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, 1997.
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934.
Commission file number 333-07429
Remington Products Company, L.L.C.
------------------------------------------
(Exact name of registrant as specified in its charter)
Delaware 06-1451076
- ---------------------------------- ----------------------
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
60 Main Street, Bridgeport, Connecticut 06604
- --------------------------------------- -----------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (203) 367-4400
--------------
Securities registered pursuant to Section 12(b) of the Act:
Title of Each class Name of each exchange on which registered
None None
- -------------------- ----------------------------------------
Securities registered pursuant to Section 12(g) of the Act:
11% Series B Senior Subordinated Notes due 2006
--------------------------------------
(Title of Class)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes x/ No _____
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/]
<PAGE>
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 hair dryers, 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.
Description of Business
Products
Electric Shavers. The Company's primary men's electric shaver line is the
MicroScreen(R) line of single, dual and triple foil shavers, each with the
MicroScreen(R) cutting system. In addition, the Company also has a line of men's
Dual Track(TM), rotary shavers and certain specialty shavers such as the "sport
shaver". The Company has recently introduced its new Intercept(TM) line of
premium shavers, with the intercept shaving system that sandwiches a
trimmer-style cutter between two foil heads. The women's electric shaver lines
primarily include the women's wet/dry Dual Foil shaver, the women's wet/dry
battery operated shaver and the wet/dry Swirl(TM) 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 and shaver accessories accounted for
approximately 42%, 44% and 44% of the Company's total net sales for the years
ended December 31, 1997, 1996 and 1995 respectively.
Women's Personal Care Appliances. Women's personal care appliances consist
primarily of hairsetters, hair dryers, curling irons, hot air brushes and
make-up mirrors. The 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 proprietary
technology that indicates to users when optimum heat levels have been reached by
changing the color of the rollers, and the Style Setter(R) hairsetter. Women's
personal care appliances accounted for approximately 25%, 28% and 30% of the
Company's total net sales for the years ended December 31, 1997, 1996 and 1995,
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 hair dryers, steamers, irons,
voltage converter/adapter plugs and shavers. In the home health appliance
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product category, Remington sells foot spas and back massagers currently outside
the United States, as well as other small appliances such as vacuums.
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 112 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.
On a worldwide basis, Wal-Mart accounted for 15%, 16% and 16% of the
Company's net sales during the years ended December 31, 1997, 1996 and 1995. No
other customer accounted for more than 10% of the Company's net sales during the
years ended December 31, 1997, 1996, and 1995.
Service Stores
As of December 31, 1997, the Company owned and operated a chain of 112
service stores with 93 in the United States, ten in the United Kingdom and nine
in Australia. During 1997, the Company opened a net of ten service stores in the
United States, one store in the United Kingdom and six 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 and outlet malls within large
metropolitan areas. The stores sell and service a variety of Remington and
non-Remington shavers and accessories, personal care appliances, knives,
scissors, travel appliances and other related products. The service stores also
oversee sales of replacement parts to approximately 300 independent authorized
shaver service dealers across the United States. In 1997, the Company's service
stores generated worldwide net sales of $46.5 million, with $38.6 million in the
U.S. and $7.9 million internationally. Sales of Remington products accounted for
approximately 40% of the service stores 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. 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
seasonal 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 seasonal workers.
Suppliers
The majority of the Company's finished goods inventories are manufactured
for the Company by third party suppliers primarily located in China, Japan and
Thailand. While Remington sources a large portion of its materials and products
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from third-party suppliers, it continues to manufacture its MicroScreen(R) 3 and
certain other shavers in-house and maintains ownership of tools and molds used
by many of its suppliers. The Company's two most significant suppliers, Izumi
Products, Inc. ("Izumi") and Raymond International, accounted for approximately
35% of the Company's overall cost of sales in 1997. These two suppliers'
manufacturing facilities are located in China and Japan. Remington has had a
relationship with these suppliers for many years and management considers its
present relationships to be good.
Research and Product Development
The Company believes that research and development activities are an
important part of the Company's business and are essential to its long-term
prospects. Research and development efforts at Remington allow the Company to
maintain its unique manufacturing strength in cutting systems for shavers. The
Company is continuously pursuing new innovations for its line of shavers
including foil improvements and new cutting and trimmer configurations. The
Company also devotes resources to the development of new technology for other
products such as women's personal care products, including hairsetters, hair
dryers and curling irons, as well as for men's grooming products.
The Company has continued to increase its investment in research and
development activities in recent years. During 1997, 1996 and 1995, research and
development expenditures for the Company amounted to approximately $2.8. $2.1
and $1.9 million, respectively.
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, hair dryers 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
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
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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 and Australia.
Employees
As of December 31, 1997, the Company employed approximately 1,145 people in
the United States and abroad of which approximately 200 were seasonal
manufacturing workers and 250 were employed part-time in the Company's service
stores. 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 43%, 39% and 36% of the Company's net sales in 1997,
1996 and 1995, respectively. The Company's international network of subsidiaries
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and distributors currently extends to over 85 countries worldwide. The Company
markets products throughout Europe, the Middle East, Africa, and a portion of
South America through its subsidiary in the United Kingdom, throughout Asia
through its subsidiary in Australia 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 South Africa. In all other parts of the
world the Company distributes its products through strategic alliances with
local distributors. As in the United States market, the primary asset of the
Company's international operations is the 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
Bridgeport, CT Headquarters (Owned) 40,000
Bridgeport, CT Manufacturing (Owned) 167,000
Milford, CT Warehouse (Leased) 100,000
In addition to these properties, Remington leases offices and warehouse
space in Canada, United Kingdom, Germany, France, Australia, New Zealand, South
Africa, Ireland, Sweden and Hong Kong, and 112 service stores, of which 93 are
in the United States, ten are in the United Kingdom and nine are in Australia.
ITEM 3. Legal Proceedings
The Company and Philips are engaged in litigation in the United Kingdom and
Australia 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.
The U.K. trial court found in favor of the Company and Philips has appealed that
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decision. The trial in the Australian action is scheduled for mid-1998. The
costs of defending the U.K. and Australian 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 ultimately determined
adversely to the Company or Izumi, the Company's ability to sell rotary shavers
in such countries could be limited or prohibited. In 1997, the Company's net
sales of rotary shavers in Europe were not material.
In December 1997, the Company settled all litigation with Dickson Industries
Co., Ltd. and Charles W. Howard which was pending in the U.S. District Court for
the Eastern District of California. The litigation, which was commenced against
Remington in December 1996 alleged that Remington infringed a patent owned by
Mr. Howard, which was licensed to Dickson, relating to certain curling irons
sold by the Company. The Company agreed to cease distribution of the product and
the settlement had no material effect on the Company's 1997 financial position
or results of operations.
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 15, 1998, there were two holders of the common equity securities
of the Company.
(c) Dividends
No cash distributions have been paid on the common and preferred equity of
the Company since the Closing Date. Prior to the reorganization of the Company
in May 1996, as discussed in Note 2 of the "Notes to the Financial Statements",
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 appearing elsewhere herein, significantly restrict the payment of
dividends.
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(d) Recent Sales of Unregistered Securities
None.
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
-------------------------------------- -----------------------------------------------------------------
Year 31 Weeks 21 Weeks 3 Months Year
Ended Ended Ended Year Ended Ended Ended
December 31, December 31, May 23, December 31, December 31, Sept. 30
---------------------------
1997 1996 1996 1995 1994 1993 1993
--------------- ----------------- ----------- --------------- ---------- ------------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
Statement of
Operations Data:
Net sales $241,572 $185,286 $ 56,713 $255,323 $261,446 $71,152 $156,665
Operating income
(loss) 14,146 12,508 (16,951) 26,516 21,228 5,459 7,681
Interest expense 19,318 12,164 2,228 7,604 6,414 1,248 4,066
Net income (loss) (7,923) (3,172) (18,191) 17,240 14,725 4,024 3,021
Balance Sheet Data
(at period end):
Working capital 76,361 $ 77,860 N/A $ 47,223 $ 62,862 $ 70,164 N/A
Total assets 205,245 214,823 N/A 170,922 160,543 175,567 N/A
Total debt 180,831 171,631 N/A 56,990 55,093 71,931 N/A
Cumulative Preferred
Dividend (1) 12,932 4,576
</TABLE>
- ----------------------------
(1) 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
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
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stores in the United Kingdom and Australia) and the Company's results of
operations as a percentage of net sales for the years ended December 31, 1997,
1996 and 1995. To facilitate comparison of the operating results of the periods
set forth below, results of operations for the year 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 Consolidated Financial Statements and accompanying notes thereto
appearing elsewhere herein.
<TABLE>
<CAPTION>
Successor Successor and Predecessor Predecessor
--------------------- ------------------------- --------------------------
Year Ended Combined Year Ended Year Ended
December 31, 1997 December 31, 1996 December 31, 1995
-------------------- ------------------------ -----------------------
$ % $ % $ %
------ ---- ------- ---- ------ -----
<S> <C> <C> <C> <C> <C> <C>
Net Sales:
U.S. $ 99.6 41.2 $113.2 46.7 $131.2 51.4
U.S. service stores 38.6 16.0 33.7 13.9 32.9 12.9
International 103.4 42.8 95.1 39.4 91.2 35.7
------ ------ ---- ----- ------ -----
241.6 100.0 242.0 100.0 255.3 100.0
Cost of sales 141.3 58.5 152.7 63.1 143.2 56.1
------ ------ -- ----- ----- -----
Gross profit 100.3 41.5 89.3 36.9 112.1 43.9
Selling, general and
administrative 84.3 34.9 91.9 37.9 83.9 32.9
Intangible amortization 1.9 0.8 1.9 0.8 1.7 0.6
-------- ------- ------ ------ ------- ------
Operating income (loss) 14.1 5.8 (4.5) (1.8) 26.5 10.4
Interest expense 19.3 8.0 14.4 5.9 7.6 3.0
Other expense (income) 0.5 0.2 0.3 0.1 0.4 0.2
-------- ------- ------ ------ ------- ----
Income (loss) before income
taxes (5.7) (2.4) (19.2) (7.9) 18.5 7.2
Provision for income
taxes 2.2 0.9 2.2 0.9 1.3 0.5
-------- ------- ------ ----- ------- -----
Net income (loss) $(7.9) (3.3) $(21.4) (8.8) $17.2 6.7
====== ====== ======= ====== ===== =====
</TABLE>
Year Ended December 31, 1997 compared to the year ended December 31, 1996
Net Sales. Net sales for the year ended December 31, 1997 were $241.6
million compared to $242.0 million for the previous year. International net
sales and U.S. service store sales demonstrated strong results for 1997 with
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increases of 8.7% and 14.5%, respectively over the prior year. These results
were more than offset by a decline in net sales in the United States.
Net sales in the United States decreased 12.0% from $113.2 million for the
year ended December 31, 1996 to $99.6 million in 1997. This decrease was
primarily related to lower sales of certain men's and women's shavers. Men's
shaver sales were impacted by the effect of transitioning to the updated line of
MicroScreen(R) shavers, competitive actions in rotary shavers as well as the
decision not to repeat certain promotional programs offered during 1996. The
introduction of the new line of MicroScreen(R) 2 shavers in the third quarter of
1997 helped sales of the mid-priced and largest line of Remington shavers come
in on line with the prior year, while the impact of the announced 1998
introduction of the new MicroScreen(R) 3 shavers resulted in lower transitional
sales of the older Triple Foil(TM) line of shavers in 1997. Women's shaver sales
were impacted by an overall decline in the market for women's shavers.
Additionally, domestic sales of women's personal care appliances were negatively
impacted by competitive actions in hairsetters and the cancellation of a new
line of curling irons.
Net sales through the Company's U.S. service stores increased 14.5% to $38.6
million in 1997 from $33.7 million in 1996. This increase is primarily
attributable to the opening of a net of 10 additional stores for a total of 93
stores open during the holiday shopping season. Additionally, same store sales
increased 4.3% from 1996 to 1997 as a result of a strong holiday selling season.
International net sales increased to $103.4 million in 1997 from $95.1
million in 1996 as a result of the United Kingdom and Australian operations. Net
sales in the United Kingdom increased 14.0% in 1997 as a result of strong
demand, particularly in the personal care product sales. Despite a negative
currency impact, net sales in Australia increased 11.0% in 1997 due to strong
demand for new personal care products and growth in retail service stores from
three stores in 1996 to nine stores at December 31, 1997. These results were
somewhat offset by lower net sales in Germany in 1997 due to lower demand and a
negative currency impact, while Canadian net sales remained flat year to year.
Gross Profit. Gross profit increased to $100.3 million, or 41.5% of net
sales, in 1997 from $89.3 million or 36.9% of net sales in 1996. Approximately
2.0% of the gross profit margin percentage increase was due to inventory
valuation adjustments recorded in 1996, while the remaining increase was due to
slightly lower costs and improved mix.
Selling, General and Administrative. Selling, general and administrative
expenses decreased to $84.3 million in 1997, or 34.9% of net sales, from $91.9
million, or 37.9% of net sales in 1996. The 1996 expenses included $10.9 million
in non-recurring charges related to the reorganization and a $1.3 million charge
related to the bankruptcy of the Company's largest customer in Canada. After
considering the effect of these charges in 1996, expenses in 1997 increased over
1996, as a result of a 25% increase in advertising expenses and investments the
Company has made in marketing and new product development.
Operating Income (Loss). Operating income increased to $14.1 million in
1997, or 5.8% of net sales, from an operating loss of $(4.5) million in 1996, or
(1.8)% of net sales.
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Interest Expense. Interest expense increased to $19.3 million in 1997 from
$14.4 million in 1996. This increase is primarily attributable to a full year of
interest charged on senior subordinated notes in 1997 in connection with the May
1996 reorganization, as well as increased average borrowings on revolving credit
facilities.
Provision for Income Taxes. The provision for income taxes was $2.2 million
in 1997 and in 1996 and relates to the Company's foreign operations.
Year Ended 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 $131.2 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.
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
which were subsequently cancelled. 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 December 31, 1996.
International net sales increased 4.0% to $95.1 million in 1996 from $91.2
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
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$10.9 million in non-recurring expenditures related to the reorganization in May
1996. 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.
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. This increase was partially
offset by 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.
Liquidity and Capital Resources
For the year ended December 31, 1997, the Company used approximately $8.0
million in cash for operating activities, compared to providing cash of $5.8
million in 1996. The primary reasons for the lower cash flow in 1997 were lower
receivable collections resulting from lower fourth quarter sales in 1996 versus
1995 and increased interest payments as a result of the new Senior Subordinated
Notes issued May 23, 1996.
The Company's operations are not capital intensive. During 1997 and 1996,
the Company purchased property, plant and equipment of $5.1 million and $3.7
million, respectively. The Company's 1998 capital expenditure budget is $4.7
million, of which approximately $1.7 million will be used for purchases of tools
and molds for new products.
During 1997, the Company repaid aggregate scheduled principal amounts on
term loans of $1.0 million, and increased its net borrowings under revolving
credit agreements by $10.9 million.
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 through
March 31, 2002. Borrowings under the Revolving Credit Facilities mature on June
30, 2002. The Company believes that cash generated from operations and borrowing
resources will be adequate to permit the Company to meet both its debt service
requirements and capital requirements for the next twelve months, although no
assurance can be given in this regard.
-12-
<PAGE>
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 certain foreign markets such as
Europe, Canada and Australia in local currency. While many of the Company's
foreign 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. As of December 31, 1997, forward contracts to sell $15.3
million U.K. Pounds Sterling were outstanding, all of which mature in 1998.
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.
Year 2000 Compliance
The Company continues to assess its exposure related to the impact of the
Year 2000 date issue. The Year 2000 date issue arises from the fact that many
computer programs use only two digits to identify a year in a date field. The
Company's key financial and operational systems have been reviewed and it has
been determined that the majority of the systems do not require modification.
Accordingly, management does not expect that any costs to be incurred will have
a material adverse impact on the Company's financial position, results of
operations or cash flows. However, the Company could be adversely impacted by
the Year 2000 date issue if suppliers, customers and other businesses do not
address this issue successfully. Management continues to assess these risks in
order to reduce the impact on the Company.
-13-
<PAGE>
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
PART III
ITEM 10. Directors and Executive Officers.
The following table sets forth certain information (ages as of March
15, 1998) with respect to each executive officer of the Company and individuals
who are directors on the Remington Management Committee.
Name Age Positions and Offices
- --------------------- ------ -------------------------------
Neil P. DeFeo 51 Chief Executive Officer,President
and Director
Alexander R. Castaldi 47 Executive Vice President and
Chief Financial Officer
Lawrence D. Handler 52 President, Remington Service
Stores
Geoffrey L. Hoddinott 54 Vice President, Remington Europe,
Africa and Middle East
H. Graham Kimpton 62 Vice President, Remington
Australia and Asia
Lester C. Lee 37 Senior Vice President Sales and
Integrated Logistics
Michael A. Linton 41 Vice President, Marketing
Allen S. Lipson 55 Vice President, Administration,
General Counseland Secretary
Timothy G. Simmone 32 Vice President, Chief Technical
Officer
Victor K. Kiam, II 71 Chairman and Director
Norman W. Alpert 39 Director
William B. Connell 57 Director
Victor K. Kiam, III 38 Director
Kevin A. Mundt 44 Director
Arthur J. Nagle 59 Director
Daniel S. O'Connell 43 Director
Robert L. Rosner 38 Director
-14-
<PAGE>
Neil P. DeFeo has served as President, Chief Executive Officer and a
Director of the Company since January 1997. From 1993 to 1996, Mr. DeFeo was
Group Vice President, U.S. Operations for The Clorox Company. For 25 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.
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.
Lawrence D. Handler has been President, Remington Service Stores, since
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 and
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 and Asia. Mr.
Kimpton joined the Company in April 1988 and has been managing the
Australian/New Zealand operation since that time.
Lester C. Lee has been Senior Vice President Sales and Integrated Logistics
of the Company since July 1997. From 1995 until 1997, he was with Pacific Bell
Mobile Services, a Division of Pacific Telesis, most recently as Vice President
of Sales, and from 1989 until 1995, he was with Norelco Consumer Products
Company in various sales positions, including Director of Sales, Western
Division.
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 since May 1996. Mr. Lipson has been the General Counsel
of the Company since October 1988.
Timothy G. Simmone was appointed Vice President, Chief Technical Officer of
the Company in June 1997. From 1988 until 1997, he was with The Stanley Works
Corporation in various engineering position, most recently as Vice President,
Product Development of the Stanley Fastening Systems Division.
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 the Chairman of
RPI Inc., and a director of Citadel Technology and News Communication.
-15-
<PAGE>
Norman W. Alpert has been a Director of Remington since May 1996. Mr.
Alpert is a Managing Director of Vestar Capital Partners and was a founding
partner of Vestar at its inception in 1988. Mr. Alpert is Chairman of the Board
of Directors of International AirParts Corporation, Aearo Corporation and
Advanced Organics, Inc., and a director of Clark-Schwebel, Inc. 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., New
Day Schools, Inc. and Retail Optical Holdings.
Victor K. Kiam, III has been a Director of Remington since 1992. Mr Kiam has
been Executive Vice President of RPI Corporation since 1996 and was with the
Company from 1986 until 1996 in a variety of positions in manufacturing, sales
and marketing, including Vice President Corporate Development. He is the son of
Victor K. Kiam, II.
Kevin A. Mundt has been a Director of Remington since July 1996. Mr. Mundt
is Vice President, Group Business Head of Mercer Management Consulting since
1997 and was co-founder and Managing Director of Corporate Decisions, Inc. since
its inception in 1983 until its merger with Mercer Management Consulting in
1997. Mr. Mundt is a director of Russell Stanley Corporation, Advanced Organics,
Inc. and Reid Plastics, companies in which Vestar or its affiliates have a
significant equity interest and in Telephone Data Systems, Inc.
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. and La Petite Holdings
Corporation, 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 Advanced Organics, Inc., Aearo Corporation,
Clark-Schwebel, Inc., Pinnacle Automation, Inc., Reid Plastics Holdings, Inc.,
Sun Apparel, Inc. 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 serves as Chairman of the
Board of Directors of Russell-Stanley Corporation, a company in which Vestar or
its affiliates have a significant equity interest.
-16-
<PAGE>
ITEM 11. Executive Compensation
Compensation of Executive Officers
The following Summary Compensation Table includes individual compensation
information during each of the years ended December 31, 1996 and 1997 for each
individual who served in the position of the Company's Chief Executive Officer
("CEO") during 1997 and each of the next four most highly compensated executive
officers of the Company who were serving as executive officers of the Company at
the end of 1997 (collectively, the "Named Executive Officers") for services
rendered in all capacities to the Company.
