AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JULY 1, 1996
REGISTRATION NO. 33-86132
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
AMENDMENT NO. 2 TO FORM S-1
ON
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
BEST PRODUCTS CO., INC.
(Exact name of registrant as specified in its charter)
Virginia 54-0853592
(State or other jurisdiction (I.R.S. Employer
of incorporation Identification No.)
or organization)
1400 Best Plaza
Richmond, Virginia 23227-1125
(804) 261-2000
(Address, including zip code, and telephone number,
including area code, of registrant's principal executive offices)
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Copy to:
<S> <C>
W. Edward Clingman, Jr., Esq. Robert L. Burrus, Jr., Esq.
Vice President-General Counsel and Secretary McGuire, Woods, Battle & Boothe, L.L.P.
Best Products Co., Inc. One James Center
1400 Best Plaza Richmond, Virginia 23219
Richmond, Virginia 23227-1125 Telephone: (804) 775-4306
Telephone: (804) 261-2035
(Name, address, including zip code, and telephone number,
including area code, of agent for service)
</TABLE>
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED
SALE TO THE PUBLIC: From time to time after this
Registration Statement becomes effective.
If the only securities being registered on this Form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box. |_|
If any of the securities being registered on this Form are to be
offered on a delayed or continuous basis pursuant to Rule 415 under the
Securities Act of 1933, other than securities offered only in connection with
the dividend or interest reinvestment plans, check the following box. [x]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. |_|
If this Form is a post-effective amendment filed pursuant to Rule
462(c) under the Securities Act, check the following box and list the Securities
Act registration statement number of the earlier effective registration
statement for the same offering. |_|
If delivery of the prospectus is expected to be made pursuant to Rule
434, please check the following box. |_|
The Registrant hereby amends this Registration Statement on such date or dates
as may be necessary to delay its effective date until the Registrant shall file
a further amendment which specifically states that this Registration Statement
shall thereafter become effective in accordance with Section 8(a) of the
Securities Act of 1933 or until the Registration Statement shall become
effective on such date as the Commission, acting pursuant to said Section 8(a),
may determine.
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SUBJECT TO COMPLETION, DATED JULY 1, 1996
10,553,273 SHARES
PROSPECTUS
BEST PRODUCTS CO., INC.
COMMON STOCK,
$1.00 PAR VALUE PER SHARE
---------------
10,553,273 shares (the "Shares") of Common Stock, par value $1.00 per
share (the "Common Stock"), of Best Products Co., Inc., a Virginia corporation
(the "Company"), may be offered from time to time as described in this
Prospectus by Chemical Bank (the "Selling Shareholder"). As of May 31, 1996,
31,019,969 shares of Common Stock were issued and outstanding. 910,225 of the
Shares are subject to issuance upon exercise of outstanding warrants held by the
Selling Shareholder (the "Warrants").
The Common Stock is traded on The Nasdaq Stock Market's National Market
(the "Nasdaq National Market") under the symbol "BEST". On July __, 1996, the
last sale price of the Common Stock, as reported by the Nasdaq National Market,
was $______ per share.
FOR A DISCUSSION OF CERTAIN FACTORS WHICH SHOULD BE CONSIDERED BY
PROSPECTIVE PURCHASERS OF THE SHARES, SEE "RISK FACTORS"
COMMENCING ON PAGE 3.
-----------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION NOR HAS THE SECURITIES AND EXCHANGE COMMISSION
OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
------------------------------
The Selling Shareholder may offer and sell Shares from time to time,
directly or through agents, dealers or underwriters designated from time to
time, on terms to be determined at the time of offer or sale. The aggregate
proceeds to the Selling Shareholder from the sale of the Shares will be the
total purchase price of the Shares sold, less the aggregate agents' commissions
and underwriters' discounts, if any, and other expenses of the offering not
borne by the Company. None of the proceeds from the sale of Shares pursuant to
this Prospectus will be received by the Company. The Company will pay certain
expenses in connection with the registration of offers and sales of Shares
pursuant hereto. The Company has agreed to indemnify the Selling Shareholder,
any underwriters of an offering made hereby and certain other persons against
certain liabilities, including liabilities under the Securities Act of 1933, as
amended (the "Securities Act"). See "Selling Shareholder" and "Plan of
Distribution".
To the extent required, the purchase price or public offering price of
any Shares, the names of any agent, dealer or underwriter, their material
relationships (if any) with the Company and any applicable commission, discount
or concessions allowed or reallowed, and expenses payable by the Company, with
respect to a particular offer will be set forth in an accompanying Prospectus
Supplement.
The Selling Shareholder and any agents, dealers or underwriters that
participate with the Selling Shareholder in the distribution of the Shares may
be deemed to be "underwriters" within the meaning of the Securities Act, and any
commission received by them and any profit on the resale of the Shares purchased
by them may be deemed to be underwriting commissions or discounts under the
Securities Act.
-----------------
The date of this Prospectus is ____________, 1996.
<PAGE>
NO PERSON IS AUTHORIZED IN CONNECTION WITH ANY OFFERING MADE HEREBY TO
GIVE ANY INFORMATION OR TO MAKE ANY REPRESENTATION NOT CONTAINED IN THIS
PROSPECTUS AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATION MUST NOT BE
RELIED UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY, BY THE SELLING SHAREHOLDER
OR BY ANY AGENT, DEALER OR UNDERWRITER. THIS PROSPECTUS DOES NOT CONSTITUTE AN
OFFER TO SELL OR A SOLICITATION OF AN OFFER TO BUY ANY SECURITY OTHER THAN THE
SHARES OF COMMON STOCK OFFERED HEREBY, NOR DOES IT CONSTITUTE AN OFFER TO SELL
OR A SOLICITATION OF AN OFFER TO BUY ANY OF THE SECURITIES OFFERED HEREBY TO ANY
PERSON IN ANY JURISDICTION IN WHICH IT IS UNLAWFUL TO MAKE SUCH AN OFFER OR
SOLICITATION TO SUCH PERSON. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY
SALE MADE HEREUNDER SHALL UNDER ANY CIRCUMSTANCES CREATE ANY IMPLICATION THAT
THE INFORMATION CONTAINED HEREIN IS CORRECT AS OF ANY DATE SUBSEQUENT TO THE
DATE HEREOF.
