THIS IS A CONFIRMING COPY OF THE REGISTRATION STATEMENT ON FORM S-1
(FILE NO. 33-90648) OF CONAIR CORPORATION FILED IN PAPER FORM ON MARCH 27, 1995.
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON MARCH 27, 1995
REGISTRATION NO. 33-
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- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
-------------------
FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
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CONAIR CORPORATION
(Exact name of registrant specified in its charter)
<TABLE>
<S> <C> <C>
DELAWARE 3634 11-1950030
(State or other jurisdiction of (Primary Standard Industrial (I.R.S. Employer
incorporation or organization) Classification Code Number) Identification Number)
</TABLE>
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150 MILFORD ROAD
EAST WINDSOR, NEW JERSEY 08520
(609) 426-1300
(Address, including zip code, and telephone number, including area code, of
registrant's principal executive offices)
-------------------
LEANDRO P. RIZZUTO
PRESIDENT
CONAIR CORPORATION
1 CUMMINGS POINT ROAD
STAMFORD, CONNECTICUT 06904
(203) 351-9000
(Name, address, including zip code, and telephone number, including area code,
of agent for service)
-------------------
COPIES TO:
<TABLE>
<S> <C>
JAMES M. DUBIN, ESQ. DENNIS J. BLOCK, ESQ.
CARL L. REISNER, ESQ. AKIKO MIKUMO, ESQ.
PAUL, WEISS, RIFKIND, WHARTON & GARRISON WEIL, GOTSHAL & MANGES
1285 AVENUE OF THE AMERICAS 767 FIFTH AVENUE
NEW YORK, NEW YORK 10019-6064 NEW YORK, NEW YORK 10153
(212) 373-3000 (212) 310-8000
</TABLE>
-------------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after the effective date of this Registration Statement.
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, check the following box: / /
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CALCULATION OF REGISTRATION FEE
<TABLE>
<S> <C> <C> <C> <C>
PROPOSED
PROPOSED MAXIMUM
MAXIMUM AGGREGATE AMOUNT OF
TITLE OF EACH CLASS OF AMOUNT TO BE OFFERING PRICE OFFERING REGISTRATION
SECURITIES TO BE REGISTERED REGISTERED(1) PER SHARE (2) PRICE (2) FEE (3)
<S> <C> <C> <C> <C>
Class A Common Stock, par value
$0.01............................... 10,000,000 $16.00 $160,000,000 $55,172.00
</TABLE>
(1) Includes 1,300,000 shares that the Underwriters have the option to purchase
to cover over-allotments, if any.
(2) Estimated under Rule 457(a) solely for purposes of calculating the
registration fee.
(3) Calculated pursuant to Rule 457(a) based upon an estimate of the maximum
offering price.
----------------------
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 THIS REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.
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<PAGE>
EXPLANATORY NOTE
This Registration Statement contains two forms of prospectus: one to be used
in connection with a United States offering, and one to be used in a concurrent
international offering. The two prospectuses will be identical in all respects
except for the front and back cover pages. Pages to be included in the
international prospectus and not the U.S. prospectus are marked "Alternate
Page."
<PAGE>
CONAIR CORPORATION
CROSS REFERENCE SHEET
PURSUANT TO ITEM 501(B) OF REGULATION S-K
SHOWING THE LOCATION IN THE PROSPECTUS OF INFORMATION
REQUIRED BY ITEMS 1 THROUGH 12, PART I, OF FORM S-1
<TABLE><CAPTION>
REGISTRATION STATEMENT
ITEM NUMBER AND CAPTION LOCATION IN PROSPECTUS
------------------------------------------- -------------------------------------------
<C> <S> <C>
1. Forepart of the Registration Statement and
Outside Front Cover Page of Prospectus... Outside Front Cover Page of Prospectus
2. Inside Front and Outside Back Cover Pages
of Prospectus............................ Inside Front and Outside Back Cover Page of
Prospectus; Available Information
3. Summary Information, Risk Factors and Ratio
of Earnings to Fixed Charges............. Prospectus Summary; Investment
Considerations
4. Use of Proceeds............................ Use of Proceeds
5. Determination of Offering Price............ Underwriting
6. Dilution................................... Dilution
7. Selling Security Holders................... Not Applicable
8. Plan of Distribution....................... Outside Front Cover Page of Prospectus;
Underwriting
9. Description of Securities to be
Registered............................... Prospectus Summary; Description of Capital
Stock
10. Interests of Named Experts and Counsel..... Inapplicable
11. Information with Respect to the
Registrant............................... Outside Front Cover Page of Prospectus;
Prospectus Summary; The Company; Dividend
Policy; Capitalization; Selected
Financial Information; Management's
Discussion and Analysis of Financial
Condition and Results of Operations;
Business; Management; Description of
Capital Stock; Certain Transactions;
Legal Matters; Financial Statements
12. Disclosure of Commission Position on
Indemnification for Securities Act
Liabilities.............................. Inapplicable
</TABLE>
<PAGE>
SUBJECT TO COMPLETION, DATED MARCH 27, 1995
PROSPECTUS
8,700,000 SHARES
CONAIR CORPORATION
CLASS A COMMON STOCK
All of the shares of Class A Common Stock (the "Shares") offered hereby are
being sold by Conair Corporation, a Delaware corporation (the "Company"). Of
these Shares, shares (the "U.S. Shares") are being offered in the United
States (the "U.S. Offering") by the U.S. Underwriters and shares (the
"International Shares") are being offered concurrently outside the United States
(the "International Offering") by the Managers. The public offering price and
the underwriting discounts and commissions are identical for both the U.S.
Offering and the International Offering (collectively, the "Offering").
Prior to this Offering, there has been no public market for the Class A
Common Stock. It is currently anticipated that the initial public offering price
will be between $14.00 and $16.00 per Share. See "Underwriting" for a discussion
of the factors considered in determining the initial public offering price. The
Company intends to apply for the listing of the Class A Common Stock on the New
York Stock Exchange under the symbol " ".
The Company has two classes of authorized Common Stock, Class A Common
Stock, which is offered hereby, and Class B Common Stock. Holders of shares of
Class A Common Stock are entitled to one vote per share and holders of shares of
Class B Common Stock are entitled to ten votes per share. The holders of shares
of Class A Common Stock are entitled to vote separately as a class to elect 25%
of the entire Board of Directors of the Company. All of the outstanding shares
of Class B Common Stock, which will represent approximately % of the
aggregate voting power of the Company upon completion of this Offering, are
beneficially owned by Mr. Leandro P. Rizzuto, Chairman and President of the
Company.
--------------
PROSPECTIVE INVESTORS SHOULD CONSIDER THE INFORMATION SET FORTH UNDER
"INVESTMENT CONSIDERATIONS" IN CONNECTION WITH THE PURCHASE OF THE CLASS A
COMMON STOCK OFFERED HEREBY.
--------------
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.
<TABLE><CAPTION>
UNDERWRITING DISCOUNTS PROCEEDS TO
PRICE TO PUBLIC AND COMMISSIONS (1) COMPANY (2)
<S> <C> <C> <C>
Per Share.................................. $ $ $
Total(3)................................... $ $ $
</TABLE>
(1) The Company has agreed to indemnify the U.S. Underwriters and the Managers
against certain liabilities, including liabilities under the Securities Act
of 1933, as amended. See "Underwriting."
(2) Before deducting expenses related to this Offering, which are estimated to
be approximately $ .
(3) The Company has granted to the U.S. Underwriters and the Managers 30-day
options to purchase in the aggregate up to 1,300,000 additional Shares
solely to cover over-allotments, if any. If the over-allotment options are
exercised in full, the total Price to Public, Underwriting Discounts and
Commissions and Proceeds to Company will be $ , $ and $ ,
respectively. See "Underwriting."
--------------
The U.S. Shares are offered by the several U.S. Underwriters, subject to
prior sale, when, as and if delivered to and accepted by them, and subject to
certain conditions. The U.S. Underwriters reserve the right to withdraw, cancel
or modify the U.S. Offering and to reject orders in whole or in part. It is
expected that delivery of the U.S. Shares will be made against payment therefor
on or about , 1995, at the offices of Bear, Stearns & Co. Inc., 245
Park Avenue, New York, New York 10167.
--------------
BEAR, STEARNS & CO. INC. MERRILL LYNCH & CO.
, 1995
<PAGE>
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY
OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES
EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES
IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR
TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE.
<PAGE>
[Space reserved for pictures.]
IN CONNECTION WITH THIS OFFERING, THE UNDERWRITERS MAY OVER-ALLOT OR EFFECT
TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE CLASS A COMMON
STOCK AT A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN MARKET.
SUCH TRANSACTIONS MAY BE EFFECTED ON THE NEW YORK STOCK EXCHANGE OR OTHERWISE.
SUCH STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME.
--------------
CONAIR(R), CUISINART(R), JHERI REDDING(R), PRIMA(R), CONAIRPHONE(R),
INFINITI(R), RIVA(R), ELEGANTE(R), GRAND FINALE(R) and EURO COIFFEUR(R) are
trademarks of the Company. The mark BaByliss(R) is owned by Babyliss S.A., a
wholly-owned subsidiary of the Company. RUSK(R) is a registered trademark of
Rusk, Inc., a 50% joint venture between the Company and Mr. Irvine Rusk. The
Southwestern Bell name, FREEDOM PHONE(R) and Bell logo are registered marks of
Southwestern Bell Telecommunications, Inc. The mark REVLON(R) is owned by Revlon
Consumer Products Corporation and the mark VIDAL SASSOON(R) is owned by
Richardson-Vicks, Inc., a subsidiary of Procter & Gamble Co.
2
<PAGE>
PROSPECTUS SUMMARY
The following summary is qualified in its entirety by the more detailed
information and Consolidated Financial Statements (and Notes thereto) appearing
elsewhere in this Prospectus. Unless otherwise indicated, all information in
this Prospectus assumes that the U.S. Underwriters' and the Managers'
over-allotment options have not been exercised and that the Company's
recapitalization and stock split have been completed. The Company's Class A
Common Stock, par value $.01 per share, and Class B Common Stock, par value $.01
per share, are sometimes collectively referred to in this Prospectus as the
"Common Stock." In this Prospectus, unless the context otherwise requires, all
references to the "Company" mean Conair Corporation and its consolidated
subsidiaries.
THE COMPANY
The Company is a leading designer, manufacturer and marketer of branded
consumer products, including personal care and beauty products, telephones and
small kitchen appliances and cookware. The Company's main product groups,
principal products and brand names are highlighted in the following table:
<TABLE><CAPTION>
PRODUCT GROUP PRINCIPAL PRODUCTS BRAND NAMES
- ---------------------------- ---------------------------------- -------------------------
<S> <C> <C>
Personal Care Appliances Hair dryers, curling irons, CONAIR(R)
hairsetters and other beauty and JHERI REDDING(R)
grooming appliances. BaByliss(R)
REVLON(R)*
VIDAL SASSOON(R)*
Consumer Electronics Consumer cordless and corded CONAIRPHONETM
telephones and answering machines. Southwestern Bell
FREEDOM PHONE(R)*
CUISINART(R) Products Food processors, mini choppers, CUISINART(R)
cookware and other small kitchen
appliances.
Toiletries and Professional A retail line of liquid hair care CONAIR(R)
Salon Products products and brushes and a JHERI REDDING(R)
professional line of hair care RUSK(R)
appliances and liquid products. BaByliss(R)
</TABLE>
- ------------
* Pursuant to long-term licenses.
The Company has achieved significant growth principally through successful
introduction of new and enhanced products, long-term brand name licensing and
acquisitions. From 1992 through 1994, the Company's net sales grew at a compound
annual rate of 20.4%. During this period, operating income margins have
increased from 6.0% to 8.0% through low cost manufacturing and sourcing and
reduction of overhead expenses as a percentage of sales. The Company's improved
operating results, together with a substantial reduction in interest expense,
have led to significantly increased earnings.
The Company believes that the following factors have been key to its revenue
and profit growth:
. Strong Market Position--Nearly half of the Company's sales are attributable to
products of which it is either the #1 or #2 seller in the United States. The
Company is the #1 seller of hair dryers, curling irons and high-end food
processors in the United States. The Company is also a leading seller of hair
care appliances in Europe.
. Powerful Brand Names--The Company's CONAIR(R), CUISINART(R), Southwestern Bell
FREEDOM PHONE(R) and JHERI REDDING(R) brand names are widely recognized in the
United States. In 1993, according to a "top brands" survey of mass
merchandisers, the CONAIR(R) name was rated #11 among over 1,200 brands. The
Company recently acquired the BaByliss(R) brand name and
3
<PAGE>
licensed the REVLON(R) and VIDAL SASSOON(R) brand names, which are widely
recognized in international markets.
. Innovative Products--The Company derived 40% of its revenues in 1994 from new
or enhanced products introduced over the last three years. The Company has been
able to introduce new and enhanced products rapidly and inexpensively in
response to changing market trends, consumer preferences and technological
developments.
. Solid Customer Relationships--The Company has long-standing customer
relationships in all principal retail and beauty professional distribution
channels and sells to substantially all of the leading retailers in the United
States, France and the United Kingdom.
. Effective Distribution Techniques--The Company offers retailers the
opportunity to purchase a large number of branded or private label products in
multiple product categories that cover broad price point ranges. This and the
Company's strong brand names enable the Company to capture greater retail shelf
space and solidify its relationship with its customers.
. Quality Products at Competitive Prices--The Company's flexible manufacturing
and sourcing have enabled it to supply competitively priced, quality merchandise
on a timely basis.
. Successful Acquisitions and Licenses--The Company has supplemented its
internal growth through a number of strategic acquisitions and brand licensing
arrangements. The Company acquired certain assets of Cuisinarts, Inc. in 1989
and the capital stock of Babyliss S.A. ("Babyliss") in February 1995.
Significant exclusive long-term licenses include licenses to sell Southwestern
Bell's consumer telephones in the United States and to sell personal care
products in selected international markets under the REVLON(R) and VIDAL
SASSOON(R) brand names. The Company has used its strong design, manufacturing
and marketing capabilities to substantially grow the revenues and profitability
of its acquired businesses.
. Professional Heritage and Presence--The Company's professional heritage and
strong presence in the professional salon industry help the Company stay current
with emerging fashion trends and enhance product acceptance and name brand
recognition by retail customers.
The Company plans to achieve growth domestically through continued new
product introductions in existing and related categories, brand licensing and
acquisitions. The Company believes that there is significant potential for
expansion of its international business. The Company intends to achieve
international growth through strategic acquisitions and brand licensing. On
February 18, 1995, the Company purchased all of the stock of Babyliss, a leading
designer, manufacturer and marketer of personal care appliances to retailers and
professional beauty salons in France, the United Kingdom and other parts of
Western Europe. See "Business--Recent Acquisition." The acquisition of Babyliss
gives the Company immediate access to a strong European distribution capability
and a leading European brand name.
THE OFFERING
<TABLE>
<S> <C>
Shares Offered............................. 8,700,000 shares of Class A Common Stock.
Common Stock Outstanding After the Offering
(1)(2)..................................... shares of Class A Common Stock.
shares of Class B Common Stock.
Use of Proceeds............................ To retire or defease certain long-term debt,
including debt incurred to acquire Babyliss,
and for general corporate purposes.
</TABLE>
- ------------
(1) Does not include outstanding stock options to purchase shares of Class
A Common Stock or restricted stock awards for shares of Class A Common
Stock. See "Management--Employees and Directors Stock Plan."
(2) Includes shares of Class A Common Stock into which the Series A
Convertible Preferred Stock will be converted concurrently with the
Offering.
4
<PAGE>
SUMMARY FINANCIAL INFORMATION
The summary financial information presented below, except as adjusted
information, is derived from the Company's Consolidated Financial Statements and
the Notes thereto appearing elsewhere in this Prospectus, except income
statement data for the years ended December 31, 1990 and 1991 which are derived
from the Company's consolidated financial statements not included herein. Also
see "Management's Discussion and Analysis of Financial Condition and Results of
Operations."
<TABLE><CAPTION>
YEAR ENDED DECEMBER 31,
---------------------------------------------------------------
AS
ADJUSTED
1990 1991 1992 1993 1994 1994 (1)
-------- -------- -------- -------- -------- --------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Net sales............................... $298,502 $330,125 $361,838 $442,562 $524,398 $
Gross profit............................ 102,887 114,150 122,827 144,146 166,411
Operating income........................ 15,133 17,161 21,820 28,474 41,814
Net interest expense.................... 12,110 13,650 12,374 7,435 8,353
Income before provision for income taxes
and extraordinary items................ 3,023 6,004 9,446 21,039 33,461
Income before extraordinary items (2)... 1,025 2,916 5,085 12,061 20,487
Net income.............................. 1,304 2,930 1,219 12,061 20,487 $ (5)
Earnings per share before extraordinary
items (3)(4)........................... $ $ $ $ $ $
Earnings per share (3)(4)............... $ $ $ $ $ $
Weighted average shares (3).............
-------- -------- -------- -------- -------- --------
</TABLE>
AS OF DECEMBER 31,
-----------------------
AS ADJUSTED
1994 1994 (1)
-------- -----------
(IN THOUSANDS)
BALANCE SHEET DATA:
Current assets............. $212,188 $
Current liabilities........ 65,535
Total assets............... 362,704
Long-term debt............. 100,405
Stockholders' equity....... 175,454 (4)
- ------------
(1) The as adjusted information reflects the consolidated results of operations
of the Company for 1994 and the financial position at December 31, 1994 as
if the Company (i) had completed the issuance and sale of the Shares and
(ii) had applied the estimated net proceeds therefrom as described herein
under "Use of Proceeds," all as of January 1, 1994, in the case of the
Income Statement Data, and as of December 31, 1994, in the case of the
Balance Sheet Data.
(2) For all periods, extraordinary items represent gains or losses on the early
extingishment of debt.
(3) Excludes shares of Class A Common Stock issuable upon exercise of
options outstanding under the Company's stock option plan and shares of
Class A Common Stock issued pursuant to restricted stock awards. See
"Management-- Employees and Directors Stock Plan."
(4) After deduction of dividends on the Company's Series A Convertible Preferred
Stock.
(5) Includes an extraordinary charge of $ (net of tax benefit of
$ ), including the write-off of deferred financing costs, related to
the early extinguishment of debt.
5
<PAGE>
THE COMPANY
The Company was founded in 1959 by Leandro P. Rizzuto and his parents, who
were hair salon professionals, as a supplier to the professional beauty trade.
In 1968, the Company introduced its first consumer electrical product and has
since become the leading seller of hair dryers in the United States. The Company
has expanded its personal care appliance line to include curling irons,
hairsetters and grooming products and introduced toiletry products for the
retail market. In 1983, the Company commenced selling a line of consumer
telephones under the CONAIRPHONETM brand name. In 1993, the Company entered into
a long-term licensing arrangement with Southwestern Bell Telecommunications,
Inc. ("Southwestern Bell") to market telephones, answering machines and caller
ID devices in the United States under the Southwestern Bell FREEDOM PHONE(R)
brand name. The Company acquired the CUISINART(R) brand name and certain related
operating assets in 1989. In 1993 and 1994, respectively, the Company acquired
exclusive rights to manufacture and market certain personal care appliances for
the retail and professional markets under the REVLON(R) brand name in Europe and
Mexico, and under the VIDAL SASSOON(R) brand name in the Asia Pacific region. In
February 1995, the Company acquired all of the stock of Babyliss S.A.
("Babyliss"), a leading designer, manufacturer and marketer of personal care
appliances to retailers and professional beauty salons in France, the United
Kingdom and other parts of Western Europe.
In 1985, the Company, which had been a public company since 1972, was taken
private in a leveraged buyout and became wholly owned by Mr. Rizzuto. All of the
outstanding indebtedness incurred to finance the buyout was retired or defeased
by the end of 1992.
The Company's principal executive offices are located at 150 Milford Road,
East Windsor, New Jersey 08520, and its telephone number is (609) 426-1300.
INVESTMENT CONSIDERATIONS
Prospective investors should carefully review the following considerations,
in addition to the other information presented in this Prospectus, before
purchasing the Shares offered hereby.
IMPORTANCE OF NEW PRODUCTS
Successful new and enhanced product introductions have been and are expected
to remain key to the Company's business. The Company derived 40% of its 1994
revenues from new or enhanced products introduced over the last three years. The
growth of the Company has been, and will continue to be, dependent upon a number
of factors, including the ability of the Company to introduce new and enhanced
products and design innovations and to acquire brand names and enter new product
categories. There can be no assurance that the Company will continue to respond
in a timely manner to changes in customer preferences or technological changes
or that the Company will continue to successfully introduce new or enhanced
products.
FOREIGN OPERATIONS AND EXPANSION
Many of the Company's products are manufactured in foreign countries,
including Costa Rica, the People's Republic of China ("PRC"), Hong Kong, Taiwan,
Indonesia, Malaysia, Japan, the Philippines, South Korea, Italy, Belgium and
Germany. In 1994, approximately 85% of products sold by the Company, as measured
by the cost of products, were manufactured by approximately 50 foreign
manufacturers and subcontractors, of which approximately 12% were manufactured
by the Company's subsidiary in Costa Rica. The Company's arrangements with such
foreign manufacturers are subject to the risks of doing business abroad,
including risks associated with economic or political instability in countries
in which such manufacturers are located, labor strikes, foreign currency
fluctuations and potential import restrictions, including the possibility of the
loss of most-favored nation status by or retaliatory tariffs imposed on products
of countries such as the PRC.
6
<PAGE>
Although the Company seeks to reduce the risks of foreign production by
diversification of its sourcing, the loss of certain foreign manufacturers,
inability of certain manufacturers to meet the Company's production needs, loss
of access to manufacturers in any particular country and the inability of the
Company to remove its tooling, molds and dies from manufacturing facilities in
foreign countries could have an adverse impact on the Company's business. The
Company is also subject to risks associated with the availability of and time
required for the transportation of products from foreign countries, including
shipping losses, or the loss of sales that may result from delays or
interruptions in shipping.
As a result of its acquisition of Babyliss, the Company will have an
immediate increase in foreign sales and operations. The Company intends to
expand its operations in foreign markets in Europe and elsewhere, and will seek
to expand Babyliss' business in its existing markets and to enter new markets.
There can be no assurance, however, that the Company will be able to
successfully integrate Babyliss or to expand its current operations in
international markets or enter new markets successfully. Furthermore, such
foreign expansion will increase the Company's exposure to the inherent risks of
doing business outside the United States, including the risk of foreign currency
fluctuations.
RELIANCE ON KEY CUSTOMERS
The Company's net sales in the aggregate to its five largest customers
during the fiscal year ended December 31, 1994 were approximately 34%. Two of
the Company's customers, WalMart and Kmart Corp. accounted for approximately 12%
and 11%, respectively, of the Company's net sales during the fiscal year ended
December 31, 1994. Kmart Corp. has accounted for over 10% of the Company's net
sales during each fiscal year since fiscal 1980. Although the Company has
long-established relationships with many of its customers, the Company does not
have long-term contracts with any of its customers. A decrease in business from
any of its major customers could have a material adverse effect on the Company's
results of operations and financial condition. See "Business--Customers and
Distribution."
RETAIL INDUSTRY
The Company sells its products through retailers, including mass
merchandisers, department and drug stores, electronic stores, discount and
variety stores and catalog houses and showrooms. Retail sales depend, in part,
on general economic conditions and a significant decline in such conditions
could have a negative impact on sales by retailers of the types of products
offered by the Company. A significant deterioration in the financial condition
of the Company's major customers, or in the retail environment in general, could
have a material adverse effect on the Company's sales and profitability. See
"Business--Customers and Distribution."
DEPENDENCE ON KEY PERSONNEL
The Company's senior management, in particular Leandro P. Rizzuto, Chairman
and President, Ronald T. Diamond, who manages the Company's consumer appliances
and toiletries product groups, and Barry Haber, who manages the Company's
consumer electronics and CUISINART(R) product groups, has substantial experience
and expertise. The members of the Company's senior management have over 130
years of collective experience in the Company's business. The loss of the
services of any of these individuals could adversely affect the Company. The
Company currently has an Employment Agreement with Mr. Rizzuto for a term
through June 30, 1996 (which is subject to automatic renewals of successive
one-year periods), but it does not have employment agreements with the other
members of its senior management. See "Management--Employment Agreement." The
Company maintains a "key man" life insurance policy for Mr. Rizzuto, but
otherwise does not maintain such insurance with respect to any of its other
senior managers.
7
<PAGE>
COMPETITION
The Company's business is highly competitive. Some of the Company's current
and potential competitors are larger and have greater financial resources than
the Company. The Company's business is not characterized by substantial
regulatory or economic barriers to entry of new competitors. A number of factors
affect competition in the sale of the Company's products. Among these are brand
identification, style, design features, packaging, price, quality, promotion,
sales staff and the level of service provided to customers. The importance of
these competitive factors varies from customer to customer and from product to
product. There can be no assurance that the Company will be able to compete
effectively in all or any of its product groups. See "Business--Competition."
ANTI-TAKEOVER EFFECT OF CAPITAL STRUCTURE; CONTROL BY PRINCIPAL STOCKHOLDER
The Company has two classes of authorized Common Stock, Class A Common
Stock, which is offered hereby, and Class B Common Stock. While holders of Class
A Common Stock are entitled to one vote per share, holders of Class B Common
Stock are entitled to ten votes per share. The Class A Common Stock and the
Class B Common Stock generally vote together as a single class, except that
holders of Class A Common Stock are entitled to vote separately as a class to
elect 25% of the number of directors constituting the entire Board of Directors
of the Company and the holders of Class B Common Stock are entitled to vote
separately as a class to elect the remaining directors. Leandro P. Rizzuto (the
"Principal Stockholder"), as trustee of the Leandro P. Rizzuto Revocable Trust,
beneficially owns all of the outstanding Class B Common Stock and has the right
to vote and dispose of the shares held by the Trust. Upon completion of this
offering, the Principal Stockholder will own approximately % of the
outstanding shares of the Company's Common Stock and hold approximately %
of the aggregate voting power of the Company, which will allow him to control
all actions to be taken by the stockholders, including the election of 75% of
the total number of directors to the Board of Directors. Class B Common Stock is
freely convertible into Class A Common Stock on a one-for-one basis and, at such
time as the Class B Common Stock constitutes less than 20% of the outstanding
shares of Common Stock, all shares of Class B Common Stock will automatically
convert into shares of Class A Common Stock. Mr. Rizzuto will be able, at any
time, to convert a portion of the shares of Class B Common Stock into Class A
Common Stock and obtain the power to elect the directors to be elected by
holders of the Class A Common Stock while retaining sufficient shares of Class B
Common Stock to elect the remainder of the Board of Directors. This voting
control may have the effect of discouraging offers to acquire the Company
because the consummation of any such acquisition would require the consent of
the Principal Stockholder. In addition, the Board of Directors is authorized to
issue shares of preferred stock from time to time with such rights and
preferences as the Board may determine. Preferred stock could be issued in the
future with terms and conditions that could further discourage offers to acquire
the Company. See "Principal Stockholder" and "Description of Capital Stock."
SHARES ELIGIBLE FOR FUTURE SALE
No prediction can be made as to the effect, if any, that future sales of
shares, or the availability of shares for future sale, will have on the market
price of the Class A Common Stock prevailing from time to time. Sales or
issuances of substantial amounts of Class A Common Stock (including shares
issued upon the exercise of stock options or the conversion of shares of Class B
Common Stock), or the perception that such sales or issuances might occur, could
adversely affect prevailing market prices of the Class A Common Stock. Upon
completion of this Offering, the Company will have outstanding shares of
Class A Common Stock, including the shares of Class A Common Stock
offered hereby, shares of Class A Common Stock issued upon the conversion of
the Company's Series A Convertible Preferred Stock to the Profit Sharing Plan of
the Company, and shares of Class A Common Stock issued pursuant to
restricted stock awards granted under the Company's Employees and Directors
Stock Plan (the "Stock Plan"), and shares of Class B Common Stock. In
addition, options to purchase up to shares of Class A Common Stock have
been
8
<PAGE>
granted under the Stock Plan. Following this Offering, holders of Class B Common
Stock will be eligible to convert their shares into Class A Common Stock and
sell such shares without registration pursuant to, and subject to the volume
limitations of, Rule 144 under the Securities Act of 1933, as amended (the
"Securities Act"). The Company and its senior executive officers, including
Leandro P. Rizzuto, as beneficial owner of all outstanding shares of Class B
Common Stock, have agreed not to offer, sell, contract to sell, or otherwise
dispose of any shares of Common Stock or rights to acquire such shares or
securities convertible into or exchangeable for Common Stock for a period of 180
days after the date of this Prospectus without the prior written consent of the
representatives of the U.S. Underwriters and the Managers. See "Shares Eligible
for Future Sale," "Management--Employees and Directors Stock Plan" and
"Underwriting."
DILUTION
Purchasers of Shares will experience immediate and substantial dilution in
the net tangible book value per share of Common Stock. See "Dilution."
ABSENCE OF PRIOR MARKET; DETERMINATION OF OFFERING PRICE; POSSIBLE VOLATILITY OF
STOCK PRICE
Prior to the Offering, there has been no public market for the Class A
Common Stock. Although the Company intends to apply for the listing of the Class
A Common Stock on the New York Stock Exchange, there can be no assurance that an
active or liquid trading market in the Class A Common Stock will develop upon
completion of the Offering or, if developed, that it will continue. The initial
public offering price of the Class A Common Stock will be determined through
negotiations between the Company and the representatives of the U.S.
Underwriters and the Managers and may not be indicative of the market price for
the Class A Common Stock after the Offering. The market price for shares of
Class A Common Stock may be highly volatile depending on news announcements and
changes in general market conditions. In recent years, the stock market has
experienced extreme price and volume fluctuations. See "Dilution" and
"Underwriting."
9
<PAGE>
USE OF PROCEEDS
The net proceeds to be received by the Company from the sale of the Shares
offered hereby, assuming an initial public offering price of $ per Share
and after deducting underwriting discounts and commissions and the expenses
related to the Offering, are estimated to be approximately $ .
The Company intends to use the proceeds of the Offering to reduce its
outstanding long-term debt, including debt incurred to acquire Babyliss, in
order to increase its financial flexibility and facilitate its future growth.
After the application of the proceeds of the Offering, the Company expects to
enter into new or amended long-term credit facilities.
As of December 31, 1994, the Company had long-term indebtedness outstanding
(including the current portion thereof) in the aggregate amount of $106,680,000,
in the form of industrial development bonds, senior and subordinated notes and
mortgage notes. As of March 23, 1995, such indebtedness (including the current
portion thereof) had increased to $131,418,000, approximately $32,000,000 of
which was incurred in connection with the acquisition of Babyliss. Such
indebtedness bears interest at rates ranging from 5.8% to 10% and has varying
final maturity dates depending on the nature of the indebtedness. The Company's
revolving credit facility has a final maturity of March 2000. The two term loans
mature in 1998 and 2004. The various senior and subordinated notes issued by the
Company are due in the years 2001 through 2003. The two issues of industrial
development bonds mature in 1998 and 2001 and the two issues of mortgage notes
mature in 1996 and 1998. For a more complete description of such indebtedness,
see "Capitalization" and Note 7 to the Company's Audited Consolidated Financial
Statements.
Until applied to any of the foregoing uses, the net proceeds of the Offering
will be invested by the Company in short-term interest-bearing deposit accounts,
certificates of deposit or similar financial instruments.
DIVIDEND POLICY
The Company intends to pay quarterly cash dividends on the outstanding
shares of its Common Stock at an initial annual rate of $. per share. Any
determination to pay such cash dividends, however, will be at the discretion of
the Company's Board of Directors and will depend on the Company's results of
operations, financial condition, capital requirements, rights of holders of
preferred stock, contractual restrictions and other factors deemed relevant at
that time by the Company's Board of Directors. Shares of Class A Common Stock
and Class B Common Stock are equal in respect of rights to dividends and other
distributions.
10
<PAGE>
CAPITALIZATION
The following table sets forth the unaudited consolidated capitalization of
the Company and its subsidiaries at December 31, 1994, and as adjusted to give
effect to the issuance and sale of the Shares and the application of the
estimated net proceeds as set forth herein under "Use of Proceeds."
<TABLE><CAPTION>
DECEMBER 31, 1994
------------------------
AS
ACTUAL ADJUSTED (1)
-------- ------------
(IN THOUSANDS)
<S> <C> <C>
Long-term debt, including current portion:
8.05% Industrial Development Bonds.................................. $ 3,353 $
Mortgage Note Payable............................................... 1,881
Floating Rate Industrial Development Bonds.......................... 1,500
6.25% Promissory Note due 2001...................................... 9,188
7.44% Series A Senior Fixed Rate Notes due 2002..................... 40,000
6.56% Series B Senior Rate Reset Notes due 2002..................... 10,000
10% Subordinated Promissory Note due 2003........................... 6,000
Revolving Credit Loan due 2000 (2).................................. 10,000
5.8% Term Loan due 1998............................................. 3,133
6.5% Mortgage Note due 1998......................................... 1,625
7% Term Loan due 2004............................................... 20,000
New Credit Agreement................................................ 0
-------- ------------
Total long-term debt.............................................. 106,680
-------- ------------
Stockholders' equity:
Preferred Stock, $.01 par value, authorized--5,000,000 shares;
outstanding--none..................................................... -- --
Series A Convertible Preferred Stock, $1.00 par value,
authorized--5,000 shares; outstanding--5,000 shares; none, as
adjusted (3).......................................................... 5
Class A Common Stock, $.01 par value, authorized-- shares;
outstanding--[ ]; [ ] as adjusted (3)(4)(5).................
Class B Common Stock, $.01 par value, authorized-- shares;
outstanding--[ ] shares (5)...................................
Old Common Stock, $100 par value, authorized--5,000 shares;
outstanding--2,814 shares; none, as adjusted (5)...................... 281
Additional paid-in capital (5)........................................ 7,633
Cumulative translation adjustments.................................... (18)
Retained earnings..................................................... 167,553 (6)
-------- ------------
Total stockholders' equity........................................ 175,454
-------- ------------
Total capitalization............................................ $282,134 $
-------- ------------
-------- ------------
</TABLE>
- ------------
(1) See "Use of Proceeds" for the application of the net proceeds from the
issuance and sale of the Shares.
(2) Extended from 1997 to the year 2000 in conjunction with the acquisition of
Babyliss. (See Note 15 to the Consolidated Financial Statements.)
(3) Reflects the conversion of the Company's Series A Convertible Preferred
Stock into shares of Class A Common Stock concurrently with the Offering.
(4) Excludes shares of Class A Common Stock issuable upon exercise of
options outstanding under the Company's stock option plan and shares of
Class A Common Stock issuable under restricted stock awards (see
"Management-- Employees and Directors Stock Plan").
(5) Reflects the recapitalization and stock split of the Company's shares of
Common Stock, par value $100 per share, into shares of Class A Common
Stock, par value $.01 per share, and shares of Class B Common Stock,
par value $.01 per share, and the conversion of 2,814 shares of Common
Stock, par value $100 per share, into shares of Class B Common Stock.
(6) Includes an extraordinary charge of $ (net of tax benefit of
$ ), including the write-off of deferred financing costs, related to
the early extinguishment of debt. See "Use of Proceeds."
11
<PAGE>
DILUTION
The net tangible book value of the Company at December 31, 1994 was
approximately $ , or $ per share of Common Stock. "Net tangible book
value per share" represents the amount of total tangible assets less total
liabilities, divided by the shares of Common Stock assumed to have been
outstanding on December 31, 1994. Without taking into account any changes in net
tangible book value subsequent to December 31, 1994, other than to give effect
to shares of Class A Common Stock into which the Series A Convertible
Preferred Stock will be converted concurrently with the Offering, shares
of Class A Common Stock issued pursuant to restricted stock awards granted under
the Company's stock option plan (see "Management--Employees and Directors Stock
Plan"), the sale by the Company of the Shares and the receipt and application of
the net proceeds therefrom, as set forth in "Use of Proceeds," and without
giving effect to the exercise of options to acquire shares of Class A
Common Stock granted under the Company's stock option plan (see
"Management--Employees and Directors Stock Plan"), the pro forma net tangible
book value of the Company as of December 31, 1994 would have been approximately
$ , or $ per share of Common Stock. This represents an immediate
increase in net tangible book value of $ per share of Common Stock to the
existing stockholder, and an immediate dilution of $ per share of Common
Stock to Shares in the Offering being made hereby, as illustrated in the
following table:
<TABLE><CAPTION>
<S> <C> <C>
Assumed initial public offering price per share............... $
--------
Net tangible book value per share at December 31, 1994(1)... $
--------
Increase in net tangible book value per share attributable
to the Offering (2).......................................
--------
Pro forma net tangible book value per share after the
Offering......................................................
--------
Dilution per share to new investors (3)....................... $
--------
--------
</TABLE>
- ------------
(1) Excludes .
(2) After deduction of commissions, fees and estimated offering expenses.
Includes an extraordinary charge of $ (net of tax benefit of
$ ), including the write-off of deferred financing costs, related to
the early extinguishment of debt.
(3) Dilution per share to new investors is determined by subtracting the pro
forma net tangible book value per share after the Offering being made hereby
from the amount of cash paid by a new investor for a share of Common Stock.
The following table summarizes on a pro forma basis at December 31, 1994 the
differences between the Principal Stockholder and new investors with respect to
the number of shares of Class A Common Stock purchased from the Company, the
total consideration paid to the Company and the average consideration paid per
share (at an assumed initial public offering price of $15.00 per share):
<TABLE><CAPTION>
SHARES PURCHASED TOTAL CONSIDERATION
-------------------- ---------------------- AVERAGE PRICE
NUMBER PERCENT AMOUNT PERCENT PER SHARE
---------- ------- ------------ ------- -------------
<S> <C> <C> <C> <C> <C>
Principal Stockholder...................... % $ 2,919,000 $
------
New Investors.............................. % $ $
---------- ------- ------------ ------- ------
Total.................................. 100.0% 100.0% $
---------- ------- ------------ ------- ------
---------- ------- ------------ ------- ------
</TABLE>
The foregoing table assumes no exercise of outstanding stock options and
does not give effect to shares of Class A Common Stock into which the
Series A Convertible Preferred Stock will be converted concurrently with the
Offering or shares of Class A Common Stock issued pursuant to restricted
stock awards granted under the Company's stock option plan. At , there
were outstanding options to purchase shares of Class A Common Stock at a
purchase price equal to and restricted stock awards covering shares
had been granted. See "Management-- Employees and Directors Stock Plan."
12
<PAGE>
SELECTED FINANCIAL INFORMATION
The selected financial information presented below, except as adjusted
information, is derived from, and should be read in conjunction with, the
Consolidated Financial Statements (and the Notes thereto) appearing elsewhere
herein. The selected income statement and balance sheet data (other than as
adjusted data) at and for the periods ended December 31 for each of the years
1990 through 1994 are derived from the consolidated financial statements of the
Company, which have been audited by Deloitte & Touche LLP, independent auditors,
and which in the case of the three most recent fiscal years appear elsewhere
herein.
<TABLE><CAPTION>
YEAR ENDED DECEMBER 31,
---------------------------------------------------------------
AS
ADJUSTED
1990 1991 1992 1993 1994 1994 (1)
-------- -------- -------- -------- -------- --------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Net sales......................................... $298,502 $330,125 $361,838 $442,562 $524,398 $
Cost of goods sold................................ 195,615 215,975 239,011 298,416 357,987
-------- -------- -------- -------- -------- --------
Gross profit...................................... 102,887 114,150 122,827 144,146 166,411
Selling, general and administrative............... 87,754 96,989 101,007 115,672 124,597
-------- -------- -------- -------- -------- --------
Operating income.................................. 15,133 17,161 21,820 28,474 41,814
Other (income) expense:
Interest expense.................................. 14,736 14,320 12,966 7,524 8,511
Interest income................................... (2,626) (670) (592) (89) (158)
Gain on sale of buildings......................... -- (2,493) -- -- -- --
-------- -------- -------- -------- -------- --------
12,110 11,157 12,374 7,435 8,353
Income before provision for income taxes and
extraordinary items.............................. 3,023 6,004 9,446 21,039 33,461
Income tax provision.............................. 1,998 3,088 4,361 8,978 12,974
-------- -------- -------- -------- -------- --------
Income before extraordinary items (2)............. $ 1,025 $ 2,916 $ 5,085 $ 12,061 $ 20,487 $
-------- -------- -------- -------- -------- --------
-------- -------- -------- -------- -------- --------
Net income........................................ $ 1,304 $ 2,930 $ 1,219 $ 12,061 $ 20,487 $ (6)
-------- -------- -------- -------- -------- --------
-------- -------- -------- -------- -------- --------
Earnings per share before extraordinary items
(3)(4)(5)......................................... $ $ $ $ $ $
Earnings per share (3)(4)(5)...................... $ $ $ $ $ $
Weighted average shares (3)(4)....................
-------- -------- -------- -------- -------- --------
</TABLE>
<TABLE><CAPTION>
DECEMBER 31,
---------------------------------------------------------------
AS
ADJUSTED
1990 1991 1992 1993 1994 1994 (1)
-------- -------- -------- -------- -------- --------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Current assets.................................... $144,859 $157,629 $161,960 $176,154 $212,188
Current liabilities............................... 38,807 42,549 39,628 51,395 65,535
Total assets...................................... 291,745 298,879 297,471 310,188 362,704
Long-term debt.................................... 100,109 100,332 96,151 87,575 100,405
Stockholders' equity.............................. 136,061 138,971 145,030 151,637 175,454
</TABLE>
- ------------
(1) The as adjusted information reflects the consolidated results of operations
of the Company for 1994 and the financial position at December 31, 1994 as
if the Company (i) had completed the issuance and sale of the Shares and
(ii) had applied the estimated net proceeds therefrom as described herein
under "Use of Proceeds," all as of January 1, 1994 in the case of the Income
Statement Data and as at December 31, 1994 for the Balance Sheet Data.
(2) For all periods, extraordinary items represent gains or losses on the early
extinguishment of debt.
(3) Excludes shares of Class A Common Stock issuable upon exercise of
options outstanding under the Company's stock option plan. See
"Management--Employees and Directors Stock Plan."
(4) Includes shares of Class A Common Stock into which the Company expects
its Series A Convertible Preferred Stock to be converted concurrently with
the Offering.
(5) After deduction of dividends on the Company's Series A Convertible Preferred
Stock.
(6) Includes an extraordinary charge of $ (net of tax benefit of
$ ), including the write-off of deferred financing costs, related to
the early extinguishment of debt.
13
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
The following discussion and analysis should be read in conjunction with the
Consolidated Financial Statements (and Notes thereto) which appear elsewhere in
this Prospectus.
INTRODUCTION
The Company operates in one industry segment, with revenues primarily
derived from the sale of personal care appliances, mainly hair dryers and
hairstyling devices, consumer electronics, mainly telephones and
telephone-related devices, CUISINART(R) products, such as small kitchen
appliances and cookware and consumer toiletries and professional salon products.
In recent years, the Company has substantially expanded the range of product
categories that it offers through internal growth, as well as licensing
arrangements and acquisitions. Most significantly, in 1993, the Company entered
into a long-term licensing arrangement with Southwestern Bell to market
telephone and telephone-related products in the United States under the
Southwestern Bell FREEDOM PHONE(R) name. This arrangement has enabled the
Company to diversify and broaden the price point coverage of its consumer
electronics products line. In addition, in February 1995, the Company acquired
the stock of Babyliss S.A., a leading designer, manufacturer and marketer of
personal care appliances in France, the United Kingdom and other parts of
Western Europe for approximately $38,000,000 in cash subject to a downward
adjustment. Because the acquisition was consummated in February 1995, it is not
reflected in the historical figures discussed below. See "Business--Recent
Acquisition."
The following table summarizes the net sales of each of the Company's
product groups for the three years ended December 31, 1992, 1993 and 1994.
<TABLE><CAPTION>
YEARS ENDED DECEMBER 31,
--------------------------------
PRODUCT GROUP 1992 1993 1994
- ------------------------------------------------------------ -------- -------- --------
(IN THOUSANDS)
<S> <C> <C> <C>
Personal Care Appliances.................................... $184,244 $208,063 $227,222
Consumer Electronics........................................ 56,648 112,400 149,601
CUISINART(R) Products....................................... 47,311 49,316 56,839
Toiletries and Professional Salon Products.................. 73,635 72,783 90,736
-------- -------- --------
Total....................................................... $361,838 $442,562 $524,398
-------- -------- --------
-------- -------- --------
</TABLE>
RESULTS OF OPERATIONS
The following table sets forth for the periods indicated certain
consolidated statements of operations data expressed as a percentage of net
sales:
<TABLE><CAPTION>
PERCENTAGE OF NET SALES
--------------------------
YEARS ENDED DECEMBER 31,
--------------------------
1992 1993 1994
------ ------ ------
<S> <C> <C> <C>
Net sales...................................................... 100.0% 100.0% 100.0%
Cost of goods sold............................................. 66.1 67.4 68.3
------ ------ ------
Gross profit................................................... 33.9 32.6 31.7
Selling, general and administrative............................ 27.9 26.2 23.7
------ ------ ------
Operating income............................................... 6.0 6.4 8.0
Interest expense............................................... 3.6 1.7 1.6
Interest income................................................ (0.2) (0.1) --
------ ------ ------
Income before extraordinary items and income taxes............. 2.6 4.8 6.4
Income tax provision........................................... 1.2 2.1 2.5
------ ------ ------
Net income before extraordinary items.......................... 1.4 2.7 3.9
------ ------ ------
------ ------ ------
</TABLE>
14
<PAGE>
OVERVIEW
The Company's growth is primarily driven by new and enhanced products,
augmented by brand licensing and acquisitions. The Company has achieved a
compound annual growth rate of 20.4% in sales from 1992 through 1994.