<TABLE>
<CAPTION>
Annual Compensation All Other
Name and Principal Position Year Salary ($)(1) Bonus ($)(2) Compensation ($)
- --------------------------- ----- ------------- ------------ ---------------
<S> <C> <C> <C> <C>
Neil P. DeFeo, President, CEO and 1997 $392,000 $200,000 $ 214,048(4)
Director (3)
Alexander R. Castaldi, Executive VP 1997 265,000 132,000 3,189(6)
and CFO (5) 1996 25,500 --
Allen S. Lipson, VP, Administration 1997 195,400 78,400 4,413(7)
General Counsel & Secretary 1996 188,900 452,123(8) 5,521(7)
Lawrence D. Handler, President, 1997 154,100 65,500 2,745(6)
Remington Service Stores 1996 133,200 76,065(9) 1,394(6)
Michael A. Linton, VP Marketing (10) 1997 129,500 61,868 1,637(6)
F. Peter Cuneo, former President 1997 32,308 -- 151,483(12)
and CEO(11) 1996 418,200 -- 6,156(12)
</TABLE>
- -----------------------
(1) Includes compensation earned during the year but deferred pursuant to the
Company's Deferred Compensation Plan.
(2) Bonus amounts shown are those accrued for and paid in or after the end of
the year and include amounts deferred pursuant to the Company's Deferred
Compensation Plan.
(3) Mr. DeFeo became President and CEO in January 1997.
(4) The amounts shown include Company matching contributions to the Company's
401(k) Plan of $ 2,415 and $211,633 of relocation and travel expenses.
(5) Mr. Castaldi became Executive Vice President and CFO in November 1996.
(6) Company matching contribution to the Company's 401(k) Plan.
(7) The amounts shown include Company matching contributions to the Company's
401 (k) Plan of $ 2,631 and $3,738 for 1997 and 1996 and disability
insurance premium payments of $1,782 for 1997 and 1996.
(8) A special bonus paid in connection with the reorganization of the Company
which occurred in May 1996.
(9) Includes a special bonus of $39,315 paid in connection with the
reorganization of the Company which occurred in May 1996.
(10) Mr. Linton became Vice President Marketing in March 1997.
(11) Mr. Cuneo ceased to be employed by the Company in January 1997.
(12) The amounts shown include payments upon termination pursuant to a
termination agreement totaling $150,512, Company matching contributions to
the Company's 401 (k) Employee Savings Plan of $646 and $2,250 in 1997 and
1996 and disability insurance premium payments of $325 and $3,906 in 1997
and 1996.
-17-
<PAGE>
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
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
The Company has an employment agreement with Mr. DeFeo which provides for
his continued employment as President and Chief Executive Officer through the
year 2000, unless earlier terminated. The agreement provides for a base salary
of not less than $400,000, of which $100,000 is deferred, and an annual bonus
not less than $200,000 in the event the Company achieves 100% of the criteria
established by the Management Committee for such year. The agreement provides
for Mr. DeFeo to receive 18 months of salary continuation plus the annual bonus
he would have been entitled to if his employment is involuntarily terminated
other than for "cause" or if he resigns for "good reason ", or 12 months of
salary continuation plus annual bonus in the event the agreement is not renewed
by the Company. The Company is required to provide Mr. DeFeo with a letter of
credit equal to the severance benefit payable to Mr. DeFeo until such time as
the Company's earnings (before interest, taxes, depreciation and amortization)
exceeds $26 million. The Company is also required to provide Mr. DeFeo with term
life insurance in the amount of not less than $500,000.
The Company has entered into agreements with Messrs. Castaldi, Lipson,
Linton and Handler whereby such employees would be entitled to salary
continuation for a specified period if their employment was involuntarily
terminated other than for "cause" during the term of the agreement and, for Mr.
Castaldi, if he resigns for "good reason". Messrs. Castaldi and Lipson are each
entitled to 12 months of salary continuation and Messrs. Linton and Handler are
each entitled to 6 months of salary continuation.
Deferred Compensation Plan
During 1997, the Company established a Deferred Compensation Plan pursuant
to which eligible executive employees (including the Named Executive Officers)
may elect to defer all or a portion of the bonus otherwise payable under the
Company's Bonus Plan and up to 33% of their annual salary, and such amounts are
placed into a deferral account. The participants may select various mutual funds
in which all or a part of their deferral accounts shall be deemed to be
invested. Distributions from a participant's deferral accounts will be paid in a
lump sum or in equal annual installments over a period of up to 15 years
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<PAGE>
beginning upon their termination of employment, death or retirement. All amounts
deferred by the participants in the Plan are paid to a Deferred Compensation
Plan Trust to be held in order to fund the Company's obligations under the
Deferred Compensation Plan. The assets of the trust, however, are subject to the
claims of the creditors of the Company in the event the Company is Insolvent, as
such term is defined in the trust agreement.
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, representing up to 75% of his or her annual base salary that
will be paid if predetermined performance goals are achieved. Performance goals
for the various areas of the Company are established annually by the
Compensation Committee of the Company.
Phantom Equity Program
In January 1998, the Company replaced its Management Option Program and
adopted a Phantom Equity Program under which a maximum of 21% of the value of
the Company's Common Units and Preferred Equity (together, the "Equity") can be
awarded to selected officers and other key employees of the Company and its
affiliates. Awards under the Phantom Equity Program replaced all of the
Management options previously issued to management and also resulted in the
Company repurchasing from management all Common Units originally purchased in
connection with the reorganization of the Company in May 1996. See Item 13,
Certain Relationships and Related Transactions. The Phantom Equity Program is
comprised of time based (consisting of 12 1/2% of the Equity), performance based
(6 1/2%) and super performance (2%) based awards. All awards grant to the
recipient a specified percentage of the Equity (the "applicable percentage").
A time based award vests in five equal annual installments, upon the sale of
the Company or upon an initial public offering of the Company's stock ("IPO"),
whichever comes first. If the individual's employment with the Company is
terminated for any reason other than death or disability within three years of
the date of grant of the award, the award is automatically terminated. The
amount received under the award and how it is paid is based upon the event which
gave rise to the payment. If the payment is due to a Company sale, the
individual will receive the applicable percentage of the net amount available
for distribution for the outstanding Equity payable, at the Company's option, in
a lump sum upon the closing of the sale or in the same manner as the selling
shareholders. If the payment is due to an IPO, the payment is an amount equal to
the applicable percentage of the Equity implied in the public offering payable,
at the option of the Company, either entirely in cash or 40% in cash and the
remainder in Company stock. If the payment is due to termination of employment,
the participant receives the applicable percentage of the fair market value of
the Equity, determined by the Management Committee payable, at the Company's
option, in up to five equal annual installments or upon an IPO or Company sale.
The performance and super performance based awards are similar to the time
based awards except that performance based award vests in stages as the Company
achieves specified performance targets while the super performance based award
vests entirely upon the achievement of a single target. Payment of the awards
does not occur until and is dependent upon the achievement of both a performance
criteria and an event criteria. The event criteria is a Company sale or when
Vestar's ownership falls below 10% of the Common Units. The performance criteria
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<PAGE>
for the performance based award vests in segments as the Company achieves
specified performance targets while there is only one target for the super
performance based award. Any performance or super performance based award which
is not fully vested by December 31, 2002 is automatically terminated.
The Phantom Equity Program and all awards are subject to readjustment in the
event of a reorganization of the Company required in connection with a
refinancing, and the applicable percentages are subject to readjustment to take
into consideration new issuances of Common Units or Preferred Capital.
The following table contains information with respect to grants of phantom
awards to each of the Named Executive Officers in January, 1998:
<TABLE>
<CAPTION>
Assumed Annual
Rated of Stock
Individual Grants Appreciation for Award Term(4)
--------------------------------------------------------------------------------------------------
Number of Securities Exercise or
Underlying % of Total Base Price Expiration
Name Award's Granted(1) SARs Granted(2) ($/Sh)(3) Date 5%($) 10%($)
- ------------------ ------------------ --------------- --------- ----------- ------ -------
<S> <C> <C> <C> <C> <C> <C>
Neil P. DeFeo 4.00(5) 32.9 N/A 12/31/2009 N/A N/A
2.00(6) 34.2 N/A 12/31/2002 N/A N/A
Alexander R. Castaldi 1.30(5) 10.7 N/A 12/31/2009 N/A N/A
0.50(6) 8.5 N/A 12/31/2002 N/A N/A
0.22(7) 13.0 N/A 12/31/2002 N/A N/A
Allen S. Lipson 0.90(5) 7.4 N/A 12/31/2009 N/A N/A
0.35(6) 6.0 N/A 12/31/2002 N/A N/A
0.16(7) 9.5 N/A 12/31/2002 N/A N/A
Lawrence D. Handler 0.35(5) 2.9 N/A 12/31/2009 N/A N/A
0.20(6) 3.4 N/A 12/31/2002 N/A N/A
0.09(7) 5.3 N/A 12/31/2002 N/A N/A
Michael A. Linton 0.60(5) 4.9 N/A 12/31/2009 N/A N/A
0.30(6) 5.1 N/A 12/31/2002 N/A N/A
0.13(7) 7.7 N/A 12/31/2002 N/A N/A
</TABLE>
- ---------------------
(1) Indicates the applicable percentage of the Company's Equity underlying
each award granted.
(2) Indicates the % of total time, performance and super performance based
award granted.
(3) There is no exercise price and as of the time of the grant, there was
no market price for the Company's Equity.
(4) The Company's Equity is not registered under the Securities Act of
1933 and is therefore not publically traded. Accordingly, there is no
market price for the Company's Equity. Payments to holders of phantom
equity awards are dependent upon the realized value of the Equity upon
a sale of the Company or and IPO. See above for a complete description
of the Phantom Equity Program and the determination of payouts.
(5) Grant of Time Based award.
(6) Performance Based award.
(7) Super Performance Based award.
401(k) Plan
The Company maintains a savings plan (the "Savings Plan") qualified under
Sections 401 (a) and 401(k) of the Internal Revenue Code. Generally, all
employees of the Company in the United States who have completed three months of
service are eligible to participate in the Savings Plan. For each employee who
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<PAGE>
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.
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, 1998. 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) % Number %
- --------------------- ----------- ---- ------ ----
<S> <C> <C> <C> <C>
Vestar Equity Partners (2)(3) $30,000,000 48.4% 34,400 50%
245 Park Avenue, 41st Floor
New York, New York 10167
RPI Corp. (3) 32,000,000 51.6% 34,400 50%
350 Fifth Avenue, Suite 5408
New York, New York 10118
Victor K. Kiam, II (3)(4) 32,000,000 51.6% 34,400 50%
Norman W. Alpert(5) 30,000,000 48.4% 34,400 50%
Arthur J. Nagle (5) 30,000,000 48.4% 34,400 50%
Daniel S. O'Connell (5) 30,000,000 48.4% 34,400 50%
Robert L. Rosner (5) 30,000,000 48.4% 34,400 50%
Directors and executive officers as a group
(5 persons) $62,000,000 100.0% 68,800 100%
</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
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 and RPI 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.
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<PAGE>
Ownership of Remingtonequity 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 in connection with the reorganization of the Company in 1996, Vestar
Capital Partners ("Vestar Capital") receives an annual advisory fee equal to the
greater of $500,000 or 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. The Management Agreement will be in effect until May 23, 2006,
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 May 23, 1996, and provided further that Vestar Capital may terminate
the Management Agreement at any time. Vestar Capital owns, indirectly through
Vestar Corp., 50% of the Common Units of the Company and possesses the right to
designate five of the nine individuals who comprise the Management Committee of
the Company.
Pursuant to a consulting and transitional services agreement (the
"Consulting Agreement") entered into in connection with the reorganization of
the Company in 1996, RPI receives an aggregate annual fee equal to the sum of:
(i) the greater of $500,000 or 1.5% of EBITDA (as defined in such agreement) of
the Company on a consolidated basis and (ii) $250,000 in 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 May 23, 2006, 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 May 23, 1996, 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 50% 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")
dated May 23, 1996, 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
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<PAGE>
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.
In connection with the adoption of the Phantom Equity Program and the
issuance of Phantom Equity Agreements in January 1998, the Company repurchased
from Messrs. Lipson, Hoddinott and Kimpton all shares of Common Units they had
purchased from the Company in May 1996 in connection with the reorganization of
the Company at the same price they had originally paid for such units. The
Company paid for the repurchased Common Units by issuing promissory notes for
the full purchase price, payable within 60 days following the termination of
employment for reasons other than cause (as defined in the promissory note) or
upon the payment of any phantom equity award to such individuals. The phantom
equity agreements with each of these individuals provided that any payment under
the promissory note would reduce, dollar for dollar, the applicable phantom
equity payment. The promissory note issued to Mr. Lipson was for $150,000,
together with interest of 6 1/2% and the non-interest bearing notes issued to
Messrs. Hoddinott and Kimpton were each for $46,000.
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. Incorporated by
reference to Exhibit 3.1 in Registration Statement onForm S-4
(File Number 333-07429).
3.2 Certificate of Formation of Remington Products Company,
L.L.C.("Remington"). Incorporated by reference to Exhibit 3.2 in
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.
Incorporated by reference to Exhibit 4.1 in Registration
Statement on Form S-4(File Number 333-07429).
4.2 Form of 11% Series B Senior Subordinated Notes. Incorporated by
reference to Exhibit 4.2 in Registration Statement on Form
S-4(File Number 333-07429).
-23-
<PAGE>
4.3 Purchase Agreement dated May 16, 1996 between Remington, Capital
and Bear, Sterns & Co. Inc. Incorporated by reference to Exhibit
4.3 in Registration Statement on Form S-4(File Number 333-07429).
4.4 Registration Rights Agreement dated as of May 23, 1996 between
Remington, Capital and Bear Stearns & Co. Inc. Incorporated by
reference to Exhibit 4.4 in 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 "Credit and Guarantee Agreement"). Incorporated by
reference to Exhibit 10.1 in Registration Statement on Form S-4
(File Number 333- 07429).
10.2 First Amendment and Waiver Number 1,dated as of December 27,1996,
to the Credit and Guarantee Agreement. Incorporated by reference
to Exhibit 10.1 in the Company's Current Report on Form 8-K dated
December 24, 1996.
10.3 Second Amendment, dated as of March 30, 1997 to the Credit and
Guarantee Agreement. Incorporated by reference to Exhibit 10.1 in
the Company's Quarterly Report on Form 10-Q for the quarter ended
March 29, 1997.
10.4 Third Amendment, dated as of May 16, 1997 to the Credit and
Guarantee Agreement. Incorporated by reference to Exhibit 10.1 in
the Company's Quarterly Report on Form 10-Q for the quarter ended
June 28, 1997.
10.5 Fourth Amendment, dated as of March 20, 1998 to the Credit and
Guarantee Agreement.
10.6 Company Security Agreement dated as of May 23, 1996 made by
Remington in favor of the Agent. Incorporated by reference to
Exhibit 10.2 in Registration Statement on Form S-4(File Number
333-07429).
10.7 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. Incorporated by reference to Exhibit 10.3 in
Registration Statement on Form S-4(File Number 333-07429).
10.8 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. Incorporated by reference to
Exhibit 10.4 in Registration Statement on Form S-4(File Number
333-07429).
-24-
<PAGE>
10.9 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. Incorporated by reference to
Exhibit 10.5 in Registration Statement on Form S-4(File Number
333-07429).
10.10 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. Incorporated by reference to
Exhibit 10.6 in Registration Statement on Form S- 4(File Number
333-07429).
10.11 Conditional Assignment of and Security Interest in Trademark
Rights(United Kingdom) dated as of May 23, 1996 made by IP
Subsidiary in favor of the Agent. Incorporated by reference to
Exhibit 10.7 in Registration Statement on Form S- 4(File Number
333-07429).
10.12 Members Limited Recourse Pledge Agreement dated as of May 23,
1996 made by Remington in favor of the Agent. Incorporated by
reference to Exhibit 10.8 in Registration Statement on Form
S-4(File Number 333-07429).
10.13 Company Pledge Agreement dated as of May 23, 1996 made by
Remington in favor of the Agent. Incorporated by reference to
Exhibit 10.9 in Registration Statement on Form S-4(File Number
333-07429).
10.14 Subsidiaries Pledge Agreement dated as of May 23, 1996 made by
Rand in favor of the Agent. Incorporated by reference to Exhibit
10.10 in Registration Statement on Form S-4(File Number
333-07429).
10.15 Subsidiaries Guarantee dated as of May 23, 1996 made by Capital,
IP subsidiary and Rand in favor of the Agent. .Incorporated by
reference to Exhibit 10.11 in Registration Statement on Form
S-4(File Number 333-07429).
10.16 Purchase Agreement dated as of May 1, 1996 by and among Vestar
Corp I., Remington, Remsen, Isaac Perlmutter, RPI and Victor K.
Kiam, II. Incorporated by reference to Exhibit 10.12 in
Registration Statement on Form S-4(File Number 333- 07429).
10.17 Agreement and Plan of Merger dated as of May 23, 1996 between
Remington Products Company and Remington. Incorporated by
reference to Exhibit 10.13 in Registration Statement on Form
S-4(File Number 333-07429).
10.18 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.
Incorporated by reference to Exhibit 10.14 in Registration
Statement on Form S-4(File Number 333-07429).
-25-
<PAGE>
10.19 Management Agreement dated as of May 23, 1996 between Remington
and Vestar Capital Partners. Incorporated by reference to Exhibit
10.15 in Registration Statement on Form S-4(File Number
333-07429).
10.20 Consulting and Transitional Services Agreement dated as of May
23,1996 between Remington and RPI. Incorporated by reference to
Exhibit 10.16 in Registration Statement on Form S-4(File Number
333-07429).
10.21 Employment Agreement made as of January 8, 1997 between the
Company and Neil P. DeFeo. Incorporated by reference to Exhibit
10.2 in the Company's Quarterly Report on Form 10-Q for the
quarter ended March 29, 1997.
10.22 Form of Executive Severance Agreement dated as of May 23, 1996 by
and between Remington and Allen S.Lipson is incorporated herein
by reference to Registration Statement on Form S-4(File Number
333-07429).
10.23 Executive Severance Agreement dated as of November 25, 1996
between Remington and Alexander R. Castaldi. Incorporated by
reference to Exhibit 10.20 in the Company's Annual Report on Form
10-K for the year ended December 31, 1996.
10.24 Form of Severance Agreement
10.25 Form of Time Based Phantom Equity Agreement with participants in
the Phantom Equity Program.
10.26 Form of Performance Based Phantom Equity Agreement with
participants in the Phantom Equity Program.
10.27 Form of Super Performance Based Phantom Equity Agreement with
participants in the Phantom Equity Program.
10.28 Promissory Note dated January 14, 1998 from Remington to Allen S.
Lipson for $150,000.
10.29 License Agreement made May 23, 1996 by and between IP Subsidiary
and Act II Jewelry, Inc. Incorporated by reference to Exhibit
10.23 in Registration Statement on Form S-4 (File Number
333-07429).
10.30 License Agreement made May 23, 1996 by and between IP Subsidiary
and VKK Equities Corporation. Incorporated by reference to
Exhibit 10.24 in Registration Statement on
Form S-4 (File Number 333-07429).
10.31 Tradename Agreement made May 23, 1996 by and between IP
Subsidiary and Remington Apparel Company, Inc.. Incorporated by
reference to Exhibit 10.25 in Registration Statement on Form S-4
(File Number 333-07429).
-26-
<PAGE>
10.32 License Agreement dated as of May 23, 1996 by and between
Remington and IP Subsidiary. Incorporated by reference to Exhibit
10.26 in Registration Statement on Form S-4 (File Number
333-07429).
10.33 1998 Remington Bonus Plan.
21 Subsidiaries of Remington.
24. Powers of Attorney.
27 Financial Data Schedule.
-27-
<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 27, 1998
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 27, 1998.
* *
- -------------------------------------- ----------------------------------
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 Director
Controller
* *
- ------------------------------------- ----------------------------------
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
-28-
<PAGE>
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
Pages
-------
Financial Statements
- --------------------
<S> <C>
Independent Auditors' Report F-2
Report of Independent Accountants F-3
Consolidated Balance Sheets as of
December 31, 1997 and December 31, 1996 F-4
Consolidated Statements of Operations for each of the years in the three-year
period ended December 31, 1997 F-5
Consolidated Statements of Members' Deficit/Partners' Capital for each of the
years in the three-year period ended December 31, 1997 F-6
Consolidated Statements of Cash Flows for each of the years in the three-year
period ended December 31,1997 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 for each of the years in the
three year period ended December 31,1997 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 sheets of Remington
Products Company, L.L.C. and subsidiaries (the "Company") as of December 31,
1997 and 1996, and the related consolidated statements of operations, members'
deficit/partners' capital, and cash flows for the year ended December 31, 1997
and for the thirty-one week period ended December 31, 1996 and for Remington
Products Company and subsidiaries (the "Predecessor") for the twenty-one week
period ended May 23, 1996. Our audits also included the consolidated financial
statement schedule for 1997 and 1996 listed in the index to the consolidated
financial statements. The 1997 and 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 provide a reasonable basis for our opinion.
