<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JANUARY 10, 1997
REGISTRATION NO. 333-4520, 333-4520-01
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
----------------
AMENDMENT NO. 1 TO
FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
----------------
RACI HOLDING, INC.
REMINGTON ARMS COMPANY, INC.
(EXACT NAME OF REGISTRANTS AS SPECIFIED IN THEIR CHARTERS)
----------------
DELAWARE 6719 51-0350929
DELAWARE 3484 51-0350935
(STATE OR OTHER (PRIMARY STANDARD INDUSTRIAL (I.R.S.
JURISDICTION CLASSIFICATION CODE NUMBERS) EMPLOYER
OF INCORPORATION OR IDENTIFICATION
ORGANIZATION) NOS.)
----------------
870 REMINGTON DRIVE
P.O. BOX 700
MADISON, NORTH CAROLINA 27025-0700
(910) 548-8700
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING
AREA CODE, OF REGISTRANTS' PRINCIPAL EXECUTIVE OFFICES)
----------------
MARK A. LITTLE
VICE PRESIDENT, CONTROLLER
REMINGTON ARMS COMPANY, INC.
870 REMINGTON DRIVE
P.O. BOX 700
MADISON, NORTH CAROLINA 27025-0700
(910) 548-8831
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING
AREA CODE, OF REGISTRANTS' AGENT FOR SERVICE)
WITH COPIES TO:
DAVID A. BRITTENHAM, ESQ.
WAYLAND E. HUNDLEY, ESQ.
REMINGTON ARMS COMPANY, INC. DEBEVOISE & PLIMPTON
875 THIRD AVENUE
870 REMINGTON DRIVE
NEW YORK, NEW YORK 10022
P.O. BOX 700
(212) 909-6347
MADISON, NORTH CAROLINA 27025-0700
(910) 548-8515
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APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after this Registration Statement becomes effective.
If the securities being registered on this Form are being offered in
connection with the formation of a holding company and there is compliance
with General Instruction G, check the following box: [_]
----------------
THE REGISTRANTS HEREBY AMEND THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANTS
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>
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
+ +
+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. +
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
SUBJECT TO COMPLETION, DATED JANUARY 10, 1997
PROSPECTUS
[LOGO]
REMINGTON ARMS COMPANY, INC.
OFFER TO EXCHANGE 9 1/2% SENIOR SUBORDINATED NOTES DUE 2003, SERIES B,
FOR ANY AND ALL EXISTING NOTES (AS DEFINED BELOW)
PAYMENT OF PRINCIPAL AND INTEREST GUARANTEED BY
RACI HOLDING, INC.
-----------
THE EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M., NEW YORK CITY TIME, ON ,
1997, UNLESS EXTENDED. AS DESCRIBED HEREIN, WITHDRAWAL RIGHTS WITH RESPECT TO
THE EXCHANGE OFFER ARE EXPECTED TO EXPIRE AT THE EXPIRATION OF THE EXCHANGE
OFFER.
-----------
Remington Arms Company, Inc., a Delaware corporation formerly named RACI
Acquisition Corporation ("Remington"), hereby offers (the "Exchange Offer"),
upon the terms and subject to the conditions set forth in this Prospectus (the
"Prospectus") and the accompanying Letter of Transmittal (the "Letter of
Transmittal"), to exchange up to $100,000,000 aggregate principal amount of its
9 1/2% Senior Subordinated Notes due 2003, Series B (the "New Notes"), which
have been registered under the Securities Act of 1933, as amended (the
"Securities Act"), pursuant to a Registration Statement of which this
Prospectus is a part, for a like principal amount of its issued and outstanding
9 1/2% Senior Subordinated Notes due 2003, Series A (the "Existing Notes"). The
Existing Notes were originally issued and sold in a transaction that was exempt
from registration under Section 4(2) of the Securities Act and resold to
certain qualified institutional buyers in reliance on, and subject to the
restrictions imposed pursuant to, Rule 144A under the Securities Act ("Rule
144A"), as well as to a limited number of institutional investors that are
"accredited investors" within the meaning of subparagraph (a) (1), (2), (3) or
(7) of Rule 501 under the Securities Act. The terms of the New Notes are
substantially identical to the terms of the Existing Notes that are to be
exchanged therefor except that the New Notes have been registered under the
Securities Act and will not bear legends restricting the transferability
thereof. See "Description of Notes." For federal income tax purposes, an
exchange made pursuant to the Exchange Offer should not constitute a taxable
exchange. See "Certain Federal Tax Considerations."
SEE "RISK FACTORS" ON PAGES 13 THROUGH 22 FOR A DESCRIPTION OF CERTAIN RISK
FACTORS THAT SHOULD BE CONSIDERED IN CONNECTION WITH THE EXCHANGE OFFER AND AN
INVESTMENT IN THE NEW NOTES OFFERED HEREBY.
Based on interpretations by the staff of the Securities and Exchange
Commission (the "Commission" or "SEC"), as set forth in no-action letters
issued to third parties, Remington believes the New Notes issued pursuant to
the Exchange Offer may be offered for resale, resold and otherwise transferred
by any holder thereof (other than any such holder that is an "affiliate" of
Remington within the meaning of Rule 405 under the Securities Act) without
compliance with the registration and prospectus delivery provisions of the
Securities Act, provided that such New Notes are acquired in the ordinary
course of such holder's business and such holder (and any other person
accepting the Exchange Offer on behalf of any such holder) neither is engaging
in, nor intends to engage in, and has no arrangement or understanding with any
person to participate in, a distribution of such New Notes.
(Continued on next page)
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR BY ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED
UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
-----------
THE DATE OF THIS PROSPECTUS IS , 1997.
<PAGE>
(Cover Page Continued)
However, the Commission has not considered the Exchange Offer in the context
of a no-action letter and therefore there can be no assurance that the staff
of the Commission would make a similar determination with respect to the
Exchange Offer as in such other circumstances. Each holder of Existing Notes
that desires to participate in the Exchange Offer, other than a broker-dealer,
must acknowledge that it is not engaged in, and does not intend to engage in,
a distribution of New Notes and has no arrangement or understanding to
participate in a distribution of New Notes.
Each broker-dealer that receives New Notes for its own account pursuant to
the Exchange Offer in exchange for Existing Notes, where such Existing Notes
were acquired by such broker-dealer as a result of market-making activities or
other trading activities, must acknowledge that it will deliver a prospectus
in connection with any resale of such New Notes. The Letter of Transmittal
states that by so acknowledging and by delivering a prospectus, a broker-
dealer will not be deemed to admit that it is an "underwriter" within the
meaning of the Securities Act. This Prospectus, as it may be amended or
supplemented from time to time, may be used by a broker-dealer in connection
with resales of New Notes received in exchange for Existing Notes where such
Existing Notes were acquired by such broker-dealer as a result of market-
making activities or other trading activities and, by acceptance of the
Exchange Offer, each broker-dealer that receives New Notes pursuant to the
Exchange Offer agrees to notify the Company prior to using this Prospectus in
connection with any such resale. As described more fully herein, for a period
of 90 days after the Expiration Date (as defined herein), Remington will make
this Prospectus available to any Participating Broker-Dealer (as defined
herein) for use in connection with any such resale. See "Plan of
Distribution." Broker-dealers, if any, that acquired their Existing Notes from
the Company in the initial offering of the Existing Notes cannot use this
Prospectus, and must comply with the registration and prospectus delivery
requirements of the Securities Act in connection with any sale or transfer of
New Notes, unless such sale or transfer is made pursuant to an exemption from
such requirements.
EXCEPT AS DESCRIBED IN THE PRECEDING PARAGRAPH, THIS PROSPECTUS MAY NOT BE
USED FOR AN OFFER TO RESELL, A RESALE OR ANY OTHER RETRANSFER OF NEW NOTES.
There has not previously been any public market for the New Notes. Remington
does not intend to list the New Notes on any securities exchange or to seek
approval for quotation through any automated quotation system. There can be no
assurance that an active market for the New Notes will develop. See "Risk
Factors--Absence of a Public Market for the Notes; Limitations on Liquidity."
Moreover, to the extent that Existing Notes are tendered and accepted in the
Exchange Offer, the trading market, if any, for untendered and tendered but
unaccepted Existing Notes could be adversely affected.
The Exchange Offer is not conditioned upon any minimum number of Existing
Notes being tendered. The Exchange Offer will expire at 5:00 p.m., New York
City time, on , 1997, unless extended (the "Expiration Date"). Subject to
the terms and conditions of the Exchange Offer, including the reservation of
certain rights by Remington and the right of holders of Existing Notes to
withdraw tenders at any time prior to the acceptance thereof, any and all
Existing Notes validly tendered prior to the Expiration Date will be accepted
on or promptly after the Expiration Date. New Notes to be issued in exchange
for properly tendered Existing Notes will be mailed by the Exchange Agent (as
defined herein) promptly after the acceptance thereof. In the event Remington
terminates the Exchange Offer and does not accept for exchange any Existing
Notes, Remington will promptly return the Existing Notes to the holders
thereof. See "The Exchange Offer."
The New Notes and Existing Notes are referred to collectively as the
"Notes." The Notes bear interest at a rate equal to 9 1/2% per annum, except
that pursuant to the Registration Rights Agreement (as defined herein), the
Notes bear interest at a rate equal to 10% per annum from April 30, 1994 to
the day before the date of consummation of the Exchange Offer. See
"Registration Rights." Interest on the Notes is payable semi-annually on June
1 and December 1 of each year. The Notes are senior subordinated obligations
of the Company and, as such, are subordinated to all existing and future
Senior Indebtedness (as defined in the Indenture) of the
<PAGE>
(Cover Page Continued)
Company. As of September 30, 1996, the aggregate principal amount of Senior
Indebtedness of the Company was $182.8 million. As of the same date, none of
the indebtedness of the Company ranked pari passu with the Notes. The Notes
are redeemable before December 1, 1998 only in the event of a Change of
Control (as defined herein), in which case Remington may, at its option,
redeem the Notes, in whole or in part, within 180 days of such Change of
Control at a redemption price equal to the principal amount thereof, together
with accrued and unpaid interest, if any, to the date of redemption plus the
Applicable Premium (as defined herein). In addition, the Notes are redeemable,
in whole or in part, at the option of Remington at any time and from time to
time on or after December 1, 1998, at the redemption prices set forth herein,
plus accrued interest to the date of redemption. The Notes are fully and
unconditionally guaranteed on a senior subordinated basis by RACI Holding,
Inc. ("Holding"), Remington's parent, pursuant to the Holding Guarantee (as
defined herein). The Holding Guarantee ranks subordinate to the guarantee
issued by Holding in respect of the Credit Agreement (as defined herein) and
certain other guarantees. See "Description of Notes."
Remington expects that, except for New Notes acquired by certain
institutional "accredited investors" (as defined in Rule 501 under the
Securities Act) who are not "qualified institutional buyers" (as defined in
Rule 144A) ("Non-Global Purchasers"), the New Notes issued pursuant to this
Exchange Offer will be issued in the form of one or more fully registered
global securities (collectively, the "New Global Certificate"), which will be
deposited with, or on behalf of, The Depository Trust Company ("DTC" or the
"Depository") and registered in its name or in the name of Cede & Co., its
nominee. New Notes issued to Non-Global Purchasers will be issued in
registered, certificated form without coupons (the "Certificated New Notes").
Beneficial interests in the New Global Certificate will be shown on, and
transfers thereof will be effected only through, records maintained by DTC and
its participants. After the initial issuance of each global security, New
Notes in certificated form will be issued in exchange for the global
securities only as set forth in the Indenture (as defined herein). Upon the
transfer to a "qualified institutional buyer" (as defined in Rule 144A) (a
"QIB") of Certificated New Notes initially issued to a Non-Global Purchaser,
such Certificated New Notes will be exchanged for an interest in the New
Global Certificate representing the principal amount of Notes being
transferred. See "Description of Notes--Book-Entry Delivery and Form."
Remington will not receive any proceeds from the Exchange Offer, but will
bear certain offering expenses pursuant to the Registration Rights Agreement,
dated as of November 30, 1993 (the "Registration Rights Agreement"), among
Remington and the original purchasers of the Existing Notes. The Exchange
Offer is intended to satisfy certain of Remington's obligations under the
Registration Rights Agreement, including the obligation to register the
exchanged Existing Notes under the Securities Act. Upon the completion of the
Exchange Offer, certain special rights under the Registration Rights Agreement
will terminate with respect to Existing Notes, and holders of New Notes will
not be entitled to such rights. See "The Exchange Offer--Termination of
Certain Rights." No dealer manager is being utilized in connection with the
Exchange Offer.
----------------
Remington (R), Blue Rock (R), Core-Lokt (R), Duplex (R), Express (R),
Peerless (R), Peters (R), Power Piston (R), Premier (R), Stren (R), UMC (R),
Viper (R), and Wingmaster (R) are registered trademarks of Remington, and
Copper Solid (TM) Golden Saber (TM), Model 11-87 (TM), Sporting Clays Model
11-87 (TM), Model Seven (TM), Model 396 (TM), Model 700 (TM), Model 870 (TM),
Model 1100 (TM), Model 7400 (TM), Model 7600 (TM), Express-Steel (TM), Nitro-
Steel (TM), Leadless (TM), Nitro-27 (TM), Premier Steel (TM), Supertough (TM)
and Model 90-T (TM) are trademarks of Remington.
<PAGE>
SUMMARY
The following summary is qualified in its entirety by, and should be read in
conjunction with, the more detailed information and financial statements,
including the related notes, appearing elsewhere in this Prospectus. On
December 1, 1993, Remington acquired (the "Acquisition") substantially all the
assets and business of Sporting Goods Properties, Inc., formerly named
Remington Arms Company, Inc. ("Sporting Goods"), and certain related assets of
Sporting Goods' parent E. I. du Pont de Nemours and Company ("DuPont"). Unless
the context otherwise requires, the term "Company" as used in this Prospectus
means, with respect to the period prior to the Acquisition, the businesses
conducted through Sporting Goods and, with respect to periods after the
Acquisition, Holding and Remington. The market share and competitive position
data contained in this Prospectus is based on industry and government sources.
The Company believes that such data is inherently imprecise, but is generally
indicative of its relative market share and competitive position. See also
"Business--General." Certain market share data is based on the latest available
information published by the National Sporting Goods Association ("NSGA"),
American Sports Data Incorporated ("ASD"), Sports Market Research Group, Inc.
("SMRG") and Paumanok Publications, Incorporated ("PPI"). Unless otherwise
indicated, all market share data is based on retail sales by dollar amount.
THE COMPANY
Founded in 1816, the Company is engaged in the design, manufacture and sale
of sporting good products for the hunting, shooting sports and fishing markets.
The Company's product lines consist of firearms, ammunition and hunting/gun
care accessories sold under the Remington name and other labels, fishing
products sold under the Stren name and other labels and clay targets. The
Company is the only domestic manufacturer of both firearms and ammunition and,
according to the NSGA, is the largest U.S. manufacturer of shotguns and rifles.
The Company manufactures firearms at a one million square foot facility in
Ilion, New York, ammunition at a 750 thousand square foot plant in Lonoke,
Arkansas, and clay targets at two plants located in Findlay, Ohio and Ada,
Oklahoma. The Company has begun construction of a new 44 thousand square foot
firearms manufacturing facility in Mayfield, Kentucky at which the Company
expects to begin manufacturing rimfire rifles in March 1997. In 1995 the
Company completed the consolidation of its research and development at a new 33
thousand square foot facility in Elizabethtown, Kentucky. The Company markets
fishline sourced from third party manufacturers. The Company's products are
distributed throughout the United States and in over 50 other countries, with
distribution in the United States being primarily through wholesalers,
distributors and major retail chains. In 1995, 8% of the Company's revenues
were attributable to sales outside the United States.
Remington enjoys a domestic market leadership position for many of its
firearms product lines and is one of the three major manufacturers in the
domestic ammunition market. According to studies conducted for the Company,
among hunters and anglers, Remington and Stren are among the most-recognized
brand names in their markets. The Company believes that its substantial market
positions are attributable to the strength of the Remington brand name, the
Company's family of well-established products, the breadth of products sold by
the Company, product innovation and quality and the Company's marketing,
distribution and manufacturing expertise. In 1994 according to PPI, the Company
had the largest share of the retail shotgun market, at approximately 39%, with
its nearest competitor holding a market share of approximately 25%. Remington
was also the second largest brand of rifles in the United States in 1994
according to PPI, with a market share of approximately 18%, with its largest
competitor holding a market share of approximately 25%. In the ammunition
market, the Company was the second largest manufacturer in the United States in
1994 based on PPI data, with a share of approximately 25%, with its nearest
competitor holding a market share of approximately 35%. Sales of firearms and
ammunition comprised approximately 48% and 41%, respectively, of the Company's
sales in 1995. In the retail fishline market segment, the Company held a share
of approximately 26% in 1995, with its nearest competitor holding a market
share of approximately 36%, according to SMRG.
According to ASD, approximately 23 million people in the United States enjoy
the shooting sports, including approximately 17 million who hunt annually.
Total domestic consumer expenditures in this market for
<PAGE>
1994 are estimated by the NSGA to have been $379 million for shotguns, $794
million for rifles, and $916 million for ammunition. Additionally, according to
ASD approximately 23% of the U.S. population (55 million people) consider
themselves anglers. Fishing is considered an inexpensive sport that can be
enjoyed by people of widely varying ages, skills and abilities. The NSGA
estimated that the retail market for recreational fishing tackle, of which the
fishline segment forms a relatively small part, exceeded $730 million in 1995;
the Company's 26% market share of the retail fishline market in 1995
constituted approximately 3% of the total retail market in 1995 for
recreational fishing tackle according to SMRG.
The principal executive offices of Holding and the Company are located at 870
Remington Drive, P.O. Box 700, Madison, North Carolina 27025-0700 and their
telephone number is (910) 548-8700.
Remington and its parent, Holding, are Delaware corporations organized in
October 1993 to acquire the Company from Sporting Goods and DuPont (the
"Sellers"). Remington is a wholly owned subsidiary of Holding.
THE ACQUISITION
Pursuant to an asset purchase agreement among Remington, Sporting Goods and
DuPont (the "Asset Purchase Agreement"), on December 1, 1993, Remington
acquired substantially all the assets (other than certain discontinued
properties, real property and other assets) of Sporting Goods and certain other
assets of DuPont used in connection with the marketing of fishline and fishline
accessories (collectively, the "Business"). As consideration for the
Acquisition, Remington paid the Sellers $300 million in cash and assumed (i)
certain specified liabilities, including certain trade payables and contractual
obligations of Sporting Goods, and (ii) subject to certain dollar limitations,
financial responsibility with respect to certain disclosed product liability
claims arising out of occurrences prior to the closing of the Acquisition (the
"Closing"), and environmental claims relating to the operation of the Business
prior to the Closing.
The initial equity contribution to Holding of $75 million was contributed to
Remington and represented approximately 23% of the total initial sources of
funds for the Acquisition. The Company's initial debt of approximately $240
million consisted primarily of approximately $99 million for the Existing Notes
($100 million face amount) and approximately $141 million in borrowings under a
new senior bank credit agreement (the "Credit Agreement"), consisting of a $130
million term loan facility (the "Term Loan Facility") and a $150 million
revolving credit facility (the "Revolving Credit Facility"). See "Description
of Credit Agreement" and "Description of Notes." The closing of these financing
transactions, including the offering of the Existing Notes, occurred
concurrently with the Closing.
The initial equity contribution to Holding of $75 million was made by The
Clayton & Dubilier Private Equity Fund IV Limited Partnership, a Connecticut
limited partnership ("C&D Fund IV"), which is a private investment fund managed
by Clayton, Dubilier & Rice, Inc. ("CD&R"). CD&R is a New York-based private
investment firm that specializes in acquisitions with management participation.
Holding intends to offer certain officers and key employees of the Company an
opportunity through additional equity investments to acquire from Holding up to
15% of the Holding common stock (on a fully diluted basis, giving effect to
such issuance and to the initial issuance of Holding common stock to C&D Fund
IV). It is expected that the proceeds of the sale of such Holding common stock
will be contributed to the Company or used for general corporate purposes.
SUMMARY OF TERMS OF THE EXCHANGE OFFER
Registration Rights The Existing Notes were sold by Remington on
Agreement.................. December 1, 1993 to Merrill Lynch & Co., Merrill
Lynch, Pierce, Fenner & Smith Incorporated and CS
First Boston Corporation (the "Initial
2
<PAGE>
Purchasers") in a transaction that was exempt
from registration under Section 4(2) of the
Securities Act. The Initial Purchasers placed the
Existing Notes with certain institutional and
accredited investors in reliance on exemptions
from the registration requirements of the
Securities Act, including pursuant to Rule 144A
thereunder. In connection therewith, Remington
executed and delivered, for the benefit of the
holders of the Existing Notes, the Registration
Rights Agreement providing for, among other
things, the Exchange Offer. See "The Exchange
Offer--General" and "Plan of Distribution." The
Existing Notes may be subject to certain resale
restrictions under the Securities Act and related
rules and regulations of the Commission. See "The
Exchange Offer--Certain Effects of the Exchange
Offer."
The Exchange Offer..........
The Company is offering to exchange up to
$100,000,000 aggregate principal amount of its
New Notes for a like principal amount of Existing
Notes. The Company will issue the New Notes to
holders on the earliest practicable date
following the Expiration Date. Based on
interpretations of the staff of the Commission
set forth in several no-action letters issued to
third parties, the Company believes that New
Notes issued pursuant to the Exchange Offer in
exchange for Existing Notes may be offered for
resale, resold and otherwise transferred by any
holder thereof (other than any such holder that
is an "affiliate" of the Company within the
meaning of Rule 405 under the Securities Act)
without compliance with the registration and
prospectus delivery provisions of the Securities
Act, provided that such New Notes are acquired in
the ordinary course of such holder's business and
that such holder (and any other person accepting
the Exchange Offer on behalf of any such holder)
neither is engaging in nor intends to engage in,
and has no arrangement or understanding with any
person to participate in, a distribution of such
New Notes. The Commission, however, has not
considered the Exchange Offer in the context of a
no-action letter and there can be no assurance
that the staff of the Commission would make a
similar determination with respect to the
Exchange Offer as in such other circumstances.
