated herein by reference
to Registration Statement on Form S-4(File Number 333-07429).
10.11 Subsidiaries Guarantee dated as of May 23, 1996 made by
Capital, IP subsidiary and Rand in favor of the Agent is
incorporated herein by reference to Registration Statement on
Form S-4(File Number 333- 07429).
10.12 Purchase Agreement dated as of May 1, 1996 by and among Vestar
Corp I., Remington, Remsen, Isaac Perlmutter, RPI and Victor
K. Kiam, II is incorporated herein by reference to
Registration Statement on Form S-4(File Number 333-07429).
10.13 Agreement and Plan of Merger dated as of May 23, 1996 between
Remington Products Company and Remington is incorporated
herein by reference to Registration Statement on Form S-4(File
Number 333-07429).
10.14 Securityholders Agreement dated as of May 16, 1996 among the
Vestar Members, Vestar Equity Partners, L.P. ("Vestar"), RPI,
Victor K. Kiam, II and the other parties signatory thereto is
incorporated herein by reference to Registration Statement on
Form S-4(File Number 333-07429).
35
<PAGE>
10.15 Management Agreement dated as of May 23, 1996 between
Remington and Vestar Capital Partners is incorporated herein
by reference to Registration Statement on Form S-4(File Number
333- 07429).
10.16 Consulting and Transitional Services Agreement dated as of May
23, 1996 between Remington and RPI is incorporated herein by
reference to Registration Statement on Form S-4(File Number
333-07429).
10.17 Form of Management Common Units Subscription Agreement dated
as of May 23, 1996 by and between Remington and each of F.
Peter Cuneo, James J. Vatrt, Jack W. Waller, Allen S. Lipson,
H. Graham Kimpton and Geoffrey L. Hoddinott is incorporated
herein by reference to Registration Statement on Form S-4(File
Number 333- 07429).
10.18 Form of Option Agreement dated as of May 23, 1996 by and
between Remington and certain members of senior management of
the Company is incorporated herein by reference to
Registration Statement on Form S-4(File Number 333-07429).
10.19 Form of Executive Severance Agreement dated as of May 23, 1996
by and between Remington or certain of its subsidiaries and
each of F. Peter Cuneo, James J. Vatrt, Jack W. Waller, Allen
S. Lipson, H. Graham Kimpton and Geoffrey L. Hoddinott is
incorporated herein by reference to Registration Statement on
Form S-4(File Number 333-07429).
10.20 Executive Severance Agreement dated as of November 25, 1996
between Remington and Alexander R. Castaldi.
10.21 Option Agreement dated as of November 25, 1996 between
Remington and Alexander R. Castaldi.
10.22 Non-Competition Agreement dated as of May 23, 1996 among
Victor K. Kiam, II, Victor K. Kiam, III, Remington and the
Vestar Members is incorporated herein by reference to
Registration Statement on Form S-4(File Number 333-07429).
36
<PAGE>
10.23 License Agreement made May 23, 1996 by and between IP
Subsidiary and Act II Jewelry, Inc is incorporated herein by
reference to Registration Statement on Form S-4 (File Number
333-07429).
10.24 License Agreement made May 23, 1996 by and between IP
Subsidiary and VKK Equities Corporation is incorporated herein
by reference to Registration Statement on Form S-4 (File
Number 333-07429).
10.25 Tradename Agreement made May 23, 1996 by and between IP
Subsidiary and Remington Apparel Company, Inc. is incorporated
herein by reference to Registration Statement on Form S-4
(File Number 333-07429).
10.26 License Agreement dated as of May 23, 1996 by and between
Remington and IP Subsidiary is incorporated herein by
reference to Registration Statement on Form S-4 (File Number
333-07429).
10.27 1997 Remington Bonus Plan.
21 Subsidiaries of Remington is incorporated herein by reference
to Registration Statement on Form S-4 (File Number 333-07429).
24. Powers of Attorney.
27 Financial Data Schedule.
37
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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: March 31, 1997
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities on March 31, 1997.
* *
- --------------------------------------- -------------------------------------
Neil F. DeFeo, Chief Executive Officer, Alexander R. Castaldi, Executive Vice
President and Director President and Chief Financial Officer
/s/ Kris J. Kelley *
- --------------------------------------- -------------------------------------
Kris J. Kelley, Vice President and Victor K. Kiam II, Chairman and
Controller Director
38
<PAGE>
* *
- --------------------------------------- -------------------------------------
Victor K. Kiam III, Director Norman W. Alpert, Director
* *
- --------------------------------------- -------------------------------------
Arthur J. Nagle, Director Daniel S. O'Connell, Director
*
- --------------------------------------- -------------------------------------
Robert L. Rosner, Director William B. Connell, Director
*
- ---------------------------------------
Kevin A. Mundt, Director
*By /s/ Allen S. Lipson
------------------------------------
Allen S. Lipson, as Attorney-in-Fact
39
<PAGE>
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
Pages
-----
Financial Statements
<S> <C>
Reports of Independent Accountants F-2
Consolidated Balance Sheets as of December 31, 1996 (Successor) and 1995
(Predecessor) F-4
Consolidated Statements of Operations for the thirty-one weeks ended December
31, 1996 (Successor), and for the twenty-one weeks ended May 23, 1996 and
the years ended December 31, 1995 and 1994 (Predecessor) F-5
Consolidated Statement of Members' Deficit for the thirty-one weeks ended
December 31, 1996 (Successor), and Consolidated Statements of Total Partners'
Capital for the twenty-one weeks ended May 23, 1996 and the years
ended December 31, 1995 and 1994 (Predecessor) F-6
Consolidated Statements of Cash Flows for the thirty-one weeks ended
December 31, 1996 (Successor), and for the twenty-one weeks ended May 23,
1996 and the years ended December 31, 1995 and 1994 (Predecessor) F-7
Notes to Consolidated Financial Statements F-8
Financial Statement Schedule
Report of Independent Accountants on Supplemental Schedule S-1
Schedule II - Valuation and Qualifying Accounts S-2
</TABLE>
Certain schedules are omitted because they are not applicable or the
required information is provided in the Financial Statements or related notes
thereto.
F-1
<PAGE>
Independent Auditors' Report
To the Management Committee of
REMINGTON PRODUCTS COMPANY, L.L.C.:
We have audited the accompanying consolidated balance sheet of Remington
Products Company, L.L.C. and subsidiaries (Company) as of December 31, 1996, and
the related consolidated statements of operations, members' deficit/partners'
capital and cash flows of Remington Products Company and subsidiaries
(Predecessor Company) for the twenty-one week period ended May 23, 1996 and for
the Company for the thirty-one week period ended December 31, 1996. Our audits
also included the consolidated financial statement schedule listed in the index
to the consolidated financial statements. The 1996 consolidated financial
statements and financial statement schedule are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
consolidated financial statements and financial statement schedule based on our
audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provides a reasonable basis for our opinion.
In our opinion, such consolidated financial statements referred to above
present fairly, in all material respects, the consolidated financial position of
Remington Products Company, L.L.C. and subsidiaries as of December 31, 1996, and
the consolidated results of their operations and their cash flows of Predecessor
Company for the twenty-one week period ended May 23, 1996 and of the Company for
the thirty-one week period ended December 31, 1996, in conformity with generally
accepted accounting principles. Also, in our opinion, such 1996 consolidated
financial statement schedule when considered in relation to the basic
consolidated financial statements taken as a whole, presents fairly in all
material respects, the information set forth therein.
DELOITTE & TOUCHE L.L.P.
Stamford, Connecticut
March 7, 1997
F-2
<PAGE>
Report of Independent Accountants
To the Management Committee of
REMINGTON PRODUCTS COMPANY:
We have audited the accompanying consolidated balance sheets of Remington
Products Company and Subsidiaries (the "Company") as of December 31, 1995, and
the related consolidated statements of operations, total partners' capital and
cash flows for the years ended December 31, 1995 and 1994. These financial
statements are the responsibility of management of the Company. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the consolidated financial position of Remington
Products Company and Subsidiaries as of December 31, 1995, and the consolidated
results of their operations and their cash flows for the years ended December
31, 1995 and 1994, in conformity with generally accepted accounting principles.
COOPERS & LYBRAND L.L.P.
Stamford, Connecticut
March 4, 1996.
F-3
<PAGE>
Remington Products Company, L.L.C.
Consolidated Balance Sheets
As of December 31, 1996 (Successor) and 1995 (Predecessor)
(in thousands)
<TABLE>
<CAPTION>
Successor Predecessor
1996 1995
--------- ---------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 7,199 $ 6,804
Accounts receivable, less allowance for doubtful accounts
of $1,340 in 1996 and $1,366 in 1995 54,262 69,414
Inventories 63,785 53,739
Prepaid and other current assets 4,212 3,853
--------- ---------
Total current assets 129,458 133,810
Property, plant and equipment, net 13,982 14,544
Intangibles, net 62,520 21,082
Other assets 8,863 1,486
--------- ---------
Total assets $ 214,823 $ 170,922
========= =========
LIABILITIES AND MEMBERS' DEFICIT/ PARTNERS' CAPITAL
Current Liabilities:
Accounts payable $ 16,414 $ 9,835
Short-term borrowings 1,153 1,488
Current portion of long-term debt 1,067 48,952
Accrued liabilities 32,964 26,312
--------- ---------
Total current liabilities 51,598 86,587
Long-term debt 169,411 6,550
Other liabilities 1,521 1,840
Commitments and contingencies
Members' deficit/partners' capital:
Members' deficit/partners' capital (7,351) 76,736
Cumulative translation adjustment (356) (791)
--------- ---------
Total members' deficit/partners' capital (7,707) 75,945
--------- ---------
Total liabilities and members' deficit/partners' capital $ 214,823 $ 170,922
========= =========
</TABLE>
See notes to consolidated financial statements.
F-4
<PAGE>
Remington Products Company, L.L.C.