AVAILABLE INFORMATION
The Company is subject to the informational requirements of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), and in
accordance therewith files reports, proxy statements, and other information with
the Securities and Exchange Commission (the "Commission"). The Registration
Statement of which this Prospectus is a part (the "Registration Statement"),
reports, proxy statements, and other information filed by the Company can be
inspected and copied at the public reference facilities maintained by the
Commission at Room 1024, 450 Fifth Street, N.W., Washington, D.C. 20549 and at
the Commission's Regional Offices located at 7 World Trade Center, New York, New
York 10048 and Citicorp Center, 500 West Madison Street, Suite 1400, Chicago,
Illinois 60661. Copies of such materials can be obtained from the Public
Reference Section of the Commission at 450 Fifth Street, N.W., Washington, D.C.
20549 at prescribed rates. The Common Stock of the Company is listed on the
Nasdaq National Market. Reports and other information concerning the Company may
also be inspected and copied at the offices of the Nasdaq National Market, 1725
K Street, N.W., Washington, D.C. 20006.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents filed with the Commission by the Company are
hereby incorporated by reference into this Prospectus:
(a) the Company's Annual Report on Form 10-K for the fiscal year
ended February 3, 1996;
(b) all other reports filed with the Commission pursuant to
Section 13(a) or 15(d) since February 3, 1996, including the
Quarterly Report on Form 10-Q for the fiscal quarter ended May
4, 1996 and the Company's Current Reports on Form 8-K for
January 4, 1996, February 8, 1996, March 12, 1996 and June 18,
1996; and
(c) the description of the Common Stock appearing in the Company's
Registration Statement on Form 10/A filed with the Commission
on July 20, 1994.
All documents filed by the Company pursuant to Section 13(a), 13(c), 14
or 15(d) of the Exchange Act subsequent to the date of this Prospectus and prior
to the termination of the offering of the Common Stock shall be deemed to be
incorporated by reference into this Prospectus and to be a part hereof from the
respective dates of filing of such documents. Any statement contained herein or
in a document all or any portion of which is incorporated or deemed to be
incorporated by reference herein shall be deemed to be modified or superseded
for purposes of this Prospectus to the extent that a statement contained herein
or in any other subsequently filed document which also is or is deemed to be
incorporated by reference herein modifies or supersedes such earlier statement.
Any statement so modified or superseded shall not be deemed, except as so
modified or superseded, to constitute a part of this Prospectus.
The Company will provide without charge to any person to whom this
Prospectus is delivered, upon the written or oral request of such person, a copy
of any or all of the foregoing documents incorporated herein by reference (other
than certain exhibits to such documents). Requests for such copies should be
directed to Corporate Secretary, Best Products Co., Inc., 1400 Best Plaza,
Richmond, Virginia 23227-1125 (telephone number (804) 261-2035).
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RISK FACTORS
Prospective purchasers of the Shares should carefully consider the
following factors, and all other information set forth or incorporated by
reference in this Prospectus, in evaluating an investment in the Shares.
RECENT LOSSES
The Company reported a loss of $95.7 million for the fiscal year ended
February 3, 1996 ("fiscal 1995"), including a charge of $35.6 million to provide
for the anticipated costs and losses associated with various initiatives under
its restructuring plan. See "-- Restructuring Plan." For the first quarter of
the fiscal year ending February 1, 1997 ("fiscal 1996"), the Company reported a
loss of $34.6 million. The Company is implementating its restructuring plan to
improve the Company's financial performance; however, there can be no assurance
that the restructuring plan will be successful or that the Company will not
continue to report losses.
RESTRUCTURING PLAN
The Company is pursuing various initiatives as part of a restructuring
plan intended to improve the Company's financial performance and reposition the
Company as a specialty retailer offering category-dominant assortments of
jewelry and home furnishings. These initiatives include (i) exiting certain
unprofitable merchandise categories (including bicycles, home office
electronics, film processing, video games, specialty electronics, selected toys,
certain calculators and music items, and some sporting goods), (ii) the closing
of at least eight underperforming stores and (iii) terminating or assigning the
leases for at least seven stores previously intended to open during 1996 and
1997. While the Company believes that the restructuring charge of $35.6 million
taken in the fourth quarter of fiscal 1995 relating to the foregoing initiatives
should be sufficient to cover all expenses and losses associated with the
restructuring, in the event such expenses and losses are higher than
anticipated, or additional restructuring charges are taken, this could have a
material adverse effect on the Company's results of operations and financial
condition. The initiatives also include (i) revamping the shopping process to be
more customer friendly by reassigning more store personnel to the sales floor
and accelerating the check-out process and (ii) further rationalization of the
Company's merchandise assortment, including the addition of basic domestics such
as pillows and pads. The Company expects to generally complete its restructuring
initiatives by Fall of 1997, however, certain of the initiatives in the
restructuring plan, such as the negotiation of store lease terminations, are not
fully within the control of the Company and as a result there can be no
assurance that such initiatives will be successful or implemented on a timely
basis. While the restructuring plan is intended to enable the Company to
reposition itself and improve its financial performance, there can be no
assurance that the intended benefits of the plan will be realized even if the
plan is successfully implemented on a timely basis.