Each broker-dealer that receives New Notes for
its own account pursuant to the Exchange Offer in
exchange for Existing Notes, where such Existing
Notes were acquired by such broker-dealer as a
result of market-making activities or other
trading activities, must acknowledge that it will
deliver a prospectus in connection with any
resale of such New Notes. The Letter of
Transmittal states that by so acknowledging and
by delivering a prospectus, a broker-dealer will
not be deemed to admit that it is an
"underwriter" within the meaning of the
Securities Act. This Prospectus, as it may be
amended or supplemented from time to time, may be
used by a broker-dealer for a period of 90 days
after the Expiration Date in connection with
resales of New Notes received in exchange for
Existing Notes where such Existing Notes were
acquired by such broker-dealer as a result of
market-making activities or other trading
activities and, by acceptance of the
3
<PAGE>
Exchange Offer, each broker-dealer that receives
New Notes pursuant to the Exchange Offer agrees
to notify the Company, in writing, prior to using
this Prospectus in connection with any such
resale. The Company has agreed that, for a period
of 90 days after the Expiration Date, the Company
will make this Prospectus, as it may be amended
or supplemented from time to time, available to
the Initial Purchasers and to any other broker-
dealer that makes a market in the Existing Notes
with the Company's prior written consent and
receives New Notes pursuant to the Exchange Offer
(collectively, "Participating Broker-Dealers")
for use in connection with any such resale. See
"The Exchange Offer--General" and "Plan of
Distribution." Any holder who tenders in the
Exchange Offer with the intention to participate,
or for the purpose of participating, in a
distribution of the New Notes, or who has not
acquired the New Notes in the ordinary course of
their business, could not rely on interpretations
of the staff of the Commission enunciated in
Exxon Capital Holdings Corporation (available May
13, 1988) or similar no-action letters issued to
third parties. Accordingly, such a holder could
not use the Prospectus, and (in the absence of an
exemption therefrom), must comply with the
registration and prospectus delivery requirements
of the Securities Act, in connection with a
secondary resale transaction. Failure to comply
with such requirements in such instance may
result in such holder incurring liability under
the Securities Act for which the holder is not
indemnified by the Company.
Expiration Date.............
The Exchange Offer will expire at 5:00 p.m., New
York City time, on , 1997, unless the
Exchange Offer is extended by the Company in its
sole discretion, in which case the term
"Expiration Date" means the latest date and time
to which the Exchange Offer is extended. Any
Existing Notes not accepted for exchange for any
reason will be returned without expense to the
tendering holders thereof as promptly as
practicable after the Expiration Date.
Accrued Interest on the New
Notes and Existing Notes...
Holders of Existing Notes that are accepted for
exchange will not receive any accrued interest
thereon. However, each New Note will bear
interest from the most recent date to which
interest has been paid on the corresponding
Existing Note. The interest rate on the Notes,
10% per annum as of the date of this Prospectus,
will return to 9 1/2% per annum from and after
the day before the date of consummation of the
Exchange Offer. See "Registration Rights."
Conditions to the Exchange The Exchange Offer is subject to certain
Offer...................... customary conditions, which may be waived by the
Company. If any such conditions do exist prior to
the Expiration Date, the Company may (i) refuse
to accept any Existing Notes and return all
previously tendered Existing Notes, (ii) extend
the Exchange Offer or (iii) waive such
conditions. See "The Exchange Offer--Conditions."
The Exchange Offer is not conditional upon any
minimum aggregate principal amount of Existing
Notes being tendered for exchange.
4
<PAGE>
Procedures for Tendering
Existing Notes.............
Tendering holders of Existing Notes must, prior
to 5:00 p.m., New York City time, on the
Expiration Date, either (i) complete and sign a
Letter of Transmittal, or a facsimile thereof,
have their signatures guaranteed if required,
forward the Letter of Transmittal and any other
required documents to the Exchange Agent at the
address set forth under the caption "The Exchange
Offer--Exchange Agent", and either deliver the
Existing Notes to the Exchange Agent or tender
such Existing Notes pursuant to the procedures
for book-entry transfer or (ii) request a broker,
dealer, bank, trust company or other nominee to
effect the transaction for them. Beneficial
owners of Existing Notes registered in the name
of a broker, dealer, bank, trust company or other
nominee must contact such institution to tender
their Existing Notes. Existing Notes may be
physically delivered, but physical delivery is
not required if a confirmation of a book-entry of
such Existing Notes to the Exchange Agent's
account at DTC is delivered in a timely fashion.
Certain provisions have also been made for
holders whose Existing Notes are not readily
available or who cannot comply with the procedure
for book-entry transfer on a timely basis.
Questions regarding how to tender and requests
for information should be directed to the
Exchange Agent. Executing and tendering a Letter
of Transmittal will be deemed a representation by
the holder that, among other things, such holder
is not an "affiliate" of the Company (as defined
in Rule 405 under the Securities Act), that any
New Notes acquired by such holder pursuant to the
Exchange Offer will have been acquired in the
ordinary course of such holder's business, and
that such holder (and any other person accepting
the Exchange Offer on behalf of such holder)
neither is engaging in nor intends to engage in,
and has no arrangement or understanding with any
person to participate in, a distribution of such
New Notes. Each broker-dealer that receives New
Notes for its own account in exchange for
Existing Notes, where such Existing Notes were
acquired by such broker-dealer as a result of
market-making activities or other trading
activities, must acknowledge that it will deliver
a prospectus with any resale of such New Notes.
See "The Exchange Offer--How to Tender."
Withdrawal Rights .......... Subject to the conditions set forth herein,
tenders of Existing Notes may be withdrawn at any
time prior to 5:00 p.m., New York City time, on
the Expiration Date. See "The Exchange Offer--
Withdrawal Rights."
Acceptance of Existing
Notes and Delivery of New
Notes...................... Subject to the terms and conditions of the
Exchange Offer, including the reservation of
certain rights by the Company, the Company will
accept for exchange any and all Existing Notes
which are properly tendered in the Exchange
Offer, and not withdrawn, prior to 5:00 p.m., New
York City time, on the Expiration Date. Subject
to such terms and conditions, the New Notes
issued pursuant to the
5
<PAGE>
Exchange Offer will be delivered on the earliest
practicable date following the Expiration Date.
Any Existing Notes not accepted for exchange will
be returned without cost to the tendering holder
thereof promptly after the Exchange Date. See
"The Exchange Offer--Acceptance of Tenders."
Certain Federal Income Tax
Consequences...............
In the view of the Company, which is based on the
advice of Debevoise & Plimpton, special counsel
to the Company, for federal income tax purposes,
the exchange of an Existing Note for a New Note
pursuant to the Exchange Offer should not
constitute a taxable exchange by its holder.
Accordingly, the holder should not recognize any
taxable gain or loss upon such exchange. See
"Certain Federal Tax Considerations."
Untendered Existing Notes... Holders of Existing Notes who do not tender their
Existing Notes in the Exchange Offer or whose
Existing Notes are not accepted for exchange will
continue to hold such Existing Notes and will be
entitled to all the rights and preferences and
will be subject to the limitations applicable
thereto under the Indenture (as defined herein),
except for any such rights or limitations which,
by their terms, terminate or cease to be
effective as a result of this Exchange Offer. All
untendered and tendered but unaccepted Existing
Notes will continue to be subject to certain
restrictions on transfer provided therein. To the
extent that Existing Notes are tendered and
accepted in the Exchange Offer, the trading
market, if any, for untendered and tendered but
unaccepted Existing Notes could be adversely
affected. See "The Exchange Offer--Certain
Effects of the Exchange Offer."
Exchange Agent.............. First Trust National Association is serving as
Exchange Agent (the "Exchange Agent") in
connection with the Exchange Offer.
SUMMARY OF TERMS OF NOTES
Notes Issued or Offered..... $100,000,000 aggregate principal amount of
Existing Notes and New Notes, consisting of 9
1/2% Senior Subordinated Notes. The Existing
Notes sold to QIBs were initially issued in the
form of a global note, registered in the name of
the nominee of DTC, and remain in the custody of
the Trustee pursuant to a FAST Balance
Certificate Agreement between DTC and First Trust
National Association, a national association (the
"Trustee"). Existing Notes sold to Non-Global
Purchasers were issued in certificated, fully
registered form without coupons. Except for New
Notes acquired by Non-Global Purchasers, the New
Notes will be initially issued in the form of one
or more global notes, registered in the name of
the nominee of DTC, and will remain in the
custody of the Trustee pursuant to a FAST Balance
Certificate Agreement. Except in limited
circumstances, New Notes in global form will not
be exchangeable for Notes in certificated form.
New Notes issued to Non-Global Purchasers will be
issued in registered, certificated form without
coupons.
6
<PAGE>
Issuer...................... The Notes are unsecured obligations of Remington
Arms Company, Inc., a Delaware corporation.
Maturity Date............... December 1, 2003.
Interest Payment Dates...... Interest on the Notes is payable at 9 1/2% per
annum, except that it is payable at 10% per annum
from April 30, 1994 to the day before the date of
consummation of the Exchange Offer. See
"Registration Rights." Interest on the Notes is
payable semi-annually on June 1 and December 1 of
each year.
Optional Redemption.........
The Notes are redeemable at the option of the
Company, in whole or in part, on or after
December 1, 1998, at the redemption prices set
forth herein, together with accrued and unpaid
interest, if any, to the date of redemption. Upon
a Change of Control (as defined) prior to
December 1, 1998, the Company will have the
option to redeem the Notes, in whole or in part,
within 180 days of such Change of Control, at a
redemption price equal to the principal amount
thereof, together with accrued and unpaid
interest, if any, to the date of redemption plus
the Applicable Premium (as defined).
Mandatory Purchase upon a
Change of Control.....
Upon the occurrence of a Change of Control, each
holder of the Notes may require the Company to
purchase all or a portion of such holder's Notes
at a purchase price in cash equal to 101% of the
principal amount thereof, together with accrued
and unpaid interest, if any, to the date of
purchase, unless the Company has exercised its
right to redeem the Notes as described above.
There can be no assurance that the Company will
have the financial resources necessary, or that
it will be able to obtain the necessary consents
under the Credit Agreement, to permit the
purchase of the New Notes upon a Change of
Control. The Credit Agreement prohibits the
Company from so purchasing the New Notes without
first obtaining the consent of the Required
Lenders (as defined therein). See "Description of
Notes--Optional Redemption" and "Description of
Notes--Certain Covenants." Failure of the Company
so to purchase such holder's Notes would
constitute an Event of Default (as defined in the
Indenture).
Ranking.....................
The Notes are senior subordinated obligations of
the Company and, as such, are subordinated to all
existing and future Senior Indebtedness of the
Company. The Notes rank pari passu with all
senior subordinated indebtedness of the Company
and rank senior to all other subordinated
indebtedness of the Company. As of September 30,
1996, the aggregate amount of Senior Indebtedness
of the Company was $182.8 million.
Guarantee...................
The Notes are fully and unconditionally
guaranteed on a senior subordinated basis by
Holding. This guarantee (the "Holding Guarantee")
is subordinated to the guarantee by Holding of
the Company's obligations under the Credit
Agreement and will be subordinated in the future
to all future guarantees by Holding of Senior
Indebtedness of the Company. As of September 30,
1996, the aggregate amount of Indebtedness of
Holding ranking senior in right of payment to the
Holding Guarantee was $182.8 million.
7
<PAGE>
Restrictive Covenants....... The Indenture pursuant to which the Existing
Notes have been issued and the New Notes are to
be issued (the "Indenture") contains certain
covenants, including, but not limited to,
covenants with respect to the following matters:
(i) limitation on indebtedness; (ii) limitation
on restricted payments; (iii) limitation on
transactions with affiliates; (iv) limitation on
certain other subordinated indebtedness; (v)
limitation on liens with respect to pari passu
indebtedness or subordinated indebtedness; (vi)
limitation on guarantees with respect to
indebtedness; (vii) limitation on sale of assets;
(viii) restriction on transfer of assets to
subsidiaries; (ix) limitation on preferred stock
of subsidiaries; (x) limitation on dividends and
other payment restrictions affecting
subsidiaries; and (xi) restrictions on
consolidation, merger and sale of assets.
Event Risk Considerations... Certain transactions would not constitute a
Change of Control that would otherwise entitle a
holder of Notes to require the Company to
purchase such Notes, including acquisitions of
Holding common stock by C&D Fund IV (Holding's
current sole stockholder), CD&R or certain
affiliates thereof; certain acquisitions of
Holding common stock not exceeding specified
ownership thresholds; and certain changes in
Holding's board of directors approved by certain
incumbent directors. See "Description of Notes--
Certain Covenants--Purchase of Notes on a Change
of Control." The Company will be permitted to
merge with or consolidate with another entity if
certain requirements are met, including that the
surviving entity is Remington or is a qualifying
entity and assumes the Indenture, and that, on a
pro forma basis giving effect to the transaction,
the surviving entity meets a consolidated net
worth test, and could incur indebtedness by
meeting a fixed charge coverage ratio test. See
"Description of Notes--Consolidation, Merger,
Sale of Assets." If the Company meets certain
financial tests, it is permitted to incur
additional indebtedness, and to pay dividends or
distributions to stockholders, guarantee
indebtedness of certain affiliates and effect
certain other restricted payments or
transactions. See "Description of Notes--Certain
Covenants--Limitation on Indebtedness" and "--
Limitation on Restricted Payments." The Company
is permitted to enter into most transactions with
certain affiliates on a specified arms-length
basis, or by meeting certain other criteria, or
by obtaining the approval of a majority of
Remington's directors who have no material
related financial interest. See "Description of
Notes--Certain Covenants--Limitation on
Transactions with Affiliates." The Indenture's
covenant and other provisions accordingly may
have limited applicability to some transactions,
such as certain leveraged recapitalizations or
restructurings not involving a Change of Control.
Registration Rights......... The Company has filed a registration statement on
Form S-4 (together with any amendments thereto,
the "Registration Statement") with respect to the
Exchange Offer made hereby.
8
<PAGE>
Based on interpretations of the staff of the
Commission as set forth in several no-action
letters issued to third parties, the Company
believes that the New Notes would in general be
freely tradable after the Exchange Offer without
further registration under the Securities Act.
However, any purchaser of Notes who is an
"affiliate" of the Company or who intends to
participate in the Exchange Offer for the purpose
of distributing the New Notes (i) will not be
able to rely on such interpretations of the staff
of the Commission, (ii) will not be able to
tender its Notes in the Exchange Offer made
hereby and (iii) must comply with the
registration and prospectus delivery requirements
of the Securities Act in connection with any sale
or transfer of the Notes unless such sale or
transfer is made pursuant to an exemption from
such requirements. See "Registration Rights."
Under the Registration Rights Agreement, the
Company agreed that, in the event that any
changes in law or the applicable interpretations
of the staff of the Commission do not permit the
Company to effect the Exchange Offer made hereby
or if the Registration Statement was not declared
effective within 180 days following the original
issuance of the Existing Notes, or upon the
request of the Initial Purchasers under certain
circumstances, the Company would use its best
efforts to cause to become effective by a stated
date a shelf registration statement with respect
to the resale of the Existing Notes (the "Shelf
Registration Statement") and to keep the Shelf
Registration Statement effective for up to three
years after the effective date thereof (or until
one year after such effective date if such Shelf
Registration Statement is filed at the request of
the Initial Purchasers). Upon consummation of the
Exchange Offer, the Company believes that it will
have no further obligation to file the Shelf
Registration Statement or otherwise register the
Existing Notes. By acceptance of the Exchange
Offer, each holder of Existing Notes confirms
that such holder agrees that the Company is not
obligated to file the Shelf Registration
Statement once the Exchange Offer is consummated,
and consents to waive any requirement that the
Company do so effective upon the consummation of
the Exchange Offer. If holders of at least a
majority in aggregate principal amount of
Existing Notes that are Registrable Securities
(as defined in the Registration Rights Agreement)
so consent, such waiver will be binding on all
holders of Registrable Securities under the terms
of the Registration Rights Agreement. See
"Registration Rights." Because the Registration
Statement was not declared effective on or prior
to the 150th calendar day following the date of
original issue of the Existing Notes, the
interest rate borne by the Notes increased by
one-half of one percent per annum to 10% per
annum, effective from April 30, 1994. Upon the
day before the date of consummation of the
Exchange Offer, the interest rate borne by the
Notes from the date of such effectiveness will be
reduced by the full amount of any such increase
from the original interest rate, to 9 1/2% per
annum. See "Description of Notes--General."
9
<PAGE>
Absence of a Public
Marketfor the Notes........
The New Notes will be new securities for which
there currently is no market. Although the
Initial Purchasers have informed the Company that
they currently intend to make a market in the
Notes, they are not obligated to do so, and any
such market making may be discontinued at any
time without notice. Accordingly, there can be no
assurance as to the development or liquidity of
any market for the Notes. The Existing Notes are
eligible for trading in the Private Offerings,
Resale and Trading through Automatic Linkages
(PORTAL) market. The Company does not intend to
apply for listing of the Notes on any securities
exchange or for quotation through Nasdaq.
Use of Proceeds........ The Company will not receive any proceeds from
the Exchange Offer. The net proceeds to the
Company from the sale of the Existing Notes
comprised a portion of the financing for the
Acquisition.
For further information regarding the New Notes, see "Description of Notes."
RISK FACTORS
Ownership of the Notes involves certain risk factors, described in "Risk
Factors," which should be carefully considered by investors.
10
<PAGE>
SELECTED FINANCIAL INFORMATION
The following table sets forth certain selected financial information derived
from the Company's financial statements for the five year period ended December
31, 1995 and the nine months ended September 30, 1996 and 1995. The financial
information for the three year period ended December 31, 1995 has been derived
from the Company's audited consolidated financial statements. The financial
information for the nine months ended September 30, 1996 and 1995 has been
derived from the Company's unaudited interim financial statements, which
reflect, in the opinion of the Company, all adjustments, which include only
normal recurring adjustments, necessary to a fair presentation of the financial
data for such periods. Results for interim periods are not necessarily
indicative of results for the full year. The balance sheet and income statement
information as of and for each of the two years ended December 31, 1991 and
1992, respectively, and as of and for the eleven month period ended November
30, 1993, relate to the businesses conducted through Sporting Goods prior to
the Acquisition. The consolidated balance sheet and consolidated income
statement information as of and for the one month period ended December 31,
1993 and as of and for the two years ended December 31, 1994 and 1995,
respectively, relate to Remington and its operations. Generally, the
comparability of the Company's results of operations for the years ended
December 31, 1995 and 1994 and the one-month period ended December 31, 1993, to
its results of operations for the eleven-month period ended November 30, 1993
and the years ended December 31, 1992 and 1991, are significantly limited
because of the effects of the Acquisition. The table should be read in
conjunction with "Management's Discussion and Analysis of Financial Condition
and Results of Operations," and the Company's financial statements and related
notes and other financial information included elsewhere in this Prospectus.
<TABLE>
<CAPTION>
REMINGTON SPORTING GOODS BUSINESS
----------------------------------------- ----------------------------
NINE MONTHS ONE
ENDED YEAR ENDED MONTH ELEVEN MONTHS YEAR ENDED
SEPTEMBER 30, DECEMBER 31, ENDED ENDED DECEMBER 31,
--------------- -------------- DEC. 31, NOV. 30, --------------
1996 1995 1995 1994 1993 1993 1992 1991
------ ------ ------ ------ -------- ------------- ------ ------
(UNAUDITED)
(DOLLARS IN MILLIONS EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS
DATA:
Sales (a)............... $316.5 $333.6 $427.0 $417.7 $ 19.2 $346.9 $341.7 $312.4
Gross Profit............ 97.1 112.0 141.7 130.6 3.4 106.0 104.5 84.5
Operating Expenses (b).. 78.5 72.6 100.2 94.2 5.5 99.4 80.3 72.8
Operating Profit
(Loss)................. 18.6 39.4 41.5 36.4 (2.1) 6.6 24.2 11.7
Interest Expense........ 19.2 16.1 21.5 20.6 1.5 5.3 6.8 7.2
Profit (Loss) before
Income Taxes........... (.6) 23.3 20.0 15.8 (3.6) 2.0 19.1 5.4
Net Income (Loss) before
Effect of Accounting
Changes................ (.3) 13.9 11.5 9.4 (2.3) 1.4 12.0 3.5
Effect of Changes in
Accounting for
Postretirement Benefits
other than Pensions and
Postemployment Benefits
(c).................... -- -- -- -- -- (74.1) -- --
Net Income (Loss)....... (.3) 13.9 11.5 9.4 (2.3) (72.7) 12.0 3.5
Net Income (Loss) Per
Common Share........... (.40) 18.53 15.33 12.53 (3.07) -- -- --
Ratio of Earnings to
Fixed Charges (d)...... 1.0x 2.4x 1.9x 1.8x -- -- 3.6x 1.7x
OPERATING AND OTHER
DATA:
EBITDA (e).............. $ 30.9 $ 50.4 $ 56.0 $ 68.0 $ 4.0 $ 16.8 $ 36.5 $ 26.8
EBITDA Margin (f)....... 9.8% 15.1% 13.1% 16.3% 20.8% 4.8% 10.7% 8.6%
Depreciation and
Amortization........... 11.5 9.7 13.2 12.1 1.0 9.5 10.6 10.2
Capital Expenditures.... 12.8 13.3 18.9 9.3 0.8 9.1 9.5 11.6
Ratio of EBITDA to
Interest Expense
(e)(g)................. 1.6x 3.1x 2.6x 3.3x 2.7x 3.2x 5.4x 3.7x
Consolidated Fixed
Charge Coverage Ratio
(g).................... 1.0x 3.1x 2.5x 2.3x -- 3.0x 5.0x 3.1x
BALANCE SHEET DATA (END
OF PERIOD):
Working Capital......... $205.5 $153.2 $125.0 $131.3 $125.8 $ 93.9 $ 97.6 $105.3
Total Assets............ 480.4 422.3 404.4 403.3 403.2 175.6 172.0 180.2
Total Debt (h).......... 288.4 231.9 213.2 219.8 229.4 -- 0.7 0.8
Shareholder's Equity.... 93.3 96.0 93.6 82.1 72.7 115.0 145.4 153.3
</TABLE>
(Footnotes on following page)
11
<PAGE>
(Footnotes)
- --------
(a) Sales are presented net of federal excise taxes. Excise taxes were $25.8
million and $28.7 million for the years ended December 31, 1991, and 1992
and $28.8 million for the eleven-month period ended November 30, 1993,
respectively, $1.4 million for the one-month period ended December 31,
1993, $33.7 million and $36.0 million for the years ended December 31, 1994
and 1995, respectively and $27.8 million and $26.5 million for the nine-
month periods ended September 30, 1995 and 1996, respectively.