In our opinion, such consolidated financial statements referred to above
present fairly, in all material respects, the financial position of the Company
as of December 31, 1997 and 1996, and the results of their operations and their
cash flows for the year ended December 31, 1997 and the thirty-one week period
ended December 31, 1996 and of the Predecessor for the twenty-one week period
ended May 23, 1996 in conformity with generally accepted accounting principles.
Also, in our opinion, such 1997 and 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 20, 1998
F-2
<PAGE>
Report of Independent Accountants
To the Management Committee of
REMINGTON PRODUCTS COMPANY:
We have audited the accompanying consolidated statements of operations,
total partners' capital and cash flows of Remington Products Company and
Subsidiaries (the "Company") for the year ended December 31, 1995. These
financial statements are the responsibility of management of the Company. Our
responsibility is to express an opinion on these financial statements based on
our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the 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 audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the consolidated results of operations and cash flows
of Remington Products Company and Subsidiaries for the year ended December 31,
1995, 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
(in thousands)
<TABLE>
<CAPTION>
December 31, December 31,
1997 1996
------------ ------------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 5,408 $ 7,199
Accounts receivable, less allowance for doubtful accounts
of $734 in 1997 and $1,340 in 1996 53,052 54,262
Inventories 60,507 63,785
Prepaid and other assets 1,525 4,212
----------- ----------
Total current assets 120,492 129,458
Property, plant and equipment, net 16,033 13,982
Intangibles, net 60,538 62,520
Other assets 8,182 8,863
----------- ----------
Total assets $205,245 $214,823
======== ========
LIABILITIES AND MEMBERS' DEFICIT
Current liabilities:
Accounts payable $ 13,359 $ 16,414
Short-term borrowings 1,300 1,153
Current portion of long-term debt 1,417 1,067
Accrued liabilities 28,055 32,964
---------- --------
Total current liabilities 44,131 51,598
Long-term debt 178,114 169,411
Other liabilities 1,278 1,521
Commitments and contingencies
Members' deficit:
Members' deficit (15,894) (7,351)
Cumulative translation adjustment (2,384) (356)
---------- -----------
Total members' deficit (18,278) (7,707)
--------- ----------
Total liabilities and members' deficit $205,245 $214,823
======== ========
</TABLE>
See notes to consolidated financial statements.
F-4
<PAGE>
Remington Products Company, L.L.C.
Consolidated Statements of Operations
(in thousands)
<TABLE>
<CAPTION>
Year Ended December 31, 1996
Year ------------------------------------- Year
Ended 31 Weeks 21 Weeks Ended
December 31, Ended Ended December 31,
1997 December 31 May 23 1995
-------------- ------------- ------------ ------------
(Successor) (Successor) (Predecessor) (Predecessor)
<S> <C> <C> <C> <C>
Net sales $241,572 $185,286 $ 56,713 $255,323
Cost of sales 141,296 117,723 35,102 143,203
---------- -------- --------- --------
Gross profit 100,276 67,563 21,611 112,120
Selling, general and administrative 84,194 53,860 37,912 83,949
Amortization of intangibles 1,936 1,195 650 1,655
---------- -------- --------- --------
Operating income (loss) 14,146 12,508 (16,951) 26,516
Interest expense 19,318 12,164 2,228 7,604
Other expense (income) 526 498 (115) 408
---------- -------- --------- ---------
Income (loss) before income taxes (5,698) (154) (19,064) 18,504
Provision (benefit) for income taxes 2,225 3,018 (873) 1,264
---------- -------- --------- --------
Net income (loss) $ (7,923) $(3,172) $(18,191) $ 17,240
========== ======== ========= ========
Net loss applicable to common units $(16,279) $(7,748)
========== ========
</TABLE>
See notes to consolidated financial statements.
F-5
<PAGE>
Remington Products Company, L.L.C.
Consolidated Statements of Members' Deficit/Partners' Capital
(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>
REDECESSOR
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)
Net loss (7,923) (7,923)
Preferred dividend 8,356 (8,356) -
Repurchase of common units (620) (620)
Foreign currency translation (2,028) (2,028)
-------- ------- ---------- -------- --------- ---------
Balance, December 31, 1997 $74,932 $7,122 $(73,921) $(24,027) $ (2,384) $(18,278)
======= ====== ========= ======== ========= ==========
</TABLE>
See notes to consolidated financial statements.
F-6
<PAGE>
Remington Products Company, L.L.C.
Consolidated Statements of Cash Flows
(in thousands)
<TABLE>
<CAPTION>
Year Ended December 31, 1996
Year -------------------------------- Year
Ended 31 Weeks 21 Weeks Ended
December 31, Ended Ended December 31,
1997 December 31 May 23 1995
------------ ------------ ------------ -----------
(Successor) (Successor) (Predecessor) (Predecessor)
<S> <C> <C> <C> <C>
Cash flows from operating activities:
Net income (loss) $ (7,923) $(3,172) $(18,191) $17,240
Adjustment to reconcile net income (loss) to net cash provided by (used in)
operating activities:
Depreciation 2,831 1,184 1,355 3,283
Amortization of intangibles 1,936 1,195 650 1,655
Amortization of deferred financing fees 1,072 1,260 262 690
Deferred income taxes (44) 1,251 (561) (735)
Foreign currency forward losses 115 1,501 - -
Changes in assets and liabilities:
Accounts receivable 1,210 (27,291) 41,043 (13,955)
Inventories 3,278 (2,546) (8,339) 299
Accounts payable (3,055) 5,392 1,187 (11,605)
Accrued liabilities (5,267) 10,731 (933) 3,579
Other, net (2,133) ( 70) (158) 202
-------- -------- --------- --------
Cash provided by (used in) operating activities (7,980) (10,565) 16,315 653
-------- -------- -------- -------
Cash flows from investing activities:
Capital expenditures (5,078) (2,399) (1,310) (3,291)
Payment for purchase of Company, net - (139,750) - -
Proceeds from working capital adjustment 2,500 - - -
Other 204 (181) - -
-------- --------- --------- ---------
Cash used in investing activities (2,374) (142,330) (1,310) (3,291)
-------- --------- -------- --------
Cash flows from financing activities:
Proceeds from sale of senior subordinated notes - 129,026 - -
Net repayments under term loan facilities (965) (3,463) (3,600) (13,550)
Net borrowings (repayments) under credit facilities 10,938 1,564 (12,353) 14,965
Equity investments (repurchases) (620) 34,302 - -
Debt issuance costs - (9,075) - -
Other, net (251) 1,595 - 354
-------- --------- ---------- --------
Cash provided by (used in) financing activities 9,102 153,949 (15,953) 1,769
Effect of exchange rate changes on cash (539) 503 (214) 51
-------- --------- --------- ---------
Increase (decrease) in cash and cash equivalents (1,791) 1,557 (1,162) (818)
Cash and cash equivalents, beginning of period 7,199 5,642 6,804 7,622
-------- --------- --------- --------
Cash and cash equivalents, end of period $ 5,408 $ 7,199 $ 5,642 $ 6,804
======== ========= ========= ========
Supplemental cash flow information:
Interest paid $18,756 $ 9,121 $ 1,874 $ 6,936
Income taxes paid $ 2,493 $ 1,563 $ 440 $ 1,073
</TABLE>
See notes to consolidated financial statements.
Remington Products Company, L.L.C.
F-7
<PAGE>
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 sheets as of December 31, 1997 and 1996 include
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 year ended December
31, 1997 and for the period from May 24, 1996 to December 31, 1996. The
statements also include the 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 15% of the consolidated inventories
as of December 31, 1997 and 28% at 1996, are stated at the lower of cost or
market, with cost determined by the last-in, first-out (LIFO) method. As of
December 31, 1997 and 1996, 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-8
<PAGE>
Remington Products Company, L.L.C.
Notes to Consolidated Financial Statements (continued)
Property, Plant and Equipment:
Property, plant and equipment is recorded primarily at cost. In conjunction
with the Reorganization (See Note 2), 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 3 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.
Costs 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
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 totaled $2.8 million for the year ended
December 31, 1997; $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
for the year ended December 31, 1995.
Income Taxes:
Federal income taxes on net earnings of the Company are payable directly by
the partners. In jurisdictions where partnership status is not recognized or
foreign corporate subsidiaries exist, the Company provides for income taxes
currently payable as well as for those deferred because of 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 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 totaled $(0.7) million for the
year ended December 31, 1997; $(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 million for the year ended December 31, 1995.
F-9
<PAGE>
Remington Products Company, L.L.C.
Notes to Consolidated Financial Statements (continued)
Recent Accounting Pronouncements:
In June of 1997, the Financial Accounting Standards Board ("FASB") issued
SFAS No. 130, "Reporting Comprehensive Income," which requires disclosures of
comprehensive income to be included in the financial statements for fiscal years
beginning after December 15, 1997. The Company will include such statement, if
applicable, beginning with the first quarter of 1998.
In addition, in June of 1997, the FASB issued SFAS No. 131, "Disclosure
About Seqments of an Enterprise and Related Information." SFAS No. 131 requires
disclosures of certain information about operating segments and about products
and services, the geographic areas in which a company operates, and their major
customers. The Company is presently in the process of evaluating the effect this
new standard will have on disclosures in the Company's financial statements and
the required information will be reflected in its financial statements for the
year eneded December 31, 1988.
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.
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):
<TABLE>
<CAPTION>
<S> <C>
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
=========
</TABLE>
F-10
<PAGE>
Remington Products Company, L.L.C.
Notes to Consolidated Financial Statements (continued)
<TABLE>
<S> <C>
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
=========
</TABLE>
(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.
(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, 1997 and
1996 (in thousands):
<TABLE>
<CAPTION>
1997 1996
--------- ---------
<S> <C> <C>
Finished goods $ 55,099 $ 59,205
Work in process 5,392 4,556
Raw materials 16 24
-------- --------
$ 60,507 $ 63.785
======== ========
</TABLE>
F-11
<PAGE>
Remington Products Company, L.L.C.
Notes to Consolidated Financial Statements (continued)
4. Property, Plant and Equipment
Property, plant and equipment as of December 31, 1997 and 1996 consisted
of (in thousands):
<TABLE>
<CAPTION>
1997 1996
--------- --------
<S> <C> <C>
Land and buildings $ 2,459 $ 2,441
Leasehold improvements 3,308 1,981
Machinery, equipment and tooling 9,237 7,487
Furniture, fixtures and other 4,769 3,283
-------- --------
19,773 15,192
Less accumulated depreciation (3,740) (1,210)
-------- --------
$ 16,033 $ 13,982
======== ========
</TABLE>
5. Intangibles
Intangibles were comprised of the following (net of accumulated
amortization of $3,129 and $1,195 thousand) as of December 31, 1997
and 1996, respectively (in thousands):
<TABLE>
<CAPTION>
1997 1996
--------- ---------
<S> <C> <C>
Goodwill $ 31,142 $ 31,994
Tradenames 25,473 26,136
Patents 3,923 4,390
-------- --------
$ 60,538 $ 62,520
======== ========
</TABLE>
6. Accrued Liabilities
Accrued liabilities were comprised of the following as of December 31,
1997 and 1996 (in thousands):
<TABLE>
<CAPTION>
1997 1996
-------- ---------
<S> <C> <C>
Advertising and promotion expenses $ 7,953 $10,012
Compensation and benefits 4,182 4,787
Income and other taxes payable 3,790 3,855
Interest 1,900 2,454
Other 10,230 11,856
------- -------
$28,055 $32,964
======= =======
</TABLE>
7. Debt
Senior Credit Agreement
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.
F-12
<PAGE>
Remington Products Company, L.L.C.
Notes to Consolidated Financial Statements (continued)
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, 1997, availability under the Revolving Credit
Facilities was approximately $12.5 million. The availability has been reduced by
approximately $1.9 million in short-term commercial and stand-by letters of
credit outstanding as of December 31, 1997. The term loans under the Senior
Credit Agreement are payable in quarterly installments. Aggregate scheduled
installments over the next five years ending December 31, 2002 are $1.4, $1.6,
$1.9, $3.1 and $1.0 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
"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 5.9% in 1997 and
5.1% in 1996.
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.
Subsequent to December 31, 1997, the Company amended the Senior Credit
Agreement to adjust the financial covenants prospectively based upon a review of
expected future operating performance. As a result of the amendment,
F-13
<PAGE>
Remington Products Company, L.L.C.
Notes to Consolidated Financial Statements (continued)
the Revolving Credit Facilities' borrowing base can be increased as needed by
$10 million over the applicable percentage of eligible receivables and
inventories, (still limited to the $70 million total facilities) for the period
April 1, 1998 through June 30, 1999. In addition, the interest rate on
borrowings under the Revolving Credit Facilities will be increased by one
quarter percent during any period that any of the additional $10 million in
borrowing base is utilized.
Details of long-term debt at December 31, 1997 and 1996 are as follows (in
thousands):
<TABLE>
<CAPTION>
1997 1996
--------- ----------
<S> <C> <C>
Revolving Credit Facilities $ 40,523 $ 30,224
Senior Subordinated Notes 130,000 130,000
Term Loans 9,008 10,254
--------- ---------
180,831 170,478
Less current portion (1,417) (1,067)
--------- ---------
$ 178,114 $ 169,411
========= =========
</TABLE>
8. Members' Equity
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
members' equity (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, 1997 the aggregate unpaid Preferred Equity dividend amounted to
$12.9 million.
As a result of the Reorganization, on the Closing Date, RPI had a $35.4
million equity interest in the Company ($32.0 million in Preferred Equity) and
the Vestar Members had a $33.4 million equity interest in the Company ($30.0
million in Preferred Equity). As of December 31, 1997, the Company's Common
Units were owned 49.8% by the Vestar Members, 49.8% by RPI and 0.4% by certain
Management Investors. 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. The effect of applying the fair value method as
prescribed by SFAS No. 123 to the Comany's stock-based awards results in net
losses that are not materially different than those reported.
In January 1998, the Company repurchased the remaining outstanding common
units owned by the Management Investors and cancelled all outstanding Management
Options and adopted a new Phantom Equity Program. Under this program a maximum
of 21% of the value of the Company's Common Units and Preferred Equity
(together, the "Equity") can be awarded to selected officers and other key
employees of the Company . The Phantom Equity Program is comprised of time based
(consisting of 12 1/2% of the Equity), performance based (6 1/2%) and super
performance (2%) based awards. All awards grant to the recipient a specified
percentage of the Equity (the "applicable percentage").
A time based award vests in five equal annual installments, upon the sale of
the Company or upon an initial public offering of the Company's stock ("IPO"),
whichever comes first. The performance and super performance based awards are
similar to the time based awards except that performance based award vests in
stages as the Company achieves
F-14
<PAGE>
Remington Products Company, L.L.C.
Notes to Consolidated Financial Statements (continued)
specified performance targets while the super performance based award vests
entirely upon the achievement of a single target. Payment of the performance
based awards does not occur until and is dependent upon the achievement of both
a performance criteria and an event criteria. The event criteria is a Company
sale or when Vestar's ownership falls below 10% of the Common Units. The
performance criteria for the performance based award vests in segments as the
Company achieves specified performance targets while there is only one target
for the super performance based award. Any performance or super performance
based award which is not fully vested by December 31, 2002 is automatically
terminated.
The Phantom Equity Program and all awards are subject to readjustment in the
event of a reorganization of the Company required in connection with a
refinancing, and the applicable percentages are subject to readjustment to take
into consideration new issuances of Equity.
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 $6,023, $7,785, $(2,433) and $7,632 thousand for the year
ended December 31, 1997, the 31 weeks ended December 31, 1996, the 21 weeks
ended May 23, 1996, and the year ended December 31, 1995, respectively.
The provision (benefit) for income taxes consists of the following (in
thousands):
<TABLE>
<CAPTION>
Year Ended December 31, 1996
Year ------------------------------ Year
Ended 31 Weeks 21 Weeks Ended
December 31, Ended Ended December 31,
1997 December 31 May 23 1995
--------- ----------- ---------- ----------
(Successor) (Successor) (Predecessor) (Predecessor)
<S> <C> <C> <C> <C>
Current:
State and local $ 15 $ 5 $ - $ 40
Foreign 2,254 1,762 (312) 1,959
Deferred:
Foreign (44) 1,251 (561) (735)
--------- ------- ------- -------
Total $ 2,225 $3,018 $ (873) $ 1,264
========= ====== ======= =======
Income taxes computed at statutory U.S. Federal
income tax rate $(1,994) $ (54) $(6,672) $ 6,476
Partnership status for U.S. federal income tax
purposes 4,102 2,779 5,821 (3,805)
State and local income taxes 15 5 - 40
Adjustment for foreign income tax rates 102 288 (22) 506
Utilization of foreign net operating loss -
carryforwards - - (1,340)
Recognition of foreign deferred tax asset - - - (613)
----------- -------
Income taxes as reported $ 2,225 $ 3,018 $ (873) $ 1,264
--------- ------- ------- --------
</TABLE>
Current deferred tax assets of the foreign subsidiaries as of December
31, 1997 and 1996 totaled $145 and $101 thousand, respectively.
F-15
<PAGE>
Remington Products Company, L.L.C.
Notes to Consolidated Financial Statements (continued)
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):
<TABLE>
<CAPTION>
<S> <C>
1998 $ 4,122
1999 3,581
2000 2,474
2001 1,778
2002 962
2003 and thereafter 158
--------
$13,075
</TABLE>
Rent expense was $6,014, $3,760, $2,095 and $5,469 thousand for the year
ended December 31, 1997, the thirty-one weeks ended December 31, 1996, the
twenty-one weeks ended May 23, 1996 and for the year ended December 31, 1995,
respectively.
The majority of the leases contain escalation clauses which provide for
increases in base rentals to recover future increases in certain operating
costs. The future minimum rental payments shown above include base rentals with
known escalations. Lease agreements 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.
11. Employee Savings Plan
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 years ended
December 31, 1997 and 1996 were approximately $271and $388 thousand,
respectively.
The plan's funded status as of December 31, 1997 and 1996 are as follows (in
thousands):
<TABLE>
<CAPTION>
1997 1996
------- --------
<S> <C> <C>
Accumulated benefit obligations $(5,831) $(4,446)
-------- --------
Projected benefit obligation (6,222) $(4,788)
Plan assets at fair value (principally marketable securities) 5,996 5,369
-------- --------
Plan assets greater (less than)projected benefit obligation (226) 581
Unrecognized (gain)/loss 323 (480)
-------- --------
Prepaid pension cost $ 97 $ 101
======== ========
</TABLE>
F-16
<PAGE>
Remington Products Company, L.L.C.
Notes to Consolidated Financial Statements (continued)
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
$237, $94, $52 and $104 thousand for the year ended December 31, 1997, the
thirty-one weeks ended December 31, 1996, the twenty-one weeks ended May 23,
1996 and for the year ended December 31, 1995, 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, 1997,
the difference between contract rate and fair value on the Company's foreign
currency forward contracts was not material. The fair value of long-term debt
was approximately $157.3 million (book value of $178.1 million).
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
December 31, 1997, the Company had uncollateralized receivables with two
mass-merchant retailers which represented approximately 22% of the Company's
accounts receivable balance. During calendar 1997, sales to these two customers
represented approximately 19% 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, 1997,
forward contracts to sell 15.3 million UK Pounds Sterling were outstanding, all
of which mature in 1998. At December 31, 1996, forward contracts to sell 18.7
million UK Pounds Sterling were outstanding and matured at various dates through
1997.
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
suppliers to be good, any adverse change in the relationships with these
suppliers, the financial condition of such
F-17
<PAGE>
Remington Products Company, L.L.C.
Notes to Consolidated Financial Statements (continued)
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 or 1.5% 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 thousand for barter credits that can be used to pay for media advertising
at a predetermined rate of cash and barter credits. During 1995, RPC incurred
$2,948 thousand for media advertising purchased through the related entity, of
which $521 thousand represented utilization of the barter credits. The entity
ceased being a related party as of the Closing Date.
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 and $381
thousand for related services during the twenty-one weeks ended May 23, 1996 and
for the year ended December 31, 1995, 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.
F-18
<PAGE>
Remington Products Company, L.L.C.
Notes to Consolidated Financial Statements (continued)
RPC acquired certain products for resale in its service stores from
companies owned by each of RPC's partners. Such purchases aggregated
approximately $80 and $94 thousand during the twenty-one weeks ended May 23,
1996 and for the year ended December 31, 1995, respectively.
In 1995, RPC paid $984 thousand of costs incurred on behalf of the
partners. Approximately $800 thousand of such costs related to various change in
ownership transactions, which were not completed. The remaining $184 thousand
was paid to one of RPC's partners.