RELIANCE ON WORKING CAPITAL FACILITY
On February 7, 1996, the Company entered into a $300.0 million
revolving credit facility (the "Working Capital Facility") replacing an earlier
$150.0 million facility. The Working Capital Facility, which currently expires
August 6, 1997, is being used to support general corporate and working capital
requirements and to issue import and standby letters of credit. The facility is
the Company's primary source of liquidity (other than cash flow from
operations). The Working Capital Facility is secured by a first and exclusive
lien on all unencumbered assets of the Company including inventory and general
intangibles. The loss of certain or all of such collateral by foreclosure would
have a material adverse effect on the Company's operations and financial
results. The availability of loans under the Working Capital Facility is
governed by a weekly borrowing base calculation with an effective advance rate
of approximately 50% of eligible inventory. There is a $100.0 million sublimit
for the issuance of letters of credit. As the Company relies on such facility to
provide liquidity, if the facility were to become unavailable, this would have a
material adverse effect on the Company's results of operations and financial
condition. Under the terms of the facility, the Company is required, among other
things, to achieve certain minimum levels of financial performance and maintain
inventory between specified minimum and maximum levels. The Working Capital
Facility also contains a number of restrictive covenants, including covenants
limiting capital expenditures, the incurrence of indebtedness, the sale of
certain assets and the opening and closing of stores. The Company
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has from time to time sought and obtained amendments to the Working Capital
Facility for various reasons, including where it considered the covenants
contained therein inappropriate in view of the Company's operating trends. While
the Company is currently in compliance with all of its covenants under the
Working Capital Facility, there can be no assurance that the Company will in the
future be able to obtain any amendments or waivers it may need thereunder. The
Company's ability to continue to fund its working capital and capital
expenditure needs is dependent upon the Company's operating results, the
continued support of the Company's numerous providers of goods and services and
the Company's compliance with the financial covenants under the Working Capital
Facility. The terms of this facility could impair the Company's ability to
obtain financing in the future or to take advantage of significant business
opportunities that may arise. In addition, the terms of the facility and the
Company's reliance on the facility may increase the Company's vulnerability to
an increase in interest rates, adverse general economic and retailing industry
conditions and to increased competitive pressures.
CHANGES IN MARKETING PROGRAM
The Company uses newspaper inserts and direct mailings as its principal
means of communication with customers. Such media have historically been
supplemented by distribution of an annual catalog each fall, which the Company
has decided to discontinue. The Company intends to increase the variety and
quantity of its print media advertising for the remainder of fiscal 1996, and is
considering the possible initiation of broadcast advertising in the future. The
redirected marketing program is expected to be funded by the elimination of the
fall catalog. While the Company believes this redirected marketing program will
be a more cost-effective means of communicating with customers than the
Company's traditional program, there can be no assurance that the effect, if
any, on the Company's results of operations from this change will be favorable.
MARKET RISK; VOLATILITY
The Common Stock has been listed on the Nasdaq National Market since
July 1994. There can be no assurance, however, that an active market for the
Common Stock will continue to develop or be maintained. The prices at which
shares of Common Stock trade may depend on many factors, including prevailing
interest rates, conditions in the financial markets and the retail industry and
the performance of, and investor expectations for, the Company. The market for
the Common Stock has been and is expected to remain volatile, at least for the
remainder of fiscal 1996. No assurance can be given as to the market price or
trading volume that may prevail at any particular time.
SHARES ELIGIBLE FOR FUTURE SALE; FUTURE ISSUANCES REQUIRED BY THE PLAN
A substantial number of the presently outstanding shares of Common
Stock as well as the Warrants are or will become available for future sale in
the public market. Pursuant to a Shelf Registration Rights Agreement dated as of
June 14, 1994 (the "Shelf Registration Rights Agreement") between the Company
and Chemical Bank, which beneficially owns 33.1% of the outstanding Common
Stock, the Company has filed a "shelf" registration statement (the "Registration
Statement") (of which this Prospectus is a part) under the Securities Act
relating to any resales by such holder of all shares of Common Stock held by it
as of the date hereof or subsequently acquired by it upon exercise of the
Warrants, at any time and from time to time on a continuous or delayed basis.
The Company must maintain the Registration Statement until the second
anniversary of its initial effective date (plus the number of days of any
suspension of Chemical Bank's right to sell under the Registration Statement),
subject to customary conditions. The Company and Chemical Bank have also entered
into a deferred registration rights agreement. See "Selling Shareholder".
Moreover, most of the Company's shareholders are permitted to dispose of their
shares in public market transactions not requiring registration under federal or
state securities laws. Sales of or offers to sell a substantial number of
shares, or the perception by investors, investment professionals and securities
analysts of the possibility of such sales, could adversely affect the market for
and prevailing prices with respect to the Common Stock.
Substantially all of the presently outstanding Common Stock was issued
on June 14, 1994 (the "Plan Effective Date"), pursuant to the Joint Plan of
Reorganization, as amended and modified (the "Plan"), of the Company and certain
of its affiliates, which Plan was confirmed by order of the United States
Bankruptcy Court for the Southern District of New York (the "Bankruptcy Court").
The consummation of the Plan on the Plan Effective Date resolved the related
cases (the
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"Chapter 11 Case") which the Company and such affiliates had commenced on
January 4, 1991 (the "Commencement Date") under chapter 11 of title 11 of the
United States Code (the "Bankruptcy Code"). The Plan requires the Company to
issue an aggregate of 31,660,711 shares of Common Stock (excluding 2,333,395
shares issuable pursuant to outstanding Warrants), assuming the allowed amount
of all claims filed against the Company by its general unsecured creditors,
excluding bank debt, industrial development bond claims and subordinated debt
(which were treated as separate classes under the Plan), will not exceed $341.5
million. The Company currently estimates that the total amount needed to settle
such claims will not exceed $341.5 million. As of June 24, 1996, the Company had
issued a total of 31,338,351 shares of Common Stock pursuant to the Plan,
including 318,382 shares which have reverted to or been reacquired by the
Company leaving 31,019,969 shares outstanding. As additional shares are issued
over time pursuant to the Plan, such shares generally will be eligible for
resale either without registration or pursuant to the Registration Statement, as
summarized in the preceding paragraph.