Consolidated Statements of Operations
For the thirty-one weeks ended December 31, 1996
(Successor), and for the twenty-one weeks ended May 23, 1996,
and the years ended December 31, 1995 and 1994 (Predecessor)
(in thousands)
<TABLE>
<CAPTION>
Successor Predecessor
--------- ------------------------------------
31 Weeks 21 Weeks
Ended Ended Year Ended
December 31, May 23, December 31,
1996 1996 1995 1994
--------- -------- -------- ---------
<S> <C> <C> <C> <C>
Net sales $ 185,286 $ 56,713 $255,323 $ 261,446
Cost of sales 117,723 35,102 143,203 150,104
--------- -------- -------- ---------
Gross profit 67,563 21,611 112,120 111,342
--------- -------- -------- ---------
Selling, general and administrative 53,860 37,912 83,949 88,534
Amortization of intangibles 1,195 650 1,655 1,580
--------- -------- -------- ---------
Operating income (loss) 12,508 (16,951) 26,516 21,228
Interest expense 12,164 2,228 7,604 6,414
Other expense (income) 498 (115) 408 (997)
--------- -------- -------- ---------
Income (loss) before income taxes (154) (19,064) 18,504 15,811
Provision (benefit) for income taxes 3,018 (873) 1,264 1,086
--------- -------- -------- ---------
Net income (loss) $ (3,172) $(18,191) $ 17,240 $ 14,725
========= ======== ======== =========
Net loss applicable to common units $ (7,748)
=========
</TABLE>
See notes to consolidated financial statements.
F-5
<PAGE>
Remington Products Company, L.L.C.
Consolidated Statement of Members' Deficit
For the thirty-one weeks ended December 31, 1996 (Successor),
and Consolidated Statements of Total Partners' Capital
for the twenty-one weeks ended May 23, 1996,
and the years ended December 31, 1995 and 1994 (Predecessor)
(in thousands)
<TABLE>
<CAPTION>
Total
Partners'
Cumulative Capital/
Preferred Common Other Accumulated Translation Members'
Equity Units Capital Deficit Adjustments Deficit
------ ----- ------- ------- ----------- -------
<S> <C> <C> <C> <C> <C> <C>
PREDECESSOR
Balance, December 31, 1993 $ 45,172 $(1,377) $43,795
Net income 14,725 14,725
Partners' distribution (401) (401)
Foreign currency translation 1,845 1,845
-------- ----- -----
Balance, December 31, 1994 59,496 468 59,964
Net income 17,240 17,240
Foreign currency translation (1,259) (1,259)
------ ------
Balance, December 31, 1995 76,736 (791) 75,945
Net loss (18,191) (18,191)
Foreign currency translation (217) (217)
Effects of recapitalization:
Issuance of equity units $62,000 $7,742 69,742
Excess of fair value over
predecessor basis (73,921) (73,921)
Cancellation of
predecessor partners'
capital (58,545) (58,545)
Elimination of cumulative
translation 1,008 1,008
------- ------ -------- ----- -----
Balance, May 23, 1996 $62,000 $7,742 $(73,921) $ - $ (4,179)
======= ====== ======== ====== ========
SUCCESSOR
Balance, May 24, 1996 $62,000 $7,742 $(73,921) $ (4,179)
Net loss $(3,172) (3,172)
Preferred dividend 4,576 (4,576) -
Foreign currency translation $ (356) (356)
------- ------ -------- ------- --------- --------
Balance December 31, 1996 $66,576 $7,742 $(73,921) $(7,748) $ (356) $ (7,707)
======= ====== ======== ======= ========= ========
</TABLE>
See notes to consolidated financial statements.
F-6
<PAGE>
Remington Products Company, L.L.C.
Consolidated Statements of Cash Flows
For the thirty-one weeks ended December 31, 1996
(Successor), and for the twenty-one weeks ended
May 23, 1996,
and for the years ended December 31, 1995 and 1994 (Predecessor)
(in thousands)
<TABLE>
<CAPTION>
Successor Predecessor
--------- ------------------------------------
31 Weeks 21 Weeks
Ended Ended Year Ended
December 31, May 23, December 31,
1996 1996 1995 1994
--------- -------- -------- --------
<S> <C> <C> <C> <C>
Cash flows from operating activities:
Net income (loss) $ (3,172) $(18,191) $ 17,240 $ 14,725
Adjustment to reconcile net income (loss) to net cash
provided by (used in) operating activities:
Depreciation 1,184 1,355 3,283 2,663
Amortization of intangibles 1,195 650 1,655 1,580
Amortization of deferred financing fees 1,260 262 690 688
Deferred income taxes 1,251 (561) (735) --
Foreign currency forward loss 1,501 -- -- --
Changes in assets and liabilities:
Accounts receivable (27,291) 41,043 (13,955) 8,446
Inventories (2,546) (8,339) 299 (3,578)
Accounts payable 5,392 1,187 (11,605) (604)
Accrued liabilities 10,731 (933) 3,579 (10,966)
Other, net 433 (372) 253 1,875
--------- -------- -------- --------
Cash provided by (used in) operating activities (10,062) 16,101 704 14,829
--------- -------- -------- --------
Cash flows from investing activities:
Capital expenditures (2,399) (1,310) (3,291) (4,356)
Payment for purchase of Company, net (139,750) -- -- --
Proceeds from acquisition-related receivable -- -- -- 9,260
Other (181) -- -- --
--------- -------- -------- --------
Cash provided by (used in) investing activities (142,330) (1,310) (3,291) 4,904
--------- -------- -------- --------
Cash flows from financing activities:
Proceeds from sale of senior subordinated notes 129,026 -- -- --
Net repayments under term loan facilities (3,463) (3,600) (13,550) (3,475)
Net borrowings (repayments) under credit facilities 1,564 (12,353) 14,965 (13,569)
Equity investments/(distributions) 34,302 -- -- (401)
Debt issuance costs (9,075) -- -- --
Other, net 1,595 -- 354 319
--------- -------- -------- --------
Cash provided by (used in) financing activities 153,949 (15,953) 1,769 (17,126)
--------- -------- -------- --------
Increase (decrease) in cash and cash equivalents 1,557 (1,162) (818) 2,607
Cash and cash equivalents, beginning of period 5,642 6,804 7,622 5,015
--------- -------- -------- --------
Cash and cash equivalents, end of period $ 7,199 $ 5,642 $ 6,804 $ 7,622
========= ======== ======== ========
Supplemental cash flow information:
Interest paid $ 9,121 $ 1,874 $ 6,936 $ 5,244
Income taxes paid $ 1,563 $ 440 $ 1,073 $ 995
</TABLE>
See notes to consolidated financial statements.
F-7
<PAGE>
Remington Products Company, L.L.C. and Subsidiaries
Notes to Consolidated Financial Statements
1. Summary of Significant Accounting Policies
Remington Products Company, L.L.C. and its wholly-owned subsidiaries, (the
"Company") manufacture and market electrical personal care appliances. The
Company distributes on a worldwide basis men's and women's electrical shavers
and accessories, women's personal care appliances, including hairsetters,
curling irons and hair dryers, men's electrical grooming products, travel
products and other small electrical consumer appliances. The Company's products
are sold worldwide through mass merchandisers, catalog showrooms, drugstore
chains and department stores in addition to the Company's own service stores.
Organization:
Remington Products Company, L.L.C., a Delaware limited liability company,
was formed by Vestar Shaver Corp. ("Vestar Corp. I") and RPI Corp. ("RPI") to
acquire (the "Reorganization") the operations of Remington Products Company and
its subsidiaries ("RPC"). In May 1996, Vestar Razor Corp. ("Vestar Corp. II")
was formed to hold an interest in the Company, Vestar Corp. I and Vestar Corp.
II (together, the "Vestar Members") are wholly owned by Vestar Equity Partners,
L.P.
Basis of Presentation:
The consolidated balance sheet as of December 31, 1996 includes the
accounts of Remington Products Company, L.L.C. and Subsidiaries, the "Successor"
company following the change in ownership on May 23, 1996 (the "Closing Date")
(see Note 2) and the consolidated results of operations and cash flows include
the accounts for the successor company for the period from May 24, 1996 to
F-8
<PAGE>
Remington Products Company, L.L.C. and Subsidiaries
Notes to Consolidated Financial Statements (continued)
December 31, 1996. The statements also include the balance sheet and results of
operations and cash flows of RPC, the "Predecessor" company, prior to the
Closing Date. All significant intercompany accounts and transactions are
eliminated in consolidation.
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make certain estimates and
assumptions that affect the reported amount of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the reported
periods. Actual results could differ from those estimates.
Cash and Cash Equivalents:
All highly liquid debt instruments purchased with a maturity of three
months from their date of acquisition or less are considered cash equivalents.
Inventories:
The inventories of foreign subsidiaries and purchased product for resale
by the merchandising and service store operations are valued at the lower of
cost or market utilizing the first-in, first-out (FIFO) method. Domestic
manufactured inventories which represent approximately 28% of the consolidated
inventories as of December 31, 1996 and 1995 are stated at the lower of cost or
market, with cost determined by the last-in, first-out (LIFO) method. As of
December 31, 1996 and 1995, the excess of current replacement cost over LIFO
cost of inventories was not significant. In the fourth quarter of 1996, the
Company recorded a charge of approximately $3.9 million for certain inventory
valuation adjustments.
F-9
<PAGE>
Remington Products Company, L.L.C. and Subsidiaries
Notes to Consolidated Financial Statements (continued)
Property, Plant and Equipment:
Property, plant and equipment is recorded primarily at cost. In
conjunction with the Reorganization, property, plant and equipment was restated
to reflect fair value excluding the ownership percentage retained by RPI.
Depreciation is provided for principally on a straight-line basis over the
estimated useful lives of the assets, which range from 5 to 20 years. Leasehold
improvements are amortized over the lesser of the lease term or the estimated
useful lives of the improvements.