(b) In 1991, DuPont announced a cost improvement initiative for the business
segments of which the Company was a part. Costs of these programs were
accrued by DuPont in the fourth quarter of 1991 and included estimates of
the cost for enhanced pension benefits and other payments for actual and
projected employee terminations associated with these programs. The $4.0
million restructuring charge in 1991 includes a $2.9 million charge from
DuPont for the cost of these programs to the Company, and $1.1 million
related to a restructuring of the Company's marketing and sales
organization.
(c) Effective January 1, 1993 the Company adopted Statement of Financial
Accounting Standards (SFAS) No. 106, "Employers' Accounting for
Postemployment Benefits (an amendment of FASB Statements No. 5 and 43)."
The Company recorded charges of $74.1 million to its net income for the
eleven-month period ended November 30, 1993 for the cumulative effect of
transition to this new standard. See "Management's Discussion and Analysis
of Financial Condition and Results of Operations--Adoption of New
Accounting Standards."
(d) For purposes of computing this ratio, earnings consists of earnings before
income taxes and fixed charges, excluding capitalized interest. Fixed
charges consists of interest expense, capitalized interest, amortization of
discount on indebtedness and one-third of rental expense (the portion
deemed representative of the interest factor). Earnings were inadequate to
cover fixed charges for the eleven month-period ended November 30, 1993 and
the one-month period ended December 31, 1993 by $72.1 million and $3.6
million, respectively. However, excluding the impact of the $74.1 million
cumulative effect of an accounting change noted above, the ratio of
earnings to fixed charges for the eleven-month period ended November 30,
1993 would have been 1.4x.
(e) EBITDA represents earnings before deducting interest expense, non-cash
expenses and charges, non-recurring business restructuring charges, income
tax expense, depreciation expense and amortization expense. EBITDA is
presented to facilitate a more complete analysis of the Company's financial
condition, by adding back depreciation, amortization and other non-cash
items to operating income, as an indicator of the ability of the Company to
generate cash flows to service fixed obligations. EBITDA should not be
construed by investors as an alternative to net income (as determined in
accordance with generally accepted accounting principles) as an indicator
of the Company's operating performance, or to cash flows from operating
activities (as determined in accordance with generally accepted accounting
principles) as a measure of liquidity or ability to meet all cash needs.
The Company's cash flows are discussed elsewhere in this Prospectus under
"Management's Discussion and Analysis of Financial Condition and Results of
Operations--Liquidity and Capital Resources." The Company has presented
EBITDA because it is commonly used by investors to analyze and compare
companies on the basis of operating performance and to determine a
company's ability to service debt.
(f) Represents EBITDA as a percentage of revenues.
(g) The Consolidated Fixed Charge Coverage Ratio is a financial measure used in
the Indenture to determine when the Company can incur certain kinds of new
debt and engage in certain other transactions. It measures the ratio of (a)
the sum of Consolidated Net Income, Consolidated Interest Expense,
Consolidated Income Tax Expense and Consolidated Non-Cash Charges deducted
in computing Consolidated Net Income (Loss), all determined in accordance
with GAAP, to (b) the sum of Consolidated Interest Expense and cash
dividends paid on any Preferred Stock, as each of these terms is defined in
the Indenture. For the complete definition of Consolidated Fixed Charge
Coverage Ratio and the other defined terms used therein, see "Description
of Notes--Certain Definitions." The ratio of EBITDA to Interest Expense is
presented in addition to Consolidated Fixed Charge Coverage Ratio because
it is commonly used by investors to analyze and compare companies.
(h) Total debt consists of long-term debt, current portion of long-term debt,
and capital lease commitments.
12
<PAGE>
RISK FACTORS
Ownership of the Notes involves certain risk factors, described below, which
should be carefully considered by investors in addition to the other
information in this Prospectus.
RISKS RELATING TO LEVERAGE
The Company incurred substantial indebtedness in connection with the
financing of the Acquisition. As a result, the Company is highly leveraged and
subject to substantial repayment obligations. The Credit Agreement includes a
term loan facility and a revolving credit facility. The Credit Agreement
requires the Company to make quarterly principal payments on the term loans
thereunder, which began in March 1994, and equaled $10 million in 1994, $9.3
million in 1995 and $13.6 million in 1996. In addition, the Credit Agreement
requires the Company to prepay the term loans thereunder annually in an amount
equal to 50% of Excess Cash Flow (as defined therein) for the preceding fiscal
year. Such prepayments result in reductions in all subsequently scheduled
principal payments on such term loans. See "Description of Credit Agreement."
The Company made such a prepayment of approximately $10.7 million in 1995 for
the year ended December 31, 1994. The Company did not have Excess Cash Flow
for the year ended December 31, 1995, and accordingly no such prepayment was
made in 1996. See "Management's Discussion and Analysis of Financial Condition
and Results of Operations--Liquidity and Capital Resources." After giving
effect to the prepayment, the installment schedule for the remaining term loan
principal payments requires payments of $18.2 million in each of 1997 and
1998, and $22.7 million in 1999, with the balance of the term loans and all
then outstanding revolving credit loans being due in 2000.
Interest on the Notes is payable semiannually, currently at a rate of 10%
per annum to the day before the consummation of the Exchange Offer, and 9 1/2%
per annum thereafter. Accordingly, after completion of the Exchange Offer, the
Company's annual interest payments on the Notes will amount to $9,500,000. The
principal amount of the Notes will be due on December 1, 2003.
The Company's ability to make scheduled payments of principal or interest
on, or to refinance, its indebtedness will depend on its future operating
performance and cash flow, which are subject to prevailing economic
conditions, prevailing interest rate levels, and financial, competitive,
business and other factors beyond its control. The degree to which the Company
is leveraged could have important consequences to the holders of the Notes,
including the following: (i) the Company's ability to obtain additional
financing for working capital or other purposes in the future may be limited;
(ii) a substantial portion of the Company's cash flow from operations will be
dedicated to the payment of principal and interest on its indebtedness,
thereby reducing funds available for operations; (iii) certain of the
Company's borrowings, including all borrowings under the Credit Agreement,
will be at variable rates of interest, which could cause the Company to be
vulnerable to increases in interest rates; (iv) all of the indebtedness
incurred in connection with the Credit Agreement will become due prior to the
time any principal payment on the Notes is due; and (v) the Company may be
more vulnerable to economic downturns and be limited in its ability to
withstand competitive pressures. The Company is not currently a party to any
interest rate cap, hedging or other protection arrangements with respect to
its variable interest rate indebtedness.
While the Company believes that based upon current levels of operations it
should be able to meet its current debt service obligations, including
principal and interest payments on the Notes when due, if the Company cannot
generate sufficient cash flow from operations to meet its obligations, then
the Company might be required to refinance its debt or to dispose of assets to
obtain funds for such purpose. There is no assurance that refinancings or
asset dispositions could be effected on satisfactory terms or would be
permitted by the terms of the Credit Agreement or the Indenture.
The Credit Agreement and the Indenture permit the Company to incur certain
amounts of specified indebtedness in addition to the indebtedness thereunder.
In the case of the Indenture, the Company may also incur additional
indebtedness by meeting a fixed charge coverage ratio test on a pro forma
basis. See "Description of Notes--Certain Covenants--Limitation on
Indebtedness." As of September 30, 1996, the Company would not have been
permitted to incur any additional indebtedness in accordance with this fixed
charge coverage ratio test.
13
<PAGE>
RISKS RELATING TO COVENANT RESTRICTIONS
The Credit Agreement and the Indenture pursuant to which the Notes have been
or will be issued contain numerous operating covenants that limit the
discretion of the Company's management with respect to certain business
matters. These covenants place significant restrictions on, among other
things, the ability of the Company to incur additional indebtedness, to create
liens or other encumbrances, to make certain payments, investments, loans and
guarantees and to sell or otherwise dispose of assets and merge or consolidate
with another entity. See "Description of Credit Agreement" and "Description of
Notes--Certain Covenants." The Credit Agreement also contains a number of
financial covenants that require the Company to meet certain financial ratios
and tests, including a minimum net worth test, a minimum interest coverage
ratio, a maximum debt to earnings ratio, a minimum earnings test, a limitation
on capital expenditures and a minimum working capital test. The Company
recently obtained an amendment to its Credit Agreement to modify (i) the
minimum earnings, minimum interest coverage ratio and net worth covenants to
decrease the required levels, (ii) the maximum debt to earnings ratio covenant
to increase the permissible debt levels and (iii) the capital expenditure
covenant to reduce the permissible capital expenditure levels. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations--Liquidity and Capital Resources--Credit Agreement." A failure to
comply with the obligations contained in the Credit Agreement or the Indenture
could result in an event of default under the Credit Agreement or an Event of
Default under the Indenture which, if not cured or waived, could permit
acceleration of the relevant debt and acceleration of debt under other
instruments that may contain cross-acceleration or cross-default provisions.
Under certain circumstances an event of default under the Credit Agreement
that results in acceleration of debt thereunder could give rise to an Event of
Default under the Indenture. See "Description of Notes--Events of Default."
Other indebtedness of the Company and its subsidiaries could contain
amortization and other prepayment provisions, or financial or other covenants,
more restrictive than those applicable to the Notes.
The Indenture also provides that upon the occurrence of a Change of Control,
each holder of the Notes may require the Company to purchase all or a portion
of such holder's Notes at a purchase price in cash equal to 101% of the
principal amount thereof, together with accrued and unpaid interest, if any,
to the date of purchase, unless the Company has previously exercised its right
to redeem the Notes. There can be no assurance that the Company will have the
financial resources necessary, or that it will be able to obtain the necessary
consents under the Credit Agreement, to permit the purchase of the New Notes
upon a Change of Control. The Credit Agreement prohibits the Company from so
purchasing the New Notes without first obtaining the consent of the Required
Lenders (as defined therein). See "Description of Notes--Optional Redemption"
and "Description of Notes--Certain Covenants--Purchase of Notes Upon a Change
of Control."
RISKS RELATING TO SUBORDINATION OF THE NOTES AND THE HOLDING GUARANTEE; ASSET
ENCUMBRANCES
The payment of principal of, premium, if any, and interest on, and any other
amounts owing in respect of, the Notes is subordinated to the prior payment in
full of existing and future Senior Indebtedness of the Company, which includes
all indebtedness under the Credit Agreement. Therefore, in the event of the
liquidation, dissolution, reorganization or any similar proceeding regarding
the Company, the assets of the Company will be available to pay obligations on
the Notes only after Senior Indebtedness has been paid in full in cash or Cash
Equivalents (as defined in the Indenture) or in any other form acceptable to
the holders of Senior Indebtedness, and there may not be sufficient assets to
pay amounts due on all or any of the Notes. In addition, the Company may not
pay principal of, premium, if any, or interest on or any other amounts owing
in respect of the Notes, make any deposit pursuant to defeasance provisions
applicable to the Notes or purchase, redeem or otherwise retire the Notes, if
any Designated Senior Indebtedness (as defined in the Indenture) is not paid
when due or any other default on Designated Senior Indebtedness occurs and the
maturity of such indebtedness is accelerated in accordance with its terms,
unless, in either case, such default has been cured or waived, any such
acceleration has been rescinded or such indebtedness has been repaid in full.
In addition, under certain circumstances, if any non-payment default exists
with respect to Designated Senior Indebtedness, the Company may not make any
payments on the Notes for a specified period of time, unless such default is
cured or waived, any acceleration of such indebtedness has been rescinded or
such indebtedness has been repaid in full. See "Description of Notes--
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Subordination." As of September 30, 1996, the aggregate principal amount of
Senior Indebtedness of the Company outstanding was $182.8 million, with an
additional $51.9 million available to be borrowed under the Revolving Credit
Facility.
The Notes are not secured by any of the Company's assets. The obligations of
the Company under the Credit Agreement are secured by a security interest in
substantially all of the assets of the Company and its subsidiaries (if any),
including intangible assets, such as licenses, trademarks and customer lists.
If the Company becomes insolvent or is liquidated, or if payment under the
Credit Agreement is accelerated, the lenders under the Credit Agreement would
be entitled to exercise the remedies available to a secured lender under
applicable law and pursuant to the Credit Agreement. Accordingly, such lenders
will have a prior claim on such assets of the Company and its subsidiaries.
The Holding Guarantee is subordinated to the guarantee by Holding of the
Company's obligations under the Credit Agreement (the "Holding Bank
Guarantee") and will be subordinated in the future to all future guarantees by
Holding of Senior Indebtedness of the Company.
Holding is a holding company with no independent operations and no
significant assets other than its ownership of the capital stock of the
Company. Holding will, therefore, be dependent upon the receipt of dividends
or other distributions from the Company to fund any obligations that it
incurs, including obligations under the Holding Guarantee. The Indenture does
not, however, permit distributions from the Company to Holding, other than for
certain specified purposes or upon meeting certain other requirements, as
described under "Description of Notes--Certain Covenants--Limitation on
Restricted Payments." The Credit Agreement contains similar, more restrictive
provisions. See "Description of Credit Agreement." Accordingly, if the Company
should at any time be unable to pay interest on or principal of the Notes, it
is unlikely that it will be permitted to distribute to Holding the funds
necessary to enable Holding to meet its obligations under the Holding
Guarantee.
RISKS RELATING TO PRODUCT LIABILITY
Pursuant to the Asset Purchase Agreement, the Sellers retained liability
for, and are required to indemnify the Company against, (1) all product
liability cases and claims (whenever they may arise) involving discontinued
products and (2) all product liability cases and claims involving products
that had not been discontinued as of the Closing ("extant products") and
relating to occurrences that took place, but were not disclosed to the
Company, prior to the Closing. The Company assumed financial responsibility,
up to an aggregate amount of $25.0 million (the "Cap"), for (1) product
liability cases and claims involving extant products and relating to
occurrences that took place, and were disclosed to the Company, prior to the
Closing, and (2) any environmental liabilities relating to the ownership or
operation of the Business prior to the Closing. The Sellers retained liability
for, and are required to indemnify the Company against, all such disclosed
product liability occurrences and such environmental liabilities in excess of
the Cap. This indemnification obligation of the Sellers is not subject to any
survival period limitation. Pursuant to the Asset Purchase Agreement, the
Sellers designated $24.5 million of the Cap for assumed product liability
costs (the "Product Liability Cap") and the remainder for environmental costs.
The Company and the Sellers have agreed that, as of October 31, 1996, $1.9
million in assumed product liability costs remained to be paid by the Company
before the exhaustion of the Product Liability Cap (the "Remaining Cap"). See
Note 6 to the Unaudited Condensed Consolidated Financial Statements dated
September 30, 1996. Except for certain cases and claims relating to shotguns
as described below and for all cases and claims relating to discontinued
products, the Company generally bears financial responsibility for product
liability cases and claims relating to occurrences after the Closing. Because
of the nature of firearm and ammunition products, the Company anticipates that
it, as well as other manufacturers of firearm or ammunition products, will
continue to be involved in product liability cases and claims in the future.
Prior to the Acquisition, the Sellers were self-insured for product
liability obligations of the Business, with excess insurance coverage
available at $50.0 million per occurrence. Since December 1, 1993, the Company
has
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maintained insurance coverage for product liability claims subject to certain
self-insured retentions both on a per-occurrence basis and in the aggregate
for personal injury or property damage relating to occurrences arising after
the Closing. The Company believes its current insurance coverage is adequate
for its needs. The current insurance policy extends through November 30, 2000.
See "Business--Legal Proceedings."
The Company and the Sellers are engaged in the joint defense of product
liability litigation involving Remington brand firearms and Company ammunition
products. As of December 31, 1996, approximately 45 such cases were pending,
primarily alleging defective product design or manufacture, or failure to
provide adequate warnings. All but two of these cases are individual actions
alleging personal injury, and many seek punitive as well as compensatory
damages. Of these pending cases, most are subject to the Cap or involve
discontinued products or undisclosed pre-Closing occurrences, and accordingly
are cases for which the Sellers retained liability and are required to
indemnify the Company, either in full or in excess of the Cap. Fewer than 20
of the pending cases involve post-Closing occurrences for which the Company
would be responsible under the Asset Purchase Agreement. The Company has
previously disposed of a number of other cases involving post-Closing
occurrences by settlement.
Two cases, Leonel Garza et al. v. Sporting Goods Properties, Inc., et al.
("Garza"), and Joe Luna, et al. v. Remington Arms Company, Inc. and E.I. du
Pont de Nemours and Company ("Luna"), involving Company products that were
pending at the time of the Closing, and for which the Company assumed
financial responsibility up to the amount of the Cap, were asserted as class
actions, one involving shotguns and the other bolt-action rifles. In each case
certification was sought of a class of owners of Remington brand firearms,
generally claiming economic loss based on alleged product defect, and seeking
compensatory, punitive and treble damages, plus other costs. In addition to
the liabilities retained by the Sellers in excess of the Cap, the Sellers also
are required to indemnify the Company for all claims in these cases for
economic loss involving firearms similar to those involved in these cases and
shipped up to 42 calendar months after the Closing.
On February 6, 1996, the Federal district court (the "Court") in San
Antonio, Texas gave final approval to a settlement of the Garza class action
relating to Remington brand shotguns, and that decision has become final and
non-appealable. The Garza case involved certain Remington brand 12-gauge
shotguns, including Model 1100, 11-87 and 870 shotguns, manufactured from 1960
to 1995. That lawsuit was filed against the Sellers in Texas state court in
November 1993, and was later removed to Federal court. Pursuant to the
settlement, a fund of approximately $19.0 million will be distributed to
eligible shotgun owners. Notices were published in mid-1996 informing owners
how to apply for payment from the fund. The deadline for such filing was
September 30, 1996. However, the Court extended that deadline until December
1, 1996 for certain claims. As of that date, approximately 500,000 class
members had filed claims covering approximately 800,000 guns. It is
anticipated that the funds will be disbursed in the first quarter of 1997.
Defense costs associated with Garza are subject to the Cap. However, pursuant
to a separate agreement between the Company and the Sellers as discussed
below, the $19.0 million cost of the fund, as well as additional settlement
costs and court-ordered plaintiff's attorneys fees, are to be paid by the
Sellers, without regard to the Cap. Except for the very few class members who
opted out and chose not to participate, the settlement resolves all claims
that might be brought by owners of the shotguns at issue in connection with
the barrel steel formerly used in such firearms, other than claims for
personal injury. Publicity regarding the Garza agreement led to some
additional claims of personal injury allegedly involving use of the shotguns
included in the class action lawsuit; most of which were settled in 1996
without lawsuits being filed. The Company anticipates, at least in the short
term, an increase in the number of such claims. The Company does not believe
that the disposition of Garza (including any individual personal injury
actions which might be filed as a result of the settlement) is likely to have
a material adverse effect upon its financial condition or results of
operations.
The other purported class action, Luna, filed in 1989 against the Sellers in
Texas district court in Jim Wells County, and amended in December 1993, seeks
certification of a class consisting of all Texas owners, allegedly 400,000 in
number, of Model 700 bolt-action rifles. The parties in Luna have briefed the
issue of whether class certification is appropriate in this case, and a
hearing took place on May 6, 1996. Shortly thereafter, the court
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issued a ruling that certified for class treatment the limited issues of
whether the Model 700 fire control system is defective and, if so, the cost of
repair. Pursuant to Texas law, the Sellers have filed a timely appeal of this
ruling to the intermediate level state appellate court. Briefing on the merits
of the appeal has been delayed pending transcription of a hearing record and
will not begin before January 1997. The Company had not been included as a
defendant at the time of the decision or the filing of the appeal. However, on
July 16, 1996, plaintiffs further amended the complaint by naming the Company,
which filed an answer in September 1996.
The representations and warranties in the Asset Purchase Agreement expired
18 months after the Closing, with certain exceptions, and claims for
indemnification with respect thereto were to be made within 30 days of such
expiration. The Company made claims for such indemnification involving product
liability issues within that time period. In connection with the consummation
of the Garza settlement, the Company and the Sellers agreed that the Sellers
shall assume financial responsibility for a portion of costs relating to
product liability claims and cases involving certain shotguns manufactured
prior to mid-1995 and based on occurrences arising prior to November 30, 1999,
and that any claims the Company and the Sellers may have against each other
under the Asset Purchase Agreement relating to shotguns (excluding various
indemnification rights and the allocation of certain costs under the Cap) are
released. See "The Acquisition." Any claims between the Company and the
Sellers relating to other product liability issues remain open.
Because the Company's assumption of financial responsibility for certain
product liability cases and claims involving pre-Acquisition occurrences is
limited to the amount of the Cap, with the Sellers retaining liability in
excess of the Cap and indemnifying the Company in respect thereof, and because
of the Company's accruals with respect to such cases and claims, the Company
believes that product liability cases and claims involving occurrences arising
prior to the Closing are not likely to have a material adverse effect upon the
financial condition or results of operations of the Company. While it is
difficult to forecast the outcome of litigation, the Company does not believe,
in light of relevant circumstances (including the current availability of
insurance with respect to cases and claims involving occurrences arising after
the Closing, the Company's accruals for the uninsured costs of such cases and
claims and the agreement that the Sellers will be responsible for certain
post-Closing shotgun-related costs, as described above), that the outcome of
all pending product liability cases and claims will be likely to have a
material adverse effect upon the financial condition or results of operations
of the Company. However, in part because of the uncertainty as to the nature
and extent of manufacturer liability for personal injury due to alleged
product defects, there can be no assurance that the Company's resources will
be adequate to cover future product liability occurrences, cases or claims, in
the aggregate, or that such a material adverse effect will not result
therefrom. See "Business--Legal Proceedings."
RISKS RELATING TO DUPONT INDEMNIFICATION
Pursuant to the Asset Purchase Agreement entered into in connection with the
Acquisition, the Sellers have agreed jointly and severally to indemnify the
Company against certain product liabilities and environmental liabilities. The
Company could be adversely affected if in the future the Sellers become unable
to satisfy these obligations.
RISKS RELATING TO COMPETITION
The markets in which the Company operates are highly competitive.