Approximately half of the sales growth during that period was as a result of the
inclusion of Southwestern Bell FREEDOM PHONE(R) sales in the Company's
consolidated sales after April 1993 and the Company's success in rapidly
increasing sales of Southwestern Bell FREEDOM PHONE(R) products since the
commencement of the licensing arrangement. Excluding sales of these products,
the Company's compound annual growth rate during this period would have been
10.3%.
The Company's gross margins have declined slightly from 1992 to 1994 because
a higher portion of the Company's sales consisted of consumer electronics
products, which generate lower gross margins than most of the Company's other
product categories. Excluding sales of consumer electronics products, the
Company's gross margins would have remained essentially unchanged during this
period.
Despite a decrease in gross margins, the Company's operating profit has
increased as a percentage of sales from 6.0% in 1992 to 8.0% in 1994, primarily
because of the fixed or semi-variable nature of certain of the Company's
expenses and the Company's ability to realize economies of scale. As a result of
improved efficiency, salaries and wages included in selling, general and
administrative expenses declined from 6.7% of sales in 1992 to 5.4% in 1994. In
addition, depreciation and amortization of goodwill and intangibles have
declined as a percentage of sales from 1.7% to 1.2% in the same period. The
Company believes it can continue to increase sales at a higher rate than the
increase in general and administrative expenses that is required to achieve such
sales growth, although the positive impact on improved operating profits may not
be as great as in recent years. The Company's improved operating results,
together with a substantial reduction in interest expense due to refinancings,
has led to significantly improved earnings.
YEAR ENDED DECEMBER 31, 1994 COMPARED TO YEAR ENDED DECEMBER 31, 1993
Net sales increased by 18.5% to $524,398,000 in 1994 from $442,562,000 in
1993. Each of the Company's product groups contributed to this increase, with
approximately 41% of this increase attributable to increased sales of
Southwestern Bell FREEDOM PHONE(R) products. The significant contribution of
sales of the Southwestern Bell FREEDOM PHONE(R) products was due to sales of new
telephone and telephone-related products, expanded distribution and the
inclusion of a full year of sales of Southwestern Bell FREEDOM PHONE(R) products
in 1994 compared to only nine months commencing in April 1993, when the Company
started selling these products. For the comparable nine-month period in 1994,
sales of the Company's Southwestern Bell FREEDOM PHONE(R) products increased by
approximately 42%. This rate of increase is not indicative of future growth
because 1993 was the Company's first year of sales of the Southwestern Bell
FREEDOM PHONE(R) products. Sales of other consumer electronics products
increased by approximately 5% in 1994, principally due to increased sales of
telephone answering machines. This increase was offset partially by a decrease
in sales of corded phones, reflecting an industry reduction of basic corded
phone sales.
Personal care appliance sales increased by approximately 9% during this
period. The Company's domestic personal care appliance sales increased by 5%. An
8% increase in sales of products sold under the CONAIR(R) brand, such as hair
cutting kits and curling irons, was offset by a 3% reduction in sales of private
label products and higher unit sales of lower priced CONAIR(R) brand hair dryer
models. International sales increased by 50% principally due to sales of
REVLON(R) brand products in Europe which were not sold in 1993 and increased
sales in Canada. Sales of CUISINART(R) products increased by 16% due to new
product introductions and increases in unit sales of existing products. Sales of
consumer toiletries and professional salon products increased by approximately
25% due principally to increased sales of private label toiletry products and
the introduction of the Company's Magical Mane hair shampoo and conditioner,
which was offset by a decrease in sales of professional salon products.
15
<PAGE>
Gross margins decreased as a percentage of net sales to 31.7% in 1994 from
32.6% in 1993. The decrease was primarily due to changes in the mix of products
sold by the Company, as described more fully under "--Overview." Specifically,
this decrease resulted from a disproportionate increase of approximately 33% in
sales of consumer electronics, primarily telephones, which have relatively lower
gross margins as a percentage of sales than the Company's other products,
compared to a 14% increase in sales of all of the Company's other products.
Excluding sales of telephones in both periods, gross margins remained
essentially unchanged as a percentage of sales during this period.
Selling, general and administrative expenses decreased as a percentage of
net sales to 23.7% in 1994 from 26.2% in 1993, but increased by 7.7% to
$124,597,000 in 1994 from $115,672,000 in 1993. The increase of $8,925,000 was
principally due to increases in variable sales expenses to support the increase
in sales in the United States and, to a lesser degree, to an increase in direct
fixed expenses for the Company's new subsidiary in the United Kingdom. The
decline of 2.5% as a percentage of net sales resulted primarily from the fixed
and semi-variable nature of certain costs in this category, including salaries
and wages and, to a lesser extent, depreciation of property, plant and equipment
and amortization of intangibles. In addition, the Company benefitted from a
reduction in its lease costs as a result of the purchase of its executive office
facility in Stamford, Connecticut in March 1994.
The Company's interest expense of $8,511,000 in 1994 increased from
$7,524,000 in 1993. This was as a result of an increase in the Company's
long-term debt, primarily to finance the purchase of its executive office
facility.
The Company's effective income tax rate decreased to 38.8% in 1994 from
42.7% in 1993, primarily due to an increase, as compared to the prior period, in
taxable income relative to the amount of amortized goodwill, which is not
deductible for tax purposes.
YEAR ENDED DECEMBER 31, 1993 COMPARED TO YEAR ENDED DECEMBER 31, 1992
Net sales increased by 22.3% to $442,562,000 in 1993 from $361,838,000 in
1992. More than approximately 60% of this increase was due to the introduction
of Southwestern Bell FREEDOM PHONE(R) products, which were not sold prior to
1993. Sales of other consumer electronics products increased approximately 10%
due to significant increases in sales of telephone answering machines and
cordless phones. These increases resulted from a combination of new product
introductions and expanded distribution, which were partially offset by a
decrease in sales of corded phones, reflecting reductions in the overall corded
phone market. Sales of personal care appliances increased by approximately 13%
in 1993. Sales in the United States of personal care appliances marketed under
the CONAIR(R) name increased by 13% due principally to increases in unit sales
of hair dryers. An increase of 49% in foreign sales of personal care appliances
was offset by lower growth in the Company's domestic sales of private label
personal care appliances. CUISINART(R) products sales increased in 1993 by
approximately 4% principally due to the successful introduction of a line of
high-end blenders and coffee makers. Sales of consumer toiletries and
professional salon products decreased by approximately 1% in 1993 due primarily
to a reduction in sales of toiletries to one customer.
Gross margins decreased as a percentage of net sales to 32.6% in 1993 from
33.9% in 1992. This decrease resulted primarily from changes in the mix of
products sold by the Company during such periods, and in particular due to the
impact of lower gross margins on sales of Southwestern Bell FREEDOM PHONE(R)
products, which were not sold prior to 1993. If the sales of these products are
excluded from 1993 figures, gross margins for 1993 would have increased by 0.2%
as compared to 1992.
Selling, general and administrative expenses decreased as a percentage of
net sales to 26.2% in 1993 from 27.9% in 1992, but increased by 14.5% to
$115,672,000 in 1993 from $101,007,000 in 1992. The increase of $14,665,000 was
principally due to increases in variable selling expenses to support the higher
level of sales, increases in direct consumer advertising, general increases in
salaries and wages and increases in rent and related expenses due to additional
office space leased at the Company's Stamford, Connecticut executive offices.
The reduction in selling, general and administrative expenses
16
<PAGE>
of 1.7% as a percentage of sales was primarily due to the fixed and
semi-variable nature of certain of these costs, including salaries and wages
and, to a lesser extent, depreciation of property, plant and equipment and
amortization of intangibles.
Interest expense decreased by approximately 42% to $7,524,000 in 1993 from
$12,966,000 in 1992 due to a reduction in long-term debt and a refinancing of
the Company's long-term debt in 1992. Interest income decreased by approximately
85% to $89,000 in 1993 from $592,000 in 1992, primarily due to a reduction in
funds available for short-term investment and lower interest rates.
The Company's effective income tax rate decreased to 42.7% in 1993 from
46.2% in 1992, primarily due to an increase, as compared to the prior period, in
taxable income relative to the amount of amortized goodwill, which is not
deductible for tax purposes and partially offset by a 1% increase in Federal
income tax rates in 1993.
LIQUIDITY AND CAPITAL RESOURCES
At December 31, 1994, the Company's working capital was $146,653,000 and its
current ratio was 3.2 to 1. The Company's cash balance was $23,702,000 and
long-term debt was $100,405,000 at December 31, 1994. As of December 31, 1993,
the Company had working capital of $124,759,000 and a cash balance of
$15,856,000.
Capital expenditures during 1994 and anticipated capital expenditures during
1995 are higher than in previous years because of certain real estate
acquisitions and improvements. Capital expenditures were $29,546,000 in 1994,
$20,000,000 of which represents the purchase price of the Company's executive
office facility in Stamford, Connecticut. Capital expenditures in 1993 were
$7,647,000 compared to $5,858,000 in 1992. Capital expenditures for 1995 are
anticipated to be approximately $20,000,000, of which approximately $7,000,000
is for the completion of the Company's warehouse and distribution facility in
Glendale, Arizona and $4,000,000 is for the exercise of the Company's option to
purchase lease rights in its executive office facility in Stamford, Connecticut
from Leandro P. Rizzuto. See "Certain Transactions" below.
Historically, approximately 60% of the Company's sales and 70% of its
operating profit are achieved in the second half of the year. The Company relies
on short-term bank debt to finance its seasonal operating needs which result in
a build-up of receivables and inventory during the first nine months of each
year with a substantial reduction in receivables, inventories and bank credit
during the fourth quarter. As of December 31, 1994, the Company had short-term
lines of credit aggregating $64,400,000, which do not include an additional
$25,000,000 available for the period June 1 to November 30 to finance its
seasonal business needs. In addition, the Company had a long-term revolving
credit line of $21,000,000, of which $11,000,000 was unutilized at December 31,
1994. After the application of the proceeds of the Offering, the Company expects
to enter into a new or amended revolving credit facility. After giving effect to
the Offering, the Company will have substantially reduced its long-term debt and
will have availability of $ under its long and short-term credit
facilities.
In connection with the Babyliss acquisition, the Company increased its bank
revolving credit line by $37,500,000. This additional debt has mandatory
principal repayments of $5,000,000 on December 15, 1996, $7,500,000 on December
15, 1997, $10,000,000 on each of December 15, 1998 and December 15, 1999 and
$5,000,000 on March 15, 2000. The interest rate on this facility is variable and
is subject to change based on the leverage and operating performance of the
Company.
For the year ended December 31, 1994, the Company's cash flows from
operations included $20,487,000 from net income, $7,239,000 from depreciation
and $4,784,000 from amortization of goodwill and intangibles. This was
supplemented with cash flow from trade creditors in the amount of $9,635,000.
The Company's cash flow has been sufficient to cover the increased investment in
receivables from customers of $10,372,000 and additional inventories of
$18,804,000 for future sales. During
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1994, the Company borrowed $24,000,000 in additional long-term debt, which,
together with available cash resources, was used to finance its net capital
additions of $27,621,000 and reduce long-term debt by $3,520,000. The Company
expects to substantially reduce its long-term indebtedness, including debt
incurred to acquire Babyliss, from the proceeds of the Offering. The Company
believes its capital resources are adequate to finance normal growth and service
the Company's debt obligations.
Historically, foreign currency exchange rate fluctuations have not had a
material impact on the results of operations or liquidity of the Company due to
the small proportion of the Company's sales reported and costs incurred in
foreign currencies. The Company hedged certain of its foreign exchange
transactions; however, these transactions were not significant with respect to
the Company's overall operations. As a result of the Company's acquisition of
Babyliss, the Company is reassessing its foreign currency risks and will develop
a hedging program designed to hedge firm purchase commitments of goods and
services denominated in foreign currencies.
In December 1990, the FASB issued SFAS No. 106, "Employers' Accounting for
Postretirement Benefits Other Than Pensions," and in November 1992, the FASB
issued SFAS No. 112, "Employers' Accounting for Postemployment Benefits." The
Company does not presently offer such benefits and, therefore, is not affected
by such pronouncements.
In 1992, the FASB issued SFAS No. 109, "Accounting for Income Taxes," which
was adopted by the Company in 1993. SFAS No. 109 requires determination of
income taxes in accordance with the asset and liability method. The effect of
the adoption of SFAS No. 109 on the Company's Consolidated Financial Statements
in 1993 was not material.
EFFECTS OF INFLATION
The Company believes that the relatively moderate rate of inflation over the
past few years has not had a significant impact on the Company's results of
operations.
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BUSINESS
OVERVIEW
The Company is a leading designer, manufacturer and marketer of branded
consumer products, including personal care and beauty products, telephones and
small kitchen appliances and cookware. The Company's main product groups,
principal products and brand names are highlighted in the following table:
<TABLE><CAPTION>
PRODUCT GROUP PRINCIPAL PRODUCTS BRAND NAMES
- ---------------------------- ------------------------------- -------------------------
<S> <C> <C>
Personal Care Appliances Hair dryers, curling irons, CONAIR(R)
hairsetters and other beauty JHERI REDDING(R)
and grooming appliances. BaByliss(R)
REVLON(R)*
VIDAL SASSOON(R)*
Consumer Electronics Consumer cordless and corded CONAIRPHONETM
telephones and answering Southwestern Bell
machines. FREEDOM PHONE(R)*
CUISINART(R) Products Food processors, mini choppers, CUISINART(R)
cookware and other small
kitchen appliances.
Toiletries and Professional A retail line of liquid hair CONAIR(R)
Salon Products care products and brushes and a JHERI REDDING(R)
professional line of hair care RUSK(R)
appliances and liquid products. BaByliss(R)
</TABLE>
- ------------
* Pursuant to long-term licenses.
The Company has achieved significant growth principally through successful
introduction of new and enhanced products, long-term brand name licensing and
acquisitions. From 1992 through 1994, the Company's net sales grew at a compound
annual rate of 20.4%. During this period, operating income margins have
increased from 6.0% to 8.0% through low cost manufacturing and sourcing and
reduction of overhead expenses as a percentage of sales. The Company's improved
operating results, together with a substantial reduction in interest expense,
have led to significantly increased earnings.
BUSINESS STRATEGY
The Company's strategy is to achieve further revenue and profit growth by:
(i) introducing new products and product enhancements in response to changing
market trends, consumer preferences and technological developments; (ii)
leveraging the Company's market position and strong brand names and broadening
distribution to increase the Company's share of retailers' shelf space; (iii)
pursuing strategic acquisitions and brand licensing; (iv) expanding sales
internationally; and (v) pursuing continued cost reductions and quality
enhancements.
The key elements of this strategy are described below:
CREATE NEW PRODUCTS AND ENHANCEMENTS. The Company derived 40% of its
revenues in 1994 from new or enhanced products introduced over the last three
years. The Company will continue to create and introduce new products and
enhancements in response to changing market trends, consumer preferences and
technological developments. In creating new or enhanced products, the Company
looks for concepts and features that are not offered by existing products and
which the Company can produce at reasonable cost and sell at a price that
reflects the product's added value. The Company uses its advanced computer
design technology and product prototyping capabilities, close coordination of
sales, marketing, design and development personnel and its established
distribution network to introduce new and enhanced products rapidly and
inexpensively. In addition, the Company's professional heritage and strong
presence in the professional salon industry help it stay current with emerging
fashion trends and bring products to the retail market on a timely basis.
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LEVERAGE MARKET POSITION AND BRAND NAMES. Nearly half of the Company's sales
are attributable to products of which it is either the #1 or #2 seller in the
United States. The Company is the #1 seller of hair dryers, curling irons and
high-end food processors in the United States. The Company is also a leading
seller of hair care appliances in Europe. The Company's CONAIR(R), CUISINART(R)
and JHERI REDDING(R) brand names, as well as its licensed Southwestern Bell
FREEDOM PHONE(R) brand name, enjoy wide recognition and awareness among
retailers and consumers in the United States. In a recent survey of top brands
in the United States conducted by Discount Store News, the CONAIR(R) brand name
was rated the #11 "power brand" among over 1,200 brands that were evaluated in
23 retail merchandise categories. The Company will continue to leverage its
brand names to achieve rapid and extensive distribution of its new products and
product line extensions. Recognizing the importance of brand name awareness, the
Company intends to use the BaByliss(R) name and its licensed brand names,
REVLON(R) in Europe and Mexico and VIDAL SASSOON(R) in the Asia Pacific region,
as an integral part of its international expansion strategy. The Company
believes that the ongoing promotion of these licensed brand names by Revlon and
Procter & Gamble, respectively, will also enhance the Company's product
distribution in these new markets.
INCREASE PENETRATION AND DISTRIBUTION. The Company sells to substantially
all of the leading retailers in the United States and believes its distribution
strategy will foster customer retention and increased market penetration. The
recent acquisition of Babyliss provides the Company with similar customer
strength in France and the United Kingdom and an established, well-regarded
European distribution system which will accelerate the Company's growth in that
region. The Company seeks to capture greater retail shelf space and strengthen
its customer relationships by offering retailers (i) a diversified portfolio of
products in several categories, (ii) both brand name products and private label
programs, (iii) products that cover a broad range of price points and (iv) new
and enhanced products. In addition, the Company intends to maintain its high
level of customer service which emphasizes timely delivery, high quality
products, product merchandising and responsiveness to individual customer needs.
As retailers consolidate their supply sources, the Company believes that they
are more likely to purchase products from suppliers, such as the Company that
provide a high level of customer service and offer products in multiple
categories and with multiple price points.
PURSUE STRATEGIC ACQUISITIONS AND BRAND LICENSING. The Company has
supplemented its internal growth through a number of strategic acquisitions and
brand name licensing such as (i) the purchase of certain assets of Cuisinarts
and the expansion of its product offerings, (ii) an exclusive long-term license
for Southwestern Bell's consumer telephone business in the United States, (iii)
an exclusive long-term license to market and sell personal care products under
the REVLON(R) and VIDAL SASSOON(R) brand names in certain international markets,
and (iv) the acquisition of Babyliss. In addition, the Company has used its
strong design, manufacturing and marketing capabilities to substantially grow
businesses and brands that it has acquired. The Company plans to combine its
marketing, product and sourcing expertise with Babyliss' brand name, product
line and distribution system in order to grow and enhance Babyliss' revenues and
profits. In addition, the Company plans to use Babyliss' established
distribution system and brand name to market certain of its other personal care
and professional products, including Revlon licensed products, in Europe. As
part of its growth strategy, the Company plans to pursue additional strategic
acquisitions or alliances and brand licenses to provide synergies with or
complement its existing business.
EXPAND INTERNATIONAL PRESENCE AND SALES. The Company believes that
international markets offer significant potential for expanding its business.
For instance, the Company believes that international markets represent
approximately two-thirds of the potential worldwide market for hair dryers. The
Babyliss acquisition has substantially advanced the Company's international
growth by providing it with a leading European brand name and product offerings
and an extensive distribution system. The Company plans to grow its Babyliss
operations by expanding into new markets and introducing new products currently
marketed in the United States. The Company also believes it will be able to
accelerate the growth of its REVLON(R) licensed products, which it started
selling in mid-1994, by using
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<PAGE>
Babyliss' distribution system. The Babyliss product line complements the
Company's licensed REVLON(R) products and, together with the Company's existing
European private label program, should allow the Company to capture greater
retail shelf space. The Company believes that its low cost, high quality
manufacturing and design capabilities will enable the Company to increase the
profitability of its Babyliss operations.
In other international markets where its brands are less recognized, the
Company will use licensed brand names such as REVLON(R) and VIDAL SASSOON(R).
The Company expects to begin sales of certain personal care appliances under the
VIDAL SASSOON(R) name in Asia in 1995. In the long-term, the Company intends to
introduce products into the international markets from its other product groups
using its growing distribution network. The Company may also seek additional
acquisition opportunities or joint ventures to augment its international brand
offerings and distribution channels.
REDUCE MANUFACTURING AND SOURCING COSTS AND ENHANCE QUALITY. The Company's
flexible manufacturing and sourcing have enabled it to supply competitively
priced, quality merchandise on a timely basis. Most of the Company's products
are manufactured by third-party subcontractors located in Asia and at its
facility in Costa Rica where manufacturing costs are generally recognized as
being less than in the United States. Further, the Company uses its pooled
purchasing strength to lower the cost of raw materials and components for itself
and its suppliers. The Company intends to continue to supply high quality
merchandise in order to achieve sales growth and customer satisfaction. The
Company emphasizes quality control and direct Company oversight of both internal
and subcontracted production processes. The Company maintains employees in Asia,
Canada, Costa Rica, Europe and the United States to supervise manufacturing
processes and/or conduct quality control and product and component testing.
PRODUCTS
PERSONAL CARE APPLIANCES
The Company's personal care appliances, which accounted for 43% of its 1994
sales, include hair dryers, curling irons, curling brushes, hairsetters, body
massagers, lighted make-up mirrors, heating pads, men's grooming appliances and
hair trimmers. Babyliss sells a similar line of hair care appliances and also
sells a line of body care appliances including facial saunas, massagers, foot
spas and hair removal devices. See "--Recent Acquisition" and "--International"
for a fuller discussion of Babyliss.
The Company's personal care appliances are marketed in the United States
principally under the CONAIR(R) brand name, which is a leading brand name in
this product category. In a recent survey of top brands in the United States
conducted by Discount Store News, the CONAIR(R) brand was rated the #11 "power
brand" among over 1,200 brands that were evaluated in 23 merchandise categories
in the retail trade. The designation "power brand" denotes a brand's strength
and performance among mass merchandisers and preference among consumers. The
Company also produces private label appliances for a number of major retail
chains, including several of the leading mass merchandisers in the United
States. By selling its own brand as well as its private label appliances, the
Company is able to offer its customers products with broad price point coverage.
For each year since 1992, the Company has received the Supplier of the Year
award from members of the Suppliers Performance Awards by Retail Categories
(SPARC), recognizing the Company as the #1 supplier to the retail trade.
The principal personal care appliance product of the Company is hair dryers.
The Company introduced the pistol-grip hair dryer in the United States in 1971,
and has since become the leading domestic seller of hair dryers. The Company is
also a leading seller of hair care appliances in Europe. The Company believes
that it is recognized as a major new product innovator in this area. The Company
markets numerous types of hair dryers, including pistol grip, Euro-style, travel
and compact dryers and diffusers. In 1991, the Company introduced its Euro-style
dryer product line, which achieved the highest first year revenues of any hair
dryer in the Company's history.
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<PAGE>
The Company is also the #1 seller of curling iron products in the United
States. The Company has sold and marketed several innovative curling products,
such as the cordless curling iron introduced in 1987, the "Big Curls" iron
introduced in late 1992, which sold over one million pieces in its first full
year of sales and, recently, a new generation of hot-air curling irons.
Sales of hair dryers in the United States were approximately $315 million in
1994, and are increasing at an annual rate of 2%. The Company believes that
approximately 63% of United States hair dryer sales are made to "replacement"
consumers. Accordingly, the Company expects that its revenues from hair dryers
will grow at a slower rate than its revenues from other products. The Company
believes that the CONAIR(R) brand name and its ability to implement product and
design innovations will enable it to maintain its leading position. In addition,
the Company is seeking increased growth in international hair dryer sales and
believes that its acquisition of Babyliss will significantly contribute to that
growth.
The Company's personal care appliances are sold through all principal retail
distribution channels, including mass merchandisers, department stores,
telemarketers, warehouse clubs, drug stores, supermarkets, catalog houses and
showrooms and mail order houses. See "--Customers and Distribution." The Company
believes that the strength of its retail accounts has facilitated acceptance by
its retail customers of the Company's new personal care product lines and
categories. In addition, the Company believes that its recognition in this
industry will facilitate its entry into other personal and beauty care appliance
categories such as ladies' or men's shavers.
CONSUMER ELECTRONICS
The Company's consumer electronics products include standard or basic
telephones, cordless telephones, telephone answering devices and combination
cordless telephone/answering machines. In 1983, the Company commenced selling a
line of consumer telephones under the CONAIRPHONETM brand name and is now the
second largest seller of corded trimline telephones in the United States,
following AT&T. The Company positions its CONAIRPHONETM and PRIMA(R) telephones
as among the least expensive nationally branded telephone products. In 1993, the
Company entered into a licensing arrangement with Southwestern Bell (see
"--License Agreements"), pursuant to which it acquired the exclusive right to
market in the United States cordless and corded one and two-line residential
telephones, answering machines and caller ID devices under the Southwestern Bell
FREEDOM PHONE(R) trademarks and the Bell logo. This licensing arrangement
enables the Company to provide broad price point and product type coverage in
rapidly growing segments of the telephone and telephone-related products market.
Southwestern Bell FREEDOM PHONE(R) is a well-established consumer telephone
brand, with a reputation for quality and reliability.
The Company's consumer electronics products are sold in drugstores, discount
department stores, warehouse clubs, mass merchandisers, electronics stores,
catalog houses and showrooms and mail order houses. See "--Customers and
Distribution." The rapid expansion of the Company's consumer electronics sales,
including the sales of its Southwestern Bell products, has been assisted by the
Company's presence in most of their distribution channels.
CUISINART(R) PRODUCTS
The Company markets small kitchen appliances and cookware under the
CUISINART(R) brand name, including food processors, stainless steel cookware,
accessories and other kitchen appliances such as pasta makers, hand mixers,
chopper/grinders, toasters, blenders and coffee makers. The Company is the #1
seller of high-end food processors in the United States. The Company markets its
CUISINART(R) product line through exclusive distribution channels (principally,
prestigious department stores, specialty shops and gourmet shops, as well as
exclusive catalog order houses), which supports the line's quality image. The
Company expects to further enhance the reputation of its CUISINART(R) products
by sponsoring a series of cooking programs on public television in which
CUISINART(R) products will be
22
<PAGE>
available for use by instructors from the Culinary Institute of America. See
"--Customers and Distribution."
The Company acquired the CUISINART(R) brand name and related net operating
assets from the bankruptcy estate of Cuisinarts in December 1989 for
approximately $17 million. Since the acquisition, the Company has significantly
increased Cuisinarts' revenues and profitability by introducing new products and
product line extensions and improving distribution and supply channels, which
had been severely damaged by its predecessor's financial failure. Since 1990,
the annual compound growth of the Company's sales in this product category has
been approximately 24%. New product introductions included pasta makers,
toasters, hand mixers, blenders and coffee makers. In 1990, the categories which
were covered by the CUISINART(R) product line accounted for only 15% of total
unit sales of all kitchen electrics categories. By 1994, the categories covered
by this product line accounted for 52% of such sales. By offering new
CUISINART(R) products, the Company has strengthened its relationships with
customers such as Federated Department Stores, May Company and Dayton Hudson.
The Company has also expanded the types of distribution channels for its
CUISINART(R) products by marketing its products to exclusive catalog houses.
TOILETRIES AND PROFESSIONAL SALON PRODUCTS
Consumer Toiletries
The Company manufactures and markets consumer toiletries principally under
the JHERI REDDING(R) and CONAIR(R) brand names, including shampoos, conditioners
and hair treatments, and styling aids such as gels and mousses. The Company also
markets hair brushes under the CONAIR(R) brand name. The Company's branded
products are manufactured at the Company's facilities in Rantoul and Highland
Park, Illinois, which also manufactures private label products for its 50% joint
venture with Irvine Rusk, retailers and major health and beauty care companies.
The Company employs a niche strategy in its consumer toiletries business,
which emphasizes salon-type styling and finishing products. The Company's
consumer toiletries and other products are sold through similar distribution
channels, which enables the Company to capitalize on the reputation of its
personal care appliances and consumer electronics products to market and
distribute these products. This, and the Company's niche strategy, results in
minimal direct advertising and promotional expenditures. See "--Customers and
Distribution."
Professional Salon Products
For over 35 years, the Company has been a leading innovator in the
manufacture and marketing of high quality advanced and sophisticated products
designed to meet the needs of professionals in the hair-styling industry. The
Company believes that its introduction and promotion of the pistol grip hair
dryer to the professional hairstyling trade was a major factor in establishing
blow drying as a key element of hairdressing. The Company's professional salon
products include appliances (hair dryers, curling irons and curling brushes),
liquids (shampoos, conditioners, hairsprays, gels, mousses and perms) and
sundries (tipping caps and shears). The Company is a leading seller of
appliances to the professional hairstyling trade, with its professional hair
dryers being the #1 selling professional hair dryers and curling irons in the
industry. The Company's professional salon products are principally marketed
under its CONAIR(R) and JHERI REDDING(R) brand names, as well as its exclusively
professional brands INFINITI(R), RIVA(R), ELEGANTE(R), GRAND FINALE(R) and EURO
COIFFEUR(R). Babyliss also markets a professional line of hair care appliances
and has a significant presence in the European professional beauty trade. The
Company believes that the acquisition of Babyliss will enable it to expand its
range of domestic professional salon products.
The Company works closely with beauty professionals to provide new products
that meet their needs. The Company utilizes the services of part-time
independent educators, who conduct product
23
<PAGE>
testing, as well as training and product demonstrations for beauty
professionals. The Company also conducts product testing and evaluation at its
in-house salon. In addition, the Company has, through its Rusk joint venture,
developed new products exclusively for salons such as its anti-curl treatment
which straightens curly hair without using harsh chemicals that are
characteristic of other hair straighteners. Rusk also employs its own staff of
professional educators who help promote Rusk's line of professional beauty salon
products.
The Company's professional salon products are distributed to professional
salons primarily through beauty and barber supply dealers, as well as directly
to chain beauty stores. Through its Rusk joint venture, the Company markets an
additional line of professional salon products under the RUSK(R) brand name.
The Company's history and continued leading presence in the appliance
section of this market is important to its success in the retail sales of its
personal care appliances and toiletries. The Company believes that its high
quality brand image is enhanced when consumers see beauty professionals using
the Company's appliances and toiletries and believes its presence in the
professional hairstyling industry strengthens its ability to design new products
and adapt styles for the retail marketplace.
PRODUCT DEVELOPMENT AND INNOVATION
Successful new and enhanced product development and introduction has been
and is expected to remain key to the Company's business. The Company creates and
introduces new products and innovations in response to changing market trends,
consumer preferences and technological developments. The Company derived 40% of
its revenues in 1994 from new or enhanced products introduced over the last
three years. The Company uses its advanced computer design technologies and
product prototyping capabilities, close co-ordination of sales, marketing,
design and development personnel and its established distribution network to
introduce new and enhanced products rapidly and inexpensively. In addition, the
Company's professional heritage and strong presence in the professional salon
industry help it to stay current with emerging fashion trends and bring products
to the retail market on a timely basis. The Company has also developed and
enhanced the product categories it has acquired or licensed to successfully grow
these businesses.
The Company's new products and product enhancements range from minor changes
in colors or features to significant new functional capability. In creating new
or enhanced products, the Company looks for concepts and features that are not
offered by existing products and which the Company can produce at reasonable
cost and sell at a price that reflects the product's added value. The Company
introduced its Euro-style hair dryer line in 1991 and the innovative "Big Curls"
iron in 1992. New products introduced by the Company in 1994 include the hot-air
curling iron, ladies' shavers and the Company's Magical Mane hair shampoo and
conditioner. In 1995, the Company expects to market value-priced, high quality
speaker-phones. In the Consumer Electronics Show held in January 1995, the
Company was recognized with several Innovations in Design awards for its design
and engineering excellence. These included awards for its ergonomic "S" Series
line of cordless telephone and cordless answering systems and telephone
answering systems with an industry first--the CallkeeperTM metallic answering
system. Since its acquisition of the CUISINART(R) brand name, the Company has
introduced new products such as toasters, coffee makers, blenders and hand
mixers to this line of products. In 1995, the Company expects to launch a new
line of CUISINART(R) coffee makers, as well as espresso machines and coffee
grinders and mills, and to market a line of non-stick cookware.
RECENT ACQUISITION
On February 18, 1995, the Company completed the acquisition of the
outstanding capital stock of Babyliss for a purchase price of approximately
$38,000,000, subject to a maximum downward adjustment of approximately
$4,000,000. Babyliss is a leading designer, manufacturer and marketer of
personal care appliances and skin and body care products to retailers and the
professional beauty trade
24
<PAGE>
in France, the United Kingdom and other parts of Western Europe. In 1994,
Babyliss had consolidated net sales of $ million and an operating profit of
$ million.
Babyliss sells its products primarily in France, Belgium, the Netherlands,
the United Kingdom, Germany, Sweden and Spain, accounting for approximately %
of its 1994 consolidated net sales. Babyliss markets its products principally
under the widely recognized BaByliss(R) brand name through substantially all of
the European distribution channels for such products. Babyliss also supplies
products to the professional beauty trade in Europe, with sales accounting for
approximately 10% of its 1994 consolidated net sales. Babyliss obtains
approximately 70% of its product from outside suppliers as finished products,
many of whom are the same suppliers as those used by the Company. In addition,
approximately 30% of the products sold by Babyliss and its subsidiaries are
assembled at Babyliss' Belgian assembly facility. The Company believes that the
acquisition of Babyliss will create efficiencies in manufacturing and sourcing
and will provide a research and development staff that will assist the Company
in designing products that meet the technical requirements for European markets.
The general managers of Babyliss' subsidiaries in the United Kingdom, the
Netherlands, Germany and Belgium own minority interests in such subsidiaries.
The Company is currently negotiating the purchase of these minority interests
and anticipates that the aggregate purchase price for such interests will not be
material to the Company.
While the Company believes that Babyliss can be integrated with the Company
successfully, there can be no assurance that these expectations will be
realized. The current president of Babyliss has agreed to continue in the
employment of Babyliss for a two year period. The Company believes that this
will facilitate the transition to the Company's ownership. In addition, the
Company has performed certain business and legal review of Babyliss and its
subsidiaries. Despite such investigation, there can be no assurance that there
do not exist liabilities which could have a material adverse effect on Babyliss
or the Company.
INTERNATIONAL
The Company believes that international markets offer significant potential
for expanding its business. For instance, the Company believes that
international markets represent approximately two-thirds of the potential
worldwide market for hair dryers. In addition, while the domestic market for
hair dryers is primarily replacement-oriented, the Company believes that the
worldwide market for such products is less mature. International sales represent
the fastest growing portion of the Company's revenues. Such sales, which have
been primarily in Canada, Western Europe and Mexico, grew at a compound annual
rate of 22% from 1992 to 1994 and represented approximately 5% of net sales in
1994. Giving effect to the acquisition of Babyliss, the Company's international
sales on a pro forma basis would have been % in 1994. The Company's
international strategy is to (i) expand Babyliss' operations into new markets
and capture greater retail shelf space, (ii) complement Babyliss' product
offerings with the Company's REVLON(R) and other consumer appliance products,
(iii) use internationally recognized licensed brand names, such as VIDAL
SASSOON(R), in certain foreign markets and (iv) introduce products from the
Company's other product groups into the Company's international distribution
channels.
Through Babyliss, the Company is a leading designer, manufacturer and
marketer of personal care appliances in Europe. Babyliss provides the Company
with a leading European brand name and product offerings and an extensive
distribution system. The Company plans to grow its Babyliss operations by
expanding into new markets and introducing new products currently marketed in
the United States. The Company also believes it will be able to accelerate the
growth of its REVLON(R) licensed products, which it started selling in mid-1994,
by using Babyliss' extensive European distribution system. The Babyliss product
line complements the Company's licensed REVLON(R) products and, together with
the Company's existing European private label program, should allow the Company
to capture greater retail shelf space by offering retailers (i) a diversified
portfolio of products in several categories, (ii) both brand name products and
private label programs and (iii) products that cover a full range of price
points. The Company believes that its low cost, high quality manufacturing and
design capabilities will enable the Company to increase the profitability of its
Babyliss operations.
25
<PAGE>
The Company intends to introduce personal care products under the REVLON(R)
name in Mexico and the VIDAL SASSOON(R) name in certain countries in the Asia
Pacific region in 1995. By using brand names that are well-recognized in the
relevant local market, the Company will be able to penetrate new markets without
incurring the substantial start-up costs normally associated with establishing a
brand name in a new market. In addition, the Company will be able to benefit
from the advertising and promotion activities undertaken by the licensors of
licensed brand names. The Company may seek additional acquisition opportunities
or joint ventures to augment its international brand offerings and distribution
channels.
CUSTOMERS AND DISTRIBUTION
The Company sells to substantially all of the largest retailers in the
United States and is a leading supplier in its product categories to mass
merchandisers. The Company's domestic customers include Kmart Corp., WalMart,
Target, Williams-Sonoma, Federated Department Stores, Price/Costco, Best Buy and
Sally Beauty Supply. The Company assists its retail customers with their
merchandising strategy, including designing product displays to achieve
favorable product placement, which is an important factor in the Company's
distribution strategy. The Company also supports its customers through a variety
of programs, including inventory control and management information systems and
the availability of electronic data interchange (EDI). In 1994, over 60% of the
Company's sales were processed through the EDI system through which certain
customers electronically place orders with the Company.
The Company's net sales to its two largest retail accounts, WalMart and
Kmart Corp. accounted for approximately 12% and 11%, respectively, of the
Company's net sales for the year ended December 31, 1994. WalMart and Kmart
Corp. accounted for approximately 11% of the Company's net sales during 1993.
By operating its own manufacturing facilities and closely monitoring the
operations of its subcontractors, the Company is able to provide timely shipment
of its products and adjust production requirements to meet the needs of its
retail customers. See "--Manufacturing and Sourcing." In order to respond
efficiently to the demands of its retail customers, the Company utilizes both
direct shipments of its products from overseas to its retail customers, as well
as shipments out of the Company's domestic warehouse inventory. The Company's
three distribution facilities, in East Windsor, New Jersey, Phoenix, Arizona,
and Rantoul, Illinois (see "--Properties"), facilitate prompt delivery response
to reorders and stock-outs. During 1994, the Company utilized temporary
facilities in independent warehouses during peak inventory periods. The Company
recently commenced construction of a 350,000 square foot state-of-the-art
warehouse and distribution facility in Glendale, Arizona to increase its
distribution capacity and replace its Phoenix facility. The Glendale facility is
scheduled for completion by the end of 1995.
The recent acquisition of Babyliss provides the Company with similar
customer relationships in France and an established and well-regarded European
distribution system. Babyliss customers include leading department stores,
hypermarket chains and drug stores such as Galeries Lafayette, Harrods, Boots
and Argos. Outside the United States and certain European markets, the Company
may establish its own distribution network or appoint existing distributors to
market its products. In 1993, the Company opened its own sales office in the
United Kingdom. The Company plans to consolidate this operation with Babyliss'
United Kingdom operations. The Company and Babyliss have negotiated distribution
arrangements with distributors, in the case of the Company, in Greece, Ireland,
Scandinavia and Mexico and, in the case of Babyliss, the People's Republic of
China, Japan and Spain, to sell its personal care appliance products.
26
<PAGE>
SALES AND MARKETING
The Company believes that its sales and marketing ability has been key to
its success. Sales strategies vary across product lines and reflect the needs of
retail customers and consumers.
The Company's products, with the exception of its professional salon
products, are sold in the United States and Canada through over 400 independent
sales representatives who are supervised by the Company's internal sales staff
and paid on a commission basis. The Company's internal sales staff is organized
by its product groups and consists of a total of eight sales managers, 25
regional sales managers and 29 related support staff. The Company's sales
managers are actively involved in servicing all retail accounts. Sales managers
and representatives assist the Company's customers with merchandising and
inventory management. Each regional sales manager supervises the activities of
the independent sales representatives. A significant portion of the Company's
sales, including those to WalMart and Kmart Corp., are managed as house accounts
serviced by its own sales force, on which no commissions are paid. The Company's
professional salon products are principally distributed through beauty and
barber supply dealers. These sales are conducted for the Company by independent
sales organizations and the Company's own sales personnel.
The Company maintains a customer service department in its East Windsor, New
Jersey and Phoenix, Arizona facilities, which provide toll-free customer service
telephone numbers for end-users of its products. This customer service
department assists with product operation, answers any other product-related
queries and arranges repairs for products under warranty. Calls are monitored
and recorded to assure consistent quality. The customer service line enables the
Company to have direct contact with, and obtain feedback from, end-users of the
Company's products.
The Company conducts a wide variety of advertising and promotional
activities. It participates with its retail customers in extensive co-operative
advertising programs in order to maximize product sell-through, which the
Company believes is the most cost-effective means of advertising. The Company
has supplemented its co-operative advertising with national television and print
advertising for its branded products, particularly products that are
demonstrably different from those of its competitors. The Company has spent
approximately $137 million on product promotion over the past five years,
including co-operative advertising, magazine advertising, television advertising
and infomercials. With its licensed international brands, REVLON(R) and VIDAL
SASSOON(R), the Company believes it will be able to benefit from the name
recognition and promotional activities of the beauty products and cosmetics
which are sold by Revlon and Procter & Gamble, respectively, under these names.
The Company's unique packaging is a powerful point-of-purchase sales tool
because consumers typically purchase personal and beauty care products without
the assistance of knowledgeable retail sales staff. To more effectively promote
its products and illustrate product features and usage, the Company also
utilizes point-of-sale displays, in-store demonstrations, promotions and product
analysis.
The Company's advertising and promotional efforts are supported by its
in-house creative services department. The creative staff designs and produces
the packaging, sales material and advertisements for all product groups. All
work is created and executed on a state-of-the-art computer system.
Babyliss has also spent significant amounts on advertising, promotion and
marketing. Babyliss maintains a permanent retail sales staff of persons and
hires approximately [100] demonstrators at the points of sale. Babyliss also
maintains [34] independent sales and demonstration stands in major department
stores in France which are staffed by its own personnel. Babyliss uses
inspectors who travel in a geographic region and visit stores and supervise
demonstrators. The professional marketing is headed by one full-time employee
and [eight] independent salesmen working on a commission basis.
MANUFACTURING AND SOURCING
The Company manufactures its products in its own production facilities in
Costa Rica and Illinois and through third-party subcontractors in the People's
Republic of China, Hong Kong, Taiwan,
27
<PAGE>
Indonesia, Japan, Malaysia, Philippines, South Korea, Italy, Belgium and
Germany. The management, coordination and control of third-party subcontracting
operations are centralized at the offices of its wholly-owned subsidiary in Hong
Kong. The Company also owns an assembly plant in Belgium which manufactures
approximately 30% of Babyliss' products. The remainder of Babyliss' products are
manufactured by third-party subcontractors in Asia, some of which also supply
the Company. The Company believes that it will be able to reduce the cost of
certain Babyliss products by using its sourcing expertise and applying
purchasing leverage to Babyliss' existing suppliers. The Company selects
subcontractors which are capable of producing sufficient quantities of superior
quality products at competitive costs and on acceptable delivery schedules.
Substantially all tooling and molds utilized by subcontractors in the
manufacturing of the products of the Company are owned by the Company. The
Company also has the right to use all tools owned or controlled by Southwestern
Bell for the manufacture, sale and marketing of the Southwestern Bell FREEDOM
PHONE(R) products. In 1994, approximately 85% of the Company's products, as
measured by the cost of products, were sourced overseas from owned or
subcontracted facilities.
The Company's Hong Kong subsidiary coordinates the Company's sourcing
program in Asia. It provides materials, component and packaging procurement,
production supervision and scheduling, engineering support, quality assurance
and control and shipment tracking services. The Hong Kong subsidiary employs
approximately 170 employees and independent consultants in this program.
The Company owns a vertically-integrated, personal care appliance
manufacturing plant in Costa Rica, which started production in 1989. Because of
the facility's proximity to the United States, deliveries of products to markets
in the United States, Canada, Mexico and Latin America can be timely made on
relatively short notice. Capabilities of the Costa Rica facility include plastic
injection molding, production of water immersion detection plugs, heaters and
line cords and final assembly. The Costa Rica facility is located in a free
trade zone and receives tax benefits and reductions in duties for imports into
the United States; furthermore, exports from the Costa Rica facility to Mexico
and Central America enjoy favorable duty treatment. In 1994, approximately 12%
of the Company's products, as measured by the cost of products, were
manufactured in this facility.
During 1989, the Company purchased a manufacturing facility in Rantoul,
Illinois to produce toiletry products. The Rantoul facility supplies
substantially all of the current liquid product requirements of the Company's
consumer toiletries and professional salon products group, and manufactures
private label products for major health and beauty care companies such as Revlon
Professional and Biersdorf. The facility has the capability to produce a wide
variety of products ranging from permanent wave products and shampoos to
hairsprays and gels. The facility runs automated aerosol, liquid and stick
filling and tableting lines, as well as powder, paste and gel-filling
operations. This facility is registered with the Food and Drug Administration as
a manufacturer and distributor of cosmetics, drugs and medical products. In
November 1993, the Company started production of private label toiletry and
household maintenance products such as "ice-melt" and trial-size packettes for
its Northstar division at a leased manufacturing facility in Highland Park,
Illinois.
Quality assurance is particularly important to the Company. The Company
maintains rigid quality controls and extensively tests its products. The
Company's personnel perform source inspections of the Company's suppliers, and
laboratory approval is required before any products are released for
distribution. The Company conducts quality control and product and component
testing in each of its manufacturing facilities. The Company also maintains a
permanent quality control staff in its Hong Kong operations and the People's
Republic of China to assure the quality of products produced by the Company's
independent suppliers and raw materials suppliers. The Company has personnel
stationed in other countries in Asia, such as Malaysia, Indonesia and Taiwan, to
work closely with and constantly monitor the quality of products manufactured by
its subcontractors and to expedite orders. In-house research and development and
testing of the Company's liquid products is supplemented by independent research
and development laboratories and testing salons.
28
<PAGE>
COMPETITION
The Company believes that the markets for all of its product categories are
highly competitive and that competition is based on several factors, including
price, quality, access to retail shelf space, product features and enhancements,
brand names, new product introduction and marketing support and distribution
capabilities.