SIGNIFICANT SHAREHOLDER
As of June 24, 1996, Chemical Bank held 9,643,048 shares of Common
Stock representing approximately 31.1% of the then outstanding 31,019,969 shares
of Common Stock. As of such date, Chemical Bank also held Warrants exercisable
for an additional 910,225 shares of Common Stock, exercise of which would
increase Chemical Bank's ownership percentage to 33.1% of 31,930,194 shares. The
exercise price of the Warrants is $8.27 per share subject to customary
anti-dilution adjustments in the event of stock splits, mergers, acquisitions,
recapitalizations and other similar events. The Registration Statement of which
this Prospectus is a part registers for offer and sale from time to time any and
all of such shares. Furthermore, based on the most recently available
information as of the date of this Prospectus, each of three other institutions
beneficially owned more than 5% of the Common Stock. If several holders of
significant numbers of shares of Common Stock were to act together for purposes
of voting their shares, such holders might be in a position to control the
outcome of actions requiring shareholder approval, including the election of
directors. This concentration of ownership could also facilitate or hinder any
negotiated change of control of the Company and, consequently, affect the value
of the Common Stock.
In addition, under the Shareholder Agreement negotiated with Chemical
Bank in connection with the resolution and consummation of the Chapter 11 Case
(the "Shareholder Agreement"), Chemical Bank has certain rights not available to
other holders of the Common Stock, until the earlier of (i) Chemical Bank's
ceasing to own at least 10% of the then issued and outstanding Common Stock, and
(ii) the fifth anniversary of the Plan Effective Date. Such rights include the
right to have an observer present at meetings of the Board of Directors and the
right to disapprove the following Company actions, if proposed: (i) issuance of
shares of preferred stock having voting rights other than those required by law,
(ii) adoption of a shareholder rights plan, (iii) amendment of the Restated
Articles of Incorporation so as to elect for the Company to be governed by the
"affiliated transactions" or "control share acquisitions" provisions of the
Virginia Stock Corporation Act, or (iv) amendment of such articles to change the
percentage of outstanding Common Stock required to amend the Company's bylaws,
remove directors or call special meetings of shareholders. Under the agreement,
in the event of certain vacancies on the Board of Directors, the Company is
obligated to retain a nationally recognized executive search firm to identify
individuals from among whom the Board of Directors will select a replacement
nominee. Chemical Bank's rights under the Shareholder Agreement are not
assignable except to Chemical Bank's parent or certain wholly-owned subsidiaries
of such parent. Chemical Bank has agreed to preserve the confidentiality of all
materials and information received by it pursuant to the Shareholder Agreement.
For further information with respect to Chemical Bank and its
relationships with the Company, see "Selling Shareholder".
LIMITED POST-CHAPTER 11 OPERATING HISTORY
The Company's emergence from chapter 11 occurred on June 14, 1994, and
consequently the Company's subsequent operating history is limited to fiscal
1995 and the last thirty-three weeks of the fiscal year ended January 28, 28,
1995 ("fiscal 1994"). The Company's financial statements for such post-emergence
period are not comparable to the pre-emergence financial statements.
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SEASONALITY AND SENSITIVITY TO ECONOMIC CONDITIONS
The Company's business is highly seasonal, with approximately one-third
or more of its net sales for a fiscal year generally occurring in November and
December. Historically, substantially all of the Company's operating income is
earned in its fourth quarter, and the Company typically sustains an operating
loss in earlier fiscal quarters each year. In fiscal 1995, the Company reported
an operating loss in each quarter, including the fourth quarter. In addition,
the Company's performance, like that of many other retailers, is sensitive to
the overall U.S. economic cycle and related economic conditions which influence
consumer trends and spending patterns.
COMPETITIVE CONDITIONS
The retailing business is highly competitive. To differentiate itself
from other retailers, the Company provides broad assortments of fine jewelry and
quality brand name home furnishings at attractive prices. The Company competes
with virtually all retail formats selling similar merchandise. Key competitive
formats include mall based and other specialty retailers, mass merchant
discounters and category-dominant retailers. The Company considers quality,
value, merchandise mix, service and location to be the most significant
competitive factors in its retailing business. The Company's specific
competitors vary from market to market. Some of the companies with which the
Company competes are substantially larger or have substantially greater
financial resources.
CERTAIN INCOME TAX MATTERS
As of February 3, 1996, net operating loss ("NOL") carryforwards for
federal income tax purposes were approximately $138.0 million expiring in fiscal
years 2006 through 2010. As a result of an ownership change, as defined in
Section 382 of the Internal Revenue Code of 1986, as amended (the "Code"), that
occurred on the Plan Effective Date, the utilization of $85.0 million of the NOL
carryforwards is subject to an annual limitation of approximately $20 million.
If the Company experiences another ownership change, all of the NOL
carryforwards available as of the date of such change would be subject to an
annual limitation which could be significantly less than the current $20 million
limitation established as of the Plan Effective Date. In general terms, an
ownership change may result from transactions that increase the ownership of
certain stockholders in the Common Stock by more than 50 percentage points over
the shorter of a three-year period or the period of time since the most recent
ownership change. The approximate aggregate change in ownership since the
ownership change that occurred on the Plan Effective Date was 40 percentage
points as of May 31, 1996. Additional sales of Common Stock (including sales
under this Prospectus) could result in a greater than 50 percentage point
ownership change, which could have the effect of substantially limiting the
annual utilization of the NOL carryforwards.
The amount of the annual limitation on the utilization of the NOL
carryforwards in the event of a more than 50 percentage point ownership change
will depend upon the market value of the Company and the long-term tax exempt
rate (as defined in the Code) on the date on which such an ownership change
occurs for purposes of Section 382 of the Code. If such an ownership change had
occurred on May 31, 1996, the annual limitation would have become approximately
$5.4 million (assuming that the fair market value of the Company was based on
the closing price of the Company's Common Stock on the Nasdaq National Market on
May 31, 1996), and the time periods referenced above for the carryforwards would
expire before the entire amount of the NOL carryforwards could be utilized.