Competition is based primarily on quality of products, product innovation,
price and customer service and support. Product image, quality and innovation
are the dominant competitive factors in the firearms industry, with price the
dominant factor in the ammunition industry.
The Company's competitors vary according to product line. Certain of these
competitors are subsidiaries of large corporations with substantially greater
financial resources than the Company. The Company's shotgun products compete
primarily with products offered by USRAC (which produces Winchester firearms)
and Browning (both units of GIAT Industries), O.F. Mossberg & Sons, Inc.,
Sturm, Ruger & Co., Inc. and Beretta U.S.A. Corporation. The Company's rifles
compete primarily with products offered by Browning and USRAC,
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Marlin Firearms Co., Sturm, Ruger & Co., Inc. and Savage Arms, Inc. In the
ammunition market, the Company competes primarily with the Winchester unit of
Olin Corporation, the Federal Cartridge Co. unit of Pentair Inc. and the CCI
unit of Blount, Inc. The Company's main competitor in the fishing line market
is Berkley, Inc.
The Company believes that it competes effectively with all of its present
competitors. However, there can be no assurance that the Company will continue
to do so, and the Company's ability to compete could be adversely affected by
its leveraged condition. See "--Risks Relating to Leverage" and "--Risks
Relating to Covenant Restrictions."
RELIANCE ON A MATERIAL CUSTOMER
Sales made to a mass merchandiser, Wal-Mart Stores, Inc. ("Wal-Mart")
accounted for approximately 22% of the Company's total net revenues in 1995.
The Company's sales to Wal-Mart are not governed by a written contract between
the parties. In the event that Wal-Mart were to significantly reduce or
terminate its purchases of firearms and/or ammunition from the Company, the
Company's financial condition or results of operations could be adversely
affected. The Company's sales for the first nine months of 1996 were adversely
affected by reduced purchases by Wal-Mart and a number of other significant
customers, which the Company believes primarily resulted from changes in
inventory management practices by these customers. See "Management's
Discussion and Analysis of Financial Condition and Results of Operations." The
Company has not received any indication that Wal-Mart intends to discontinue
or substantially reduce its relationship with the Company apart from the
inventory management practices noted. See "Business--Marketing and
Distribution."
RELIANCE ON CERTAIN SUPPLIERS OF RAW MATERIALS
To manufacture its various products, the Company utilizes numerous raw
materials, including steel, lead, brass, plastics and wood, as well as
manufactured parts purchased from independent manufacturers. For a number of
the Company's raw materials, it relies on one or a few suppliers. The
Company's requirements for carbon steel, stainless steel, steel shot, brass
strip and walnut gun stock blanks are each currently being met by a single
vendor. Generally, the Company has had satisfactory, long-term relationships
with these suppliers. The Company has purchase contracts with certain of these
suppliers for periods ranging from one to seven years but no formal contracts
with others. In addition, the Company purchases most of the fishline it
requires for its product lines from DuPont under a supply agreement that
expired in December 1996. The parties have begun discussions with respect to a
renewal of this agreement. The Company believes it has a good relationship
with the division of DuPont that produces nylon monofilament fishline, and
believes it will be able to negotiate a new supply agreement, although there
can be no assurance in this regard.
Alternative sources, many of which are foreign, exist for each of these
materials from which the Company could obtain such raw materials. Nonetheless,
the Company does not currently have significant supply relationships with any
of these alternative sources and cannot estimate with any certainty the length
of time that would be required to establish such a supply relationship, or the
sufficiency of the quantity or quality of materials that could be so obtained.
In addition, the Company may incur additional costs in sourcing raw materials
from alternative producers. See "Business--Supply of Raw Materials."
DEPENDENCE UPON CONSUMER SPENDING
The sale of sporting good products for hunting, shooting sports and fishing
depends upon a number of factors related to the level of consumer spending,
including the general state of the economy and the willingness of consumers to
spend on discretionary items. Changes in consumer spending can affect the
quantity of the Company's products purchased by consumers. Reduced consumer
confidence and spending may result in reduced demand for the Company's
products and limitations on the ability of the Company to maintain or increase
prices.
RISKS RELATING TO REGULATION
The purchase of firearms is subject to federal, state and local governmental
regulation. Federal laws generally prohibit the private ownership of fully
automatic weapons and place certain restrictions on the interstate
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sale of firearms unless certain licenses are obtained. The Company does not
manufacture fully automatic weapons. In 1994, a federal law was enacted that
generally prohibits the manufacture of 19 models of "assault weapons" as well
as the sale or possession of "assault weapons" except for those that, prior to
the law's enactment into law, were legally in the owner's possession. This law
exempts from its prohibition approximately 650 models of firearms that are
generally used by hunters and sporting enthusiasts, including all of the
Company's current firearm products. Various bills have been introduced in
Congress in recent years to repeal the ban on semi-automatic assault weapons
and large-capacity ammunition feeding devices; the likelihood of their passage
is uncertain. Another federal law enacted in 1993, the so-called "Brady Bill,"
provides among other things for a waiting period of five business days before
a prospective purchaser of a handgun may take possession of the handgun, in
order to give law enforcement officials time to make a background check on the
prospective purchaser. The Company does not currently produce handguns.
In addition, bills have been introduced in Congress in the past several
years that would affect the manufacture and sale of handgun ammunition,
including bills to regulate the manufacture, importation and sale of any
projectile that is capable of penetrating body armor, to impose a tax and
import controls on bullets designed to penetrate bullet-proof vests, to
prohibit the manufacture, transfer or importation of .25 caliber, .32 caliber
and 9mm handgun ammunition, to increase the tax on handgun ammunition, to
impose a special occupational tax and registration requirements on
manufacturers of handgun ammunition, and to drastically increase the tax on
certain handgun ammunition, such as 9mm, .25 caliber, and .32 caliber bullets.
Certain of these bills would apply to handgun ammunition of the kind produced
by the Company, and accordingly, if enacted, could have a material adverse
effect on the business of the Company. The Company believes that existing
regulations applicable to handgun ammunition have not had such an effect.
State and local laws and regulations vary significantly in the level of
restrictions they place on gun ownership and transfer. Some states have
recently enacted, and others are considering, legislation restricting or
prohibiting the ownership, use or sale of certain categories of firearms and
ammunition. Many states currently have mandatory waiting period laws for
handguns in effect similar to that imposed by the Brady Bill. Currently,
however, there are few restrictive state regulations applicable to handgun
ammunition. The Company's current firearm and ammunition products generally
are not subject to current state restrictions on ownership, use or sale of
certain categories of firearms and ammunition, and generally would not be
subject to any known proposed state legislation relating to regulation of
"assault weapons."
The Company believes that existing federal and state legislation relating to
the regulation of firearms and ammunition has not had a material adverse
effect on its sales of these products from 1993 through 1995. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations." However, there can be no assurance that the regulation of
firearms and ammunition will not become more restrictive in the future and
that any such development would not have a material adverse effect on the
business of the Company.
In addition, regulatory proposals, even if never enacted, may affect
firearms or ammunition sales as a result of consumer perceptions. The Company
believes that its increased ammunition sales in 1994 and early 1995 resulted
in part from consumer fear that proposed legislation would increase taxes on
ammunition and from consumer uncertainty over the Brady Bill, and that the
lessening of these consumer concerns has been a factor in decreased ammunition
sales since early 1995. See "Management's Discussion and Analysis of Financial
Condition and Results of Operations--Results of Operations."
CONTROL OF THE COMPANY BY MAJORITY STOCKHOLDER
Currently, Holding's sole stockholder is C&D Fund IV, a private investment
fund managed by CD&R. After completion of the currently planned offering of
Holding common stock to Company management, C&D Fund IV will continue to be
Holding's majority stockholder. See "Ownership of Capital Stock." The general
partner of C&D Fund IV is Clayton & Dubilier Associates IV Limited
Partnership, a Connecticut limited partnership ("Associates IV"). The
ownership interest of C&D Fund IV gives it control of Holding, permitting it
to elect all
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of the members of the Board of Directors of Holding and, through Holding, all
of the members of the Board of Directors of the Company. The control of the
Boards of Directors by a single stockholder could restrict the Company's
ability to pursue business opportunities not favored by such stockholder.
Certain of the members of the Boards of Directors of Holding and the Company
are persons who are principals of or have other relationships with CD&R, C&D
Fund IV and/or other corporations in which entities managed by CD&R have
previously invested. See "Management" and "Certain Relationships and Related
Transactions--CD&R and C&D Fund IV."
CD&R receives an annual fee for management consulting, monitoring and
financial advisory services provided to the Company. CD&R, C&D Fund IV,
Holding and Remington have entered into an indemnification agreement. See
"Certain Relationships and Related Transactions--CD&R and C&D Fund IV."
RISKS RELATING TO FRAUDULENT CONVEYANCE CONSIDERATIONS
In connection with the Acquisition, Remington and Holding incurred
substantial indebtedness, including the indebtedness under the Existing Notes
and the Credit Agreement and the issuance of the Holding Guarantee and the
Holding Bank Guarantee. If under relevant federal and state fraudulent
conveyance statutes in a bankruptcy, reorganization or rehabilitation case or
similar proceeding or a lawsuit by or on behalf of unpaid creditors of the
Company or Holding, a court were to find that, at the time the Existing Notes
or the Holding Guarantee were issued, (a) Remington or Holding issued the
Existing Notes or the Holding Guarantee with the intent of hindering, delaying
or defrauding current or future creditors or (b)(i) Remington or Holding
received less than reasonably equivalent value or fair consideration for
issuing the Existing Notes or the Holding Guarantee, as the case may be, and
(ii) Remington or Holding, as the case may be, (A) was insolvent or was
rendered insolvent by reason of the Acquisition and/or such related
transactions, including the incurrence of the indebtedness to fund the
Acquisition, (B) was engaged, or about to engage, in a business or transaction
for which its assets constituted unreasonably small capital, (C) intended to
incur, or believed that it would incur, debts beyond its ability to pay as
such debts matured (as all of the foregoing terms are defined in or
interpreted under such fraudulent conveyance statutes) or (D) was a defendant
in an action for money damages, or had a judgment for money damages docketed
against it (if, in either case, after final judgment, the judgment is
unsatisfied), such court could avoid or subordinate the Notes and the Holding
Guarantee to presently existing and future indebtedness of Remington and
Holding (in addition to the Senior Indebtedness to which the Notes are
expressly subordinated and the senior indebtedness of Holding to which the
Holding Guarantee is expressly subordinated) and take other action detrimental
to the holders of the Notes and the Holding Guarantee, including, under
certain circumstances, invalidating the Notes and the Holding Guarantee.
The measure of insolvency for purposes of the foregoing considerations will
vary depending upon the federal or local law that is being applied in any such
proceeding. Generally, however, Remington or Holding would be considered
insolvent if, at the time it incurred the indebtedness constituting the Notes
or the Holding Guarantee, either (i) the fair market value (or fair salable
value) of its assets is less than the amount required to pay the probable
liability on its total existing debts and liabilities (including contingent
liabilities) as they become absolute and matured or (ii) it is incurring debt
beyond its ability to pay as such debt matures.
Each of Holding's and Remington's Board of Directors and management believe
that at the time of its issuance of the Existing Notes and the Holding
Guarantee, as the case may be, Remington and Holding (i) were (a) neither
insolvent nor rendered insolvent thereby, (b) in possession of sufficient
capital to operate their respective businesses effectively and (c) incurring
debts within their respective abilities to pay as the same mature or become
due and (ii) had sufficient assets to satisfy any probable money judgment
against them in any pending action. In reaching the foregoing conclusions,
Holding and Remington have relied upon their analyses of internal cash flow
projections and estimated values of assets and liabilities of the Company.
There can be no assurance, however, that such analyses will prove to be
correct or that a court passing on such questions would reach the same
conclusions.
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ABSENCE OF A PUBLIC MARKET FOR THE NOTES; LIMITATIONS ON LIQUIDITY
The Existing Notes are eligible for trading in the PORTAL market. The New
Notes will be new securities for which there is currently no market. Although
the Initial Purchasers have informed the Company that they currently intend to
make a market in the Notes, they are not obligated to do so, and any such
market making may be discontinued at any time without notice. The Company does
not intend to apply for listing of the Notes on any securities exchange or
quotation through Nasdaq. Accordingly, there can be no assurance as to the
development or liquidity of any market for the Notes.
To the extent that Existing Notes are tendered and accepted in the Exchange
Offer, the trading market for the remaining untendered or tendered but not
accepted Existing Notes could be adversely affected. Because the Company
anticipates that most holders of the Existing Notes will elect to exchange
such Existing Notes for New Notes due to the absence of restrictions on the
resale of New Notes under the Securities Act, the Company anticipates that the
liquidity of the market for any Existing Notes remaining after the
consummation of the Exchange Offer may be substantially limited.
If a market does develop for the Notes, the Notes may trade at a discount
from their principal amount, and the price of the Notes may fluctuate
depending on many factors including, but not limited to, prevailing interest
rates, the Company's operating results and the market for similar securities.
Such fluctuations could have a greater impact on untendered or tendered but
not accepted Existing Notes than on New Notes. If a market for the Notes does
not develop, purchasers may be unable to resell such securities for an
extended period of time, if at all.
RISKS RELATING TO RESTRICTIONS ON RESALE
The Existing Notes were offered and sold in a private offering exempt from
registration pursuant to Section 4(2) of the Securities Act. As a result, the
Existing Notes may not be reoffered or resold by purchasers except pursuant to
an effective registration statement under the Securities Act, or pursuant to
an applicable exemption from such registration, and the Existing Notes are
legended to restrict such transfer. Upon consummation of the Exchange Offer,
Remington believes that it will have no further obligation to register the
Existing Notes. See "Registration Rights." The Existing Notes may be sold
pursuant to and in compliance with the restrictions set forth in Rule 144A or
Regulation S under the Securities Act without registration under the
Securities Act. In addition, pursuant to Rule 144 under the Securities Act,
Existing Notes may be sold by a holder that is not an affiliate of Remington,
and that has not been such an affiliate for the three months preceding the
sale, without registration under the Securities Act, if the sale occurs after
the later of December 1, 1996 and (if applicable) the date that is three years
after such Existing Notes were acquired from Remington or an affiliate of
Remington. These resale restrictions could adversely affect the liquidity or
value of the Existing Notes after the consummation of the Exchange Offer.
The Company believes that each holder (other than any holder who is an
affiliate of the Company) who duly exchanges Existing Notes for New Notes in
the Exchange Offer will receive New Notes that, under existing Commission
interpretations, generally will be freely tradable under the Securities Act.
Holders of Existing Notes who participate in the Exchange Offer should be
aware, however, that, except in the case of certain broker-dealers as
described below, if they accept the Exchange Offer for the purpose of engaging
in secondary resales, the New Notes may not be publicly reoffered or resold
without complying with the registration and prospectus delivery requirements
of the Securities Act. As a result, each holder of Existing Notes (except
certain broker-dealers as described below) accepting the Exchange Offer will
be deemed to have represented, by its acceptance of the Exchange Offer, that
it acquired the New Notes in the ordinary course of its business and such
holder (and any other person accepting the Exchange Offer on behalf of such
holder) neither is engaging in nor intends to engage in, and has no
arrangement or understanding with any person to participate in, a distribution
of the New Notes. Each broker-dealer that receives New Notes for its own
account in exchange for Existing Notes, where such Existing Notes were
acquired by such broker-dealer as a result of market-making activities or
other trading activities, must acknowledge that it will deliver a prospectus
in connection with any resale of such New Notes. See "Plan of Distribution."
If existing Commission interpretations permitting free transferability of the
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New Notes following the Exchange Offer are changed prior to consummation of
the Exchange Offer so as to further restrict the free transferability of the
New Notes, the Company will use its best efforts to register the Existing
Notes for resale under the Securities Act. See "The Exchange Offer" and
"Registration Rights."
NO FURTHER OBLIGATION OF THE COMPANY TO REGISTER EXISTING NOTES
Under the terms of the Registration Rights Agreement the Company has certain
obligations with respect to the filing and effectiveness of a Shelf
Registration Statement. Upon the consummation of the Exchange Offer, the
Company believes that it will have no further obligation in this regard. By
acceptance of the Exchange Offer, each holder of Existing Notes confirms that
such holder agrees that the Company is not obligated to file the Shelf
Registration Statement, consents to waive any requirement that the Company do
so and consents to waive certain additional rights related to the obligation
to file a Shelf Registration Statement. If holders of at least a majority in
aggregate principal amount of Existing Notes that are Registrable Securities
(as defined in the Registration Rights Agreement) so consent, such waiver will
be binding on all holders of Registrable Securities under the terms of the
Registration Rights Agreement. See "Exchange Offer--General," "Exchange
Offer--Termination of Certain Rights" and "Registration Rights." As a result,
the liquidity or value of the Existing Notes could be adversely affected
following the consummation of the Exchange Offer.
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THE COMPANY
Founded in 1816, the Company is engaged in the design, manufacture and sale
of sporting good products for the hunting, shooting sports and fishing
markets. The Company's product lines consist of firearms, ammunition and
hunting/gun care accessories sold under the Remington name and other labels,
fishing products sold under the Stren name and other labels and clay targets.
The Company is the only domestic manufacturer of both firearms and ammunition
and, according to the NSGA, is the largest U.S. manufacturer of shotguns and
rifles. The Company manufactures firearms at a one million square foot
facility in Ilion, New York, ammunition at a 750 thousand square foot plant in
Lonoke, Arkansas, and clay targets at two plants located in Findlay, Ohio and
Ada, Oklahoma. The Company has begun construction of a new 44 thousand square
foot firearms manufacturing facility in Mayfield, Kentucky at which the
Company expects to begin manufacturing rimfire rifles in March 1997. In 1995
the Company completed the consolidation of its research and development at a
new 33 thousand square foot facility in Elizabethtown, Kentucky. The Company
markets fishline sourced from third party manufacturers. The Company's
products are distributed throughout the United States and in over 50 other
countries, with distribution in the United States being primarily through
wholesalers, distributors and major retail chains. In 1995, 8% of the
Company's revenues were attributable to sales outside the United States.
Remington enjoys a domestic market leadership position for many of its
firearms product lines and is one of the three major manufacturers in the
domestic ammunition market. According to studies conducted for the Company,
among hunters and anglers, Remington and Stren are among the most-recognized
brand names in their markets. The Company believes that its substantial market
positions are attributable to the strength of the Remington brand name, the
Company's family of well-established products, the breadth of products sold by
the Company, product innovation and quality and the Company's marketing,
distribution and manufacturing expertise. In 1994, according to PPI, the
Company had the largest share of the retail shotgun market, at approximately
39%, with its nearest competitor holding a market share of approximately 25%.
Remington was also the second largest brand of rifles in the United States in
1994, according to PPI, with a market share of approximately 18%, with its
largest competitor holding a market share of approximately 25%. In the
ammunition market, the Company was the second largest manufacturer in the
United States in 1994, based on PPI data, with a share of approximately 25%,
with its nearest competitor holding a market share of approximately 35%. Sales
of firearms and ammunition comprised approximately 48% and 41%, respectively,
of the Company's sales in 1995. In the retail fishline market segment, the
Company held a share of approximately 26% in 1995, with its nearest competitor
holding a market share of approximately 36%, according to SMRG.
According to ASD, approximately 23 million people in the United States enjoy
the shooting sports, including approximately 17 million who hunt annually.
Total domestic consumer expenditures in this market for 1994 are estimated by
the NSGA to have been $379 million for shotguns, $794 million for rifles, and
$916 million for ammunition. Additionally, according to ASD approximately 23%
of the U.S. population (55 million people) consider themselves anglers.
Fishing is considered an inexpensive sport that can be enjoyed by people of
widely varying ages, skills and abilities. The NSGA estimated that the retail
market for recreational fishing tackle, of which the fishline segment forms a
relatively small part, exceeded $730 million in 1995; the Company's 26% market
share of the retail fishline market in 1995 constituted approximately 3% of
the total retail market in 1995 for recreational fishing tackle according to
SMRG.
The principal executive offices of Holding and the Company are located at
870 Remington Drive, P.O. Box 700, Madison, North Carolina 27025-0700 and
their telephone number is (910) 548-8700.
Remington and its parent, Holding, are Delaware corporations organized in
October 1993 to acquire the Company from the Sellers. Remington is a wholly-
owned subsidiary of Holding.
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THE EXCHANGE OFFER
GENERAL
The Existing Notes were sold by Remington on December 1, 1993 to the Initial
Purchasers in a transaction that was exempt from registration under Section
4(2) of the Securities Act. The Initial Purchasers placed the Existing Notes
with certain institutional and accredited investors in reliance on exemptions
from the registration requirements of the Securities Act, including pursuant
to Rule 144A thereunder. In connection with the initial sale of the Existing
Notes, the Company entered into the Registration Rights Agreement with the
Initial Purchasers pursuant to which the Company agreed, subject to certain
conditions, to use its best efforts to conduct the Exchange Offer. The
Company's purpose in making the Exchange Offer is to comply with the
Registration Rights Agreement and to reduce the interest rate on the Notes to
the rate in effect prior to the increase that occurred effective from April
30, 1994 because of the delay in consummating the Exchange Offer and to avoid
any need to file the Shelf Registration Statement to register the Existing
Notes for resale. See "Description of Notes--General" and "Registration
Rights." The full terms of the Company's obligations with respect to the
Exchange Offer are set forth in the Registration Rights Agreement, which has
been filed as an exhibit to the Registration Statement of which this
Prospectus is a part.
The Exchange Offer should provide holders of Existing Notes with the ability
to effect an exchange (which should not constitute a taxable exchange for
federal income tax purposes) of such Existing Notes, which may be subject to
trading limitations, for New Notes that the Company believes should not be
subject to such limitations. The Company has not sought, and does not intend
to seek, a no-action letter from the Commission with respect to the effects of
the Exchange Offer. In addition to providing holders of Existing Notes with
the ability to obtain publicly registered securities, the consummation of the
Exchange Offer and the issuance of the New Notes pursuant thereto will subject
the Company to the periodic and other reporting requirements of the Securities
Exchange Act of 1934, as amended, and the rules and regulations of the
Commission thereunder.