The Company competes with established companies, a number of which have
substantially greater resources than those of the Company. The Company's
business is not characterized by substantial regulatory or economic barriers to
entry of new competitors. In addition, the general availability of offshore
manufacturing capacity allows easy access by new market entrants. There can be
no assurance that the Company will be able to compete successfully against
current and future sources of competition or that the competitive pressures
faced by the Company will not adversely affect its profitability or financial
performance.
The Company believes that its ability to compete successfully is based on
the wide recognition of its own brand names and licensed brands, its ability to
design, develop, manufacture and market competitively priced products, its broad
product coverage within each product category, its attention to retailer and
consumer needs and its access to major channels of distribution.
RAW MATERIALS
The Company purchases component parts and raw materials for its
manufacturing operations from numerous suppliers and does not believe that it is
dependent on any single supplier for any specific raw material or any
significant portion of its raw material purchases. Accordingly, the Company
believes that the loss of any supplier of raw materials to the Company would not
have a material adverse effect on the Company. The Company has not experienced
any material shortage of component parts or materials in recent years.
SEASONALITY
The Company's business is subject to certain seasonal fluctuations, with net
sales in the second half of the year generally benefitting from increased levels
of retail purchasing in the late summer for "back to school" sales and in the
fall for the Christmas selling period. Historically, approximately 60% of the
Company's sales and 70% of its operating profit are achieved in the second half
of the year.
TRADEMARKS AND PATENTS
CONAIR(R), BaByliss(R), CUISINART(R) and JHERI REDDING(R) are registered
trademarks of the Company. The Company also holds a large number of other
trademarks and patents registered in the United States for various products and
designs. The Company believes that none of its product lines is dependent upon
any single patent, group of patents or other intellectual property rights.
The Southwestern Bell name, FREEDOM PHONE(R) and Bell logo are registered
marks of Southwestern Bell Telecommunications, Inc. The mark REVLON(R) is owned
by Revlon Consumer Products Corporation and the mark VIDAL SASSOON(R) is owned
by Richardson-Vicks, Inc., a subsidiary of Procter & Gamble Co.
The Company recently received a letter from Braun AG in Germany asserting
that a "volumizing pic" attachment included with a hair dryer model currently
being distributed by the Company in the United Kingdom falls within the scope of
a patent application Braun has filed with the European Patent Office. Braun
stated that it expects the patent to issue before the end of June 1995. The
Company believes that Braun's claim is unfounded. The model in question, in any
event, is in the process of being replaced by a new, improved model. The Company
believes that the new model is not covered by Braun's patent application.
29
<PAGE>
The Company has also recently received correspondence from counsel
representing Premier Networks, Inc. ("PNI") asserting that certain of the
Company's telephone products infringe patents held by PNI. The Company believes
that PNI's claim is unfounded.
LICENSE AGREEMENTS
In 1993, the Company acquired exclusive rights under a Licensing and
Distribution Agreement with Southwestern Bell Telecommunications, Inc. to
manufacture and market single and dual-line telephones, including accessories
and ancillary items, such as answering machines and caller ID machines, under
the Southwestern Bell FREEDOM PHONE(R) name and the Bell logo. The Licensing and
Distribution Agreement covers the retail market in the United States and its
possessions and is for a total term of 25 years, with an initial term of 15
years, renewable at the Company's option for two successive terms of five years
each.
The Company entered into licensing arrangements in 1993 and 1994,
respectively, to acquire the exclusive rights to manufacture and distribute
personal care appliances, professional products and accessories such as hair
dryers, curling appliances, lighted mirrors and personal hair products (other
than liquids) under the REVLON(R) and VIDAL SASSOON(R) names, respectively. The
REVLON(R) agreement, which was entered into in 1993 with Revlon Consumer
Products Corporation, grants the Company exclusive rights for Western Europe,
Scandinavia and Mexico for an initial term of 20 years, renewable at the
Company's option for two consecutive 10-year periods. The VIDAL SASSOON(R)
license entered into by the Company in 1994 with Richardson-Vicks, Inc., a
subsidiary of Procter & Gamble Co., extends to countries in the Asia Pacific
region and is for a term of 20 years, expiring in 2013.
Each of the three license agreements described above require the Company to
pay royalties based on a percentage of sales or a prescribed minimum fee,
whichever is higher. In each case, the failure to pay such royalties permits the
licensor to terminate the licenses. In addition, both the REVLON(R) and VIDAL
SASSOON(R) licenses are terminable by the licensor if the Company fails to meet
certain sales targets. The Company has paid all royalties due and owing under
each of the license agreements and has no reason to believe that it will not be
able to continue to meet such obligations in the future.
PROPERTIES
The following table sets forth certain information concerning the Company's
properties as of March 24, 1995:
<TABLE><CAPTION>
BUILDING OWNED/
LOCATION AREA LEASED DESCRIPTION
- ------------------------- -------- ------ ------------------------------------------------
<S> <C> <C> <C>
(SQ.FT.)
East Windsor, NJ 431,000 Owned Executive offices, warehouse/distribution and
repair facility
Rantoul, IL 273,000 Owned Manufacturing and distribution facility
Zona Industrial De 233,000 Owned Costa Rica manufacturing facility and warehouse
Cartago, Costa Rica
Stamford, CT 165,000 Owned Executive offices
Phoenix, AZ 124,000 Owned Warehouse/distribution facility and offices
Wandre, Belgium 46,000 Owned Assembly facility, warehouse and offices
Valenciennes, France 37,000 Owned Warehouse/distribution facility
Highland Park, IL 67,000 Leased Manufacturing facility
Toronto, Ontario, Canada 34,000 Leased Warehouse/distribution facility and offices
Breda, Netherlands 19,300 Leased Warehouse and offices
Hong Kong 16,500 Leased Continental Conair Ltd. offices
Dusseldorf, Germany 13,500 Leased Warehouse and offices
Montrouge, France 8,600 Leased Babyliss S.A. offices
</TABLE>
30
<PAGE>
Also, during 1992, 1993 and 1994, temporary facilities in independent
warehouses were utilized to service the Company during peak inventory periods.
The Company's facilities are generally modern and efficient and in satisfactory
working condition. The Company also owns 100 acres of vacant land in Glendale,
Arizona, on which it has commenced construction of a 350,000 square foot
state-of-the-art warehouse and distribution facility. Construction of this
facility is scheduled to be completed by the end of 1995.
LEGAL PROCEEDINGS
The Company is, from time to time, a party to litigation that arises in the
normal course of its business operations. The Company does not believe it is
presently a party to litigation that will have a material adverse effect on its
business or operations. See "--Trademarks and Patents."
EMPLOYEES
As of February 28, 1995, the Company and its subsidiaries, including
Babyliss, employed approximately 3,200 persons. The Company's employees are not
represented by any labor union. The Company considers its relationship with its
employees to be satisfactory.
REGULATION
The Company is subject to federal, state and local regulations in the United
States and in the foreign countries in which it has operations concerning
occupational safety and health, trade-related issues and consumer products
safety. In addition, the Company, like most manufacturing enterprises, is
subject to a variety of federal, state and local statutes and regulations
governing environmental matters, including, but not limited to the Resource
Conservation and Recovery Act and the Clean Air Act. Because the Company's
operations generate hazardous materials, which are disposed of at off-site
facilities, it is possible that the Company could be named as a potentially
responsible party under the Comprehensive Environmental Response Compensation
and Liability Act for costs associated with investigating and remediating any
contamination at such sites. To date, the Company has not, to the best of its
knowledge, been named as a potentially responsible party. The Company has not
experienced significant difficulty in complying with such statutes or
regulations, and compliance has not had an adverse effect on the Company's
business.
In the United States, Canada and Europe, most governmental authorities
require Underwriters Laboratory, Inc. or other comparable safety regulation
certification prior to marketing consumer electrical appliances in those
jurisdictions. All of the personal care appliances marketed by the Company have
such certifications or the equivalent thereof. Certain of the products sold by
the Company in the United States are subject to the cosmetic purity and
labelling provisions of the Fair Packaging and Labelling Act and certain rules
and regulations of the Federal Food and Drug Administration.
31
<PAGE>
MANAGEMENT
The following table sets forth certain information regarding the executive
officers and directors of the Company as of January 31, 1995:
<TABLE><CAPTION>
NAME AGE POSITION WITH THE COMPANY
- ------------------------- ---- ---------------------------------------------------
<S> <C> <C>
DIRECTORS
Leandro P. Rizzuto(3) 56 Director, Chairman and President
Melvin L. Braun(1) 73 Director
Maurice Lucas 61 Director and Executive Vice President
John P. Lomenzo(1)(2) 79 Director
Walter Margulies(3) 85 Director and Secretary
David Sommer(1)(2) 77 Director
Uzi Zucker 59 Director
SENIOR EXECUTIVE OFFICERS
Ronald T. Diamond 43 Senior Vice President, Consumer Appliances and
Consumer Toiletries
Barry Haber 44 Senior Vice President, Consumer Electronics and
Cuisinarts
Eugene C. Marotta 42 Senior Vice President, Professional
John J. Mayorek 47 Senior Vice President, Administration
Patrick P. Yannotta 58 Senior Vice President, Finance
EXECUTIVE OFFICERS
Paul M. Ackels 54 Vice President, Cuisinarts, Marketing
Ann Marie Cioffi 46 Vice President, Human Resources
Ralph R. Coccaro 44 Vice President, Professional, Marketing
John Denis 47 Vice President, Consumer Toiletries, Sales and
Marketing
John T. Errett 64 Vice President, Strategic Services
Maryellen Flynn 55 Vice President, Creative Services
Stuart D. Fox 52 Vice President, Sales, Retail Appliances
Barbara Hodges-Leinhart 49 Vice President, Quality Control and Research and
Development-Rantoul
Kevin R. Hudak 41 Senior Group Controller
John B. Kilroy 52 Vice President, Treasurer
Frank Lindsey 45 Vice President, Consumer Appliances, Marketing
Richard A. Margulies 48 Vice President, Legal and Assistant Secretary
Jaime M. Morozowski 43 Vice President, Consumer Toiletries, Marketing
Jules Nachtigal 56 Vice President, Consumer Toiletries, Research and
Development
Thomas M. Perko 45 Vice President, Consumer Electronics, Sales
James A. Porcelli 39 Vice President, Corporate Controller
Denis Rizzuto 31 Vice President, Private Label Liquids, Sales and
Marketing
John A. Rusk 51 Vice President, Purchasing and Planning
Kenneth Russo 40 Vice President, Professional, Sales
Ludwig Salce 60 Vice President, Perm Development
Anthony P. Solomita 33 Vice President, Consumer Electronics, Marketing
Jack W. Wilson II 41 Vice President, Cuisinarts, Sales
</TABLE>
- ------------
(1) Member of the Audit Committee of the Board of Directors.
(2) Member of the Executive Committee of the Board of Directors.
(3) Member of the Compensation Committee of the Board of Directors.
32
<PAGE>
Leandro P. Rizzuto is the founder of Conair and has served as the Company's
Chairman and President for more than the past five years. He was elected to the
Board of Directors of the Company's predecessor in 1959. He is the father of
Denis Rizzuto.
Melvin L. Braun was elected to the Board of Directors of the Company in
1987. He was a partner in the accounting firm of Deloitte & Touche LLP (and its
predecessor firms) from 1960 until his retirement in 1987. Mr. Braun is also a
member of the Board of Directors of Shorewood Packaging Corp.
Maurice Lucas has served as a member of the Company's Board of Directors
since 1973 and Executive Vice President of the Company for more than the past
five years.
John P. Lomenzo, a director of the Company since 1975, is a former Secretary
of State of New York and has been a partner in the law firm of Field, Lomenzo &
Turret, P.C. for more than the past five years.
Walter Margulies, a director and Secretary of the Company, has been a
partner in the law firm of Margulies & Margulies, P.C., General Counsel to the
Company, for more than the past five years. Mr. Margulies became a director of
the Company in 1966 and is the father of Richard A. Margulies.
David Sommer was elected to the Board of Directors of the Company in 1980.
Mr. Sommer is a retired Senior Vice President of Rite Aid Corporation. Mr.
Sommer is also a member of the Board of Directors of Cytologics, Inc.
Uzi Zucker became a director of the Company in 1985. He is a Senior Managing
Director of Bear, Stearns & Co. Inc. and a member of the Board of Directors of
the parent company, The Bear Stearns Companies Inc. In the United States, Mr.
Zucker is also a director of Carnival Corporation and Titan Pharmaceuticals Inc.
In Israel, Mr. Zucker is Chairman of the Board of Alliance Tire Company (1992)
Ltd. and a director of The Jerusalem Economic Corporation Ltd., Industrial
Buildings Corp. Ltd., Tnuport Ltd. and Mivnat Ltd.
Ronald T. Diamond has served as Senior Vice President, Consumer Appliances
and Consumer Toiletries for more than the past five years.
Barry Haber has served as Senior Vice President, Consumer Electronics and
Cuisinarts since June 1990. Prior to that, he was Senior Vice President and
General Manager of the Consumer Electronics Division.
Eugene C. Marotta has served as Senior Vice President, Professional Division
for more than the past five years.
John J. Mayorek has served as a Senior Vice President, Administration for
more than the past five years.
Patrick P. Yannotta has served as Senior Vice President, Finance since
December 1993. From December 1985 to December 1993, he was Vice President,
Finance.
Paul M. Ackels has served as Vice President, Cuisinarts, Marketing since May
1990 and was Vice President, Sales, Hamilton Beach, Inc. from June 1988 to
February 1990.
Ann Marie Cioffi has served as Vice President, Human Resources since June
1990. From 1986 to June 1990, she was Corporate Director, Human Resources.
Ralph R. Coccaro has served as Vice President, Professional, Marketing since
October 1994. Prior to joining the Company, he was Director of Marketing for
ABBA Pure & Natural Products from August 1993 to September 1994. Prior to that,
he was Senior Vice President, Business Development for Sebastian International
Inc. from January 1993 to August 1993 and for the prior two years Vice
President, Sales and Marketing. Prior to that, he was General Manager of Berner
Company.
33
<PAGE>
John Denis has served as Vice President, Consumer Toiletries, Sales and
Marketing for more than the past five years.
John T. Errett has served as Vice President, Strategic Services for more
than the past five years.
Maryellen Flynn has served as Vice President, Creative Services since April
1993. Prior to that, she was a consultant to Shiseido International Co. from May
1992 to March 1993 and Vice President, Co-Creative Director for Grey Advertising
from 1986 to 1992.
Stuart D. Fox was appointed Vice President, Sales, Retail Appliances
effective January 1, 1995 and prior to that was Vice President, Sales for
Hamilton Beach--Proctor/Silex, Inc. from January 1984 to December 1994.
Barbara Hodges-Leinhart has served as Vice President, Quality Control and
Research and Development-Rantoul for more than the past five years.
Kevin R. Hudak has served as Senior Group Controller since January 1994. He
was Divisional Controller from June 1990 to December 1993 and Special Assistant
to the President from September 1989 to June 1990.
John B. Kilroy has served as Vice President, Treasurer since December 1993
and was appointed Treasurer of the Company in August 1990. He served as Director
of Corporate Finance for Betz Laboratories, Inc. from 1973 to 1989.
Frank Lindsey has served as Vice President, Consumer Appliance, Marketing
for more than the past five years.
Richard A. Margulies has served as Vice President, Legal since August 1990
and was Corporate Counsel prior to that. Mr. Margulies is the son of Walter
Margulies, a Director and Secretary of the Company.
Jaime M. Morozowski has served as Vice President, Consumer Toiletries,
Marketing for more than the past five years.
Jules Nachtigal has served as Vice President, Consumer Toiletries, Research
and Development for more than the past five years.
Thomas M. Perko has served as Vice President, Consumer Electronics, Sales
since January 1993. Prior to that, he was National Sales Manager, Consumer
Electronics from November 1990 to December 1994 and prior to that was Regional
Sales Manager, Consumer Electronics.
James A. Porcelli was appointed Vice President, Corporate Controller in
December 1994. Mr. Porcelli served as Corporate Controller of the Company from
December 1985 to December 1994.
Denis Rizzuto has served as Vice President, Private Label Liquids since
December 1992. Prior to that, he was Director of Sales/Marketing of Private
Label Liquids from September 1989 to December 1992. Mr. Rizzuto is the son of
Leandro P. Rizzuto.
John A. Rusk has served as Vice President, Purchasing and Planning for more
than the past five years.
Kenneth Russo has served as Vice President, Professional, Sales since
September 1994. Prior to that he was Director of Marketing, Professional from
July 1989 through August 1994.
Ludwig Salce has served as Vice President, Perm Development since February
1993. Prior to joining the Company, he was Director, Perm Technology of Zotos
International, Inc.
Anthony P. Solomita was appointed Vice President, Consumer Electronics,
Marketing in December 1994. From 1993 to 1994, he was Director of Marketing,
Consumer Electronics and from 1990 to 1992, he was Marketing Manager, Consumer
Electronics.
34
<PAGE>
Jack W. Wilson II has served as Vice President, Cuisinarts, Sales since
October 1992 and was National Sales Manager, Cuisinarts from November 1990 to
September 1992. Prior to that, he was Regional Sales Manager, Consumer
Electronics.
BOARD COMMITTEES, COMPENSATION AND TERMS OF OFFICE
The Board of Directors currently maintains an Executive Committee, an Audit
Committee and a Compensation Committee. Messrs. Lomenzo and Sommer are members
of the Executive Committee, Messrs. Braun, Lomenzo and Sommer are members of the
Audit Committee and Messrs. Margulies and Rizzuto are members of the
Compensation Committee. Mr. Rizzuto is President of the Company. Directors
receive $3,000 for each meeting of the Board of Directors and $1,000 for each
Executive, Audit and Compensation Committee meeting attended. Directors who are
also officers, as well as directors who are also consultants or legal advisors
to the Company, receive no additional compensation for services rendered as a
director. All directors hold office until the next meeting of the stockholders
of the Company and until their successors are elected and qualified. Approval of
the Company's independent directors will be required in connection with
transactions between the Company and related parties.
EXECUTIVE COMPENSATION
The following table sets forth the compensation paid by the Company to the
Company's chief executive officer and each of the four most highly compensated
executive officers of the Company whose aggregate cash compensation exceeded
$100,000, in each case for all services rendered during the fiscal years ended
December 31, 1992, 1993 and 1994:
<TABLE><CAPTION>
LONG-TERM COMPENSATION
ANNUAL COMPENSATION
--------------------------- ------------------------
OTHER RESTRICTED SECURITIES
NAME ANNUAL STOCK UNDERLYING
PRINCIPAL POSITION YEAR SALARY BONUS COMPENSATION(1) AWARDS OPTIONS
- ---------------------------- ---- ---------- -------- --------------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Leandro P. Rizzuto.......... 1994 $1,000,000 $ -- $51,200
Chairman and President 1993 1,750,000 300,000 53,400
1992 1,750,000 -- 56,300
Ronald T. Diamond........... 1994 446,000 200,000 17,300
Senior Vice President, 1993 398,000 150,000 20,200
Consumer Appliances and 1992 356,000 100,000 24,300
Consumer Toiletries
Barry Haber................. 1994 356,000 150,000 20,600
Senior Vice President, 1993 316,000 125,000 23,600
Consumer Electronics and 1992 280,700 100,000 25,700
Cuisinarts
John J. Mayorek............. 1994 275,600 108,800 14,900
Senior Vice President, 1993 250,600 35,000 18,800
Administration 1992 228,600 25,000 22,000
Richard A. Margulies........ 1994 259,800 65,000 18,900
Vice President, Legal and 1993 229,800 60,000 22,500
Assistant Secretary 1992 204,800 50,000 31,100
</TABLE>
- ------------
(1) Includes amounts paid or reimbursed by the Company to purchase life and
disability insurance under its Executive Life and Disability Insurance
Program which benefits officers of the Company, amounts paid by the Company
for medical reimbursement under the Company's Executive Medical
Reimbursement Plan which benefits officers and amounts set aside for these
individuals under the Company's Profit Sharing Plan and Employee Stock
Ownership Plan. (The Company's Employee Stock Option Ownership Plan was
merged into the Profit Sharing Plan, effective December 31, 1994.)
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<PAGE>
EMPLOYMENT AGREEMENT
The Company and Leandro P. Rizzuto are parties to an employment agreement
dated June 20, 1985, for a term through June 30, 1996, subject to automatic
renewals of successive one-year periods, pursuant to which the Company employs
Mr. Rizzuto as Chairman and President of the Company at a base annual salary and
incentive compensation to be determined annually by the Executive Committee of
the Board of Directors. Mr. Rizzuto receives insurance and other benefits in
accordance with the Company's practice.
EMPLOYEES AND DIRECTORS STOCK PLAN
The Conair Corporation Employees and Directors Stock Plan (the "Plan") was
adopted by action of the Company's Board of Directors on December 15, 1994, and
approved by the Company's sole common stockholder on December 22, 1994. A
maximum of 2.5 million shares of Class A Common Stock (subject to adjustment as
described below) have been reserved by the Company for issuance under the Plan
pursuant to options and restricted stock awards under the Plan.
The Plan is administered by a committee of the Company's Board of Directors
(the "Committee"), the composition of which may be intended to satisfy the
provisions of Rule 16b-3 under the Securities Exchange Act of 1934, as amended,
and section 162(m) of the Internal Revenue Code of 1986 (the "Code"), to the
extent applicable. The fact that a Committee member may fail to qualify under
either of the foregoing requirements will not invalidate any award which is
otherwise validly made under the Plan. The Company's Board of Directors has
appointed Messrs. Margulies and Rizzuto to be members of the Committee.
During the 10-year period ending in 2004, the Committee has authority,
subject to the terms of the Plan, (i) to exercise all powers granted to it under
the Plan, (ii) to construe, interpret and implement the Plan and any agreements
executed pursuant thereto, (iii) to prescribe, amend and rescind rules and
regulations relating to the Plan, (iv) to make all necessary or advisable
administrative determinations and (v) to correct any defect, supply any omission
and reconcile any inconsistency in the Plan.
Under the Plan, the Committee may grant "incentive stock options" ("ISOs")
within the meaning of Code section 422, "nonqualified stock options" ("NQSOs")
and restricted stock awards to officers, directors (including non-employee
directors) and executive, managerial or professional employees of the Company
and any of its affiliates (as defined in the Plan), except that ISOs may be
granted only to employees of the Company and its subsidiaries. There are
approximately eligible employees and directors. In any year, no person may
be granted options under the Plan covering more than 250,000 shares of Class A
Common Stock.
To the extent an option intended to be an ISO fails for any reason to
qualify as an ISO, such option shall be regarded as a NQSO if such option meets
the Plan's requirements for NQSOs. To the extent that the aggregate fair market
value (as defined in the Plan) of Class A Common Stock with respect to which
ISOs granted under the Plan and all other option plans of the Company
(determined as of the date of grant) or its subsidiaries exercisable for the
first time by an individual during any calendar year exceeds $100,000, such
options shall be treated as NQSOs.
Options may be exercisable during the term of the option at such times, in
such amounts, in accordance with such terms and conditions, and subject to such
restrictions, as may be determined by the Committee; provided, that no option
may be exercisable over a period greater than ten years from the date of grant
(five years in the case of an ISO granted to an individual who, at the time of
grant, owns shares possessing 10% or more of the total combined voting power of
all classes of stock of the Company, and its subsidiaries (a "10%
Stockholder")); and, provided, further, that options shall not be exercisable
for 12 months following a hardship distribution subject to applicable Treasury
regulations under Code section 401(k). The Committee may, with the grantee's
consent, cancel any award and issue a new award in substitution therefor,
provided that the substituted award satisfies all applicable Plan
36
<PAGE>
requirements as of the date made. Option agreements may provide that the Company
shall have a right of first refusal with respect to any shares of Class A Common
Stock.
The exercise price of an option (the "Option Price") may not be less than
100% of the fair market value of the Class A Common Stock for which it will be
exercisable on the date of grant (110% in the case of an ISO granted to a 10%
Stockholder).
Unless an applicable plan agreement provides otherwise, all of a grantee's
outstanding options terminate upon his termination of service with the Company
for any reason, except that: (i) if the grantee's service terminates other than
for cause (as defined in the Plan) or on account of the grantee's death, the
grantee's vested options remain exercisable until 90 days following termination
of service, or, if earlier, the date such options terminate (other than on
account of termination of service), and (ii) if the grantee's service terminates
on account of death, or if he dies within the period described in (i), his
vested options remain exercisable until one year after the grantee's death, or,
if earlier, the date such options terminate (other than on account of
termination of service).
The Committee may grant restricted stock awards, in such amounts and subject
to such terms and conditions as the Committee shall determine. The vesting of a
restricted stock award granted under the Plan may be conditioned upon the
completion of a specified period of service, upon the attainment of specified
performance goals and/or upon such other criteria as the Committee may
determine. Unless the applicable plan agreement provides otherwise or the
Committee otherwise determines, restricted stock awards terminate upon
termination of the grantee's service for the Company. Unless an applicable plan
agreement otherwise provides, a grantee may vote and receive dividends on
restricted stock awarded under the Plan and any stock received as a dividend on
or in connection with a stock split of a restricted stock award shall be subject
to the same restrictions as such restricted stock. No restricted stock award may
vest more than ten years after grant.
The Company's Board of Directors may amend, suspend or discontinue the Plan
at any time except that, no amendment shall impair any rights under any
outstanding award without the grantee's consent and except that (with certain
exceptions) unless an amendment is approved (at a meeting held within 12 months
before or after the date of such amendment) by the holders of a majority of the
issued and outstanding shares of Class A Common Stock entitled to vote, no such
amendment may (i) materially increase the benefits accruing to grantees under
the Plan, (ii) materially increase the maximum number of shares as to which
awards may be granted under the Plan or as to which options may be granted under
the Plan in any year, (iii) materially change the requirements as to eligibility
for participation in the Plan, (iv) provide for the grant of options having an
Option Price less than the fair market value of Class A Common Stock on the date
of grant, (v) permit an option to be exercisable, or a restricted stock award to
vest, more than ten years after grant or (vi) extend the term of the Plan beyond
ten years.
Awards may be transferred by a grantee only by will or by the laws of
descent and distribution, and options may be exercised during the grantee's
lifetime only by the grantee.
The Committee may require a grantee to remit, or may deduct from payments
due to a grantee, an amount sufficient to satisfy all governmental withholding
tax requirements. Under Plan rules, a grantee may elect to satisfy any
withholding tax requirements by delivery of unrestricted shares of Class A
Common Stock or, with Committee permission, by withholding shares otherwise
issuable pursuant to the award giving rise to the withholding obligation.
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<PAGE>
Since the adoption of the Plan, NQSOs to purchase an aggregate of
shares of Class A Common Stock have been granted to the following participants:
<TABLE><CAPTION>
NUMBER OF EXERCISE
NAME/GROUP OF OPTIONEES OPTIONS GRANTED PRICE(S)
- --------------------------------------------------- --------------- ---------------
<S> <C> <C>
All current executive officers as a group [ 300,000] [$10.50]
All directors who are not executive officers
[Any nominee of a director]
[Any associate of any of the foregoing]
Each other person who has received 5% of the
options granted
All other employees as a group
</TABLE>
Prior to the Offering, the Company intends to grant restricted stock awards,
with a five year vesting period, for up to 100,000 shares of Class A Common
Stock to certain executive officers.
Generally, under applicable provisions of the Code, the profit realized by a
grantee upon exercise of a NQSO is taxed as ordinary income to the grantee. The
Company is entitled to a compensation deduction in the same amount and at the
same time.
An optionee who holds the stock received on exercise of an ISO for at least
two years from the date the option was granted and at least one year from the
receipt of stock on exercise generally pays no tax until the stock is sold, at
which time any profit or loss realized is long-term capital gain or loss, as the
case may be; the Company gets no tax deduction at any time. The spread at
exercise of an ISO is effectively treated as a tax preference item in the
exercise year, for purposes of calculating the grantee's alternative minimum
tax.
An optionee who sells the stock received on exercise of an ISO within two
years after the option was granted or within one year of receipt of the stock is
taxed on the profit up to the date of exercise (which is ordinary income) and
the Company is entitled to a corresponding tax deduction; the income and
deduction items are recognized by the grantee and the Company, respectively, in
the year the stock is sold. Appreciation or depreciation after the date of
exercise is taxable to the grantee as capital gain or loss, respectively, and is
nondeductible by the Company.
Generally, on exercise of an NQSO, the amount by which the fair market value
of the shares of the Class A Common Stock on the date of exercise exceeds the
purchase price of such shares will be taxable to the Plan participant as
ordinary income, and will be deductible for tax purposes by the Company or its
Affiliates in the year in which the Plan participant recognizes income.
The Company may be required to withhold tax on the amount of the income
recognized by the optionee upon exercise of an NQSO and upon transfer of stock
received on exercise of an ISO.
Generally, at the time a restricted stock award vests, the grantee of the
award will realize ordinary income in an amount equal to the fair market value
of the restricted stock and any cash delivered at the time of vesting, and the
Company will be entitled to a corresponding deduction. However, if an employee
makes a special tax election to recognize income with respect to the restricted
stock award on the date of grant, the amount of ordinary income will be
determined on such date. Dividends paid to the holder before the award vests
will also be ordinary income to the employee and deductible as such by the
Company.
In 1993, Code section 162(m) was enacted, which precludes a publicly-held
corporation from deducting compensation in excess of $1 million per year paid to
each of the Company's chief executive officer and the four most highly
compensated other employees of the Company at the end of the Company's taxable
year. There are exceptions for qualified performance based compensation
(including certain stock options), and for awards relating to periods prior to
the time the corporation became publicly-held, if certain conditions are met.
Although the Company intends that amounts relating to stock options to be
awarded under the Plan will be fully deductible, there can be no assurance such
awards will satisfy the applicable requirements. Restricted stock awards
generally do not generate qualified performance based compensation, within the
meaning of Code section 162(m) and amounts paid in respect thereof may not be
fully deductible.
38
<PAGE>
CERTAIN TRANSACTIONS
The Company and Leandro P. Rizzuto are parties to an employment agreement,
dated June 20, 1985, for a term through June 30, 1996, subject to automatic
renewals of successive one year periods, pursuant to which the Company employs
Mr. Rizzuto as Chairman and President of the Company at a base annual salary and
incentive compensation to be determined annually by the Executive Committee of
the Board of Directors. Mr. Rizzuto's base salary and incentive compensation
will be subject to upward adjustments at the discretion of the Board.
In 1986, the Company leased its Stamford, Connecticut executive office
facility from Leandro P. Rizzuto, President and sole common stockholder of the
Company. In 1993, such lease was at a cost of $2,622,500 under a net lease
requiring the Company to pay all taxes, charges and expenses. The rental was
determined by an independent appraisal. On March 15, 1994, the Company acquired
this facility from Leandro P. Rizzuto for $20 million. The purchase price was
based on an independent appraisal. A 10-year unsecured loan in the amount of $20
million was obtained by the Company to finance this acquisition. The interest
rate on this loan is 7%. The Company leased back to Mr. Rizzuto a portion of the
facility for a period of 99 years subject to the Company's option, for a period
of 10 years, to buy back the lease rights. The option price for the Company to
repurchase the lease rights is $4 million for the first five years, escalating
to $6.4 million over the remaining five years. The initial option price was
determined based on an independent appraisal. On February 28, 1995, the Company
exercised this option and the closing is scheduled for March 31, 1995.
The Company occasionally charters a jet that is beneficially owned by
Leandro P. Rizzuto. In 1992, 1993 and 1994, the Company paid $376,200, $350,100
and $323,200, respectively, to Mr. Rizzuto as charter payments. These payments
approximate amounts charged by Mr. Rizzuto to unaffiliated parties.
On October 20, 1992, the Company received $10 million upon the issuance to
Leandro P. Rizzuto of a $10 million par value 10% Subordinated Promissory Note
due April 27, 2003. Interest is payable semi-annually on June 15 and December
15. The principal balance is due at maturity. These notes are subordinated to
the Series A Senior Fixed Rate Notes, the Series B Senior Rate Reset Notes and
certain bank credit facilities of the Company. In 1993, the Company prepaid $4
million of this loan at par and the Company expects to repay the $6 million
balance at par with a portion of the proceeds of this Offering.
On July 1, 1994, the Company purchased from Leandro P. Rizzuto his 50%
interest in Rusk, Inc. at his cost of $575,000. Rusk, Inc. is a marketer of
upscale, professional-only hair care products.
In 1992, 1993 and 1994, the Company paid $69,000 each year to Melvin L.
Braun for consulting fees. Mr. Braun is a director of the Company.
In 1992, 1993 and 1994, the Company paid $75,000 each year to John P.
Lomenzo for legal fees. Mr. Lomenzo is a director of the Company.
Maurice Lucas, an officer and director of the Company, is an officer and
principal stockholder of L&R Distributors, Inc., an independent New York based
distributor of hair care and personal care products. In 1992, 1993 and 1994, L&R
Distributors, Inc. purchased products from the Company in the amounts of
$1,701,000, $1,401,000 and $1,668,000, respectively. The prices charged to L&R
Distributors, Inc. were consistent with the amounts charged by the Company to
other independent distributors.
In 1992, 1993 and 1994, the Company paid approximately $54,000, $43,000 and
$43,000, respectively, to the law firm of Margulies & Margulies, P.C. for legal
fees. Walter Margulies, a director of the Company, and Richard A. Margulies, a
Vice President of the Company, are partners in this law firm. Richard Margulies
now works full-time for the Company.
39
<PAGE>
On October 20, 1992, the Company sold 5,000 shares of its Series A
Convertible Preferred Stock to the Profit Sharing Plan of the Company for the
sum of $5 million. On July 1, 1993 these shares were sold by the Profit Sharing
Plan to the Conair Employee Stock Ownership Plan for the sum of $5 million.
Effective as of December 31, 1994, the Conair Employee Stock Ownership Plan was
merged into the Company's Profit Sharing Plan, with the result that the Series A
Convertible Preferred Stock are currently held by the Company's Profit Sharing
Plan.
PRINCIPAL STOCKHOLDER
Leandro P. Rizzuto, 1 Cummings Point Road, Stamford, Connecticut 06904, as
trustee of the Leandro P. Rizzuto Revocable Trust, beneficially owns all of the
Company's outstanding stock as of the date of this Prospectus. Mr. Rizzuto has
the right to vote and dispose of the shares held by the Trust. No other
director, executive officer or other person beneficially owns any shares of
Common Stock.
DESCRIPTION OF CAPITAL STOCK
The Company is authorized to issue (i) [ ] million shares of Common Stock,
par value $.01 per share, divided into two classes, one designated Class A
Common Stock, with 50 million shares authorized and the other class designated
Class B Common Stock, with [ ] million shares authorized, (ii) 5 million shares
of Preferred Stock, par value $.01 per share and (iii) 5,000 shares of Series A
Convertible Preferred Stock, par value $1.00 per share.
The following description is a summary and is subject to the detailed
provisions of the Company's Amended and Restated Certificate of Incorporation
(the "Restated Certificate of Incorporation") and By-laws, does not purport to
be complete and is qualified by reference thereto.
COMMON STOCK
All currently outstanding shares of the Class B Common Stock are, and the
Shares offered hereby will be, fully paid and nonassessable. The holder of the
Company's currently outstanding shares of Class B Common Stock does not have,
and holders of the Shares will not have, any preemptive rights to subscribe for
or purchase any additional securities issued by the Company. No redemption or
sinking fund provisions are associated with the Class A Common Stock or Class B
Common Stock. Cumulative voting is not permitted by holders of either the Class
A Common Stock or Class B Common Stock.
Voting. Holders of Class A Common Stock are entitled to one vote per share
and holders of Class B Common Stock are entitled to ten votes per share on all
matters submitted to a vote of the stockholders of the Company. Except as
described below, proposals submitted to a vote of the stockholders of the
Company will be voted on by holders of Class A Common Stock and Class B Common
Stock voting together as a single class (or, if any holders of Preferred Stock
are entitled to vote together with the holders of Class A Common Stock and Class
B Common Stock as a single class with such holders of Preferred Stock).
The holders of Class A Common Stock are entitled to vote separately as a
class to elect 25% of the total number of directors constituting the entire
Board of Directors of the Company. If 25% of the total number of directors
constituting the entire Board of Directors is not a whole number, then it is
rounded up to the nearest whole number of directors that is at least 25% of such
membership. Holders of Class B Common Stock are entitled to vote separately as a
class to elect the remaining directors.
In accordance with Section 242 of the Delaware General Corporation Law, the
holders of a majority of all outstanding shares of Class A Common Stock or Class
B Common Stock, voting as separate classes, must also approve amendments to the
Restated Certificate of Incorporation that alter or change the powers,
preferences or special rights of the shares of such class so as to affect them
adversely, provided that any proposed amendment to the Restated Certificate of
Incorporation that would increase or decrease the aggregate number of authorized
shares of Class B Common Stock or Preferred Stock shall not be deemed to be
amendments that would adversely affect the holders of Class A Common Stock.
40
<PAGE>
The Principal Stockholder holds shares of Class B Common Stock constituting
approximately % of the voting power of the outstanding Common Stock, which
will allow him to control all actions to be taken by the stockholders, including
the election of 75% of the total number of directors constituting the Board of
Directors. Mr. Rizzuto will be able to convert a portion of the shares of Class
B Common Stock into Class A Common Stock and obtain the power to elect the
directors to be elected by the holder of the Class A Common Stock while
retaining sufficient shares of Class B Common Stock to elect the remainder of
the Board of Directors. See "Investment Considerations-- Anti-Takeover Effect of
Capital Structure; Control by Principal Stockholder."
The Company's Restated Certificate of Incorporation provides that, so long
as any shares of Class B Common Stock are outstanding, any action that can be
taken at a meeting of the stockholders may be taken by written consent in lieu
of the meeting if the Company receives consents signed by stockholders having
the minimum number of votes that would be necessary to approve the action at a
meeting at which all shares entitled to vote on the matter were present. This
would permit the Principal Stockholder to take all actions required to be taken
by the stockholders without providing the other stockholders the opportunity to
make nominations or raise other matters at a meeting.
Dividends. Holders of Class A Common Stock and Class B Common Stock are
entitled to receive cash dividends at the same rate if, as and when such
dividends are declared by the Board of Directors of the Company from funds
legally available therefor after payment of dividends required to be paid on the
Preferred Stock, if any. In the case of any dividend paid other than in cash,
holders of Class A Common Stock and Class B Common Stock are entitled to receive
such dividend pro rata on a per share basis.
If a dividend or distribution payable in Class A Common Stock is made on the
Class A Common Stock, the Company must also make a pro rata and simultaneous
dividend or distribution on the Class B Common Stock payable in shares of Class
B Common Stock. Conversely, if a dividend or distribution payable in Class B
Common Stock is made on the Class B Common Stock, the Company must also make a
pro rata and simultaneous dividend or distribution on the Class A Common Stock
payable in shares of Class A Common Stock.
Restrictions on Transfer. No person holding shares of Class B Common Stock
(a "Class B Holder") may transfer such shares, whether by sale, assignment,
gift, bequest, appointment or otherwise, except to a Permitted Transferee (as
defined in the Restated Certificate of Incorporation), which, in general,
consists of the following: (1) if the Class B Holder is a natural person: (i)
the spouse of a Class B Holder; provided, that, upon divorce any shares of Class
B Common Stock held by the spouse shall immediately and automatically be
converted into Class A Common Stock on a share-for-share basis, except to the
extent that, and for so long as, the Class B Holder retains the power to vote or
direct the vote of such shares, (ii) a lineal descendent (which shall include
descendants by birth or adoption) of a great grandparent of a Class B Holder (a
"Descendant"), (iii) the trustee of a trust for the benefit of a Class B Holder
or a Descendant, (iv) an organization established by a Class B Holder to which
contributions are deductible for federal income, estate or gift tax purposes (a
"Charitable Organization"), (v) any partnership in which all of the partners
are, and all of the partnership interests are owned by, a Class B Holder and/or
such Class B Holder's spouse or Descendants or (vi) any corporation that is
wholly owned by a Class B Holder and/or such Class B Holder's spouse or
Descendants; (2) in the case of an estate of a deceased Class B Holder, or an
estate of a bankrupt or insolvent Class B Holder, any person determined to be a
Permitted Transferee of such Class B Holder pursuant to clause (1) above; (3) in
the case of a Class B Holder that is a trust (other than an irrevocable trust)
or a Charitable Organization, the person transferring Class B Common Stock to
such trust or Charitable Organization or any Permitted Transferee of such
transferor determined pursuant to clause (1) above, and in the case of an
irrevocable trust, any person to whom or for whose benefit principal may be
distributed either during or at the end of the term of such trust, whether by
power of appointment or otherwise; or (4) in the case of a Class B Holder that
is a partnership or a
41
<PAGE>
corporation, any partner of such partnership or a shareholder of such
corporation, respectively, or any Permitted Transferee of such partner or
shareholder determined pursuant to clause (1) above.
Conversion. Class A Common Stock has no conversion rights. Class B Common
Stock is convertible into Class A Common Stock, in whole or in part, at any time
and from time to time at the option of the holder, on the basis of one share of
Class A Common Stock for each share of Class B Common Stock converted. In the
event of a transfer of shares of Class B Common Stock to any person other than a
Permitted Transferee, each share of Class B Common Stock so transferred
automatically shall be converted into one share of Class A Common Stock. Each
share of Class B Common Stock shall also automatically convert into one share of
Class A Common Stock if, on the record date for any annual meeting of the
stockholders, the number of shares of Class B Common Stock then outstanding is
less than 20% of the aggregate number of shares of Class A Common Stock and
Class B Common Stock then outstanding.
Liquidation. Holders of Class A Common Stock and Class B Common Stock share
with each other on a ratable basis as a single class in the net assets of the
Company available for distribution in respect of Class A Common Stock and Class
B Common Stock in the event of liquidation.
Further Issuances of Class B Common Stock. Except pursuant to any
subdivision of the Class B Common Stock by way of a stock split, stock dividend,
reclassification, recapitalization or otherwise, any issuances by the Company of
shares of Class B Common Stock after the Offering shall require the affirmative
vote of a holder of a majority of the outstanding shares of the Class B Common
Stock.
Other Terms. Neither the Class A Common Stock nor the Class B Common Stock
may be subdivided or combined in any manner unless the other class is subdivided
or combined in the same proportion.
PREFERRED STOCK
The Board of Directors is empowered under the Company's Restated Certificate
of Incorporation and without further stockholder action by resolution to divide
any and all shares of the Preferred Stock into series and to fix and determine
the relative rights, preferences, privileges and restrictions of the shares of
any series so established, except that, the Board of Directors may not issue any
shares of Preferred Stock that have the right (i) to vote for the election of
any directors under ordinary circumstances or (ii) under any circumstances to
elect 50% or more of the Company's directors, unless holders of a majority of
the outstanding shares of Class B Common Stock have approved the issuance of
such shares of Preferred Stock. This requirement for the approval of holders of
Class B Common Stock reinforces the ability of the holders of Class B Common
Stock to control all actions to be taken by the stockholders, including the
election of 75% of the total number of directors constituting the Board of
Directors. The issuance of Preferred Stock by the Board of Directors could
affect the rights of holders of shares of Common Stock. For example, issuance of
the Preferred Stock could result in a class of securities outstanding that will
have certain preferences with respect to dividends and in liquidation over the
Common Stock, and may enjoy certain voting rights, contingent or otherwise, in
addition to that of the Common Stock, and could result in the dilution of the
voting rights, net income per share and net book value of the Common Stock.
Shares of Preferred Stock issued by the Board of Directors could be utilized,
under certain circumstances, as a method of preventing a takeover of the
Company. Under the Company's Restated Certificate of Incorporation, the Company
is authorized to issue, and has issued, 5,000 shares of Series A Convertible
Preferred Stock. There are no agreements or understandings for the issuance of
any other shares of Preferred Stock.
SERIES A CONVERTIBLE PREFERRED STOCK
General. All of the authorized shares of Series A Convertible Preferred
Stock of the Company (the "Series A Stock") have been issued and are owned by
Maurice Lucas, Walter Margulies and Leandro P. Rizzuto, as trustees of the
Profit Sharing Plan of the Company.
42
<PAGE>
Ranking. The Series A Stock ranks prior to the Common Stock and the shares
of any classes or series of capital stock other than the Common Stock, which by
their terms are junior to the Series A Stock as to dividend rights and rights
upon liquidation, winding up or dissolution (the "Junior Stock"). The Series A
Stock ranks pari passu with or junior to any class or series of capital stock
designated as being on a parity with ("Parity Stock") or senior to,
respectively, the Series A Stock.
Dividend Rights. The holders of Series A Stock are entitled to receive, if,
when and as declared by the Board of Directors, out of funds legally available
therefor, cash dividends at an annual rate of $100.00 per share. Dividends on
the Series A Stock are payable, if declared, quarterly in four equal
installments on or about the 15th day of January, April, July and October in
each year. If the date for the payment of any dividend is not a business day,
then such dividend is payable on the next succeeding business day. Dividends are
cumulative and accrue on a day-to-day basis whether or not declared and whether
or not earned after the date of issuance.
Unless all dividends on the Series A Stock have been paid or declared and
funds set apart for payment thereof, no Series A Stock, Parity Stock or Junior
Stock may be redeemed, purchased or otherwise acquired by the Company or any of
its subsidiaries, and no dividend or other distribution (other than in Junior
Stock) may be paid or declared and set aside for payment or made upon any Junior
Stock.
Liquidation Value. The holders of Series A Stock are entitled to receive per
share in preference to the holders of Junior Stock the sum of $1,000.00, plus
any accrued but unpaid dividends in the event of any dissolution of the Company,
before any distribution is made to holders of Junior Stock. Upon such
dissolution, such preferential amounts with respect to the Series A Stock and
any Parity Stock, if not paid in full, will be distributed pro rata in
proportion to the respective amounts which the Series A Stock and such Parity
Stock are entitled.