Intangibles:
Patents are being amortized on a straight-line basis over a period of ten
years. All other intangibles are amortized on a straight-line basis over 40
years. The Company periodically evaluates the recoverability of goodwill and
measures the amount of impairment, if any, by assessing whether the amortization
of the goodwill balance over its remaining life can be recovered through
undiscounted future operating cash flows.
Cost associated with obtaining financing arrangements are included in
other assets and are being amortized over the term of the related borrowings.
Options:
Financial Accounting Statement No. 123, "Accounting for Stock Based
Compensation", (SFAS 123) requires expanded disclosures of employee stock based
compensation arrangements and encourages, but does not require, employers to
adopt a fair value based method of accounting for employee stock based
compensation. Under the fair value based method, compensation cost is measured
F-10
<PAGE>
Remington Products Company, L.L.C. and Subsidiaries
Notes to Consolidated Financial Statements (continued)
at the grant date based on the value of the option and is recognized over the
service period, which is usually the vesting period. As provided by SFAS 123,
the Company follows Accounting Principles Board Opinion No. 25, "Accounting for
Stock Issued to Employees", for employee stock compensation measurement, which
does not require compensation expense recognition when the exercise price of
stock options is greater than or equal to current market value at the date of
the stock option grant.
Research and Development
Research and development costs related to both present and future products
are expensed as incurred. Such costs totalled $1.3 million for the thirty-one
weeks ended December 31, 1996; $0.8 million for the twenty-one weeks ended May
23, 1996; and $1.9 million and $1.6 million for the years ended December 1995
and 1994, respectively.
Income Taxes:
In jurisdictions where Partnership status is not recognized or foreign
corporate subsidiaries exist, deferred taxes on income are provided for
temporary differences between the financial and tax bases of assets and
liabilities.
Translation of Foreign Currencies:
Assets and liabilities of the Company's foreign subsidiaries are
translated at the exchange rate in effect at each balance sheet date. Statement
of operations accounts are translated at the weighted average exchange rate for
the period. Translation adjustments arising from the use of differing exchange
F-11
<PAGE>
Remington Products Company, L.L.C. and Subsidiaries
Notes to Consolidated Financial Statements (continued)
rates from period to period are included in the cumulative translation
adjustment account in members' deficit or total partners' capital. Foreign
currency transaction gains and losses, including mark-to-market gains and losses
on forward contracts are recognized in earnings and totalled $(0.7) million for
the thirty-one weeks ended December 31, 1996, $(0.1) million for the twenty-one
weeks ended May 23, 1996 and $0.2 and $0.6 million for the years ended December
31, 1995 and 1994, respectively.
Reclassifications:
Certain prior year amounts have been reclassified to conform with the
current year presentation.
2. Reorganization
RPC was a general partnership, jointly owned and controlled by RPI and
Remsen Partners ("Remsen"). As a result of the Reorganization of RPC, the
following transactions occurred: (i) RPC made cash payments to Remsen and RPI
totalling $135.4 million (less the amount of certain excluded obligations and
net of a working capital adjustment), (ii) the Vestar Members purchased Remsen's
interest in RPC for $33.4 million in cash; (iii) certain members of senior
management of RPC (the "Management Investors") acquired an equity interest in
the Company, for $1.12 million (including a cash purchase of $0.86 million and
assuming exercise of certain management options with an aggregate exercise price
of $0.26 million), (iv) RPI retained an equity investment in the Company with an
implied value of $35.4 million, and (v) RPC merged with and into the Company. In
addition, $41.3 million of existing indebtedness of RPC was refinanced.
F-12
<PAGE>
Remington Products Company, L.L.C. and Subsidiaries
Notes to Consolidated Financial Statements (continued)
The Reorganization has been accounted for as a purchase transaction
effective as of the Closing Date, in accordance with Accounting Principles Board
Opinion No. 16, Business Combinations, and EITF Issue No. 88-16, Basis in
Leveraged Buyout Transactions, and accordingly, consolidated financial
statements for periods subsequent to the Closing Date reflect the purchase
price, including transaction costs, allocated to tangible and intangible assets
acquired and liabilities assumed, based on their estimated fair values as of the
Closing Date. The valuation of assets and liabilities acquired reflect carryover
basis for the percentage ownership retained by RPI.
The Reorganization reflected the following adjustments (in thousands):
Cash payments and distributions (1) $139,750
Implied fair value of equity interests issued to RPI (2) 35,440
---------
Total consideration and direct acquisition costs 175,190
Less RPC's historical cost of net assets acquired (3) (71,246)
---------
Excess of consideration paid over RPC's historical cost 103,944
Less excess of fair value over predecessor basis (4) (73,921)
---------
30,023
Debt issuance costs 9,075
---------
Net adjustment $ 39,098
========
F-13
<PAGE>
Remington Products Company, L.L.C. and Subsidiaries
Notes to Consolidated Financial Statements (continued)
Allocation of net adjustment (5):
Inventories (865)
Prepaid and other current assets (1,752)
Property, plant and equipment, net (1,554)
Goodwill 11,387
Tradenames 26,534
Patents 4,670
Other assets (6) 8,463
Accrued liabilities (7,785)
---------
$ 39,098
========
(1) Consists of cash payments to Remsen and RPI of $90,351 and $45,049 (net of
the final working capital adjustment), respectively, which were reduced by
$13,708 for certain excluded obligations, and $4,350 of direct acquisition
costs.
(2) The fair value of equity interests issued to RPI consists of Preferred
Equity with a liquidation preference of $32,000 and Common Units with a
fair value of $3,400, based on the cash paid by the Vestar members and
certain Management Investors for their respective equity interests. RPI's
predecessor basis in RPC was $8,208.
(3) Represents historical total partners' capital of RPC adjusted to reflect
$13,708 for certain excluded obligations.
(4) Represents adjustments to decrease the fair value of the interests
retained by RPI and certain Management Investors to reflect their
carryover basis.
F-14
<PAGE>
Remington Products Company, L.L.C. and Subsidiaries
Notes to Consolidated Financial Statements (continued)
(5) Represents the adjustments required to record the allocation of the excess
of the consideration paid over RPC's historical basis in the net assets
acquired, adjusted to reflect their carryover basis. The acquired assets
are recorded 53.07% at fair value (for the common equity interest acquired
by the Vestar members and certain of the Management Investors) and 46.93%
at carryover basis (for the residual common equity interests retained by
RPI and certain of the Management Investors).
(6) Represents debt issuance costs of $9,075 net of a $612 write-off of deferred
financing costs related to existing debt being repaid.
3. Inventories
Inventories were comprised of the following as of December 31, 1996 and
1995 (in thousands):
Successor Predecessor
1996 1995
--------- -----------
Finished goods $59,205 $46,524
Work in process 4,556 7,177
Raw materials 24 38
--------- ---------
$63,785 $53,739
========= =========
F-15
<PAGE>
Remington Products Company, L.L.C. and Subsidiaries
Notes to Consolidated Financial Statements (continued)
4. Property, Plant and Equipment
Property, plant and equipment as of December 31, 1996 and 1995 consisted
of (in thousands):
Successor Predecessor
1996 1995
--------- -----------
Land and buildings $ 5,071 $ 6,263
Leasehold improvements 1,737 1,945
Machinery, equipment and tooling 7,083 10,915
Furniture, fixtures and other 1,301 2,184
------- -------
15,192 21,307
Less accumulated depreciation (1,210) (6,763)
------- -------
$13,982 $14,544
======= =======
5. Intangibles
Intangibles were comprised of the following (net of accumulated
amortization of $1,195 and $4,078) as of December 31, 1996 and 1995,
respectively (in thousands):
Successor Predecessor
1996 1995
--------- -----------
Goodwill $31,994 $ 21,082
Tradenames 26,136 -
F-16
<PAGE>
Remington Products Company, L.L.C. and Subsidiaries
Notes to Consolidated Financial Statements (continued)
Patents 4,390 -
------- --------
$62,520 $ 21,082
======= ========
6. Accrued Liabilities
Accrued liabilities were comprised of the following as of December 31,
1996 and 1995 (in thousands):
Successor Predecessor
1996 1995
--------- -----------
Advertising and promotion expenses $10,012 $ 9,673
Compensation and benefits 4,787 3,264
Income and other taxes payable 3,855 4,077
Interest 2,454 662
Other 11,856 8,636
------- -------
$32,964 $26,312
======= =======
7. Debt
Senior Credit Agreement
F-17
<PAGE>
Remington Products Company, L.L.C. and Subsidiaries
Notes to Consolidated Financial Statements (continued)
On the Closing Date, the Company entered into a credit agreement (the
"Senior Credit Agreement") with a syndicate of banks. The Senior Credit
Agreement, as amended, provides for a term loan of $5.0 million to the Company
and $5.0 million to the Company's U.K. subsidiary (the "Term Loans") and a
revolving credit facility of $50.0 million to the Company and $20.0 million to
the Company's U.K. subsidiary (the "Revolving Credit Facilities"). The Senior
Credit Agreement expires on June 30, 2002. The initial borrowings under the
Senior Credit Agreement, along with the proceeds of the Senior Subordinated
Notes, were used to repay the debt of the predecessor company.
The Revolving Credit Facilities are subject to a borrowing base of 85% of
eligible accounts receivable and 60% of eligible inventory for the applicable
borrower. As of December 31, 1996, availability under the Revolving Credit
Facilities was approximately $34.9 million. The term loans under the Senior
Credit Agreement are payable in quarterly installments. Aggregate scheduled
installments over the next five years ending December 31, 2001 are $1.1, $1.4,
$1.6, $1.9 and $3.2 million, respectively. The obligations under the Senior
Credit Agreement are guaranteed by each of the Company's domestic subsidiaries
and secured by their assets and properties and pledge of the common equity
interests.