14. Geographic Information
The Company operates in one industry segment, the manufacture and marketing
of electrical personal care appliances. The Company sells its products
principally through mass merchandisers and its own service stores in the United
States and also has merchandising operations in Europe (principally U.K. and
Germany) and other countries (principally Australia and Canada).
Information by geographical location is as follows (in thousands):
<TABLE>
<CAPTION>
Year Ended December 31, 1996
Year -------------------------------- Year
Ended 31 Weeks 21 Weeks Ended
December 31, Ended Ended December 31,
1997 December 31 May 23 1995
------------ ------------ ------------- --------------
(Successor) (Successor) (Predecessor) (Predecessor)
<S> <C> <C> <C> <C>
Net sales*:
United States $ 138,202 $ 112,153 $ 34,747 $ 164,080
Europe 69,809 50,122 13,927 62,288
Other 33,561 23,011 8,039 28,955
--------- --------- -------- ---------
$ 241,572 $ 185,286 $ 56,713 $ 255,323
======== ========= ======== =========
Operating income (loss):
United States $ 5,532 $ 2,749 $(14,745) $ 18,402
Europe 5,145 6,394 (1,168) 4,914
Other 3,469 3,365 (1,038) 3,200
--------- --------- --------- ---------
$ 14,146 $ 12,508 $(16,951) $ 26,516
========= ========= ========= =========
Identifiable assets:
United States $ 129,329 $ 143,581 $ 106,606
Europe 52,494 48,193 45,366
Other 23,422 23,049 18,950
--------- --------- ---------
$ 205,245 $ 214,823 $ 170,922
========= ========= =========
</TABLE>
*Net Sales exclude sales from the United States to affiliate companies
and sales between affiliates of $8,638, $7,812, $2,716 and $11,366 thousand for
the year ended December 31, 1997, the 31 weeks ended December 31, 1996, the 21
weeks ended May 23, 1996 and the year ended December 31, 1995, 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-19
<PAGE>
Report of Independent Accountants
To the Management Committee of
REMINGTON PRODUCTS COMPANY:
Our report on the consolidated statements of operations, total partner's
capital and cash flows of Remington Products Company is included on page F-3 of
this Form 10-K. In connection with our audit of such financial statments, we
have also audited the related financial statement schedule listed in the index
on page F-1 of this Form 10-K.
In our opinion, this financial statement schedule referred to above, 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
(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
Year Ended December 31, 1997
Allowance for doubtful accounts $1,340 $ 188 $ 794 $ 734
Allowance for cash discounts and returns 9,419 16,007 16,501 8,925
31 Weeks Ended December 31, 1996
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 16,140 7,852
</TABLE>
S-2
<PAGE>
Exhibit 10.5
FOURTH AMENDMENT
FOURTH AMENDMENT, dated as of March 20, 1998 (this "Amendment"), to the
Credit end Guarantee Agreement, dated as of May 23, 1996 (as amended,
supplemented or otherwise modified from time to time, the "Credit Agreement"),
among:
(a) REMINGTON PRODUCTS COMPANY, L.L.C., a Delaware limited liability
company (the "Company");
(b) REMINGTON CONSUMER PRODUCTS LIMITED, a corporation organized and
existing under the laws of the United Kingdom (the "UK Borrower");
(c) each Acquisition Subsidiary from time to time party thereto (together
with the Company and the UK Borrower, the "Borrowers");
(d) the Lenders from time to time parties to the Agreement including the
Issuing Bank;
(e) FLEET NATIONAL BANK and BANQUE NATIONALE DE PARIS, as Co-
Documentation Agents (in such capacity, the "Co Documentation
Agents"); and
(f) THE CHASE MANHATTAN BANK (formally known as CHEMICAL BANK), a New York
banking corporation, as administrative agent (in such capacity, the
"agent") for the Lenders hereunder.
W I T N E S S E T H
WHEREAS, the Borrowers, the Lenders and the Agent are parties to
the Credit Agreement;
WHEREAS, the Borrowers have requested that the Agent and the
Lenders agree to amend certain provisions of the Credit Agreement in and with
the terms hereof;
WHEREAS, the Agent, the Lenders and The Chase Manhattan Bank (as
Issuing Lender) are willing to amend such provisions of the Credit Agreement,
but only upon the terms and subject to the conditions set forth herein;
NOW THEREFORE, in consideration of the premises contained herein,
the parties hereto agree as follows:
1. Defined Terms. Unless otherwise defined herein, capitalized
terms which are used herein shall have the meanings assigned thereto in the
Credit Agreement.
2. Amendment of Subsection 1.1. Subsection l.1 of the Credit
Agreement hereby is amended by (a) deleting tberefrom in their entireties the
definitions of the terms "Domestic Borrowing Base" and "UK Borrowing Base"
contained thereto (b) inserting therein in proper alphabetical order the
following new definitions:
"Domestic Borrowing Base": as of any date of determination an amount
<PAGE>
equal to the sum, without duplication of (a) 85%. of the total of
Eligible Domestic Accounts of the Company and in Domestic Subsidiaries
as of such date less the Domestic Dilution Reserve then in effect, (b)
60% of the Eligible Domestic Inventory of the Company and its Domestic
Subsidiaries as of such date and (c) during any Overadvance Period,
$10,000,000 minus any Seasonal Overadvance Utilization then in effect.
For purposes of determining the Domestic Borrowing Base from time to
time, Eligible Domestic Accounts and Eligible Domestic Accounts of the
Company and its Domestic Subsidiaries shall be determined from time to
time by the Agent by reference to the Domestic Borrowing Base
Certificate then most recently delivered to it; provided that the
information contained in such Domestic Borrowing Base Certificate
shall not be conclusive in calculating the amount of Eligible Domestic
Accounts and Eligible Domestic Inventory and, after consultation with
the Company, the Agent shall be entitled to adjust the amounts and
other information contained therein to the extent that it believes in
its reasonable credit judgment that such adjustment is appropriate to
reflect (x) the then current amount of Eligible Domestic Accounts and
Eligible Domestic Accounts or (y) changes in the business practices of
the Company and its Domestic Subsidiaries (or newly disclosed matters
with respect to them).
"Lock Box Agreement" shall mean a Lock Box Agreement among the
Company or a Subsidiary, the Agent and a Lock Box Bank (as defined
therein; .provided that each Lock Box Bank shall be a Bank party to
this agreement), substantially in the form of Exhibit G hereto (with
such changes therein as shall (x) in the case of any lock Box Agreement
with the UK Borrower or any of its Subsidiaries, be appropriate in
accordance with customary practice in the United Kingdom and (y) in any
case, be negotiated by the Agent and the respective Lock Box Bank), as
the same may be amended, supplemented or otherwise modified from time
to time in accordance with the terms thereof and of this Agreement.
"Overadvance Period" shall mean the period from April 1, 1998
through June 30, 1999; provided that, in the reasonable judgment of the
Required Lenders, the Company is proceeding in good faith to enhance
its option in order to achieve an Interest Coverage Ratio of 1.35 to
1.0.
"UK Borrowing Base": as of any date of determination, an
amount equal to the Sum, without duplication of (a) 85% of the total of
Eligible UK Accounts of the UK Borrower as of such date less the UK
Dilution Reserve then in effect, (b) 60% of the Eligible UK Inventory
of the UK Borrower and (c) during any Overadvance Period, the pounds
Sterling equivalent of $10,000,000 minus any Seasonal Overadvance
Utilization then in effect. For purposes of determining the UK
Borrowing Base from time to time, Eligible UK Accounts ant Eligible UK
Inventory of the UK Borrower shall be determined from time to time by
the Agent by reference to the UK Borrowing Base Certificate then most
recently delivered to it; provided that the information contained in UK
Borrowing Base Certificate shall not be conclusive in calculating the
amount of Eligible UK Accounts and Eligible UK Inventory and, after
consultation with the Company, the Agent shall be entitled to adjust
the amounts and other information contained therein and/or the advance
rates set forth above to the extent that it believes in its reasonable
credit judgment that such adjustment is appropriate to reflect (x) the
then current amounts of Eligible UK Inventory and Eligible UK Accounts
or (y) changes in the business practices
<PAGE>
of the UK Borrower (or newly disclosed matters with respect to it).
3. Amendment of Subsection 10.7. Subsection 10.7 of the Credit
Agreement hereby is amended by inserting therein as a new clause (d} thereof the
following:
(d) The Company agrees to pay to the Agent for the account of
each Lender, an overadvance fee for each day upon which there is any
Seasonal Overadvance Utilization in effect in the amount equal to 1/4
of 1% per annum on the then outstanding amount of such Lender's
Domestic Revolving Credit Exposure, UK Revolving Credit Exposure,
Domestic Terms Loans and UK Term Loans. Such overadvance fee shall be
payable quarterly, in arrears on the last day of each March, June,
September and December to occur after the date of the occurrence of any
Seasonal Overadvance Utilization. Such overadvance fee shall be payable
for the period from April 1, 1998 until June 30, 1999.
4. Amendment of Subsection 11.21. Subsection 11.21 of the Credit
Agreement hereby is amended by inserting therein as new clause (d) thereof the
following:
(f) Each Lock-Box Agreement is effective to create in favor of
the Agent, for the ratable benefit of the Agent and the Lenders, a
perfected first Lien on, and security interest in, all right, title and
interest of the Company or its Subsidiary (as the case may be) party
thereto in the proceeds of accounts receivable and in all other monies
received in any lock box established pursuant to any Lock Box
Agreement. The Company and each of its Subsidiaries has notified the
account debtors in respect of each Account to make all payments in
respect of such Accounts through the lock boxes established pursuant to
the Lock Box Agreement. Notwithstanding the foregoing, the
representations and warranties contained in this subsection 11.21(d)
shall be made by the Company only from and after March 31, 1998.
5. Amendment of Section 10. Section 10 of the Credit Agreement
hereby is amended by inserting therein as new subsection 10.15 thereof the
following:
10.15 Lock Box Accounts. Any amounts received from
time to time in the Lock Box Account (as defined in the Lock Box
Agreements) or otherwise paid in accordance with the requirements of
subsection 14.21 shall be applied:
(a) in the case of amounts owing to the Company and
its Domestic Subsidiaries, to repay, first, any then
outstanding Domestic Swing Line Loans, second , any then
outstanding Domestic Revolving Credit Loans, third, to cash
collateralize any then outstanding Domestic Letters of Credit
and, fourth, to prepay any then outstanding Domestic Term
Loans; and
(b) in the case of other amounts, to repay, first,
any then outstanding UK Swing Line Loans, second, any then
outstanding UK Revolving Credit Loans and, third, to cash
collateralize any then outstanding UK Letters of Credit.
The Company hereby acknowledges and agrees that all fees and expenses
incurred by the Agent, any Lender or the Company with regard to a Lock
Box Agreement, the lock boxes established pursuant thereto and any
concentration accounts established in connection therewith shall be
the obligation of the Company.
<PAGE>
6. Amendment of Subsection 13.4. Subsection 13.4 of the Credit
Agreement hereby is amended by:
(a) deleting from clause (e) thereof the phrase "concurrently with any
delivery of any such financial statements" and by substituting
therefor the phrase "concurrently with any delivery of any such
financial statements contemplated by clauses (a) through (d) hereof";
and
(b) deleting therefrom in its entirety clause (j) thereof and substituting
therefor the following:
(j) on each "delivery date" for the relevant "reporting
date," deliver to the Administrative Agent for each of a Domestic
Borrowing Base Certificate and a UK Borrowing Base Certificate
(and any applicable supporting documentation described in
Schedule XIV) setting forth the Domestic Borrowing Base or the UK
Borrowing Base, as the case may be, as of the relevant reporting
date, duly completed and signed by a Responsible Officer of the
Company (in his or her capacity as such); for purposes of this
clause (j), the term:
(x) "reporting date" shall mean each of (I) the last
day of each calendar month, (ii) the fifteenth day of each
of each calendar month during the period from September of
1998 through January 1999, (iii) the fifteenth day of each
calendar month during the period from September 1999 through
January 2000 and (iv) any other time when the Agent notifies
the Company that it reasonably believes that the then
existing Domestic Borrowing Base or UK Borrowing Base (as
the case may be) is materially inaccurate; and
(y) "delivery date" shall mean fifteen days after the
corresponding reporting date (or, to the extent that the
relevant Borrowing Base Certificate is being delivered
pursuant to clause (x)(iii) above, ten days after the date
upon which the notice described therein is delivered);
; provided that, for purposes of completing any Borrowing
Base Certificates delivered pursuant to clause (x)(ii) or
(xx)(iii) above. the relevant Borrowing Base shall be calculated
based upon a reasonable, good faith estimate by the Company of
its Eligible Domestic Inventory and Eligible Domestic Accounts or
the UK Borrower of its Eligible UK Inventory and Eligible UK
Accounts (as the case may be) on the relevant reporting date;
(c) inserting therein as new clauses (m) and (n) the following:
(m) as soon as available. and in any event not later than 30
days after the end of each month occurring during each fiscal
year (other than the third, sixth, ninth and twelfth such month)
the unaudited consolidated balance sheets of the Company and its
consolidated Subsidiaries as at the end of such month and the
<PAGE>
related unaudited consolidated statements of income and of cash
flows for such month and the portion of the fiscal year through
the end of such month, setting forth in each case in comparative
form the figures for the previous year, accompanied by a
certificate of a Responsible Officer certifying that (I) such
financial statements are fairly stated in all material respects
(subject to normal year-end audit adjustments) and (ii) such
Responsible Officer has no actual knowledge of the occurrence of
any Event of Default or Default, or if s/he has knowledge of any
Event of Default or Default, specifying the nature and extent
thereof any corrective action taken or proposed to be taken with
respect thereto; and
(n) as soon as available, and in any event not later than 30
days after the end of each month occurring during each fiscal
year (other than the third, sixth, ninth and twelfth such month),
the unaudited consolidated balance sheets of the UK Borrower and
its consolidated Subsidiaries as at the end of such month and the
related unaudited consolidated shots of income and of cash flows
for such month and the portion of the fiscal year through the end
of such month, setting forth in each case in comparative form the
figures for the previous year, accompanied by a certificate of a
Responsible Officer certifying that (I) such financial statements
are fairly stated in all material respects (subject to normal
year-end audit adjustments) and (ii) such Responsible Officer has
no actual knowledge of the occurrence of any Event of Default or
Default or, if s/he has knowledge of any Event of Default or
Default, specifying the nature and extent thereof and any
corrective action taken or proposed to be taken with respect
thereto.
7. Amendment of Subsection 14.12. Subsection 14. 12 of the Credit
Agreement hereby is amended by deleting therefrom clause (b) and by substituting
therefor the following:
(b) not more than $1,500,000 of such Capital Lease Obligations at any
one time outstanding shall, at the time of its incurrence, have an
average life to maturity which is shorter than the average life to
maturity of the Domestic Term Loans outstanding at such time and
8. Amendment of Subsection 14.14. Subsection 14.14 of the Credit
Agreement is amended by deleting therefrom the dates set forth under the heading
"Period" and the ratios set forth under the heading "Ratio" contained therein
and by substituting therefor the following:
Period Ratio
03/31/99 - 06/30/99 1.00 to 1.0
07/01/99 - thereafter 1.05 to 1.0
9. Amendment of Subsection 14.15. Subsection 14.15 of the Credit
Agreement hereby is amended by deleting therefrom the dates set forth under the
heading "Period" and the ratios set forth under the heading "Ratios" contained
therein and by substituting therefor the following:
<PAGE>
Period Ratio
Closing Date - 12/31/98 1.00 to 1.0
01/01/99 - 06/30/00 1.60 to 1.0
07/01/00 - 06/30/01 1.70 to 1.0
07/01/01 - 12/31/01 1.80 to 1.0
01/01/02 - thereafter 2.00 to 1.0
10. Amendment of Subsection 14.16(a). Subsection 14.16(a) of the
Credit Agreement hereby is amended by deleting therefrom the dates set form
under the heading "Period" and the ratios set forth under the heading "Ratio"
contained therein and by substituting therefor the following:
Period Ratio
01/01/99 - 06/30/99 5.5 to 1.0
07/01/99 - 0630/00 5.0 to 1.0
07/01/00 - 06/30/01 4.5 to 1.0
07/01/01 - thereafter 4.0 to 1.0
11. Amendment of Section 14. Section 14 of the Credit Agreement
hereby is amended by inserting therein as new subsections 14.16(b), 14.21 and
14.22 the following:
14.16(b) Senior Leverage Ratio. Permit the Senior Leverage Ratio
for the period of four consecutive fiscal quarters ending on the last
day of any fiscal quarter ending during any period set forth below
(commencing with the period ending March 31, 1998) to be in excess of
the ratio set for opposite such period:
Period Ratio
01/01/98 - 03/31/98 2.8 to 1.0
04/01/98 - 09/30/98 2.9 to 1.0
10/01/98 - 06/30/99 3.2 to 1.0
14.21 Payments in Respect of Account. The Company shall not, nor
shall it permit any of its Subsidiaries organized under the laws of
the United States or the United Kingdom to, instruct or otherwise
permit any Person obligated under any of the Accounts (as defined in
the Security Agreements) to remit any payment (whether by check, wire
transfer or otherwise) to any account other than a Lock Box Account
(as defined in the Lock Box Agreement) established by the Agent
pursuant to a Lock Box Agreement, other than, in the case of amounts
owed to the UK Borrower and its Subsidiaries, payments which are made
through an alternate means which (in the reasonable judgement of the
Agent) (a) enables the Agent to maintain a perfected, first priority
security interest in such payments and the proceeds thereof and (b)
provides for the application of such proceeds in the same manner as
payments deposited in a Lock BOX Account. The Company hereby agrees
that it shall not, and shall not permit any of its Subsidiaries to,
cause or permit any amounts which are not Collateral to be deposited
in the Lock Box Account (as defined in the Lock Box Agreement).
<PAGE>
14.22 Bank Accounts. The Company shall not nor shall it permit
any of its Subsidiaries to, establish or maintain, or permit to be
established or maintained, any bank accounts in the name of, or for
the benefit of, the Company or any of its Domestic Subsidiaries, other
than (x) bank accounts establishes or maintained with a Bank, (y)
other bank accounts containing operating funds required to cover
substantially immediate payment obligations (including, without
limitation, payroll obligations) and (z) other operating bank accounts
which are debited on a daily basis so that they do not contain any
material overnight deposits.
12. Amendment of Exhibits. The Credit Agreement hereby is amended
by inserting therein as new Exhibit G thereof the form of Lock Box Agreement
which is attached hereto as Exhibit A.
13. Acknowledgment. The Company hereby acknowledges and agrees
that, without limiting the provisions of subsection 13.7(b) of the Credit
Agreement:
(a) the Agent intends to conduct (or to cause to be conducted) an audit
and/or collateral examination of the Accounts and Inventory of the
Company and its Subsidiaries, and of the Domestic Borrowing Base and
UK Borrowing Base, not less frequently than twice per annum; and
(b) the Agent intends to conduct (or to cause to be conduced) an appraisal
of the inventory of the Company and its Domestic Subsidiaries [and of
the UK Borrower and its Subsidiaries]
The Company hereby (x) covenants and agrees to cooperate, and to cause its
Subsidiaries to cooperate, fully with the Agent and its agents in the conduct of
such audits, collateral examinations and appraisals and (y) acknowledges and
agrees that the reasonable costs and expenses of the Agent and its agents in
connection with such audits, collateral examinations and appraisals shall be for
the account of the Company.
14. Conditions to Effectiveness. This Amendment shall become
effective on the date upon which the Agent receives (a) counterparts hereof,
executed and delivered by a duly authorized officer of each Borrower and the
Required Lenders and (b) an amendment fee, for ratable account of the Lenders
which execute and deliver this Amendment on or prior to March 20, 1998, in the
amount equal to 1/4 of 1% of the amount of the Domestic Revolving Credit
Commitments then then in effect, the UK Revolving Credit Commitments then in
effect and the aggregate then outstanding principal amount of the Domestic Term
Loans and the UK Term Loans.
15. Representations and Warranties. The Borrowers hereby confirm,
reaffirm and restate the representations and warranties set forth in Section 6
of the Credit Agreement; provided that each reference to the Credit Agreement
therein shall be deemed to be a reference to the Credit Agreement giving effect
to this Amendment. The Borrowers represent and warrant that no Default or Event
of Default has occurred and is continuing.
<PAGE>
16. Continuing Effect of Credit Agreement. This Amendment shall
not constitute a waiver or amendment of any other provision of the Credit
Agreement not expressly referred to herein and shall not be construed as a
waiver or consent to any further or future action on the part of a Borrower that
would require a waiver or consent of the Agent or the Lenders. Except as
expressly amended hereby, the provisions of the Credit Agreement are and shall
remain in full force and effect.
17. Counterparts. This Amendment may be executed by the parties
hereto in any number of counterparts, and all of such counterparts taken
together shall be deemed to constitute one and the same instrument.