Holders of Existing Notes who participate in the Exchange Offer should be
aware that, except in the case of certain broker-dealers as described below,
if they accept the Exchange Offer for the purpose of participating in a
distribution of the New Notes, or if they have not acquired such New Notes in
the ordinary course of their business, they cannot rely on the interpretations
of the staff of the Commission enunciated in Exxon Capital Holdings
Corporation (available May 13, 1988) or similar no-action letters issued to
third parties and must comply with the registration and prospectus delivery
requirements of the Securities Act. Based on such interpretations of the staff
of the Commission set forth in such no-action letters, the Company believes
that the Exchange Offer will provide holders of Existing Notes with New Notes
that will generally be freely transferable by holders thereof (other than any
holder who is an "affiliate" of the Company within the meaning of Rule 405
under the Securities Act), who may offer for resale, resell or otherwise
transfer such New Notes without complying with the registration and prospectus
delivery provisions of the Securities Act, provided that such New Notes are
acquired in the ordinary course of each such holder's business and such holder
(and any other person accepting the Exchange Offer on behalf or any such
holder) neither is engaging in, nor intends to engage in, and has no
arrangement or understanding with any person to participate in, a distribution
of the New Notes. Each holder (and any other person accepting the Exchange
Offer on behalf of any such holder) of the Existing Notes who wishes to
exchange Existing Notes for New Notes in the Exchange Offer will be required
to represent, and by tendering Existing Notes and executing the Letter of
Transmittal, will be deemed to represent, that (i) it is neither an affiliate
of the Company nor a broker-dealer tendering Existing Notes acquired directly
from the Company for its own account, (ii) any New Notes to be received by it
were acquired in the ordinary course of its business and (iii) at the time of
commencement of the Exchange Offer, it neither is engaging in nor intends to
engage in, and has no arrangement or understanding with any person to
participate in, a distribution (within the meaning of the Securities Act) of
the New Notes.
Based on interpretations by the staff of the Commission as set forth in no-
action letters issued to third parties, the Company believes that each broker-
dealer that receives New Notes for its own account in exchange for Existing
Notes, where such Existing Notes were acquired by such broker-dealer as a
result of market-making
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<PAGE>
activities or other trading activities, must acknowledge that it will deliver
a prospectus with any resale of such New Notes. The Commission has taken the
position that such broker-dealers may fulfill their prospectus delivery
requirements with respect to a resale of New Notes (other than a resale of New
Notes received in exchange for an unsold allotment from the original sale of
the Existing Notes) with the prospectus contained in the Registration
Statement. Under the Registration Rights Agreement, for a period of 90 days
after the Expiration Date the Company is required to allow such broker-dealers
and other persons, if any, subject to similar prospectus delivery requirements
to use this Prospectus in connection with the resale of such New Notes. By
acceptance of this Exchange Offer, each broker-dealer that receives New Notes
pursuant to the Exchange Offer agrees to notify the Company in writing prior
to using this Prospectus in connection with the sale or transfer of New Notes.
See "Plan of Distribution." Broker-dealers, if any, that acquired their
Existing Notes from the Company in the initial offering of the Existing Notes
cannot use this Prospectus, and must comply with the registration and
prospectus delivery requirements of the Securities Act in connection with any
sale or transfer of New Notes, unless such sale or transfer is made pursuant
to an exemption from such requirements.
Except as described above, this Prospectus may not be used for or in
connection with an offer to resell, a resale or any other retransfer of New
Notes.
In addition, any holder of Existing Notes who is an affiliate of Remington
or who intends to participate in the Exchange Offer for the purpose of
distributing the New Notes (i) cannot rely on the interpretations of the staff
of the Commission set forth in the no-action letters referred to above, (ii)
cannot tender its Existing Notes in the Exchange Offer and (iii) must comply
with the registration and prospectus delivery requirements of the Securities
Act in connection with any sale or transfer of the Existing Notes, unless such
sale or transfer is made pursuant to an exemption from such requirements.
Because of the delay in the effectiveness of the Registration Statement
beyond the period provided in the Registration Rights Agreement, the
Registration Rights Agreement provides that the Company has certain
obligations with respect to the filing and effectiveness of the Shelf
Registration Statement. The Company does not intend to file the Shelf
Registration Statement in the event that the Exchange Offer is consummated.
The Company believes that it will have no further obligation in this regard
under the Registration Rights Agreement once the Exchange Offer has been
consummated. In addition, by acceptance of the Exchange Offer, each holder of
Existing Notes confirms that such holder agrees that the Company is not
obligated to file the Shelf Registration Statement once the Exchange Offer is
consummated, and consents to waive any requirement that the Company do so and
certain other provisions of the Registration Rights Agreement, effective upon
the consummation of the Exchange Offer. If holders of at least a majority in
aggregate principal amount of Existing Notes that are Registrable Securities
(as defined in the Registration Rights Agreement) so consent, such waiver will
be binding on all holders of Registrable Securities under the terms of the
Registration Rights Agreement. See "Registration Rights."
TERMS OF THE OFFER
The Company hereby offers, upon the terms and conditions set forth herein
and in the related Letter of Transmittal, to exchange New Notes for a like
principal amount of outstanding Existing Notes. An aggregate of $100,000,000
principal amount of Existing Notes are outstanding. The Exchange Offer is not
conditioned upon any minimum principal amount of Existing Notes being
tendered. The Exchange Agent will act as agent for the tendering holders of
Existing Notes for the purpose of receiving the New Notes from the Company.
The Exchange Offer will expire at 5:00 p.m., New York time, on , 1997
unless extended. The term "Expiration Date" means 5:00 p.m., New York City
time, on , 1997, unless the Company, in its sole discretion, notifies the
Exchange Agent that the period of the Exchange Offer has been extended, in
which case the term "Expiration Date" means the latest time and date on which
the Exchange Offer as so extended will expire. See "--Expiration and
Extension."
Holders of Existing Notes (or any other person accepting the Exchange Offer
on behalf of any such holder) who wish to exchange Existing Notes for New
Notes and who validly tender Existing Notes to the Exchange
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<PAGE>
Agent or validly tender Existing Notes by complying with the book-entry
transfer procedures described below and, in each case, who furnish the Letter
of Transmittal and any other required documents to the Exchange Agent, will
have New Notes mailed to them by the Exchange Agent, promptly after such
tender is accepted by the Company. Subject to the terms and conditions of the
Exchange Offer, Existing Notes which have been validly tendered prior to the
Expiration Date will be accepted on or promptly after the Expiration Date,
subject to the applicable rules of the Commission. See "--Conditions."
The Exchange Offer is being made in accordance with the Securities Act, the
Securities Exchange Act of 1934, as amended, and the rules and regulations of
the Commission. Changes in the terms of the Exchange Offer may necessitate the
filing of a post-effective amendment to the Registration Statement, the
distribution of an amended or supplemental prospectus or the dissemination of
information in a manner reasonably designed to inform the holders of the
Existing Notes of such change.
CERTAIN EFFECTS OF THE EXCHANGE OFFER
Because the Exchange Offer is for any and all Existing Notes, the number of
Existing Notes tendered and exchanged in the Exchange Offer will reduce the
principal amount of Existing Notes outstanding. As a result, the liquidity of
any remaining Existing Notes may be substantially reduced. The Existing Notes
are currently eligible for sale pursuant to Rule 144A through the PORTAL
System of the National Association of Securities Dealers, Inc. Because the
Company anticipates that most holders of Existing Notes will elect to exchange
such Existing Notes for New Notes due to the absence of restrictions on the
resale of New Notes under the Securities Act, the Company anticipates that the
liquidity of the market for any Existing Notes remaining outstanding after the
consummation of the Exchange Offer may be substantially limited.
The Existing Notes that are not exchanged for New Notes pursuant to the
Exchange Offer will remain restricted securities under the Securities Act, and
accordingly may only be offered, resold or otherwise transferred pursuant to
an exemption from the registration requirements of the Securities Act, in the
absence of any such registration. Pursuant to Rule 144 under the Securities
Act, Existing Notes may be sold by a holder that is not an affiliate of
Remington, and that has not been such an affiliate for the three months
preceding the sale, without registration under the Securities Act, if the sale
occurs after the later of December 1, 1996 and (if applicable) the date that
is three years after such Existing Notes were acquired from Remington or an
affiliate of Remington. If a holder of Existing Notes acquired such Existing
Notes from Remington or an affiliate of Remington, such Existing Notes may be
offered, sold or otherwise transferred, prior to the date that is three years
after the last date on which Remington or any affiliate of Remington owned
such Existing Notes, only (i) to Remington, (ii) pursuant to a registration
statement that has been declared effective under the Securities Act, (iii) for
so long as the Existing Notes are eligible for resale pursuant to Rule 144A,
to a person that the holder of such Existing Notes reasonably believes is a
"qualified institutional buyer" (as defined in Rule 144A) that purchases for
its own account or for the account of such a "qualified institutional buyer"
to whom notice is given that the transfer is being made in reliance on Rule
144A, (iv) pursuant to offers and sales to non-U.S. persons that occur outside
the United States within the meaning of Regulation S under the Securities Act,
(v) to an institutional "accredited investor" (as defined in Rule 501(a)(1),
(2), (3) or (7) of Regulation D under the Securities Act) that is acquiring
the security for its own account or for the account of such an institutional
"accredited investor," for investment purposes and not with a view to, or for
offer or sale in connection with, any distribution in violation of the
Securities Act, or (vi) pursuant to any other available exemption from the
registration requirements of the Securities Act, subject to the Company's and
the Trustee's right prior to any such offer, sale or transfer (a) pursuant to
clause (iv), (v) or (vi) to require the delivery of an opinion of counsel,
certification and/or other information satisfactory to each of them, and (b)
in each of the foregoing cases, to require that a certificate of transfer in
the form appearing on the Securities is completed and delivered by the
transferor to the trustee. After the Exchange Offer is completed, holders of
Existing Notes will not have certain registration rights under the
Registration Rights Agreement. See "--Termination of Certain Rights."
EXPIRATION AND EXTENSION
The Exchange Offer will expire at 5:00 p.m., New York City time, on ,
1997, unless extended by the Company. The Exchange Offer may be extended by
oral or written notice from the Company to the Exchange
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<PAGE>
Agent at any time or from time to time, on or prior to the date then fixed for
the expiration of the Exchange Offer. Public announcement of any extension of
the Exchange Offer will be timely made by the Company, but, unless otherwise
required by law or regulation, the Company will not have any obligation to
communicate such public announcement other than by making a release to the Dow
Jones News Service.
ACCRUED INTEREST ON THE NEW NOTES AND EXISTING NOTES
The New Notes will bear interest at a rate equal to 9 1/2% per annum (except
as otherwise described below), payable semi-annually on June 1 and December 1
of each year. Holders of Existing Notes that are accepted for exchange will
not receive any accrued interest thereon. However, each New Note will bear
interest from the most recent date to which interest has been paid on the
corresponding Existing Note. The Existing Notes bear interest at a rate equal
to 9 1/2% per annum to April 30, 1994, and equal to 10% per annum for the
period from April 30, 1994 to the day before the date of consummation of the
Exchange Offer. See "Registration Rights."
CONDITIONS
Notwithstanding any other provisions of the Exchange Offer, or any extension
of the Exchange Offer, the Company will not be required to accept for
exchange, or exchange New Notes for, any Existing Notes not theretofore
accepted for exchange, or to cause the issuance of New Notes in respect of any
validly tendered Existing Notes not accepted and, prior to the acceptance of
tendered Existing Notes, may amend or terminate the Exchange Offer (by oral or
written notice to the Exchange Agent and by timely public announcement
communicated, unless otherwise required by applicable law or regulation, by
making a release to the Dow Jones News Service) and, subject to compliance
with the applicable rules of the Commission, delay the acceptance of the
tendered Existing Notes, if any of the following conditions exist:
(a) the Exchange Offer, or the making of any exchange by a holder, violates
applicable law or any applicable interpretation of the staff of the
Commission; or
(b) there shall be instituted or threatened any action or proceeding before
any court or governmental agency with respect to the Exchange Offer
which, in the Company's judgment, would reasonably be expected to
impair the ability of the Company to proceed with the Exchange Offer;
or
(c) any law, statute, rule or regulation shall have been adopted or enacted
which, in the judgment of the Company, would reasonably be expected to
materially impair the ability of the Company to proceed with the
Exchange Offer.
Subject to the Company's obligations under the Registration Rights
Agreement, the Company expressly reserves the right, at any time prior to the
acceptance of tendered Existing Notes, to terminate the Exchange Offer and not
accept for exchange any Existing Notes or to delay acceptance of tendered
Existing Notes, upon the occurrence of any of the foregoing conditions,
subject to the provisions of Rule 14e-1(c) under the Exchange Act, which
requires that a tender offeror pay the consideration offered or return the
tendered securities promptly after the termination or withdrawal of a tender
offer. In addition, the Company may amend the Exchange Offer at any time prior
to the acceptance of tendered Existing Notes if any of the conditions set
forth above occur. Moreover, regardless of whether any of the foregoing
conditions have occurred, the Company reserves the right to amend the Exchange
Offer in any manner consistent with its obligations under the Registration
Rights Agreement prior to the acceptance of tendered Existing Notes, although
it has no current intention to do so. If any of the conditions set forth above
occur, the Company may waive certain of such conditions with respect to the
Exchange Offer and accept all properly tendered Existing Notes that have not
been withdrawn or revoked. If any such amendment or waiver constitutes a
material change to the Exchange Offer or in the information previously
disclosed to the holders of Existing Notes, the Company will, in accordance
with the applicable rules of the Commission, disseminate promptly disclosure
of such change in a manner reasonably calculated to inform holders of the
Existing Notes of such change. If it is necessary to permit adequate
dissemination of information regarding such material change, the Company will
extend the Exchange Offer to permit an adequate time for holders of Existing
Notes to consider the additional information.
The foregoing conditions are for the sole benefit of the Company and may be
asserted by the Company regardless of the circumstances giving rise to any
such condition or may be waived by the Company, in whole
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or in part, in its sole discretion. Any determination made by the Company
concerning an event, development or circumstance described or referred to
above will be final and binding on all parties to the Exchange Offer. In the
event that the Company deems satisfied any such condition, where it is
unreasonable to do so, such action may be the equivalent of a waiver by the
Company of such condition. If such action would be such a waiver, and such
waiver constitutes a material change to the Exchange Offer or in the
information previously disclosed to the holders of Existing Notes, the Company
will, in accordance with the applicable rules of the Commission, disseminate
promptly disclosure of such change in a manner reasonably calculated to inform
holders of the Existing Notes of such change.
If the event referred to in clause (a) above shall occur, the Company shall
be under no continuing obligation under the Registration Rights Agreement to
consummate the Exchange Offer, but in lieu thereof will be obligated to file
and use its best efforts to secure and maintain the effectiveness under the
Securities Act of a "shelf" registration statement providing for the resale of
Existing Notes. See "Registration Rights."
HOW TO TENDER
A holder of Existing Notes may tender Existing Notes by (a) properly
completing and signing the Letter of Transmittal or a facsimile thereof (all
references in this Prospectus to the Letter of Transmittal shall be deemed to
include a facsimile thereof) and delivering the same, together with the
Existing Notes being tendered (or a confirmation of an appropriate book-entry
transfer and any other required documents), to the Exchange Agent on or prior
to the Expiration Date, or (b) requesting a broker, dealer, bank, trust
company or other nominee to effect the transaction for such holder prior to
5:00 p.m., New York City time, on the Expiration Date. If any beneficial
holder whose Existing Notes are registered in the name of its broker, dealer,
bank, trust company or other nominee wishes to tender on its own behalf, such
beneficial holder must, prior to completing and executing the Letter of
Transmittal and delivering its Existing Notes, either make appropriate
arrangements to register ownership of the Existing Notes in such holder's name
or obtain a properly completed bond power from the registered holder. The
transfer of record ownership may take considerable time.
If New Notes are to be delivered to an address or issued in a name other
than that of the registered holder appearing on the Note Register, the
signature on the Letter of Transmittal must be guaranteed by a commercial bank
or trust company having an office or correspondent in the United States, or by
a member firm of a national securities exchange or the National Association of
Securities Dealers, Inc. (any of the foregoing is hereinafter referred to as
an "Eligible Institution").
The Exchange Agent will establish an account with respect to the Existing
Notes at DTC within two business days after the date of this Prospectus, and
any financial institution which is a participant in DTC may make book-entry
delivery of the Existing Notes by causing DTC to transfer such Existing Notes
into the Exchange Agent's account in accordance with DTC's procedure for such
transfer. Although delivery of Existing Notes may be effected through book-
entry transfer into the Exchange Agent's account at DTC, the Letter of
Transmittal, with any required signature guarantees and any other required
documents, must in any case be transmitted to and received by the Exchange
Agent prior to 5:00 p.m., New York City time, on the Expiration Date at one of
its addresses set forth below under "Exchange Agent," or the guaranteed
delivery procedure described below must be complied with. Delivery of
documents to DTC in accordance with its procedures does not constitute
delivery to the Exchange Agent. All references in this Prospectus to deposit
or delivery of Existing Notes shall be deemed to include DTC's book-entry
delivery method.
THE METHOD OF DELIVERY OF EXISTING NOTES AND ALL OTHER DOCUMENTS, INCLUDING
DELIVERY THROUGH DTC, IS AT THE ELECTION AND RISK OF THE HOLDER. IF SENT BY
MAIL, IT IS RECOMMENDED THAT REGISTERED OR CERTIFIED MAIL, RETURN RECEIPT
REQUESTED, BE USED, AND PROPER INSURANCE BE OBTAINED. IN ALL CASES, SUFFICIENT
TIME SHOULD BE ALLOWED TO ASSURE TIMELY DELIVERY. NO EXISTING NOTE OR LETTER
OF TRANSMITTAL SHOULD BE SENT TO THE COMPANY.
If a holder desires to tender Existing Notes pursuant to the Exchange Offer
and such holder's Existing Notes are not immediately available or time will
not permit all of the above documents to reach the Exchange Agent prior to the
Expiration Date, or such holder cannot complete the procedure of book-entry
transfer on a timely basis, such tender may be effected if the following
conditions are satisfied:
(a) such tender is made by or through an Eligible Institution;
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<PAGE>
(b) a properly completed and duly executed Notice of Guaranteed Delivery,
in substantially the form provided by the Company, is received by the
Exchange Agent as provided below prior to 5:00 p.m., New York City
time, on the Expiration Date; and
(c) the Existing Notes, in proper form for transfer (or confirmation of
book-entry transfer of such Existing Notes into the Exchange Agent's
account at DTC as described above), together with a properly completed
and duly executed Letter of Transmittal and all other documents
required by the Letter of Transmittal, are received by the Exchange
Agent within five New York Stock Exchange, Inc. trading days after the
date of execution of such Notice of Guaranteed Delivery.
The Notice of Guaranteed Delivery may be delivered by hand or transmitted by
facsimile transmission or mail to the Exchange Agent and must include a
guarantee by an Eligible Institution in the form set forth in such Notice of
Guaranteed Delivery.
A tender will be deemed to have been received as of the date when the
tendering holder's duly signed Letter of Transmittal accompanied by Existing
Notes (or a timely confirmation received of a book-entry transfer of Existing
Notes into the Exchange Agent's account at DTC) or a Notice of Guaranteed
Delivery from an Eligible Institution is received by the Exchange Agent.
Issuances of New Notes in exchange for Existing Notes tendered pursuant to a
Notice of Guaranteed Delivery by an Eligible Institution will be made only
against delivery of the Letter of Transmittal (and any other required
documents) and the tendered Existing Notes (or a timely confirmation received
of a book-entry transfer of Existing Notes into the Exchange Agent's account
at DTC) with the Exchange Agent.
With respect to tenders of Existing Notes, the Company reserves full
discretion to determine whether the documentation is complete and generally to
determine all questions as to tenders, including the date of receipt of a
tender, the propriety of execution of any document, and other questions as to
the validity, form, eligibility or acceptability of any tender. The Company
reserves the absolute right to reject any and all tenders not in proper form
or otherwise not valid or the acceptance of exchange of which may, in the
opinion of the Company's counsel, be unlawful, or to waive any defects,
irregularities or conditions, and the Company's interpretation of the terms
and conditions of the Exchange Offer (including the instructions on the Letter
of Transmittal) will be final and binding on all parties. The Company shall
not be obligated to give notice of any defects or irregularities in tenders
and shall not incur any liability for failure to give any such notice. The
Exchange Agent shall not be obligated to give notice of any irregularities or
defects in tenders, and shall not incur any liability for any failure to give
any such notice. Existing Notes shall not be deemed to have been duly or
validly tendered unless and until all defects and irregularities have been
cured or waived. All improperly tendered Existing Notes, as well as Existing
Notes in excess of the principal amount tendered for exchange, will be
returned (unless irregularities and defects are timely cured or waived),
without cost to the tendering holder (or, in the case of Existing Notes
delivered by book-entry transfer within DTC, will be credited to the account
maintained within DTC by the participant in DTC which delivered such shares),
promptly after the Expiration Date.
In addition, the Company reserves the right in its sole discretion to
purchase or make offers for any Existing Notes that remain outstanding
subsequent to the Expiration Date or, as set forth above under "Conditions,"
to terminate the Exchange Offer and, to the extent permitted by applicable
law, purchase Existing Notes in the open market, in privately negotiated
transactions or otherwise. The terms of any such purchases or offers could
differ from the terms of the Exchange Offer.
TERMS AND CONDITIONS OF THE LETTER OF TRANSMITTAL
The Letter of Transmittal contains certain terms and conditions, including
those summarized below, which are part of the Exchange Offer.
Tendering Existing Notes and execution of the Letter of Transmittal are
deemed to constitute a representation, warranty and agreement that the
tendering holder of Existing Notes (and any other person accepting the
Exchange Offer on behalf of any such holder) is not an affiliate of the
Company, that it acquired the New Notes in the ordinary course of its business
and that it neither is engaging in nor intends to engage in, and has no
arrangement or understanding with any person to participate in, a distribution
of the New Notes. If the tendering holder of Existing Notes is a broker-dealer
that will receive New Notes for its own account in
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exchange for Existing Notes that were acquired as a result of market-making
activities or other trading activities, tendering Existing Notes and execution
of the Letter of Transmittal are deemed to constitute an acknowledgment and
agreement by such holder that it will deliver a prospectus in connection with
any resale of such New Notes. See "Plan of Distribution." In addition,
tendering Existing Notes and execution of the Letter of Transmittal are deemed
to constitute a confirmation by the tendering holder of Existing Notes of such
holder's agreement that the Company will have no obligation to file the Shelf
Registration Statement once the Exchange Offer is consummated, and a consent
by such holder to waive any requirement that the Company do so and certain
other provisions of such agreement, which consent is conditioned on the
consummation of the Exchange Offer. See "Registration Rights."