At the Company's option, the interest rates per annum applicable to the
loans under the Senior Credit Agreement will be based upon (a) in the case of
the Company, a Eurodollar rate ("LIBOR") plus 2.25% or the greater of (i) the
prime rate plus 1.0% and (ii) the federal funds rate plus 1.5% and (b) in the
case of loans to the Company's U.K. subsidiary, a EuroSterling Rate (the
F-18
<PAGE>
Remington Products Company, L.L.C. and Subsidiaries
Notes to Consolidated Financial Statements (continued)
"EuroSterling Rate") plus 2.25% or the Sterling Base Rate plus 1.0%; provided,
however, the interest rates are subject to reduction if certain requirements of
financial performance are met. Interest is payable quarterly in arrears,
including a commitment fee of 0.5% on the average daily unused portion of the
Revolving Credit Facilities.
11% Senior Subordinated Notes
The 11% Series B Senior Subordinated Notes due 2006 (the "Senior
Subordinated Notes") are general unsecured obligations of the Company which
mature on May 15, 2006. Interest accrues at the rate of 11% per annum and is
payable semi-annually in arrears. The Senior Subordinated Notes are redeemable,
in whole or in part, at the option of the Company at any time on or after May
15, 2001 at a redemption price ranging from 105.5% to 100.0% of the Principal
amount then outstanding plus accrued and unpaid interest, depending when
redeemed, and any applicable damages. In addition, on or prior to May 15, 1999,
the Company may redeem up to 35% in aggregate principal amount of the Senior
Subordinated Notes at a redemption price of 111.0% of the principal amount plus
accrued and unpaid interest and any applicable damages with the net proceeds of
one or more offerings of capital stock subject to certain terms and conditions.
Short Term Borrowings
Short Term Borrowings consist of local revolving credit lines at certain
of the Company's foreign subsidiaries'. These facilities are collateralized by
assets of the subsidiaries or are guaranteed by the Company. The weighted
average interest rate under these facilities was approximately 5.1% in 1996 and
1995.
F-19
<PAGE>
Remington Products Company, L.L.C. and Subsidiaries
Notes to Consolidated Financial Statements (continued)
Debt Covenants
The Senior Credit Agreement requires the Company to meet certain financial
tests, the more restrictive of which require the Company to maintain certain
interest coverage and leverage ratios, as defined. The Senior Subordinated Note
indenture and the Senior Credit Agreement also contain a number of operating
covenants which limit the discretion of Management with respect to certain
business matters, including the amount and terms under which the Company can
obtain additional financing in the future. In addition, these agreements limit
the amount of dividends that the Company is permitted to pay.
Details of long-term debt at December 31, 1996 and 1995 are as follows (in
thousands):
Successor Predecessor
1996 1995
--------- -----------
Revolving credit facilities $ 30,224 $ 39,252
Senior Subordinated Notes 130,000 -
F-20
<PAGE>
Remington Products Company, L.L.C. and Subsidiaries
Notes to Consolidated Financial Statements (continued)
Term loans 10,254 16,250
-------- -------
170,478 55,502
Less current portion (1,067) (48,952)
-------- --------
$169,411 $ 6,550
======== ========
8. Membership Interests
The Vestar Members, RPI and certain Management Investors (collectively the
"Members") have entered into an Amended and Restated Limited Liability Company
Agreement (the "LLC Agreement"). The Company was organized as a limited
liability company because such an entity would (i) shield the members from
unlimited liability and (ii) qualify as a pass-through entity for tax purposes.
The LLC Agreement will govern the relative rights and duties of the Members.
The ownership interests of the Members in the Company consist of preferred
membership interests (the "Preferred Equity") and common units (the "Common
Units"). The Common Units represent the common equity of the Company. The
Preferred Equity is entitled to a preferred yield of 12% per annum, compounded
quarterly, and to an aggregate liquidation preference of $62 million (net of any
prior repayments of Preferred Equity) plus any accrued but unpaid preferred
yield. As of December 31, 1996 the aggregate unpaid Preferred Equity dividend
amounted to $4.6 million.
F-21
<PAGE>
Remington Products Company, L.L.C. and Subsidiaries
Notes to Consolidated Financial Statements (continued)
As a result of the Reorganization, on the Closing Date, RPI has a $35.4
million equity interest in the Company ($32.0 million in Preferred Equity) and
the Vestar Members have a $33.4 million equity interest in the Company ($30.0
million in Preferred Equity). As of December 31, 1996, the Company's Common
Units were owned 44.3% by the Vestar Members, 44.3% by RPI and 11.13% by certain
Management Investors (43.0%, 43.0% and 14%, respectively, on a fully diluted
basis). Vestar Corp. I controls the Management Committee and the affairs and
policies of the Company.
On the Closing Date, certain Management Investors were granted options
(the "Management Options") to acquire in the aggregate, up to 2,580 Common Units
at an exercise price of $100 per unit, the fair market value of the Common Units
as of the Closing Date. Subsequent to the Closing Date an additional 1,600
Management Options were granted and none were cancelled. The Management Options,
which are fully vested at the time of grant, are exercisable only under certain
conditions. The shares purchased upon exercise of the options are subject to
certain call provisions exercisable by the Company and certain put provisions
exercisable by the holder.
The Company applies APB Opinion 25 "Accounting for Stock Issued to
Employees", in accounting for the Management Options. Had compensation cost for
the Management Options been determined based on the fair value of the Management
Options at date of grant consistent with the requirements of SFAS No. 123,
"Accounting for Stock Based Compensation", the Company's net loss for the
thirty-one weeks ended December 31, 1996 would have increased by approximately
$0.1 million. The fair value of the Management Options granted during 1996 have
been estimated at the respective dates of grant using the Black-Scholes option
pricing model with the following assumptions: (i) a risk factor interest rate of
6.1%; (ii) an expected life
F-22
<PAGE>
Remington Products Company, L.L.C. and Subsidiaries
Notes to Consolidated Financial Statements (continued)
of five years; (iii) an expected dividend yield of zero; and (iv) an expected
volatility of zero.
9. Income Taxes
Federal income taxes on net earnings of the Company are payable directly
by the partners 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 partnership status for taxing purposes
and require taxes be paid on net earnings. Furthermore, earnings of certain
foreign operations are taxable under local statutes. Foreign pretax
earnings/(losses) were $7,785, $(2,433), $7,632 and $3,232 thousand for the 31
weeks ended December 31, 1996, the 21 weeks ended May 23, 1996, and the years
ended December 31, 1995 and 1994, respectively.
The provision (benefit) for income taxes consists of the following (in
thousands):
<TABLE>
<CAPTION>
Successor Predecessor
--------- ---------------------------------
31 Weeks 21 Weeks
Ended Ended Year Ended
December 31, May 23, December 31,
1996 1996 1995 1994
------- ------- ------- -------
<S> <C> <C> <C> <C>
Current:
State and local $ 5 $ -- $ 40 $ 19
Foreign 1,762 (312) 1,959 1,067
Deferred:
</TABLE>
F-23
<PAGE>
Remington Products Company, L.L.C. and Subsidiaries
Notes to Consolidated Financial Statements (continued)
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
Foreign 1,251 (561) (735) --
------- ------- ------- -------
Total $ 3,018 $ (873) $ 1,264 $ 1,086
======= ======= ======= =======
Income Taxes computed at statutory U.S. Federal
income tax rate $ (54) $(6,672) $ 6,476 $ 5,534
Partnership status for U.S. federal income tax
purposes 2,779 5,821 (3,805) (4,403)
State and local income taxes 5 -- 40 19
Adjustment for foreign income tax rates 288 (22) 506 (33)
Utilization of foreign net operating loss
carryforwards -- -- (1,340) (31)
Recognition of foreign deferred tax asset -- -- (613) --
------- ------- ------- -------
Income taxes as reported $ 3,018 $ (873) $ 1,264 $ 1,086
------- ------- ------- -------
</TABLE>
Deferred tax accounts of the foreign subsidiaries as of December 31, 1996
and 1995 comprise the following (in thousands):
F-24
<PAGE>
Remington Products Company, L.L.C. and Subsidiaries
Notes to Consolidated Financial Statements (continued)
Successor Predecessor
1996 1995
--------- -----------
Current:
Deferred tax assets:
Deductible interest $624
Lease costs 153
Other $101 15
---- ----
Current deferred tax assets 101 792
---- ----
Non-Current:
Deferred tax assets:
Fixed asset depreciation - 136
Deferred tax liability:
Pension surplus - (40)
---- ----
Non-Current deferred tax assets - 96
---- ----
Net deferred tax assets $101 $888
==== ====
10. Commitments and Contingencies
The Company is liable under the terms of noncancelable operating leases of
real estate and equipment for minimum annual rent payments as follows (in
thousands):
F-25
<PAGE>
Remington Products Company, L.L.C. and Subsidiaries
Notes to Consolidated Financial Statements (continued)
1997 $ 3,686
1998 3,038
1999 2,548
2000 1,557
2001 1,077
2002 and thereafter 748
-------
$12,654
=======
Rent expense was $3,760, $2,095, $5,469 and $5,605 thousand for the
thirty-one weeks ended December 31, 1996, the twenty-one weeks ended May 23,
1996 and for the years ended December 31, 1995 and 1994, respectively.
The majority of the leases contain escalation clauses which provide for
increases in base rentals to recover future increases in certain operating
costs. The future minimum rental payments shown above include base rentals with
known escalations. Lease agreements may include renewal options and usually
require that the Company pay for utilities, taxes, insurance and maintenance
expenses.
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.
F-26
<PAGE>
Remington Products Company, L.L.C. and Subsidiaries
Notes to Consolidated Financial Statements (continued)
11. Employee Benefit Plans
UK Pension Plan. The Company's UK subsidiary has a contributory defined
benefit pension plan which covers substantially all of the UK subsidiary's
employees. Pension benefits are based upon length of service and compensation
under a final compensation averaging formula. The Company's funding policy is to
make contributions consistent with statutory requirements. The plan's assets are
primarily invested in equity instruments. Net pension cost for the year ended
December 31, 1996 was approximately $388 thousand.