18. GOVERNING LAW. THIS AMENDMENT SHALL BE GOVERNED BY, AND
CONSTRUED AND INTERPRETED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK
IN WITNESS WHEREOF, the parties hereto have caused this Amendment
to be executed and delivered by their respective duly authorized offices as of
the date first above written.
REMINGTON PRODUCTS COMPANY, L.L.C.
/s/
By:-----------------------------
Title:
REMINGTON CONSUMER PRODUCTS
LIMITED
/s/
By:-----------------------------
Title
THE CHASE MANHATTAN BANK,
as Administrative Agent, as
a Lender and as (or on
behalf of) the Issuing
Bank.
/s/
By: ----------------------------
Title:
BANQUE NATIONALE DE PARIS, as a Co-
Documentation Agent and as a Lender
/s/
By:------------------------------
Title:
FLEET NATIONAL BANK, as a Co-
Documentation Agent and as a Lender
/s/
By:-----------------------------
Title:
<PAGE>
CORESTATES BANK, N.A.
/s/
By:----------------------------
Title:
THE FIRST NATIONAL BANK OF BOSTON
/s/
By:----------------------------
Title:
FIRST UNION BANK OF CONNECTICUT
By:-----------------------------
Title:
HELLER FINANCIAL, INC.
/s/
By:-----------------------------
Title:
PEOPLE'S BANK
/s/
By:-----------------------------
Title:
PNC BANK, NATIONAL ASSOCIATION
/s/
By:-------------------------------
Title:
THE PROVIDENT BANK
/s/
By:------------------------------
Title:
<PAGE>
EXHIBIT A
to
FOURTH AMENDMENT
EXHIBIT G to
Credit Agreement
FORM OF
LOCK BOX AGREEMENT
LOCK BOX AGREEMENT, dated as of March _, 1998, among [ ], as
lock box bank (in such capacity, the "Lock Box Bank"), [______________} (the
"Grantor") and THE CHASE MANHATTAN BANK, as administrative agent (in such
capacity, the "Agent) pursuant to the Credit and Guarantee Agreement, dated as
of May 23, 1996 (as amended, supplemented or otherwise modified from time to
time, the "Credit Agreement), among the Borrowers named therein, the banks and
other financial institutions parties thereto (the "Lenders"), the
Co-documentation Agents named therein and the Agent.
For good and valid consideration, the receipt of which hereby
is acknowledged, the parties hereto hereby agree as follows:
1. (a) The Lock Box Bank has rented Post Office Box [ ] (the
"Post Office Box) into which the Grantor has directed and shalt direct debtors
in respect of the Accounts (as defined in the Security Agreement) to mail
payments in respect of the Accounts (unless such debtors are to make payment
directly into the Lock Box Account described below or into the relevant
concentration account described in paragraph 4 below by wire transfer of
immediately available fiends). The Lock Box Bank shall instruct the Agent and
the Grantor how mail intended for the Lock Box Account should be addressed. The
Lock Box Bank shall have exclusive access to the Post Office Box ant shall
collect the mail delivered to such Post Office Box (even though addressed to the
Grantor or to the Agent) on each business day in accordance with the Lock Box
Banks regular collection schedule. For hereof, the term "Security Agreement"
shall mean the Security Agreement dated as of May 23, 1996, made by the Grantor
in favor of the Agent, as the same may be amended, supplemented or otherwise
modified from time to time.
(b) The Lock Box Bank has opened a bank account in the name of
the Grantor entitled the "Remington Products Company LLC Lock Box Account for
the benefit of The Chase Manhattan Bank, as Agent" (Account No._____________)
(the "Lock Box Account") Nothing shall be deposited in the Lock Box Account
other than amounts constituting proceeds of Collateral (as defined in the
Security Agreement) in which the Agent has a security interest pursuant to the
Security Agreement.
(c) The Grantor hereby grants to the Agent a first priority
security interest in all items received in the Post Office Box and in all
amounts on deposit in the Lock Box Account. The Grantor and the Lock Box Bank
hereby acknowledge and agree that the Lock Box Bank holds all amounts on deposit
in the Lock Box Account, and constitutes a bailee in possession thereof, for the
benefit of the Agent.
<PAGE>
2.(a) The Lock Box Bank shall have unrestricted and exclusive
access to the Post Office Box for the purpose of collecting mail for delivery
and deposit into the Lock Box Account. The Lock Box Bank shall remove the
contents of the Post Office Box periodically (and, in any event on each Business
Day) in accordance with the Lock Box Bank's schedule of calls to this postal
station.
(b) The Lock Box Account shall be under the sole dominion and
control of the Agent, which shall be exercised in accordance with this Lock Box
Agreement. Neither the Grantor nor any other Personal claiming by, through or
under the Grantor shall have any control over the use of, or any right to
withdraw any amount from, the Lock Box Account, provided that the Lock Box Bank
shall withdraw funds from the Lock Box Account and make such funds available to
the Agent as provided in this Lock Box Agreement. The Lock Box Bank shall be
entitled to rely on, and shall act in accordance with, all instructions given to
it by the Agent with respect to the Lock Box Account, which instructions the
Agent will give only in accordance wit this Lock Box Agreement.
(c) Except as expressly set forth herein, and without in any way
derogating from the Agent's sole dominion and control of the Lock Box Account,
the Grantor has the right to instruct the Lock Box Bank with respect to matters
(other than with respect to the matters set forth in the next succeeding
sentence) relating to the operation and administration of the Lock Box Account;
provided that upon the occurrence and during the continuance of any Event of
Default (as defined in the Credit Agreement) the Agent shall have the right to
notify the Lock Box Bank that an Event of Default has occurred, in which case
the Agent shall thereafter have the exclusive right to so instruct the Lock Box
Bank unless the Agent notifies the Lock Box Bank to the contrary. Such matters
with respect to which the Grantor has the exclusive right shall not include
matters relating to the collection of nay items in (or to the credit of) the
Lock Box Account and the withdrawal and use of proceeds thereof. The Lock Box
Bank may rely on all instructions given by the Grantor in accordance with this
paragraph 2(c) as fully as if such instructions were given by the Agent.
3(a) The contents of the mail colleted from the Post Office Box,
whether consisting of cash, checks, notes, drafts, bills of exchange, money
orders, commercial paper or other item of payment, shall be promptly deposited
by the Lock Box Bank into the Lock Box Account in accordance with the terms of
this Lock Box Agreement. The Lock Box Bank shall endorse all checks which appear
to be in order for deposit into the Lock Box Account and shall process each item
under the same terms and conditions as would apply if the Agent or the Grantor
had made the deposit directly. In endorsing the checks, the Lock Box Bank may
use the payee endorsement stamp.
(b) The Lock Box Bank shall make a photocopy of each check,
draft, note, bill of exchange, money order, commercial paper or other item of
payment (collectively, the "checks") deposited into the Lock Box Account, with
the date of deposit to be shown on the right-hand side and bottom edges.
Promptly after receipt thereof, such photocopies, together with (I) all
attachments received with payments, such as detachable stubs, (ii) any
correspondence and the individual envelope and (iii) all other materials
rejected for various reasons shall be sent by the Lock Box Bank to the Grantor
or , at any time after written notice by the Agent (which the Agent agrees only
to give after the occurrence and during the continuance of an Event of Default,
as defined in the Agreement), to the Agent; provided that the Lock Box
<PAGE>
Bank shall send copies thereof to the Agent from time to time upon its request.
Checks returned unpaid because of uncollected or insufficient Funds shall be
redeposited without advice. Checks returned a second time shall be charged to
the Lock Box Account and mailed under appropriate advice to the Grantor or, at
any time after written notice by the Agent (which the Agent agrees only to give
after the occurrence and during the continuance of an Event of Default, as
defined in the Credit Agreement), to the Agent.
(c) The Lock Box Bank shall process in accordance with its usual
operating procedure all checks postdated up to seven days, and shall forward to
the Grantor for, upon a notice given in accordance with the penultimate sentence
of this paragraph, to the Agent) all checks postdated eight days or more.
Undated checks may be dated by the Lock Box Bank to agree with the postmark date
and included in the regular deposit. Checks incorrectly made out, where fill and
amount differ, are to be deposited for the written amount only. Checks bearing
no signature are to be returned with daily lock box detail. Third-party checks
may be deposited into the Lock Box Account if properly endorsed. Checks bearing
the legend "Payment in Full" or words of similar import, either typed or
handwritten, shall be withheld from the clearing system and sent to the Grantor
or, at any time after written notice by the Agent (which the Agent agrees only
to give after the occurrence and during the continuance of an Event of Default,
as defined in the Credit Agreement), to the Agent. Should such an item be
cleared, the Agent and the Grantor hereby agree that no liability shall accrue
to the Lock Box as a result of such actions.
(d) The Lock Box Bank shall maintain a microfilm record of each
check included in the Lock Box Account. This film shall be available for use by
the Agent, the Grantor or any Lender.
(e) The Lock Box Bank shall exercise due diligence in examining
all checks which are received and processed under this Agreement
4. (a) On each day as which both the branch office of the Lock
Box Bank at which the Lock Box Account is being maintained the offices of the
Agent located in New York City are open, the Lock Box Bank shall transfer (by
wire transfer of immediately available funds) all collected funds on deposit in
the Lock Box Account to the concentration account or accounts from time to time
notified to the Lock Box Bank by the Agent.
(b) Upon the request of the Agent at any time and from time to
time, the Lock Box Bank will notify the Agent (at __________________ or at such
other telephone number which the Agent may from time to time designated) of the
amounts deposited in the Lock Box Account on such day and of the amounts
transferred to the Agent in accordance with the provisions of this Section 4.
5. The Lock Box Bank waives, with respect to all of its existing
and future claims against the Grantor or any affiliate thereof, all existing and
future rights of set-off and banker's liens again the Lock Box Accounts and all
items (and proceeds thereof) that come into its possession in connection with
the Lock Box Account, provided that the Lock Box Bank retains the right to
charge any Lock Box Account (a) for all items deposited in such Lock Box Account
after the date hereof and subsequently returned to the Lock Box Bank unpaid and
(b) for all compensation and expense with respect to the Lock Box Account.
<PAGE>
6. (a) This Lock Box Agreement is to become effective as of the
date hereof, and the Lock Box Bank shall be in a position to process remittances
on test date.
(b) This Lock Box Agreement may be terminated by any party upon
30 days' written notice to the other parties hereto. In the event that such
notice is given by any party, the Grantor shall, with the consent of the Agent
(which consent shall not be unreasonably withheld) designate an alternate lock
box bank; provided, however, that if the Grantor and the Agent are unable to
agree upon an alternate lock box bank prior to the termination date, the Agent
may designate any of the Lenders willing to serve as an alternate lock box bank
as such alternative lock box bank and such designation shall be to be acceptable
to the Grantor. Upon termination of this Agreement, the Lock Box Bank shall, at
the direction of the Agent, deliver all checks and other funds received by it to
( I) a lock box account governed by a Lock Box Agreement (as defined in the
Credit Agreement) maintained by the institution selected or deemed to be
selected by the Grantor and the Agent or (ii) one or more concentration accounts
maintained by the Agent. Until such checks and funds are so delivered, the Lock
Box Bank shall hold such checks and funds for the benefit of the Agent, which
shall have exclusive dominion and control over them.
7. The Grantor shall pay or reimburse the Lock Box Bank for its
reasonable and customary fees and its costs and expenses as Lock Box Bank as
shall be mutually agreed upon by the Grantor and the Lock Box Bank from time to
time.
8. (a) The Grantor agrees to pay, indemnify and hold the Lock Box
Bank harmless from any and any all liabilities, obligations, losses, damages.
penalties. actions, judgments, suits, costs, expenses or disbursements of any
kind or nature whatsoever (including, without limitation, reasonable legal fees,
but not including income taxes) with respect to the performance of this Lock Box
Agreement in accordance with its terms by the Lock Box Bank's directors,
officers, agents or employees, unless arising from its or their own gross
negligence or willful misconduct.
(b) The Lock Box Bank undertakes to perform only such duties as
are expressly set forth herein. Notwithstanding any other provision of this Lock
Box Agreement, it is agreed by the parties hereto that the Lock Box Bank shall
not be liable for any action taken by it or any of its directors, officers,
agents or employees in accordance with this Lock Box Agreement, except for its
or their own gross negligence or willful misconduct. In no event shall the Lock
Box Bank: be liable for losses or delays resulting from forces majeure, computer
malfunctions, interruption of communications facilities, labor difficulties or
other causes beyond the Lock Box Bank's reasonable control or for indirect,
special consequential damages.
9. All notices, requests and demands to or upon the respective
parties hereto to be effective shall be in writing (including telegraph,
telecopy or telex) and shall be deemed to have been duly given or made when
delivered by hand, or five days after being deposited in the United States mail,
postage prepaid, or, in the case of telegraphic notice, when delivered to the
telegraph company, or, in the case of telex notice, when sent, addressed as set
forth below under the signature of such party, or to such other address as may
be hereafter notified by the respective parties thereto.
<PAGE>
10. THIS LOCK BOX AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED
AND INTERPRETED IN ACCORDANCE WITH THE LAW OF THE STATE OF NEW YORK.
IN WITNESS WHEREOF, the partied hereto have caused this Lock Box
Agreement to be duly executed and deliverer by their respective officers
thereunto duly authorized as of the date first above written.
[ ], as Lock Bank
By: ------------------------------
Title
Address: ---------------------------------
---------------------------------
Attention:------------------------
Telecopy: ------------------------
THE CHASE MANHATTAN BANK, as Agent
By: -------------------------------
Title
Address: -----------------------------------
-------------------------------------
Attention: ---------------------------
Telecopy: ----------------------------
[NAME OF GRANTOR]
By:----------------------------------
Title
Address: ------------------------------------
------------------------------------
Attention:--------------------------
Telecopy:---------------------------
<PAGE>
Exhibit 10.24
SEVERANCE AGREEMENT
Agreement ("Agreement") between Remington Products Company, L.L.C.
("Remington") and _________________ ("Employee").
1. Remington agrees that in the event of any involuntary termination of
Employee's employment (other than for Cause or Disability) on or before
July 31, 1998, and subject to the Employee's compliance with the terms of
this Agreement and signing the Release attached hereto as Exhibit A (the
"Release"), Remington agrees to continue to pay Employee his then annual
base salary for a period of 6 months after the effective date of the
termination of Employee's employment (the "Salary Continuation Period").
Remington also agrees that during the Salary Continuation Period, it will
continue to provide Employee the medical benefits he was entitled to on the
date hereof (hereinafter "Health Benefits") and to the extent Remington's
insurance plans permit, the long-term disability and life insurance
benefits Employee was entitled to on the date hereof (hereinafter "Insured
Benefits"); provided, however, that the continued provision of the Health
Benefits and the Insured Benefits will cease when Employee becomes employed
and such new employer provides Employee medical benefits substantially
similar to the Health Benefits. Any sums due pursuant to the provisions of
this Section 1 shall be reduced (a) by any sums payable to Employee
pursuant to any severance or termination pay program maintained by the
Company for employees generally and (b) 75% of any compensation earned by
Employee during the Salary Continuation Period.
2. For purposes of this Agreement, the following definitions shall apply:
a. "Cause" shall mean a termination of the employment of Employee by
the Company or any subsidiary thereof due to (i) the commission
by Employee 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), (ii) the commission by Employee of a felony, (iii)
the willful misconduct of Employee as an employee of the Company
or any of its subsidiaries which is reasonably likely to result
in injury or financial loss to the Company or any of its
subsidiaries or (iv) the willful failure of Employee to render
services to the Company or any of its subsidiaries in accordance
with the terms of Employee's employment which failure amounts to
a material neglect of Executive's duties to the Company or any of
its subsidiaries.
b. "Disability" shall mean the inability of Employee to perform the
essential functions of Employee'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 Employee returns to work for at least
30 consecutive business days during such period and performs
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during such period services at the level and competence that were
performed prior to the beginning of the six-month period.
3. Employee agrees that during the Salary Continuation Period, he will not,
without Remington's consent, directly or indirectly:
a. Own, manage, participate in, consult with, render services for,
or in any manner engage in any business that competes anywhere in
the United States with the business of Remington or its
subsidiaries as businesses exist or are in the process on the
date of Employee's termination of employment; or
b. Induce or attempt to induce any employee of Remington or its
subsidiaries to leave the employ of Remington or such subsidiary,
or in any way interfere with the relationship between Remington
or its subsidiaries and any employee thereof
c. Hire any person who was employed by Remington or its subsidiaries
as of the date of Employee's termination of employment or during
the Salary Continuation Period; or
d. Induce or attempt to induce any customer, supplier, licensee or
other business relation of Remington or its subsidiaries to cease
doing business with Remington or its subsidiaries or in any way
interfere with the relationship between any such customer,
supplier, licensee or business relation and Remington or its
subsidiaries.
4. Employee acknowledges that the information, observations and data obtained
by him while employed by Remington concerning the business or affairs of
Remington and its subsidiaries that (i) are not available to the public,
customers, suppliers and competitors of Remington (ii) are in the nature of
trade secrets, or (iii) the disclosure of which could reasonably be
expected to cause a financial loss to Remington, or otherwise have a
material adverse effect on Remington (collectively, the "Confidential
Information") are the property of Remington or such subsidiary. Therefore,
Employee 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 Remington, 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 Employee's acts or omissions to act.
5. Employee agrees that he will, after termination of employment, promptly
return to Remington any property in his possession, custody or control that
belongs to Remington or any of its subsidiaries (such property includes,
without limitation, equipment, credit cards, keys, files, 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 Remington or any of its
subsidiaries).
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6. Employee agrees that if: (A) any provision of this Agreement or the Release
is declared illegal or unenforceable by any court competent jurisdiction as
the result of efforts by the Employee, or any person or entity acting on
his behalf; or (B) Employee brings a claim against any of the Released
Entities (as such term is defined in the Release), or any of their
partners, members, management committee members, officers, employees or
agents, Employee will return to Remington all consideration that he has
received pursuant to this Agreement. In the event that Employee fails to
return any consideration under such circumstances, Employee will pay
Remington the attorneys fees and other expenses incurred by Remington in
recovering such consideration, and in otherwise enforcing the terms of this
Agreement.
7. Employee understands and agrees that in the event he breaches the
provisions of paragraph 3, Remington shall have the right to immediately
cease all further Salary Continuation payments.
8. This Agreement contains the entire agreement between Remington and Employee
relating to subject matter hereof.
-----------------------------------------
Employee Signature Date
REMINGTON PRODUCTS COMPANY, L.L.C.
By: ----------------------------------
Date:
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<PAGE>
Exhibit A to Severance Agreement
RELEASE
1. As consideration for Employee's agreement to be bound by the terms of the
Severance Agreement, and provided that Employee does not revoke this
Release, Remington agrees to make the payments as provided in the Severance
Agreement between Remington and Employee to which this Release is attached
as Exhibit A.
2. Employee agrees that neither he nor his heirs, executors, administrators or
assigns will make, bring or file, or cause to be made, brought or filed
against Remington or any parent, subsidiary, or affiliated corporation or
entity (herein after Remington and such other corporations and entities
will be collectively referred to as the "Released Entities"), or any of the
Released Entities current or former partners, members, management committee
members, officers, employees or agents, any demand, complaint, cause of
action, claim or charge of any kind whatsoever as a result of any act that
has heretofore occurred.
3. Without in any way limiting the scope and effect of Paragraph 2:
A. Employee represents that he is able to read the language,
and understand the meaning and effect of this Release.
B. Employee acknowledges that among the rights knowingly and
voluntarily waived in Paragraph 2 are the rights to bring
any demands, complaints, causes of action, claims, and
charges under the Age Discrimination in Employment Act, and
under any other federal, state or local law, regulation or
decision, including without limitation laws that prohibit
discrimination in employment on the basis of age, race,
color, religion, sex, national origin, ancestry, marital
status, sexual orientation and physical or mental
disability.
C. Employee understands that the waiver contained in Paragraph
2 includes a waiver of all demands, complaints, causes of
action, claims and charges against the Released Entities and
their current and former partners, members, management
committee members, officers, employees and agents, whether
known or unknown, asserted or unasserted, suspected or
unsuspected, which Employee may have as a result of any act
that has heretofore occurred.
D. Employee acknowledges that he would not otherwise be
entitled to the consideration described in the Severance
Agreement, and that Remington is providing such
consideration in return for Employee's Agreement to be bound
by the terms of this Release.
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<PAGE>
E. Employee acknowledges that he has been advised to consult
with an attorney regarding this Release.
F. Employee acknowledges that he was first provided with this
Release on _____________ and has been given until
______________ to consider its terms; therefore, Employee
has been given at least twenty-one days to consider the
terms of this Release and understands that this Release will
not become effective or enforceable until the 8th day
following its execution. An Employee may revoke this Release
during the first seven (7) days following its execution.