Voting Rights. The holders of the Series A Stock are not entitled to any
voting rights, except as required by law and as set forth below.
A vote of holders of at least a majority of the shares of Series A Stock,
voting separately as a class, is required for any amendment, alteration or
repeal of any provisions of the Restated Certificate of Incorporation of the
Company, which materially and adversely affects any of the preferences, rights,
powers or privileges of the Series A Stock or the holders thereof.
An affirmative vote of at least a majority of the total number of
outstanding shares of Series A Stock and of any series of Preferred Stock having
the right to vote as a class on such matter, voting as a class, is required to
increase the authorized amount of the Preferred Stock or the Series A Stock.
Redemption at the Option of the Company. The Company may, at its election,
redeem shares of the Series A Stock in whole or in part on the occurrence of any
of the following events: (i) a change in tax law with respect to the
deductibility of any dividends paid on the Series A Stock, (ii) at any time
following October 1, 1995 when the fair market value of the Series A Stock, as
appraised by an independent financial expert, equals or exceeds $1,500.00 per
share, or (iii) the termination of the Profit Sharing Plan of the Company.
The redemption price is $1,000.00 per share, plus an amount equal to the
accrued but unpaid dividends thereon to the redemption date. The Company may pay
the redemption price in cash, in shares of Class A Common Stock or Readily
Marketable Securities (as defined), or in a combination of the foregoing.
Redemption at the Option of the Holder. At the option of the holder of the
shares of Series A Stock, the Company must, subject to any contractual
restrictions on its ability to do so, redeem such shares at the redemption
price, in cash or, if the Company so elects, in shares of Class A Common Stock
or Readily Marketable Securities, or a combination of the foregoing.
Any holder of the shares of Series A Stock may exercise this option (i) when
it is necessary to provide for distributions required to be made to participants
under, or to satisfy an investment election
43
<PAGE>
provided to participants in accordance with, the Profit Sharing Plan, or any
successor plan, or (ii) when necessary to meet diversification requirements set
forth in the Internal Revenue Code of 1986, as amended.
Conversion of Series A Stock. Any holder of shares of Series A Stock may
convert such shares into shares of Class A Common Stock at any time and from
time to time. The number of shares of Class A Common Stock issued upon
conversion upon each share of Series A Stock is equal to $1,000.00 divided by
the Conversion Price, i.e., $ , which Conversion Price is subject to
adjustment. Adjustments are permitted if the Company declares a dividend on the
Common Stock in shares of its capital stock, subdivides, combines or
reclassifies the Common Stock, or the Company sells Common Stock to its common
stockholders at a price per share less than the Current Market Price (as
defined), or the Company makes a distribution to its common stockholders of debt
securities, assets or rights to subscribe for securities of the Company.
In addition, if, after the date the Company would be allowed a deduction for
federal income tax purposes in the full amount of the dividends paid on the
Series A Stock, the Series A Stock is transferred to any person other than any
successor trustee under the Profit Sharing Plan, the shares of Series A Stock so
transferred shall be automatically converted into shares of Class A Common Stock
on the terms described in the preceding paragraph.
The Company expects that its Series A Stock will be converted into
shares of Class A Common Stock concurrently with the Offering.
CERTAIN PROVISIONS OF DELAWARE LAW
Section 203 of the Delaware General Corporation Law prohibits certain
transactions between a Delaware corporation and an "interested stockholder,"
which is defined as a person who, together with any affiliates or associates of
such person, beneficially owns, directly or indirectly, 15% or more of the
outstanding voting shares of a Delaware corporation. This provision prohibits
certain business combinations (defined broadly to include mergers,
consolidations, sales or other dispositions of assets having an aggregate value
in excess of 10% of the consolidated assets of the corporation, and certain
transactions that would increase the interested stockholder's proportionate
share ownership in the corporation) between an interested stockholder and a
corporation for a period of three years after the date the interested
stockholder becomes an interest stockholder, unless (i) the business combination
is approved by the corporation's board of directors prior to the date the
interested stockholder becomes an interested stockholder; (ii) the interested
stockholder acquired at least 85% of the voting stock of the corporation (other
than stock held by directors who are also officers or by certain employee stock
plans) in the transaction in which it became an interested stockholder; or (iii)
the business combination is approved by a majority of the board of directors and
by the affirmative vote of 66 2/3% of the outstanding voting stock which is not
owned by the interested stockholder.
TRANSFER AGENT AND REGISTRAR
The transfer agent and registrar for the Class A Common Stock is
.
OTHER
Special meetings of stockholders may only be called by the Board of
Directors. The Company's By-laws provide that the Board of Directors has the
power to fill newly created directorships and vacancies in the Board.
In addition, the Company's By-laws provide that a stockholder must provide
advance notice of nominations of directors to be made at, and of business
proposed to be brought before, a stockholders meeting. The failure to deliver
proper notice within the periods specified in the By-laws will result in the
denial to the stockholder of the right to make such nominations or propose such
action at the meeting.
44
<PAGE>
SHARES ELIGIBLE FOR FUTURE SALE
Upon completion of the Offering, the Company will have outstanding [ ]
shares of Class A Common Stock, including the shares of Class A Common
Stock offered hereby, shares of Class A Common Stock issued upon the
conversion of the Company's Series A Convertible Preferred Stock to the Profit
Sharing Plan of the Company, and shares of Class A Common Stock issued
pursuant to restricted stock awards granted under the Company's Employees and
Directors Stock Plan, and [ ] million shares of Class B Common Stock. The
shares of Class A Common Stock offered hereby will be freely tradeable and
the remaining shares of Class A Common Stock outstanding and the [ ] million
shares of Class B Common Stock will be "restricted securities" for the purposes
of the Securities Act. Such restricted securities (including the Class B Common
Stock which are immediately convertible into Class A Common Stock) will be
eligible for resale 180 days after the completion of this Offering pursuant to,
and subject to the volume and manner of sale limitations of, Rule 144 under the
Securities Act.
The Company and its senior executive officers, including Leandro P. Rizzuto,
as beneficial owner of all outstanding shares of Class B Common Stock, have
agreed pursuant to certain agreements (the "Lock-up Agreements") not to offer,
sell, contract to sell or otherwise dispose of any shares of Common Stock or
rights to acquire such shares or securities convertible into or exchangeable for
Common Stock, other than sales contemplated hereby or pursuant to employee stock
option plans in effect on the date of this Prospectus for a period of 180 days
after the date of this Prospectus without the prior written consent of the
representatives of the U.S. Underwriters and the Managers.
The Company has agreed that it will not file any registration statement
under the Securities Act, except for a registration on Form S-8 with respect to
[ ] shares of Class A Common Stock issuable under the Company's employee
benefit plans in effect on the date of this Prospectus, during the 180-day
period after the date of this Prospectus without the prior written consent of
the representatives of the U.S. Underwriters and the Managers. The Company may
file a registration statement on Form S-8 under the Securities Act to register
shares of Class A Common Stock issued pursuant to the Company's employee stock
option plans in effect as of the date of this Prospectus. See "Management--
Employees and Directors Stock Plan." Shares of Class A Common Stock covered by
this registration statement will be eligible for sale in the public market after
the effective date of the registration statement, subject, where applicable, to
the Lock-up Agreements.
In general, under Rule 144, as currently in effect, a shareholder (or
shareholders whose securities are aggregated) who (together with predecessor
holders who were not "affiliates" of the Company (as such term is defined in
Rule 144 under the Securities Act, "Affiliates")) has beneficially owned Common
Stock which is treated as "restricted securities" (as defined in Rule 144) for
at least two years from the date such restricted securities were acquired from
the Company or an Affiliate, is entitled to sell, within any three-month period,
a number of shares that does not exceed the greater of 1% of the Company's Class
A Common Stock then outstanding or the average weekly trading volume in the
Company's Class A Common Stock during the four calendar weeks preceding the date
on which notice of such sale was filed under Rule 144. Sales under Rule 144 are
also subject to certain provisions relating to the manner and notice of sale and
availability of current public information about the Company. In addition,
Affiliates of the Company must comply with the restrictions and requirements of
Rule 144 (other than the two-year holding period requirements) in order to sell
Class A Common Stock that are not restricted securities (such as Class A Common
Stock acquired by Affiliates in the Offering).
Furthermore, under Rule 144(k), if a period of at least three years has
elapsed between the later of the date restricted securities were acquired from
the Company or an Affiliate, a holder of such restricted securities who is not
an Affiliate at the time of the sale and has not been an Affiliate for at least
three months prior to such sale would be entitled to sell the shares immediately
without regard to the volume limitations and other conditions described above.
Prior to the Offering, there has been no public market for the Class A
Common Stock. No prediction can be made as to the effect, if any, that market
sales of Class A Common Stock or the availability of shares for sale will have
on the market price of the Class A Common Stock prevailing from time to time.
Nevertheless, sales of substantial amounts of Class A Common Stock in the public
market could adversely affect prevailing market prices and could impair the
Company's future ability to raise capital through the sale of its equity
securities.
45
<PAGE>
UNDERWRITING
The underwriters of the U.S. Offering named below (the "U.S. Underwriters"),
for whom Bear, Stearns & Co. Inc., and Merrill Lynch, Pierce, Fenner & Smith
Incorporated are acting as representatives, have severally agreed with the
Company, subject to the terms and conditions of the U.S. Underwriting Agreement
(the form of which has been filed as an exhibit to the Registration Statement of
which this Prospectus is a part), to purchase from the Company the aggregate
number of U.S. Shares set forth opposite their respective names below:
NUMBER OF
NAME OF U.S. UNDERWRITER U.S. SHARES
- --------------------------------------------------------------- -------------
Bear, Stearns & Co. Inc. ......................................
Merrill Lynch, Pierce, Fenner & Smith
Incorporated........................................
-------------
Total...............................................
-------------
-------------
The Managers of the concurrent International Offering named below (the
"Managers"), for whom Bear, Stearns International Limited and Merrill Lynch
International Limited are acting as lead Managers, have severally agreed with
the Company, subject to the terms and conditions of the International
Underwriting Agreement (the form of which has been filed as an exhibit to the
Registration Statement of which this Prospectus is a part), to subscribe and pay
for the aggregate number of International Shares set forth opposite their
respective names below:
NUMBER OF
INTERNATIONAL
NAME OF MANAGER SHARES
- --------------------------------------------------------------- -------------
Bear, Stearns International Limited............................
Merrill Lynch International Limited............................
-------------
Total......................................................
-------------
-------------
The nature of the respective obligations of the U.S. Underwriters and the
Managers is such that all of the U.S. Shares and all of the International Shares
must be purchased if any are purchased. Those obligations are subject, however,
to various conditions, including the approval of certain matters by counsel. The
Company has agreed to indemnify the U.S. Underwriters and the Managers against
certain liabilities, including liabilities under the Securities Act, and, where
such indemnification is unavailable, to contribute to payments that the U.S.
Underwriters and the Managers may be required to make in respect of such
liabilities.
The Company has been advised that the U.S. Underwriters propose to offer the
U.S. Shares in the United States and the Managers propose to offer the
International Shares outside the United States, initially at the public offering
price set forth on the cover page of this Prospectus and to certain selected
dealers at such price less a concession not to exceed $ per share; that the
U.S. Underwriters and the Managers may allow, and such selected dealers may
reallow, a concession to certain other dealers not to exceed $ per share;
and that after the commencement of the Offering, the public offering price and
the concessions may be changed.
The Company has granted the U.S. Underwriters and the Managers options to
purchase in the aggregate up to 1,300,000 additional shares of Class A Common
Stock solely to cover over-allotments, if any. The options may be exercised in
whole or in part at any time within 30 days after the date of this
46
<PAGE>
Prospectus. To the extent the options are exercised, the U.S. Underwriters and
the Managers will be severally committed, subject to certain conditions, to
purchase the additional shares in proportion to their respective purchase
commitments as indicated in the preceding tables.
Pursuant to an agreement between the U.S. Underwriters and the Managers (the
"Agreement Between"), each U.S. Underwriter has agreed that, as part of the
distribution of the U.S. Shares and subject to certain exceptions, (a) it is not
purchasing any U.S. Shares for the account of anyone other than a U.S. Person
(as defined below) and (b) it has not offered or sold, and will not offer, sell,
resell or deliver, directly or indirectly, any U.S. Shares or distribute any
prospectus relating to the U.S. Offering outside the United States or Canada or
to anyone other than a U.S. Person or a dealer who similarly agrees. Similarly,
pursuant to the Agreement Between, each Manager has agreed that, as part of the
distribution of the International Shares and subject to certain exceptions, (a)
it is not purchasing any of the International Shares for the account of any U.S.
Person and (b) it has not offered or sold, and will not offer, sell, resell or
deliver, directly or indirectly, any of the International Shares or distribute
any prospectus relating to the International Offering in the United States or to
any U.S. Person or a dealer who does not similarly agree. As used herein, "U.S.
Person" means any resident or citizen of the United States, any corporation,
pension, profit sharing or other trust, or other entity organized under or
governed by the laws of the United States or of any political subdivision
thereof (other than the foreign branch of any U.S. Person), any estate or trust,
the income of which is subject to United States federal income taxation
regardless of the source of its income, and any United States branch of a person
other than a U.S. Person. The term "United States" means the United States of
America, its territories, its possessions and other areas subject to its
jurisdiction.
Pursuant to the Agreement Between, sales may be made between the U.S.
Underwriters and the Managers of such number of shares of Class A Common Stock
as may be mutually agreed upon. The price of any shares so sold shall be the
public offering price as then in effect for the Class A Common Stock being sold
by the U.S. Underwriters and the Managers, less an amount not greater than the
selling concession allocable to such Class A Common Stock. To the extent that
there are sales between the U.S. Underwriters and the Managers pursuant to the
Agreement Between, the number of shares initially available for sale by the U.S.
Underwriters or by the Managers may be more or less than the amount specified on
the cover page of this Prospectus.
Each U.S. Underwriter and each Manager has represented and agreed that (a)
it has not offered or sold, and will not offer or sell, in the United Kingdom by
means of any document, any shares of Class A Common Stock other than to persons
whose ordinary business it is to buy or sell shares or debentures, whether as
principal or agent (except under circumstances which do not constitute an offer
to the public within the meaning of the Companies Act 1985 of Great Britain);
(b) it has complied and will comply with applicable provisions of the Financial
Services Act 1986 with respect to anything done by it in relation to the Class A
Common Stock in, from or otherwise involving the United Kingdom; and (c) it has
only issued or passed on, and will only issue or pass on to any person in the
United Kingdom, any documents received by it in connection with the issue of
Class A Common Stock if that person is of a kind described in Article 9(3) of
the Financial Services Act 1986 (Investment Advertisements) (Exemptions) Order
1988 (as amended) or in other circumstances exempted from the restrictions on
advertising in the Financial Services Act 1986.
Purchasers of the shares offered hereby may be required to pay stamp taxes
and other charges in accordance with the laws and practices of the country of
purchase in addition to the initial public offering price set forth on the cover
page hereof.
The Company and its senior executive officers, including Leandro P. Rizzuto,
as beneficial owner of all outstanding shares of Class B Common Stock, have
agreed that, for a period of 180 days after the date of this Prospectus, they
will not, without the prior written consent of the representatives of the U.S.
Underwriters and the Managers, offer, sell, contract to sell or otherwise
dispose of any shares of Class A Common Stock or rights to require such shares
or securities convertible into or exchangeable for
47
<PAGE>
Class A Common Stock other than the sale of the Shares offered hereby or
pursuant to employee stock option plans in effect on the date of this
Prospectus.
The U.S. Underwriters and the Managers have reserved, for sale at the
initial public offering price, up to Shares which may be sold to the
Company's officers, employees, customers, suppliers and other persons associated
with the Company. However, the U.S. Underwriters and the Managers are not
obligated to sell any such Shares to such persons. The number of Shares
available for sale to the general public will be reduced to the extent such
persons purchase such reserved Shares. Any reserved Shares not so purchased will
be offered by the U.S. Underwriters and the Managers on the same basis as the
other Shares offered hereby.
Prior to this Offering, there has been no public market for the Company's
Class A Common Stock. Consequently, the initial public offering price will be
determined through negotiations among the Company and the representatives of the
U.S. Underwriters and the Managers. Among the factors to be considered in making
such determination will be the prevailing market conditions, the Company's
financial and operating history and condition, its prospects and prospects for
the industry in which it does business in general, the management of the
Company, the general condition of the equity securities market and the demand
for securities considered comparable to those of the Company.
Mr. Uzi Zucker, a director of the Company, is a Senior Managing Director of
Bear, Stearns & Co. Inc. ("Bear Stearns") and a member of the board of directors
of the parent company, The Bear Stearns Companies Inc. Bear Stearns is one of
the investment banking firms serving as a U.S. Underwriter in the U.S. Offering.
In addition, Bear, Stearns International Limited is one of the Managers in the
International Offering.
LEGAL MATTERS
The validity of the shares of Class A Common Stock offered hereby will be
passed upon for the Company by Paul, Weiss, Rifkind, Wharton & Garrison. Certain
legal matters will be passed upon for the Underwriters by Weil, Gotshal & Manges
(a partnership including professional corporations).
EXPERTS
The financial statements included in this Prospectus, the related financial
statement schedule included elsewhere in the Registration Statement, and the
financial statements from which the Selected Financial Data included in this
Prospectus have been derived have been audited by Deloitte & Touche LLP,
independent auditors, as stated in their reports appearing herein and elsewhere
in the Registration Statement. Such financial statements, financial statement
schedule and Selected Financial Data have been included herein and elsewhere in
the Registration Statement in reliance upon the reports of such firm given upon
their authority as experts in accounting and auditing.
48
<PAGE>
AVAILABLE INFORMATION
The Company has filed with the Securities and Exchange Commission
("Commission") a Registration Statement on Form S-1 (together with all
amendments and exhibits thereto, the "Registration Statement") under the
Securities Act. This Prospectus, which constitutes a part of the Registration
Statement, does not contain all of the information set forth in the Registration
Statement, certain parts of which are contained in the exhibits and schedules
thereto as are omitted in accordance with the rules and regulations of the
Commission. Statements made in this Prospectus as to the contents of any
contract, agreement or other document to which reference is made are not
necessarily complete. With respect to each such contract, agreement or other
document filed as an exhibit to the Registration Statement, reference is made to
the exhibit for a more complete description of the matter involved, and each
such statement shall be deemed qualified in its entirety by such reference. The
Company is subject to the informational requirements of the Exchange Act, and in
accordance therewith files reports and other information with the Commission.
The Registration Statement, including the exhibits and schedules thereto, and
the reports and other information filed by the Company pursuant to the Exchange
Act, may be inspected and copied at the public reference facilities of the
Commission, Room 1024, Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C.
20549, and at the following regional offices of the Commission: Seven World
Trade Center, 13th Floor, New York, New York 10048 and Northwest Atrium Center,
500 West Madison Street (Suite 1400), Chicago, Illinois 60661. Copies of such
materials also may be obtained by mail from the Public Reference Section of the
Commission at 450 Fifth Street, N.W., Washington, D.C. 20549 at prescribed
rates.
Following the consummation of the Offering, the Company intends to furnish
to its stockholders annual reports containing audited financial statements
reported upon by independent auditors and quarterly reports containing unaudited
financial information for each of the first three fiscal quarters.
49
<PAGE>
CONAIR CORPORATION
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
<TABLE><CAPTION>
PAGE
----
<S> <C>
Independent Auditors' Report................................................. F-2
Consolidated Balance Sheets as of December 31, 1993 and 1994................. F-3
Consolidated Statements of Operations for the years ended December 31, 1992,
1993 and 1994.............................................................. F-4
Consolidated Statements of Stockholders' Equity for the years ended December
31, 1992, 1993 and 1994...................................................... F-5
Consolidated Statements of Cash Flows for the years ended December 31, 1992,
1993 and 1994.............................................................. F-6
Notes to Consolidated Financial Statements for the years ended December 31,
1992, 1993 and 1994........................................................ F-7
</TABLE>
F-1
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Board of Directors and Stockholders of
CONAIR CORPORATION
East Windsor, New Jersey
We have audited the accompanying consolidated balance sheets of Conair
Corporation and subsidiaries as of December 31, 1994 and 1993 and the related
consolidated statements of operations, stockholders' equity and cash flows for
each of the three years in the period ended December 31, 1994. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, such consolidated financial statements present fairly, in
all material respects, the financial position of Conair Corporation and
subsidiaries as of December 31, 1994 and 1993, and the results of their
operations and their cash flows for each of the three years in the period ended
December 31, 1994 in conformity with generally accepted accounting principles.
We have also previously audited, in accordance with generally accepted
auditing standards, the consolidated balance sheets as of December 31, 1992,
1991 and 1990 and the related consolidated statements of operations,
stockholders' equity, and cash flows for the years ended December 31, 1991 and
1990 (none of which are presented herein); and we expressed unqualified opinions
on those consolidated financial statements. In our opinion, the information set
forth in the selected financial data for each of the five years in the period
ended December 31, 1994, appearing on page 13, is fairly stated in all material
respects in relation to the consolidated financial statements from which it has
been derived.
Deloitte & Touche LLP
New York, New York
February 11, 1995
(February 28, 1995 as to Note 15)
F-2
<PAGE>
CONAIR CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 1993 AND 1994
(IN THOUSANDS, EXCEPT SHARE INFORMATION)
<TABLE><CAPTION>
1993 1994
-------- --------
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents............................................ $ 15,856 $ 23,702
Accounts receivable, net of allowance for doubtful accounts of $1,337
and $1,458, respectively........................................... 70,244 80,616
Inventories.......................................................... 85,416 104,220
Prepaid expenses..................................................... 1,753 1,610
Deferred income taxes................................................ 2,885 2,040
-------- --------
176,154 212,188
-------- --------
PROPERTY, PLANT AND EQUIPMENT--At cost, net of accumulated depreciation
and amortization..................................................... 44,685 66,992
-------- --------
INVESTMENTS AND OTHER ASSETS:
Investments in affiliated companies.................................. 1,141 464
Excess of cost over net assets of acquired companies................. 73,829 70,575
Deferred expenses and other assets................................... 14,309 12,485
-------- --------
89,279 83,524
-------- --------
$310,118 $362,704
-------- --------
-------- --------
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable and other current liabilities....................... $ 41,014 $ 50,694
Income taxes......................................................... 6,756 8,611
Current portion of long-term debt.................................... 3,625 6,275
-------- --------
51,395 65,535
-------- --------
OTHER LIABILITIES:
Long-term debt....................................................... 87,575 100,405
Deferred income taxes................................................ 19,511 21,310
-------- --------
107,086 121,715
-------- --------
STOCKHOLDERS' EQUITY:
Convertible preferred stock, $1.00 par value--authorized 10,000
shares; issued and outstanding, 5,000 shares....................... 5 5
Common stock, $100 par value--authorized, 5,000 shares; issued and
outstanding, 2,814 shares.......................................... 281 281
Reduction for ESOP Loan Guarantee.................................... (5,000) --
Additional paid-in capital........................................... 7,633 7,633
Cumulative translation adjustments................................... 129 (18)
Retained earnings.................................................... 148,589 167,553
-------- --------
151,637 175,454
-------- --------
$310,118 $362,704
-------- --------
-------- --------
</TABLE>
See notes to consolidated financial statements.
F-3
<PAGE>
CONAIR CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
YEARS ENDED DECEMBER 31, 1992, 1993 AND 1994
(IN THOUSANDS)
<TABLE><CAPTION>
1992 1993 1994
-------- -------- --------
<S> <C> <C> <C>
NET SALES................................................... $361,838 $442,562 $524,398
-------- -------- --------
COSTS AND EXPENSES:
Cost of goods sold........................................ 239,011 298,416 357,987
Selling, general and administrative....................... 101,007 115,672 124,597
-------- -------- --------
340,018 414,088 482,584
-------- -------- --------
INCOME FROM OPERATIONS...................................... 21,820 28,474 41,814
-------- -------- --------
OTHER (INCOME) EXPENSE:
Interest expense.......................................... 12,966 7,524 8,511
Interest income........................................... (592) (89) (158)
-------- -------- --------
12,374 7,435 8,353
-------- -------- --------
INCOME BEFORE INCOME TAXES AND EXTRAORDINARY ITEM........... 9,446 21,039 33,461
Income tax provision........................................ 4,361 8,978 12,974
-------- -------- --------
INCOME BEFORE EXTRAORDINARY ITEM............................ 5,085 12,061 20,487
EXTRAORDINARY ITEM:
Loss on repurchase and redemption of debt
(net of income taxes)................................... (3,866) -- --
-------- -------- --------
NET INCOME.................................................. $ 1,219 $ 12,061 $ 20,487
-------- -------- --------
-------- -------- --------
</TABLE>
See notes to consolidated financial statements.
F-4
<PAGE>
CONAIR CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
YEARS ENDED DECEMBER 31, 1992, 1993 AND 1994
(IN THOUSANDS, EXCEPT NUMBER OF SHARES)
<TABLE><CAPTION>
PREFERRED STOCK COMMON REDUCTION
STOCK FOR ESOP ADDITIONAL CUMULATIVE TOTAL
--------------- -------------- LOAN PAID-IN RETAINED TRANSLATION STOCKHOLDERS'
SHARES AMOUNT SHARES AMOUNT GUARANTEE CAPITAL EARNINGS ADJUSTMENTS EQUITY
------ ------- ------ ------ --------- ---------- -------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
BALANCE, January 1, 1992........ -- $ -- 2,814 $281 $ -- $2,638 $135,841 $ 211 $ 138,971
Net income..................... -- -- -- -- -- -- 1,219 -- 1,219
Cumulative translation
adjustments. .................. -- -- -- -- -- -- -- (41) (41)
Dividends declared............. -- -- -- -- -- -- (119) -- (119)
Shares issued.................. 5,000 5 -- -- -- 4,995 -- -- 5,000
------ ------- ------ ------ --------- ----- -------- --- -----------
BALANCE, December 31, 1992...... 5,000 5 2,814 281 -- 7,633 136,941 170 145,030
Net income..................... -- -- -- -- -- -- 12,061 -- 12,061
Cumulative translation
adjustments.................... -- -- -- -- -- -- -- (41) (41)
Reduction for ESOP loan
guarantee...................... -- -- -- -- (5,000) -- -- (5,000)
Dividends declared............. -- -- -- -- -- -- (500) (500)
Tax benefit on dividends paid
to ESOP........................ -- -- -- -- -- -- 87 -- 87
------ ------- ------ ------ --------- ----- -------- --- -----------
BALANCE, December 31, 1993...... 5,000 5 2,814 281 (5,000) 7,633 148,589 129 151,637
Net income..................... -- -- -- -- -- -- 20,487 -- 20,487
Cumulative translation
adjustments.................... -- -- -- -- -- -- -- (147) (147)
ESOP loan guarantee
adjustment..................... -- -- -- -- 5,000 -- -- -- 5,000
Dividends declared............. -- -- -- -- -- -- (1,699) -- (1,699)
Tax benefit on dividends paid
to ESOP........................ -- -- -- -- -- -- 176 -- 176
------ ------- ------ ------ --------- ----- -------- --- -----------
BALANCE, December 31, 1994...... 5,000 $ 5 2,814 $281 $ -- $7,633 $167,533 $ (18) $ 175,474
------ ------- ------ ------ --------- ----- -------- --- -----------
------ ------- ------ ------ --------- ----- -------- --- -----------
</TABLE>
See notes to consolidated financial statements.
F-5
<PAGE>
CONAIR CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 31, 1992, 1993 AND 1994
(IN THOUSANDS)
<TABLE><CAPTION>
1992 1993 1994
------- ------- -------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income................................................... $ 1,219 $12,061 $20,487
Adjustments to reconcile net income to net cash provided by
operating activities:
Depreciation............................................... 5,323 6,500 7,239
Amortization of goodwill................................... 3,060 2,532 2,960
Loss on repurchase and redemption of debt (before income
tax benefit)............................................. 6,137 -- --
Amortization of deferred expenses and other assets......... 1,511 282 1,824
Deferred income taxes...................................... (571) 3,177 2,644
Tax benefit on dividends paid to ESOP...................... -- 87 176
Other--net................................................. (142) (161) (1,101)
Changes in operating assets and liabilities:
Accounts receivable...................................... 2,829 (12,182) (10,372)
Inventories.............................................. (11,972) (6,872) (18,804)
Prepaid expenses......................................... (695) 834 143
Accounts payable and other current liabilities........... (4,954) 6,402 9,635
Income taxes............................................. (983) 2,647 1,855
------- ------- -------
762 15,307 16,686
------- ------- -------
CASH FLOWS FROM INVESTING ACTIVITIES:
Investment in joint venture.................................. -- -- (575)
Additions to property, plant and equipment................... (5,858) (7,647) (29,546)
Net proceeds from the sales of assets........................ -- -- --
Proceeds from sale of affiliate.............................. -- -- 2,500
------- ------- -------
(5,858) (7,647) (27,621)
------- ------- -------
CASH FLOWS FROM FINANCING ACTIVITIES:
Repurchase and redemption of debt............................ (96,107) -- --
Reduction of long-term debt.................................. (3,017) (39,313) (3,520)
Proceeds from issuance of long-term debt..................... 90,500 28,455 24,000
Proceeds from issuance of convertible preferred stock........ 5,000 -- --
Dividends declared........................................... -- (500) (1,699)
------- ------- -------
(3,624) (11,358) 18,781
------- ------- -------
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS............... (8,720) (3,698) 7,846
CASH AND CASH EQUIVALENTS, January 1,.......................... 28,274 19,554 15,856
------- ------- -------
CASH AND CASH EQUIVALENTS, December 31,........................ $19,554 $15,856 $23,702
------- ------- -------
------- ------- -------
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid during the year for:
Interest (net of amount capitalized)....................... $13,289 $ 7,450 $ 7,698
------- ------- -------
------- ------- -------
Income taxes............................................... $ 3,644 $ 3,067 $ 8,299
------- ------- -------
------- ------- -------
</TABLE>
See notes to consolidated financial statements.
F-6
<PAGE>
CONAIR CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1992, 1993 AND 1994
1. SIGNIFICANT ACCOUNTING POLICIES
Consolidation--The accompanying consolidated financial statements include
the accounts of Conair Corporation and its subsidiaries (the "Company"), all of
which are wholly-owned. All significant intercompany accounts and transactions
have been eliminated in consolidation.
Fair Value of Financial Instruments--During October 1994, the Financial
Accounting Standards Board issued SFAS 119, "Disclosure about Derivative
Financial Instruments and Fair Value of Financial Instruments". This statement
requires the disclosure of estimated fair values for all financial instruments
for which it is practicable to estimate fair value.
For instruments including cash and cash equivalents, accounts receivable and
payable, accruals and short-term debt, it was assumed that the carrying amount
approximated fair value because of their short maturity. The carrying amount of
long-term debt which bears interest at floating rates is also assumed to
approximate the fair value.
The fair value of long-term debt with fixed interest rates is estimated
based on the quoted market price for similar issues. As of December 31, 1994,
the carrying amount and the fair value of such long-term debt were $93,299,000
and $89,903,000, respectively. The fair value amounts are not necessarily
indicative of the amounts for which the debt could be liquidated.
Cash Equivalents--Cash equivalents consist principally of commercial paper
and time deposits having original maturity of less than 90 days, and amounted to
$4,096,000 and $17,176,000 at December 31, 1993 and 1994, respectively.
Inventories--Inventories are stated at the lower of cost (first-in,
first-out) or market.
Income Taxes--The Company has adopted Statement of Financial Accounting
Standards No. 109, "Accounting for Income Taxes." SFAS No. 109 requires the
Company to compute deferred income taxes based on the difference between the
financial statement and tax bases of assets and liabilities using enacted tax
rates in effect in the years in which differences are expected to reverse. The
effect of the adoption of SFAS No. 109 on the Consolidated Financial Statements
of the Company in 1993 was not material.
Property, Plant and Equipment--Depreciation and amortization of property,
plant and equipment are computed primarily on the straight-line method over the
estimated useful lives of the related assets.
Excess of Cost Over Net Assets of Acquired Companies--The excess of cost
over net assets of acquired companies is being amortized on the straight-line
basis over periods of up to 40 years and is shown net of accumulated
amortization of $25,945,000 and $27,897,000 at December 31, 1993 and 1994,
respectively. The Company's policy of reviewing the recoverability of goodwill
is based on projections of undiscounted future income from operations.
Deferred Expenses and Other Assets--Deferred expenses and other assets
include various intangible assets acquired in the Company's purchase of certain
net assets of Cuisinarts. These assets are being amortized on the straight-line
basis over periods ranging from 3 to 40 years and are shown net of accumulated
amortization of $7,738,000 and $10,101,000 at December 31, 1993 and 1994,
respectively.
F-7
<PAGE>
CONAIR CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1992, 1993 AND 1994
1. SIGNIFICANT ACCOUNTING POLICIES--(CONTINUED)
Foreign Currency Translation--Gains and losses arising from the translation
of foreign subsidiary financial statements are excluded from the determination
of net income and included in a separate component of stockholders' equity.
2. LICENSING AND DISTRIBUTION AGREEMENT
On March 16, 1993, the Company signed a Licensing and Distribution Agreement
with Southwestern Bell Telecommunications, Inc. under which it received an
exclusive license to market one and two-line residential telephones--including
cordless telephones, answering machines and caller ID devices--to be sold to
U.S. retailers. The Company will continue to market telephones under the
CONAIRPHONE name as well as the BELL logo, the Southwestern Bell name and the
FREEDOM PHONE trademark. This agreement became effective on April 9, 1993 after
approval from the Federal Trade Commission.
3. EXTRAORDINARY ITEM
In 1992, the Company repurchased portions of its 14% senior subordinated
debentures and 14 1/2% subordinated debentures which were carried at $12,500,000
and $17,368,000, respectively. On November 19, 1992, the $27,184,000 par value
14% of senior subordinated debentures and $34,721,000 par value of 14 1/2%
subordinated debentures which remained outstanding were redeemed by the Company.
The loss resulting from the repurchase and redemption in 1992 was approximately
$3,866,000, net of income tax benefit of $2,271,000. Such loss includes the
difference between the repurchase price and the carrying value which includes
the related deferred financing expenses.
4. INVENTORIES
Inventories are summarized as follows:
DECEMBER 31,
-------------------
1993 1994
------- --------
(IN THOUSANDS)
Components and raw materials........................... $11,441 $ 12,728
Finished goods......................................... 73,975 91,492
------- --------
$85,416 $104,220
------- --------
------- --------
F-8
<PAGE>
CONAIR CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1992, 1993 AND 1994
5. PROPERTY, PLANT AND EQUIPMENT
The major classes of these assets are as follows:
DECEMBER 31,
ESTIMATED -------------------
USEFUL LIFE 1993 1994
----------- ------- --------
(IN THOUSANDS)
Land...................................... $ 5,160 $ 9,160
Buildings................................. 15-40 years 21,416 37,615
Building improvements..................... 7-20 years 1,355 1,582
Furniture and fixtures.................... 5-10 years 7,670 8,255
Machinery and equipment................... 3-11 years 37,987 44,632
Construction in progress.................. 455 2,345
------- --------
74,043 103,589
Less accumulated depreciation and
amortization.............................. 29,358 36,597
------- --------
$44,685 $ 66,992
------- --------
------- --------
6. SHORT-TERM DEBT
At December 31, 1994, the Company had available short-term lines of credit
with banks in the United States and abroad aggregating $64,400,000. The trade
credit lines are available for letters of credit and bankers' acceptances which
are secured by an interest in the goods underlying such borrowings and the trade
receivables resulting from the sale of such goods. During the years ended
December 31, 1992, 1993 and 1994, the Company had short-term borrowings of up to
$17,400,000, $35,000,000 and $32,000,000, respectively, to finance its seasonal
business needs. The average borrowings during 1992, 1993 and 1994 were
$3,890,000, $15,739,000 and $11,581,000, respectively, and the approximate
weighted average interest rates were 4.5%, 4.9% and 5.5%, respectively. At
December 31, 1992, 1993 and 1994, the Company had no borrowings against these
lines. The Company has various informal compensating balance arrangements with
its banks which do not legally restrict withdrawal of funds.
F-9
<PAGE>
CONAIR CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1992, 1993 AND 1994
7. LONG-TERM DEBT
Long-term debt consists of the following:
DECEMBER 31,
-------------------
1993 1994
------- --------
(IN THOUSANDS)
8.05% Industrial Development Bonds(a).................. $ 3,833 $ 3,353
Mortgage Note Payable(b)............................... 1,934 1,881
Floating Rate Industrial Development Bonds(c).......... 1,875 1,500
6.25% Promissory Note due 2001(d)...................... 10,500 9,188
7.44% Series A Senior Fixed Rate Notes due 2002(e)..... 40,000 40,000
6.56% Series B Senior Rate Reset Notes due 2002(f)..... 10,000 10,000
10% Subordinated Promissory Note due 2003(g)........... 6,000 6,000
Revolving Credit Loan due 1997(h)...................... 6,000 10,000
5.8% Term Loan due 1998(i)............................. 3,933 3,133
10% ESOP Loan Guarantee(j)............................. 5,000 --
6.5% Mortgage Note due 1998(k)......................... 2,125 1,625
7.0% Term Loan due 2004(l)............................. -- 20,000
------- --------
91,200 106,680
Less current portion of long-term debt................. 3,625 6,275
------- --------
$87,575 $100,405
------- --------
------- --------
- ------------
(a) On December 16, 1986, the Company completed a $9,600,000 industrial
development bond financing which was used to fund the building of an
office/warehouse/distribution center located in East Windsor, New Jersey.
The bonds, which mature on December 15, 2001, are payable in monthly
installments of $110,186 which began January 15, 1988 until December 15,
1990; $60,186 commencing January 15, 1991 until June 15, 1992; $39,912
commencing July 15, 1992 until November 15, 2001; $79,812 on December 15,
2001. The bonds may be redeemed prior to maturity on December 15, 1996. This
indebtedness is collateralized by the land and building purchased with the
proceeds which have a net carrying value of $9,317,000 at December 31, 1994.
The bonds contain certain restrictions relating to net income and net worth.
Interest is payable monthly.
(b) On May 15, 1991, the Company completed a variable rate mortgage in the
amount of $2,060,000 due June 1, 1996 payable in monthly installments, which
began June 1, 1991. The opening rate of interest was 9.125% and will be
reset annually at 3% over the rate on one-year U.S. Treasury Bills. The
indebtedness was collateralized by the land and building at the existing
facility in Phoenix, Arizona which have a net carrying value of $1,674,000
at December 31, 1994. The interest rate at December 31, 1994 was 7.75%.
(c) On April 13, 1989, the Company assumed $5,307,692 of floating rate
Industrial Development Revenue Bonds in the purchase of its toiletry
products manufacturing facility in Rantoul, Illinois. The bonds, which
mature on December 1, 1998, are payable annually which began December 11,
1989 for $230,769; December 1, 1990 for $2,076,923; $375,000 commencing
December 1, 1991 until December 1, 1998. Interest is payable quarterly at
70% of the prime rate. This indebtedness is collateralized by the land and
building which have a net carrying value of $5,504,000 at December 31, 1994.
The interest rate at December 31, 1994 was 5.95%.
(Footnotes continued on following page)
F-10
<PAGE>
CONAIR CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1992, 1993 AND 1994
7. LONG-TERM DEBT--(CONTINUED)
(Footnotes continued from preceding page)
(d) On June 11, 1992, the Company received a $10,500,000 loan which matures on
November 15, 2001 and had an interest rate of 9.7%. Interest is payable
quarterly commencing August 15, 1992. Semi-annual principal payments of
$656,250 began on May 15, 1994. The loan was refinanced in 1993 reducing its
interest rate to 6.25%. The loan is collateralized by a pledge of a portion
of the stock of one of the Company's subsidiaries.
(e) On October 20, 1992, the Company issued $40,000,000 Series A Senior Fixed
Rate Notes. The notes mature on December 28, 2002, and have an interest rate
of 7.44% per annum to be paid on the 28th day of each December, March, June
and September. The principal payments are due as follows: $2,750,000 on
December 28, 1995; $4,000,000 on December 28, 1996; and $5,500,000
commencing with December 28, 1997 and every December 28th thereafter until
December 28, 2001 and a final payment of $5,750,000 on December 28, 2002.
The notes contain covenants requiring the Company to, among other things,
maintain certain levels of tangible net worth, liquidity and leverage. The
loan is collateralized by a pledge of a portion of the stocks of the
Company's subsidiaries.
(f) On October 20, 1992, the Company issued $10,000,000 Series B Senior Rate
Reset Notes. The notes mature on December 28, 2002, and have an interest
rate initially set at 6.56% to be paid on the 28th day of each December,
March, June and September. The reset date is October 20, 1996 and the reset
rate is based on the U.S. Treasury rate equal to the remaining average life
of the Series B Notes plus 1.75% per annum. The principal payments are
scheduled to commence with a payment of $1,500,000 on December 28, 1996 and
every December 28th thereafter and ending on December 28, 2001 and a final
payment of $1,000,000 on December 28, 2002. The notes contain covenants
requiring the Company to, among other things, maintain certain levels of
tangible net worth, liquidity and leverage. The loan is collateralized by a
pledge of a portion of the stocks of the Company's subsidiaries.
(g) On October 20, 1992, the Company issued a 10% Subordinated Promissory Note
due April 27, 2003. Interest payments are payable semi-annually on June 15
and December 15. In 1993, the Company repaid $4,000,000 of this loan at par.
The principal balance is due at maturity. (See Note 14)
(h) On October 20, 1992, the Company entered into a Bank Credit Agreement with a
syndicate of domestic banks providing for a $20,000,000 revolving credit
loan. This loan was restructured in 1993 and the availability under the
Revolving Credit line was increased to $30,000,000 ($21,000,000 at December
31, 1994). Interest rates on this facility are at variable rates subject to
changes in short-term interest rates and changes in leverage and operating
performance of the Company. The loan commitment of $21,000,000 is scheduled
to be reduced by the following amounts: $6,000,000 on December 15, 1995 and
$7,500,000 on December 15, 1996 and December 15, 1997. The Agreement
contains covenants requiring the Company to, among other things, maintain
certain levels of tangible net worth, liquidity and leverage. The loan is
collateralized by a pledge of a portion of the stocks of the Company's
subsidiaries. The interest rate at December 31, 1994 was 7.5%. (See Note
15.)
(i) On November 24, 1993, the Company completed a term loan in the amount of
$4,000,000 due November 1, 1998 payable in monthly installments which began
December 1, 1993. The interest rate on this loan is 5.8%. The loan was used
to prepay $4,000,000 of principal due on its 10% Subordinated Promissory
Note due in 2003. The Company's obligations under this loan are unsecured.
(Footnotes continued on following page)
F-11
<PAGE>
CONAIR CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1992, 1993 AND 1994
7. LONG-TERM DEBT--(CONTINUED)
(Footnotes continued from preceding page)
(j) On December 31, 1994 as a result of the merger of the Conair Corporation
Employee Stock Ownership Plan with the Profit Sharing Plan of Conair
Corporation, this debt obligation was satisfied and the Loan Guarantee is no
longer outstanding.
(k) On February 1, 1993, the Company completed a term loan in the amount of
$2,500,000 due on February 1, 1998. Repayment of principal is at the rate of
$125,000 per quarter commencing on June 30, 1993. Interest is payable
monthly. The proceeds of this loan were used to expand the distribution
capacity of the Rantoul, Illinois facility. The loan is secured by a
mortgage on this facility, which has a net carrying value of $5,504,000 at
December 31, 1994.
(l) On March 15, 1994, the Company obtained a ten year term loan in the amount
of $20,000,000. This loan was used to finance the acquisition of its
executive office facility in Stamford, Connecticut. The loan is unsecured
and has a fixed interest rate of 7%. Principal repayments on the loan begin
on June 1, 1996 with a payment of $625,000 and variable sums are due
semi-annually on June 1 and December 1 until a final payment of $4,000,000
at maturity on February 28, 2004.
The various debt covenants place limitations on the payment of preferred
dividends and prohibit the payment of dividends on common stock pending the
receipt of an equity issuance in excess of $20,000,000. The Company is in
compliance with all covenants under its debt obligations at December 31, 1994.
At December 31, 1994, projected maturities of long-term debt are as follows:
AMOUNT
--------------
YEAR ENDING DECEMBER 31, (IN THOUSANDS)
- ---------------------------------------------------------------
1995........................................................... $ 6,275
1996........................................................... 12,039
1997........................................................... 21,996
1998........................................................... 11,775
1999........................................................... 10,791
Thereafter..................................................... 43,834
--------------
$106,680
--------------
--------------
All of the Company's Serial Zero Coupon Senior Notes were retired or
defeased in 1989.
8. CAPITAL STOCK
On October 19, 1992, pursuant to the written consent of the sole stockholder
of the Company, the Company's Certificate of Incorporation was amended to
provide for the authorization of an aggregate of 15,000 shares of capital stock,
consisting of 5,000 authorized shares of common stock, par value $100 per share,
and 10,000 shares of preferred stock, par value $1.00 per share.
On October 20, 1992, the Company sold 5,000 shares of Convertible Preferred
Stock to the Profit Sharing Plan of Conair Corporation for the sum of
$5,000,000. These shares receive a cumulative dividend at an annual rate of $100
per share payable on the fifteenth day of January, April, July and October of
each year. The shares may be redeemed, under certain conditions, at the option
of the Company. The shares are presently convertible into 69 shares of common
stock.