In accordance with Statement of Position 90-7, "Financial Reporting by
Entities in Reorganization Under the Bankruptcy Code" ("SOP 90-7"), issued by
the American Institute of Certified Public Accountants (the "AICPA"), the income
tax benefit resulting from any future realization of the NOL carryforwards not
recognized as of the Plan Effective Date will be credited to additional paid-in
capital.
DIVIDEND POLICY
The Company has not paid any dividends on the Common Stock and
presently does not intend to pay cash dividends in the foreseeable future. In
addition, the terms of certain of the Company's debt agreements prohibit payment
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of cash dividends on the Common Stock. The payment of cash dividends, if any,
will be made only from assets legally available for that purpose, and will
depend on the Company's financial condition, results of operations, current and
anticipated capital requirements, restrictions under then existing debt
instruments and other factors deemed relevant by the Board of Directors.
Certain institutional investors may only invest in dividend-paying
equity securities or may operate under other restrictions which prohibit or
limit their ability to invest in the Common Stock.
THE COMPANY
The Company is a specialty retailer selling jewelry and nationally
advertised brand name home furnishings merchandise in 169 stores in 23 states,
principally on the East and West Coasts. The Company's retailing concept is to
operate as a category-dominant retailer of merchandise categories which
management believes offer growth potential.
The Company was incorporated in the Commonwealth of Virginia in 1961.
Its principal executive offices are located at 1400 Best Plaza, Richmond,
Virginia 23227, and its main telephone number is (804) 261-2000.
USE OF PROCEEDS
The Shares may be sold hereunder from time to time by the Selling
Shareholder, and the Company will not receive any of the proceeds from such
sales.
SELLING SHAREHOLDER
SELLING SHAREHOLDER
Pursuant to this Prospectus, Chemical Bank may offer the 10,553,273
Shares from time to time. The Shares (including 910,225 Shares issuable upon
exercise of Warrants) constitute all shares of Common Stock beneficially owned
at the date hereof by the Selling Shareholder, Chemical Bank. Because the
Selling Shareholder may offer some or all of the Shares pursuant to the
offerings contemplated by this Prospectus, because the offerings of the Shares
may or may not be made on a firm commitment underwriting basis, and because the
Selling Shareholder could purchase additional Common Stock from time to time,
the Company cannot estimate the amount of Common Stock which will be held by the
Selling Shareholder after completion of its offering hereby. See "Plan of
Distribution".
In addition to the Shelf Registration Rights Agreement, the Company and
Chemical Bank have also entered into a deferred registration rights agreement
("Deferred Registration Rights Agreement"). Under this agreement, Chemical Bank
may, at any time during the period beginning on the date the Shelf Registration
Rights Agreement expires and ending on June 14, 1999 (the "Deferred Registration
Period"), make written requests for an aggregate of two registration statements
under the Securities Act for any shares of Common Stock still held by Chemical
Bank or acquired by it upon exercise of the Warrants (the "Registrable
Securities"). Generally, if during the Deferred Registration Period the Company
proposes to register any of its equity securities under the Securities Act,
whether or not for sale for its own account, in a manner that would permit
registration of Registrable Securities for sale to the public under the
Securities Act, the Company must use reasonable commercial efforts to include in
the proposed registration all such Registrable Securities which Chemical Bank
requests be included, subject to customary conditions. Chemical Bank's rights
under each of the Shelf Registration Rights Agreement and the Deferred
Registration Rights Agreement with respect to the Registrable Securities are
assignable to any person acquiring directly from Chemical Bank Shares and/or
Warrants representing at least 10% of the issued and outstanding Common Stock on
a fully diluted basis at the time of transfer, provided that the party agrees to
be bound by such agreement.
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The CIT Group/Business Credit, Inc. ("CIT"), a subsidiary of The CIT
Group Holdings, Inc. ("CIT Holdings") is a lender, and serves as agent for the
lenders, under the Working Capital Facility. Approximately 20% of the equity
interest in CIT Holdings is held by a subsidiary of The Chase Manhattan
Corporation, the parent company of Chemical Bank. As the letter of credit issuer
under the Working Capital Facility, Chemical Bank issues import and standby
letters of credit and creates acceptances to facilitate the Company's importing
of merchandise. The Working Capital Facility is secured by a lien on all
unencumbered assets of the Company, including inventory and general intangibles.
Under the terms of the Working Capital Facility and related agreements, the
Company has paid or agreed to pay to CIT, for its own account and/or the account
of the other lenders, various fees, including commitment fees, agency fees,
closing and syndication fees and letter of credit and acceptance fees. The
Working Capital Facility and related agreements were negotiated in the ordinary
course of business on terms which the Company believes are no more or less
favorable to the Company than if entered into with unaffiliated parties.
For further information concerning relationships between the Selling
Shareholder and the Company within the past three years, see "Risk
Factors--Significant Shareholder" and "--Shares Eligible for Future Sale; Future
Issuances Required by the Plan".
PLAN OF DISTRIBUTION
Any of or all of the Shares may be sold from time to time to purchasers
directly by the Selling Shareholder in one or more transactions on the Nasdaq
National Market, in the over-the-counter market, in negotiated transactions, or
a combination of such methods of sale, at market prices prevailing at the time
of sale, at prices related to such prevailing market prices or at negotiated
prices. Alternatively, the Selling Shareholder may from time to time offer the
Shares through underwriters, dealers or agents who may receive compensation in
the form of discounts, concessions or commissions from the Selling Shareholder
and/or the purchasers of Shares for whom they may act (which compensation may be
in excess of customary commissions). The Selling Shareholder and any such
underwriters, dealers or agents that participate in the distribution of Shares
may be deemed to be underwriters under the Securities Act, and any profit on the
sale of the Shares by them and any discounts, commissions or concessions
received by them may be deemed to be underwriting discounts and commissions
under the Securities Act. To the extent required, at the time a particular offer
of Shares is made a supplement to this Prospectus will be distributed which will
set forth the number of Shares being offered and the terms of the offering,
including the name or names of any underwriters, dealers or agents, their
material relationships (if any) to the Company, any discounts, commissions and
other items constituting compensation from the Selling Shareholder and any
discounts, commissions or concessions allowed or reallowed or paid to dealers,
including the proposed selling price to the public. The Company will not receive
any of the proceeds from any sale by the Selling Shareholder of the Shares
offered hereby.