-----------------------------------------
Employee Signature Date
5
Exhibit 10.25
TIME BASED PHANTOM EQUITY AGREEMENT
TIME BASED PHANTOM EQUITY AGREEMENT (this "Agreement") is made as of
_______________ 1998, by and between Remington Products Company, L.L.C., a
Delaware limited liability company (the "Company"), and _________________
("Executive").
WHEREAS, on the terms and subject to the conditions hereof, the Company
desires to grant Executive certain rights in any increase in the value of the
equity of the Company under certain events.
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. For the purposes of this Agreement, the following terms
shall have the meanings set forth below:
1.1 "Agreement": the meaning set forth in the preface.
1.2 "Applicable Percentage": the percentage set forth in
Schedule A attached hereto; provided, that such percentage may be adjusted, from
time to time, by the Management Committee pursuant to Section 12.2 herein. .
1.3 "Cause": termination of the employment of Executive by the
Company or any subsidiary thereof due to (a) 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), (b) the commission by Executive of a felony, (c) 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 (d) 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. In the event
Executive terminates his employment and at such time Executive was under active
investigation by the Company or any of its subsidiaries for possible termination
for Cause and thereafter the Company makes a good faith determination that
sufficient facts existed to support Executive's termination for Cause or, within
45 days following such resignation, the Company or any of its subsidiaries
obtains information which, if known prior to Executive's resignation, would have
permitted the Company to terminate Executive for Cause, the Executive shall be
deemed
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<PAGE>
terminated for Cause for all purposes of this Agreement notwithstanding the fact
that Executive had resigned.
1.4 "Common Units": the common units of the Company or the
common stock of a corporation that is the successor of the Company.
1.5 "Company": the meaning set forth in the preface.
1.6 "Company Sale": the meaning set forth in the Limited
Liability Company Agreement. Under no circumstances that a Company Sale be
deemed to include liquidation or bankruptcy of the Company.
1.7 "Disability": 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 date of the termination of
Employment in the event of such Disability) shall be on the first day of such
six-month period.
1.8 "Employee": 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
1.9 "Equity": the Common Units and Preferred Capital
1.10 "Fair Market Value": 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, plus in each case the value of the
outstanding Preferred Capital, if any, determined in good faith by the
Management Committee. 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
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<PAGE>
of the Equity determined in good faith by the Management Committee taking into
consideration the current, historical and projected EBITDA of the Company and
recognizing that control of the Company is not being sold at such time.
1.11 "Financing Default": 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: (a) the Credit and Guarantee Agreement and Indenture (collectively, the
"Senior Financing Agreements") dated as of May 23, 1996, as amended, 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; (b) any provision of the Limited Liability Company Agreement or the
certificate of incorporation or limited liability company agreement of any of
its subsidiaries, as the case may be, as in effect on the Grant Date and (c) any
of the securities issued pursuant to or whose terms are governed by the terms of
any of the agreements set forth in clauses (a) and (b) above, and any
extensions, renewals, refinancings or refundings thereof in whole or in part
1.12 "Fully Diluted Basis": assumes all outstanding options,
warrants and other rights to receive Common Units are fully vested and have been
exercised, excluding any Phantom Equity Payment (as defined in Section 3)
hereunder.
1.13 "Grant Date": ___________.
1.14 "IPO" : 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.
1.15 " IPO Exit Transaction" means the first date after the
consummation of an IPO on which Vestar Equity Partners, L.P., a Delaware limited
partnership and its affiliates (not including employees of the general partner
of Vestar) own less than 10% of the Common Units.
1.16 "Limited Liability Company Agreement" : 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, 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.
1.17 "Management Committee": the Company's Management
Committee or any board of directors or similar governing body of a successor to
the Company.
1.18 "Payment Date" : the date that is no later than the 60th
day after the occurrence of the Payment Event.
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1.19 "Payment Event" : the occurrence of any of the following
(a) a Company Sale, (b) an IPO (c) termination of Executive's Employment because
of death or Disability, or (d) at the Company's option, termination of
Executive's Employment for any reason other than death or Disability.
1.20 "Phantom Equity Payment": the meaning set forth in
Section 3 below.
1.21 "Preferred Capital": the preferred capital of the Company
or the preferred stock of a corporation that is the successor of the Company.
1.22 "Residual Equity Value": (a) in the case of a Company
Sale, the aggregate net amount (including cash, non-cash and any deferred payout
amounts) available for distribution to the issued and outstanding Equity (on a
Fully Diluted Basis), after the payment of all fees and expenses of the Company
incurred in connection with such sale, (b) in the case of an IPO, the valuation
of the Company's Equity implied in the public offering, after giving effect to
the shares issued in such IPO, and (c) in the case of a termination of
Employment, Fair Market Value of the issued and outstanding Equity (on a Fully
Diluted Basis) as of the last day of the last fiscal quarter ending immediately
prior to the occurrence of such termination of Employment.
1.23 "Securityholders Agreement": the Securityholders
Agreement dated as of May 16, 1996 among Shaver, Razor, Vestar Equity Partners
L.P., Victor K. Kiam, II and other equity holders of the Company.
1.24 "Vested Percentage" 100% upon the occurrence of an IPO, a
Company Sale and immediately prior to any reorganization of the Company from a
limited liability company to a corporation which is necessitated by an IPO or a
Company Sale; provided, that if the proposed IPO or Company Sale is not
consummated after a reorganization, the Vested Percentage shall automatically
revert to zero.
2 Confirmation of Grant, Phantom Equity Payment. 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 right to receive the Phantom Equity Payment. Upon the occurrence of a
Payment Event resulting from a Company Sale or IPO, Executive shall be entitled
to receive an amount equal to the Vested Percentage of the Applicable Percentage
of the Residual Equity Value (the "Phantom Equity Payment").
2.1 Company Sale. If the Payment Event is a Company Sale, at
the Company's option:
(a) on the Payment Date, the Company shall pay the Phantom Equity
Payment first by the cancellation of indebtedness, if any, owing from
Executive to the Company or any of its subsidiaries and the remainder
by the Company's delivery of a check or wire transfer of immediately
available funds for the remainder of the Phantom Equity Payment, if
any; or
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<PAGE>
(b) immediately prior to the closing of the Company Sale, the
Company shall convert the Applicable Percentage into an identical
percentage of the issued and outstanding Equity (on a Fully Diluted
Basis) and issue to Executive certificates for the appropriate number
of Common Units and Preferred Capital of the Company, in full
satisfaction of the Phantom Equity Payment due Executive hereunder;
provided, that if the Company Sale is structured to include non-cash
consideration, the Company shall assure that the Executive receives
such portion of the Phantom Equity Payment in cash and the balance in
Common Units and Preferred Capital of the Company in order to provide
Executive with sufficient funds to pay any Federal and state income
taxes that will result from the receipt of the Phantom Equity Payment.
In the event Executive fails or refuses to comply, if required, with the
provisions of Section 5, or to execute the Limited Liability Company Agreement
and Securityholders Agreement, the obligation of the Company to make any Phantom
Equity Payment to Executive under this Agreement shall immediately cease.
2.2 IPO If the Payment Event is an IPO, on the Payment Date,
the Company shall pay the Phantom Equity Payment first by the cancellation of
indebtedness, if any, owing from Executive to the Company or any of its
subsidiaries and the remainder, at the Company's option:
(a) by the Company's delivery of a check or wire transfer of
immediately available funds for the remainder of the Phantom Equity
Payment, if any, or
(b) by the Company's delivery of a check or wire transfer of
immediately available funds in an amount equal to 40% of the remainder
of the Phantom Equity Payment, if any, and the delivery of stock
certificates for the appropriate number of common shares of the
Company at the IPO price for the balance of the Phantom Equity
Payment.
If Executive fails or refuses to comply, if required, with the provisions of
Section 5, or to execute the Limited Liability Company Agreement and
Securityholders Agreement, the obligation of the Company to make any Phantom
Equity Payment to Executive under this Agreement shall immediately cease.
3 Termination of Employment
3.1 Solely for purposes of this Section 3 and notwithstanding
anything to the contrary contained herein, Vested Percentage shall be determined
by the following Time Criteria and Event Criteria:
(a) Time Criteria: (i) 20% after the expiration of 12 months from
the Grant Date; (ii) 40% after the expiration of 24 months from the
Grant Date; (iii) 60% after the expiration of 36 months from the Grant
Date; (iv) 80% after the expiration of 48 months
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<PAGE>
from the Grant Date; and (v) 100% after the expiration of 60 months
from the Grant Date; provided, that if Executive's Employment is
terminated prior to the third anniversary of the Grant Date for any
reason other than Disability or death, or at any time by the Company
for Cause, the time based portion of the Vested Percentage shall be
equal to zero; provided, further, that if the Executive's Employment is
terminated by the Company without Cause prior to the third anniversary
of the Grant Date and a Company Sale occurs less than 90 days after
such termination, the Time Criteria portion of the Vested Percentage as
of the date of termination of Employment shall be determined in
accordance with clauses (i) through (v) above but the Payment Event
shall be deemed a Company Sale; and
(b) Event Criteria: (i) Company Sale, (ii) IPO and (iii)
immediately prior to any reorganization of the Company from a limited
liability company to a corporation which is necessitated by an IPO or
a Company Sale; provided, that if the proposed IPO or Company Sale is
not consummated after a reorganization, the Event Criteria shall be
deemed not to have been satisfied.
3.2 Upon termination of Executive's Employment for any reason
other than death or Disability, the Company shall have the option, at the
Company's sole discretion, of waiving the Event Criteria and treating such
termination as a Payment Event in which case the Vested Percentage shall be
determined solely by reference to the Time Criteria. If the Company does not
elect to waive the Event Criteria, the Company shall have no obligation to make
any Phantom Equity Payment until the Event Criteria shall be met. Upon the
occurrence of the Event Criteria, the Company shall pay Executive the Phantom
Equity Payment in accordance with Section 2, but the Time Criteria shall be
determined as of the date of termination of Employment.
3.3 Upon termination of Executive's Employment as a result of
death or Disability, or in the event the Company elects to waive the Event
Criteria, the Vested Percentage shall be determined solely by reference to the
Time Criteria and on the Payment Date, the Company shall pay the Phantom Equity
Payment first by the cancellation of indebtedness, if any, owing from Executive
to the Company or any of its subsidiaries and the remainder, at the Company's
option:
(a) by the Company's delivery of a check or wire transfer of
immediately a available funds for the remainder of the Phantom Equity
Payment, if any; or
(b) by the Company's delivery of a check or wire transfer of
immediately available funds for an amount equal to one fifth of the
remainder of the Phantom Equity Payment, if any, and 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 funded indebtedness outstanding) of the Company (a "Payment
Note") in a principal amount equal to the balance of the Phantom
Equity Payment, payable in four equal annual installments commencing
on the first anniversary of the issuance thereof and
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<PAGE>
bearing interest payable annually at the publicly announced prime rate
of Chase Manhattan Bank, N.A., on the date of issuance and each June 30
and December 31 thereafter.
4 Suspension of Phantom Equity Payment.
4.1 Notwithstanding anything to the contrary contained in this
Agreement, the Company shall not be obligated to pay the Phantom Equity Payment
at any time pursuant to Sections 2 and 3, regardless of whether a Payment Event
has occurred, to the extent that (a) such Phantom Equity Payment (together with
any other Phantom Equity Payments pursuant to other Phantom Equity Agreements)
would result (i) 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) or (ii) after giving effect
thereto, in a Financing Default, or (b) if immediately prior to such payment
there exits a Financing Default which prohibits such payment. The Company shall,
within fifteen days of learning of any such default, so notify Executive that it
is not obligated to pay the Phantom Equity Payment otherwise due hereunder.
4.2 Any Phantom Equity Payment which the Company is obligated
to make to Executive pursuant to Sections 2 and 3, but which in accordance with
Section 4.1 is not made on the Payment Date, shall be paid by the Company on or
prior to the fifteenth day after such date or dates that it is no longer
prohibited from making such payment under Section 4.1 (after taking into account
any payments to be made at such time pursuant to other Phantom Equity
Agreements), and the Company shall give Executive five days prior written notice
of any such payment.
5 Investment Representations and Covenants of the Executive.
5.1 In the event Executive is to receive Common Units pursuant
to the provisions of Section 2.2, Executive shall execute and deliver to the
Company the Securityholders Agreement.
5.2 The Executive acknowledges and represents that Executive
has been advised by the Company that any Common Units delivered to Executive
pursuant to Section 2.2:
(a) shall not have been registered under the Securities Act;
(b) must be held indefinitely and Executive must continue to
bear the economic risk of such investment in the Common Units
unless the offer and sale of such Common Units is subsequently
registered under the Securities Act and all applicable state
securities laws or an exemption from such registration is
available;
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(c) a restrictive legend, in the form required by the
Securityholders Agreement, shall be placed on the certificates
representing the Common Units;
(d) a notation shall be made in the appropriate records of
the Company indicating that the Common Units are subject to
restrictions on transfer and appropriate stoptransfer
instructions will be issued to the transfer agent with respect to
the Common Units.
5.3 Prior to receiving any Common Units pursuant to Section
2.2, 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;
(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, 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.
6 Call Option.
6.1 The Company shall have the right and option to purchase up
to all of the Common Units received by Executive pursuant to Section 2.2 at Fair
Market Value within 180 days following termination of Executive's Employment
prior to the first anniversary of the Payment Event (a) by Executive for any
reason other than Disability, death, retirement or (b) by the Company for Cause.
6.2 The Company shall have the right and option to purchase up
to fifty (50%) percent of the Common Units received by Executive pursuant to
Section 2.2 at Fair Market Value within 180 days following termination of
Executive's Employment prior to the second anniversary of the Payment Event (a)
by Executive for any reason other than Disability, death, retirement or (b) by
the Company for Cause.
6.3 The Company shall have the right to exercise the option
granted by Sections 6.1. and 6.2 within 180 following the date of termination of
Executives's Employment by sending written notice to Executive of its intention
to purchase the Common Units, specifying the number of Common Units to be
.
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purchased Subject to the provisions of Section 4, 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 written notice to
Executive. The Company shall pay the purchase price for the Common Units it
purchases against delivery of the certificates or other instruments representing
the Common Units so purchased, duly endorsed. first, by the cancellation of
indebtedness, if any, owing from Executive to the Company or any of its
subsidiaries and the remainder, by the Company's delivery of a check or wire
transfer of immediately a available funds for the remainder of the purchase
price, if any.
6.4 Solely for the purposes of this Section 6, in determining
the Fair Market Value of the Common Units to be purchased, the Management
Committee may, in good faith, take into consideration the fact that the sale by
Executive of such shares may negatively impact the price of the publicly traded
Common Units.
6.5 Notwithstanding anything to the contrary contained herein,
the Company's right and option to purchase Common Units pursuant to this Section
6shall automatically terminate upon the occurrence of a Company Sale or an IPO
Exit Transaction.
7 Transfers of Phantom Equity Payment. Executive may transfer the right
to receive the Phantom Equity Payment only upon his death pursuant to applicable
laws of descent and distribution. Any transfer or attempted transfer of the
right to receive the Phantom Equity Payment in violation of any provision of
this Agreement shall be void.
8 Tax Withholding. Whenever any cash payment is to be made hereunder or
Common Units are to be issued pursuant to the terms of this Agreement, the
Company shall have the power to withhold, require Executive to remit to the
Company in cash or offset against any amounts otherwise payable to Executive, an
amount sufficient to satisfy all Federal, state, local and foreign withholding
tax requirements relating to such transaction and the Company may defer any cash
payment or issuance of Common Units until such requirements are satisfied.
9 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.
10 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.
11 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.
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12 Amendments: Adjustment of Applicable Percentage.
12.1 This Agreement may be amended only by a written consent
signed by the parties hereto; provided, that, the Management Committee may, in
good faith, make whatever modifications to this Agreement may be necessary as a
result of any reorganization of the Company required in connection with
refinancing of the Company's outstanding debt for money borrowed. Executive
shall be notified in writing of any such modification or change to this
Agreement. 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.
12.2 The Management Committee may, in good faith, from time to
time make appropriate adjustments to the Applicable Percentage set forth in
Schedule A attached hereto as a result of the issuance of new Equity (to include
but not be limited to: Common Units, Preferred Capital, options, rights or
warrants to acquire Common Units or any security convertible into Equity) by the
Company or the creation of additional or new phantom equity programs. Executive
shall be notified in writing of any such modification to the Applicable
Percentage.
13 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.
14 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 an inconvenient forum.
15 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
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Bridgeport CT 06604
Attention: General Counsel
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
(ii) If to Executive:
16 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, specifically including the prior grant of or the promise to grant
options for the purchase of Common Units of the Company. 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 any prior
agreements and understandings between the parties with respect to such subject
matter, and shall be deemed to automatically terminate any option agreement
previously issued to Executive to purchase Common Units of the Company,
including any agreement to issue such options to Executive.
17 Counterparts. This Agreement may be executed in separate
counterparts each of which shall be deemed an original and all of which shall
constitute one and the same instrument.
18 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
exercise 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 of such power
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or right 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 right to exercise the same at any subsequent time or
times hereunder.
19 Termination of Agreement. This Agreement and Executive's right to
receive any Phantom Equity Payment shall terminate on December 31, 2009.
IN WITNESS WHEREOF, the parties have executed this Agreement as
of the date and year first written above.
REMINGTON PRODUCTS COMPANY, L.L.C.
By------------------------ ---------------------------
Executive
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Schedule A
to
Time Based Phantom Equity Agreement with_________________
APPLICABLE PERCENTAGE: __%.
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EXHIBIT 10.26
PERFORMANCE BASED PHANTOM EQUITY AGREEMENT
PERFORMANCE BASED PHANTOM EQUITY AGREEMENT (this "Agreement") is made
as of ___________________, by and between Remington Products Company, L.L.C., a
Delaware limited liability company (the "Company"), and _______________________
Executive").
WHEREAS, on the terms and subject to the conditions hereof,
the Company desires to grant Executive certain rights in any increase in the
value of the equity of the Company under certain events.
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. For the purposes of this Agreement, the following terms
shall have the meanings set forth below:
1.1 "Agreement": the meaning set forth in the preface.
1.2 "Applicable Percentage": the percentage set forth in
Schedule A attached hereto; provided, that such percentage may be adjusted, from
time to time, by the Management Committee pursuant to Section 12.2 herein. .
1.3 "Cause": termination of the employment of Executive by the
Company or any subsidiary thereof due to (a) 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), (b) the commission by Executive of a felony, (c) 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 (d) 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. In the event
Executive terminates his employment and at such time Executive was under active
investigation by the Company or any of its subsidiaries for possible termination
for Cause and thereafter the Company makes a good faith determination that
sufficient facts existed to support Executive's termination for Cause or, within
45 days following such resignation, the Company or any of its subsidiaries
obtains information which, if known prior to Executive's resignation, would have
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permitted the Company to terminate Executive for Cause, the Executive shall be
deemed terminated for Cause for all purposes of this Agreement notwithstanding
the fact that Executive had resigned.
1.4 "Common Units": the common units of the Company or the
common stock of a corporation that is the successor of the Company.
1.5 "Company": the meaning set forth in the preface.
1.6 "Company Sale": the meaning set forth in the Limited
Liability Company Agreement. Under no circumstances shall a Company Sale be
deemed to include liquidation or bankruptcy of the Company.
1.7 "Disability": 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 date of the termination of
Employment in the event of such Disability) shall be on the first day of such
six-month period.
1.8 "EBITDA":the meaning set forth in the Credit and Guarantee
Agreement.
1.9 "Employee": 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
1.10 "Equity": the Common Units and Preferred Capital.
1.11 "Fair Market Value": 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, plus in each case, the value of the
outstanding Preferred Capital, if any, determined in good faith by the
Management Committee. If at any time the Common Units are not listed on any
securities exchange or quoted in the
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NASDAQ System or the over-the-counter market, the Fair Market Value shall be the
fair value of the Equity determined in good faith by the Management Committee
taking into consideration the current, historical and projected EBITDA of the
Company and recognizing that control of the Company is not being sold at such
time.
1.12 "Financing Default": 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: (a) the Credit and Guarantee Agreement (the "Credit and Guarantee
Agreement")and Indenture (collectively, the "Senior Financing Agreements") dated
as of May 23, 1996, as amended, 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; (b) any provision of the
Limited Liability Company Agreement or the certificate of incorporation or
limited liability company agreement of any of its subsidiaries, as the case may
be, as in effect on the Grant Date and (c) any of the securities issued pursuant
to or whose terms are governed by the terms of any of the agreements set forth
in clauses (a) and (b) above, and any extensions, renewals, refinancings or
refundings thereof in whole or in part.
1.13 "Fully Diluted Basis": assumes all outstanding options,
warrants and other rights to receive Common Units are fully vested and have been
exercised, excluding any Phantom Equity Payment (as defined in Section 3)
hereunder.