F-12
<PAGE>
CONAIR CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1992, 1993 AND 1994
9. INCOME TAXES
The provision for income taxes consists of the following:
<TABLE><CAPTION>
YEARS ENDED DECEMBER 31,
--------------------------------
1992 1993 1994
------- ----------- ------
(IN THOUSANDS)
<S> <S> <C> <C>
Current Tax Expense:
U.S. Federal............................... $ 3,214 $ 3,121 $ 6,318
State and local............................ 88 317 369
Foreign.................................... 2,324 2,344 3,643
------- ----------- -------
Total Current................................ 5,626 5,782 10,330
Deferred Tax Expense (Benefit):
U.S. Federal............................... (1,265) 3,196 2,644
------- ----------- -------
$ 4,361 $ 8,978 $12,974
------- ----------- -------
------- ----------- -------
</TABLE>
The following table reconciles taxes on income to the Federal statutory rate
of 34% for the year ended December 31, 1992 and 35% for the years ended December
31, 1993 and 1994.
<TABLE><CAPTION>
YEARS ENDED DECEMBER 31,
---------------------------
1992 1993 1994
------ ------ -------
(IN THOUSANDS)
<S> <C> <C> <C>
Computed tax at statutory rate................... $3,222 $7,390 $11,752
State and local income taxes, net of Federal
income tax benefit............................. 58 209 240
Amortization of excess of cost over net assets of
acquired companies............................... 963 971 1,040
Other, net....................................... 118 408 (58)
------ ------ -------
$4,361 $8,978 $12,974
------ ------ -------
------ ------ -------
</TABLE>
Deferred tax liabilities (assets) are comprised of the following at December
31:
<TABLE><CAPTION>
1992 1993 1994
------- ------- -------
(IN THOUSANDS)
<S> <C> <C> <C>
Deferred Tax Liabilities:
Depreciation................................ $ 1,100 $ 1,338 $ 1,012
Unremitted earnings of foreign
subsidiaries.................................. 15,562 18,173 20,298
------- ------- -------
16,662 19,511 21,310
------- ------- -------
Deferred Tax Assets:
Vacation.................................... (330) (308) (203)
Bad Debt.................................... (573) (590) (223)
Inventory................................... (586) (557) (356)
Warranty.................................... (1,041) (919) (919)
Other....................................... (683) (511) (339)
------- ------- -------
(3,213) (2,885) (2,040)
------- ------- -------
Net Deferred Tax Liabilities.................. $13,449 $16,626 $19,270
------- ------- -------
------- ------- -------
</TABLE>
F-13
<PAGE>
CONAIR CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1992, 1993 AND 1994
10. COMMITMENTS AND CONTINGENCIES
The Company was contingently liable for letters of credit amounting to
approximately $24,661,000 at December 31, 1994.
In 1993, the Company leased a 60,000 sq. ft. manufacturing facility in
Highland Park, IL for a term beginning November 1, 1993 and continuing until
December 31, 1996. The rent during this term is $162,266 per year. The lease is
a net lease requiring the Company to pay all taxes, charges and expenses.
In January 1993, the Company entered into a five-year lease of computer
equipment for approximately $1,700,000. Monthly lease payments in the first year
were $13,288 and in subsequent years increase to $40,874.
In 1994, the Company, through its wholly-owned subsidiary, Continental
Conair Limited, renewed its lease of a 16,500 sq. ft. facility in Kowloon, Hong
Kong. The term of the renewal is three years with rent of $525,000 per year. The
lease is a net lease requiring the Company to pay all taxes, charges and
expenses.
11. EMPLOYEE BENEFIT PLAN
The Company provides for a non-contributory employee benefit program
consisting of a defined contribution plan which covers substantially all U.S.
full-time employees. Company contributions, approved by the Board of Directors
(not in excess of amounts deductible for Federal income tax purposes) are paid
into a trust. Total contributions to this plan charged to expense for the years
ended December 31, 1992, 1993 and 1994 were $1,268,000, $1,285,000 and
$1,022,000, respectively.
On June 1, 1993, the Company formed a new employee benefit plan, an Employee
Stock Ownership Plan (ESOP). On July 1, 1993, the ESOP acquired the Convertible
Preferred Stock from the Profit Sharing Plan of Conair Corporation. The ESOP
issued a 10% $5,000,000 note payable to the Profit Sharing Plan. The ESOP note
was guaranteed by the Company. Total contributions to this plan charged to
expense for the years ended December 31, 1993 and 1994 were $100,000 and
$500,000, respectively.
On December 31, 1994, the Company merged the Conair Corporation ESOP with
the Profit Sharing Plan of Conair Corporation. As a result of this transaction,
the Profit Sharing Plan acquired the Convertible Preferred Stock and the
obligations under the ESOP note and its corresponding guarantee by the Company
were satisfied.
12. INTERNATIONAL OPERATIONS AND OTHER
The Company operates in one industry segment and is engaged in the design,
manufacture, assembly and marketing of personal care consumer products and
consumer electronic and kitchen appliances.
During the years ended December 31, 1992, 1993 and 1994, sales to the
largest customer aggregated approximately $41,212,000, $50,147,000 and
$62,811,000, respectively. Sales to the Company's second largest customer in
1992, 1993 and 1994 were $55,938,000, $50,828,000 and $59,362,000, respectively.
No other customer represented sales in excess of 10% of consolidated revenues.
Continental Conair Limited, a wholly-owned subsidiary, is located in Hong
Kong. Sales of this subsidiary to unaffiliated customers for the years ended
December 31, 1992, 1993 and 1994 were $44,150,000, $36,200,000 and $38,197,000,
respectively; operating income was $8,711,000, $6,536,000
F-14
<PAGE>
CONAIR CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1992, 1993 AND 1994
12. INTERNATIONAL OPERATIONS AND OTHER--(CONTINUED)
and $6,872,000, respectively; and identifiable assets at December 31, 1992, 1993
and 1994 were $26,873,000, $28,466,000 and $35,267,000, respectively. Conair
Costa Rica, S.A., a wholly-owned subsidiary, is located in Costa Rica. Sales of
this subsidiary to unaffiliated customers for the years ended December 31, 1993
and 1994 were $13,223,000 and $10,483,000, respectively; operating income was
$3,316,000 and $2,235,000, respectively; and identifiable assets at December 31,
1993 and 1994 were $18,615,000 and $20,281,000, respectively. Conair Costa Rica,
S.A. sales to unaffiliated customers were not significant in 1992.
International sales were approximately $12,826,000, $19,160,000 and
$28,804,000 for 1992, 1993, and 1994, respectively.
13. CONDENSED UNAUDITED QUARTERLY RESULTS OF OPERATIONS
Condensed unaudited quarterly results of operations for the years ended
December 31, 1993 and 1994 are as follows:
<TABLE><CAPTION>
QUARTER ENDED
--------------------------------------------------
MARCH 31 JUNE 30 SEPTEMBER 30 DECEMBER 31
-------- ------- ------------ -----------
1993 (IN THOUSANDS)
- ------------------------------------------------
<S> <C> <C> <C> <C>
Net sales....................................... $83,987 $93,472 $132,108 $ 132,995
Gross profit.................................... 28,694 30,495 41,422 43,535
Net income...................................... 907 1,213 4,555 5,386
</TABLE>
<TABLE><CAPTION>
QUARTER ENDED
---------------------------------------------------
MARCH 31 JUNE 30 SEPTEMBER 30 DECEMBER 31
-------- -------- ------------ -----------
1994 (IN THOUSANDS)
- -----------------------------------------------
<S> <C> <C> <C> <C>
Net sales...................................... $95,575 $117,060 $157,197 $ 154,566
Gross profit................................... 31,814 37,554 48,384 48,659
Net income..................................... 1,603 3,634 7,403 7,847
</TABLE>
14. RELATED PARTY TRANSACTIONS
Conair Corporation and Leandro P. Rizzuto are parties to an employment
agreement, dated June 20, 1985, for a term through June 30, 1996, subject to
automatic renewals of successive one-year periods, pursuant to which the Company
employs Mr. Rizzuto as Chairman and President of the Company at a base annual
salary and incentive compensation to be determined annually by the Executive
Committee of the Board of Directors. Mr. Rizzuto's base salary and incentive
compensation will be subject to upward adjustments at the discretion of the
Board of Directors.
In 1993, the Company leased its Stamford, Connecticut executive office
facility from Leandro P. Rizzuto at a cost of $2,622,500 under a net lease
requiring the Company to pay all taxes, charges and expenses. On March 15, 1994,
the Company acquired this facility from Leandro P. Rizzuto, for $20,000,000. The
purchase price was based on an independent appraisal. A ten-year unsecured loan
in the amount of $20,000,000 was obtained by the Company to finance this
acquisition. The interest rate on this loan is 7%. Principal repayments on this
loan begin on June 1, 1996 with the payment of $625,000 and variable sums are
due semi-annually on June 1 and December 1 until a final payment of $4,000,000
at maturity on February 28, 2004. The Company leased back to Mr. Rizzuto a
portion of the facility for a period of ninety-nine years subject to the
Company's option, for a period of ten years, to buy back the lease rights. The
option price for the Company to repurchase the lease rights is $4 million
F-15
<PAGE>
CONAIR CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1992, 1993 AND 1994
14. RELATED PARTY TRANSACTIONS--(CONTINUED)
for the first five years, escalating to $6.4 million over the remaining five
years. The initial option price was determined based on an independent
appraisal.
The Company occasionally charters a jet that is beneficially owned by
Leandro P. Rizzuto. In 1992, 1993 and 1994 the Company paid $376,200, $350,100
and $323,200, respectively, to Mr. Rizzuto as charter payments. These payments
approximate amounts charged by Mr. Rizzuto to unaffiliated parties.
On October 20, 1992 the Company received $10,000,000 upon the issuance to
Leandro P. Rizzuto of a $10,000,000 par value 10% Subordinated Promissory Note
due April 27, 2003. Interest is payable semi-annually on June 15 and December
15. The principal balance is due at maturity. These notes are subordinated to
the Series A Senior Fixed Rate Notes, the Series B Senior Rate Reset Notes and
the Bank Credit Facilities. In 1993, the Company prepaid $4,000,000 of this loan
at par.
On July 1, 1994, the Company purchased from Leandro P. Rizzuto his 50%
interest in Rusk, Inc. at his cost of $575,000. Rusk, Inc. is a marketer of
upscale, professional-only hair care products.
In 1992, 1993 and 1994, the Company paid $69,000 each year for consulting
fees to a Director of the Company.
In 1992, 1993 and 1994, the Company paid $75,000 each year for legal fees to
a Director of the Company.
An officer and director of the Company is an officer and principal
stockholder of L&R Distributors, Inc., an independent New York based distributor
of hair care and personal care products. In 1992, 1993 and 1994, L&R
Distributors, Inc. purchased products from the Company in the amounts of
$1,701,000, $1,401,000 and $1,668,000, respectively. The prices charged to L&R
Distributors, Inc. were consistent with the amounts charged by the Company to
other independent distributors.
In 1992, 1993, and 1994, the Company paid approximately $54,000, $43,000 and
$43,000, respectively, to a law firm for legal fees. A director and a vice
president of the Company are partners in this law firm.
15. SUBSEQUENT EVENTS
On February 18, 1995, the Company acquired 100% of the common stock of
Babyliss, S.A. for approximately $38,000,000 which is subject to a maximum
downward adjustment of approximately $4,000,000 based on the terms of the
agreement. Babyliss, S.A. is a manufacturer and marketer of personal care
appliance products principally in France, the United Kingdom, Germany, Belgium,
the Netherlands and Spain. Through its distributors Babyliss products are also
marketed in Scandinavia and several non-European markets including North
America, Africa and East Asia. In connection with this acquisition, the Company
increased its bank revolving credit line by $37,500,000. This additional debt
has mandatory principal repayments of $5,000,000 on December 15, 1996;
$7,500,000 on December 15, 1997; $10,000,000 on each of December 15, 1998 and
December 15, 1999 and $5,000,000 on March 15, 2000. The interest rate on this
facility is variable and is subject to change based on the leverage and
operating performance of the Company.
On February 28, 1995, the Company exercised its option to purchase the
portion of its Stamford, Connecticut executive office facility leased to Leandro
P. Rizzuto. The option price is $4,000,000 and the closing is scheduled for
March 31, 1995.
F-16
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
NO DEALER, SALESMAN OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS, OTHER THAN THOSE CONTAINED IN THIS
PROSPECTUS, AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS
MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY OR ANY U.S.
UNDERWRITER. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE HEREUNDER
SHALL UNDER ANY CIRCUMSTANCES CREATE ANY IMPLICATION THAT THERE HAS BEEN NO
CHANGE IN THE AFFAIRS OF THE COMPANY SINCE THE DATE HEREOF. THIS PROSPECTUS DOES
NOT CONSTITUTE AN OFFER TO SELL NOR A SOLICITATION OF AN OFFER TO BUY ANY
SECURITIES OFFERED HEREBY BY ANYONE IN ANY JURISDICTION IN WHICH SUCH OFFER OR
SOLICITATION IS NOT AUTHORIZED OR IN WHICH THE PERSON MAKING SUCH OFFER OR
SOLICITATION IS NOT QUALIFIED TO DO SO OR TO ANYONE TO WHOM IT IS UNLAWFUL TO
MAKE SUCH OFFER OR SOLICITATION.
-------------------
TABLE OF CONTENTS
PAGE
----
Prospectus Summary................... 3
The Company.......................... 6
Investment Considerations............ 6
Use of Proceeds...................... 10
Dividend Policy...................... 10
Capitalization....................... 11
Dilution............................. 12
Selected Financial Information....... 13
Management's Discussion and Analysis
of Financial Condition
and Results of Operations.......... 14
Business............................. 19
Management........................... 32
Certain Transactions................. 39
Principal Stockholder................ 40
Description of Capital Stock......... 40
Underwriting......................... 46
Legal Matters........................ 48
Experts.............................. 48
Available Information................ 49
Index to Consolidated Financial
Statements........................... F-1
-------------------
UNTIL , 1995 (25 DAYS AFTER
THE DATE OF THIS PROSPECTUS) ALL DEALERS EFFECTING TRANSACTIONS IN THE
REGISTERED SECURITIES, WHETHER OR NOT PARTICIPATING IN THIS DISTRIBUTION,
MAY BE REQUIRED TO DELIVER A PROSPECTUS. THIS REQUIREMENT IS IN ADDITION
TO THE OBLIGATION OF DEALERS TO DELIVER A PROSPECTUS WHEN ACTING AS
UNDERWRITERS AND WITH RESPECT TO THEIR UNSOLD ALLOTMENTS OR SUBSCRIPTIONS.
8,700,000 SHARES
CONAIR CORPORATION
CLASS A COMMON STOCK
----------------
PROSPECTUS
----------------
BEAR, STEARNS & CO. INC.
MERRILL LYNCH & CO.
, 1995
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
[INTERNATIONAL PROSPECTUS--ALTERNATE PAGES]
SUBJECT TO COMPLETION, DATED MARCH 27, 1995
PROSPECTUS
8,700,000 SHARES
CONAIR CORPORATION
CLASS A COMMON STOCK
All of the shares of Class A Common Stock (the "Shares") offered hereby are
being sold by Conair Corporation, a Delaware corporation (the "Company"). Of
these Shares, shares (the "International Shares") are being offered
outside the United States (the "International Offering") by the Managers and
shares (the "U.S. Shares") are being offered concurrently in the United
States (the "U.S. Offering") by the U.S. Underwriters. The public offering price
and the underwriting discounts and commissions are identical for both the
International Offering and the U.S. Offering (collectively, the "Offering").
Prior to this Offering, there has been no public market for the Class A
Common Stock. It is currently anticipated that the initial public offering price
will be between $ and $ per Share. See "Underwriting" for a discussion
of the factors considered in determining the initial public offering price. The
Company intends to apply for the listing of the Class A Common Stock on the New
York Stock Exchange under the symbol " ".
The Company has two classes of authorized Common Stock, Class A Common
Stock, which is offered hereby, and Class B Common Stock. Holders of shares of
Class A Common Stock are entitled to one vote per share and holders of shares of
Class B Common Stock are entitled to ten votes per share. The holders of shares
of Class A Common Stock are entitled to vote separately as a class to elect 25%
of the entire Board of Directors of the Company. All of the outstanding shares
of Class B Common Stock, which will represent approximately % of the
aggregate voting power of the Company upon completion of this Offering, are
beneficially owned by Mr. Leandro P. Rizzuto, Chairman and President of the
Company.
--------------
PROSPECTIVE INVESTORS SHOULD CONSIDER THE INFORMATION SET FORTH UNDER
"INVESTMENT CONSIDERATIONS" IN CONNECTION WITH THE PURCHASE OF THE CLASS A
COMMON STOCK OFFERED HEREBY.
--------------
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.
<TABLE><CAPTION>
UNDERWRITING DISCOUNTS PROCEEDS TO
PRICE TO PUBLIC AND COMMISSIONS (1) COMPANY (2)
<S> <C> <C> <C>
Per Share.................................. $ $ $
Total(3)................................... $ $ $
</TABLE>
(1) The Company has agreed to indemnify the Managers and the U.S. Underwriters
against certain liabilities, including liabilities under the Securities Act
of 1933, as amended. See "Underwriting."
(2) Before deducting expenses related to this Offering, which are estimated to
be approximately $ .
(3) The Company has granted to the Managers and the U.S. Underwriters 30-day
options to purchase in the aggregate up to 1,300,000 additional Shares
solely to cover over-allotments, if any. If the over-allotment options are
exercised in full, the total Price to Public, Underwriting Discounts and
Commissions and Proceeds to Company will be $ , $ and $ ,
respectively. See "Underwriting."
--------------
The International Shares are offered by the several Managers, subject to
prior sale, when, as and if delivered to and accepted by them, and subject to
certain conditions. The Managers reserve the right to withdraw, cancel or modify
the International Offering and to reject orders in whole or in part. It is
expected that delivery of the Managers Shares will be made against payment
therefor on or about , 1995, at the offices of Bear, Stearns & Co.
Inc., 245 Park Avenue, New York, New York 10167.
--------------
BEAR, STEARNS INTERNATIONAL LIMITED
MERRILL LYNCH INTERNATIONAL LIMITED
, 1995
<PAGE>
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY
OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES
EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES
IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR
TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE.
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
[INTERNATIONAL PROSPECTUS--ALTERNATE PAGES]
NO DEALER, SALESMAN OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS, OTHER THAN THOSE CONTAINED IN THIS
PROSPECTUS, AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS
MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY OR ANY MANAGER.
NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL UNDER
ANY CIRCUMSTANCES CREATE ANY IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE
AFFAIRS OF THE COMPANY SINCE THE DATE HEREOF. THIS PROSPECTUS DOES NOT
CONSTITUTE AN OFFER TO SELL NOR A SOLICITATION OF AN OFFER TO BUY ANY SECURITIES
OFFERED HEREBY BY ANYONE IN ANY JURISDICTION IN WHICH SUCH OFFER OR SOLICITATION
IS NOT AUTHORIZED OR IN WHICH THE PERSON MAKING SUCH OFFER OR SOLICITATION IS
NOT QUALIFIED TO DO SO OR TO ANYONE TO WHOM IT IS UNLAWFUL TO MAKE SUCH OFFER
OR SOLICITATION.
-------------------
TABLE OF CONTENTS
PAGE
----
Prospectus Summary................... 3
The Company.......................... 6
Investment Considerations............ 6
Use of Proceeds...................... 10
Dividend Policy...................... 10
Capitalization....................... 11
Dilution............................. 12
Selected Financial Information....... 13
Management's Discussion and
Analysis of Financial Condition
and Results of Operations.......... 14
Business............................. 19
Management........................... 32
Certain Transactions................. 39
Principal Stockholder................ 40
Description of Capital Stock......... 40
Underwriting......................... 46
Legal Matters........................ 48
Experts.............................. 48
Available Information................ 49
Index to Consolidated Financial
Statements........................... F-1
-------------------
UNTIL , 1995 (25 DAYS AFTER THE DATE OF THIS PROSPECTUS)
ALL DEALERS EFFECTING TRANSACTIONS IN THE REGISTERED SECURITIES, WHETHER OR NOT
PARTICIPATING IN THIS DISTRIBUTION, MAY BE REQUIRED TO DELIVER A PROSPECTUS.
THIS REQUIREMENT IS IN ADDITION TO THE OBLIGATION OF DEALERS TO DELIVER A
PROSPECTUS WHEN ACTING AS UNDERWRITERS AND WITH RESPECT TO THEIR UNSOLD
ALLOTMENTS OR SUBSCRIPTIONS.
8,700,000 SHARES
CONAIR CORPORATION
CLASS A COMMON STOCK
----------------
PROSPECTUS
----------------
BEAR, STEARNS
INTERNATIONAL LIMITED
MERRILL LYNCH
INTERNATIONAL LIMITED
, 1995
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The following table sets forth the various expenses incurred by the
Registrant in connection with the sale and distribution of the securities being
registered hereby, other than underwriting discounts and commissions. All
amounts are estimated except the Securities and Exchange Commission registration
fee and the New York Stock Exchange listing fee.
AMOUNT
-------
SEC registration fee............................................. $55,172
NASD filing fee.................................................. 16,500
New York Stock Exchange listing fee..............................
Blue Sky fees and expenses....................................... 15,000
Accounting fees and expenses.....................................
Legal fees and expenses..........................................
Printing and engraving expenses..................................
Registrar and transfer agent's fees..............................
Miscellaneous fees and expenses..................................
-------
Total........................................................ $
-------
-------
ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Section 145 of the Delaware General Corporation Law (the "Delaware GCL")
permits the Registrant's board of directors to indemnify any person against
expenses (including attorneys' fees), judgments, fines and amounts paid in
settlement actually and reasonably incurred by him in connection with any
threatened, pending or completed action, suit or proceeding in which such person
is made a party by reason of his being or having been a director, officer,
employee or agent of the Registrant, in terms sufficiently broad to permit such
indemnification under certain circumstances for liabilities (including
reimbursement for expenses incurred) arising under the Securities Act of 1933,
as amended (the "Act"). The statute provides that indemnification pursuant to
its provisions is not exclusive of other rights of indemnification to which a
person may be entitled under any by-law, agreement, vote of stockholders or
disinterested directors, or otherwise.
The Registrant's Restated Certificate of Incorporation and By-laws provides
for indemnification of its directors and officers to the fullest extent
permitted by law.
As permitted by sections 102 and 145 of the Delaware GCL, the Registrant's
Restated Certificate of Incorporation eliminates a director's personal liability
for monetary damages to the Registrant and its stockholders arising from a
breach or alleged breach of a director's fiduciary duty except for liability
under section 174 of the Delaware GCL or liability for any breach of the
director's duty of loyalty to the Registrant or its stockholders, for acts or
omissions not in good faith or which involve intentional misconduct or a knowing
violation of law or for any transaction which the director derived an improper
personal benefit.
ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES
In October 1992, the Registrant sold 5,000 shares of its Series A
Convertible Preferred Stock to the Profit Sharing Plan of the Registrant at a
price of $1,000 per share. These shares were issued without registration under
the Securities Act of 1933, as amended, pursuant to Section 4(2) thereof.
II-1
<PAGE>
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULE
(a) The exhibits listed in the following Exhibit Index are filed as part of
the Registration Statement.
<TABLE><CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- -------- ----------------------------------------------------------------------------------
<C> <S>
1.1**** --Form of U.S. Underwriting Agreement
1.2**** --Form of International Underwriting Agreement
3.1**** --Amended and Restated Certificate of Incorporation of the Company
3.2**** --By-Laws of the Company
4.1**** --Form of Certificate for Class A Common Stock
4.2*** --Amended and Restated Credit Agreement among the Company, Continental Conair
Limited and the banking institutions named therein dated October 1, 1994
4.3*** --First Amendment to the Amended and Restated Credit Agreement among the Company,
Continental Conair Limited and the banking institutions named therein dated
February 17, 1995
5.1**** --Opinion of Paul, Weiss, Rifkind, Wharton & Garrison
10.1* --Conair Corporation Employees and Directors Stock Plan
10.2** --Employment Agreement between Conair Corporation and Leandro P. Rizzuto dated
June 20, 1985.
10.3* --Contract of Sale between Leandro P. Rizzuto and the Company dated March 14,
1994.
10.4* --Lease between the Company and Leandro P. Rizzuto dated March 14, 1994
10.5*** --English translation of original French language Stock Purchase Agreement dated
January 22, 1995 between the Company and Jean-Pierre Feldblum
10.6*** --English translation of original French language Stock Purchase Agreement dated
January 22, 1995 between the Company and Financiere de l'Europe Occidentale
10.7*** --English translation of original French language amendment dated February 18,
1995 to Stock Purchase Agreement dated January 22, 1995 between the Company and
Financiere de l'Europe Occidentale
11.1**** --Statement regarding computation of per share earnings
21.1* --Subsidiaries of the Company
23.1* --Consent of Deloitte & Touche LLP
23.2 --Consent of Paul, Weiss, Rifkind, Wharton & Garrison (included in its opinion
filed as Exhibit 5.1)
24.1 --Power of Attorney (included on the signature page of the Registration Statement)
</TABLE>
- ------------
* Filed herewith.
** Incorporated herein by reference to exhibits to Amendment No. 2 to the
Registrant's S-1 Registration Statement dated June 13, 1985 (File No.
2-97868).
*** Incorporated herein by reference to exhibits to the Company's Current
Report on Form 8-K (File No. 1-8919).
**** To be filed by amendment.
(b) Index to financial statement schedule.
Schedule II--Valuation and Qualifying Accounts
All other schedules have been omitted because they are not required or
because the required information is contained in the financial statements or the
notes thereto.
II-2
<PAGE>
ITEM 17. UNDERTAKINGS
(a) Insofar as indemnification for liabilities arising under the Securities
Act of 1933, as amended (the "Act"), 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.
(b) The undersigned Registrant hereby undertakes that:
(1) For purposes of determining any liability under the Act, the
information omitted from the form of Prospectus filed as part of this
Registration Statement in reliance upon Rule 430A and contained in a form of
Prospectus filed by the Registrant pursuant to Rule 424(b)(1) or (4) or
497(h) under the Act shall be deemed to be part of this Registration
Statement as of the time it was declared effective.
(2) For the purpose of determining any liability under the Act, each
post-effective amendment that contains a form of Prospectus shall be deemed
to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed to
be the initial bona fide offering thereof.
(3) It will provide to the Underwriters at the closing specified in the
underwriting agreements certificates in such denominations and registered in
such names as required by the Underwriters to permit prompt delivery to each
purchaser.
II-3
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Stamford, State of
Connecticut, on the 27th day of March, 1995.
CONAIR CORPORATION
By: /s/ LEANDRO P. RIZZUTO
..................................
Leandro P. Rizzuto
Chairman of the Board and President
POWER OF ATTORNEY
Each of the undersigned hereby appoints Leandro P. Rizzuto and Richard A.
Margulies and each of them (with full power to act alone), as attorneys and
agents for the undersigned, with full power of substitution, for and in the
name, place and stead of the undersigned, to sign and file with the Securities
and Exchange Commission under the Securities Act of 1933 any and all amendments
and exhibits to this Registration Statement and any and all applications,
instruments and other documents to be filed with the Securities and Exchange
Commission pertaining to the registration of the securities covered hereby, with
full power and authority to do and perform any and all acts and things
whatsoever requisite or desirable.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below by the following persons in the
capacities and on the dates indicated.
<TABLE><CAPTION>
SIGNATURE TITLE DATE
- ------------------------------------ ------------------------------------ ---------------
<C> <S> <C>
/s/ LEANDRO P. RIZZUTO Chairman of the Board and President March 27, 1995
.................................... (Principal Executive Officer) and
(Leandro P. Rizzuto) Director
/s/ PATRICK P. YANNOTTA Senior Vice President, Finance March 27, 1995
.................................... (Principal Financial Officer and
(Patrick P. Yannotta) Principal Accounting Officer)
/s/ MELVIN L. BRAUN Director March 27, 1995
....................................
(Melvin L. Braun)
/s/ MAURICE LUCAS Director and Executive Vice March 27, 1995
.................................... President
(Maurice Lucas)
/s/ JOHN P. LOMENZO Director March 27, 1995
....................................
(John P. Lomenzo)
/s/ WALTER MARGULIES Director March 27, 1995
....................................
(Walter Margulies)
/s/ DAVID SOMMER Director March 27, 1995
....................................
(David Sommer)
/s/ UZI ZUCKER Director March 27, 1995
....................................
(Uzi Zucker)
</TABLE>
II-4
<PAGE>
SCHEDULE II
CONAIR CORPORATION AND SUBSIDIARIES
VALUATION AND QUALIFYING ACCOUNTS
<TABLE><CAPTION>
COLUMN A COLUMN B COLUMN C COLUMN D COLUMN E
- -------------------------------- ------------ ----------------------------------- ----------------- ----------
ADDITIONS
(1) (2)
-----------------------------------
CHARGED TO CHARGED TO
BALANCE PROFIT AND LOSS OTHER DEDUCTIONS FROM BALANCE AT
DESCRIPTION AT BEGINNING OR INCOME ACCOUNTS--DESCRIBE RESERVES--DESCRIBE END
- -------------------------------- ------------ --------------- ----------------- ----------------- ----------
<S> <C> <C> <C> <C> <C>
YEAR ENDED DECEMBER 31, 1994
Allowance for doubtful
accounts........................ $1,337,000 $ 427,000 $-- $ 306,000(A) $1,458,000
------------ --------------- ------- ----------------- ----------
------------ --------------- ------- ----------------- ----------
Accrued sales returns........... $5,951,000 $20,175,000 $-- $17,382,000 $8,744,000(B)
------------ --------------- ------- ----------------- ----------
------------ --------------- ------- ----------------- ----------
YEAR ENDED DECEMBER 31, 1993
Allowance for doubtful
accounts........................ $1,370,000 $ 727,000 $-- $ 760,000(A) $1,337,000
------------ --------------- ------- ----------------- ----------
------------ --------------- ------- ----------------- ----------
Accrued sales returns........... $5,559,000 $12,132,000 $-- $11,740,000 $5,951,000(B)
------------ --------------- ------- ----------------- ----------
------------ --------------- ------- ----------------- ----------
YEAR ENDED DECEMBER 31, 1992
Allowance for doubtful
accounts........................ $1,375,000 $ 425,000 $-- $ 430,000(A) $1,370,000
------------ --------------- ------- ----------------- ----------
------------ --------------- ------- ----------------- ----------
Accrued sales returns........... $6,167,000 $13,663,000 $-- $14,271,000 $5,559,000(B)
------------ --------------- ------- ----------------- ----------
------------ --------------- ------- ----------------- ----------
</TABLE>
- ------------
<TABLE>
<C> <S>
(A) Accounts considered uncollectible and charged against reserve--net of recoveries.
(B) Deducted from accounts receivable.
</TABLE>
<PAGE>
EXHIBIT INDEX
<TABLE><CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- -------- ----------------------------------------------------------------------------------
<C> <S>
1.1**** --Form of U.S. Underwriting Agreement
1.2**** --Form of International Underwriting Agreement
3.1**** --Amended and Restated Certificate of Incorporation of the Company
3.2**** --By-Laws of the Company
4.1**** --Form of Certificate for Class A Common Stock
4.2*** --Amended and Restated Credit Agreement among the Company, Continental Conair
Limited and the banking institutions named therein dated October 1, 1994
4.3*** --First Amendment to the Amended and Restated Credit Agreement among the Company,
Continental Conair Limited and the banking institutions named therein dated
February 17, 1995
5.1**** --Opinion of Paul, Weiss, Rifkind, Wharton & Garrison
10.1* --Conair Corporation Employees and Directors Stock Plan
10.2** --Employment Agreement between Conair Corporation and Leandro P. Rizzuto dated
June 20, 1985.
10.3* --Contract of Sale between Leandro P. Rizzuto and the Company dated March 14,
1994.
10.4* --Lease between the Company and Leandro P. Rizzuto dated March 14, 1994
10.5*** --English translation of original French language Stock Purchase Agreement dated
January 22, 1995 between the Company and Jean-Pierre Feldblum
10.6*** --English translation of original French language Stock Purchase Agreement dated
January 22, 1995 between the Company and Financiere de l'Europe Occidentale
10.7*** --English translation of original French language amendment dated February 18,
1995 to Stock Purchase Agreement dated January 22, 1995 between the Company and
Financiere de l'Europe Occidentale
11.1**** --Statement regarding computation of per share earnings
21.1* --Subsidiaries of the Company
23.1* --Consent of Deloitte & Touche LLP
23.2 --Consent of Paul, Weiss, Rifkind, Wharton & Garrison (included in its opinion
filed as Exhibit 5.1)
24.1 --Power of Attorney (included on the signature page of the Registration Statement)
</TABLE>
- ------------
* Filed herewith.
** Incorporated herein by reference to exhibits to Amendment No. 2 to the
Registrant's S-1 Registration Statement dated June 13, 1985 (File No.
2-97868).
*** Incorporated herein by reference to exhibits to the Company's Current
Report on Form 8-K (File No. 1-8919).
**** To be filed by amendment.
Exhibit 10.1
CONAIR CORPORATION
EMPLOYEES AND DIRECTORS STOCK PLAN
<PAGE>
TABLE OF CONTENTS
-----------------
Page
ARTICLE 1
GENERAL . . . . . . . . . . . . . . . . . . . . . . . . 1
1.1 Purpose . . . . . . . . . . . . . . . . . . . 1
1.2 Administration. . . . . . . . . . . . . . . . 1
1.3 Persons Eligible for Awards . . . . . . . . . 2
1.4 Types of Awards Under Plan . . . . . . . . . 2
1.5 Shares Available for Awards . . . . . . . . . 3
1.6 Definitions of Certain Terms . . . . . . . . 3
1.7 Agreements Evidencing Awards . . . . . . . . 5
ARTICLE 2
STOCK OPTIONS . . . . . . . . . . . . . . . . . . . . 5
2.1 Grant of Stock Options . . . . . . . . . . . 5
2.2 Exercisability of Options . . . . . . . . . . 5
2.3 Limitation on Exercise . . . . . . . . . . . 7
2.4 Payment of Option Price . . . . . . . . . . . 7
2.5 Default Rules Concerning Termination of
Service . . . . . . . . . . . . . . . . . . . 9
2.6 Special ISO Requirements . . . . . . . . . . 10
ARTICLE 3
RESTRICTED STOCK AWARDS . . . . . . . . . . . . . . . . 11
3.1 Grant of Awards. . . . . . . . . . . . . . . 11
3.2 Payment . . . . . . . . . . . . . . . . . . . 11
3.3 Forfeiture upon Termination of Employment . . 11
3.4 Issuance of Shares . . . . . . . . . . . . . 11
3.5 Grantees' Rights Regarding Restricted Stock . 12
3.6 Vesting . . . . . . . . . . . . . . . . . . . 12
ARTICLE 4
MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . 12
4.1 Amendment of the Plan; Modification of
Awards . . . . . . . . . . . . . . . . . . . 12
4.2 Restrictions . . . . . . . . . . . . . . . . 13
4.3 Nontransferability . . . . . . . . . . . . . 14
4.4 Withholding Taxes. . . . . . . . . . . . . . 14
4.5 Adjustments Upon Changes in Capitalization . 15
4.6 Right of Discharge Reserved . . . . . . . . . 15
i
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4.7 No Rights as a Stockholder . . . . . . . . . 15
4.8 Nature of Payments . . . . . . . . . . . . . 16
4.9 Non-Uniform Determinations . . . . . . . . . 16
4.10 Other Payments or Awards . . . . . . . . . . 17
4.11 Reorganization . . . . . . . . . . . . . . . 17
4.12 Section Headings . . . . . . . . . . . . . . 17
4.13 Effective Date and Term of Plan . . . . . . 18
4.14 Governing Law . . . . . . . . . . . . . . . 18
ii
<PAGE>
CONAIR CORPORATION
EMPLOYEES AND DIRECTORS STOCK PLAN
ARTICLE 1
GENERAL
1.1 Purpose.
-------
The purpose of the Conair Corporation
Employees and Directors Stock Plan (the "Plan") is to
provide for certain officers, directors and key personnel,
as defined in Section 1.3, of Conair Corporation (the
"Company") and certain of its Affiliates an equity-based
incentive to maintain and enhance the performance and
profitability of the Company. It is the further purpose of
this Plan to permit the granting of awards that will
constitute performance based compensation for certain
executive officers, as described in section 162(m) of the
Internal Revenue Code of 1986, as amended (the "Code"), and
regulations promulgated thereunder, to the extent that Code
section 162(m) is applicable.
1.2 Administration.
--------------
(a) The Plan shall be administered by a
committee (the "Committee") appointed by the Board of
Directors of the Company (the "Board"), which Committee
shall consist of two or more directors. It is intended that
the directors appointed to serve on the Committee may be
"disinterested persons" (within the meaning of Rule 16b-3
promulgated under the Securities Exchange Act of 1934 (the
"Act")) and "outside directors" (within the meaning of Code
section 162(m)), to the extent Rule 16b-3 and Code section
162(m), respectively, are applicable; however, the mere fact
that a Committee member shall fail to qualify under either
of the foregoing requirements shall not invalidate any award
made by the Committee which award is otherwise validly made
under the Plan. The members of the Committee shall be
appointed by, and may be changed at any time and from time
to time in the discretion of, the Board.
(b) The Committee shall have the authority
(i) to exercise all of the powers granted to it under the
Plan, (ii) to construe, interpret and implement the Plan and
any Plan agreements executed pursuant to the Plan, (iii) to
prescribe, amend and rescind rules relating to the Plan,
(iv) to make any determination necessary or advisable in
<PAGE>
2
administering the Plan and (v) to correct any defect, supply
any omission and reconcile any inconsistency in the Plan.
(c) The determination of the Committee on
all matters relating to the Plan or any Plan agreement shall
be conclusive.
(d) No member of the Committee shall be
liable for any action or determination made in good faith
with respect to the Plan or any award hereunder.
(e) Notwithstanding anything to the contrary
contained herein: (i) until the Board shall appoint the
members of the Committee, the Plan shall be administered by
the Board and (ii) the Board may, in its sole discretion, at
any time and from time to time, resolve to administer the
Plan. In either of the foregoing events, the term Committee
as used herein shall be deemed to mean the Board.
1.3 Persons Eligible for Awards.
---------------------------
Awards under the Plan may be made to such
officers, directors (including directors who are not
employees) and executive, managerial or professional
employees ("key personnel") of the Company or its Affiliates
as the Committee shall from time to time in its sole
discretion select.
1.4 Types of Awards Under Plan.
--------------------------
(a) Awards may be made under the Plan in the
form of (i) options, which may be either "nonqualified"
stock options subject to the provisions of Code section 83
or options intended to qualify for incentive stock option
treatment described in Code section 422 or (ii) restricted
stock awards.
(b) All options when granted are intended to
be nonqualified stock options, unless the applicable Plan
agreement explicitly states that the option is intended to
be an incentive stock option. If an option is intended to
be an incentive stock option, and if for any reason such
option (or any portion thereof) shall not qualify as an
incentive stock option, then, to the extent of such
nonqualification, such option (or portion) shall be regarded
as a nonqualified stock option appropriately granted under
the Plan provided that such option (or portion) otherwise
meets the Plan's requirements relating to nonqualified stock
options.
<PAGE>
3
1.5 Shares Available for Awards.
---------------------------
(a) Subject to Section 4.5 (relating to
adjustments upon changes in capitalization), as of any date
the total number of shares of Common Stock with respect to
which awards may be granted under the Plan shall equal the
excess (if any) of 2,500,000 shares, over the sum of (i) the
number of shares of Common Stock subject to outstanding
awards, (ii) the number of shares in respect of which
options granted under the Plan have been exercised and
(iii) the number of shares issued subject to forfeiture
restrictions that have lapsed.
In accordance with (and without limitation upon)
the preceding sentence, awards may be granted in respect of
shares covered by previously-granted awards that have
expired, terminated or been canceled for any reason
whatsoever (other than by reason of exercise or vesting) and
with respect to which shares a grantee has received no
benefits of ownership (other than voting rights and
dividends that were forfeited on such expiration,
termination or cancellation).
In any year, a person eligible for awards under
the Plan may not be granted options under the Plan covering
a total of more than 250,000 shares of Common Stock.
(b) Shares of Common Stock that shall be
subject to issuance pursuant to the Plan shall be authorized
and unissued or treasury shares of Common Stock.
(c) Without limiting the generality of the
foregoing, the Committee may, with the grantee's consent,
cancel any award under the Plan and issue a new award in
substitution therefor upon such terms as the Committee may
in its sole discretion determine, provided that the
substituted award shall satisfy all applicable Plan
requirements as of the date such new award is made.
1.6 Definitions of Certain Terms.
----------------------------
(a) The term "Affiliate" as used herein
means any person or entity which, at the time of reference,
directly, or indirectly through one or more intermediaries,
is controlled by the Company.
(b) The term "Common Stock" as used herein
means the shares of Class A common stock of the Company, par
value $.01 per share, as constituted on the effective date
of the Plan, and any other shares into which such Class A
common stock shall thereafter be changed by reason of a
<PAGE>
4
recapitalization, merger, consolidation, split-up,
combination, exchange of shares or the like.
(c) Except as otherwise determined by the
Committee in its sole discretion, the "fair market value" as
of any determination date and in respect of any share of
Common Stock shall mean:
(i) if the Common Stock is listed for trading on
the New York Stock Exchange, the mean between the high
and low sales prices of the Common Stock on such
determination date as reported on the New York Stock
Exchange Composite Tape, or if no such reported sale of
the Common Stock shall have occurred on such
determination date, on the next preceding date on which
there was such a reported sale; or
(ii) if the Common Stock is not listed for trading
on the New York Stock Exchange but is listed on another
national securities exchange or authorized for
quotation on the National Association of Securities
Dealers Inc.'s Nasdaq National Market ("Nasdaq National
Market"), the mean between the high and low sales
prices of the Common Stock on such determination date
on such exchange or Nasdaq National Market, as the case
may be, on which the largest number of shares of Common
Stock have been traded in the aggregate on the
preceding 20 trading days, or if no such reported sale
of the Common Stock shall have occurred on such
determination date on such exchange or Nasdaq National
Market, as the case may be, on the next preceding date
on which there was such a reported sale on such
exchange or Nasdaq National Market, as the case may be;
or
(iii) if the Common Stock is not listed for trading
on a national securities exchange or authorized for
quotation on Nasdaq National Market, the average of the
closing bid and asked prices on such determination date
as reported by the National Association of Securities
Dealers Automated Quotation System ("NASDAQ") or if no
such prices shall have been so reported for such
determination date, on the next preceding date for
which such prices were so reported; or
(iv) if the Common Stock is not listed for trading
on a national securities exchange, authorized for
quotation on Nasdaq National Market or reported by the
NASDAQ, the fair market value of the Common Stock on
such determination date, as determined by the Committee
in its sole discretion.
<PAGE>
5
In no event shall the fair market value of any share be less
than its par value.
1.7 Agreements Evidencing Awards.
----------------------------
(a) Options and restricted stock awards
granted under the Plan shall be evidenced by written
agreements. Any such written agreements shall (i) contain
such provisions not inconsistent with the terms of the Plan
as the Committee may in its sole discretion deem necessary
or desirable and (ii) be referred to herein as "Plan
agreements."
(b) Each Plan agreement shall set forth the
number of shares of Common Stock subject to the award
granted thereby.
(c) Each Plan agreement with respect to the
granting of an option shall set forth the amount (the
"option exercise price") payable by the grantee to the
Company in connection with the exercise of the option
evidenced thereby. The option exercise price per share
shall not be less than the fair market value of a share of
Common Stock on the date the option is granted.
ARTICLE 2
STOCK OPTIONS
2.1 Grant of Stock Options.
----------------------
The Committee may grant options to purchase
shares of Common Stock in such amounts and subject to such
terms and conditions as the Committee shall from time to
time in its sole discretion determine, subject to the terms
of the Plan.
2.2 Exercisability of Options.
-------------------------
Subject to the other provisions of the Plan:
(a) Exercisability Determined by Plan
---------------------------------
Agreement. Each Plan agreement shall set forth the period
---------
during which and the conditions subject to which the option
evidenced thereby shall be exercisable, as determined by the
Committee in its discretion; provided, however, that options
shall not be exercisable for 12 months following a hardship
distribution subject to Treasury Regulations Sec.1.401(k)-
1(d)(2)(iv)(B)(4).
<PAGE>
6
(b) Default Vesting Provisions. Unless the
--------------------------
applicable Plan agreement otherwise specifies:
(i) no option shall be exercisable
prior to the first anniversary of the date of grant,
(ii) each option granted under the Plan
shall become cumulatively exercisable with respect to
20% of the shares of Common Stock subject thereto,
rounded down to the next lower full share, on each of
the first, second, third and fourth anniversary of the
date of grant,
(iii) each option shall become 100%
exercisable on the fifth anniversary of the date of
grant,
(iv) each option shall remain 100%
exercisable through the day prior to the tenth
anniversary of the date of grant, after which such
option shall terminate and cease to be exercisable;
provided, that no option granted under the Plan shall become
exercisable prior to the earlier of (a) the date of the
consummation of an initial public offering on or after
January 1, 1995, of at least ten percent (10%) of the shares
of Common Stock of the Company and (b) the ninth anniversary
of the date of grant.
(c) Partial Exercise Permitted. Unless the
--------------------------
applicable Plan agreement otherwise provides, an option
granted under the Plan may be exercised from time to time as
to all or part of the full number of shares as to which such
option shall then be exercisable.
(d) Notice of Exercise; Exercise Date.
---------------------------------
(i) An option shall be exercisable by
the filing of a written notice of exercise with the
Company, on such form and in such manner as the
Committee shall in its sole discretion prescribe, and
by payment in accordance with Section 2.4.
(ii) For purposes of the Plan, the
"option exercise date" shall be deemed to be the sixth
business day immediately following the date written
notice of exercise is received by the Company.