The plan's funded status as of December 31, 1996 is as follows (in thousands):
Accumulated benefit obligations $(4,446)
-------
Projected benefit obligation $(4,788)
Plan assets at fair value (principally
marketable securities) 5,369
Plan assets in excess of projected benefit -------
obligation 581
Unrecognized gain (480)
-------
Prepaid pension cost $ 101
-------
Comparable information for the year ended December 31, 1995 was not available.
Employee Savings Plan. The Company has a savings accumulation plan (the
"Plan") under Section 401(k) of the Internal Revenue Code covering substantially
all regular employees. The Plan is subject to the provisions of ERISA and has
been updated for subsequent amendments. The Plan allows for employees to defer
up to the lesser of 15% of their annual earnings or within limitations on a
pre-tax basis through voluntary contributions to the plan. The Plan provides for
contributions in an amount equal to 40% of their employees' contributions up to
a maximum of 5% of their total salary. The Company's matching contributions were
$94, $52, $104 and $114 thousand for the thirty-one weeks ended December 31,
1996, the twenty-one weeks ended May 23, 1996 and for the years ended December
31, 1995 and 1994 respectively.
12. Financial Instruments, Credit Risk and Other
Fair Value of Financial Instruments:
The carrying amounts for cash and cash equivalents, accounts receivable,
short-term borrowings, accounts payable and accrued liabilities approximate fair
value due to the short maturities of these instruments. At December 31, 1996,
the net accrued unrealized loss on foreign currency forward contracts was
approximately $1.5 million and the fair value of long-term debt was
approximately $149.9 million (book value of $169.4 million). At December 31,
1995, the net accrued unrealized loss on foreign currency forward contracts was
not material and the carrying value of long-term debt approximated fair value.
Concentration of Credit Risk:
Financial instruments, which potentially subject the Company to
concentration of credit risk, consist principally of cash and accounts
receivable. The Company places its cash with high credit quality institutions.
At times such amounts may be in excess of the FDIC insurance limits. As of
F-27
<PAGE>
Remington Products Company, L.L.C. and Subsidiaries
Notes to Consolidated Financial Statements (continued)
December 31, 1996, the Company had uncollateralized receivables with two
mass-merchant retailers which represented approximately 21% of the Company's
accounts receivable balance. During calendar 1996, 1995 and 1994, sales to these
two customers represented approximately 25%, 21% and 21%, respectively, of the
Company's net sales. The Company performs ongoing credit evaluations of its
customers' financial condition but does not require collateral to support
customer receivables. The Company establishes an allowance for doubtful accounts
based upon factors surrounding the credit risk of specific customers, historical
trends and other information.
Foreign Currency Exposure Management:
The Company has entered into foreign currency forward contracts to
mitigate the effect of fluctuating foreign currencies on intercompany
transactions and balances between U.S. and foreign operations. Realized and
unrealized gains and losses on such contracts are recognized in income as an
offset to gains or losses on the underlying intercompany transactions. At
December 31, 1996, forward contracts to sell 18.7 million UK Pounds Sterling
were outstanding, all of which mature in 1997. At December 31, 1995, forward
contracts to sell 9.6 million UK Pounds Sterling and 3.0 million German Marks
were outstanding and matured at various dates through June 30, 1996.
Other
A substantial portion of the Company's finished goods are manufactured for
the Company by certain third-party suppliers located in China, Japan and
Thailand. Although the Company considers its present relationships with these
F-28
<PAGE>
Remington Products Company, L.L.C. and Subsidiaries
Notes to Consolidated Financial Statements (continued)
suppliers to be good, any adverse change in the relationships with these
suppliers, the financial condition of such suppliers, the Company's ability to
import outsourced products or the suppliers' ability to manufacture and deliver
outsourced products on a timely basis would have a material adverse effect on
the Company.
13. Related Party Transactions
Pursuant to a management agreement (the "Management Agreement") entered
into by the Company as of the Closing Date, Vestar Capital Partners ("Vestar
Capital"), an affiliate of the Vestar Members, will receive an annual advisory
fee equal to the greater of $500 thousand and 1.5% of EBITDA (as defined in such
agreement) of the company on a consolidated basis for rendering advisory and
consulting services in relation to strategic financial planning and other
affairs of the Company. Vestar Capital will also be paid reasonable and
customary investment banking fees in connection with an initial public offering,
sale of the Company and other financing. In addition, Vestar Capital received a
fee in the amount of $2.0 million from the Company on the Closing Date. The
Management Agreement will be in effect until the tenth anniversary of the
Closing Date, provided that the Management Agreement will terminate on the
earlier to occur of: (i) a qualified public offering or (ii) the first date that
an affiliate of Vestar Capital owns less than 25% of the number of the Company's
Common Units owned by Vestar Capital on the Closing Date, and provided further
that Vestar Capital may terminate the Management Agreement at any time.
Pursuant to a consulting and transitional services agreement (the
"Consulting Agreement") entered into by the Company as of the closing Date, RPI
will receive an aggregate annual fee equal to the sum of (i) the greater of $500
thousand and 1.5%
F-29
<PAGE>
Remington Products Company, L.L.C. and Subsidiaries
Notes to Consolidated Financial Statements (continued)
of EBITDA (as defined in such agreement) of the Company on a consolidated basis
and (ii) $250 thousand in 1996, 1997 and 1998 if the Company's net revenues or
EBITDA (as defined in such agreement) exceed certain targets in such years, for
rendering advisory and consulting services in relation to strategic financial
panning, product development and evaluation of mergers, acquisitions and
divestitures. The Consulting Agreement will be in effect until the tenth
anniversary of the Closing Date, provided that the Consulting Agreement will
terminate on the earlier to occur of: (I) a qualified public offering or (ii)
the first date that RPI owns less than 25% of the number of the Company's Common
Units owned by RPI on the Closing Date, and provided further that Vestar Capital
may terminate the Consulting Agreement at any time (but only to the extent that
Vestar Capital also terminates similar provisions of the Management Agreement).
The Company utilized consultants from an entity controlled by a director
of the Company for a limited duration project during 1996. The Company recorded
fees to the consultants of $323 thousand for this project which has been
completed.
During January 1995, RPC entered into a barter transaction with an entity
controlled by one of RPC's partners. RPC exchanged inventory with a cost of
$4,275 for barter credits that can be used to pay for media advertising at a
predetermined rate of cash and barter credits. The transaction resulted in the
recording in 1994 of an inventory writedown of $2,137 to reduce the bartered
inventory to its net realizable value and prepaid advertising of $2,138,
representing management's estimate of the net realizable value of the inventory
exchanged. During 1995, RPC incurred $2,948 for media advertising purchased
through the related entity, of which $521 represented utilization of the barter
credits. TMI ceased being a related party as of the Closing Date.
F-30
<PAGE>
Remington Products Company, L.L.C. and Subsidiaries
Notes to Consolidated Financial Statements (continued)
RPC utilized various consultants (principally in its computer and service
store operations) from an entity controlled by one of RPC's partners. RPC was
billed based upon a prearranged hourly amount and was charged $37, $381 and $375
thousand for related services during the twenty-one weeks ended May 23, 1996 and
for the years ended December 31, 1995 and 1994, respectively. Fees paid to an
entity controlled by the other RPC partner amounted to $54 thousand for
transportation services and reimbursement of the partner's expenses during the
year ended December 31, 1995.
RPC acquired certain products for resale in its service stores from
companies owned by each of RPC's partners. Such purchases aggregated
approximately $80, $94 and $45 thousand during the twenty-one weeks ended May
23, 1996 and for the years ended December 31, 1995 and 1994, respectively.
Included in accounts receivable is $27 thousand owed by a partner and
related affiliates at December 31, 1995. Included in other assets is $200
thousand owed by an officer at December 31, 1995.
In 1995, RPC paid $984 thousand of costs incurred on behalf of the
partners. Approximately $800 thousand of such costs relate to various change in
ownership transactions, which were not completed. The remaining $184 thousand re
presents payments to one of RPC's partners.
14. Geographic Information
F-31
<PAGE>
Remington Products Company, L.L.C. and Subsidiaries
Notes to Consolidated Financial Statements (continued)
The Company operates in one industry segment, the manufacture and
marketing of electrical personal care appliances. The Company sells its products
principally through mass merchandisers and its own service stores in the United
States and also has merchandising operations in Europe (principally U.K. and
Germany) and other countries (principally Canada and Australia).
Information by geographical location is as follows (in thousands):
<TABLE>
<CAPTION>
Successor Predecessor
--------- --------------------------------------------
31 Weeks 21 Weeks
Ended Ended Year Ended
December 31, May 23, December 31,
1996 1996 1995 1994
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
Net sales*:
United States $112,153 $ 34,747 $164,080 $176,230
Europe 50,122 13,927 62,288 57,757
Other 23,011 8,039 28,955 27,459
--------- --------- --------- ---------
$185,286 $ 56,713 $255,323 $261,446
======== ======== ======== ========
Operating profit (loss):
United States $ 2,749 $(14,745) $ 18,402 $ 17,225
Europe 6,394 (1,168) 4,914 1,267
Other 3,365 (1,038) 3,200 2,736
-------- --------- ---------- ----------
$12,508 $(16,951) $ 26,516 $ 21,228
======= ========= ======== ========
</TABLE>
F-32
<PAGE>
Remington Products Company, L.L.C. and Subsidiaries
Notes to Consolidated Financial Statements (continued)
<TABLE>
<S> <C> <C> <C> <C>
Identifiable assets:
United States $143,581 $106,606 $ 99,486
Europe 48,193 45,366 40,898
Other 23,049 18,950 20,159
--------- ---------- ---------
$214,823 $170,922 $160,543
======== ======== ========
</TABLE>
*Net Sales exclude sales from the United States to affiliate companies
of $7,812, $2,716, $11,366 and $12,700 thousand for the 31 weeks ended
December 31, 1996, the 21 weeks ended May 23, 1996 and the years ended
December 31, 1995 and 1994, respectively.