The Company is paying certain expenses (not including commissions of
dealers or agents) incident to the offering and sale of the Shares to the
public, which are estimated to be approximately $680,000. To the extent
supplements to this Prospectus are required to be distributed, the Company will
incur additional expenses in excess of the amount estimated above.
In the Shelf Registration Rights Agreement, the Company has agreed to
indemnify and hold harmless, to the extent permitted by law, the Selling
Shareholder, its directors, officers and agents and each other person who
participates as an underwriter, if any, in the offering and sale of the Shares,
and each other person, if any, who controls the Selling Shareholder or any such
underwriter within the meaning of the Securities Act, against certain
liabilities, including certain liabilities to which any such person may become
subject under the Securities Act.
The Selling Shareholder and any other person participating in a sale or
distribution of the Common Stock will be subject to applicable provisions of the
Exchange Act and the rules and regulations thereunder, including without
limitation Rules 10b-5, 10b-6 and 10b-7, which provisions may limit the timing
of purchases and sales of any of the Common Stock by the Selling Shareholder and
any other such person. Furthermore, under Rule 10b-6 under the Exchange Act, any
person engaged in a distribution of the Common Stock may not simultaneously
engage in market making activities with respect
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thereto for a period of up to nine business days prior to the commencement of
such distribution. All of the foregoing may affect the marketability of the
Common Stock and the ability of any person or entity to engage in market-making
activities with respect to the Common Stock.
For further information with respect to the Selling Shareholder and its
relationships with the Company, see "Risk Factors--Shares Eligible for Future
Sale; Future Issuances Required by the Plan", "--Significant Shareholder" and
"Selling Shareholder".
VALIDITY OF THE SHARES
The validity of the Shares will be passed upon for the Company by
McGuire, Woods, Battle & Boothe, L.L.P., Richmond, Virginia. At June 26, 1996,
lawyers of such firm who have performed services in connection with the offering
own an aggregate of approximately 6,000 shares of Common Stock.
EXPERTS
The financial statements and schedule of Best Products Co., Inc. (the
"Successor") as of February 3, 1996 and January 28, 1995 and for the fiscal year
ended February 3, 1996 and the thirty-three weeks ended January 28, 1995 and of
Best Products Co., Inc. (the "Predecessor") for the nineteen weeks ended June
11, 1994 and for the fiscal year ended January 29, 1994, incorporated by
reference herein, have been audited by KPMG Peat Marwick LLP, independent
certified public accountants, as stated in their reports incorporated herein by
reference, and have been included herein in reliance upon such reports and the
authority of that firm as experts in accounting and auditing.
ADDITIONAL INFORMATION
The Company has filed the Registration Statement on Form S-3 under the
Securities Act. This Prospectus does not contain all information set forth in
the Registration Statement, certain parts of which are omitted in accordance
with the rules and regulations of the Commission. For further information,
reference is hereby made to the Registration Statement, including the exhibits
and schedules thereto, which may be inspected and copied or obtained from the
Commission or the Nasdaq National Market in the manner described above. See
"Available Information." Statements contained in this Prospectus as to the
contents of any agreement, instrument or other document are not necessarily
complete, and, in each instance, reference is made to the copy of such
agreement, instrument or document filed as an exhibit to the Registration
Statement, each such statement being qualified in its entirety by such
reference.
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PART II. INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
It is expected that the following expenses (all of which will be paid
by the Company) will be incurred in connection with the registration and
distribution of the Shares:
Securities and Exchange Commission filing fee.............. $ 25,360
Blue Sky fees and expenses................................. $ 30,000
Legal fees and expenses.................................... $250,000
Accounting fees and expenses............................... $250,000
Other...................................................... $ 75,000
Miscellaneous.............................................. $ 49,640
--------
Total................................................ $680,000
========
All of these expenses except the Securities and Exchange Commission filing
fee represent estimates only. These expenses may be higher in the event Shares
are distributed pursuant to an underwritten offer.
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Article 10 of the Virginia Stock Corporation Act (the "Virginia Act")
allows, in general, for indemnification, in certain circumstances, by a
corporation of any person threatened with or made a party to any action, suit or
proceeding by reason of the fact that he or she is, or was, a director, officer,
employee or agent of such corporation. Indemnification is also authorized with
respect to a criminal act or proceeding where the person had no reasonable cause
to believe that his or her conduct was unlawful. Article 9 of the Virginia Act
provides limitations on damages payable by officers and directors, except in
cases of willful misconduct or knowing violation of criminal law or any federal
or state securities laws.
Article VI of the Company's Articles provides that in every instance in
which the Virginia Act, and any amendments thereto, permits the limitation or
elimination of liability of directors or officers of a corporation to the
corporation or its shareholders, the directors and officers of the Company shall
not be liable to the Company or its shareholders.
The Articles provide for mandatory indemnification of any individual
who is, was or is threatened to be made a party to a proceeding (including a
proceeding by or in the right of the Company) because such individual is or was
a director or officer of the Company or because such individual is or was
serving the Company or other legal entity in any capacity at the request of the
Company while a director or officer of the Company, against all liabilities and
reasonable expenses incurred in the proceeding, except such liabilities and
expenses as are incurred because of such individual's willful misconduct or
knowing violation of the criminal law.