(e) Cashout of Options. If and to the
------------------
extent that the applicable Plan agreement so provides: At
any time prior to the consummation of an initial public
offering on or after January 1, 1995, of at least ten
<PAGE>
7
percent (10%) of the shares of Common Stock of the Company
and after the Company's receipt of written notice of
exercise of an option and prior to the "option exercise
date" (as defined in Section 2.2(d)), the Committee in its
sole discretion may, by written notice to the grantee,
cancel all or any portion of the option in respect of which
exercise notice was given if the Committee in its sole
discretion determines that tax or legal or contractual
restrictions or brokerage or other market considerations
would make the Company's or grantee's acquisition or sale of
Common Stock illegal, impracticable or inadvisable. If the
Committee cancels any part of an option in accordance with
the preceding sentence of this Section 2.2(e), the Company
shall pay to the grantee, as soon as practicable thereafter,
an amount equal in cash to the excess of (i) the aggregate
fair market value of the shares of Common Stock subject to
the option or part thereof canceled determined as of the
date written notice of exercise was filed with the Company,
over (ii) the aggregate option exercise price of the shares
of Common Stock subject to the option or part thereof
canceled.
(f) Right of First Refusal. An applicable
----------------------
Plan agreement may provide, under such terms and conditions
as the Committee may determine, that the Company shall have
a right of first refusal with respect to any shares of
Common Stock acquired under Plan.
2.3 Limitation on Exercise.
----------------------
Notwithstanding any other provision of the
Plan, no Plan agreement shall permit an option to be
exercisable more than ten years after the date of grant.
2.4 Payment of Option Price.
-----------------------
(a) Tender Due Upon Notice of Exercise. Any
----------------------------------
written notice of exercise of an option shall be accompanied
by payment of the full purchase price for the shares being
purchased (in accordance with Section 2.4(b) or (c) below,
and the grantee shall have no right to receive shares of
Common Stock with respect to an option exercise prior to the
option exercise date.
(b) Manner of Payment. Payment of the
-----------------
option exercise price shall be made in any combination of
the following:
(i) by certified or official bank check
payable to the Company (or the equivalent thereof
acceptable to the Committee);
<PAGE>
8
(ii) with the consent of the Committee
in its sole discretion, by personal check (subject to
collection), which may in the Committee's discretion be
deemed conditional;
(iii) if and to the extent provided in
the applicable Plan agreement, by delivery of
previously acquired shares of Common Stock owned by the
grantee for at least six months (or such other period
as the Committee may prescribe) having a fair market
value (determined as of the option exercise date) equal
to the portion of the option exercise price being paid
thereby, provided that the Committee may require the
grantee to furnish an opinion of counsel acceptable to
the Committee to the effect that such delivery would
not result in the grantee incurring any liability under
Section 16(b) of the Act and does not require any
Consent (as defined in Section 4.2); and
(iv) with the consent of the Committee
in its sole discretion, by the promissory note and
agreement of the grantee providing for payment with
interest on the unpaid balance accruing at a rate not
less than that needed to avoid the imputation of income
under Code section 7872 and upon such terms and
conditions (including the security, if any, therefor)
as the Committee may determine.
(c) Exercise by Assignment of Proceeds.
----------------------------------
Payment in accordance with clause (i) of Section 2.4(b) may
be deemed to be satisfied, if and to the extent provided in
the applicable Plan agreement, by delivery to the Company of
an assignment of a sufficient amount of the proceeds from
the sale of Common Stock acquired upon exercise to pay for
all of the Common Stock acquired upon exercise and an
authorization to the broker or selling agent to pay that
amount to the Company, which sale shall be made at the
grantee's direction at the time of exercise, provided that
the Committee may require the grantee to furnish an opinion
of counsel acceptable to the Committee to the effect that
such delivery would not result in the grantee incurring any
liability under Section 16(b) of the Act and does not
require any Consent (as defined in Section 4.2). The
grantee shall be liable for any portion of the exercise
price not covered by the assignment of proceeds of sale
described in this Section 2.4(c).
(d) Issuance of Shares. As soon as
------------------
practicable after receipt of full payment, the Company
shall, subject to the provisions of Section 4.2, deliver to
the grantee one or more certificates for the shares of
Common Stock so purchased, which certificates may bear such
<PAGE>
9
legends as the Company may deem appropriate concerning
restrictions on the disposition of the shares in accordance
with applicable securities laws, rules and regulations or
otherwise.
2.5 Default Rules Concerning Termination of
---------------------------------------
Service.
-------
Subject to the other provisions of the Plan
and unless the applicable Plan agreement otherwise provides:
(a) General Rule. All options granted to a
------------
grantee shall terminate upon his termination of service with
the Company and all Affiliates for any reason (including
death) except to the extent post-service exercise of the
vested portion of an option is permitted in accordance with
this Section 2.5. The "vested portion" of any option shall
mean the portion thereof which is exercisable immediately
prior to the grantee's termination of service for any
reason.
(b) Improper Activity; Quit. All options
-----------------------
granted to a grantee shall terminate and expire on the day
the grantee's service with the Company and all Affiliates is
terminated for cause or the grantee quits service, whether
or not he is a party to a written employment (or similar)
contract. For purposes of this Section 2.5, a grantee's
service shall be deemed to be terminated for "cause" if he
is discharged (i) on account of fraud, embezzlement or other
unlawful or tortious conduct, whether or not involving or
against the Company or any Affiliate, (ii) for violation of
a policy of the Company or any Affiliate, (iii) for serious
and willful acts of misconduct detrimental to the business
or reputation of the Company or any Affiliate or (iv) for
"cause" or any like term as defined in any written
employment (or similar) contract with or written employment
(or similar) policy applicable to the grantee.
(c) Regular Termination. If the grantee's
-------------------
service with the Company and all Affiliates terminates for
reasons other than as provided in subsection (b) or (d) of
this Section 2.5, the portion of options granted to such
grantee which were exercisable immediately prior to such
termination of service may be exercised until the earlier of
(a) 90 days after his termination of service or (b) the date
on which such options terminate or expire in accordance with
the provisions of the Plan (other than this Section 2.5) and
the Plan agreement; provided, that the Committee may in its
sole discretion determine such other period for exercise in
the case of an individual whose employment terminates solely
because his employer ceases to be an Affiliate or he
<PAGE>
10
transfers his employment with the Company's consent to a
purchaser of a business disposed of by the Company.
(d) Death. If a grantee's service with the
-----
Company and all Affiliates terminates by reason of death, or
if a grantee's service with the Company and all Affiliates
terminates in the manner described in Section 2.5(c) and he
dies within the period for exercise provided for therein,
the options exercisable by him immediately prior to his
death shall be exercisable by the person to whom such
options pass under the grantee's will (or, if applicable,
pursuant to the laws of descent and distribution) until the
earlier of (a) one year after the grantee's death or (b) the
date on which such options terminate or expire in accordance
with the provisions of the Plan (other than this Section
2.5) and the Plan agreement.
(e) Leaves of Absence. The Committee may in
-----------------
its discretion determine (i) whether any leave of absence
(including short-term or long-term disability or medical
leave) shall constitute a termination of service for
purposes of the Plan and (ii) the impact, if any, of any
such leave on outstanding awards under the Plan.
2.6 Special ISO Requirements.
------------------------
In order for a grantee to receive special tax
treatment with respect to stock acquired under an option
intended to be an incentive stock option, the grantee of
such option must be, at all times during the period
beginning on the date of grant and ending on the day three
months before the date of exercise of such option, an
employee of the Company or any of the Company's parent or
subsidiary corporations (within the meaning of Code section
424), or of a corporation or a parent or subsidiary
corporation of such corporation issuing or assuming a stock
option in a transaction to which Code section 424(a)
applies. If an option granted under the Plan is intended to
be an incentive stock option, and if the grantee, at the
time of grant, owns stock possessing ten percent (10%) or
more of the total combined voting power of all classes of
stock of the grantee's employer corporation or of its parent
or subsidiary corporation, then (i) the option exercise
price per share shall in no event be less than 110% of the
fair market value of the Common Stock on the date of such
grant and (ii) such option shall not be exercisable after
the expiration of five years after the date such option is
granted.
<PAGE>
11
ARTICLE 3
RESTRICTED STOCK AWARDS
3.1 Grant of Awards.
---------------
The Committee may grant restricted stock
awards, alone or in tandem with other awards, under the Plan
in such amounts and subject to such terms and conditions as
the Committee shall from time to time in its sole discretion
determine. The vesting of a restricted stock award granted
under the Plan may be conditioned upon the completion of a
specified period of service with the Company or any
Affiliate, upon the attainment of specified performance
goals and/or upon such other criteria as the Committee may
determine in its sole discretion.
3.2 Payment.
-------
Each Plan agreement with respect to a
restricted stock award shall set forth the amount (if any)
to be paid by the grantee with respect to such award. If a
grantee makes any payment for a restricted stock award which
does not vest, appropriate payment may be made to the
grantee following the forfeiture of such award on such terms
and conditions as the Committee may determine.
3.3 Forfeiture upon Termination of Employment.
-----------------------------------------
Unless the applicable Plan agreement
otherwise provides or the Committee otherwise determines,
(i) if a grantee's service with the Company and all
Affiliates terminates for any reason (including death)
before his restricted stock awards have vested, such awards
shall terminate and expire upon such termination of service
and (ii) in the event any condition to the vesting of
restricted stock awards is not satisfied within the period
of time permitted therefor, such unvested shares shall be
returned to the Company.
3.4 Issuance of Shares.
------------------
The Committee may provide that one or more
certificates representing restricted stock awards shall be
registered in the grantee's name and bear an appropriate
legend specifying that such shares are not transferable and
are subject to the terms and conditions of the Plan and the
applicable Plan agreement, or that such certificate or
certificates shall be held in escrow by the Company on
behalf of the grantee until such shares vest or are
forfeited, all on such terms and conditions as the Committee
may determine. Unless the applicable Plan agreement
<PAGE>
12
otherwise provides, no share of restricted stock may be
assigned, transferred, otherwise encumbered or disposed of
by the grantee until such share has vested in accordance
with the terms of such award. Subject to the provisions of
Section 4.2, as soon as practicable after any restricted
stock award shall vest, the Company shall issue or reissue
to the grantee (or to his designated beneficiary in the
event of the grantee's death) one or more certificates for
the Common Stock represented by such restricted stock award
without such restricted legend.
3.5 Grantees' Rights Regarding Restricted Stock.
-------------------------------------------
Unless the applicable Plan agreement
otherwise provides, (i) a grantee may vote and receive
dividends on restricted stock awarded under the Plan and
(ii) any stock received as a dividend on, or in connection
with a stock split of, a restricted stock award shall be
subject to the same restrictions as such restricted stock.
3.6 Vesting.
-------
Notwithstanding any other provision of the
Plan, no Plan agreement shall permit a restricted stock
award to vest more than ten years after the date of grant.
ARTICLE 4
MISCELLANEOUS
4.1 Amendment of the Plan; Modification of
--------------------------------------
Awards.
------
(a) Plan Amendments. The Board may, without
---------------
stockholder approval, at any time and from time to time
suspend, discontinue or amend the Plan in any respect
whatsoever, except that no such amendment shall impair any
rights under any award theretofore made under the Plan
without the consent of the grantee of such award.
Furthermore, except as and to the extent otherwise permitted
by Rule 16b-3 of the Act or by Section 4.5 or 4.11, no such
amendment shall, without stockholder approval:
(i) materially increase the benefits
accruing to grantees under the Plan;
(ii) materially increase, beyond the
amounts set forth in Section 1.5, the number of shares
of Common Stock in respect of which awards may be
issued under the Plan or increase the number of shares
<PAGE>
13
of Common Stock in respect of which options may be
granted in any year under Section 1.5;
(iii) materially modify the designation
in Section 1.3 of the class of persons eligible to
receive awards under the Plan;
(iv) provide for the grant of stock
options having an option exercise price per share of
Common Stock less than 100% of the fair market value of
a share of Common Stock on the date of grant;
(v) permit a stock option to be
exercisable, or a restricted stock award to vest, more
than ten years after the date of grant; or
(vi) extend the term of the Plan beyond
the period set forth in Section 4.13.
(b) Award Modifications. With the consent
-------------------
of the grantee and subject to the terms and conditions of
the Plan (including Section 4.1(a)), the Committee may amend
outstanding Plan agreements with such grantee, including,
without limitation, any amendment which would (i) accelerate
the time or times at which an award may vest or become
exercisable and/or (ii) extend the scheduled termination or
expiration date of the award.
4.2 Restrictions.
------------
(a) Consent Requirements. If the Committee
--------------------
shall at any time determine that any Consent (as hereinafter
defined) is necessary or desirable as a condition of, or in
connection with, the granting of any award under the Plan,
the acquisition, issuance or purchase of shares or other
rights hereunder or the taking of any other action hereunder
(each such action being hereinafter referred to as a "Plan
Action"), then such Plan Action shall not be taken, in whole
or in part, unless and until such Consent shall have been
effected or obtained to the full satisfaction of the
Committee. Without limiting the generality of the
foregoing, the Committee shall be entitled to determine not
to make any payment whatsoever until Consent has been given
if (i) the Committee may make any payment under the Plan in
cash, Common Stock or both and (ii) the Committee determines
that Consent is necessary or desirable as a condition of, or
in connection with, payment in any one or more of such
forms.
(b) Consent Defined. The term "Consent" as
---------------
used herein with respect to any Plan Action means (i) any
and all listings, registrations or qualifications in respect
<PAGE>
14
thereof upon any securities exchange or other self-
regulatory organization or under any federal, state, local
or foreign law, rule or regulation, (ii) the expiration,
elimination or satisfaction of any prohibitions,
restrictions or limitations under any federal, state, local
or foreign law, rule or regulation or the rules of any
securities exchange or other self-regulatory organization,
(iii) any and all written agreements and representations by
the grantee with respect to the disposition of shares, or
with respect to any other matter, which the Committee shall
deem necessary or desirable to comply with the terms of any
such listing, registration or qualification or to obtain an
exemption from the requirement that any such listing,
qualification or registration be made and (iv) any and all
consents, clearances and approvals in respect of a Plan
Action by any governmental or other regulatory bodies or any
parties to any loan agreements or other contractual obliga-
tions of the Company or any Affiliate.
4.3 Nontransferability.
------------------
No award granted to any grantee under the
Plan or under any Plan agreement shall be assignable or
transferable by the grantee other than by will or by the
laws of descent and distribution. During the lifetime of
the grantee, all rights with respect to any option granted
to the grantee under the Plan or under any Plan agreement
shall be exercisable only by him.
4.4 Withholding Taxes.
-----------------
(a) Whenever under the Plan shares of Common
Stock are to be delivered pursuant to an award, the
Committee may require as a condition of delivery that the
grantee remit an amount sufficient to satisfy all federal,
state and other governmental withholding tax requirements
related thereto. Whenever cash is to be paid under the
Plan, the Company may, as a condition of its payment, deduct
therefrom, or from any salary or other payments due to the
grantee, an amount sufficient to satisfy all federal, state
and other governmental withholding tax requirements related
thereto or to the delivery of any shares of Common Stock
under the Plan.
(b) Without limiting the generality of the
foregoing, (i) a grantee may elect to satisfy all or part of
the foregoing withholding requirements by delivery of
unrestricted shares of Common Stock owned by the grantee for
at least six months (or such other period as the Committee
may determine) having a fair market value (determined as of
the date of such delivery by the grantee) equal to all or
part of the amount to be so withheld, provided that the
<PAGE>
15
Committee may require, as a condition of accepting any such
delivery, the grantee to furnish an opinion of counsel
acceptable to the Committee to the effect that such delivery
would not result in the grantee incurring any liability
under Section 16(b) of the Act; and (ii) the Committee may
permit any such delivery to be made by withholding shares of
Common Stock from the shares otherwise issuable pursuant to
the award giving rise to the tax withholding obligation (in
which event the date of delivery shall be deemed the date
such award was exercised).
4.5 Adjustments Upon Changes in Capitalization.
------------------------------------------
If and to the extent specified by the
Committee, the number of shares of Common Stock which may be
issued pursuant to awards under the Plan, the number of
shares of Common Stock subject to awards, the option
exercise price of options theretofore granted under the
Plan, and the amount payable by a grantee in respect of an
award, shall be appropriately adjusted (as the Committee may
determine) for any change in the number of issued shares of
Common Stock resulting from the subdivision or combination
of shares of Common Stock or other capital adjustments, or
the payment of a stock dividend after the effective date of
the Plan, or other change in such shares of Common Stock
effected without receipt of consideration by the Company;
provided, that any awards covering fractional shares of
Common Stock resulting from any such adjustment shall be
eliminated and provided further, that each incentive stock
option granted under the Plan shall not be adjusted in a
manner that causes such option to fail to continue to
qualify as an "incentive stock option" within the meaning of
Code section 422. Adjustments under this Section shall be
made by the Committee, whose determination as to what
adjustments shall be made, and the extent thereof, shall be
final, binding and conclusive.
4.6 Right of Discharge Reserved.
---------------------------
Nothing in the Plan or in any Plan agreement
shall confer upon any person the right to continue in the
service of the Company or an Affiliate or affect any right
which the Company or an Affiliate may have to terminate the
service of such person.
4.7 No Rights as a Stockholder.
--------------------------
No grantee or other person shall have any of
the rights of a stockholder of the Company with respect to
shares subject to an award until the issuance of a stock
certificate to the grantee for such shares. Except as
otherwise provided in Section 4.5, no adjustment shall be
<PAGE>
16
made for dividends, distributions or other rights (whether
ordinary or extraordinary, and whether in cash, securities
or other property) for which the record date is prior to the
date such stock certificate is issued. In the case of a
grantee of an award which has not yet vested, the grantee
shall have the rights of a stockholder of the Company if and
only to the extent provided in the applicable Plan
agreement.
4.8 Nature of Payments.
------------------
(a) Any and all awards or payments hereunder
shall be granted, issued, delivered or paid, as the case may
be, in consideration of services performed for the Company
or for its Affiliates by the grantee.
(b) No such awards and payments shall be
considered special incentive payments to the grantee or,
unless otherwise determined by the Committee, shall be taken
into account in computing the grantee's salary or
compensation for the purposes of determining any benefits
under (i) any pension, retirement, life insurance or other
benefit plan of the Company or any Affiliate or (ii) any
agreement between the Company or any Affiliate and the
grantee.
(c) By accepting an award under the Plan,
the grantee shall thereby waive any claim to continued
exercise or vesting of an award or to damages or severance
entitlement related to non-continuation of the award beyond
the period provided herein or in the applicable Plan
agreement, notwithstanding any contrary provision in any
written employment (or similar) contract with the grantee,
whether any such contract is executed before or after the
grant date of the award.
4.9 Non-Uniform Determinations.
--------------------------
The Committee's determinations under the Plan
need not be uniform and may be made by it selectively among
persons who receive, or are eligible to receive, awards
under the Plan (whether or not such persons are similarly
situated). Without limiting the generality of the
foregoing, the Committee shall be entitled, among other
things, to make non-uniform and selective determinations,
and to enter into non-uniform and selective Plan agreements,
as to (a) the persons to receive awards under the Plan, (b)
the terms and provisions of awards under the Plan and (c)
the treatment of leaves of absence pursuant to Section
2.5(e).
<PAGE>
17
4.10 Other Payments or Awards.
------------------------
Nothing contained in the Plan shall be deemed
in any way to limit or restrict the Company, any Affiliate
or the Committee from making any award or payment to any
person under any other plan, arrangement or understanding,
whether now existing or hereafter in effect.
4.11 Reorganization.
--------------
(a) In the event that the Company is merged
or consolidated with another corporation and, whether or not
the Company shall be the surviving corporation, there shall
be any change in the shares of Common Stock by reason of
such merger or consolidation, or in the event that all or
substantially all of the assets of the Company are acquired
by another person, or in the event of a reorganization or
liquidation of the Company (each such event being herein-
after referred to as a "Reorganization Event") or in the
event that the Board shall propose that the Company enter
into a Reorganization Event, then the Committee may in its
discretion, by written notice to a grantee, (i) provide that
the grantee's options will be terminated unless exercised
within 30 days (or such longer period as the Committee shall
determine in its sole discretion) after the date of such
notice, provided that if the Committee takes such action the
Committee may (but shall not be required to) accelerate the
dates upon which all outstanding options of such grantee
shall be exercisable and/or (ii) adjust any award under the
Plan as the Committee shall determine in its sole discretion
deem appropriate, including, but not limited to, changing
the number and kind of shares covered by the award and the
aggregate purchase price of the shares covered by the award.
The Committee also may in its discretion by written notice
to a grantee provide that all or some of the restrictions on
any of his awards may lapse in the event of a Reorganization
Event upon such terms and conditions as the Committee may
determine.
(b) Whenever deemed appropriate by the
Committee, the actions referred to in Section 4.11(a) may be
made conditional upon the consummation of the applicable
Reorganization Event.
4.12 Section Headings.
----------------
The section headings contained herein are for
the purposes of convenience only and are not intended to
define or limit the contents of said sections.
<PAGE>
18
4.13 Effective Date and Term of Plan.
-------------------------------
(a) The Plan shall be deemed adopted and
become effective upon the approval thereof by the Board or
such other date as the Board shall determine; provided that,
notwithstanding any other provision of the Plan, no award
made under the Plan shall be exercisable unless the Plan is
approved, directly or indirectly, by (i) the express consent
of stockholders holding at least a majority of the Company's
voting stock voting in person or by proxy at a duly held
stockholders' meeting or (ii) the unanimous written consent
of the stockholders of the Company, within 12 months before
or after the date the Plan is adopted.
(b) The Plan shall terminate ten years after
the earlier of the date on which it becomes effective or is
approved by shareholders, and no awards shall thereafter be
made under the Plan. Notwithstanding the foregoing, all
awards made under the Plan prior to such termination date
shall remain in effect until such awards have been satisfied
or terminated in accordance with the terms and provisions of
the Plan and the applicable Plan agreement.
4.14 Governing Law.
-------------
The Plan shall be governed by the laws of the
State of Delaware applicable to agreements made and to be
performed entirely within such state.
Exhibit 10.3
------------
CONTRACT OF SALE
between
LEANDRO P. RIZZUTO,
Seller
&
CONAIR CORPORATION,
Purchaser
March 14, 1994
Premises:
One Cummings Point Road,
Stamford, Connecticut
Counsel for Seller: Counsel for Purchaser:
Joseph Richichi, Esq. Richard Marguiles, Esq.
Sherman & Richichi One Cummings Point Road
27 Fifth Street Stamford, Connecticut 06902
Stamford, Connecticut 06905
<PAGE>
TABLE OF CONTENTS
ARTICLE Page
1. Description of Premises . . . . . . . . . . . . . 1
2. Purchase Price and Acceptable Funds . . . . . . . 1
3. The Closing . . . . . . . . . . . . . . . . . . . 2
4. Acceptable Title and Clearing Title . . . . . . . 2
5. Representations and Warranties and Operation of
Premises . . . . . . . . . . . . . . . . . . . . . 5
6. Condemnation and Damage by Fire or Other Hazard . 6
7. Seller's Closing Obligations . . . . . . . . . . . 7
8. Purchaser's Closing Obligations . . . . . . . . . 8
9. Apportionments at Closing . . . . . . . . . . . . 8
10. Broker . . . . . . . . . . . . . . . . . . . . . . 8
11. Default by Seller and Repairs . . . . . . . . . . 9
12. Violations . . . . . . . . . . . . . . . . . . . . 9
13. Default by Purchaser . . . . . . . . . . . . . . . 10
14. Notices . . . . . . . . . . . . . . . . . . . . . 10
15. Assignment . . . . . . . . . . . . . . . . . . . . 11
16. Access to Premises . . . . . . . . . . . . . . . . 11
17. Survival and Delivery of Deed . . . . . . . . . . 11
18. Miscellaneous Provisions . . . . . . . . . . . . . 11
EXHIBITS
A - Description of Land to be Conveyed
B - Exceptions to Title
C - Form of Termination of Lease
D - Maintenance and Service Agreements
i
<PAGE>
AGREEMENT
---------
AGREEMENT, dated March 14, 1994 between LEANDRO P.
RIZZUTO of Greenwich, Connecticut ("Seller"), and CONAIR
CORPORATION, a Delaware corporation with a place of business
at one Cummings Point Road, Stamford, Connecticut
("Purchaser"):
Seller and Purchaser, in consideration of the
mutual covenants herein contained, hereby covenant and agree
as follows:
Article 1. Description of Premises and
---------------------------
Acceptable Title.
----------------
1.1 Description of Premises. Seller shall
-----------------------
sell to Purchaser, and Purchaser shall purchase from Seller,
at the price and upon the terms and conditions set forth in
this Agreement:
(a) the parcel of land more
particularly described on Exhibit A attached hereto (the
---------
"Land") in the City of Stamford, Connecticut (the "City")
and subject to the Exceptions to title as noted on
Schedule B ("Exceptions");
(b) all buildings and improvements
situated on the Land, and any fixtures therein, except as
otherwise herein provided (collectively, the "Building");
and
(c) all right, title and interest of
Seller, if any, in and to the land lying in the bed of any
street or highway in front of or adjoining the Land and all
other appurtenances to the land and Building
("Appurtenances").
The Land, the Building and the Appurtenances are hereinafter
collectively referred to as the "Premises."
Article 2. Purchase Price and Acceptable
-----------------------------
Funds.
-----
2.1 Purchase Price. The purchase price (the
--------------
"Purchase Price") to be paid by Purchaser to the Seller for
the Premises is TWENTY MILLION ($20,000,000.00) DOLLARS
payable in accordance with the provisions of Section 2.3 as
-----------
follows:
<PAGE>
2
(a) TWENTY MILLION ($20,000,000.00)
DOLLARS to be delivered to the Seller at Closing as defined
in Section 3.1 hereof.
2.2 Adjustment of Cash. The cash payment to
------------------
Seller required at Closing will be increased or decreased,
as the case may be, to account for all items to be
apportioned under Article 9.
---------
2.3 Acceptable Funds. All monies payable
----------------
under this Agreement, unless otherwise specified herein,
shall be paid by immediately available funds, either wired
to an account designated by Seller or as may be mutually
agreeable to the parties hereto.
Article 3. The Closing.
-----------
3.1 Date, Place, and Time of Closing. The
--------------------------------
transfer of title to the Premises pursuant to this Agreement
(the "Closing") shall occur on the date of execution of this
Agreement by Seller and Purchaser on March 14, 1994 (the
"Closing Date"). The Closing shall be held at the offices
of Sherman & Richichi, 27 Fifth Street, Stamford,
Connecticut commencing at 10:00 a.m. on the Closing Date.
Counsels for the Seller and Purchaser are hereby
respectively authorized to execute an agreement or
agreements on behalf of the parties confirming or adjourning
the Closing Date.
3.2 Adjournment of Closing Date. Purchaser
---------------------------
shall have the right, at its option, to adjourn the Closing
Date for a period of up to 30 days, upon no less than ten
business days' notice to Seller, which notice shall include
a new date selected by Purchaser within said 30-day period
as the Closing Date. In the event that Purchaser does so
adjourn the Closing Date, no further adjournment by
Purchaser shall be permitted and, following the expiration
of said adjournment period, time shall be of the essence
with respect to Purchaser's obligation to close on the new
Closing Date set forth in Purchaser's notice.
Article 4. Acceptable Title and Clearing
-----------------------------
Title.
-----
4.1 Acceptable Title. Seller shall convey
----------------
and Purchaser shall accept title to the Premises in
accordance with the terms of this Agreement, subject only to
the exceptions specified in Exhibit A and to the following:
---------
(a) any restriction or limitations
imposed or to be imposed by governmental authority,
<PAGE>
3
including the zoning and planning rules and regulations of
the City, provided same are not in violation as of the date
of the Closing, unless any violation of same is legally non-
conforming as of the date of the Closing;
(b) taxes of the City which become due
and payable after the date of the Closing, which taxes
Purchaser will assume and agree to pay as part of the
consideration of the deed;
(c) encroachments of awnings, canopies,
ledges, fences, hedges, coping and retaining walls
projecting from the Premises over any street or highway or
over any adjoining property and encroachments of similar
elements projecting from adjoining property over the
Premises, provided same do not interfere with the current
use and enjoyment of the Buildings;
(d) public improvement assessments and
sewer connection charges, or other assessments and/or any
unpaid installments thereof, which assessments and/or
installments become due and payable after the date of the
Closing, which assessments and/or installments Purchaser
will assume and agree to pay as part of the consideration
for the deed. Seller has no knowledge of any current
assessments or charges, except as set forth on Exhibit B;
---------
(e) state of facts shown by accurate
survey and physical inspection of the Premises, provided
same does not interfere with the current use and enjoyment
of the Premises.
(f) any restrictive covenant,
condition, agreement, easement, map or condition of record,
provided same does not render title unmarketable and does
not interfere with the current use and enjoyment of the
Premises.
(g) all rights of utility companies for
the erection and/or maintenance of water, gas, electric,
telephone, sewer or other utility pipes, line, poles, wires,
conduits or other like facilities, and appurtenances
thereto, over, across and under the Premises, provided same
do not interfere with the current use and maintenance of the
Premises;
(h) all rights of federal, state or
local entities to land previously or presently lying below
the mean high water mark of any body of water abutting the
Premises, or any exception to coverage taken by a reputable
title company for land previously or presently lying below
such mean high water mark.
<PAGE>
4
4.2 Clearing Title. (a) The Seller shall
--------------
convey and Purchaser shall accept fee simple title to the
Premises in accordance with the terms of this Agreement,
subject only to (i) the exceptions referred to in
Section 4.1 herein and Exhibit B; (ii) the standard printed
----------- ---------
exceptions in the ALTA form of policy in use in the State of
Connecticut; and (iii) such other matters as any reputable
title insurance company qualified to do business in the
State of Connecticut shall be willing to omit as exceptions
to coverage or to except with insurance against collection
out of or enforcement against the Premises. Nothing shall
constitute an encumbrance, lien or exception to title for
the purposes of this Agreement if the Standards of Title of
the Connecticut Bar Association recommends that no
corrective or curative action is necessary in circumstances
substantially similar to those presented in the title to the
Premises. Seller shall not be required to bring any action
or proceeding or to incur any expense to cure any title
defect, except as herein provided.
(b) If examination of the title to the
Premises shall reveal one or more defects which prevent
Seller from conveying title in accordance with the terms of
this Agreement, Purchaser shall, within 15 days from the
date hereof, give Seller written notice of same. If
Purchaser fails to so notify Seller of such defects within
said 15-day period, Purchaser shall be deemed to have
accepted the state of title to the Premises in existence as
of the date hereof. If Purchaser does so notify Seller of
such defects, Seller shall have until 60 days subsequent to
the scheduled Closing Date to cure such defects or to locate
a title insurance company licensed to do business in
Connecticut which shall insure title to the Premises as
aforesaid for, and at the expense of Purchaser, but Seller
shall be under no obligation to do so. If the cost of such
insurance exceeds the Connecticut all-inclusive rate by up
to $10,000.00, Purchaser shall pay the same, and Seller
shall be liable for any such excess premium over $10,000.00,
provided that if the excess premium shall be more than
$20,000.00 Seller may terminate this Agreement, as provided
in (ii) below. If Seller shall accomplish same within said
period and shall be able to convey title in accordance with
the terms of this Agreement, the Closing shall then occur.
If Seller shall not accomplish same within such period,
Purchaser, within five business days after the expiration of
such period, shall elect either (i) to accept a deed to the
Premises conveying such title as Seller can give in
accordance with all of the other provisions of this
Agreement upon payment of the Purchase Price; or (ii) to
cancel and terminate this Agreement, in which event
Purchaser shall receive from Seller the Downpayment, plus
any expenses actually incurred by the Purchaser for
examination of title to the Premises, not to exceed $500.00.
<PAGE>
5
Upon such payment being made, this Agreement shall be
terminated, and neither party shall have any further
liability to the other hereunder.
Article 5. Representations and Warranties and
----------------------------------
Operation of Premises.
---------------------
5.1 Power, Authority, Execution and
-------------------------------
Delivery.
--------
(a) The Seller and the Purchaser each
represents and warrants to the other that each party has
sole power and authority, respectively, to acquire and own
or convey, as the case may be, the Premises.
(b) Purchaser and Seller each
represents and warrants to the other that the execution and
delivery of this Agreement by the persons so acting on
Purchaser's or Seller's behalf, respectively, have been
authorized by all necessary formal action of each party, and
this Agreement is the legal, valid and binding obligation of
each party respectively, enforceable in accordance wit its
terms.
5.2 Inspection. (a) Purchaser represents
----------
and warrants to Seller the following:
Except as otherwise expressly provided herein,
Purchaser has inspected the Premises, is fully familiar with
the physical condition and state of repair thereof and shall
accept the premises "as is" and in its present condition on
the Closing Date, subject to normal wear and tear, without
claim against Seller for any defects therein of any kind,
latent or otherwise, and agrees that Seller has made no
warranty or representation, express or implied, as to the
condition of the Premises or any portion thereof or as to
its permitted uses. Purchaser specifically acknowledges
that it has made its decision to buy based on its own
information and is not relying on Seller to furnish
Purchaser with any information, except as specified herein.
5.3 Operating Agreements; Additional
--------------------------------
Representations.
---------------
(a) Seller represents and warrants to
the Purchaser that the only lease in effect with respect to
the premises is that certain lease dated March 26, 1986,
between Leandro P. Rizzuto, as Lessor, and Conair
Corporation, as Lessee (the "Lease"). Simultaneously with
the Closing, the Lease shall be terminated by said parties,
by executing an agreement in the form of Exhibit C, attached
---------
hereto, and Leandro P. Rizzuto shall surrender his Premises
<PAGE>
6
"as is" and in its present condition, subject to normal wear
and tear.
(b) Seller represents and warrants to
Purchaser that there are no material written agreements with
respect to the maintenance or operation of the Premises,
except as specified in Exhibit D, attached hereto.
---------
5.4 Operation of premises. Between the date
---------------------
hereof and the Closing, Seller shall continue to operate the
Premises in normal course and Seller shall be entitled to
retain all income therefrom.
Article 6. Condemnation and Damage by Fire or
----------------------------------
Other Hazard.
------------
6.1 Immaterial Damage or Taking. If an
---------------------------
immaterial part of the Premises is damaged by fire or other
cause or is taken by eminent domain, this Agreement shall
not be affected thereby and there shall be no reduction in
the Purchase Price. Seller shall assign to Purchaser at the
Closing and Purchaser shall accept an assignment of all of
Seller's claims or rights under Seller's insurance policy or
policies on the premises and/or all of Seller's claims or
rights to receive any condemnation awards. If and to the
extent that Seller shall have received the proceeds of any
such claim or awards prior to the Closing Date, Seller shall
pay over to Purchaser on the Closing Date:
(a) the actual amount of insurance
monies collected by Seller with respect to such loss in case
of destruction by fire or other cause; or
(b) the net amount received by Seller,
in the case of a taking by eminent domain.
In any event, the assignment or the proceeds shall
be reduced by the costs incurred by Seller as a result of
the damage or condemnation, including, without limitation,
counsel fees and costs of interim protection, repair and
restoration.
6.2 Material Damage or Taking. If all or a
-------------------------
material part of the Premises is damaged by fire or other
cause, or is taken by eminent domain, Purchaser may cancel
this Agreement by notice to Seller given not later than ten
days after receipt of notice of such damage or of such
taking (as the case may be) and, in such event, this
Agreement shall be canceled and terminated, and neither
party shall have any further rights against the other and
Seller shall refund to Purchaser the Downpayment. If
Purchaser does not so cancel this Agreement, the Closing
<PAGE>
7
shall occur as scheduled, and the provisions of Section 6.1
shall control.
6.3 Definitions of Material and Immaterial.
--------------------------------------
For purposes of this Section, a material part of the
Premises shall be deemed to have been damaged if the
estimated cost to repair the Buildings shall be greater than
$250,000.00; otherwise, the damage shall be deemed to be
immaterial. For purposes of this Section, a material part
of the Premises shall be deemed to have been taken by
eminent domain if (a) more than 10% of the Premises shall be
taken by eminent domain; or (b) access to the Premises shall
be materially impaired; otherwise, the taking shall be
deemed to be immaterial.
6.4 Maintenance of Insurance. Seller agrees
------------------------
to maintain through the Closing Date the insurance policy or
policies presently in force with respect to the Premises or
insurance equivalent in amount and coverage.
Article 7. Seller's Closing Obligations.
----------------------------
At the closing, Seller shall deliver the following
to the Purchaser:
7.1 Deed. A statutory form of warranty
----
deed; executed in proper form for recording so as to convey
the title required by this Agreement.
7.2 Affidavits. Such affidavits as
----------
Purchaser's title company shall reasonably require in order
to omit from its title insurance policy all exceptions for
unrecorded mechanics' liens, together with a certification
that Seller is not a "foreign person" pursuant to
Section 145 of the Internal Revenue Code.
7.3 Transfer Taxes and Returns. Checks to
--------------------------
the order of the appropriate officers in payment of all
applicable real property conveyance taxes.
7.4 Other Required Documents.
------------------------
(a) schedules certified correct by
Seller containing the information required to calculate the
apportionments provided in Article 9 hereof;
---------
(b) a notice of termination of lease in
form suitable for recording and satisfactory to the
Purchaser;
(c) all other documents required by
this Agreement to be delivered by the Seller.
<PAGE>
8
Article 8. Purchaser's Closing Obligations.
-------------------------------
At the Closing, Purchaser shall:
8.1 Monies. Deliver to Seller funds,
------
complying with Section 2.3, in payment of the respective
-----------
portions of the Purchase price payable to him at the Closing
and items apportioned pursuant to Article 9 herein.
---------
8.2 Recordation and Filing. Cause the deed
----------------------
and Notice of Termination of Lease to be recorded and cause
all conveyance tax returns and checks in payment of such
taxes to be delivered to the appropriate officers having
jurisdiction over the Premises promptly after the Closing.
8.3 Other Documents Required. Deliver all
------------------------
other documents required by this Agreement to be delivered
by the Purchaser.
Article 9. Apportionments at Closing. Taxes
-------------------------
next due and payable to the City, municipal assessments, any
charge which has bee prepaid by lessor in that certain lease
agreement referred to in Section 5.3(a) hereof, or any
charge which the Seller herein has prepared as set forth in
a Zoning Board Certificate recorded November 10, 1986 in
Volume 2905 at page 297, S.L.R., if any, are to be
apportioned as of the date of the delivery of the Deed.
All adjustments as set forth herein are to be made
in accordance with the custom of the local Bar of the City
in which the Property is located.
Article 10. Broker.
------
The parties hereto recognize NO BROKER who
negotiated the sale of the premises. This Agreement is
consummated by Seller in reliance upon the representation of
Purchaser that no broker or agent brought the Premises to
the Purchaser's attention or was, in any way, the procuring
cause of this sale and purchase. Seller represents to
Purchaser that no broker or agent has any exclusive sale or
exclusive agency listing on the Premises. Purchaser hereby
agrees to indemnify and hold harmless the Seller against any
liability by reason of the claim of any broker or agent for
commission on account of this sale, provided that it is
adjudicated by a court of competent jurisdiction that a
commission is due by reason of such broker or agent calling
the Premises to Purchaser's attention or interesting
Purchaser therein, said indemnity to include all costs of
defending any such claim, including reasonable attorney
<PAGE>
9
fees. The provisions of this Section shall survive the
Closing, or if the Closing does not occur, the termination
of this Agreement.
Article 11. Default by Seller and Repairs.
-----------------------------
11.1 Repairs. Between the date hereof and
-------
the Closing, Seller shall be obligated only to make such
repairs to the Premises as are necessary to maintain the
Premises in its present condition, normal wear and tear
excepted. Seller shall not be obligated to expend more than
$10,000.00 in the aggregate for such repairs between the
date hereof and the Closing, including structural repairs
and repairs to the Building's mechanical, electrical,
heating and plumbing systems. In the event that the cost of
such repairs exceeds $10,000.00, and Seller elects not to
pay all or part of such excess cost, Seller shall so notify
Purchaser, stating the amount of such excess cost that
Seller does not elect to pay. In such event, Purchaser
shall notify Seller, within three business days after
receipt of Seller's notice, that Purchaser elects either
(a) to pay the excess cost that Seller is unwilling to pay,
or (b) to terminate this Agreement. If Purchaser fails to
respond within said three business-day period, Purchaser
shall be deemed to have elected alternative (a). If
Purchaser elects to terminate this Agreement, Seller shall
return the Downpayment to the Purchaser, together with
interest thereon as set forth in Paragraph 9.1 (calculated
-------------
from the date of delivery to Seller to the date of return of
the Downpayment to the Purchaser) and together with the
reasonable costs incurred by the Purchaser for the
examination of title to the Premises, not to exceed $500.00,
and the parties shall be relieved of all further obligations
hereunder. Notwithstanding the foregoing, this Agreement
shall remain in full force and effect if Seller elects, by
notice delivered to Purchaser within three (3) business days
after receipt of Purchaser's termination notice, to pay the
excess cost that Seller had previously declined to pay, and,
in such event, the Closing shall proceed as provided in this
Agreement.
11.2 Remedy. In the event of a default by
------
Seller under this Agreement, Purchaser, in its discretion,
shall have the right to declare this Agreement terminated,
and shall avail itself of all remedies, in law or in equity.
Article 12. Violations.
----------
12.1 Notices. Seller represents that it has
-------
received no notice of violations of health or building codes
with respect to the Premises and for which the occupant of
<PAGE>
10
the Premises is responsible which have not heretofore been
corrected.
12.2 Correction. Purchaser shall take title
----------
subject to all violation of laws and requirements of
governmental authority which have been issued by
governmental authority as of the Closing and which are the
obligations of the owner or occupant of the Premises,
provided that the cost of the correction of such violations
shall not exceed $50,000.00. If the cost of correction of
such violations exceeds $50,000.00, Purchaser shall have the
right to terminate this Agreement by giving written notice
to Seller within ten business days prior to the scheduled
Closing Date. In such event either (a) Seller shall elect
to pay the costs of remedying the violations in excess of
$50,000.00, in which event the Closing shall occur within
ten days thereafter, or (b) Seller shall remain to Purchaser
the Downpayment, together with interest thereon as set forth
in Section 9.1 (calculated from the date of delivery to
-----------
Seller to the date of return to the Purchaser for the
examination of title to the Premises, which shall not exceed
$500.00, in which event the parties shall be relieved of all
further obligations hereunder.
Article 13. Default by Purchaser.
--------------------
In the event Purchaser fails to perform any
of its obligations set froth in this Agreement, Purchaser
shall forfeit all claims to the Premises described herein,
and shall avail itself of any legal or equitable remedies.
Article 14. Notices.
-------
Except as otherwise specifically provided in
this Agreement, all notices, demands, requests, consents,
approvals or other communications (collectively, the
"Notices") required or permitted to be given hereunder or
which are given with respect to this Agreement shall be in
writing and shall be deemed to have been properly given when
delivered in person or by overnight or similar courier
service or sent by tested telex, telegram or telecopier or
three days after having been deposited in any post office,
branch post office or mail depository regularly maintained
by the U.S. Postal Service and sent by registered or
certified mail, postage pre-paid, addressed to the party to
be notified at its address first above set forth or to such
other address as such party shall have specified most
recently by like Notice. All notices to Seller shall be
addressed to Leandro P. Rizzuto, One Cummings Point Road,
Stamford, Connecticut 06902. At the same time if any Notice
is given to Seller, a copy thereof shall be sent as provided
<PAGE>
11
above to Attorney Joseph Richichi, 27 Fifth Street,
Stamford, Connecticut 06905 and if any Notice is given to
Purchaser, a copy thereof shall be sent as provided above to
Richard Margulies, Esq., One Cummings Point Road, Stamford,
Connecticut 06902.
Article 15. Assignment.
----------
Purchaser shall not assign this Agreement
without the prior written consent of Seller, and any
assignment in violation of this Agreement shall be null and
void.
Article 16. Access to Premises.
------------------
Seller shall permit Purchaser and Purchaser's
representatives, upon reasonable notice, to enter the
Premises at reasonable hours for the purpose of inspecting
the Premises and conducting examinations thereof prior to
Closing, provided that same shall not interfere with
Seller's use and occupancy of the Premises. Purchaser shall
restore the Premises to their condition prior to the making
of any borings or tests if such borings or tests are made.
Purchaser shall indemnify and hold Seller harmless with
respect to any damage or claims for damage made against
Seller as the result of any of Purchaser's activities on the
Premises prior to the Closing.
Article 17. Survival and Delivery of Deed.
-----------------------------
17.1 Survival. Except as otherwise
--------
specifically provided in this Agreement, no representations,
warranties, covenants or other obligations of Seller set
forth in this Agreement shall survive the Closing, and no
action based thereon shall be commenced after the Closing.
17.2 Delivery of Deed. The delivery of the
----------------
deed and agreement terminating the Lease and the acceptance
thereof by the Purchaser, shall be deemed the full
performance and discharge of every obligation on the part of
Seller to be performed hereunder, except those obligations
of Seller which are expressly stated in this Agreement to
survive the Closing.
Article 18. Miscellaneous Provisions.
------------------------
18.1 Entire Understanding. This Agreement
--------------------
embodies and constitutes the entire understanding between
the parties with respect to the transactions contemplated
<PAGE>
12
herein, and all prior agreements, understandings,
representations and statements, oral or written, are merged
into this Agreement. Neither this Agreement nor any
provision hereof may be waived, modified, amended,
discharged or terminated except by an instrument signed by
the party against whom the enforcement of such waiver,
modification, amendment, discharge or termination is sought,
and then only to the extent set forth in such instrument.
18.2 Governing Law. This Agreement shall be
-------------
governed by, and construed in accordance with, the law of
the State of Connecticut.