1.14 "Grant Date": __________________
1.15 " IPO" 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,
1.16 " IPO Exit Transaction" means the first date after the
consummation of an IPO on which Vestar Equity Partners, L.P., a Delaware limited
partnership and its affiliates (not including employees of the general partner
of Vestar) own less than 10% of the Common Units.
1.17 "Limited Liability Company Agreement" :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, 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.
1.18 "Management Committee": the Company's Management
Committee or any board of directors or similar governing body of a successor to
the Company.
1.19 "Payment Date" : the date that is no later than the 60th
day after the occurrence of the Payment Event.
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1.20 "Payment Event" : the occurrence of any of the following
(a) a Company Sale (b) an IPO Exit Transaction , (c) an IPO, (d) termination of
Executive's Employment because of death or Disability, or (e) at the Company's
option, termination of Executive's Employment for any reason other than death or
Disability.
1.21 "Phantom Equity Payment": the meaning set forth in
Section 3 below.
1.22 "Preferred Capital": the preferred capital of the Company
or the preferred stock of a corporation that is the successor of the Company.
1.23 "Residual Equity Value": (a) in the case of a Company
Sale, the aggregate net amount (including cash, non-cash and any deferred payout
amounts) available for distribution to the issued and outstanding Equity (on a
Fully Diluted Basis), after the payment of all fees and expenses of the Company
incurred in connection with such sale, (b) in the case of an IPO and IPO Exit
Transaction, the valuation of the Company's Equity implied in the public
offering, after giving effect to the shares issued in such IPO, and (c) in the
case of a termination of Employment, Fair Market Value of the issued and
outstanding Equity (on a Fully Diluted Basis) as of the last day of the last
fiscal quarter ending immediately prior to the occurrence of such termination of
Employment.
1.24 "Securityholders Agreement": 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.
1.25 "Vested Percentage" : shall be determined by meeting the
Performance Criteria and Event Criteria. In order to be fully vested, both the
Performance Criteria and Event Criteria must be met.
(a) Performance Criteria : (i) 20% when EBITDA is $27
million or greater for any trailing 12 months period, measured at the
end of any calendar quarter prior to January 1, 2002 and not less than
$24.3 million for the immediately following 12 month period; (ii) 50%
when EBITDA is $31 million or greater for any trailing 12 month period,
measured at the end of any calendar quarter prior to January 1, 2002
and not less than $27.9 million for the immediately following 12 month
period; and (iii) 100% when EBITDA is $35 million or greater for any
trailing 12 month period, measured at the end of any calendar quarter
prior to January 1, 2002 and not less than $31.5 million for the
immediately following 12 month period. Performance Criteria shall be
determined by achievement, if any, of only the initial EBITDA targets
under clauses (i) through (iii) above if less than 12 months has lapsed
following achievement of such EBITDA target and the satisfaction of the
Event Criteria.
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(b) Event Criteria: (i) a Company Sale, or (ii) an
IPO Exit Transaction, or (iii) an IPO, to the extent Performance
Criteria was met prior to the IPO, and (iv) immediately prior to any
reorganization of the Company from a limited liability company to a
corporation which is necessitated by a Company Sale, IPO Exit
Transaction or IPO; provided, that if the proposed Company Sale, IPO
Exit Transaction or IPO is not consummated after a reorganization,
Event Criteria shall have be deemed not to have been satisfied.
2 Confirmation of Grant, Phantom Equity Payment. 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 right to receive the Phantom Equity Payment. Upon the occurrence of a
Payment Event resulting from a Company Sale, an IPO Exit Transaction or an IPO,
Executive shall be entitled to receive an amount equal to the Vested Percentage
of the Applicable Percentage of the Residual Equity Value (the "Phantom Equity
Payment").
2.1 Company Sale If the Payment Event is a Company Sale, at
the Company's option:
(a) on the Payment Date, the Company shall pay the
Phantom Equity Payment first by the cancellation of indebtedness, if
any, owing from Executive to the Company or any of its subsidiaries and
the remainder by the Company's delivery of a check or wire transfer of
immediately available funds for the remainder of the Phantom Equity
Payment, if any; or
(b) immediately prior to the closing of the Company
Sale, the Company shall convert the Applicable Percentage into an
identical percentage of the issued and outstanding Equity (on a Fully
Diluted Basis) and issue to Executive certificates for the appropriate
number of Common Units and Preferred Capital of the Company, in full
satisfaction of the Phantom Equity Payment due Executive hereunder;
provided, that if the Company Sale is structured to include non-cash
consideration, the Company shall assure that the Executive receives
such portion of the Phantom Equity Payment in cash and the balance in
Common Units and Preferred Capital of the Company in order to provide
Executive with sufficient funds to pay any Federal and state income
taxes that will result from the receipt of the Phantom Equity Payment.
In the event Executive fails or refuses to comply, if required, with the
provisions of Section 5 of this Agreement, or to execute the Limited Liability
Company Agreement and Securityholders Agreement, the obligation of the Company
to make any Phantom Equity Payment to Executive under this Agreement shall
immediately cease.
2.2 IPO Exit Transaction. If the Payment Event is an IPO Exit
Transaction, on the Payment Date, the Company shall pay the Phantom Equity
Payment first by the cancellation of indebtedness, if any, owing from Executive
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to the Company or any of its subsidiaries and the remainder by the Company's
delivery of a check or wire transfer of immediately available funds for the
remainder of the Phantom Equity Payment. 2.3 IPO If the Payment Event is an IPO,
on the Payment Date, the Company shall pay the Phantom Equity Payment first by
the cancellation of indebtedness, if any, owing from Executive to the Company or
any of its subsidiaries and the remainder, at the Company's option:
(a) by the Company's delivery of a check or wire
transfer of immediately available funds for the remainder of the
Phantom Equity Payment, if any, or
(b) by the Company's delivery of a check or wire
transfer of immediately available funds in an amount equal to 40% of
the remainder of the Phantom Equity Payment, if any, and the delivery
of stock certificates for the appropriate number of common shares of
the Company at the IPO price for the balance of the Phantom Equity
Payment.
In the event Executive fails or refuses to comply, if required, with the
provisions of Section 5, or to execute the Limited Liability Company Agreement
and Securityholders Agreement, the obligation of the Company to make any Phantom
Equity Payment to Executive under this Agreement shall immediately cease. In the
event that the effective date of the IPO is prior to December 30, 2002 and the
Performance Criteria at such time was less than 100%, this Agreement shall
remain in effect after the IPO; provided, that after the IPO, the Applicable
Percentage shall be automatically reduced by the Performance Criteria of the
Applicable Percentage as of the IPO in order to reflect the Phantom Equity
Payment made to Executive pursuant to this Section 2.3.
3 Termination of Employment
3.1 Solely for purposes of this Section 3 and notwithstanding
anything to the contrary contained herein, if the Executive's Employment is
terminated by the Company without Cause prior to the third anniversary of the
Grant Date and a Company Sale occurs less than 90 days after such termination,
the Performance Criteria portion of the Vested Percentage as of the date of
termination of Employment shall be determined in accordance with clauses (i)
through (iii) of Section 1.25(a) but the Payment Event shall be deemed the
Company Sale.
3.2 Upon termination of Executive's Employment for any reason
other than death or Disability, the Company shall have the option, at the
Company's sole discretion, of waiving the Event Criteria and treating such
termination as a Payment Event in which case the Vested Percentage shall be
determined solely by reference to the Performance Criteria. If the Company does
not elect to waive the Event Criteria, the Company shall have no obligation to
make any Phantom Equity Payment until the Event Criteria shall be met. Upon the
occurrence of the Event Criteria, the Company shall pay Executive the Phantom
Equity Payment in accordance with Section 2, but the Performance Criteria shall
be determined as of the date of termination of Employment.
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3.3 Upon termination of Executive's Employment as a result of
death or Disability, or in the event the Company elects to waive the Event
Criteria, the Vested Percentage shall be determined solely by reference to the
Performance Criteria and on the Payment Date, the Company shall pay the Phantom
Equity Payment first by the cancellation of indebtedness, if any, owing from
Executive to the Company or any of its subsidiaries and the remainder, at the
Company's option:
(a) by the Company's delivery of a check or wire
transfer of immediately a available funds for the remainder of the
Phantom Equity Payment, if any; or
(b) by the Company's delivery of a check or wire
transfer of immediately available funds for an amount equal to one
fifth of the remainder of the Phantom Equity Payment, if any, and 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 funded indebtedness outstanding) of the
Company (a "Payment Note") in a principal amount equal to the balance
of the Phantom Equity Payment, payable in four 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 Manhattan Bank, N.A., on the date of issuance and
each June 30 and December 31 thereafter
4 Suspension of Phantom Equity Payment.
4.1 Notwithstanding anything to the contrary contained in this
Agreement, the Company shall not be obligated to pay the Phantom Equity Payment
at any time pursuant to Sections 2 and 3, regardless of whether a Payment Event
has occurred, to the extent that (a) such Phantom Equity Payment (together with
any other Phantom Equity Payments pursuant to other Phantom Equity Agreements)
would result (i) 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) or (ii) after giving effect
thereto, in a Financing Default, or (b) if immediately prior to such payment
there exits a Financing Default which prohibits such payment. The Company shall,
within fifteen days of learning of any such default, so notify Executive that it
is not obligated to pay the Phantom Equity Payment otherwise due hereunder.
4.2 Any Phantom Equity Payment which the Company is obligated
to make to Executive pursuant to Sections 2 and 3, but which in accordance with
Section 4.1 is not made on the Payment Date, shall be paid by the Company on or
prior to the fifteenth day after such date or dates that it is no longer
prohibited from making such payment under Section 4.1 (after taking into account
any payments to be made at such time pursuant to other Phantom Equity
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Agreements), and the Company shall give Executive five days prior written notice
of any such payment.
5 Investment Representations and Covenants of the Executive.
5.1 In the event Executive is to receive Common Units pursuant
to the provisions of Section 2.3, Executive shall execute and deliver to the
Company the Securityholders Agreement.
5.2 The Executive acknowledges and represents that Executive
has been advised by the Company that any Common Units delivered to Executive
pursuant to Section 2.3:
(a) shall not have been registered under the
Securities Act;
(b) must be held indefinitely and Executive must
continue to bear the economic risk of such investment in the Common
Units unless the offer and sale of such Common Units is subsequently
registered under the Securities Act and all applicable state securities
laws or an exemption from such registration is available;
(c) a restrictive legend in the form required by the
Securityholders Agreement shall be placed on the certificates
representing the Common Units;
(d) a notation shall be made in the appropriate
records of the Company indicating that the Common Units are subject to
restrictions on transfer and appropriate stop transfer instructions
will be issued to the transfer agent with respect to the Common Units.
5.3 Prior to receiving any Common Units pursuant to Section
2.3, 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;
(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, there may be no public market
for the Common Units and, accordingly, it may not be possible for
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Executive to liquidate Executive's investment in case of emergency, if
at all.
6 Call Option.
6.1 The Company shall have the right and option to purchase up
to all of the Common Units received by Executive pursuant to Section 2.3 at Fair
Market Value within 180 days following termination of Executive's Employment
prior to the first anniversary of the Payment Event (a) by Executive for any
reason other than Disability, death, retirement or (b) by the Company for Cause.
6.2 The Company shall have the right and option to purchase up
to fifty (50%) percent of the Common Units received by Executive pursuant to
Section 2.3 at Fair Market Value within 180 days following termination of
Executive's Employment prior to the second anniversary of the Payment Event (a)
by Executive for any reason other than Disability, death, retirement or (b) by
the Company for Cause.
6.3 The Company shall have the right to exercise the option
granted by Sections 6.1. and 6.2 within 180 following the date of termination of
Executives's Employment by sending written notice to Executive of its intention
to purchase the Common Units, specifying the number of Common Units to be
purchased. Subject to the provisions of Section 4, 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 written notice to
Executive. The Company shall pay the purchase price for the Common Units it
purchases against delivery of the certificates or other instruments representing
the Common Units so purchased, duly endorsed. first, by the cancellation of
indebtedness, if any, owing from Executive to the Company or any of its
subsidiaries and the remainder, by the Company's delivery of a check or wire
transfer of immediately a available funds for the remainder of the purchase
price, if any.
6.4 Solely for the purposes of this Section 6, in determining
the Fair Market Value of the Common Units to be purchased, the Management
Committee may, in good faith, take into consideration the fact that the sale by
Executive of such shares may negatively impact the price of the publicly traded
Common Units.
6.5 Notwithstanding anything to the contrary contained herein,
the Company's right and option to purchase Common Units pursuant to this
Sections 6 shall automatically terminate upon the occurrence of a Company Sale
or an IPO Exit Transaction.
7 Transfers of Phantom Equity Payment. Executive may transfer the right
to receive the Phantom Equity Payment only upon his death pursuant to applicable
laws of descent and distribution. Any transfer or attempted transfer of the
right to receive the Phantom Equity Payment in violation of any provision of
this Agreement shall be void.
8 Tax Withholding. Whenever any cash payment is to be made hereunder or
Common
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Units are to be issued pursuant to the terms of this Agreement, the Company
shall have the power to withhold, require Executive to remit to the Company in
cash or offset against any amounts otherwise payable to Executive, an amount
sufficient to satisfy all Federal, state, local and foreign withholding tax
requirements relating to such transaction and the Company may defer any cash
payment or issuance of Common Units until such requirements are satisfied.
9 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.
10 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.
11 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.
12 Amendments: Adjustment of Applicable Percentage.
12.1 This Agreement may be amended only by a written consent
signed by the parties hereto; provided, that, the Management Committee may, in
good faith, make whatever modifications to this Agreement may be necessary as a
result of any reorganization of the Company required in connection with
refinancing of the Company's outstanding debt for money borrowed or the
acquisition or disposition of a material amount of assets. Executive shall be
notified in writing of any such modification or change to this Agreement. 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.
12.2 The Management Committee may, in good faith, from time to
time make appropriate adjustments to the Applicable Percentage set forth in
Schedule A attached hereto as a result of the issuance of new Equity (to include
but not be limited to: Common Units, Preferred Capital, options, rights or
warrants to acquire Common Units or any security convertible into Equity) by the
Company, the creation of additional or new phantom equity programs. Executive
shall be notified in writing of any such modification to the Applicable
Percentage.
13 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.
14 Jurisdiction. Any suit action or proceeding with respect to this
Agreement, or any judgment entered by any court in respect thereof, shall be
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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 an inconvenient forum.
15 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: General Counsel
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
(ii) If to Executive:
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16 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, specifically including the prior grant of or the promise to grant
options for the purchase of Common Units of the Company. 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 any prior
agreements and understandings between the parties with respect to such subject
matter, and shall be deemed to automatically terminate any option agreement
previously issued to Executive to purchase Common Units of the Company,
including any agreement to issue such options to Executive.
17 Counterparts. This Agreement may be executed in separate
counterparts each of which shall be deemed an original and all of which shall
constitute one and the same instrument.
18 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 exercise 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 of such power or right 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 right to exercise the same at any subsequent time or times hereunder.
19 Termination of Agreement. This Agreement and Executive's right to
receive any Phantom Equity Payment shall terminate on December 31, 2009. This
Agreement shall also terminate upon the consummation of a Company Sale or IPO
Exit Transaction; provided, that such termination shall not effect any accrued
right or obligation of either party or any provision hereof which is intended to
survive termination, including the Company's obligation to make any payment to
Executive pursuant to Sections 2.1 or 2.2.
20 Off-Set Against Promissory Note. Simultaneously with the execution
of this Agreement, Executive is selling Common Units to the Company and is
receiving a promissory note (the "Note") from the Company for the purchase price
for such units. Executive understands and agrees that notwithstanding anything
else to the contrary contained herein, any Phantom Equity Payment made to
Executive hereunder shall be reduced by an amount equal any payment of principal
of the Note.
IN WITNESS WHEREOF, the parties have executed this Agreement
as of the date and year first written above.
REMINGTON PRODUCTS COMPANY L.L.C.
By:----------------------------- ---------------------------
Executive
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Schedule A
to
Performance Based Phantom Equity Agreement with
------------------------
APPLICABLE PERCENTAGE: ____%.
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EXHIBIT 10.27
SUPER PERFORMANCE BASED PHANTOM EQUITY AGREEMENT
SUPER PERFORMANCE BASED PHANTOM EQUITY AGREEMENT (this "Agreement") is
made as of ______________, by and between Remington Products Company, L.L.C., a
Delaware limited liability company (the "Company"), and __________________
("Executive").
WHEREAS, on the terms and subject to the conditions hereof, the Company
desires to grant Executive certain rights in any increase in the value of the
equity of the Company under certain events.
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. For the purposes of this Agreement, the following terms
shall have the meanings set forth below:
1.1 "Agreement": the meaning set forth in the preface.
1.2 "Applicable Percentage": the percentage set forth in
Schedule A attached hereto; provided, that such percentage may be adjusted, from
time to time, by the Management Committee pursuant to Section 12.2 herein. .
1.3 "Cause": termination of the employment of Executive by the
Company or any subsidiary thereof due to (a) 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), (b) the commission by Executive of a felony, (c) 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 (d) 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. In the event
Executive terminates his employment and at such time Executive was under active
investigation by the Company or any of its subsidiaries for possible termination
for Cause and thereafter the Company makes a good faith determination that
sufficient facts existed to support Executive's termination for Cause or, within
45 days following such resignation, the Company or any of its subsidiaries
obtains information which, if known prior to Executive's resignation, would have
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permitted the Company to terminate Executive for Cause, the Executive shall be
deemed terminated for Cause for all purposes of this Agreement notwithstanding
the fact that Executive had resigned.
1.4 "Common Units": the common units of the Company or the
common stock of a corporation that is the successor of the Company.
1.5 "Company": the meaning set forth in the preface.
1.6 "Company Sale": the meaning set forth in the Limited
Liability Company Agreement. Under no circumstances shall a Company Sale be
deemed to include liquidation or bankruptcy of the Company.
1.7 "Disability": 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 date of the termination of
Employment in the event of such Disability) shall be on the first day of such
six-month period.
1.8 "EBITDA":the meaning set forth in the Credit and Guarantee
Agreement.
1.9 "Employee": 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
1.10 "Equity": the Common Units and Preferred Capital.
1.11 "Fair Market Value": 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, plus in each case, the value of the
outstanding Preferred Capital, if any, determined in good faith by the
Management Committee. 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
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market, the Fair Market Value shall be the fair value of the Equity determined
in good faith by the Management Committee taking into consideration the current,
historical and projected EBITDA of the Company and recognizing that control of
the Company is not being sold at such time.
1.12 "Financing Default": 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: (a) the Credit and Guarantee Agreement (the "Credit and Guarantee
Agreement")and Indenture (collectively, the "Senior Financing Agreements") dated
as of May 23, 1996, as amended, 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; (b) any provision of the
Limited Liability Company Agreement or the certificate of incorporation or
limited liability company agreement of any of its subsidiaries, as the case may
be, as in effect on the Grant Date and (c) any of the securities issued pursuant
to or whose terms are governed by the terms of any of the agreements set forth
in clauses (a) and (b) above, and any extensions, renewals, refinancings or
refundings thereof in whole or in part.
1.13 "Fully Diluted Basis": assumes all outstanding options,
warrants and other rights to receive Common Units are fully vested and have been
exercised, excluding any Phantom Equity Payment (as defined in Section 3)
hereunder.
1.14 "Grant Date": ___________________
1.15 " IPO" 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,
1.16 " IPO Exit Transaction" means the first date after the
consummation of an IPO on which Vestar Equity Partners, L.P., a Delaware limited
partnership and its affiliates (not including employees of the general partner
of Vestar) own less than 10% of the Common Units.
1.17 "Limited Liability Company Agreement" :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, 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.
1.18 "Management Committee": the Company's Management
Committee or any board of directors or similar governing body of a successor to
the Company.
1.19 "Payment Date" : the date that is no later than the 60th
day after the occurrence of the Payment Event.
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1.20 "Payment Event" : the occurrence of any of the following
(a) a Company Sale (b) an IPO Exit Transaction , (c) an IPO, (d) termination of
Executive's Employment because of death or Disability, or (e) at the Company's
option, termination of Executive's Employment for any reason other than death or
Disability.
1.21 "Phantom Equity Payment": the meaning set forth in
Section 3 below.
1.22 "Preferred Capital": the preferred capital of the Company
or the preferred stock of a corporation that is the successor of the Company.
1.23 "Residual Equity Value": (a) in the case of a Company
Sale, the aggregate net amount (including cash, non-cash and any deferred payout
amounts) available for distribution to the issued and outstanding Equity (on a
Fully Diluted Basis), after the payment of all fees and expenses of the Company
incurred in connection with such sale, (b) in the case of an IPO and IPO Exit
Transaction, the valuation of the Company's Equity implied in the public
offering, after giving effect to the shares issued in such IPO, and (c) in the
case of a termination of Employment, Fair Market Value of the issued and
outstanding Equity (on a Fully Diluted Basis) as of the last day of the last
fiscal quarter ending immediately prior to the occurrence of such termination of
Employment.