The Company maintains a standard policy of officers' and directors'
liability insurance. The Company is authorized to purchase and maintain
insurance against any liability it may have under the indemnification provision
of the Articles or to protect any of the persons named above against any
liability arising from their service to the Company or any other legal entity at
the request of the Company, regardless of the Company's power to indemnify
against such liability.
Under the Plan, the obligations of the Company and its subsidiaries to
indemnify, reimburse or limit the liability of their present and any former
directors, officers or associates that were directors, officers or associates,
respectively, on or after the Commencement Date against any obligations pursuant
to the prior articles of incorporation, the prior bylaws, applicable state law
or prior specific agreement, or any combination of the foregoing, survived
confirmation of the Plan and were unaffected. Such obligations of the Company
were not discharged irrespective of whether indemnification, reimbursement or
limitation was owed in connection with an event occurring before, on, or after
the Commencement Date.
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ITEM 16. EXHIBITS.
(a) EXHIBITS:
Exhibit
No. Description
2.1 Joint Plan of Reorganization of the Company and
certain affiliates, dated January 14, 1994 (with
exhibits), and the related Order of Confirmation
(incorporated by reference to Exhibit 2.1 to the
Company's Form 10/A dated July 20, 1994)
*4.1 Restated and Amended Articles of Incorporation of the
Company
4.2 Restated Bylaws of the Company (incorporated by
reference to Exhibit 4.2 of the Company's Form S-8
dated December 19, 1994, Registration No. 33-87512)
*4.3 Shareholder Agreement between the Company and
Chemical Bank dated June 14, 1994
4.4 Shelf Registration Rights Agreement between the
Company and certain five percent shareholders dated
June 14, 1994 (incorporated by reference to Exhibit
4.4 of the Company's Annual Report on Form 10-K for
the fiscal year ended January 28, 1995)
4.5 Registration Rights Agreement between the Company and
Chemical Bank dated June 14, 1994 (incorporated by
reference to Exhibit 4.5 of the Company's Annual
Report on Form 10-K for the fiscal year ended January
28, 1995)
4.6 Form of Warrant Agreement (incorporated by reference
to Exhibit 4.7 of the Company's Annual Report on Form
10-K for the fiscal year ended January 28, 1995)
4.7 Form of Contingent Warrant Agreement (incorporated by
reference to Exhibit 4.8 of the Company's Annual
Report on Form 10-K for the fiscal year ended January
28, 1995)
5.1 Opinion of McGuire, Woods, Battle & Boothe, L.L.P.
23.1 Consent of McGuire, Woods, Battle & Boothe, L.L.P.
(included as part of Exhibit 5.1)
23.2 Consent of KPMG Peat Marwick LLP
* Previously filed
ITEM 17. UNDERTAKINGS.
(a) The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or sales are
being made, a post-effective amendment to this registration statement:
(i) To include any prospectus required by section
10(a)(3) of the Securities Act of 1933;
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<PAGE>
(ii) To reflect in the prospectus any facts or events
arising after the effective date of the
registration statement (or the most recent
post-effective amendment thereof) which,
individually or in the aggregate, represent a
fundamental change in the information set forth
in the registration statement;
(iii) To include any material information with respect
to the plan of distribution not previously
disclosed in the registration statement or any
material change to such information in the
registration statement;
Provided, however, that paragraphs (a)(1)(i) and (a)(1)(ii) do not apply if the
registration statement is on Form S-3, Form S-8 or Form F-3, and the information
required to be included in a post-effective amendment by those paragraphs is
contained in periodic reports filed with or furnished to the Commission by the
registrant pursuant to section 13 or section 15(d) of the Securities Exchange
Act of 1934 that are incorporated by reference in the registration statement.
(2) That, for the purpose of determining any liability under
the Securities Act of 1933, each such post-effective amendment shall be
deemed to be a new registration statement relating to the securities
offered therein, and the offering of such securities at that time shall
be deemed to be the initial bona fide offering thereof.
(3) To remove from registration by means of a post-effective
amendment any of the securities being registered which remain unsold at
the termination of the offering.
(4) If the registrant is a foreign private issuer, to file a
post-effective amendment to the registration statement to include any
financial statements required by Rule 3-19 of Regulation S-X at the
start of any delayed offering or throughout a continuous offering.
(b) The undersigned registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing of the
registrant's annual report pursuant to section 13(a) or section 15(d) of the
Securities Exchange Act of 1934 (and, where applicable, each filing of an
employee benefit plan's annual report pursuant to section 15(d) of the
Securities Exchange Act of 1934) that is incorporated by reference in the
registration statement shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering thereof.
(c) Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors, officers and controlling
persons of the registrant pursuant to the foregoing provisions, or otherwise,
the registrant has been advised that in the opinion of the Securities and
Exchange Commission such indemnification is against public policy as expressed
in the Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
registrant of expenses incurred or paid by a director, officer or controlling
person of the registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the registrant will, unless in
the opinion of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the Act and will
be governed by the final adjudication of such issue.
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<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
registrant certifies that it has reasonable grounds to believe that it meets all
of the requirements for filing on Form S-3 and has duly caused this registration
statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the County of Henrico, Commonwealth of Virginia, on June 28,
1996.
BEST PRODUCTS CO., INC.
By:/s/ Daniel H. Levy
Daniel H. Levy
Chairman and
Chief Executive Officer
POWER OF ATTORNEY
KNOW ALL MEN AND WOMEN BY THESE PRESENTS that each individual whose
signature appears below constitutes and appoints Frederick G. Kraegel and W.
Edward Clingman, Jr. and each of them, such individual's true and lawful
attorneys-in-fact and agents with full power of substitution, for such
individual and in his or her name, place and stead, in any and all capacities,
to sign any and all amendments (including post-effective amendments) to this
registration statement, and to file the same, with all exhibits thereto, and all
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
or she might or could do in person, hereby ratifying and confirming all that
said attorneys-in-fact and agents, or either of them, or their or his or her
substitute or substitutes, may lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
registration statement has been signed on June 28, 1996 by the following persons
in the respective capacities indicated opposite their names.