18.3 Captions. The captions in this
--------
Agreement are inserted for convenience of reference only and
in no way define, describe or limit the scope or intent of
this Agreement or any of the provisions hereof.
18.4 Successors and Assigns. This Agreement
----------------------
shall be binding upon and shall inure to the benefit of the
parties hereto and their respective heirs or successors and
permitted assigns.
18.5 Construction. As used in this
------------
Agreement, the singular shall include the plural and the
plural shall include the singular, as the context may
require. Each and every provision of this Agreement has
been mutually negotiated, prepared and drafted, each party
has been represented by legal counsel, and, in connection
with the construction of any provision hereof or deletions
herefrom, no consideration shall be given to the issue of
which party actually negotiated, prepared, drafted or
requested any provision or deletion.
18.6 Execution and Delivery. Delivery of
----------------------
this Agreement for inspection or otherwise by Seller to
Purchaser and/or its attorneys shall not constitute an offer
or create any rights in favor of Purchaser or others and
shall in no way obligate or be binding upon Seller, and this
Agreement shall have no force or effect unless and until the
same is fully executed and delivered by the parties and
fully executed copies exchanged by the parties hereto.
18.7 Exhibits. If the provisions of any
--------
Exhibit to this Agreement are inconsistent with the
provisions of this Agreement, the provisions of such Exhibit
shall prevail.
Article 19. Financing.
---------
It is expressly understood and agreed that
this Contract is contingent upon the Purchaser being able to
<PAGE>
13
obtain financing in the amount of TWENTY MILLION
($20,000,000.00) DOLLARS from a recognized lending
institution, which loan shall not bear an interest rate of
higher than seven (7%) percent. The Purchaser shall make
prompt application for the loan and shall pursue such
application with diligence. Purchaser shall keep Seller and
its Agents informed of the progress of the application, and
will use its best efforts to obtain said financing within
the time frame provided herein. If Purchaser is unable to
obtain such commitment by and if
Purchaser so notifies Seller in writing care of Joseph
Richichi, Esq., 27 Fifth Street, Stamford, Connecticut 06905
on or before said date, then this contract shall be null and
void and the Purchaser shall be entitled to a return of all
sums paid by Purchaser as a downpayment under this Contract
except $500.00 to cover the cost of preparing this Contract.
Should the Purchaser fail to comply with the provisions and
requirements of this paragraph, this Contract shall continue
in full force and effect, and the rights and obligations of
the parties shall be as if this paragraph did not appear in
this Contract. It is further understood and agreed that the
within and above Financing Contingency Clause is clear and
detailed and sets for th the entire Agreement and
understanding of the parties without the need for any of
outside clarification, and meets the requirement of the
Statute of Frauds. Neither party hereto shall at any time
claim, take the position, or asset the defense that this
clause is a violation of the Statute of Frauds, and both
parties hereto expressly waive any right to make such claim
and shall be estopped from so doing in the future.
Article 20. At the time of closing and as a
condition hereof, the parties hereto agree to enter into
that lease agreement labelled Exhibit A, attached hereto and
made a part hereof, wherein the Purchaser (Conair
Corporation) shall lease to Seller (Leandro P. Rizzuto)
those premises described in said proposed lease for a period
of ninety-nine years. Further, as more fully set forth
therein, Purchaser (Landlord) shall have the option, but not
the obligation, to purchase the lease agreement referred to
herein upon the following terms and conditions:
Seller grants and gives Purchaser, its successors
and assigns, for a period of ten (10) years from the date of
the closing and ending at 11:59 p.m. on the
right and option to purchase that Lease Agreement labelled
Exhibit A, attached hereto and made a part hereof, upon
payment of the following purchase price:
<PAGE>
14
IF THE OPTION IS EXERCISED BETWEEN: THEN THE OPTION PRICE
SHALL BE:
01 Mar 94 & 28 Feb 95 $4,000,000.00
01 Mar 95 & 29 Feb 96 4,000,000.00
01 Mar 96 & 28 Feb 97 4,000,000.00
01 Mar 97 & 28 Mar 98 4,000,000.00
01 Mar 98 & 28 Feb 99 4,000,000.00
01 Mar 99 & 29 Feb 00 4,400,000.00
01 Mar 00 & 28 Feb 01 4,840,000.00
01 Mar 01 & 28 Feb 02 5,324,000.00
01 Mar 02 & 28 Feb 03 5,856,400.00
01 Mar 03 & 29 Feb 04 6,442,040.00
To exercise this Option, the Purchaser must
deliver a written notice to the Seller fixing a date not
more than 60 days in advance for the purchase of that Lease
Agreement labelled Exhibit A hereof (which date is the "time
of Closing").
In the event that the Purchaser (Conair
Corporation) exercises its option to purchase the balance of
the Lease Agreement set forth in Exhibit A, then and in that
event Seller agrees to terminate said Lease Agreement in
such manner as may be directed by Conair Corporation so as
to insure a conveyance of title subject to no tenancy
(tenancies).
In the event that the Seller herein has sublet all
or a portion of the premises described in the Lease
Agreement (Exhibit A) and Purchaser (Conair) exercises its
option to purchase said Lease Agreement, then Conair shall
have the option to accept an assignment/conveyance of the
Lease Agreement, subject to the subtenancy or require that
Seller (Rizzuto) terminate all or any portion of said lease
agreement.
<PAGE>
15
THIS OPTION SHALL SURVIVE THE DELIVERY OF DEED IN
ACCORDANCE WITH THE TERMS SET FORTH HEREIN.
IN WITNESS WHEREOF, the parties have hereunto set
their hands and seals the day and year first above written.
/s/ Mary King SELLER: LEANDRO P. RIZZUTO
------------------------
/s/ Sophie C. Powajba
------------------------
/s/ Leandro P. Rizzuto
------------------------------
PURCHASER: CONAIR CORPORATION
/s/ Mary King
------------------------
/s/ Sophie C. Powajba By:/s/ Richard A. Margulies
------------------------ -----------------------------
Vice President
Exhibit 10.4
------------
LEASE
between
CONAIR CORPORATION
as Landlord,
and
LEANDRO P. RIZZUTO
as Tenant
As of March 14, 1994
<PAGE>
TABLE OF CONTENTS
-----------------
ARTICLE Page
------- ----
I Premises - Term . . . . . . . . . . . . . . . . 1
II Definitions . . . . . . . . . . . . . . . . . . 2
III Rent . . . . . . . . . . . . . . . . . . . . . 5
IV Gross Lease . . . . . . . . . . . . . . . . . . 5
V No Termination, Abatement, Etc. . . . . . . . . 6
VI Use of the Premises . . . . . . . . . . . . . . 6
VII Condition of the Premises . . . . . . . . . . . 7
VIII Maintenance and Repair; Mechanic's
Liens;Encroachments; Restrictions, Etc. . . . . 8
IX Alterations . . . . . . . . . . . . . . . . . . 10
X Impositions . . . . . . . . . . . . . . . . . . 12
XI Insurance . . . . . . . . . . . . . . . . . . . 12
XII Utility Services . . . . . . . . . . . . . . . 16
XIII Legal Requirements and Insurance
Requirements . . . . . . . . . . . . . . . . . 17
XIV Encumbrances . . . . . . . . . . . . . . . . . 17
XV Permitted Contests . . . . . . . . . . . . . . 18
XVI Improvements and Tenant's Equipment . . . . . . 18
XVII Damage or Destruction . . . . . . . . . . . . . 19
XVIII Condemnation . . . . . . . . . . . . . . . . . 25
XIX Assignment and Subletting . . . . . . . . . . . 27
XX Tenant's Default . . . . . . . . . . . . . . . 39
XXI Landlord's Right to Cure Tenant's Default . . . 47
XXII Subordination . . . . . . . . . . . . . . . . . 48
XIII Broker . . . . . . . . . . . . . . . . . . . . 49
XXIV Quiet Enjoyment . . . . . . . . . . . . . . . . 50
i
<PAGE>
Page
----
XXV Surrender -- Holding Over . . . . . . . . . . . 50
XXVI Estoppel Certificates . . . . . . . . . . . . . 51
XXVII Waiver of Jury and Counterclaims . . . . . . . 53
XXVIII Notices . . . . . . . . . . . . . . . . . . . . 54
XXIX No Waiver by Landlord . . . . . . . . . . . . . 54
XXX Memorandum of Lease . . . . . . . . . . . . . . 55
XXXI Acceptance of Surrender . . . . . . . . . . . . 56
XXXII Remedies Cumulative . . . . . . . . . . . . . . 56
XXXIII Landlord's Right to Purchase Lease. . . . . . . 57
XXXIV Miscellaneous . . . . . . . . . . . . . . . . . 58
XXXV No Additional Rent: Gross Lease . . . . . . . 60
XXXVI Parking . . . . . . . . . . . . . . . . . . . . 61
ii
<PAGE>
L E A S E
---------
THIS INDENTURE OF LEASE ("Lease") made as of the
14 day of March, 1994 between CONAIR CORPORATION, a Delaware
Corporation with a principal place of business at One
Cummings Point Road, Stamford, Connecticut (hereinafter
referred to as "Landlord") and LEANDRO P. RIZZUTO, of
Greenwich, Connecticut (hereinafter referred to as
"Tenant"):
ARTICLE I
---------
Premises - Term
---------------
1.1 For and in consideration of the rents,
covenants and agreements on the part of the Tenant to be
paid, kept and performed, Landlord hereby leases to Tenant
and Tenant hereby takes and hires from the Landlord, upon
and subject to the terms, covenants, conditions and agree-
ments hereinafter set forth, the following (collectively,
the "Premises"):
(a) All those certain areas designated as
Area "X" on the first floor and Area "Y" of the second floor
as shown on Schedule A, attached hereto and made a part
hereof, being part of that office building situated upon
premises known as One Cummings Point Road, Stamford,
Connecticut, the legal description of the premises upon
which the demised areas of the building herein referred to
being described on Schedule B, attached hereto and made a
part hereof.
<PAGE>
(b) The right to use, in common with others,
those areas designated as common areas ("CA") and those
common areas of ingress and egress as designated by "cross
hatch" all as shown on Schedule C.
SUBJECT TO (i) all liens, charges, encumbrances,
building and zoning laws and ordinances and other matters
affecting the Premises on the date hereof, (ii) all
Mortgages (as defined in Article II hereof) and (iii) such
other liens, charges, encumbrances and matters which may
hereafter affect all or any part of the Premises and as are
permitted by the terms of this Lease or consented to by
Landlord and Tenant,
TO HAVE AND TO HOLD the same for a term (the
"Term") commencing on the date hereof (the "Commencement
Date") and expiring at midnight on the ninety-ninth (99th)
anniversary of the Commencement Date (the "Expiration Date")
unless sooner terminated in accordance with the terms of
this Lease.
ARTICLE II
----------
Definitions
-----------
2.1 In addition to other defined terms contained
in the Lease, the following terms whenever used in this
Lease shall have the meanings hereinafter set forth:
(a) Default: Any condition or event which
-------
constitutes or would constitutes an Event of Default (as
defined in Article XXI), either with or without notice or
lapse of time, or both.
2
<PAGE>
(b) Impositions: All real estate taxes,
-----------
assessments, occupancy taxes, personal property taxes and
water, sewer and other rents, rates, charges and surcharges,
excises, levies, license and permit fees, governmental,
quasi-governmental and public utility charges, in each case
whether general or special, ordinary or extraordinary, or
foreseen or unforeseen, of every character (including,
without limitation, any interest, costs or penalties with
respect to any of the foregoing), which at any time during
the Term may be assessed, levied, confirmed, charged,
imposed upon or become a lien or due or payable in respect
of all or any part of: (i) the Premises, the Improvements,
the sidewalks or streets in front of or adjoining the
Premises, or any personal property, equipment or other
facility used in the operation thereof; (ii) any occupancy,
operation, use or possession of or activity conducted on the
Premises or any part thereof; (iii) Fixed Rent and
Additional Rent (as hereinafter defined) including all gross
receipts or similar taxes now or hereafter payable in
respect of Fixed Rent and Additional Rent and sales and use
taxes which may now or hereafter be levied or assessed
against or by payable by Landlord or Tenant on account of
the leasing or use of the Premises or the Improvements or
upon the value of the Premises or the Improvements or any
part thereof; and/or (iv) this Lease.
Nothing contained in this Lease shall require
Tenant to pay any inheritance, estate, succession, or gift
3
<PAGE>
tax of Landlord or any corporate franchise, net income or
excess profits tax imposed upon Landlord or other tax or
imposition of the same or similar nature.
(c) Insurance Requirements: All require-
----------------------
ments of any insurance policy covering or applicable to all
or any part of the Premises or the use thereof, all require-
ments of the issuer of any such policy, and all orders,
rules, regulations, recommendations and other requirements
of the National Board of Fire Underwriters (or any other
body exercising similar functions) applicable to or affect-
ing all or any part of the Premises.
(d) Legal Requirements: All federal, state,
------------------
county, city, municipal and other governmental and quasi-
governmental statutes, laws, orders, regulations,
ordinances, judgments, decrees and injunctions affecting all
or any part of the Premises or the use thereof, and permits,
licenses, authorizations and regulations relating thereto.
(e) Mortgage: Any mortgage entered into by
--------
Landlord now or hereafter encumbering the Premises, the
Improvements, or both or any part thereof, as the same may
be modified, extended, spread, renewed, replaced or
consolidated from time to time.
(f) Mortgagee: The holder or beneficiary of
---------
any Mortgage.
(g) Taking: A taking of all or any part of
------
the Premises, or any interest therein or right accruing
thereto, or the use thereof as a result of the exercise of
4
<PAGE>
the right of condemnation or of eminent domain, or any
voluntary conveyance made in lieu of or in anticipation
thereof, or a change of grade affecting the Premises or any
part thereof.
(h) Tenant's Equipment: All trade fixtures,
------------------
furniture, furnishings and other equipment and personal
property owned by Tenant and removable without damage to the
Premises.
ARTICLE III
Rent
----
3.1 Tenant shall pay to Landlord fixed rent
("Fixed Rent") of One Dollar ($1.00) per annum for the
period from the Commencement Date to the Termination Date
hereunder. The Fixed Rent shall be paid to Landlord without
notice or demand, in advance on the first day of each
calendar year during the Term.
ARTICLE IV
Gross Lease
-----------
4.1 Except as provided in Article XXXV, this
Lease shall be deemed a gross lease, and all charges,
impositions, insurance, maintenance costs and expenses of
whatsoever nature shall be the obligation of the Landlord,
it being acknowledged that Tenant's only financial
obligation hereunder to be the payment of the Fixed Rent.
5
<PAGE>
ARTICLE V
No Termination, Abatement, Etc.
-------------------------------
5.1 Except as otherwise specifically set forth
herein, this Lease shall not terminate, nor shall Tenant be
entitled to any abatement, deduction, deferment or reduction
of the Fixed Rent or set-off against the Fixed Rent, nor
shall the rights and obligations of Landlord and Tenant,
respectively, be otherwise affected for any reason
whatsoever, including any damage to or destruction of the
Premises or the Improvements from whatever cause, any
Taking, the lawful or unlawful prohibition of or
interference with the use or occupancy of the Premises or
the Improvements for any purpose or any claim which Tenant
has or might have against Landlord. The rights and
obligations of the Landlord and Tenant hereunder shall be
separate and independent covenants and agreements and the
Fixed Rent and Additional Rent shall continue to be payable
in all events unless the obligations to pay the same shall
be terminated and/or abated pursuant to an express provision
of this Lease.
ARTICLE VI
Use of the Premises
-------------------
6.1 Tenant may use the Premises for any lawful
purpose, so long as the use is not reasonably objectionable
to Landlord and provided further that said use does not
interfere with Landlord's use.
6
<PAGE>
6.2 Tenant shall not use or suffer or permit the
Premises, or any part thereof, to be used or occupied, in
any way that would (i) violate any Legal Requirements or
Insurance Requirements, (ii) make void or voidable or make
it impossible to obtain, any insurance coverage required to
be maintained hereunder, (iii) diminish or tend to diminish
the economic value of the Premises or any part thereof or
(iv) constitute a public or private nuisance or waste.
Except as provided in Article XXX, nothing contained in this
Lease and no action or inaction by Landlord shall be deemed
or construed to mean that Landlord has granted Tenant any
right, power, privilege or permission to do or fail to do
any act or to make any agreement that may create or give
rise to any right, lien, charge or other encumbrance upon
the estate of Landlord in the Premises.
ARTICLE VII
Condition of the Premises
-------------------------
7.1 Tenant acknowledges that (a) the Premises
including, without limitation, the Fixtures and all
Improvements erected thereon as of the date of this Lease
and all surface and subsurface conditions have been
inspected by Tenant or by Tenant's duly authorized
representatives and that Tenant is fully familiar with the
physical condition thereof; (b) the Premises have been
leased by Tenant as the result of such inspection and not in
reliance upon any representations or warranties by Landlord
or anyone acting or purporting to act for or on behalf of
7
<PAGE>
Landlord; (c) Landlord has neither made nor does hereby make
any representations or warranties with respect to the
physical condition of the Premises, the state of repair or
condition of the Fixtures or the Improvements or the fitness
or availability thereof for any particular use, the status
of the title to the Premises, the actual or projected costs
or expenses of operating the Premises, or any other matter
or thing relating to the Premises or the use or occupancy
thereof, and Tenant agrees to and does hereby accept the
same "as is" on the date of this Lease and without any
liability or obligation on the part of Landlord for any
latent or other defects therein or otherwise.
ARTICLE VIII
Maintenance and Repair; Mechanic's Liens;
Encroachments; Restrictions, Etc.
-----------------------------------------
8.1 Tenant assumes all responsibility for the
repair, operation, maintenance and management of the
Premises during the Term, and at its sole cost and expense,
shall put, keep and maintain the Premises and all sidewalks,
driveways and curbs adjacent or appurtenant thereto in a
safe, clean and orderly condition, free of snow, ice, debris
and other accumulations and in good order and repair; and
Tenant agrees promptly to make or cause to be made all
necessary and appropriate repairs and replacements thereto
of every kind and nature, whether ordinary or extraordinary,
foreseen or unforeseen. All repairs and replacements shall,
to the extent possible, be at least equivalent in quality
8
<PAGE>
and workmanship to the condition of the Premises as of the
Commencement Date. In any event, Tenant shall have the
right, at any time and from time to time, to remove and
dispose of Fixtures which may become obsolete or unfit for
use or which are no longer useful in the operation of the
Building in which case Tenant shall promptly replace the
same with other Fixtures, not necessarily of the same
character but of at least equal utility and value.
Immediately upon the installation of such Fixtures, title to
such Fixtures shall be vested in Landlord. Tenant shall
have the right to sell or otherwise dispose of any Fixtures
which it is required to replace or elects to replace
pursuant to the provisions of this Section and may retain as
its sole property the proceeds of any such sale or
disposition. Tenant shall at all times keep the Premises
free from all rubbish, refuse, waste and garbage and the
same shall be collected by Tenant and stored for disposal in
appropriate and sanitary containers in such a manner as to
at no time appear unsightly or conspicuous. Tenant
covenants that in performing any repairs or replacements to
the Premises it will observe and perform, insofar as the
nature of such repairs and replacements makes such
observation and performance appropriate, the conditions and
requirements relating to Alterations set forth in
Section 10.1.
8.2 If any mechanic's or materialman's lien or
claim of lien shall at any time be filed against the
9
<PAGE>
Premises or any part thereof or against Landlord's or
Tenant's respective interests therein as a result of any
labor performed or materials or services furnished, or
claimed to have been performed or furnished to or on behalf
or Tenant or any occupants of the Premises or their
contractors, Tenant, at its sole cost and expense, shall
cause the same to be vacated and discharged of record within
sixty days after the filing thereof, by bond or otherwise,
at Tenant's sole cost and expense, subject to Tenant's
rights to contest the same pursuant to Section 16.1 hereof.
ARTICLE IX
Alterations
-----------
9.1 If not in default, Tenant may from time to
time, at its sole cost and expense, make non-structural
alterations, additions or improvements to the Improvements
or Fixtures or any part thereof or replacements to the same
(collectively, "Alterations"), provided that Tenant shall
not be permitted to make any Alterations which will affect
building systems. In each instance where the reasonably
estimated cost of the Alterations exceeds $10,000.00, as
estimated by Tenant's representative who shall be a licensed
architect designated by Tenant and approved by Landlord
(which approval will not be unreasonably withheld or
delayed), Tenant shall have secured the prior consent of
Landlord thereto, which consent shall not be unreasonably
withheld or delayed if, in Landlord's reasonable opinion,
such proposed Alterations will not (a) make void or voidable
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the insurance required to be maintained pursuant to the
provisions of Section 12.1, (b) violate any Legal
Requirements and/or insurance requirements or (c) reduce the
economic value of the Premises or Improvements. The
reasonable cost and expense of reviewing plans and
specifications, shall be paid by Tenant to Landlord, on
demand, as Additional Rent. All Alterations shall be
performed expeditiously, in good and workmanlike manner and
in compliance with all Legal Requirements and insurance
requirements applicable thereto and if the reasonably
estimated cost of such Alterations shall exceed $25,000 as
estimated by the above mentioned architect the same shall be
effected under the supervision of such architect and in
compliance with plans and specifications approved, which
approval shall not be unreasonably withheld or delayed, by
Landlord. Tenant shall procure and pay for all permits,
licenses, certificates or other governmental approvals that
may be required for such Alterations and the use and
occupancy of the Improvements, as altered, and Tenant shall
promptly pay or cause to be paid all costs and expenses
relating to such Alterations. During the performance of any
Alterations, Landlord and its agents and representatives
may, from time to time, inspect the Improvements and
Landlord shall be furnished with all plans and
specifications (both as planned and "as built") and shop
drawings relating to such Alterations, at no cost to
Landlord. In addition to the insurance to be maintained by
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Tenant pursuant to the provisions of Section 12.1, during
any period in which Alterations shall be in progress, Tenant
shall maintain fire insurance with extended coverage
endorsements in builder's risk completed value nonreporting
form. All Alterations shall be the property of Landlord and
shall be part of the Premises.
ARTICLE X
Impositions
-----------
10.1 Except as provided for in Article XXXV
hereof, the Landlord shall be obligated for all Impositions
as herein defined.
ARTICLE XI
Insurance
---------
11.1 During the Term, Landlord agrees to secure
and maintain in force, at its sole cost and expense, for the
benefit of Landlord and Tenant (and, as required, any
Mortgagee) insurance covering the Premises, including the
Improvements and Fixtures (a) fire, with extended coverage,
vandalism and malicious mischief endorsements in an amount
not less than 100% of the then full insurable value (actual
replacement value of the Improvements and Fixtures without
deduction for physical depreciation but excluding costs of
excavation, (b) comprehensive general public liability
insurance against claims for bodily injury, death and
property damage occurring in or about the Premises with a
personal injury endorsement, such insurance to afford
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minimum protection of $1,000,000.00 with respect to injury
or death resulting from any one occurrence, and $500,000.00
with respect to property damage arising out of any one
occurrence, and (c) such other insurance and in such amounts
as may from time to time reasonably be required by Landlord
against other insurable hazards as are customarily obtain-
able and carried by prudent owners and tenants of similar
properties.
11.2 All policies of insurance to be carried
pursuant to Section 11.1, other than worker's compensation
and other required statutory forms of insurance covering
Tenant's employees, shall name as insureds thereunder,
Landlord, Tenant and any Mortgagee, as their respective
interests may appear, and, except for public liability
insurance, shall contain a standard non-contributory
mortgagee endorsement in favor of each Mortgagee and such
insurance shall provide (a) that no cancellation or material
alteration thereof shall be effective until at least thirty
days after receipt of notice thereof by Landlord and any
Mortgagee; and (b) that no act or omission of Landlord, any
Mortgagee or Tenant shall affect or limit the obligation of
the insurance company to pay the amount of any loss
sustained with respect to the coverage thereof. Any rent
insurance proceeds provided by Landlord shall be applied on
account the Fixed Rent and Additional Rent for the period in
respect of which such insurance shall be collected. Tenant
shall have sole responsibility for the care, custody,
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control and insuring of the Improvements and all Tenant's
Equipment and may insure the same against such risks and in
such amounts as Tenant may designate and Landlord shall have
no rights or interest in such insurance or the proceeds
thereof. Landlord shall have no responsibility with respect
to any loss or damage to the Improvements or Tenant's
Equipment.
11.3 Except as provided in Article XXX hereof,
all premiums for policies of insurance referred to in
Section 12.1 shall be paid by Landlord to the insurance
carrier. On or before the Commencement Date, Landlord shall
deliver to Tenant, certificates or duplicates of such
insurance policies and Landlord shall deliver policies or
certificates with respect to renewal or replacement policies
to Tenant and any Mortgagee, as required, not less than
thirty days prior to the expiration of the original
policies, or succeeding renewals, as the case may be,
together with receipts or other evidence that the premiums
thereon have been paid for at least one year in advance.
Premiums on policies shall not be financed in any manner
which requires such policies to be pledged to any lender.
All insurance provided for in this Article XII shall be
effected under valid and enforceable policies issued by
insurers of recognized responsibility which are licensed to
do business in the State of Connecticut.
11.4 In respect of any property owned by Tenant
or anyone claiming under Tenant located in, at or upon the
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Premises, Tenant hereby releases Landlord from and all
liability or responsibility to it or anyone claiming by,
through or under it by way of subrogation or otherwise, for
any loss or damage thereto. Tenant shall not carry separate
or additional insurance, concurrent in form or contributing,
in the event of any loss or damage to the Premises, with any
insurance required by this Article unless such separate or
additional insurance shall comply with this Article. Tenant
may not effect any insurance coverage under this Article XII
under a policy or policies of blanket insurance.
11.5 Tenant shall have the right, upon Landlord's
failure to obtain the insurance policies required hereunder,
to obtain such insurance policies at the sole expense of
Tenant, which cost shall be payable by Landlord immediately.
11.6 If Tenant elects to obtain his own
insurance, then each party agrees to use its best efforts to
include in each of it insurance policies (and, with respect
to any Tenant's Equipment in the Premises, in the insurance
policies covering such Tenant's Equipment carried by Tenant
or the lessors of such Tenant's Equipment) against loss,
damage or destruction by fire or other insured casualty a
waiver of the insurer's right of subrogation against the
other party, or if such waiver should be unobtainable or
unenforceable (a) an express agreement that such policy
shall not be invalidated if the insured waives or has waived
before the casualty the right of recovery against any party
responsible for a casualty covered by the policy, or (b) any
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other form of permission for the release of the other party.
If such waiver, agreement or permission shall not be, or
shall cease to be, obtainable without additional charge or
at all, the insured party shall so notify the other party
promptly after learning thereof. In such case, if the other
party shall agree in writing to pay the insurer's additional
charge therefor, such waiver, agreement or permission shall
(if obtainable) be included in the policy.
11.7 Landlord and Tenant each agrees that it will
cooperate with the other, to such extent as such other party
may reasonable require, in connection with the prosecution
or defense of any action or proceeding arising out of, or or
the collection of any insurance monies that may be due in
the event of, any loss or damage, and that they will execute
and deliver to such other parties such instruments as may be
required to facilitate the recovery of any insurance monies.
ARTICLE XII
Utility Services
----------------
12.1 Except as provided in Article XXXV hereof,
Landlord shall pay or cause to be paid all charges for
electricity, power, gas, water, steam, garbage, waste and
refuse collection, telephone, fuel oil and other utilities
used in connection with the Premises and the Improvements.
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ARTICLE XIII
Legal Requirements and Insurance Requirements
---------------------------------------------
13.1 Subject to the provisions of Section 16.1,
Tenant shall, at its sole cost and expense, promptly
(a) comply with all Legal Requirements and Insurance
Requirements now or hereafter in force, whether or not
requiring replacements, repairs, modifications, or
alterations in or to all or any part of the Premises, and
(b) procure, maintain and comply with all licenses, permits
and other authorizations required for any use of the
Premises then being made.
ARTICLE XIV
Encumbrances
------------
14.1 Subject to the provisions of Section 16.1,
Tenant shall not directly or indirectly create or allow to
remain and shall promptly vacate and discharge of record, at
its expense, any mortgage, lien, encumbrance, attachment,
levy, claim, title retention or security agreement or charge
upon the Premises, this Lease, the leasehold estate created
hereby or the Fixed Rent except (a) this Lease, (b) any
Fixed Mortgage, (c) restrictions, liens, charges, tenancies
and other encumbrances affecting the Premises on the date
hereof or which are hereafter consented to in writing by
Landlord, Tenant and any Mortgagee as required, (d) liens
for Impositions so long as the same are not yet payable or
are payable without the addition of any fine, penalty or
interest, and (e) any other matter expressly permitted under
this Lease.
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ARTICLE XV
Permitted Contests
------------------
15.1 Landlord, at its expense, may contest, by
appropriate legal proceedings conducted in good faith and
with due diligence, the amount, validity or application, in
whole or in part, of any Imposition, Legal Requirement,
Insurance Requirement, lien or encumbrance.
ARTICLE XVI
Improvements and Tenant's Equipment
-----------------------------------
16.1 Tenant, at its expense, may install or place
or cause to be installed or placed in or on the Improve-
ments, and remove and substitute or cause to be removed and
substituted, any items of Tenant's Equipment provided that
the installation of such equipment will not adversely affect
the Improvements nor interfere with the building systems,
and Tenant shall remove or cause to be removed the same upon
the expiration or sooner termination of this Lease. All of
Tenant's Equipment shall be and remain the property of
Tenant; provided however, that any of Tenant's Equipment not
removed within thirty (30) days after the expiration or
sooner termination of this Lease shall be deemed abandoned
and may be appropriated, sold, destroyed or otherwise
disposed of by Landlord without notice to Tenant and without
any obligation to account therefor and Landlord shall not be
responsible for any loss or damage to Tenant's Equipment.
After the expiration of this Lease, Tenant shall be per-
mitted to remove Tenant's Equipment during the ten (10) day
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period following such expiration, upon paying Fixed Rent or
Additional Rent during such ten (10) day period. Tenant
shall pay, as Additional Rent, all costs and expenses
incurred by Landlord in removing, storing or disposing of
Tenant's Equipment, and Tenant shall repair at its expense
all damage to the Premises caused by the removal of Tenant's
Equipment, whether effected by Tenant or Landlord. Tenant's
obligations in respect to the provisions of this Sec-
tion 17.1 shall survive the expiration or sooner termination
of this Lease.
ARTICLE XVII
Damage or Destruction
---------------------
17.1 Tenant shall promptly give Landlord and any
Mortgagee notice of any damage or destruction to the
Premises or any part thereof by fire or other casualty. In
case of fire or other casualty, resulting in any damage or
destruction to the Improvements or any part thereof or any
part of the Premises, Tenant shall restore, repair, replace
and rebuild the same as nearly as possible to its condition
and quality immediately prior to such damage or destruction.
Tenant's obligation to restore, repair, replace and rebuild
the Improvements shall not be limited to the amount of the
insurance proceeds paid to Tenant. If the insurance
proceeds received in respect of any damage or destruction
less any cost of recovery, are insufficient to pay the
entire hard and soft costs of such restoration, repairs,
replacement or rebuilding, Tenant shall contribute an amount
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equal to such deficiency, and the insurance proceeds
received in respect of such damage or destruction shall not
be paid until Tenant has expended for restoration or
deposited with Landlord an amount equal to such deficiency.
17.2 Notwithstanding anything contained to the
contrary in this Lease, in the event that (a) all or
substantially all of the Improvements shall be damaged or
destroyed by fire or other casualty at any time during the
last year of the Term, and (b) the cost of repairing,
rebuilding, replacing or restoring the same would exceed
$500,000 and the necessary Work would take more than six
months to perform (as estimated in writing by Landlord's
architect or licensed engineer, which estimate shall be
delivered to Tenant within fifty (50) days after the date
that such damage or destruction occurs), then, in such case,
Landlord may elect to terminate this Lease by giving not
less than thirty (30) days' notice thereof to Tenant,
provided and upon condition that such notice of termination
is given within sixty (60) days after the date that such
damage or destruction occurs, and at least seven (7) days
after the delivery to Tenant or said architect's of
engineer's certificate.
If Landlord shall effectively elect to terminate
this Lease as provided above in this Section, then (1) the
Lease shall terminate and expire on the date set forth in
such notice of termination, (2) the Fixed Rent and
Additional Rent and all other charges provided to be paid by
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tenant shall be paid to the Expiration Date, (3) Tenant
shall not be required to repair the damage or destruction,
and (4) all the insurance monies arising out of such damage
and destruction shall be paid to and be the sole property of
Landlord subject to the rights to any Fee Mortgagee.
17.3 Tenant agrees that, notwithstanding the
provisions of any statute now or hereafter in force to the
contrary, this Lease will not terminate and Tenant will not
be relieved of or from the obligations to pay, in whole or
in part, the Basic Rent or any Additional Rent or the
obligation to perform the other covenants and obligations to
be performed by Tenant hereunder, in case of any damage to
or destruction of the Premises.
17.4 If Landlord so requires, all sums
representing the proceeds of any fire or other casualty
insurance or the proceeds of any Taking (hereinafter
collectively referred to as "Deposited Sums") will be
deposited with the Landlord and said sums shall be disbursed
upon receipt by Landlord (or Mortgagee) of the following:
(a) A certificate signed by a licensed
architect or engineer selected by Tenant who shall be
satisfactory to Landlord and also signed by Tenant, dated
not more than thirty (30) days prior to the application for
such disbursement, setting forth in substance the following:
(i) That the sum then requested to be
disbursed either has been paid by Tenant and/or is justly
due to contractors, subcontractors, materialmen, engineers,
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architects or other persons (whose names and addresses shall
be stated) who have rendered and furnished certain labor and
materials for the work and giving a brief description of
such services and materials and the principal subdivisions
or categories thereof and the several amounts so paid or due
to each of said persons in respect hereof, and stating the
progress of the work up to the date of said certificate;
(ii) That the sum then requested to be
disbursed, plus all sums previously disbursed, does not
exceed the cost of the work in so far as actually
accomplished up to the date of such certificate, and that
the balance of the Deposited Sums will be sufficient to pay
in full for the completion of the work, or Landlord shall
have received other assurances reasonably satisfactory to it
of payment in full for completion thereof;
(iii) That no part of the cost of the
services and materials described in the foregoing clause (i)
of this paragraph (a), in any previous or then pending
application, has been previously the basis for the
disbursement of any part of the Deposited Sums or has been
paid out of insurance moneys not required to be paid to
Landlord (or Mortgagee) and
(iv) That except for the amounts, if any,
stated in said certificate pursuant to the foregoing
clause (i) of this paragraph (a) to be due for services or
materials, there is no outstanding indebtedness known to the
person signing the certificate, after due inquiry, which is
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<PAGE>
then due and payable for work, labor, services and materials
in connection with the work to be performed by Tenant, which
if unpaid, might become the basis of a vendor's, mechanic's,
laborer's or materialmen's statutory or similar lien upon
Tenant's leasehold estate or Tenant's or Landlord's interest
in the Premises or any part thereof.
(b) A certificate signed by Tenant, dated
not more than thirty (30) days prior to the application for
such disbursement, setting forth in substance that, to the
best knowledge of Tenant, after due inquiry,
(i) All materials and all property
described in the certificate furnished pursuant to
clause (i) of the foregoing paragraph (a) and every part
thereof, are free and clear of all liens and encumbrances,
except such as may secure indebtedness due to persons (whose
names and addresses and the several amounts due them shall
be stated) specified in said certificate, which liens and
encumbrances will be discharged upon payment of such
indebtedness and encumbrances to which this Lease is
subject; and
(ii) That no Event of Default has
occurred which has not been remedied.
(c) An official search, a certificate or
title company or other evidence reasonably satisfactory to
Landlord showing that there has not been filed against
Tenant's leasehold estate or Tenant's or Landlord's interest
in the Premises or any part thereof any vendor's,
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<PAGE>
mechanic's, laborer's or materialman's statutory or similar
lien which has not been discharged upon payment of the
amount then requested to be disbursed.
Upon compliance with the foregoing provisions
Landlord (or Mortgagee) shall, out of the Deposited Sums,
disburse to the persons named in the certificate pursuant to
the foregoing clause (i) of paragraph (a) the respective
amounts stated in said certificate to be due to them and/or
shall disburse to Tenant the amount stated in said
certificate to have been paid by Tenant.
At any time after the completion in full of the
work, the whole balance of the Deposited Sums not thereof
disbursed pursuant to the foregoing provisions of this
Section shall be disbursed to Tenant, upon receipt by
Landlord (or Mortgagee) of (a) a certificate signed by
Tenant, dated not more than thirty (30) days prior to the
application for such disbursement, setting forth in
substance the following to the best knowledge of Tenant,
after due inquiry, (i) that the work to be performed has
been completed in full; (ii) that all amounts which Tenant
is or may be entitled to have disbursed under the foregoing
provisions of this Section on account of services rendered
or materials furnished in connection with the work have been
disbursed under said provisions; (iii) that all amounts for
whose payment Tenant is or may become liable in respect of
the work to be performed have been paid in full; and
(iv) that no Event of Default has occurred which has not
24
<PAGE>
been remedied and either (b) an official search or
certificate of a title company reasonably satisfactory to
Landlord showing that there has not been filed with respect
to Tenant's leasehold estate or Tenant's or Landlord's
interest in the Premises or any part thereof, any vendor's,
mechanic's, laborer's or materialman's statutory or similar
lien which has not been discharged of record and the time to
file any such lien shall have elapsed or (c) valid and
enforceable waivers of liens from each contractor and
subcontractor.
If an Event of Default shall have occurred and be
continuing prior to the disbursement of the Deposited Sums
or any part thereof, Landlord shall have no further
obligation to disburse any of the Deposited Sums to Tenant
as herein provided.
Article XVIII
Condemnation
------------
18.1 Landlord shall promptly give Tenant notice
of any Taking.
18.2 In the event of a total Taking (or, in the
event of any other Taking, if the Premises is no longer an
economically useful unit and Tenant so notifies Landlord
within thirty (30) days after such Taking), this Lease and
the Term and all right, title and interest of Tenant
hereunder shall terminate on the date of such Taking, and
the Fixed Rent and the Additional Rent shall be apportioned
and paid up to such date.
25
<PAGE>
18.3 If at any time during the Term there shall
occur a Taking (other than a Taking for a temporary use) of
less than all or a substantial part of the Premises, this
Lease shall not terminate except in respect of the portion
of the Premises taken and a just proportion of the Fixed
Rent, according to the extent and nature of such Taking,
shall abate for the remainder of the Term; such abatement to
be effective as of the date of the determination thereof.
18.4 If any Taking described in Sections 18.2 or
18.3 shall occur, then, notwithstanding the termination of
this Lease with respect to the whole or a part of the
Premises, as the case may be, Tenant shall be entitled to
receive that portion of any award or damages for such Taking
as is attributable to: (a) Tenant's leasehold interest in
the Premises as would have existed through the Expiration
Date had such Taking not occurred; and (b) Tenant's
Equipment.
18.5 In case of a Taking for a temporary use,
there shall be no termination, cancellation or modification
of this Lease, and Tenant shall continue to perform and
comply with all of its obligations under this Lease (except
as such performance and such compliance may be rendered
impossible by reason of such Taking) and Tenant shall in no
event be relieved of its obligations to pay punctually all
Fixed Rent and Additional Rent. Unless a Default shall have
occurred and then be continuing or if such Taking shall
extend beyond the Expiration Date, Tenant shall have the
26
<PAGE>
right and power, and is hereby irrevocably authorized and
empowered, to file and prosecute all claims for the award of
damages as a result of a Taking for a temporary use.
18.6 Tenant agrees and represents that it will
take all actions with respect to the Premises within its
control to avoid a Taking, and Tenant hereby grants Landlord
an irrevocable power of attorney, coupled with an interest,
to take any and all actions Landlord deems appropriate to
contest or avoid any Taking.
ARTICLE XIX
Assignment and Subletting
-------------------------
19.1 Subject to and conditioned upon compliance
with all the terms and conditions of this Article 19,
Landlord, upon the giving of 10 days' prior written notice
by Tenant, hereby consents to (a) an assignment of this
Lease to a corporation or any other business entity which
controls, is controlled by, or is under common control with
Tenant (hereinafter referred to as a "related corporation"),
or to a successor corporation (as hereinafter defined), or
(b) a subletting of all or a portion of the Premises for any
of the purposes permitted to Tenant, subject however, to
compliance with Tenant's obligations under this Lease and
provided that (a) Tenant shall not be in default beyond any
applicable grace period in any of the terms of this Lease,
(b) prior to such subletting or assignment Tenant furnishes
Landlord with the name of any such proposed subtenant; and
(c) in the case of assignment or subletting in the
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reasonable judgment of Landlord the proposed subtenant or
assignee is of a character consistent with the standards of
a Landlord for tenants in the Building and the uses that
would be made by such subtenant do not interfere with and
are not reasonably objectional to the Landlord. Any
subletting shall not be deemed to vest in any such subtenant
any right or interest in this Lease or in the Premises nor
shall it relieve, release, impair or discharge any of the
Tenant's obligations hereunder. For the purposes hereof,
"control" shall be deemed to mean ownership of not less than
50% of all of the voting stock of such corporation or not
less than 50% of all of the equitable and legal interest in
any other business entities.
19.2 A "successor corporation," as used in this
Article 19 shall mean (a) a corporation into which or with
which Tenant, its corporate successors and assigns, is
merged or consolidated, in accordance with applicable
statutory provisions relating to the merger or consolidation
of corporations, provided that by operation of law or by
effective provisions contained in the instruments of merger
or consolidation, or (b) a corporation acquiring this Lease
and the Term and the estate hereby granted, the goodwill and
all or substantially all of the other property and assets
(other than capital stock of such acquiring corporation) of
Tenant, its corporate successors or assigns, and assuming
all or substantially all of the liabilities of Tenant, its
corporate successors and assigns, or (c) any corporate
28
<PAGE>
successor to a successor corporation becoming such by either
of the methods described in subdivisions (a) and (b) above;
provided that, (i) such merger or consolidation, or such
acquisition and assumption, as the case may be, is for a
good business purpose and not principally for the purpose of
transferring the leasehold estate created hereby, and
(ii) the corporation surviving such merger or created by
such consolidation or acquiring such assets and assuming
such liabilities, as the case may be, shall have assets,
capitalization and a net worth, as determined in accordance
with generally accepted accounting principles, and certifi-
cations to Landlord by an independent certified public
accountant, at least equal to the assets, capitalization and
net worth, similarly determined, of Tenant at the beginning
of the Term or immediately prior to such merger or consoli-
dation or such acquisition or assumption, as the case may
be, whichever is the greater. The acquisition by Tenant,
its corporate successors or assigns, of all or substantially
all of the assets, together with the assumption of all or
substantially all of the obligations and liabilities of any
corporation, shall be deemed to be a merger for the purposes
of this Article. Upon the delivery to Landlord by any
successor corporation to whom this Lease may be and is
assigned or transferred with the consent of Landlord
pursuant to the provisions of this Section, of the current
balance sheet of such successor corporation, certified by
its chief financial officer or a certified public accoun-
29
<PAGE>
tant, together with the agreement of such corporation to
assume all of the terms of this Lease to be performed by
Tenant, and to be bound thereby, the corporation so
assigning or transferring this Lease shall thereafter be
released and discharged from any obligations thereafter
arising under this Lease.
19.3 Except as provided in Paragraph 19.1 herein,
neither this Lease nor any part nor the interest of Tenant
in any sublease or the rentals thereunder, shall, by opera-
tion of law or otherwise, be assigned, mortgaged, pledged,
encumbered or otherwise transferred by Tenant, Tenant's
legal representatives or successors in interest and neither
the Premises, nor any part thereof, nor any Tenant's Equip-
ment shall be encumbered in any manner by reason of any act
or omission on the part of Tenant or anyone claiming under
or through Tenant, or shall be sublet or be used or occupied
for desk space or for mailing privileges by anyone other
than Tenant, without the prior written consent of Landlord
which shall not be unreasonably withheld or delayed, pro-
vided the conditions set forth in Section 19.7 herein have
been satisfied.
19.4 For purposes of this Article 19, (i) the
issuance of interests in Tenant or any subtenant (whether
stock or partnership interest or otherwise) to any person or
group of related persons, whether in a single transaction or
a series of related or unrelated transactions, such that
following such issuance such person or group shall have
30
<PAGE>
control of Tenant or subtenant shall be deemed an assignment
of this Lease or such sublease, as the case may be, (ii) a
transfer of more than 50% in interest of Tenant or any sub-
tenant (whether stock or partnership interest or otherwise)
by any party or parties in interest whether in a single
transaction or a series of related or unrelated transactions
shall be deemed an assignment of this Lease, or such sub-
lease except that the transfer of the outstanding capital
stock of any corporate Tenant or subtenant, by persons or
parties (other than persons or parties owning 50% or more of
the voting stock of such corporation) through the "over-the-
counter" market or any recognized national securities
exchange, shall not be included in the calculation of such
50%, (iii) a take-over agreement shall be deemed an assign-
ment of this Lease, (iv) any person or legal representative
of Tenant, to whom Tenant's interest under this Lease passes
by operation of law, or otherwise, shall be bound by the
provisions of this Article 19, and (v) a modification,
amendment or extension of a sublease shall be deemed a
sublease. Any assignment or sublease by Tenant in contra-
vention of this Article 19 shall be void. For the purposes
of clause (ii) of the preceding sentence, stock ownership
shall be determined in accordance with principles set forth
in Section 544 of the Internal Revenue Code of 1954, as the
same existed on August 16, 1954. If Tenant shall assign
this Lease or sublet the Premises or a portion thereof in
accordance with this Article 19, any such assignee or sub-
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tenant may use the Premises for executive and administrative
offices in connection with such assignee's or sublessee's
business, provided such use does not conflict with any Legal
Requirement, Insurance Requirement or any of the other terms
of this Lease.