Export sales to unaffiliated customers are included in the United States
and are not significant. Identifiable assets in the United States includes the
majority of the Company's intangible assets.
F-33
<PAGE>
Report of Independent Accountants
To the Management Committee of REMINGTON PRODUCTS COMPANY:
In connection with our audits of the consolidated financial statements of
Remington Products Company and Subsidiaries as of December 31, 1995 and for the
years ended December 31, 1995 and 1994, which financial statements are included
in the Form 10-K, we have also audited the financial statement schedule for the
years ended December 31, 1995 and 1994 listed in item 21(b) herein.
In our opinion, this financial statement schedule, when considered in
relation to the basic financial statements taken as a whole, presents fairly, in
all material respects, the information required to be included therein.
COOPERS & LYBRAND L.L.P.
Stamford, Connecticut
March 4, 1996
S-1
<PAGE>
REMINGTON PRODUCTS COMPANY
Schedule II--Valuation & Qualifying Accounts
(dollars in thousands)
<TABLE>
<CAPTION>
Additions
Balance of Charged to Balance at
Beginning Costs and End
of Period Expenses Deductions of Period
--------- -------- ---------- ---------
<S> <C> <C> <C> <C>
Successor
31 Weeks Ended December 31, 1996 (12 months)
Allowance for doubtful accounts $2,487 $1,038 $2,185 $1,340
Allowance for cash discounts and returns 3,937 14,123 8,641 9,419
Predecessor
21 Weeks Ended May 23, 1996
Allowance for doubtful accounts 1,366 1,914 793 2,487
Allowance for cash discounts and returns 7,852 4,331 8,246 3,937
Year Ended December 31, 1995
Allowance for doubtful accounts 1,461 159 254 1,366
Allowance for cash discounts and returns 7,917 16,075 16,660 7,852
Year Ended December 31, 1994
Allowance for doubtful accounts 451 1,336 326 1,461
Allowance for cash discounts and returns 5,795 18,977 16,855 7,917
</TABLE>
S-2
EXHIBIT 10.20
EXECUTIVE SEVERANCE AGREEMENT
This EXECUTIVE SEVERANCE AGREEMENT (this "Agreement") is made as of
November 25, 1996, by and between the entity named on the signature page hereto
(the "Company"), Alexander R. Castaldi (the "Executive").
In order to induce Executive to accept employment with the Company
and in consideration of the covenants and agreements contained herein, the
parties hereto agree as follows:
1. Definitions.
"Cause" shall mean a termination of the employment of Executive by
the Company or any subsidiary thereof due to (i) the commission by 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, (iii) the
willful misconduct of 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 Executive to render services to the Company or any of its
subsidiaries in accordance with the terms of Executive's employment which
failure amounts to a material neglect of Executive's duties to the Company or
any of its subsidiaries.
"Change of Control" shall mean a transaction as a result of which
any person or entity not controlled by persons currently owning Common Units
acquires more than 60% of the outstanding Common Units or of the common stock of
a corporation that either controls the Company, directly or indirectly, or is
the successor to the Company.
"Common Units" shall mean the common units of the Company, together
with any securities issued in exchange therefor.
"Confidential Information" shall have the meaning set forth in
Section 6 below.
"Good Reason" shall mean the assignment to Executive 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
positions, 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.
"Health Benefits" shall have the meaning set forth in Section 3(b)
below.
"Insured Benefits" shall have the meaning set forth in Section 3(b)
below.
<PAGE>
"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.
"Severance Term" shall have the meaning set forth in Section 3(a)
below.
"Termination Date" shall have the meaning set forth in Section 4(a)
below.
2. Job Elimination. If, within the period commencing 90 days from
the date hereof and for so long as Executive is employed by the Company, there
shall occur:
(a) any involuntary termination of Executive's employment (other
than for Cause or Disability);
(b) the resignation of Executive for Good Reason;
(c) any reduction in Executive's annual base salary in effect on the
date hereof; or
(d) any failure by the Company to provide Executive with benefits at
least as favorable as those enjoyed by Executive under any of the pension,
life insurance, medical, health and accident, disability or other employee
plans of the Company on the date hereof, or the taking of any action that
would materially reduce any of such benefits in effect on the date hereof
(unless this reduction relates to a reduction in benefits applicable to
all employees generally);
then, at Executive's option, exercisable by Executive within thirty (30) days of
the occurrence of each and every of the foregoing events, Executive may resign
from employment (or, if involuntarily terminated, give notice of intention to
collect benefits hereunder) by delivering a notice in writing to the Company,
and the provisions of Section 2 of this Agreement shall apply. The events
described in clause (b) above shall be deemed to occur in the event of a Change
of Control which results in the Company being (1) a member of a different
consolidated group and (2) controlled, directly or indirectly by another entity
which actively conducts an operating business.
3. Continuing Compensation and Benefits.
(a) The Company will continue to pay to Executive his annual base
salary at Executive's rate of pay in effect on the date hereof for a period of
twelve (12) months after the effective date of the termination of Executive's
employment (the "Severance Term"). Subject to Section 6 below, during the
Severance Term, Executive will be free to seek, accept and engage in other
full-time employment.
(b) During the Severance Term, the Company will continue to provide
to Executive the medical benefits Executive was entitled to on the date hereof
(hereinafter "Health Benefits") and to the extent the Company's insurance plans
permit, the long-term disability and life insurance benefits Executive was
entitled to on the date hereof (hereinafter "Insured Benefits"),
-2-
<PAGE>
except that the amount of coverage under the Insured Benefits will be based on
the rate of pay Executive is receiving from the Company at the time of the event
that gives rise to a claim under the Insured Benefits. The continued provision
of the Health Benefits and the Insured Benefits will cease (i) when payments to
Executive cease under Section 3(a) above or (ii) when Executive becomes employed
on a full-time basis, whichever occurs first.
(c) On the effective date of termination of Executive's employment,
the Company will pay Executive for accrued but unused vacation (at his rate of
pay in effect on the date hereof), if any, to the extent provided in the
Company's policies on the date hereof, but Executive shall not accrue any
vacation during the period referred to in Section 3(a) above.
4. Accrued Bonuses.
(a) If the effective date of the termination of Executive's
employment (the "Termination Date") is on or before the end of the second
quarter of the Company's fiscal year and after December 31, 1997, then the
Company shall pay to Executive a bonus in an amount equal to the bonus paid to
Executive for the prior fiscal year under the Company's Bonus Plan multiplied by
a fraction, the numerator of which is the number of completed fiscal quarters
which have elapsed in the Company's current fiscal year through and including
the termination date, and the denominator of which is 4.
(b) If the Termination Date is after the end of the second quarter
of the Company's fiscal year or occurs at any time prior to December 31, 1997,
then the Company shall, at the time bonuses for such fiscal year are paid to
employees of the Company, pay to Executive a bonus in an amount equal to the
lesser of (i) the bonus for the such fiscal year to which Executive would have
been entitled had he not been terminated multiplied by a fraction, the numerator
of which is the number of completed fiscal quarters which have elapsed in the
Company's current fiscal year through and including the termination date, and
the denominator of which is 4, and (ii) the bonus paid to Executive for the
prior fiscal year under the Company's Bonus Plan multiplied by a fraction, the
numerator of which is the number of completed fiscal quarters which have elapsed
in the Company's current fiscal year through and including the termination date,
and the denominator of which is 4, provided that, in the event of a Termination
occurring at any time during the period ending December 31, 1997, the amount
payable under this paragraph 3(b) shall be determined solely under clause (i) of
this paragraph 3(b). The Company shall pay one-half of the projected amount
payable under this paragraph 3(b) at the end of the Company's fiscal year and
the remainder at completion of the Company's year end audit.
(c) If the Termination Date occurs within 12 months of a Change of
Control, then the Company shall, within 5 business days of the Termination Date,
pay to Executive 100% of the greater of (i) the targeted bonus that Executive
would have received in respect of such fiscal year had he not been terminated
and (ii) the bonus paid to Executive in respect of the prior fiscal year.
(d) The provisions of this Section 3 will be effective beginning 90
days after the date hereof.
-3-
<PAGE>
5. Termination for Cause. If Executive's employment is terminated
for Cause, all of Executive's rights under paragraphs 2 and 3 shall cease as of
the effective date of the Termination Date, except that Executive (i) shall be
entitled to receive accrued salary through the Termination Date and (ii) shall
be entitled to receive the payments and benefits to which Executive was then
entitled under the employee benefit plans of the Company or any affiliate
thereof as of the Termination Date.
6. 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 that (i) are not
available to the public, customers, suppliers and competitors of the Company,
(ii) are in the nature of trade secrets, or (iii) 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 (collectively, the "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.
7. Non-Compete; Non-Solicitation.
(a) Executive agrees that during the Non-Compete 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 the
world with the businesses of the Company or its subsidiaries as such businesses
exist or are in process on the Termination Date. 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 "Non-Compete Period" means the period beginning on the date
of this Agreement and ending on the last day of the Severance Term.
(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 Date 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.
-4-
<PAGE>
(b) If, at the time of enforcement of this Section 7, 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, 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 6 or this Section 7, 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).
8. Notice/Consultation. In consideration of the foregoing, Executive
agrees to give the Company no less than 30 days prior written notice if at any
time Executive decides to resign from the Company's employ. Since, in certain
respects, Executive will be an employee of the Company during any Severance
Term, Executive agrees to consult with the Company during such Severance Term.
This consultation obligation will not prevent or interfere with Executive
seeking, accepting or engaging in full-time employment.
9. Term. This Agreement will be in effect for a period of three
years from the date hereof.