Existing Notes tendered in exchange for New Notes (or a timely confirmation
of a book-entry transfer of such Existing Notes into the Exchange Agent's
account at DTC) must be received by the Exchange Agent, with the Letter of
Transmittal and any other required documents, by 5:00 p.m., New York City
time, on or prior to , 1997, unless extended, or within the time periods
set forth above in "How to Tender" pursuant to a Notice of Guaranteed Delivery
from an Eligible Institution. The party tendering the Existing Notes for
exchange (the "Holder") sells, assigns and transfers the Existing Notes to the
Exchange Agent, as agent of the Company, and irrevocably constitutes and
appoints the Exchange Agent as the Holder's agent and attorney-in-fact to
cause the Existing Notes to be transferred and exchanged. Tendering Existing
Notes and execution of the Letter of Transmittal are deemed to constitute a
representation, warranty and agreement by the Holder that (a) it has full
power and authority to tender, exchange, sell, assign, and transfer the
Existing Notes and to acquire the New Notes issuable upon the exchange of such
tendered Existing Notes, (b) the Exchange Agent, as agent of the Company, will
acquire good and unencumbered title to the tendered Existing Notes, free and
clear of all liens, restrictions, charges and encumbrances, (c) the Existing
Notes tendered for exchange are not subject to any adverse claims when
accepted by the Exchange Agent, as agent of the Company, and (d) the Holder
will, upon request, execute and deliver any additional documents deemed by the
Company or the Exchange Agent to be necessary or desirable to complete the
exchange, sale, assignment and transfer of the Existing Notes. All authority
conferred or agreed to be conferred in the Letter of Transmittal by the Holder
will survive the death or incapacity of the Holder and any obligation of the
Holder shall be binding upon the heirs, personal representatives, successors
and assigns of such Holder.
Signature(s) on the Letter of Transmittal will be required to be guaranteed
as set forth above in "How to Tender." All questions as to the validity, form,
eligibility (including time of receipt) and acceptability of any tender will
be determined by the Company, in its sole discretion, and such determination
will be final and binding on all parties. Unless waived by the Company,
irregularities and defects must be cured by the Expiration Date.
WITHDRAWAL RIGHTS
Except as otherwise provided herein, all tenders of Existing Notes may be
withdrawn at any time prior to acceptance thereof on the Expiration Date. To
be effective, a notice of withdrawal must be timely received by the Exchange
Agent at the address set forth below under "Exchange Agent." Any notice of
withdrawal must specify the person named in the Letter of Transmittal as
having tendered the Existing Notes to be withdrawn. If the Existing Notes have
been physically delivered to the Exchange Agent, the tendering holder must
also submit the serial number shown on the particular Existing Notes to be
withdrawn. If the Existing Notes have been delivered pursuant to the book-
entry procedures set forth above under "How to Tender," any notice of
withdrawal must specify the name and number of the participant's account at
DTC to be credited with the withdrawn Existing Notes. Any notice of withdrawal
must be signed by the tendering holder in the same manner as the signature on
the relevant Letter of Transmittal by which such Existing Notes were tendered
(including any required signature guarantees) or be accompanied by documents
of transfer sufficient to have the Trustee with respect to the Existing Notes
register the transfer of such Existing Notes into the name of the person
withdrawing the tender. The Exchange Agent will return properly withdrawn
Existing Notes as soon as practicable following receipt of notice of
withdrawal. Properly withdrawn Existing Notes may be retendered by following
one of the procedures described above under "How to Tender" at any time prior
to 5:00 p.m., New York City time, on the Expiration Date. All questions as to
the validity, including time of receipt, of notices of withdrawals will be
determined by the Company, in its sole discretion, and such determination will
be final and binding on all parties.
30
<PAGE>
ACCEPTANCE OF TENDERS
Subject to the terms and conditions of the Exchange Offer, including the
reservation of certain rights by the Company, Existing Notes tendered (either
physically or through book-entry delivery as described in "How to Tender")
with a properly executed Letter of Transmittal and all other required
documentation, and not withdrawn, will be accepted promptly after the
Expiration Date. Subject to such terms and conditions, New Notes to be issued
in exchange for properly tendered Existing Notes will be issued to Non-Global
Purchasers in registered, certificated form without coupons, and to QIBs in
the form of a beneficial interest in a New Global Certificate. Beneficial
interests in the New Global Certificate will be shown on, and transfers will
be effected only through, records maintained by DTC and its participants.
Subject to such terms and conditions, certificated New Notes to be so issued
in exchange for properly tendered Existing Notes will be mailed by the
Exchange Agent promptly after the acceptance of the tendered Existing Notes.
Acceptance of tendered Existing Notes will be effected by the delivery of a
notice to that effect by the Company to the Exchange Agent. As described above
under "Conditions," the Company reserves the right, prior to the acceptance of
tendered Existing Notes, to terminate the Exchange Offer, to delay acceptance
of tendered Existing Notes or to amend the Exchange Offer, upon the occurrence
of any of the conditions set forth above under "Conditions," or to waive such
condition. The Company's reservation of the right to terminate the Exchange
Offer, or to delay acceptance of tendered Existing Notes, is subject to the
provisions of Rule 14e-1(c) under the Exchange Act, which requires that a
tender offeror pay the consideration offered or return the tendered securities
promptly after the termination or withdrawal of a tender offer.
Although the Company does not currently intend to do so, if it modifies the
terms of the Exchange Offer, such modified terms will be available to all
holders of Existing Notes, whether or not their Existing Notes have been
tendered prior to such modification. Any material modification will be
disclosed in accordance with the applicable rules of the Commission and, if
required, the Exchange Offer will be extended to permit holders of Existing
Notes adequate time to consider such modification.
The tender of Existing Notes pursuant to any one of the procedures set forth
in "How to Tender" will constitute an agreement between the tendering holder
and the Company upon the terms and subject to the conditions of the Exchange
Offer.
EXCHANGE AGENT
First Trust National Association has been appointed as Exchange Agent for
the Exchange Offer. Letters of Transmittal must be addressed to the Exchange
Agent as follows:
Facsimile Transmission: Address for Mailing and Hand
Facsimile Number: (212) 509-4529 Deliveries:
Confirm by Telephone: (212) 361-2546 First Trust New York 100 Wall
Street, 20th Floor New York, New
York 10005 Attention: Cathy Donohue
Delivery to other than the above address will not constitute valid delivery.
Owners of Existing Notes who require further information should call (612)
244-1197.
SOLICITATION OF TENDERS; EXPENSES
Except as described above under "Exchange Agent," the Company has not
retained any agent in connection with the Exchange Offer and will not make any
payments to brokers, dealers or other persons for soliciting or recommending
acceptances of the Exchange Offer. The Company, will, however, reimburse the
Exchange Agent for its reasonable out-of-pocket expenses in connection
therewith. The Company will also pay brokerage houses and other custodians,
nominees and fiduciaries the reasonable out-of-pocket expenses incurred by
them in forwarding copies of this Prospectus and related documents to the
beneficial owners of the Existing Notes and in handling or forwarding tenders
for their customers.
31
<PAGE>
The cash expenses to be incurred by the Company and its agents and advisors
in connection with the Exchange Offer will be paid by the Company and include
fees and expenses of the Exchange Agent and trustees under the Indenture and
accounting and legal fees.
TRANSFER TAXES
The Company will pay all transfer taxes, if any, applicable to the transfer
of Existing Notes to it or its order pursuant to the Exchange Offer. If,
however, New Notes and/or substitute Existing Notes not exchanged are to be
delivered to, or are to be registered or issued in the name of, any person
other than the registered holder of the Existing Notes tendered, or if
tendered Existing Notes are registered in the name of any person other than
the person signing the Letter of Transmittal, or if a transfer tax is imposed
for any reason other than the transfer of Existing Notes to the Company or its
order pursuant to the Exchange Offer, the amount of any such transfer taxes
(whether imposed on the registered holder or any other person) will be payable
by the tendering holder. If satisfactory evidence of payment of such taxes or
exemption therefrom is not submitted with the Letter of Transmittal, the
amount of such transfer taxes will be billed directly to such tendering
holder.
ACCOUNTING TREATMENT
The Company's carrying value of the Existing Notes is expected to become the
carrying value of the New Notes at the time of the Exchange Offer.
Accordingly, the Company will not recognize any gain or loss for accounting
purposes. The expenses of the Exchange Offer, including the unamortized
issuance costs of the Existing Notes, will be amortized over the term of the
New Notes.
RESALES OF THE NEW NOTES
With respect to resales of New Notes, based on interpretations of the staff
of the SEC set forth in no-action letters issued to third parties, the Company
believes that a holder (other than a person that is an affiliate of the
Company within the meaning of Rule 405 under the Securities Act) who exchanges
Existing Notes for New Notes in the ordinary course of business and who is not
participating, does not intend to participate and has no arrangement or
understanding with any person to participate, in the distribution of the New
Notes, will be allowed to resell the New Notes to the public without further
registration under the Securities Act and without delivering to the purchasers
of the New Notes a prospectus that satisfies the requirements of Section 10
thereof. However, if any holder acquires New Notes in the Exchange Offer for
the purpose of distributing or participating in a distribution of the New
Notes, such holder cannot rely on the interpretations of the staff of the
Commission enunciated in Exxon Capital Holdings Corporation (available May 13,
1988), Morgan Stanley & Co., Inc. (available June 5, 1991) and Shearman &
Sterling (available July 2, 1993) or similar no-action letters or any similar
interpretive letters, and must comply with the registration and prospectus
delivery requirements of the Securities Act in connection with a secondary
resale transaction, unless an exemption from registration is otherwise
available.
As contemplated by the above no-action letters and the Registration Rights
Agreement, each holder accepting the Exchange Offer is required to represent,
acknowledge and agree in the Letter of Transmittal that (i) the New Notes are
to be acquired by the holder in the ordinary course of business, (ii) the
holder neither is engaging in nor intends to engage in, and has no arrangement
or understanding with any person to participate in, a distribution of the New
Notes, (iii) the holder is not an affiliate of the Company and (iv) if such
holder participates in the Exchange Offer for the purpose of distributing the
New Notes such holder must comply with the registration and prospectus
delivery requirements of the Securities Act in connection with a secondary
resale of the New Notes and cannot rely on the above no-action letters.
Each broker-dealer that receives New Notes for its own account in exchange
for Existing Notes, where such Existing Notes were acquired by such broker-
dealer as a result of market-making activities or other trading activities,
must acknowledge and agree that it will deliver a prospectus in connection
with any resale of such New Notes. See "--General" and "Plan of Distribution."
Broker-dealers, if any, that acquired their Existing Notes from the Company in
the initial offering of the Existing Notes cannot use this Prospectus in
connection
32
<PAGE>
with any resale of New Notes, and must comply with the registration and
prospectus delivery requirements of the Securities Act in connection with any
sale or transfer of New Notes, unless such sale or transfer is made pursuant
to an exemption from such requirements.
TERMINATION OF CERTAIN RIGHTS
Holders of the Notes will not be entitled to certain special rights under
the Registration Rights Agreement, which rights will terminate with respect to
the Notes upon the consummation of the Exchange Offer. The rights that will
terminate include the right to require the Company to file with the
Commission, and use its best efforts to cause to become effective under the
Securities Act, a registration statement with respect to the New Notes. The
Company believes that it also will no longer have any obligation to file with
the Commission, use its best efforts to cause to become effective under the
Securities Act, and keep continuously effective for a period of up to 3 years,
any "shelf" registration statement providing for the registration of, and the
sale on a continuous or delayed basis by the holders of, all of the Existing
Notes. In addition, by acceptance of the Exchange Offer, each holder confirms
that such holder agrees that the Company is not obligated to file any such
shelf registration statement once the Exchange Offer is consummated, and
consents to waive any requirement that the Company do so and certain other
provisions of the Registration Rights Agreement effective upon the
consummation of the Exchange Offer. If holders of at least a majority in
aggregate principal amount of Existing Notes that are Registrable Securities
(as defined in the Registration Rights Agreement) so consent, such waiver will
be binding on all holders of Registrable Securities under the terms of the
Registration Rights Agreement. See "Registration Rights."
33
<PAGE>
THE ACQUISITION
GENERAL
The proceeds of the offering of the Existing Notes comprised a portion of
the financing for the Acquisition. The terms and conditions of the Acquisition
are set forth in the Asset Purchase Agreement.
Under the Asset Purchase Agreement, Remington acquired the Business at the
Closing and, in connection therewith, assumed (i) certain specified
liabilities, including certain trade payables and contractual obligations of
Sporting Goods, (ii) financial responsibility up to the Cap, in a maximum
aggregate amount of $25 million, for certain product liability claims relating
to disclosed occurrences prior to the Closing and for environmental claims
relating to the operation of the Business prior to the Closing and (iii)
liabilities for product liability claims relating to occurrences after the
Closing, except for claims involving discontinued products. All other
liabilities relating to or arising out of the operation of the Business prior
to the Closing are excluded liabilities (the "Excluded Liabilities") which the
Sellers retained and with respect to which the Sellers have certain
obligations to indemnify Remington, as discussed below. The net cash purchase
price paid for the Business was approximately $300 million. The cash purchase
price paid at the Closing, together with fees and expenses related to the
Acquisition, was financed by $141 million in bank borrowings, the issuance of
$100 million principal amount of senior subordinated notes, $75 million in
proceeds from the issuance of common stock and $11 million in cash from
operations.
ASSET PURCHASE AGREEMENT
The following summary of certain provisions of the Asset Purchase Agreement
does not purport to be complete and is subject to, and is qualified in its
entirety by reference to, all the provisions of the Asset Purchase Agreement,
a copy of which is filed as an Exhibit to the Registration Statement of which
this Prospectus forms a part.
The Asset Purchase Agreement provided for a purchase price adjustment based
on a net working capital calculation determined on the basis of an audited
closing balance sheet. The parties were unable to agree on the amount of the
adjustment and accordingly submitted the matter to arbitration, which resulted
in a $0.2 million adjustment in the Company's favor. Although the purchase
price adjustment process has been concluded, DuPont has not provided the
Company with the audited financial statements of the Business for the pre-
Closing period of 1993, and accordingly the Company has obtained such
statements through a separate audit by its accountants.
Under the Asset Purchase Agreement, the Remington pension plan was to
receive from DuPont an amount equal to the present value, as of December 1,
1993, of the projected pension benefit obligation (the "PBO") related to
employees of the Sellers who were hired by the Company in connection with the
Acquisition. DuPont calculated the PBO to be $29.8 million, and pursuant to
the terms of the Asset Purchase Agreement, has transferred $23.9 million, or
80% of that amount, plus interest, to the Remington plan. On December 20,
1996, the Company and DuPont agreed to a final settlement of $42.6 million,
including interest.
The Asset Purchase Agreement contains certain customary representations,
warranties and covenants. The Asset Purchase Agreement requires the Sellers to
indemnify Remington and its affiliates for inaccuracies in the representations
and warranties made in the Asset Purchase Agreement (environmental matters
being addressed separately), for the Sellers' failure to comply with covenants
made in the Asset Purchase Agreement, and in respect of the Excluded
Liabilities, which include, among other liabilities, certain tax liabilities
and certain employee and retiree compensation and benefit liabilities. Subject
to certain exceptions, the Sellers' indemnification obligation with respect to
inaccuracies in their representations and warranties is subject to a
deductible of $1.5 million and is limited to individual claims that exceed
$25,000. The Sellers' overall liability in respect of their representations
and warranties, covenants and the Excluded Liabilities, excluding
34
<PAGE>
environmental liabilities and certain product liability matters of the
Company, is limited to an amount equal to the $299.8 million cash portion of
the adjusted purchase price for the Acquisition plus $25 million. With certain
exceptions, the Sellers' representations and warranties in the Asset Purchase
Agreement expired 18 months after the Closing, and all claims for
indemnification with respect thereto under the Asset Purchase Agreement were
to have been asserted within 30 days of such expiration. The Company made
claims for such indemnification involving product liability issues within such
time period. See "Business--Legal Proceedings."
Under the Asset Purchase Agreement, Remington's financial responsibility for
all environmental liabilities relating to the ownership or operation of the
Business prior to the Closing, and for liabilities relating to any product
liability claims arising from occurrences prior to Closing, is limited to the
Cap of $25 million in the aggregate. See "Risk Factors--Risks Relating to
Product Liability." The Sellers retained all liabilities in respect of such
environmental and product liability matters in excess of such amount, as well
as for all claims relating to discontinued products, and are required to
indemnify Remington with respect thereto. The Sellers are also required to
indemnify Remington for certain other product-related claims for economic
loss. See "Business--Legal Proceedings." In addition, pursuant to the
agreement discussed below, the Sellers have agreed to indemnify Remington
against certain product liability claims involving shotguns and arising from
occurrences on or prior to November 30, 1999. These indemnification
obligations of the Sellers relating to product liability and environmental
matters (subject to a limited exception) are not subject to any survival
period limitation, deductible or other dollar threshold or cap. At the
Closing, the Sellers and Remington entered into separate agreements setting
forth agreed procedures for the management and disposition of environmental
and product liability claims and proceedings relating to the operation or
ownership of the Business prior to the Closing, and are currently engaged in
the joint defense of certain product liability claims and proceedings. See
"Business--Legal Proceedings."
The Sellers and Remington have entered into an agreement in connection with
the settlement of the Garza litigation. See "Business--Legal Proceedings."
Pursuant to this agreement, the Sellers have agreed to share financial
responsibility for a portion of the costs relating to product liability claims
arising from occurrences after the Closing and on or prior to November 30,
1999 that allegedly involve the use of certain barrel steel on certain models
of Remington brand shotguns, whether produced before or after the Closing. The
Sellers have also agreed to pay the cost of the settlement fund in the Garza
litigation, without reference to the Cap. This fund includes approximately
$19.0 million to be distributed to class members, approximately $12.0 million
in plaintiffs' counsel fees and costs and more than $1 million for costs of
administering the fund. In addition, Remington and the Sellers have agreed to
release any claims they may have against each other relating to shotguns
(excluding various indemnification rights and the allocation of certain costs
under the Cap). Any claims between the Company and the Sellers relating to
other product liability issues remain open. See "Business--Legal Proceedings."
OTHER AGREEMENTS AND RELATIONSHIPS WITH THE SELLERS
In connection with the Acquisition, Remington entered into a transitional
services agreement with DuPont under which DuPont provided various services
(e.g., cash management, vendor payment, benefits administration and payroll
and information systems support services). All of these services have now been
taken over by the Company.
Remington did not acquire from DuPont the assets used to manufacture
fishline. Remington currently purchases the majority of its fishline products
from DuPont. In 1993, it entered into a supply agreement, which expired in
December 1996, under which DuPont supplies nylon monofilament fishline to
Remington. The parties have begun discussions with respect to a renewal of
this agreement. The Company believes it has a good relationship with the
division of DuPont that produces nylon monofilament fishline, and believes it
will be able to negotiate a new supply agreement, although there can be no
assurance in this regard. See "Business--Supply of Raw Materials."
35
<PAGE>
USE OF PROCEEDS
This Exchange Offer is intended to satisfy certain of the Company's
obligations under the Registration Rights Agreement. The Company will not
receive any cash proceeds from the issuance of the New Notes offered hereby.
In consideration for issuing the New Notes as contemplated in this Prospectus,
the Company will receive in exchange Existing Notes in like principal amount,
the form and terms of which are the same as the form and terms of the New
Notes, except as otherwise described herein. The Existing Notes surrendered in
exchange for New Notes will be retired and canceled and cannot be reissued.
Accordingly, issuance of the New Notes will not result in any increase in the
indebtedness of the Company. Proceeds from the sale of the Existing Notes
comprised a portion of the financing of the Acquisition.
The proceeds to Remington from the sale of the Existing Notes were
approximately $99 million, net of Initial Purchasers' discount. Such proceeds
were used, together with the proceeds of approximately $141 million in
borrowings under the Credit Agreement, $75 million in proceeds from sale of
the Holding common stock and $11 million in cash from operations to pay the
initial cash purchase price for the Acquisition of approximately $300 million
and to pay fees and expenses incurred in connection with the Acquisition. See
"The Acquisition--General."
CAPITALIZATION OF HOLDING
The following table sets forth the consolidated capitalization of Holding as
of September 30, 1996. The table should be read in conjunction with the
"Selected Financial Information" and the Company's consolidated financial
statements and related notes included elsewhere in this Prospectus.
<TABLE>
<CAPTION>
SEPTEMBER 30, 1996
------------------
(IN MILLIONS)
<S> <C>
Debt:
Credit Agreement:
Term Loan Facility............................... $ 89.8
Revolving Credit Facility (a).................... 93.0
Existing Notes (b)................................. 99.5
Capital Lease Obligations.......................... 6.1
------
Total debt....................................... $288.4
Stockholder's Equity:
Common Stock, par value $.01; 2,500,000 shares au-
thorized and 750,000 issued....................... $ --
Paid in Capital.................................... 75.0
Retained Earnings.................................. 18.3
------
Total Stockholder's Equity......................... $ 93.3
------
Total Capitalization............................... $381.7
------
</TABLE>
- --------
(a) Borrowings of approximately $93.0 million and open letters of credit of
approximately $5.1 million were outstanding at September 30, 1996 under
the $150 million Revolving Credit Facility. See "Description of Credit
Agreement."
(b) Net of unamortized discount of approximately $0.5 million, which will be
amortized using the interest method over the remaining term of the Notes.
36
<PAGE>
SELECTED FINANCIAL INFORMATION
The following table sets forth certain selected financial information
derived from the Company's financial statements for the five year period ended
December 31, 1995 and the nine months ended September 30, 1996 and 1995. The
financial information for the three-year period ended December 31, 1995 has
been derived from the Company's audited consolidated financial statements. The
financial information for the nine months ended September 30, 1996 and 1995
has been derived from the Company's unaudited interim financial statements,
which reflect, in the opinion of the Company, all adjustments, which include
only normal recurring adjustments, necessary to a fair presentation of the
financial data for such periods. Results for interim periods are not
necessarily indicative of results for the full year. The balance sheet and
income statement information as of and for each of the two years ended
December 31, 1991 and 1992, respectively, and as of and for the eleven-month
period ended November 30, 1993, relate to the businesses conducted through
Sporting Goods prior to the Acquisition. The consolidated balance sheet and
consolidated income statement information as of and for the one-month period
ended December 31, 1993 and as of and for the two years ended December 31,
1994 and 1995, respectively, relate to Remington and its operations.