1.24 "Securityholders Agreement": 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.
1.25 "Vested Percentage" : shall be determined by meeting the
Performance Criteria and Event Criteria. In order to be fully vested, both the
Performance Criteria and Event Criteria must be met.
(a) Performance Criteria : 100% when EBITDA is (i)
$50 million or greater for any trailing 12 months period, measured at
the end of any calendar quarter prior to January 1, 2002 and (ii) not
less than $45 million for the immediately following 12 month period.
Performance Criteria shall be determined by achievement, if any, of
only the initial EBITDA target under clause (i) above if less than 12
months has lapsed following achievement of such EBITDA target and the
satisfaction of the Event Criteria.
(b) Event Criteria: (i) a Company Sale, or (ii) an
IPO Exit Transaction, or (iii) an IPO, to the extent the Performance
Criteria was met prior to the IPO, and (iv) immediately prior to any
reorganization of the Company from a limited liability company to a
corporation which is necessitated by a Company Sale, IPO Exit
Transaction or IPO; provided, that if the proposed Company Sale, IPO
Exit Transaction or IPO is not consummated after a reorganization, the
Event Criteria shall have be deemed not to have been satisfied.
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2 Confirmation of Grant, Phantom Equity Payment. 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 right to receive the Phantom Equity Payment. Upon the occurrence of a
Payment Event resulting from a Company Sale, an IPO Exit Transaction or an IPO,
Executive shall be entitled to receive an amount equal to the Vested Percentage
of the Applicable Percentage of the Residual Equity Value (the "Phantom Equity
Payment").
2.1 Company Sale If the Payment Event is a Company Sale, at
the Company's option:
(a) on the Payment Date, the Company shall pay the
Phantom Equity Payment first by the cancellation of indebtedness, if
any, owing from Executive to the Company or any of its subsidiaries and
the remainder by the Company's delivery of a check or wire transfer of
immediately available funds for the remainder of the Phantom Equity
Payment, if any; or
(b) immediately prior to the closing of the Company
Sale, the Company shall convert the Applicable Percentage into an
identical percentage of the issued and outstanding Equity (on a Fully
Diluted Basis) and issue to Executive certificates for the appropriate
number of Common Units and Preferred Capital of the Company, in full
satisfaction of the Phantom Equity Payment due Executive hereunder;
provided, that if the Company Sale is structured to include non-cash
consideration, the Company shall assure that the Executive receives
such portion of the Phantom Equity Payment in cash and the balance in
Common Units and Preferred Capital of the Company in order to provide
Executive with sufficient funds to pay any Federal and state income
taxes that will result from the receipt of the Phantom Equity Payment.
In the event Executive fails or refuses to comply, if required, with the
provisions of Section 5 of this Agreement, or to execute the Limited Liability
Company Agreement and Securityholders Agreement, the obligation of the Company
to make any Phantom Equity Payment to Executive under this Agreement shall
immediately cease.
2.2 IPO Exit Transaction. If the Payment Event is an IPO Exit
Transaction, on the Payment Date, the Company shall pay the Phantom Equity
Payment first by the cancellation of indebtedness, if any, owing from Executive
to the Company or any of its subsidiaries and the remainder by the Company's
delivery of a check or wire transfer of immediately available funds for the
remainder of the Phantom Equity Payment.
2.3 IPO If the Payment Event is an IPO, on the Payment Date,
the Company shall pay the Phantom Equity Payment first by the cancellation of
indebtedness, if any, owing from Executive to the Company or any of its
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subsidiaries and the remainder, at the Company's option:
(a) by the Company's delivery of a check or wire
transfer of immediately available funds for the remainder of the
Phantom Equity Payment, if any, or
(b) by the Company's delivery of a check or wire
transfer of immediately available funds in an amount equal to 40% of
the remainder of the Phantom Equity Payment, if any, and the delivery
of stock certificates for the appropriate number of common shares of
the Company at the IPO price for the balance of the Phantom Equity
Payment.
In the event Executive fails or refuses to comply, if required, with the
provisions of Section 5, or to execute the Limited Liability Company Agreement
and Securityholders Agreement, the obligation of the Company to make any Phantom
Equity Payment to Executive under this Agreement shall immediately cease. In the
event that the effective date of the IPO is prior to December 30, 2002 and the
Performance Criteria at such time was not achieved, this Agreement shall remain
in effect after the IPO.
3 Termination of Employment
3.1 Solely for purposes of this Section 3 and notwithstanding
anything to the contrary contained herein, if the Executive's Employment is
terminated by the Company without Cause prior to the third anniversary of the
Grant Date and a Company Sale occurs less than 90 days after such termination,
the Performance Criteria portion of the Vested Percentage as of the date of
termination of Employment shall be determined in accordance with clause (i) of
Section 1.25(a) but the Payment Event shall be deemed the Company Sale.
3.2 Upon termination of Executive's Employment for any reason
other than death or Disability, the Company shall have the option, at the
Company's sole discretion, of waiving the Event Criteria and treating such
termination as a Payment Event in which case the Vested Percentage shall be
determined solely by reference to the Performance Criteria. If the Company does
not elect to waive the Event Criteria, the Company shall have no obligation to
make any Phantom Equity Payment until the Event Criteria shall be met. Upon the
occurrence of the Event Criteria, the Company shall pay Executive the Phantom
Equity Payment in accordance with Section 2, but the Performance Criteria shall
be determined as of the date of termination of Employment.
3.3 Upon termination of Executive's Employment as a result of
death or Disability, or in the event the Company elects to waive the Event
Criteria, the Vested Percentage shall be determined solely by reference to the
Performance Criteria and on the Payment Date, the Company shall pay the Phantom
Equity Payment first by the cancellation of indebtedness, if any, owing from
Executive to the Company or any of its subsidiaries and the remainder, at the
Company's option:
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(a) by the Company's delivery of a check or wire
transfer of immediately a available funds for the remainder of the
Phantom Equity Payment, if any; or
(b) by the Company's delivery of a check or wire
transfer of immediately available funds for an amount equal to one
fifth of the remainder of the Phantom Equity Payment, if any, and 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 funded indebtedness outstanding) of the
Company (a "Payment Note") in a principal amount equal to the balance
of the Phantom Equity Payment, payable in four 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 Manhattan Bank, N.A., on the date of issuance and
each June 30 and December 31 thereafter
4 Suspension of Phantom Equity Payment.
4.1 Notwithstanding anything to the contrary contained in this
Agreement, the Company shall not be obligated to pay the Phantom Equity Payment
at any time pursuant to Sections 2 and 3, regardless of whether a Payment Event
has occurred, to the extent that (a) such Phantom Equity Payment (together with
any other Phantom Equity Payments pursuant to other Phantom Equity Agreements)
would result (i) 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) or (ii) after giving effect
thereto, in a Financing Default, or (b) if immediately prior to such payment
there exits a Financing Default which prohibits such payment. The Company shall,
within fifteen days of learning of any such default, so notify Executive that it
is not obligated to pay the Phantom Equity Payment otherwise due hereunder.
4.2 Any Phantom Equity Payment which the Company is obligated
to make to Executive pursuant to Sections 2 and 3, but which in accordance with
Section 4.1 is not made on the Payment Date, shall be paid by the Company on or
prior to the fifteenth day after such date or dates that it is no longer
prohibited from making such payment under Section 4.1 (after taking into account
any payments to be made at such time pursuant to other Phantom Equity
Agreements), and the Company shall give Executive five days prior written notice
of any such payment.
5 Investment Representations and Covenants of the Executive.
5.1 In the event Executive is to receive Common Units pursuant
to the provisions of Section 2.3, Executive shall execute and deliver to the
Company the Securityholders Agreement.
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5.2 The Executive acknowledges and represents that Executive
has been advised by the Company that any Common Units delivered to Executive
pursuant to Section 2.3:
(a) shall not have been registered under the
Securities Act;
(b) must be held indefinitely and Executive must
continue to bear the economic risk of such investment in the Common
Units unless the offer and sale of such Common Units is subsequently
registered under the Securities Act and all applicable state securities
laws or an exemption from such registration is available;
(c) a restrictive legend in the form required by the
Securityholders Agreement shall be placed on the certificates
representing the Common Units;
(d) a notation shall be made in the appropriate
records of the Company indicating that the Common Units are subject to
restrictions on transfer and appropriate stop transfer instructions
will be issued to the transfer agent with respect to the Common Units.
5.3 Prior to receiving any Common Units pursuant to Section
2.3, 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;
(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, 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.
6 Call Option.
6.1 The Company shall have the right and option to purchase up
to all of the Common Units received by Executive pursuant to Section 2.3 at Fair
Market Value within 180 days following termination of Executive's Employment
prior to the first anniversary of the Payment Event (a) by Executive for any
reason other than Disability, death, retirement or (b) by the Company for Cause.
8
<PAGE>
6.2 The Company shall have the right and option to purchase up
to fifty (50%) percent of the Common Units received by Executive pursuant to
Section 2.3 at Fair Market Value within 180 days following termination of
Executive's Employment prior to the second anniversary of the Payment Event (a)
by Executive for any reason other than Disability, death, retirement or (b) by
the Company for Cause.
6.3 The Company shall have the right to exercise the option
granted by Sections 6.1. and 6.2 within 180 following the date of termination of
Executives's Employment by sending written notice to Executive of its intention
to purchase the Common Units, specifying the number of Common Units to be
purchased. Subject to the provisions of Section 4, 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 written notice to
Executive. The Company shall pay the purchase price for the Common Units it
purchases against delivery of the certificates or other instruments representing
the Common Units so purchased, duly endorsed. first, by the cancellation of
indebtedness, if any, owing from Executive to the Company or any of its
subsidiaries and the remainder, by the Company's delivery of a check or wire
transfer of immediately a available funds for the remainder of the purchase
price, if any.
6.4 Solely for the purposes of this Section 6, in determining
the Fair Market Value of the Common Units to be purchased, the Management
Committee may, in good faith, take into consideration the fact that the sale by
Executive of such shares may negatively impact the price of the publicly traded
Common Units.
6.5 Notwithstanding anything to the contrary contained herein,
the Company's right and option to purchase Common Units pursuant to this
Sections 6 shall automatically terminate upon the occurrence of a Company Sale
or an IPO Exit Transaction.
7 Transfers of Phantom Equity Payment. Executive may transfer the right
to receive the Phantom Equity Payment only upon his death pursuant to applicable
laws of descent and distribution. Any transfer or attempted transfer of the
right to receive the Phantom Equity Payment in violation of any provision of
this Agreement shall be void.
8 Tax Withholding. Whenever any cash payment is to be made hereunder or
Common Units are to be issued pursuant to the terms of this Agreement, the
Company shall have the power to withhold, require Executive to remit to the
Company in cash or offset against any amounts otherwise payable to Executive, an
amount sufficient to satisfy all Federal, state, local and foreign withholding
tax requirements relating to such transaction and the Company may defer any cash
payment or issuance of Common Units until such requirements are satisfied.
9 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.
9
<PAGE>
10 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.
11 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.
12 Amendments: Adjustment of Applicable Percentage.
12.1 This Agreement may be amended only by a written consent
signed by the parties hereto; provided, that, the Management Committee may, in
good faith, make whatever modifications to this Agreement may be necessary as a
result of any reorganization of the Company required in connection with
refinancing of the Company's outstanding debt for money borrowed or the
acquisition or disposition of a material amount of assets. Executive shall be
notified in writing of any such modification or change to this Agreement. 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.
12.2 The Management Committee may, in good faith, from time to
time make appropriate adjustments to the Applicable Percentage set forth in
Schedule A attached hereto as a result of the issuance of new Equity (to include
but not be limited to: Common Units, Preferred Capital, options, rights or
warrants to acquire Common Units or any security convertible into Equity) by the
Company, the creation of additional or new phantom equity programs. Executive
shall be notified in writing of any such modification to the Applicable
Percentage.
13 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.
14 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 an inconvenient forum.
15 Notices. All notices and other communications hereunder shall be in
writing and shall be deemed to have been duly given when personally delivered,
10
<PAGE>
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: General Counsel
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
(ii) If to Executive:
16 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, specifically including the prior grant of or the promise to grant
options for the purchase of Common Units of the Company. 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 any prior
agreements and understandings between the parties with respect to such subject
matter, and shall be deemed to automatically terminate any option agreement
11
<PAGE>
previously issued to Executive to purchase Common Units of the Company,
including any agreement to issue such options to Executive.
17 Counterparts. This Agreement may be executed in separate
counterparts each of which shall be deemed an original and all of which shall
constitute one and the same instrument.
18 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 exercise 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 of such power or right 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 right to exercise the same at any subsequent time or times hereunder.
19 Termination of Agreement. This Agreement and Executive's right to
receive any Phantom Equity Payment shall terminate on December 31, 2009. This
Agreement shall also terminate upon the consummation of a Company Sale or IPO
Exit Transaction; provided, that such termination shall not effect any accrued
right or obligation of either party or any provision hereof which is intended to
survive termination, including the Company's obligation to make any payment to
Executive pursuant to Sections 2.1 or 2.2.
IN WITNESS WHEREOF, the parties have executed this Agreement
as of the date and year first written above.
REMINGTON PRODUCTS COMPANY L.L.C.
By:----------------------------- -----------------------
Executive
12
<PAGE>
Schedule A
to
Super Performance Based Phantom Equity Agreement with------------
APPLICABLE PERCENTAGE: ____%.
13
<PAGE>
EXHIBIT 10.28
PROMISSORY NOTE
$150,000 New York, New York
January 14, 1998
FOR VALUE RECEIVED, receipt of which is hereby acknowledged, REMINGTON
PRODUCTS COMPANY, L.L.C., a Delaware limited liability company (the "Company"),
hereby promises to pay to the order of Allen S. Lipson ("Executive'), the
principal sum of $150,000 (the "Principal Amount"), in lawful money of the
United States of America, together with interest on the unpaid Principal Amount
of six and one half percent (6.5%) per annum, such interest to be paid on the
date of issuance and on each and every March 31, June 30, September 30 and
December 31 thereafter.
1. The outstanding Principal Amount and any unpaid and accrued interest
shall be paid in full by the Company without notice or demand on the first to
occur of the following:
a. Within sixty days following the termination of Executive's
employment with the Company or any of its subsidiaries; provided, that if
Executive's employment is terminated for Cause, the Company shall have no
further obligation to make any payment of the Principal Amount and this
Promissory Note shall be deemed canceled.
b. Upon the Payment Date, as such term is defined in the Time
Based Phantom Equity Agreement, Performance Based Phantom Equity Agreement and
Super Performance Based Phantom Equity Agreement, each between the Company and
Executive and each dated the same date as this Payment Note (the "Agreements");
provided, that if (i) the Payment Date occurs for any reason other than
termination of Executive's employment with the Company or any of its
subsidiaries and (ii) the aggregate amount of all Phantom Equity Payments (as
defined in the Agreements) due Executive is less than the outstanding Principal
Amount, the outstanding Principal Amount shall be automatically reduced so that
it equals the aggregate amount of such Phantom Equity Payments and any remaining
amounts that may have been due under this Note are forfeited.
2. For purposes of this Promissory Note, "Cause" shall mean termination
of the employment of Executive by the Company or any subsidiary thereof due to
(a) 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), (b) the commission by Executive of a
felony, (c) 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 (d) the willful
failure of Executive to render services to
<PAGE>
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. In the event
Executive terminates his employment and at such time Executive was under active
investigation by the Company or any of its subsidiaries for possible termination
for Cause and thereafter the Company makes a good faith determination that
sufficient facts existed to support Executive's termination for Cause or, within
45 days following such resignation, the Company or any of its subsidiaries
obtains information which, if known prior to Executive's resignation, would have
permitted the Company to terminate Executive for Cause, the Executive shall be
deemed terminated for Cause for all purposes of this Agreement notwithstanding
the fact that Executive had resigned.
3. All payments of the Principal Amount and interest thereon shall be
made by the Company to an account designated by the holder of this Note.
4. The Company may, at its option, prepay all or any part of the
Principal Amount at any time before maturity, provided that such prepayment is
first applied to all accrued and unpaid interest through the date of prepayment.
5. The Company hereby waives presentment for payment, demand, notice of
nonpayment, notice of protest and all other notices in connection the delivery,
acceptance, performance, default, dishonor or enforcement of the payment of this
Note.
6. No delay or omission by Executive in the exercise of any rights or
remedies shall operate as a waiver thereof and no single or partial exercise by
Executive of any rights or remedies shall preclude other or further exercise
thereof or of any other right or remedy.
7. This instrument shall be construed according to and be governed by
the laws of the State of New York without regard to laws as to the conflict of
laws.
REMINGTON PRODUCTS COMPANY, L.L.C.
/s/ Neil P. DeFeo
By:--------------------
President
<PAGE>
Exhibit 10.33
REMINGTON PRODUCTS COMPANY
1998 BONUS PROGRAM
Except where indicated, the program would be identical to the 1997 Bonus
Program.
1. In U.S., all exempt (not paid for overtime) employees participate. In
foreign operations, local standards dictate who receives bonus.
2. Target bonuses:
a. In US, target bonuses would be:
Grade Level Target as % of Salary
---------------- ---------------------
10 5%
11 5
12 5
13 5
14 5
15 5
16 7
17 10
18 15
19 20
20 25
21 30
22 35
23 40
24 45
25 50
26 55
27 60
28 65
29 70
30 75
(b) Outside U.S., target bonuses run from 2% to maximum of 35%
(other than Hoddinott and Kimpton).
3. For senior executives (Castaldi, Handler, Hoddinott, Kimpton, Lee,
Linton, Lipson and Simmone) 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
1
<PAGE>
below direct reports, 100% of bonus dependent upon performance of
applicable business. Target bonus for many people in the U.S. (i.e.
manufacturing and finance) will be entirely dependent upon worldwide
results. NEW FOR 1998: CEO has discretion to provide that up to 20% of
target bonus for any senior executive and for individuals in level
immediately below will be dependent upon achievement of measurable
personal goals.
4. 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. The same scale would apply to that portion of the
bonus dependent upon achievement of a personal goal, i.e . no bonus
paid unless 90% of goal achieved with a maximum of 200% of the
possible.
5. Payment scale:
Achievement of Budget % of Target Bonus
90% 50%
95 75
100 100
100+ Increases 2 points for every
point above 100
6. The CEO has the authority to increase an individual's bonus above the
applicable amount and to grant a bonus to individuals not in the bonus
program.
7. Payment of bonus: Entire bonus paid upon completion of year-end audit.
8. 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.
9. 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 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.
2
<PAGE>
EXHIBIT 21
SUBSIDIARIES
State or Other Jurisdiction
of Incorporation or
Registrant Subsidiary Organization
- ---------- ---------- ------------
Remington Remington Capital Corp. Delaware
Remington Remington Consumer Products United Kingdom
Limited
Remington Remington Corporation, L.L.C. Delaware
Remington Remington Licensing Corporation Delaware
Remington Remington Products Australia Victoria,Australia
Pty. Ltd.
Remington Shaver Shop Pty. Ltd. Victoria,Australia
Remington Remington Products (Canada), Inc. Canada
Remington Remington Products GmbH Germany
Remington Remington Products New Zealand New Zealand
Limited
Remington Remington Rand Corporation Delaware
<PAGE>
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, 1997, 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 ____ day of March, 1998, by the
following persons:
/s/ Neil P. DeFeo
- ----------------------------------- --------------------------
Neil P. DeFeo, Victor K. Kiam, II,
Chief Executive Officer, President and Director Chairman and 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 /s/Daniel S. O'Connell
- ----------------------------------- --------------------------
Arthur J. Nagle, Daniel S. O'Connell,
Director Director
/s/William B. Connell /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
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
EXHIBIT 27
This schedule contains summary financial information extracted from the audited
financial statements of the Company for the year ended December 31, 1997, and is
qualified in its entirety by reference to such financial statements.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> DEC-31-1997
<CASH> 5,408
<SECURITIES> 0
<RECEIVABLES> 53,052
<ALLOWANCES> 734
<INVENTORY> 60,507
<CURRENT-ASSETS> 120,492
<PP&E> 16,033
<DEPRECIATION> 3,740
<TOTAL-ASSETS> 205,245
<CURRENT-LIABILITIES> 44,131
<BONDS> 178,114
0
0
<COMMON> 0
<OTHER-SE> (18,278)
<TOTAL-LIABILITY-AND-EQUITY> 205,245
<SALES> 241,572
<TOTAL-REVENUES> 241,572
<CGS> 141,296
<TOTAL-COSTS> 141,296
<OTHER-EXPENSES> 86,130
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 19,318
<INCOME-PRETAX> (5,698)
<INCOME-TAX> (2,225)
<INCOME-CONTINUING> (7,923)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (7,923)
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