10. Tax Withholding. All payments to Executive hereunder will be
earned and prorated on a daily basis, but shall be payable at the same time and
in the same manner as executives of the Company, or its successor, are paid
their salaries. The Company shall have the power to withhold, require 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 payments, and the Company may
defer any payments until such requirements are satisfied.
11. 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 Executive in any capacity whatsoever or to prohibit or
restrict the Company (or any such subsidiary) from terminating the employment of
Executive at any time or for any reason whatsoever, with or without Cause.
12. Administration by Management Committee. This 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.
Any action taken under the provisions of this Agreement by the Management
Committee in connection with the administration of this Agreement shall be, in
each case, within the sole discretion of the Management Committee and conclusive
and binding upon the Company, Executive, all beneficiaries of Executive, and all
persons and entities having any interest therein.
-5-
<PAGE>
13. 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.
14. 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. 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.
15. 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.
16. Jurisdiction. Any suit, action or proceeding with respect to
this Agreement, or any judgment entered by any court in respect thereof, shall
be brought in any court of competent jurisdiction in the State of New York, and
both the Company and Executive hereby submit to the exclusive jurisdiction of
such courts for the purpose of any such suit, action, proceeding or judgment.
Executive and the Company hereby irrevocably waive any objections which either
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
waive any claim that any such suit, action or proceeding brought in any such
court has been brought in any inconvenient forum.
17. 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.
(i) If to the Company:
Remington Products Company, L.L.C.
60 Main Street
Bridgeport, CT 06604
Attention: Allen S. Lipson
Telecopy: 203-366-7707
-6-
<PAGE>
and
Remington Products Company, L.L.C.
c/o Vestar Equity Partners, L.P.
245 Park Avenue, 41st 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
(ii) If to Executive:
18. 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.
19. Counterparts. This Agreement may be executed in separate
counterparts each of which shall be deemed an original, but all of which shall
constitute one and the same instrument.
20. Injunctive Relief. The Executive 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.
21. Rights Cumulative. The rights and remedies of 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 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.
* * * * *
-7-
<PAGE>
[END OF PAGE]
[SIGNATURE PAGE FOLLOWS]
-8-
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement as of
the date first above written.
REMINGTON PRODUCTS COMPANY, L.L.C.
By:__________________________
Name:
Title:
__________________________
ALEXANDER R. CASTALDI
EXHIBIT 10.21
OPTION AGREEMENT
for
ALEXANDER R. CASTALDI
THIS OPTION AGREEMENT (this "Agreement") is made as of November 25,
1996 (the "Grant Date"), by and between Remington Products Company, L.L.C., a
Delaware limited liability company (the "Company"), and Alexander R. Castaldi
(the "Executive").
WHEREAS, on the terms and subject to the conditions hereof, the
Company desires to grant Executive, and 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 "Options"); and
WHEREAS, this Agreement is one of several agreements entered into by
the Company with certain persons who are or will be key employees of the Company
(collectively with 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.
"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;
(iii) 75% during the one-year period commencing on the third anniversary of the
Grant Date; and (iv) 100% on and after the fourth anniversary of the Grant Date.
The Applicable Percentage shall be 100% after an IPO Exit Transaction.
"Cause" shall mean a termination of the employment of Executive by
the Company or any subsidiary thereof due to (i) the commission by 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, (iii) the
willful misconduct of 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 Executive to render services to the Company or any of its
subsidiaries in accordance with the terms of Executive's employment which
failure amounts to a material neglect of Executive's duties to the Company or
any of its subsidiaries.
<PAGE>
"Chase Bank" means Chase Manhattan Bank, N.A.
"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 Executive (as proportionately adjusted for all
subsequent stock splits, stock dividends and other recapitalization).
"Disability" shall mean the inability of 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, 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.
"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
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taking into account the lack of liquidity and minority position of the Common
Units subject to repurchase).
"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 as of May 23, 1996 among the Company and
the financial institutions, agents and trustees party thereto, and any
extensions, renewals, refinancings or refundings thereof in whole or in part;
(ii) any provision of the 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.
"Good Reason" shall have the meaning set forth in the Executive
Severance Agreement dated as of November __, 1996, between Executive and the
Company.
"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 Equity Partners, L.P., a Delaware limited partnership ("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 Company 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 Common Units Subscription Agreements" shall mean the
____________________.
"Management Option Holders" shall have the meaning set forth in the
preface.
"Members Pledge Agreement" shall mean _______________.
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"Options" shall have the meaning set forth in the preface.
"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.
"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.
"Retirement" shall mean Executive's retirement as an employee of the
Company or any of its subsidiaries on or after reaching age 65 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 Company" 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 16, 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.
2. Grant of Options.
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 Executive, effective on the Grant Date, of
the Options to purchase from the Company the number of Common Units set forth in
Schedule I attached hereto at an exercise price per unit (the "Exercise Price")
and for an aggregate exercise price set forth in Schedule I attached hereto. If
Executive exercises the Options, 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 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
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be exercised, subject to the terms of this Agreement, only (a) in connection
with a Sale of the 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 (i)
contain the representations and warranties set forth in Section 3.2 and (ii) 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
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;
(b) Executive must execute the Limited Liability Company Agreement
and Securityholders Agreement;
(c) Executive must deliver to the Company a completed and executed
election under 83(b) of the Internal Revenue Code of 1986, as amended, and
the regulations promulgated thereunder in the form of Exhibit A attached
hereto (which election may be filed by the Company); and
(d) Executive must, if required by the Management Committee, execute
and deliver the Members Pledge Agreement or such other pledge agreement
containing provisions substantially similar to the Members Pledge
Agreement and such other documents and instruments contemplated
thereunder.
The Management Committee may impose such additional procedural requirements to
the exercise of the Options as it may deem necessary or advisable in connection
therewith. The Executive consents to the filing of the election contemplated by
Section 2.3(c).
3. Investment Representations and Covenants of the Executive.
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 Options must be
held indefinitely and Executive must continue to bear the economic risk of
such investment in the
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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:
"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 [NAME] CASTALDI DATED AS OF
JANUARY __, 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 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 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 Executive to taxation in the various jurisdictions
where the Company conducts business.
3.2 Additional Investment Representations. Upon each exercise of the
Options, Executive shall represent and warrant that:
(a) 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;
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(b) 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) 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 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
Executive ceases 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) 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 Executive or Executive's representatives concerning the Common
Units or the Company or their prospects or other matters;
(f) 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
Limited Liability Company Agreement and the terms and conditions of the
purchase of the Common Units and to obtain any additional information
which Executive deems necessary; and
(g) all information which Executive has provided to the Company and
the Company's representatives concerning Executive and Executive's
financial position is complete and correct as of the date of this
Agreement.
4. Certain Sales Upon Termination of Employment.
4.1 Put Option.
(a) If 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 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 Put Date) or Cost
for the Applicable Percentage (measured as of the Put
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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 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 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 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 Executive's Employment is terminated by the Company at
any time without Cause or by 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 Common Units being purchased and (y) Cost for
the remainder of the Common Units being purchased;
(iii) if after the fifth anniversary of the Grant Date
Executive's Employment is terminated (A) by Executive for any reason other
than Disability, death, Retirement, or Good Reason, or (B) by the Company
with or without Cause, the purchase price shall be the greater of Fair
Market Value (measured as of the Termination Date) or Cost of the Common
Units being purchased; and
(iv) if Executive's Employment is terminated prior to the
fifth anniversary of the Grant Date (A) by Executive for any reason other
than Disability, death, Retirement, or Good Reason, or (B) by the Company
for Cause, the purchase price shall be the Cost of the Common Units being
purchased;
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provided further that, in any case, the Management Committee shall have the
right, in its sole discretion, to increase any purchase price set forth above.
(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.
5. Certain Limitations on the Company's Obligations to Purchase Common
Units.
5.1 Deferral of Purchases.
(a) Notwithstanding anything to the contrary contained in this
Agreement, 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 it is no longer prohibited from purchasing such
units under Section 5.1(a) (after taking into account any purchases to be made
at such time pursuant to the agreements with other Management Option Holders),
and the Company shall give the members of the Executive Group five days prior
notice of any such purchase.
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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 indebtedness, if any, owing from 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 (A) Section 4.1(a), or (B) any of Sections
4.2(a)(iii) or 4.2(a)(iv), 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 obligor
of the Company.
6. Miscellaneous.
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 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 clauses (f) and (g) of the definition of "Exempt
Employee Transfers" as defined in the Securityholders Agreement. Prior to any
transfer of Common Units, Executive shall deliver to the Company a written
agreement of the proposed transferee (a) evidencing such Person's 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
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Liability Company 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.
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, Common
Units, and all other 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"), 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 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 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. The Company shall use 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; provided, 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 Executive in any capacity whatsoever or to prohibit or
restrict the Company (or any such subsidiary) from terminating the employment of
Executive at any time or for any reason whatsoever, with or without Cause.
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6.6 No Rights as Equity Holder. Except as otherwise required by law,
Executive shall not have any rights as an equity holder with respect to any
Common Units until such time as the Common Units have been so issued.
6.7 Administration by 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. Any action taken under the provisions of this Agreement by the
Management Committee in connection with the administration of this Agreement
shall be, in each case, within the sole discretion of the Management Committee
and conclusive and binding upon the Company, Executive, all beneficiaries of
Executive, and all persons and entities having any interest therein.
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 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.
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(a) If to the Company:
Remington Products Company, L.L.C.
60 Main Street
Bridgeport, CT 06604
Attention: Allen S. Lipson
Telecopy: 203-366-7707
and
Remington Products Company, L.L.C.
c/o Vestar Equity Partners, L.P.
245 Park Avenue, 41st 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 Executive, to the address as shown on the equity interest
register of the Company.
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 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.
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6.16 Rights Cumulative; Waiver. The rights and remedies of 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 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.
* * * * *
-14-
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Option Agreement
as of the date first above written.