Signature Title
/s/Daniel H. Levy Chairman, Chief Executive
Daniel H. Levy Officer and Director (Principal
Executive Officer)
/s/Frederick G. Kraegel Senior Vice President and Chief
Frederick G. Kraegel Financial Officer (Principal
Financial Officer)
/s/Sharyn P. Hunt Vice President and Controller
Sharyn P. Hunt (Principal Accounting Officer)
/s/Donald D. Bennett Director
Donald D. Bennett
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<PAGE>
Signature Title
/s/William C. DeRusha Director
William C. DeRusha
/s/John C. Jamison Director
John C. Jamison
/s/Margaret A. McKenna Director
Margaret A. McKenna
/s/Denis J. Taura Director
Denis J. Taura
/s/Marshall B. Wishnack Director
Marshall B. Wishnack
II-5
<PAGE>
INDEX OF EXHIBITS
Exhibit
Number Description
2.1 Joint Plan of Reorganization of the Company and certain affiliates,
dated January 14, 1994 (with exhibits), and the related Order of
Confirmation (incorporated by reference to Exhibit 2.1 to the
Company's Form 10/A dated July 20, 1994)
*4.1 Restated and Amended Articles of Incorporation of the Company
4.2 Restated Bylaws of the Company (incorporated by reference to
Exhibit 4.2 of the Company's Form S-8 dated December 19, 1994,
Registration No. 33-87512)
*4.3 Shareholder Agreement between the Company and Chemical Bank
dated June 14, 1994
4.4 Shelf Registration Rights Agreement between the Company and certain
five percent shareholders dated June 14, 1994 (incorporated by
reference to Exhibit 4.4 of the Company's Annual Report on Form
10-K for the fiscal year ended January 28, 1995)
4.5 Registration Rights Agreement between the Company and Chemical Bank
dated June 14, 1994 (incorporated by reference to Exhibit 4.5 of
the Company's Annual Report on Form 10-K for the fiscal year ended
January 28, 1995)
4.6 Form of Warrant Agreement (incorporated by reference to Exhibit 4.7
of the Company's Annual Report on Form 10-K for the fiscal year
ended January 28, 1995)
4.7 Form of Contingent Warrant Agreement (incorporated by reference to
Exhibit 4.8 of the Company's Annual Report on Form 10-K for the
fiscal year ended January 28, 1995)
5.1 Opinion of McGuire, Woods, Battle & Boothe, L.L.P.
23.1 Consent of McGuire, Woods, Battle & Boothe, L.L.P. (included as
part of Exhibit 5.1)
23.2 Consent of KPMG Peat Marwick LLP
* Previously filed
Exhibit 5.1
July 1, 1996
Best Products Co., Inc.
1400 Best Plaza
Richmond, VA 23227-1125
Best Products Co., Inc.
(Registration Statement on Form S-3)
for Shares of Common Stock
to be Offered Pursuant to Rule 415
Ladies and Gentlemen:
We have acted as counsel to Best Products Co., Inc., a Virginia
Corporation (the "Company"), in connection with the preparation and filing with
the Securities and Exchange Commission of the Registration Statement originally
filed on Form S-1 and converted to Form S-3 by amendment (the "Registration
Statement") under the Securities Act of 1933, as amended (the "Securities Act"),
relating to the proposed offer and sale from time to time by the Selling
Shareholder specified therein of 9,643,048 shares of Common Stock, par value $1
per share (the "Outstanding Shares"), and 910,225 shares of Common Stock
issuable upon exercise of certain Warrants (the "Warrant Shares"), on terms to
be determined at the time of sale.
We have participated in the preparation of the Registration Statement
and have examined such corporate records and documents, statements and
certificates of officers of the Company and such other materials as we have
deemed necessary to the issuance of this opinion.
Based upon the foregoing, we are of the opinion that:
1. The Outstanding Shares have been duly authorized and
validly issued and are fully paid and nonassessable.
2. The Warrant Shares have been duly authorized for issuance in
accordance with the terms of the related Warrants, and when such Warrants have
been exercised in accordance with their terms, the Warrant Shares will be
validly issued, fully paid and nonassessable.
We consent to the filing of this opinion as an exhibit to the
Registration Statement and to the statement made in reference to our firm in the
related Prospectus under the heading "Validity of the Shares" and in any
supplemented versions of the Prospectus. We do not admit by giving this consent
that we are in the category of persons whose consent is required under Section 7
of the Securities Act.
Very truly yours,
McGuire, Woods, Battle & Boothe, L.L.P.
<PAGE>
Exhibit 23.2
Consent of Independent Auditors
The Board of Directors
Best Products Co., Inc.:
We consent to incorporation by reference in the registration statement on Form
S-3 of Best Products Co., Inc. of our reports dated March 18, 1996, relating to
(i) the balance sheets of Best Products Co., Inc. (the "Successor") as of
February 3, 1996 and January 28, 1995, and the related statements of operations,
changes in stockholders' equity and cash flows for the fiscal year ended
February 3, 1996 and the thirty-three weeks ended January 28, 1995, (ii) the
statements of operations, changes in stockholder's equity and cash flows for the
nineteen weeks ended Jun 11, 1994 and the fiscal year ended January 29, 1994 of
Best Products Co., Inc. (the "Predecessor"), and (iii) the related financial
statement schedule, which reports are included in the Form 10-K of Best Products
Co., Inc. for the fiscal year ended February 3, 1996, incorporated by reference
into the registration statement. We also consent to the references to our firm
under the heading "Experts" in the prospectus. Our reports refer to the adoption
of the provisions of Statement of Financial Accounting Standards No. 121,
"Accounting for the Impairment of Long-Lived Assets and for the Long-Lived
Assets to be Disposed Of," during the fiscal year ended February 3, 1996.
KPMG Peat Marwick LLP
Richmond, Virginia
June 24, 1996