Generally, the comparability of the Company's results of operations for the
years ended December 31, 1995 and 1994 and the one-month period ended December
31, 1993, to its results of operations for the eleven-month period ended
November 30, 1993 and the years ended December 31, 1992 and 1991, are
significantly limited because of the effects of the Acquisition. The table
should be read in conjunction with "Management's Discussion and Analysis of
Financial Condition and Results of Operations," and the Company's financial
statements and related notes and other financial information included
elsewhere in this Prospectus.
<TABLE>
<CAPTION>
REMINGTON SPORTING GOODS BUSINESS
------------------------------------------ -------------------------------------
NINE MONTHS
ENDED YEAR ENDED ONE MONTH ELEVEN MONTHS YEAR ENDED
SEPTEMBER 30, DECEMBER 31, ENDED ENDED DECEMBER 31,
--------------- -------------- DEC. 31, NOV. 30, --------------
1996 1995 1995 1994 1993 1993 1992 1991
------ ------ ------ ------ --------- ------------- ------ ------
(UNAUDITED)
(DOLLARS IN MILLIONS EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS
DATA:
Sales (a)............... $316.5 $333.6 $427.0 $417.7 $ 19.2 $346.9 $341.7 $312.4
Gross Profit............ 97.1 112.0 141.7 130.6 3.4 106.0 104.5 84.5
Operating Expenses (b).. 78.5 72.6 100.2 94.2 5.5 99.4 80.3 72.8
Operating Profit
(Loss)................. 18.6 39.4 41.5 36.4 (2.1) 6.6 24.2 11.7
Interest Expense........ 19.2 16.1 21.5 20.6 1.5 5.3 6.8 7.2
Profit (Loss) before
Income Taxes........... (.6) 23.3 20.0 15.8 (3.6) 2.0 19.1 5.4
Net Income (Loss) before
Effect of Accounting
Changes................ (.3) 13.9 11.5 9.4 (2.3) 1.4 12.0 3.5
Effect of Changes in
Accounting for
Postretirement Benefits
other than Pensions and
Postemployment Benefits
(c).................... -- -- -- -- -- (74.1) -- --
Net Income (Loss)....... (.3) 13.9 11.5 9.4 (2.3) (72.7) 12.0 3.5
Net Income (Loss) Per
Common Share........... (.40) 18.53 15.33 12.53 (3.07) -- -- --
Ratio of Earnings to
Fixed Charges (d)...... 1.0x 2.4x 1.9x 1.8x -- -- 3.6x 1.7x
OPERATING AND OTHER
DATA:
EBITDA (e).............. $ 30.9 $ 50.4 $ 56.0 $ 68.0 $ 4.0 $ 16.8 $ 36.5 $ 26.8
EBITDA Margin (f)....... 9.8% 15.1% 13.1% 16.3% 20.8% 4.8% 10.7% 8.6%
Depreciation and
Amortization........... 11.5 9.7 13.2 12.1 1.0 9.5 10.6 10.2
Capital Expenditures.... 12.8 13.3 18.9 9.3 0.8 9.1 9.5 11.6
Ratio of EBITDA to
Interest Expense
(e)(g)................. 1.6x 3.1x 2.6x 3.3x 2.7x 3.2x 5.4x 3.7x
Consolidated Fixed
Charge Coverage Ratio
(g).................... 1.0x 3.1x 2.5x 2.3x -- 3.0x 5.0x 3.1x
BALANCE SHEET DATA (END
OF PERIOD):
Working Capital......... $205.5 $153.2 $125.0 $131.3 $125.8 $ 93.9 $ 97.6 $105.3
Total Assets............ 480.4 422.3 404.4 403.3 403.2 175.6 172.0 180.2
Total Debt (h).......... 288.4 231.9 213.2 219.8 229.4 -- 0.7 0.8
Shareholder's Equity.... 93.3 96.0 93.6 82.1 72.7 115.0 145.4 153.3
</TABLE>
(Footnotes on following page)
37
<PAGE>
(Footnotes)
- --------
(a) Sales are presented net of federal excise taxes. Excise taxes were $25.8
million and $28.7 million for the years ended December 31, 1991, and 1992
and $28.8 million for the eleven-month period ended November 30, 1993,
respectively, $1.4 million for the one-month period ended December 31,
1993, $33.7 million and $36.0 million for the years ended December 31,
1994 and 1995, respectively and $27.8 million and $26.5 million for the
nine-month periods ended September 30, 1995 and 1996, respectively.
(b) In 1991, DuPont announced a cost improvement initiative for the business
segments of which the Company was a part. Costs of these programs were
accrued by DuPont in the fourth quarter of 1991 and included estimates of
the cost for enhanced pension benefits and other payments for actual and
projected employee terminations associated with these programs. The $4.0
million restructuring charge in 1991 includes a $2.9 million charge from
DuPont for the cost of these programs to the Company, and $1.1 million
related to a restructuring of the Company's marketing and sales
organization.
(c) Effective January 1, 1993 the Company adopted Statement of Financial
Accounting Standards (SFAS) No. 106, "Employers' Accounting for
Postemployment Benefits (an amendment of FASB Statements No. 5 and 43)."
The Company recorded charges of $74.1 million to its net income for the
eleven-month period ended November 30, 1993 for the cumulative effect of
transition to this new standard. See "Management's Discussion and Analysis
of Financial Condition and Results of Operations--Adoption of New
Accounting Standards."
(d) For purposes of computing this ratio, earnings consists of earnings before
income taxes and fixed charges, excluding capitalized interest. Fixed
charges consists of interest expense, capitalized interest, amortization
of discount on indebtedness and one-third of rental expense (the portion
deemed representative of the interest factor). Earnings were inadequate to
cover fixed charges for the eleven-month period ended November 30, 1993
and the one month period ended December 31, 1993 by $72.1 million and $3.6
million, respectively. However, excluding the impact of the $74.1 million
cumulative effect of an accounting change noted above, the ratio of
earnings to fixed charges for the eleven month period ended November 30,
1993 would have been 1.4x.
(e) EBITDA represents earnings before deducting interest expense, non-cash
expenses and charges, non-recurring business restructuring charges, income
tax expense, depreciation expense and amortization expense. EBITDA is
presented to facilitate a more complete analysis of the Company's
financial condition, by adding back depreciation, amortization and other
non-cash items to operating income, as an indicator of the ability of the
Company to generate cash flows to service fixed obligations. EBITDA should
not be construed by investors as an alternative to net income (as
determined in accordance with generally accepted accounting principles) as
an indicator of the Company's operating performance, or to cash flows from
operating activities (as determined in accordance with generally accepted
accounting principles) as a measure of liquidity or ability to meet all
cash needs. The Company's cash flows are discussed elsewhere in this
Prospectus under "Management's Discussion and Analysis of Financial
Condition and Results of Operations--Liquidity and Capital Resources." The
Company has presented EBITDA because it is commonly used by investors to
analyze and compare companies on the basis of operating performance and to
determine a company's ability to service debt.
(f) Represents EBITDA as a percentage of revenues.
(g) The Consolidated Fixed Charge Coverage Ratio is a financial measure used
in the Indenture to determine when the Company can incur certain kinds of
new debt and engage in certain other transactions. It measures the ratio
of (a) the sum of Consolidated Net Income, Consolidated Interest Expense,
Consolidated Income Tax Expense and Consolidated Non-Cash Charges deducted
in computing Consolidated Net Income (Loss), all determined in accordance
with GAAP, to (b) the sum of Consolidated Interest Expense and cash
dividends paid on any Preferred Stock, as each of these terms is defined
in the Indenture. For the complete definition of Consolidated Fixed Charge
Coverage Ratio and the other defined terms used therein see, "Description
of Notes--Certain Definitions." The ratio of EBITDA to Interest Expense is
presented in addition to Consolidated Fixed Charge Coverage Ratio because
it is commonly used by investors to analyze and compare companies.
(h) Total debt consists of long-term debt, current portion of long-term debt,
and capital lease commitments.
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<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
"Selected Financial Information" and the Company's consolidated financial
statements and related notes and the other financial information appearing
elsewhere in this Prospectus.
OVERVIEW
General
On December 1, 1993, the Company acquired the Business from the Sellers
through the Acquisition. The following discussion and analysis relates to the
Business for the eleven-month period prior to the Acquisition (the
"Predecessor") and to Holding and Remington on a consolidated basis for
periods subsequent to the Acquisition. Holding has virtually no operations and
its only significant asset is its investment in Remington.
The Company operates in one industry segment, and its sales are derived
primarily from two sources: sales of firearm products and sales of ammunition
products. These two product lines accounted for approximately 88%, 87% and 89%
of the Company's sales in 1995, 1994 and 1993, respectively. Other Company
product lines include firearm-related accessories, clay targets and traps,
fishline and related fishline accessories. The Company's sales are seasonal,
with sales in the second and third quarters generally higher than in other
quarters primarily due to the need to meet customer requirements for firearms
and ammunition during the primary hunting season. See "--Seasonality; Recent
Purchasing Patterns."
Acquisition-Related Matters
Certain Predecessor Allocations. Prior to the Acquisition, separate
financial statements were not prepared for the Business. The Company's
financial statements for the eleven months ended November 30, 1993 (the
"Predecessor Financial Statements") were derived from the historical
accounting records of the Sellers, and include certain estimated allocations
of interest expense, taxes and administrative costs. See Notes 1, 2, 4 and 10
to the Predecessor Financial Statements. Such allocations are estimates only
and do not reflect the interest expense, taxes and administrative costs that
would have actually been incurred if the Business had been operated as a
separate company, or that have been incurred in periods after the Acquisition.
Interest expense and administrative costs have increased in periods after the
Acquisition. See "--Results of Operations."
Taxes. Prior to the Acquisition, the taxable income of the Business was
included in the tax returns of the group of companies filing consolidated
returns for Federal income tax purposes with their parent, DuPont. Pursuant to
the Asset Purchase Agreement, the Sellers retained all liabilities for
Federal, state, local and foreign taxes relating to periods prior to the
Acquisition. Holding and Remington file a consolidated return for Federal
income tax purposes. The Company's consolidated Federal income tax position
for periods after the Acquisition differs significantly from that for periods
prior thereto. As a result of the Acquisition, the Company's Federal income
tax basis for its assets approximates the fair market value of those assets on
the Acquisition date. The excess of the sum of the adjusted purchase price,
assumed liabilities and capitalizable and deductible acquisition costs over
the aggregate tax basis of such assets will generally be amortizable over 15
years and deductible for Federal income tax purposes. Such amortization
deductions, other deductions resulting from the adjusted tax basis for such
assets, and deductions for interest on the Company's indebtedness will reduce
the Company's taxable income for periods after the Acquisition.
Acquisition Accounting. The Company accounted for the Acquisition using the
purchase accounting method, in accordance with Accounting Principles Board
Opinion No. 16. Accordingly, the adjusted purchase price of $299.8 million
(net of a $0.2 million post-Acquisition purchase price adjustment in the
Company's favor) and other acquisition costs totaling $313.5 million, have
been allocated to the assets and liabilities acquired, based on their
respective fair values as of the Acquisition date. In connection therewith,
the Company valued inventories acquired in the Acquisition ("acquired
inventories") based upon estimated sales values less
39
<PAGE>
disposal and completion costs and the reasonable profit thereon. The resulting
fair value exceeded the replacement cost of these inventories by $19.4
million. Therefore, the gross profit margins had been adversely effected by
$16.8 million and $2.5 million, respectively, in the year ended December 31,
1994 and the one-month period ended December 31, 1993. Additionally, the
Company valued acquired property, plant and equipment and revised their
depreciable lives based upon third party appraisals. As a result, depreciation
expense in 1994 was $2.5 million less than the combined twelve months ended
December 31, 1993. Depreciation expense in 1995 was $2.0 million higher than
1994 primarily due to additional capital expenditures. See "--Liquidity and
Capital Resources--Capital Expenditures." Intangible assets arising from the
Acquisition, consisting principally of goodwill and trade names of $94.7
million (which was adjusted for a $1.4 million investment tax credit refund
received in 1995), are being amortized over their estimated useful lives. The
related amortization expense in 1995 and 1994 was $1.9 and $2.7 million,
respectively.
Inventory Accounting Method. Prior to the Acquisition, the Predecessor used
the last-in, first-out ("LIFO") method of accounting for a substantial portion
of its inventories. The Cost of Goods Sold reflected in the Predecessor's
income statement for the eleven-month period ended November 30, 1993
accordingly approximated current costs. For periods ending after the
Acquisition, the Company uses the first-in, first-out ("FIFO") method of
accounting for its inventories. The Cost of Goods Sold reflected in the
Company's income statements for the years ended December 31, 1995 and 1994 and
the one-month period ended December 31, 1993, exclusive of the nonrecurring
inventory charge, accordingly reflected historical manufacturing costs. See
"--Acquisition Accounting."
Product Liability
For information concerning product liability cases and claims involving the
Company, see "Business--Legal Proceedings." Because the Company's assumption
of financial responsibility for certain product liability cases and claims
involving pre-Acquisition occurrences is limited to the amount of the Cap,
with the Sellers retaining liability in excess of the Cap and indemnifying the
Company in respect thereof, and because of the Company's accruals with respect
to such cases and claims, the Company believes that product liability cases
and claims involving occurrences arising prior to the Closing are not likely
to have a material adverse effect upon the financial condition or results of
operations of the Company. While it is difficult to forecast the outcome of
litigation, the Company does not believe, in light of relevant circumstances
(including the current availability of insurance with respect to cases and
claims involving occurrences arising after the Closing, the Company's accruals
for the uninsured costs of such cases and claims and the agreement that the
Sellers will be responsible for certain post-Closing shotgun-related costs),
that the outcome of all pending product liability cases and claims will be
likely to have a material adverse effect upon the financial condition or
results of operations of the Company. However, in part because of the
uncertainty as to the nature and extent of manufacturer liability for personal
injury due to alleged product defects, there can be no assurance that the
Company's resources will be adequate to cover future product liability
occurrences, cases or claims, in the aggregate, or that such a material
adverse effect will not result therefrom. Because of the nature of its
products, the Company anticipates that it will continue to be involved in
product liability cases and claims in the future.
The Company and the Sellers have resolved certain questions that the Sellers
raised concerning certain product liability-related costs that the Company had
allocated to the Cap. The parties accordingly have agreed that, as of October
31, 1996, $1.9 million in assumed product liability costs remained to be paid
by the Company before exhaustion of the portion of the Cap allocated to such
costs. As a result of this adjustment to the amount of such costs allocated to
the Cap, and the parties' agreement to share certain other defense costs
relating to product liability litigation, the Company expects that its
financial results for the fourth quarter of 1996 will reflect a nonrecurring
charge of approximately $4.7 million.
Since December 1, 1993, the Company has maintained insurance coverage for
product liability claims for personal injury or property damage relating to
occurrences arising after the Closing, subject to certain self-insured
retentions both on a per-occurrence basis and in the aggregate. The current
insurance policy extends
40
<PAGE>
through November 30, 2000. Based on actual defense and disposition costs
incurred by the Company and Sporting Goods with respect to product liability
cases and claims in recent years, management estimates that the ultimate
liability for product liability cases and claims relating to occurrences
arising during 1995 will be in the range of $4.5 million to $9.0 million, and
$4.3 million to $8.1 million for occurrences during 1994. The Company charged
$6.5 million and $17.5 million of payments against the accrual for product and
environmental liabilities in the years ended December 31, 1995, and 1994,
respectively. Management estimates that the amount of the self insured
retention accrued ($4.5 million in 1995, and $4.3 million in 1994) will be
paid out over the following three to five years.
RESULTS OF OPERATIONS
Generally, the comparability of the Company's results of operations for the
years ended December 31, 1995 and 1994 and the one-month period ended December
31, 1993, to results of operations for the eleven-month period ended November
30, 1993, are significantly limited because of the effects of the Acquisition.
See "--Overview." The results of operations for the three and nine months
ended September 30, 1996 are not necessarily indicative of results that may be
expected for the year ended December 31, 1996, in part due to the seasonality
of the Company's business.
The following table shows, for the periods indicated, the percentage
relationships to sales of certain selected financial data. Management's
discussion and analysis of the Company's results of operations compares
results for the third quarter and first nine months of 1996 to the third
quarter and first nine months of 1995 as well as 1995 results to 1994 results,
and 1994 results to the combined reported results of the eleven-month period
ended November 30, 1993 and the one-month period ended December 31, 1993.
<TABLE>
<CAPTION>
HOLDING AND
HOLDING AND REMINGTON PREDECESSOR REMINGTON COMBINED
--------------------------------------- ------------------ ------------ ---------
NINE MONTHS
ENDED ONE MONTH
SEPTEMBER 30, YEAR ENDED YEAR ENDED ELEVEN MONTHS ENDED
------------- DECEMBER 31, DECEMBER 31, ENDED NOVEMBER 30, DECEMBER 31, FULL YEAR
1996 1995 1995 1994 1993 1993 1993
------ ------ ------------ ------------ ------------------ ------------ ---------
<S> <C> <C> <C> <C> <C> <C> <C>
Sales................... 100% 100% 100% 100% 100% 100% 100%
Cost of Goods Sold(1)... 69% 66% 67% 69% 69% 82% 70%
Gross Profit............ 31% 34% 33% 31% 31% 18% 30%
Operating Expenses(2)... 25% 22% 23% 23% 29% 29% 29%
Operating Profit
(Loss)................. 6% 12% 10% 9% 2% (11%) 1%
Net Income (Loss)(3).... -- 4% 3% 2% (21%) (12%) (20%)
</TABLE>
- --------
(1) Includes $2.5 million and $16.8 million in non-recurring inventory charges
for the one month ended December 31, 1993 and the year ended December 31,
1994, respectively. See "--Overview."
(2) Operating expenses in 1993 include $30.2 million of product liability
expense related to the determination of the liability associated with a
number of long-outstanding claims.
(3) The Predecessor's 1993 results include a $74.1 million after-tax charge
resulting from the adoption of Statement of Financial Accounting Standards
(SFAS) No. 106, "Employers' Accounting for Postretirement Benefits other
than Pensions", and SFAS No. 112 "Employers' Accounting for Postemployment
Benefits." See "--Adoption of New Accounting Standards."
Recent Financial Results and Trends
Financial results for the nine months ended September 30, 1996 were affected
by a number of factors. First, the Company believes that several of its key
customers, including Wal-Mart, have instituted tighter inventory control
practices to reduce inventory levels. These changes have had the effect of
reducing the Company's sales of new firearms and ammunition products during
this period in comparison to the first nine months of 1995. Second, the
Company's ammunition sales over the first nine months of 1996 were affected by
a shift in customer buying patterns, as certain of its distributor customers
delayed purchasing ammunition until closer to the fall
41
<PAGE>
hunting season. The Company believes these customers' decision to delay
ammunition purchases resulted from changes in the Company's ammunition pricing
terms, which reduced incentives to prepay under the Company's ammunition
prepayment program. While ammunition sales improved in the third quarter of
1996, and were higher than in the third quarter of 1995, ammunition sales
overall in the first nine months of 1996 decreased from the corresponding 1995
period. Finally, firearms manufacturing costs and general and administrative
and research and development expenditures increased in the first nine months
of 1996 over the corresponding 1995 period, and together with decreased sales,
resulted in a decrease in operating profit between the two periods.
The Company believes that its customers' tighter inventory control practices
are likely to continue, and that consumer concerns about regulation, which
were a factor in market growth in 1994 and early 1995, will not be a
significant market influence in the near term. Accordingly, the Company
believes that the markets for firearms and ammunition products generally will
experience low levels of growth, at least in the near future. In light of
these market constraints on sales growth opportunities, the Company is
focusing efforts on increasing market share for its products and is
undertaking a number of cost containment initiatives. In October 1996 a plan
was announced and implemented to reduce the workforce throughout the Company
and to bring production levels and cost structure in line with current levels
of demand. As a result of the workforce reductions, the Company will take a
pre-tax restructuring expense in the fourth quarter of 1996 of approximately
$2.6 million. Management is continuing to review all aspects of operations and
is committed to managing costs in response to competitive pressures. As a
cost-saving measure, during the fourth quarter, the Company lengthened the
traditional end-of-year shutdown period at the Company's firearms
manufacturing facility, and is considering a number of other cost-saving
alternatives.
Third Quarter and First Nine Months of 1996 as Compared to Third Quarter and
First Nine Months of 1995
Sales. Sales for the third quarter of 1996 were $139.4 million, an increase
of $15.9 million, or 12.9%, from 1995 third quarter sales of $123.5 million.
This increase was primarily due to increased ammunition sales volume, sales of
newly introduced firearms products, increased sales of higher priced rifles
and higher pricing on both ammunition products and firearms products. Sales
for the first nine months of 1996 ("year-to-date") were $316.5 million, a
decrease of $17.1 million, or 5.1%, from 1995 year-to-date sales of $333.6
million. The decline in sales for the year-to-date period was primarily due to
lower demand for the Company's firearms products and ammunition products,
partially offset by higher pricing on both firearms and ammunition products.
The Company believes the decline in demand in the first nine months of 1996
was primarily due to tighter inventory management practices by several key
customers. See "--Recent Financial Results and Trends."
Firearms sales increased by $3.0 million, or 5.9%, to $53.5 million for the
third quarter of 1996, from $50.5 million in the third quarter of 1995. The
increase for the quarter was primarily due to increased sales of black powder
guns, a new product, increased sales of higher priced rifles and higher
firearms prices, partially offset by lower sales of less expensive shotguns
and rifles. Year-to-date sales in 1996 were $147.4 million, $9.7 million or
6.2%, lower than the prior year-to-date period. The decrease for the year-to-
date period was primarily due to decreased sales of the Company's less
expensive shotguns and rifles, partially offset by increased sales of black
powder guns, higher firearms prices and increased sales of higher priced
rifles. The Company believes that the lower demand for its less expensive
shotguns and rifles is due to tighter inventory management practices by
several key customers. See "--Recent Financial Results and Trends."