REMINGTON PRODUCTS COMPANY, L.L.C.
By:__________________________
Name:
Title:
__________________________
ALEXANDER R. CASTALDI
-15-
<PAGE>
SCHEDULE I
Options
- --------------------------------------------------------------------------------
AGGREGATE
NUMBER OF OPTIONS EXERCISE PRICE EXERCISE PRICE
- --------------------------------------------------------------------------------
Common Units equaling The same price per Common $162,327
2%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 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.
-16-
<PAGE>
CONSENT OF SPOUSE
The undersigned spouse of Executive hereby acknowledges that I have
read the foregoing Option Agreement (the "Agreement") and that I understand its
contents. I am aware that the Agreement provides for the repurchase of the early
termination of the Options (as defined in the Agreement) under certain
circumstances, Common Units (as defined in the Agreement) issuable upon exercise
of the Options and imposes other restrictions on the transfer of such Options
and Common Units. I agree that my spouse's interest in the Options and the
Common Units is subject to the Agreement and any interest I may have in such
Options and Common Units shall be irrevocably bound by the Agreement and further
that my community property interest, if any, shall be similarly bound by the
Agreement.
I am aware that the legal, financial and other matters contained in
the Agreement are complex and I am free to seek advice with respect thereto from
independent counsel. I have either sought such advice or determined after
carefully reviewing the Agreement that I will waive such right.
Name:______________________________
Print Name:________________________
___________________________________
Witness
-17-
<PAGE>
EXHIBIT A
_________, ____
ELECTION TO INCLUDE STOCK IN GROSS
INCOME PURSUANT TO SECTION 83(b) OF THE
INTERNAL REVENUE CODE
The undersigned purchased Common Units (the "Units") of Remington
Products Company, L.L.C., a Delaware limited liability company (the "Company"),
on , . Under certain circumstances, the Company has the right to repurchase the
Units at cost from the undersigned (or from the holder of the Units, if
different from the undersigned) should the undersigned cease to be employed by
the Company and its subsidiaries. Hence, the Units are subject to a substantial
risk of forfeiture and are nontransferable within the meaning of Section 83 of
the Internal Revenue Code, as amended (the "Code"). The undersigned desires to
make an election to have the Units taxed under the provision of Code ss. 83(b)
at the time the undersigned purchased the Units.
Therefore, pursuant to Code ss.83(b) and Treasury Regulation
ss.1.83-2 promulgated thereunder, the undersigned hereby makes an election, with
respect to the Units (described below), to report as taxable income for calendar
year the excess (if any) of the Units' fair market value on , over the purchase
price thereof.
The following information is supplied in accordance with Treasury
Regulation ss.1.83-2(e):
1. The name, address and social security number of the undersigned:
______________________________
______________________________
SSN:__________________________
2. A description of the property with respect to which the election
is being made: _______ Common Units of the Company.
3. The date on which the property was transferred: ________, _____.
The taxable year for which such election is made: calendar____ .
4. The restrictions to which the property is subject: If the
undersigned ceases to be employed by the Company or any of its subsidiaries as a
result of the undersigned's resignation during the first five years after the
grant of options that the undersigned exercised to acquire the Units, all of the
Units are be subject to repurchase by the Company at cost.
-18-
<PAGE>
5. The fair market value on ________, _____ of the property with
respect to which the election is being made, determined without regard to any
lapse restrictions: $__________ per Common Unit.
6. The amount paid for such property: $___________ per Common Unit.
A copy of this election has been furnished to the Secretary of the
Company pursuant to Treasury Regulations ss.1.83-2(e)(7).
Dated: ________, _____ __________________________________
[Name]
EXHIBIT 24
POWER OF ATTORNEY
REMINGTON PRODUCTS COMPANY, L.L.C.
KNOW ALL MEN BY THESE PRESENTS, that each person whose name appears
below constitutes and appoints Alexander R. Castaldi, Allen S. Lipson and Kris
J. Kelley and each of them, his true and lawful attorneys-in-fact and agents,
with full power of substitution and resubstitution, for and in his name, place
and stead, in any and all capacities which such person serves or may serve with
respect to Remington Products Company, L.L.C. and Remington Capital Corp., to
sign the Annual Report on Form 10-K of Remington Products Company, L.L.C. and
Remington Capital Corp. for the fiscal year ended December 31, 1996, and any or
all amendments to such Annual Report, and to file the same, with all exhibits
thereto, and other documents in connection therewith, with the Securities and
Exchange Commission, granting unto said attorneys-in-fact and agents, and each
of them, full power and authority to do and perform each and every act and thing
requisite and necessary to be done in and about the premises, as fully to all
intents and purposes as he might or could do in person, hereby ratifying and
confirming all that said attorneys-in-fact and agents or any of them, or their
or his substitutes, may lawfully do or cause to be done by virtue hereof.
This power of attorney has been signed as of the 26th day of March, 1997, by the
following persons:
/s/ Neil P. DeFeo /s/ Victor K. Kiam, II
- -------------------------------------- ------------------------------------
Neil P. DeFeo, Victor K. Kiam, II,
Chief Executive Officer, President and Chairman and Director
Director
/s/ Victor K. Kiam, III /s/ Robert L. Rosner
- -------------------------------------- ------------------------------------
Victor K. Kiam, III, Robert L. Rosner,
Director Director
/s/ Norman W. Alpert /s/ Kevin Mundt
- -------------------------------------- ------------------------------------
Norman W. Alpert, Kevin Mundt,
Director Director
/s/ Arthur J. Nagle
- -------------------------------------- ------------------------------------
Arthur J. Nagle, Daniel S. O'Connell,
Director Director
/s/ Kris J. Kelley
______________________________________ ------------------------------------
William B. Connell, Kris J. Kelley,
Director Vice President and Controller
/s/ Alexander R. Castaldi
- --------------------------------------
Alexander R. Castaldi,
Executive Vice President and Chief
Financial Officer
EXHIBIT 10.25
WORLDWIDE BONUS PLAN
KEY ELEMENTS
1. Salaried jobs only both in U.S. and International.
2. Each position classified into salary grade levels 10 to 25.
3. Target bonus based on % of base salary for each grade level.
4. Percent of base salary increases as salary grade increases (see attachment
for U.S. business). This will be different for each country.
5. For senior executives 50% of target bonus will be dependent upon
performance against EBITDA budget for entire company with remainder, where
applicable, dependent upon performance of managed business (i.e. retail,
UK, Australia, etc.) against EBITDA budget. At level immediately below
senior executives, 25% of target bonus will be dependent upon performance
of entire company against EBITDA budget with 75% dependent upon
performance of applicable business. At levels below direct reports, 100%
of bonus dependent upon performance of applicable business.
6. Sliding scale which cuts off at 90% of budgeted EBITDA (no bonus paid
below 90%) with no maximum for portion dependent upon worldwide results
and a maximum of 200% for that portion of bonus dependent upon applicable
business.
7. Payment scale:
Achievement of Budget % of Target Bonus
--------------------- -----------------
90% 50%
95 75
100 100
100+ Increases 2 points for every point
above 100
8. Individuals not in bonus program can be awarded a bonus on an exceptional
basis as approved by the CEO.
9. Payment of bonus: Entire bonus paid upon completion of year-end audit.
10. Individual must be employed by July 1st in order to be eligible for bonus.
Any exception for grade level 18 and below must be approved by the Vice
President Administration and by the CEO for any grade level above 18.
11. Individual must be employed at time of bonus payment in order to receive.
An exception is if employment is terminated for reasons other than "cause"
after June 30th and before payment of bonus, individual will receive a
proportionately reduced bonus based upon the number of months
<PAGE>
employed during the fiscal year. "Cause is defined as a) commission 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 financial loss to the Company or any of its
subsidiaries, b) conviction of a felony, c) willful misconduct which is
reasonably likely to result in injury or financial loss to the Company or
any of its subsidiaries, or d) the willful failure to render services to
the Company or any of its subsidiaries in accordance with the employee's
employment which failure amounts to a material neglect of the employee's
duties to the Company or any of its subsidiaries.
GRADE LEVEL/SALARY/BONUS
(U.S.)
Target
Job Grade Salary Range Bonus %
- --------- ----------------- ------------
10 $21,000 - $ 32,000 5%
11 23,000 - 36,000 5
12 25,000 - 40,000 5
13 27,000 - 44,000 5
14 29,000 - 48,000 5
15 32,000 - 55,000 5
16 38,000 - 65,000 7
17 42,000 - 80,000 10
18 50,000 - 95,000 15
19 60,000 - 115,000 20
20 70,000 - 135,000 25
21 80,000 - 165,000 30
22 100,000 - 225,000 35
23 125,000 - 275,000 40
24 150,000 - 325,000 45
25 200,000 - 50
2
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the results
of operations for the twelve months ended December 31 and include the combined
results for predecessor and successor companies, and is qualified in the
entirely by reference to such financial statements.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> DEC-31-1996
<CASH> 7,199
<SECURITIES> 0
<RECEIVABLES> 55,602
<ALLOWANCES> 1,340
<INVENTORY> 63,785
<CURRENT-ASSETS> 129,458
<PP&E> 15,982
<DEPRECIATION> (1,210)
<TOTAL-ASSETS> 214,823
<CURRENT-LIABILITIES> 51,598
<BONDS> 169,411
0
0
<COMMON> 0
<OTHER-SE> (7,707)
<TOTAL-LIABILITY-AND-EQUITY> 214,823
<SALES> 241,999
<TOTAL-REVENUES> 241,999
<CGS> 152,825
<TOTAL-COSTS> 152,825
<OTHER-EXPENSES> 90,665
<LOSS-PROVISION> 2,952
<INTEREST-EXPENSE> 14,392
<INCOME-PRETAX> (19,218)
<INCOME-TAX> 2,145
<INCOME-CONTINUING> (21,363)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (21,363)
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