19.5 If this Lease is assigned, whether or not in
violation of the terms of this Lease, Landlord may collect
rent from the assignee. If the Premises or any part thereof
be sublet or be used or occupied by anybody other than
Tenant, Landlord may, after default by Tenant, collect rent
from the subtenant or occupant. In either event, Landlord
may apply the net amount collected to the rent herein
reserved. The consent by Landlord to an assignment, trans-
fer, encumbering or subletting pursuant to any provision of
this Lease shall not in any way be considered to relieve
Tenant from obtaining the express prior consent of Landlord
to any other or further assignment, transfer, encumbering or
subletting. References in this Lease to use or occupancy by
anyone other than Tenant shall not be construed as limited
to subtenants and those claiming under or through subtenants
but as including also licensees and others claiming under
Tenant, immediately or remotely. The listing of any name
other than that of Tenant on any door of the Premises or on
any directory or in any elevator in the Building, or other-
wise, shall not vest in the person so named any right or
interest in this Lease or the Premises, or constitute any
consent of Landlord required under this Article, and any
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such listing shall constitute a privilege extended by Land-
lord, revocable at Landlord's will by notice to Tenant.
Tenant agrees to pay to Landlord a reasonable processing fee
(including reasonable attorneys' fees and disbursements
incurred by Landlord) in connection with any proposed
assignments or sublettings. Neither any assignment of this
Lease or any proposed subletting of the Premises or any part
thereof by any person other than Tenant, nor any collection
of rent by Landlord from any person other than Tenant, nor
any application of any such rent as provided in this Article
shall be deemed a waiver of any of the provisions of Sec-
tion 20.1 or relieve, impair, release or discharge Tenant of
its obligations fully to perform the terms of this Lease on
Tenant's part to be performed and Tenant shall remain fully
liable therefor.
19.6 Notwithstanding anything contained in
Section 19.3 to the contrary, but subject to the rights of
Tenant under Section 19.1, if Tenant desires to sublet all
or any part of the Premises or to assign its interest in
this Lease, Tenant
(a) shall submit to Landlord the name and
address of the proposed subtenant or assignee, a reasonably
detailed description of such person's business, reasonably
detailed character and financial references for such person
(including its most recent balance sheet and income
statements certified by its chief financial officer or
certified public accountant), and, a certification by Tenant
33
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that this Lease and Tenant's property are free of all liens
and encumbrances and any other information reasonably
requested by Landlord; and
(b) shall submit to Landlord (i) a conformed
or photostatic copy of the proposed assignment or sublease,
which agreements shall be conditioned on Landlord's consent
thereto and (ii) an agreement by Tenant to indemnify Land-
lord against liability resulting from any claims that may be
made against Landlord by the proposed assignee or sublessee
or by any brokers or other persons claiming a commission or
similar compensation in connection with the proposed assign-
ment or sublease.
19.7 Landlord's consent to a subletting or
assignment as required under Section 19.3 shall not be
unreasonably withheld, provided that all of the following
conditions have been satisfied:
(a) In the reasonable judgment of Landlord
the proposed subtenant or assignee is of a character and
financial worth consistent with the standards of Landlord in
those respects for the Building, and the nature of the pro-
posed subtenant's or assignee's business and its reputation
is consistent with the character of the Building and its
tenancies;
(b) The purposes for which the proposed
subtenant or assignee intends to use the Premises or the
applicable portion thereof are uses expressly permitted by
34
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and not prohibited by this Lease or by any other lease in
the Building;
(c) Tenant shall not (i) advertise or
publicize in any way the availability of all or part of the
Premises without Landlord's consent, which shall not be
unreasonably withheld, and no advertisement shall state the
name or the address of the Building or the proposed rental;
(d) The proposed occupancy shall not impose
a material extra burden upon the Building equipment or
Building services;
(e) The proposed sublease shall be expressly
subject and subordinate to all of the provisions of this
Lease;
(f) Tenant shall not be in default in the
performance of any of its obligations under this Lease
either at the time Landlord's consent to such subletting or
assignment is requested or at the commencement of the term
of any proposed sublease or upon the effective date of any
such assignment;
(g) Tenant shall reimburse Landlord for any
reasonable costs that may be incurred by Landlord in connec-
tion with said sublease or assignment, including the costs
of making investigations as to the acceptability of a pro-
posed subtenant or assignee;
(h) The proposed subtenant or assignee shall
not be entitled, directly or indirectly, to diplomatic or
sovereign immunity and shall be subject to the service of
35
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process in, and the jurisdiction of the courts of, the State
of Connecticut;
(i) The proposed subtenant or assignee shall
not be a person then negotiating with Landlord or Landlord's
agent (either directly or through a broker) for the rental
of any space in the Building;
(j) In the case of a subletting of a portion
of the Premises the space proposed to be sublet shall be
regular in shape and suitable for normal renting purposes;
and
(k) The proposed subtenant or assignee shall
have no further right to sublet or assign.
19.8 With respect to each and every sublease or
subletting or assignment authorized by the provisions of
this Section, it is further agreed and understood between
Landlord and Tenant as follows:
(a) No subletting shall be for a term ending
later than one day prior to the Expiration Date and that
part, if any, of the proposed term of any sublease or any
renewal or extension thereof which shall extend beyond a
date one day prior to the Expiration Date or the sooner
termination of the Term, is hereby deemed to be a nullity;
and
(b) There shall be delivered to Landlord,
within 10 days after the commencement of the term of the
proposed sublease, notice of such commencement, or in the
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case of an assignment, notice of the effectiveness of such
assignment.
19.9 If Landlord shall recover or come into
possession of the Premises before the date herein fixed for
the termination of this Lease, Landlord shall have the
right, but not the obligation, to take over any sublease
made by Tenant and to succeed to all the rights of Tenant
thereunder, Tenant hereby assigning (effective as of the
date of Landlord's succession to Tenant's estate in the
Premises) such subleases as Landlord may elect to take over.
Every subletting hereunder shall be subject to the condition
that, from and after the termination of this Lease or
re-entry by Landlord hereunder or other succession by Land-
lord to Tenant's estate in the Premises, the subtenant shall
waive any right to surrender possession or to terminate the
sublease and, at Landlord's election, such subtenant shall
be bound to Landlord for the balance of the term thereof and
shall attorn to and recognize Landlord, as its landlord,
under all of the then executory terms of such sublease,
except that Landlord shall not (i) be liable for any pre-
vious act, omission or negligence of Tenant under such
sublease, (ii) be subject to any counterclaim, defense or
offset not expressly provided for in such sublease, which
theretofore accrued to such subtenant against Tenant,
(iii) be bound by any previous modification or amendment of
such sublease or by any previous prepayment of more than one
month's rent and additional rent which shall be payable as
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provided in the sublease, unless such modification or
prepayment shall have been approved in writing by Landlord,
(iv) be obligated to perform any repairs or other work in
the subleased space beyond Landlord's obligations under this
Lease. Each subtenant shall execute and deliver to Landlord
any instruments Landlord may reasonably request to evidence
and confirm such attornment.
19.10 Any attempt by Tenant to sublease the whole
or any part of the Premises or to assign this Lease except
as permitted under this Article shall be null and void and
of no force or effect.
19.11 In the event that Tenant has sublet all or
a portion of the demised premises and Landlord exercises its
right to purchase this Lease Agreement in accordance with
the provisions of Article 33 hereof and requires that said
conveyance be free of any tenancies therein, notwithstanding
anything to the contrary set forth herein, Tenant, at his
sole cost and expense, within 60 days of written notice from
Landlord, shall perform whatever act(s) as may be necessary
to insure that the proposed lease purchase is free from all
tenancies. Accordingly, any proposed subtenancy by Tenant
shall contain a distinct reference to this right of termina-
tion at any time without cause should the option to purchase
be exercised.
ARTICLE XX
Tenant's Default
----------------
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20.1 If any of the following events (individu-
ally, an "Event of Default") shall occur: (a) if Tenant
shall default in the payment of any item of Fixed Rent and
such default shall continue for ten (10) days after notice
to Tenant; (b) if Tenant shall default in the payment of any
financial charge, if any, when due for ten (10) days; or
(c) if this Lease shall be assigned or the Premises be
sublet, without Tenant having obtained Landlord's express
prior consent; or (d) if Tenant shall default in the obser-
vance of any of the other terms, covenants, conditions or
agreements of this Lease and such default shall not be cured
within twenty (20) days after Landlord has given Tenant
notice of such default, provided that in the event the same
cannot be reasonably cured within twenty (20) days, then
provided Tenant shall have commenced within such twenty (20)
day period to attempt to cure the Default and proceeded with
due diligence until completion to cure, then, upon the
happening of any one or more Events of Default, Landlord
may, at its option, terminate this Lease by giving to Tenant
not less than five (5) days' notice of Landlord's intention
to terminate this Lease because of the occurrence of any
such Event of Default, and upon the date set forth in such
termination notice, this Lease and the Term shall cease,
terminate and come to an end, with the same force and effect
as though the date so specified was the date herein fixed as
the Expiration Date, but Tenant shall remain liable to Land-
lord as hereinafter set forth. Landlord shall also in any
39
<PAGE>
of such events, in addition to and not in limitation of any
other right or remedy, have the right to re-enter the Prem-
ises without being liable for any prosecution therefor, and
to repossess and enjoy the same and to remove Tenant and any
and all persons claiming through or under Tenant and remove
their property therefrom, by any suitable action or proceed-
ing prescribed by law (including summary proceedings).
20.2 (a) In the event Tenant is dispossessed
from the Premises by summary proceedings or otherwise, or
Landlord regains possession of the Premises, or in case this
Lease shall be terminated by reason of any Event of Default
or shall terminate by reason of any of the events set forth
in Section 21.5, then Tenant shall, nevertheless, remain
liable to Landlord in an amount equal to all Fixed Rent and
Additional Rent herein reserved for the balance of the Term,
or the period that would have constituted the balance of the
Term had this Lease not been terminated as aforesaid; and
Landlord may rebuild, repair, alter and redecorate the
Premises or any part thereof (without thereby releasing
Tenant from liability hereunder) in such manner as Landlord
may deem advisable, and/or let or re-let the Premises or any
part or parts thereof for a term or terms which may, at the
option of Landlord, be less than or exceed the balance of
the Term or the period which would have constituted the
balance of the Term had this Lease not been terminated as
aforesaid, in Landlord's name, or as agent of Tenant, and on
such conditions (which may include concessions or free rent)
40
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and for such purposes as Landlord may determine, and out of
any rents resulting from such reletting, Landlord shall,
first, pay to itself the expenses and costs, including
attorneys' fees and expenses, of retaking, repossessing,
repairing, altering and/or redecorating the Premises;
second, pay to itself all expenses and costs sustained in
securing any new tenant or tenants, including brokerage
fees; and third, pay to itself any balance remaining on
account of the liability of Tenant to Landlord the amount of
the Fixed Rent and Additional Rent reserved herein and
unpaid by Tenant for the period which would have been the
remainder of the Term had this Lease not been terminated as
aforesaid, and any surplus shall belong to Landlord.
Neither (i) the termination of this Lease pursuant to
Sections 21.1 or 21.5, (ii) any entry or re-entry by
Landlord, whether had or taken under summary proceedings or
otherwise, or (iii) any reletting or failure to relet the
Premises, shall absolve or discharge Tenant from any
liability hereunder, all of which shall survive any such
termination, repossession or reletting.
(b) Should any rent collected by Landlord
from such reletting be insufficient fully to pay to Landlord
a sum equal to all Fixed Rent and Additional Rent herein
reserved, the deficiency shall be paid by Tenant on the rent
days herein specified, that is, upon each of such rent days
Tenant shall pay to Landlord the amount of the deficiency
then existing and Tenant shall be liable for any such
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<PAGE>
deficiency, and the Right of Landlord to recover from Tenant
the amount thereof, or a sum equal to the amount of all
Fixed Rent and Additional Rent, if there shall be no
reletting, shall survive the issuance of any dispossessory
warrant or other termination of this Lease. Landlord shall
not be liable for failure to relet the Premises, or in the
event the Premises are relet, for failure to collect the
rent under such reletting.
(c) Suit or suits for the recovery of such
deficiency or damages, or for a sum equal to any installment
or installments of any Fixed Rent or Additional Rent
hereunder may be brought by Landlord from time to time at
Landlord's election, and nothing herein contained shall be
deemed to require Landlord to await the date on which this
Lease or the Term would have expired by limitation had there
been no such default by Tenant or no such termination or
repossession by Landlord. No suit to collect the amount of
any deficiency for any month shall prejudice Landlord's
right to collect the deficiency for any subsequent month by
a similar proceeding.
20.3 If at any time during the Term, Tenant
shall: (a) be unable, or admit in writing its inability, to
pay its debts as they mature, (b) make an assignment for the
benefit of creditors, (c) file a voluntary petition in bank-
ruptcy or for reorganization or be adjudicated a bankrupt or
insolvent by any court, (d) file any petition or answer
seeking, consenting to, or acquiescing in reorganization,
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arrangement, liquidation, dissolution or similar relief
under any present or future statute, law or regulation, or
file an answer admitting or failing to deny the material
obligations of a petition against it for any relief under
any federal or state bankruptcy or insolvency laws, (e) fail
to have dismissed any proceeding against Tenant seeking any
of the relief referred to in the foregoing clause (d) within
90 days after the commencement thereof, (f) have a trustee,
receiver or liquidator of Tenant or of any substantial part
of its properties or assets or of Tenant's estate or inter-
est in the Premises appointed with the consent or acquies-
cence of Tenant, or if any such appointment is not so
consented to or acquiesced in, shall have such appointment
remain unvacated for a period of 90 days, (g) while insol-
vent or in connection with any bankruptcy or debtor-creditor
proceeding, be liquidated or dissolved, or dissolution, or
shall, in any manner, permit the divestiture of substan-
tially all of its assets, or (h) if this Lease (but for this
provision) shall by operation of law, devolve upon or pass
to any other person or entity, except as permitted here-
under, then, upon the occurrence of any of such events, this
Lease shall ipso facto be cancelled and terminated (and the
---- -----
occurrence of any of such events resulting in a termination
of this Lease shall be deemed to constitute a Default here-
under) in which event neither Tenant nor any person claiming
through or under Tenant, by virtue of any statute or of an
order of any court, shall be entitled to possession of the
43
<PAGE>
Premises or any part thereof, or to remain in possession of
the Premises, but shall forthwith quit and surrender the
same and Landlord, in addition to the other rights and
remedies granted to Landlord under any of the provisions of
this Article or elsewhere in this Lease contained, or by
virtue of any statute or rule of law, may retain any Fixed
Rent or monies received by the Landlord from Tenant or
others on behalf of Tenant. In the event of the termination
of this Lease pursuant to the foregoing provision of this
Section 21.5, Landlord shall forthwith be entitled to
recover from Tenant an amount equal to the liquidated and
agreed final damages described in and computed in the manner
set forth in Section 21.3; however, nothing herein contained
shall limit or prejudice the right of Landlord to prove and
obtain as liquidated damages by reason of such termination,
an amount equal to the maximum allowed by any statute or
rule of law in effect at the time when, and governing the
proceedings in which, such damages are to be proved, whether
or not such amount be greater, equal to, or less than the
amount referred to above.
20.4 If this Lease is assigned to any person or
entity pursuant to the provisions of the Bankruptcy Code,
11 U.S.C. Sec. 101 et seq. (the "Bankruptcy Code"), any and all
-- ---
consideration payable or otherwise to be delivered in
connection with such assignment shall be paid or delivered
to Landlord, shall be and remain the exclusive property of
Landlord and shall not constitute property of Tenant or of
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<PAGE>
the estate of Tenant within the meaning of the Bankruptcy
Code. Any and all monies and other consideration consti-
tuting Landlord's property under the preceding sentence not
paid or delivered to Landlord shall be held in trust for the
benefit of Landlord and be promptly paid to or turned over
to Landlord. If Tenant assumes this Lease and proposes to
assign the same pursuant to the provisions of the Bankruptcy
Code to any person or entity who shall have made a bona fide
offer to accept an assignment of this Lease on terms accept-
able to Tenant, then notice of such proposed assignment,
setting forth (i) the name and address of such person,
(ii) all of the terms and conditions of such offer, and
(iii) the adequate assurance to be provided Landlord to
assure such person's future performance under this Lease,
including, without limitation, the assurance referred to in
Section 365(b)(3) of the Bankruptcy Code, shall be given to
Landlord by Tenant no later than twenty (20) days after
receipt by Tenant but in any event no later than ten (10)
days prior to the date that Tenant shall make application to
a court of competent jurisdiction for authority and approval
to enter into such assignment and assumption, and Landlord
shall thereupon have the prior right and option, to be
exercised by notice to Tenant given at any time prior to the
effective date of such proposed assignment, to accept an
assignment of this Lease upon the same terms and conditions
and for the same consideration, if any, as the bona fide
offer made by such person, less any brokerage commissions
45
<PAGE>
which may be payable out of the consideration to be paid by
such person for the assignment of this Lease.
20.5 Tenant, to the extent permitted by law,
hereby waives service of any notice of intention to
re-enter, any and all right to recover or regain possession
of the Premises or to reinstate or to redeem this Lease as
may be permitted or provided by or under any statute, law or
decision now or hereafter in force and effect, and the
benefit of any laws now or hereafter in force exempting
property from liability for rent or for debt. Whenever in
this Lease Landlord has reserved or is granted the right to
"re-enter" the Premises, the use of such word is not
intended, nor shall it be construed, to be limited to its
technical meaning.
20.6 Tenant, for itself and any and all persons
claiming through or under Tenant, including its creditors,
upon the termination of this Lease and of the Term in
accordance with the terms hereof, or in the event of entry
of judgment for the recovery of the possession of the
Premises in any action or proceeding, or if Landlord shall
enter the Premises by process of law or otherwise, hereby
waives any right of redemption provided or permitted by any
statute, law or decision now or hereafter in force, and does
hereby waive, surrender and give up all rights or privileges
which it or they may or might have under and by reason of
any present or future law or decision, to redeem the
Premises or for a continuation of this Lease for the Term
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after having been dispossessed or ejected therefrom by
process of law, or otherwise. Tenant waives all right to
trial by jury in any summary or other judicial proceedings
hereafter instituted by Landlord against Tenant in respect
to Premises. Tenant also waives any right to assert or
interpose a counterclaim in any summary proceeding or other
action commenced by Landlord to recover or obtain possession
of the Premises.
20.7 Tenant, to the extent permitted by law,
hereby waives its right to disavow this Lease in the event
of Tenant's bankruptcy.
ARTICLE XXI
Landlord's Right to Cure Tenant's Default
-----------------------------------------
21.1 If Tenant shall fail to make any payment or
perform any act required to be made or performed under this
Lease, Landlord, after demand upon Tenant (except no demand
shall be necessary in the event of any emergency) and
without waving or releasing any obligation or Default, may
(but shall not be obligated to) at any time thereafter make
such payment or perform such act for the account and at the
expense of Tenant, and may enter upon the Premises for such
purpose and take all such action thereon as, in Landlord's
reasonable opinion, may be necessary or appropriate
therefor. No such entry shall be deemed an eviction of
Tenant. All sums so paid by Landlord and all costs and
expenses (including, without limitation, reasonable attor-
neys' fees and expenses) so incurred, together with interest
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thereon at the Lease Interest Rate from the date on which
such sums or expenses are paid or incurred by Landlord,
shall be paid by Tenant to Landlord on demand and shall be
collectible by Landlord as Additional Rent.
ARTICLE XXII
Subordination
-------------
22.1 (a) This Lease and the rights and interest
of Tenant herein shall be, and hereby are made, subject and
subordinate at all times to all Mortgages and all advances
thereon.
(b) Tenant agrees that if any Mortgagee, or
any other person claiming by or through any Mortgagee, or by
or through any foreclosure proceeding of any Mortgage, shall
succeed to the rights of Landlord under this Lease, Tenant
shall attorn to and recognize such successor as Tenant's
landlord under this Lease, and Tenant shall promptly execute
and deliver any instruments that may be necessary to
evidence such attornment. Upon such attornment, this Lease
shall continue in full force and effect as a direct lease
between Tenant and such successor landlord, upon and subject
to all of the terms, covenants and conditions of this Lease.
22.2 The provisions of Section 22.1 shall be
self-operative and no further instrument of subordination or
attornment shall be necessary, unless required by Landlord
or any Mortgagee or any successor in interest to such Mort-
gagee, in which event Tenant agrees, upon demand, at any
time or times, to execute, acknowledge and deliver to Land-
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lord or any Mortgagee any and all instruments that may be
necessary or proper to confirm such subordination and
attornment. In order to effectuate the provisions of
Section 22.1 and this Section 22.2, Tenant hereby, irre-
vocably and unconditionally, appoints and designates Land-
lord as its attorney-in-fact to execute any and all such
instruments as may be necessary or proper to confirm such
subordination and attornment, such power of attorney being
deemed coupled with an interest.
22.3 If, in connection with the obtaining,
continuing or renewing of any Mortgage, any commercial or
savings bank, trust company, savings and loan association,
insurance company, real estate investment trust, pension or
retirement fund or any other entity generally considered an
institutional lender shall request reasonable modifications
of this Lease as a condition of such financing, neither
Landlord nor Tenant will unreasonably withhold or delay its
consent thereto, provided such modifications do not increase
the obligations of Landlord or Tenant hereunder nor mate-
rially and adversely affect the rights of Landlord or Tenant
under this Lease.
ARTICLE XXIII
Broker
------
23.1 Landlord and Tenant warrant and represent to
each other that they have dealt with no real estate broker
or brokers in connection with the negotiation, execution and
delivery of this Lease. Each party hereby indemnifies and
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agrees to hold the other harmless from and against any and
all costs (including reasonable attorneys' fees and
disbursements), expenses, claims, liabilities and damages by
reason of the foregoing warranty and representation being
untrue. The provisions of this Section shall survive the
execution and delivery of this Lease and the expiration or
sooner termination of this Lease.
ARTICLE XXIV
Quiet Enjoyment
---------------
24.1 So long as Tenant shall pay the Fixed Rent
and Additional Rent as the same become due hereunder and
shall fully perform and comply with all of the other terms,
covenants, conditions and agreements of this Lease, Tenant
shall peaceably and quietly have, hold and enjoy the Prem-
ises for the Term without hindrance or molestation by or
from Landlord or anyone claiming by, through or under Land-
lord, subject, however, to the terms, covenants, conditions
and agreements of this Lease.
ARTICLE XXV
Surrender -- Holding Over
-------------------------
25.1 Upon the expiration or sooner termination of
this Lease, Tenant agrees that it will peaceably and quietly
surrender and yield up possession of the Premises to Land-
lord.
25.2 If Tenant shall hold over in possession of
the Premises after the expiration or sooner termination of
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this Lease without the express written consent of Landlord,
such holding over shall not be deemed to have extended the
Term for any new term. Landlord may in such event, at its
option, elect to treat Tenant as one who has not removed at
the end of its term, and thereupon be entitled to all
remedies against Tenant provided by law in such case,
including consequential damages resulting from such holding
over, or Landlord may elect to construe such holding over as
a tenancy from month to month, upon and subject to all of
the terms and provisions hereof except that such tenancy
shall be terminable on thirty days' notice from either party
to the other and shall be at a monthly rental equal to the
total of: (a) one and one-half (1-1/2) times the monthly
installment of Fixed Rent payable during the last full month
of the Term plus (b) the Additional Rent, computed at a
monthly rate during such month to month tenancy, at the rate
in effect at the expiration or sooner termination of the
Term.
ARTICLE XXVI
Estoppel Certificates
---------------------
26.1 Upon the written request of Landlord, at any
time or from time to time, Tenant agrees to execute,
acknowledge and deliver to Landlord, within ten (10) days
after request, a written statement (a) certifying that this
Lease has not been modified and is in full force and effect
or, if there have been modifications of this Lease, that
this Lease is in full force and effect as modified, and
51
<PAGE>
stating such modifications, (b) certifying the dates to
which the Fixed Rent and Additional Rent have been paid,
(c) stating whether or not, to the best knowledge of Tenant,
Landlord is in default in the performance of any of its
obligations under this Lease and, if Landlord is in default,
specifying the nature of each such default of which Tenant
may have knowledge and (d) such other matters as Landlord
may reasonably request; it being intended that any such
statement delivered pursuant to this Section 25.1 may be
relied upon by Landlord and any prospective transferee or
assignee of its interest in this Lease or the Premises, or
any Mortgagee or prospective Mortgagee, or any prospective
assignee of such Mortgagee, but reliance on any statement by
Landlord may not extend to any default as to which the
signer shall have had no actual notice.
26.2 Upon the written request of Tenant, at any
time or from time to time, Landlord agrees to execute,
acknowledge and deliver to Tenant, within ten (10) days
after request, a written statement (a) certifying that this
Lease has not been modified and is in full force and effect
or, if there have been modifications of this Lease, that
this Lease is in full force and effect as modified, and
stating such modifications, (b) certifying the dates to
which the Fixed Rent and Additional Rent have been paid,
(c) stating whether or not notice has been sent to Tenant by
Landlord of any Default which has not been cured, and
(d) stating whether or not to the best knowledge of Land-
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lord, Tenant is in default in the performance of any of its
obligations under this Lease and, if Tenant is in default,
specifying the nature of each such default of which Landlord
may have knowledge; it being intended that any statement
delivered pursuant to this Section 26.2 may be relied upon
by Tenant or any permitted transferee or assignee of
Tenant's interest in this Lease, or any Mortgagee or pros-
pective Mortgagee, or any prospective assignee of such
Mortgagee; but reliance on such certificate by Tenant may
not extend to any default as to which the signer shall have
had no actual notice.
ARTICLE XXVII
Waiver of Jury and Counterclaims
--------------------------------
27.1 Landlord and Tenant hereby waive trial by
jury in any action, proceeding or counterclaim brought by
any of the parties hereto against another party hereto on
any matters arising out of or in any way connected with this
Lease, the relationship of Landlord and Tenant, Tenant's use
or occupancy of the Premises, and/or any claim of injury or
damage, or any emergency or other statutory remedy. In any
action or proceeding brought by Landlord against Tenant,
Tenant hereby waives the right to interpose any counter-
claim.
ARTICLE XXVIII
Notices
-------
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28.1 Any notices, consents, approvals, submis-
sion, demands or other communications (a "Notice") given
under this Lease or pursuant to any law or governmental
regulation, by Landlord to Tenant or by Tenant to Landlord,
shall be in writing. Unless otherwise required by law or
governmental regulation, any Notice shall be deemed given
only when sent by registered or certified mail, return
receipt requested, postage prepaid addressed to Tenant at
its address hereinabove set forth and to Landlord at its
address hereinabove set forth. Notices shall be effective
upon receipt.
ARTICLE XXIX
No Waiver by Landlord
---------------------
29.1 No receipt of monies by Landlord from
Tenant, after the termination or cancellation of this Lease,
shall reinstate, continue or extend the Term, or affect any
notice theretofore given to Tenant, or operate as a waiver
of the right of Landlord to enforce the payment of Fixed
Rent or Additional Rent then due, or thereafter falling due,
or operate as a waiver of the right of Landlord to recover
possession of the Premises by appropriate suit, action,
proceeding or remedy. No payment by Tenant or receipt by
Landlord of a lesser amount than the Fixed Rent or Addi-
tional Rent then due shall be deemed to be other than on
account of the earliest stipulated Fixed Rent or Additional
Rent, nor shall any endorsement or statement of or on any
check or any letter accompanying any check or payment as
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Fixed Rent or Additional Rent be deemed an accord and
satisfaction, and Landlord may accept such check or payment
without prejudice to Landlord's right to recover the balance
of such Fixed Rent or Additional Rent or pursue any other
right, privilege or remedy in this Lease or at law or in
equity provided. No failure by Landlord to insist in any
one or more cases upon the strict performance of any of the
terms, conditions or covenants of this Lease or to exercise
any right, power, option or remedy consequent upon a breach
thereof, and no acceptance of full or partial payment of
Fixed Rent or Additional Rent with knowledge of the con-
tinuance of any such breach, shall constitute a waiver of
any such breach or of any such terms, conditions or
covenants.
ARTICLE XXX
Memorandum of Lease
-------------------
30.1 Landlord and Tenant will, at any time at the
request of the other, promptly execute a short form memo-
randum of this Lease, in recordable form, which will
constitute notice of this Lease setting forth such matters
as are required by law to entitle the instrument to be
recorded and also such other portions hereof as either party
may request, other than the rental and other financial
terms.
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ARTICLE XXXI
Acceptance of Surrender
-----------------------
31.1 No surrender to Landlord of this Lease or of
the Premises or any part thereof or of any interest therein
shall be valid or effective unless agreed to and accepted in
writing by Landlord and any Mortgagee, and no act by Land-
lord or any Mortgagee or by any representative or agent of
Landlord or any Mortgagee, shall constitute an acceptance of
any such surrender.
ARTICLE XXXII
Remedies Cumulative
-------------------
32.1 Each legal, equitable or contractual right,
power and remedy of Landlord now or hereafter granted either
in this Lease or by statute or otherwise shall be cumulative
and concurrent and shall be in addition to every other
right, power and remedy, and the exercise or beginning of
the exercise by Landlord of any one or more of such rights,
owners and remedies shall not preclude the simultaneous or
subsequent exercise by Landlord of any or all of such other
rights, powers and remedies. Landlord shall have, in addi-
tion to the rights heretofore reserved Landlord, but at
Landlord's option, the right to restrain by injunction any
violation or attempted violation by Tenant, or its sub-
tenants or agents, of any of the restrictions or covenants
or agreements of Tenant set forth in this Lease.
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ARTICLE XXXIII
Option
------
33.1 Tenant grants and gives to the Landlord, its
successors and assigns, for a period of ten (10) years from
the date of closing and ending at 11:59 p.m. on ,
2004 the right and option to purchase Tenants rights in and
to this Lease Agreement upon payment of the following pur-
chase price:
IF THE OPTION IS EXERCISED THEN THE OPTION PRICE
BETWEEN: SHALL BE:
01 Mar 94 & 28 Feb 95: $4,000,000.00
01 Mar 95 & 29 Feb 96 $4,000,000.00
01 Mar 96 & 28 Feb 97 $4,000,000.00
01 Mar 97 & 28 Feb 98 $4,000,000.00
01 Mar 98 & 28 Feb 99 $4,000,000.00
01 Mar 99 & 29 Feb 00 $4,400,000.00
01 Mar 00 & 28 Feb 01 $4,840,000.00
01 Mar 01 & 28 Feb 02 $5,324,000.00
01 Mar 02 & 28 Feb 03 $5,856,400.00
01 Mar 03 & 29 Feb 04 $6,442,040.00
To exercise this Option, the Landlord must deliver
a written notice to the Tenant fixing a date not more than
60 days in advance for the purchase of the Tenant's rights
in and to this Lease Agreement (which date is the "time of
closing").
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ARTICLE XXXIV
Miscellaneous
-------------
34.1 If any term of provision of this Lease or
any application thereof shall be invalid or unenforceable,
the remainder of this Lease and any other application of
such provision shall not be affected thereby. If any
interest charge provided for in any provision of this Lease
exceeds the maximum rate permitted by applicable law, such
charge shall be fixed at the maximum permissible rate.
34.2 This Lease contains the entire agreement
between the parties in respect of the leasing of the
Premises, and no oral statements or representations or prior
written matter in respect thereof not contained in this
Lease shall have any force or effect. This Lease and the
provisions hereof may not be modified or waived in any way
or terminated, other than by a writing executed by both
parties.
34.3 Wherever it is specifically provided in this
Lease that a party's consent is not to be unreasonably with-
held, a response to a request for such consent shall also
not be unreasonably delayed. If either Landlord or Tenant
considers that the other has unreasonably withheld or
delayed a consent, it shall so notify the other party within
10 days after receipt of notice of denial of the requested
consent or, in case notice of denial is not received, within
20 days after making its request for the consent. Tenant
hereby waives any claim against Landlord which it may have
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based upon any assertion that Landlord has unreasonably
withheld or unreasonably delayed any such consent, and
Tenant agrees that its sole remedy shall be an action or
proceeding to enforce any such provision or for specific
performance, injunction or declaratory judgment. In the
event of such a determination, the requested consent shall
be deemed to have been granted; however, Landlord shall have
no liability to Tenant for its refusal or failure to give
such consent. The sole remedy for Landlord's unreasonably
withholding or delaying of consent shall be as provided in
this Section. Notwithstanding anything to the contrary
provided in this Lease, in any instance where the consent of
a Mortgagee is required, Landlord shall not be required to
give its consent until and unless such Mortgagee has given
its consent.
34.4 Wherever herein the singular number is used,
the same shall include the plural, and the masculine gender
shall include the feminine and neuter genders, and vice
versa, as the context shall require. The Article headings
used herein are for reference and convenience only, and
shall not enter into the interpretation thereof.
34.5 This Lease may be executed in several
counterparts, each of which shall be an original, but all of
which shall constitute but one and the same instrument.
34.6 The parties hereto agree that they have not
created and do not intend to create by this Lease a joint
venture or partnership relation between them.
59
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34.7 The covenants and agreements herein con-
tained, subject to the provisions of this Lease, shall be
binding upon and inure to the benefit of the parties hereto,
their respective heirs, legal representatives and successors
and assigns.
34.8 The parties hereto hereby agree that from
time to time, upon the request of the other party, they
shall execute and deliver such further documents and do such
other acts and things as may be reasonably requested to
carry out the intent of this Lease or to comply with
applicable law.
ARTICLE XXXV
No Additional Rent: Gross Lease
--------------------------------
35.1 Except as provided in this Article XXXV,
Tenant shall not be obligated to pay any additional rent
hereunder, it being acknowledged that this Lease shall be
deemed and construed to be a "gross lease," and that
Landlord shall be responsible for any charges, Impositions,
deductions, costs, expenses or obligations of any kind, and
except as provided in this Article XXXV, Tenant shall not be
expected or required to make any payment of any kind what-
soever or to be under any other obligation or liability
hereunder or otherwise with respect or which relates to, or
is attributable to the Premises, the Improvements, or the
ownership, use or occupancy thereof. In the event, however,
that the Tenant or anyone claiming by, through, or under,
the Tenant sublets, uses or permits any person or entity to
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use the Premises, then notwithstanding any other provision
of this Lease, whatsoever, Tenant shall be required to pay
his proportionate share (namely, that percentage of the
building's useable square footage being so sublet or used)
of all charges, Impositions, obligations, liabilities,
claims, costs, expenses and taxes of every kind whatsoever
which relates to or is attributable to the Premises, the
Improvements or the ownership, use or occupancy thereof, so
that the Lease will then be and be deemed a net lease under
which Tenant pays such proportional share of all charges,
Impositions, obligations, liabilities, claims, costs,
expenses and taxes whatsoever relating to or attributable to
the Premises, the Improvements, or the ownership, use or
occupancy thereof.
ARTICLE XXXVI
Parking
-------
36.1 Tenant shall be entitled to use as many
parking spaces in the South Parking Area as shown on
Schedule D attached hereto and made a part hereof as
permitted or required under the Zoning Regulations of the
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City of Stamford, so long as Landlord shall not require such
spaces.
IN WITNESS WHEREOF, the parties hereto have
executed this Lease as of the day and year first above
written.
Witness: LANDLORD: CONAIR CORPORATION
/s/ Mary King By/s/ Richard A. Margulies
-------------------- ---------------------------------
Title: Vice President
/s/ Sophie C. Powajba
---------------------
/s/ Mary King TENANT: Leandro P. Rizzuto
--------------------
/s/ Sophie C. Powajba By/s/ Leandro P. Rizzuto
--------------------- ---------------------------------
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SCHEDULE A
All that certain tract of land, together with the
buildings and improvements thereon situated in the City of
Stamford, County of Fairfield and State of Connecticut,
known and designated as "Parcel B - to be leased 7.810
Acres," on a certain map entitled, "Map Showing Subdivision
For Soundview Farms, Stamford, Conn.," now on file in the
office of the Town Clerk of said Stamford, and numbered
9350, reference thereto being had. Said premises are
bounded and described as follows: Beginning at a point
along the southeasterly side of Fairfield Avenue, said point
being at the intersection of the town line between the City
of Stamford and the Town of Greenwich, running thence along
said southeasterly side of the Fairfield Avenue, the
following courses and distances: north 53 degrees 21' 10"
east 48.72 feet; north 38 (plus and minus sign) 28' 10" each
28.79 feet; north 35 degrees 46' 10" east 35.92 feet; north
39 degrees 56' 10" east 21.08 feet north 33 degrees 24' 40"
east 59.02 feet; north 32 degrees 03' 40" east 38.04 feet;
north 34 degrees 58' 10" east 57 feet; north 31 degrees 46'
10" each 63.10 feet; north 36 degrees 17' 40" east 15 feet;
north 38 degrees 10' 40" east 56.67 feet; north 51 degrees
48' 40" east 20.16 feet; north 61 degrees 46' 10" east 11.74
feet; north 70 degrees 32' 10" east 8.42 feet; north 72
degrees 26' 40" east 9.77 feet; north 92 degrees 49' 40"
east 15.42 feet; south 89 degrees 13' 50" east 93.10 feet;
south 89 degrees 33' 50" east 108.77 feet to the westerly
side of Cummings Point Road, so-called; thence along the
westerly side of Cummings Point Road, the following courses
and distances: south 5 degrees 28' 10' west 563.90 feet;
and south 5 degrees 17' 20" west 256.10 feet to a point;
thence, westerly through land of Soundview Farms, north
84 degrees 42' 40" west 488.23 feet to the approximate
center line of a brook, being the town line between the City
of Stamford and the Town of Greenwich; thence along said
approximate center line of a brooker and being said town
line, the following courses and distances; north 31 degrees
31' 50" west 26.09 feet; north 7 degrees 59' 10" east 68.26
feet; north 2 degrees 46' 10" east 54.30 feet; north 17
degrees 05' 40" east 68.97 feet; north 7 degrees 27' 40"
east 116.67 feet; north 45 degrees 34' 10" east 39.66 feet;
north 31 degrees 16' 40" east 14.68 feet; north 9 degrees
28' 50" west 6.37 feet; and north 26 degrees 25' 50" west
44.70 feet to the point or place of beginning; together with
an easement of way in, over and upon Cummings Point Road to
and from said premises to and from the public highway.
It is understood and agreed that shown on said map
along Fairfield Avenue, there is located a legend "Reserved
For Road Widening (see inset)." The inset also shown on
said map shows that two parcels of land known and designated
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as "Parcel 2 1,627 sq. ft." and "Parcel 3 453 sq. ft.,"
being portions of the property hereinabove described are to
be conveyed to the City of Stamford in exchange for a parcel
of land known and designate on said inset as "Parcel 4
1,801 sq. ft." to be conveyed to Soundview Farms. At such
time as said exchange of property is made, and for all times
thereafter, this description shall be modified to exclude
said Parcel 2 and Parcel 3 and to include said Parcel 4,
reference being had to said Map, and more particularly to
said inset for an accurate description of said Parcels.
[Map follows showing areas to be leased by
Conair Corporation to Leandro P. Rizzuto]
64
<PAGE>
SCHEDULE B
All that certain tract of land, together with the
buildings and improvements thereon situated in the City of
Stamford, County of Fairfield and State of Connecticut,
known and designated as "Parcel B - to be leased 7.810
Acres," on a certain map entitled, "Map Showing Subdivision
For Soundview Farms, Stamford, Conn.," now on file in the
office of the Town Clerk of said Stamford, and numbered
9350, reference thereto being had. Said premises are
bounded and described as follows: Beginning at a point
along the southeasterly side of Fairfield Avenue, said point
being at the intersection of the town line between the City
of Stamford and the Town of Greenwich, running thence along
said southeasterly side of the Fairfield Avenue, the
following courses and distances: north 53 degrees 21' 10"
east 48.72 feet; north 38 (plus and minus sign) 28' 10" east
28.79 feet; north 35 degrees 46' 10" east 35.92 feet; north
39 degrees 56' 10" east 21.08 feet north 33 degrees 24' 40"
east 59.02 feet; north 32 degrees 03' 40" east 38.04 feet;
north 34 degrees 58' 10" east 57 feet; north 31 degrees 46'
10" east 63.10 feet; north 36 degrees 17' 40" east 15 feet;
north 38 degrees 10' 40" east 56.67 feet; north 51 degrees
48' 40" east 20.16 feet; north 61 degrees 46' 10" east 11.74
feet; north 70 degrees 32' 10" east 8.42 feet; north 72
degrees 26' 40" east 9.77 feet; north 92 degrees 49' 40"
east 15.42 feet; south 89 degrees 13' 50" east 93.10 feet;
south 89 degrees 33' 50" east 108.77 feet to the westerly
side of Cummings Point Road, so-called; thence along the
westerly side of Cummings Point Road, the following courses
and distances: south 5 degrees 28' 10" west 563.90 feet;
and south 5 degrees 17' 20" 256.10 feet to a point; thence,
westerly through land of Soundview Farms, north 84 degrees
42' 40" west 488.23 feet to the approximate center line of a
brook, being the town line between the City of Stamford and
the Town of Greenwich; thence along said approximate center
line of a brooker and being said town line, the following
courses and distances; north 31 degrees 31' 50" west 26.09
feet; north 7 degrees 59' 10" east 68.26 feet; north 2
degrees 46' 10" east 54.30 feet; north 17 degrees 05' 40"
east 68.97 feet north 7 degrees 27' 40" east 116.67 feet;
north 45 degrees 34' 10" east 39.66 feet; north 31 degrees
16' 40" east 14.68 feet; north 9 degrees 28' 50" west 6.37
feet; and north 26 degrees 25' 50" west 44.70 feet to the
point or place of beginning; together with an easement of
way in, over and upon Cummings Point Road to and from said
premises to and from the public highway.
It is understood and agreed that shown on said map
along Fairfield Avenue, there is located a legend "Reserved
For Road Widening (see inset"). The inset also shown on
said map shows that two parcels of land known and designated
as "Parcel 2 1,627 sq. ft." and "Parcel 3 453 sq. ft.,"
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being portions of the property hereinabove described are to
be conveyed to the City of Stamford in exchange for a parcel
of land known and designated on said inset as "Parcel 4
1,801 sq. ft." to be conveyed to Soundview Farms. At such
time as said exchange of property is made, and for all times
thereafter, this description shall be modified to exclude
said Parcel 2 and Parcel 3 and to include said Parcel 4,
reference being had to said Map, and more particularly to
said inset for an accurate description of said Parcels.
ALL that certain tract of land, situated in the
City of Stamford, County of Fairfield and State of
Connecticut bounded and described as follows:
Beginning at a point on the Northerly line of a
certain tract of land known and designated as "Parcel 1 Area
= 3.996 Ac. (plus and minus sign)" on a certain map
entitled, "Map Show Subdivision Prepared for Sound View
Farms, Stamford, Conn." now on file in the office of the
Town Clerk of said Stamford and numbered 9485, reference
thereto being had, which point is 180 feet Westerly along
said Northerly line from the intersection of said Northerly
line and the Westerly line of Cummings Point Road as shown
on said map and running thence through land of soundview
Farms, South 05 degrees 17' 20" West 377.7 feet more or less
to a point on the mean high water line of Tomac Harbor;
running Westerly and Northerly along said mean high water
line 298 feet more or less to a point; running thence South
84 degrees 25' 20" west 27 feet to a point on the boundary
line between the City of Stamford and the Town of Greenwich;
running thence along said boundary line the following
courses and distances: North 01 degrees 30' 30" East 111.37
feet, North 2U degrees 03' 05" East 35.70 feet, North 03
degrees 33' 26" East 101.86 feet, North 01 degrees 14' 47"
East 13.77 feet, North 15 degrees 39' 15" West 25.36 feet,
North 71 degrees 32' West 36 feet and North 31 degrees 31'
50" West 15.91 feet to a point; thence running through land
of said Soundview Farms South 84 degrees 42' 40" East 308.23
feet to the point or place of beginning.
66
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SCHEDULE C
----------
[Map showing areas to be leased by Conair Corporation, identifying common areas
of ingress and egress.]
Exhibit 21.1
------------
SUBSIDIARIES OF THE COMPANY
Jurisdiction of
Name of Subsidiary Incorporation
------------------ ---------------
Conair Consumer Products Inc. ............. Ontario, Canada
Conair Costa Rica, S.A. ................... Costa Rica
Conair Japan Corporation .................. Japan
Conair UK Limited ......................... England and Wales
Continental Conair Limited ................ Hong Kong
Continental Products, S.A. ................ France
Cristal Gesellschaft fur Beteiligungen
und Finanzierungen S.A. ................ Switzerland
Cuisinarts-Sanyei Co., Ltd. ............... Japan
HERC Consumer Products, LLC ............... Illinois
Rusk, Inc. ................................ California
EXHIBIT 23.1
INDEPENDENT AUDITORS' CONSENT AND REPORT ON SCHEDULE
To the Board of Directors and Stockholders of
CONAIR CORPORATION
East Windsor, New Jersey
We consent to the use in this Registration Statement relating to 10,000,000
shares of Class A Common Stock of Conair Corporation on Form S-1 of our report
dated February 11, 1995 (February 28, 1995 as to Note 15), appearing in the
Prospectus, which is a part of this Registration Statement, and to the
references to us under the headings "Selected Financial Information" and
"Experts" in such Prospectus.
Our audits of the financial statements referred to in our aforementioned
report also included the financial statement schedule of Conair Corporation,
listed in Item 16(b). This financial statement schedule is the responsibility of
the Corporation's management. Our responsibility is to express an opinion based
on our audits. In our opinion, such financial statement schedule, when
considered in relation to the basic financial statements taken as a whole,
present fairly in all material respects the information set forth therein.
Deloitte & Touche LLP
New York, New York
March 27, 1995