Ammunition sales for the third quarter of 1996 were $71.9 million, $11.0
million or 18.1% higher than the prior year period. The increase in ammunition
sales for the quarter was primarily due to increased sales volumes for the
fall hunting season which were realized later in 1996 due to changes in the
ammunition prepayment program and higher pricing. Year-to-date ammunition
sales in 1996 were $129.7 million, $7.0 million, or 5.1%, lower than the prior
year-to-date period. The Company believes that the sales decline for the year-
to-date period was primarily due to the changes in customers' inventory
management practices discussed above. In addition, the Company believes that
the first quarter of 1995 was an exceptional quarter and represented a
continuation of the strong market for ammunition experienced in 1994, and that
a portion of the decline between the two year-to-date periods was due to the
exceptional results in the first quarter of 1995.
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<PAGE>
Fishline product sales decreased from the quarter and nine months ended
September 30, 1995, primarily due to lower volumes and prices. Sales of
accessory products increased from the quarter and nine months ended September
30, 1995, primarily due to increased sales of gun safes.
Cost of Goods Sold. Cost of goods sold for the third quarter of 1996 was
$99.5 million, an increase of $14.6 million, or 17.2%, versus $84.9 million
for the third quarter 1995. Cost of goods sold increased between the two
quarterly periods as a percentage of sales from 68.7% in 1995 to 71.4% in
1996. Cost of goods sold for the first nine months of 1996 was $219.4 million,
or 69.3% of sales, versus $221.6 million, or 66.4% of sales for the
corresponding 1995 period. Cost of goods sold increased as a percentage of
sales for both the quarterly and year-to-date periods primarily due to higher
manufacturing costs within the Company's firearms business. Increased costs
associated with production line changes to meet increased demand for
centerfire rifles, price increases on purchased parts and higher costs for
contract manufacturing services, were the primary factors contributing to the
higher overall manufacturing costs. During October of 1996 management
announced and implemented certain cost containment actions in order to bring
production levels and cost structure in line with current levels of demand.
See "- Financial Overview."
Gross Profit. Gross profit was $39.9 million for the third quarter of 1996,
an increase of $1.3 million, or 3.4% from the third quarter 1995 gross profit
of $38.6 million. Gross profit margins declined from 31.3% in 1995 to 28.6% in
1996 as a percentage of sales. The increase in gross profit dollars between
the two quarterly periods was related to ammunition sales volume growth and
higher pricing on the Company's ammunition and firearms product lines,
partially offset by lower firearms sales volume and the higher manufacturing
costs previously discussed. Year-to-date gross profit was $97.1 million in the
current year versus $112.0 million in the same period of the prior year with
gross profit margins declining from 33.6% in 1995 to 30.7% in 1996. The
decline in gross profit dollars between the year-to-date periods related to
lower sales volume in the Company's firearms and ammunition businesses and the
higher firearms manufacturing costs as discussed above, partially offset by
higher pricing on the Company's firearms and ammunition products.
Operating Expenses. Operating expenses consist of selling, marketing and
distribution expense; general and administrative expense; research and
development expense; and other expenses. Operating expenses for the third
quarter of 1996 were $26.4 million, an increase of $0.2 million, or 0.8%, from
$26.2 million for the third quarter of 1995. Year-to-date operating expenses
for 1996 were $78.5 million, an increase of $5.9 million, or 8.1%, from $72.6
million for the same period of 1995.
Selling, marketing and distribution expenses for the third quarter of 1996
were $14.6 million, a decrease of $0.7 million, or 4.6%, from $15.3 million in
the third quarter of 1995. Year-to-date selling, marketing, and distribution
expenses were $43.0, $0.5 million lower than the same period of 1995. The
decrease in both the quarterly and year-to-date periods was primarily the
result of reduced advertising and marketing expenditures and a reduction in
bad debt expense, partially offset by increased commission expense. Year-to-
date results also include a charge in the second quarter relating to the
reorganization of the Company's international marketing efforts. Bad debt
expense in 1996 was lower than 1995 for both the quarter and year-to-date
periods due to increased collection and resolution of disputed amounts.
General and administrative expenses were $7.0 million for the third quarter
of 1996, a decrease of $0.4 million or 5.4%, from $7.4 million in the third
quarter of 1995. General and administrative expenses decreased from 6.0% of
sales in the third quarter of 1995 to 5.0% of sales in the third quarter of
1996. General and administrative expenses for the third quarter of 1995,
however, include a $1.4 million charge recognized for the Company's estimated
cost to relocate its corporate headquarters to North Carolina and the third
quarter of 1996 includes $0.4 million of relocation related charges. Excluding
the relocation related charges from both the quarterly and year-to-date
periods of 1996 and 1995, general and administrative expenses increased $0.6
million and $2.7 million, respectively. This increase for both the quarterly
and year-to-date periods was primarily attributable to continued costs
associated with the implementation of a new computer system and higher outside
professional fees, partially offset by lower incentive compensation charges.
For the year-to-date period, the
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<PAGE>
higher computer systems related charges were partially offset by the
elimination of transitional services fees charged by DuPont for systems and
services provided prior to implementation of the Company's new computer system
during the second quarter of 1995.
Research and development expenses were $2.4 million for the third quarter of
1996, an increase of $0.9 million, from $1.5 million in the third quarter of
1995. For the nine months ended September 30, 1996, research and development
expenses were $7.4 million, a $4.4 million increase from the same period of
the prior year. Research and development expenses for the year-to-date period
of 1995, however, include a benefit of $1.0 million as the actual costs for
the Company's consolidation of its research and development function into a
new facility in Elizabethtown, Kentucky were less than estimated. Excluding
the nonrecurring benefit from the year-to-date period of 1995, research and
development expense increased $3.4 million. The increase in research and
development expenses for both the quarterly and year-to-date periods was
primarily due to the Company's strategy to increase spending on new product
development and the effect of full period operations of the new research and
development facility on 1996 results.
Operating Profit / (Loss). Operating profit for the third quarter of 1996
was $13.5 million, a $1.1 million increase from 1995's third quarter operating
profit of $12.4 million, primarily as a result of the higher gross profit
discussed above. Operating profit declined to $18.6 million for the year-to-
date period, a $20.8 million or 52.8% decrease from 1995's year-to-date
operating profit of $39.4 million, primarily due to lower gross profit and
higher operating expenses as discussed above.
Interest Expense. Interest expense for the quarter ended September 30, 1996
was $6.9 million, an increase of $1.4 million, or 25.5% from the third quarter
1995 level of $5.5 million. Year-to-date interest was $19.2 million versus
$16.1 million in the prior year-to-date period. The increase in interest
expense in both the quarter and year-to-date periods was primarily due to
additional borrowings on the Company's revolving credit facility partially
offset by lower interest on the Company's term loan borrowings due to
scheduled debt repayments. The increase in interest expense in the year-to-
date period was also partially attributable to lower interest income in 1996,
which was primarily due to lower cash on hand.
Net Income / (Loss). Net income for the third quarter of 1996 was $3.7
million, a decrease of $0.4 million from third quarter 1995 net income of $4.1
million. Net loss for the nine months ended September 30, 1996 was $0.3
million, a decrease of $14.2 million from 1995 net income of $13.9 million.
Year Ended December 31, 1995 as Compared to Year Ended December 31, 1994
Sales. Sales for the year ended December 31, 1995 were $427.0 million, an
increase of $9.3 million, or 2.2%, over 1994 sales of $417.7 million. This
overall sales increase was primarily the result of increased firearms sales,
partially offset by decreased ammunition sales. The loss of apparel sales
revenue in 1995, attributable to the Company's discontinuation of this product
line in early 1995, was substantially offset by modest increases in fishline
product sales and sales of accessory products other than apparel between 1994
and 1995.
Firearms sales increased $26.4 million or 15.0% to $202.6 million for the
year ended December 31, 1995 from $176.2 million in 1994 primarily due to
increased sales of shotguns and centerfire rifles. Approximately 60% of the
increase was due to increased centerfire rifle sales, with the remainder
resulting primarily from increased sales of shotguns. The increase in
centerfire rifle sales resulted primarily from volume growth and price
increases, while the shotgun sales increase was primarily due to the
introduction in 1995 of a version of the Model 1100 shotgun with a synthetic
stock.
Ammunition sales for 1995 were $173.8 million, $15.9 million, or 8.4%, lower
than the prior year. This decrease in ammunition sales was primarily due to
declines in pistol and revolver ammunition sales and, to a lesser extent,
rimfire ammunition sales. Increased sales of shotshell ammunition partially
offset these declines. The Company believes that these declines were primarily
due to the easing of consumer concerns that various legislative proposals
pending in early 1994 would increase taxes on ammunition purchases and
consumer
44
<PAGE>
uncertainty in early 1994 over the impact of the Brady Bill, which was enacted
in the previous year. The Company believes that these consumer concerns and
uncertainty created an unusually high demand for ammunition and ammunition
components in the first and second quarters of 1994.
The modest increase in fishline product sales resulted primarily from sales
volume growth in the Stren and Supertough brands of fishline, while a somewhat
larger increase in sales of accessory products other than apparel was
primarily due to the successful introduction of a full line of gun safes.
Apparel sales declined substantially from 1994 to 1995 as a result of the
Company's discontinuation in January 1995 of its apparel line, which was
manufactured under contract by third parties. The Company's decision to
discontinue this line and instead to establish a licensing program with a
small, select group of apparel licensees followed a period of losses in the
apparel business. The Company is currently negotiating a number of licensing
agreements for apparel products. Apparel sales in 1995 were not material.
Cost of Goods Sold. Cost of goods sold for 1995 was $285.3 million, a
decrease of $1.8 million, or 0.1%, versus $287.1 million for 1994, declining
slightly between the two periods as a percentage of sales. However, excluding
the Acquisition-related nonrecurring inventory charge of $16.8 million
(discussed above under "--Overview--Acquisition Related Matters--Acquisition
Accounting") from 1994 results, cost of goods sold was $285.3 million for 1995
and $270.3 million for 1994, increasing to 66.8% in 1995 from 64.7% in 1994 as
a percentage of sales primarily due to higher scrap costs resulting from new
product development, lower labor productivity and the negative effects of lead
and copper price increases on the cost of raw materials in the ammunition
business.
Gross Profit. Gross profit was $141.7 million for 1995, an increase of $11.1
million, or 8.5%, versus $130.6 million for 1994, increasing slightly between
the two periods as a percentage of sales. However, excluding the Acquisition-
related nonrecurring inventory charge in 1994, gross profit was $141.7 million
for 1995 and $147.4 million for 1994, decreasing $5.7 million, or 3.9%, year
to year with gross profit margins declining from 35.3% in 1994 to 33.2% in
1995 as a percentage of sales. The decline in gross margin was primarily due
to a variety of factors impacting the ammunition business, partially offset by
improvements in the firearms business. These factors include lower ammunition
sales volumes and as well as an increase in cost of goods sold for the reasons
noted above. Labor productivity was lower as a result of retraining and hiring
initiatives undertaken at the Lonoke plant during 1995, involving hiring as
permanent employees certain personnel who had previously been employed on a
contract basis, hiring new permanent employees, and retraining both new and
existing employees.
Operating Expenses. Operating expenses consist of selling, marketing and
distribution expense; general and administrative expense; research and
development expense; and other expenses. Operating expenses in 1995 were
$100.2 million, an increase of $6.0 million, or 6.4%, from $94.2 million for
1994. This increase resulted from a $7.6 million increase in selling,
marketing and distribution expense and a $3.4 million increase in general and
administrative expense, partially offset by a $3.0 million decrease in
research and development expenses and a $2.0 million decrease in other
expenses.
Selling, marketing and distribution expenses for 1995 were $59.6 million, an
increase of $7.6 million, or 14.6%, from $52.0 million in 1994. Higher
advertising and marketing costs account for the majority of the increase. In
addition, an international marketing strategy was implemented during the
latter part of 1994 resulting in higher expenses being incurred in 1995.
General and administrative expenses were $27.0 million for 1995, an increase
of $3.4 million, or 14.4%, from $23.6 million in 1994. General and
administrative expenses increased from 5.6% of sales in 1994 to 6.3% of sales
in 1995. The increase was primarily attributable to costs associated with the
development and implementation of a new computer system and an additional $1.0
million charge recognized for the Company's estimated cost to relocate its
corporate headquarters to North Carolina. These costs were partially offset by
lower incentive compensation charges and lower transitional services fees
charged by DuPont as a result of the discontinuance of the use of certain
DuPont systems and services. These systems and services were being
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provided by DuPont pending the implementation of the Company's new computer
system which occurred during the second quarter of 1995. During 1995 the
Company amended its retiree medical program and analyzed actual costs incurred
for its active and retiree medical plans. The changes are expected to result
in a reduction of postretirement benefit expense of approximately $1.0 million
in 1996 as compared to 1995.
Research and development expenses were $5.3 million for 1995, a decrease of
$3.0 million, or 36.1%, from $8.3 million in 1994. However, research and
development expenses for 1994 include $2.3 million in estimated nonrecurring
expenses related to the Company's consolidation of its research and
development function into a new facility in Kentucky, and research and
development expenses for 1995 include a benefit of $1.0 million as the actual
relocation costs were less than estimated. Excluding the nonrecurring items in
both 1994 and 1995, research and development expenses increased slightly
between the two periods from $6.0 million in 1994 to $6.3 million in 1995.
Operating Profit. Operating profit was $41.5 million for 1995, a $5.1
million or 14.0% increase from 1994's operating profit of $36.4 million.
However, excluding the $16.8 million impact in 1994 of the Acquisition-related
purchase accounting charge for the step up in basis of acquired inventory,
operating profits declined from $53.2 million in 1994 to $41.5 million in 1995
primarily as a result of the lower gross profit and higher operating expenses
discussed above.
Interest Expense. Interest expense for the year ended December 31, 1995 was
$21.5 million, an increase of $0.9 million, or 4.4%, from the 1994 level of
$20.6 million. The increase in interest expense was due to higher interest
rates on the Company's term loan borrowings under its senior bank credit
agreement, partially offset by lower borrowings as a result of mandatory
repayments, as well as additional interest for capital lease obligations
incurred in 1995.
Net Income. Net income for 1995 was $11.5 million, an increase of 22.3% from
net income of $9.4 million for 1994. However, excluding the Acquisition-
related nonrecurring inventory charge from 1994 results, net income was $11.5
million for 1995 and $19.4 million for 1994, decreasing $7.9 million or 40.7%.
Year Ended December 31, 1994 as Compared to Combined Twelve Months Ended
December 31, 1993
Sales. Sales for the year ended December 31, 1994 were $417.7 million, an
increase of $51.6 million, or 14.1%, over sales of $366.1 million for the
combined twelve-month period ended December 31, 1993. This increase was
primarily the result of sales volume growth in both the ammunition product
line and, to a lesser extent, the firearms product line. Ammunition sales
volume increased substantially from 1993 to 1994, primarily as the result of
increased consumer demand that the Company believes arose following consumer
concerns during early 1994 that various Federal and state legislative
proposals might be enacted that would increase taxes on ammunition purchases,
as well as from general consumer uncertainties concerning the impact of the
Brady Bill, which was enacted in 1993. Firearms sales volume increased
modestly between 1993 and 1994, primarily due to demand for the Company's
centerfire rifles and pump-action shotguns.
Cost of Goods Sold. Cost of goods sold for 1994 was $287.1 million, an
increase of $30.4 million, or 11.8%, versus $256.7 million for the combined
twelve months of 1993, declining slightly between the two periods as a
percentage of sales. Excluding the Acquisition-related nonrecurring inventory
charges of $16.8 million and $2.5 million, respectively (discussed above under
"--Overview--Acquisition-Related Matters--Acquisition Accounting") cost of
goods sold was $270.3 million for 1994 and $254.1 million for combined 1993,
declining to 64.7% in 1994 from 69.4% in 1993 as a percentage of sales. This
improvement resulted primarily from productivity improvements in the Company's
firearms manufacturing facility and, to a lesser extent, the impact of reduced
depreciation expense in periods after the Acquisition as discussed above under
"--Overview--Acquisition-Related Matters--Acquisition Accounting." The
productivity improvements allowed the Company to significantly increase
firearms production to meet sales demand in 1994 without significant increases
in labor or capital costs; since the Acquisition, the Company has been able to
increase output per labor hour in its firearms production through process
redesign and an emphasis on longer production runs.
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Gross Profit. Gross profit was $130.6 million for 1994, an increase of $21.2
million, or 19.4%, versus $109.4 million for the combined twelve months of
1993, increasing slightly between the two periods as a percentage of sales.
Excluding the Acquisition-related nonrecurring inventory charges, gross profit
was $147.4 million for 1994 and $112.0 million for the combined twelve months
of 1993, increasing to 35.3% in 1994 from 30.6% in 1993 as a percentage of
sales. See "--Overview--Acquisition-Related Matters--Acquisition Accounting."
This increase was primarily due to higher sales volume in 1994, and to the
manufacturing productivity improvements reflected in the decline from 1993 to
1994 in cost of goods sold as a percentage of sales.
Operating Expenses. Operating expenses consist of selling, marketing and
distribution expense; general and administrative expense; research and
development expense; and other expenses. Operating expenses in 1994 were $94.2
million, a decrease of $10.7 million, or 10.2%, from $104.9 million for the
combined twelve months of 1993. This decrease resulted from a $23.6 million
decrease in selling, marketing and distribution expense, which was partially
offset by increases in general and administrative expense of $6.8 million, in
research and development expense of $3.0 million, and in other expenses of
$3.1 million.
The decrease in selling, marketing and distribution expense from combined
1993 to 1994 resulted primarily from a $24.7 million decrease in product
liability-related expense, from $30.5 million in 1993 to $5.8 million in 1994.
The product liability-related expense for 1993 primarily arose in the first
eleven months of that period and reflects the determination of the liability
associated with a number of long outstanding cases and claims that were
pending as of November 30, 1993.
General and administrative expenses increased from 1993 to 1994 primarily
because 1994 results reflect higher costs associated with operating the
Company on a stand-alone basis. See "--Overview--Acquisition-Related Matters--
Certain Predecessor Allocations." Increased general and administrative
expenses associated with operating as a stand-alone company include incentive
compensation based on financial performance, the cost of maintaining property
and liability insurance and costs associated with the implementation of new
information systems.
The increase in research and development expense was primarily due to $2.3
million in nonrecurring expenses incurred in 1994 relating to the relocation
of the Company's research and development organization to its new facility in
Elizabethtown, Kentucky.
Other expenses in 1994 were $10.3 million, as compared to $7.2 million for
the combined twelve months of 1993. This increase is primarily attributable to
the full year impact in 1994 of Acquisition-related amortization of intangible
assets. See "--Overview--Acquisition-Related Matters--Acquisition Accounting."
Operating Profit. Operating profit was $36.4 million for 1994, a $31.9
million increase from the operating profit for the combined twelve months of
1993 of $4.5 million. This increase resulted primarily from the impact on
operating expenses of the decrease in product liability-related expense
between the two periods and, to a lesser extent, the gross profit improvement
from 1993 to 1994, discussed above.
Interest Expense. Interest expense for the year ended December 31, 1994 was
$20.6 million, an increase of $13.8 million, from $6.8 million for the
combined twelve months of 1993, as a result of the substantial indebtedness
incurred by the Company in connection with the financing of the Acquisition.
Interest expense for combined 1993 consists of an imputed interest expense
allocation for the first eleven months of 1993, and interest expense on
Acquisition-related indebtedness for the final month of the year. See "--
Overview--Acquisition-Related Matters--Certain Predecessor Allocations."
Net Income. Net income for 1994 was $9.4 million, an improvement of $84.4
million, as compared to a net loss of $75.0 million for the combined twelve
months of 1993. Net loss for the combined twelve months of 1993 reflects the
impact of a $74.1 million charge for the cumulative effects of changes in
accounting for postretirement benefits other than pensions and for
postemployment benefits. See "--Adoption of New Accounting Standards."
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TAXES
The Company's balance sheet as of December 31, 1995 includes net deferred
tax assets in the amount of $23.8 million. See Note 16 to the Company's
financial statements as of and for the year ended December 31, 1995. The
Company's ability to realize these deferred tax assets will be dependent on
the generation of future taxable income by the Company. Excluding the effects
of various nonrecurring tax deductible items related to the Acquisition, the
Company would have generated taxable income of $32.5 million in 1995.
Management expects that the Company will generate sufficient taxable income in
future periods to fully utilize all deferred tax assets. Accordingly, the
Company has not established a valuation allowance against the net deferred tax
assets.
The Company's effective tax rate for 1995 of 42.5% is higher than the
Federal statutory rate due principally to the impact of state income taxes and
certain non-deductible expenses.
SEASONALITY; RECENT PURCHASING PATTERNS
Historically, the Company's sales have been moderately seasonal, with
generally higher sales during the second and third quarters of each year, and
generally lower sales during the first and fourth quarters of each year,
principally due to the need to meet customer requirements for firearms and
ammunition during the primary hunting season.
Products that are generally used during the fall hunting season may be
purchased under an early order or "dating" plan. Under the dating plan, the
Company allows a distributor to purchase these products commencing December,
the start of the Company's dating plan year, and to pay for them on extended
terms. Discounts are offered for early payment under this plan. Discounts
amounting to $4.1 million were given in each of 1994 and 1995. In addition,
the Company has a separate program that provides an incentive to prepay for
ammunition purchases. The Company believes that allowing both extended payment
terms for early orders and discounts for prepayment helps to level out the
demand for these otherwise seasonal products throughout the year. The Company
believes that the two plans help facilitate a more efficient manufacturing
schedule, while the ammunition prepayment program also helps facilitate
working capital management. Use of the dating plan, however, also results in
significant deferral of accounts receivable until the latter part of the year.
As a result of the seasonal nature of the payments received for Company's
sales, combined with the Company's dating plan billing practices, the
Company's working capital financing needs generally have significantly
exceeded cash provided by operations during the middle of a year, until its
deferred accounts receivable were collected in the third and fourth quarters.
As a result, the Company's working capital financing needs have tended to be
greatest during the summer months, decreasing during the fall and reaching
their lowest point during the winter.
In 1995 and the first nine months of 1996, the Company's sales were more
seasonal than in prior years. The Company believes that this increased
seasonality was due in part to a shift in the timing of consumer demand as
consumer concern over the impact of regulation on the cost and availability of
ammunition and firearms eased, and in part to a change in inventory management
practices by several key customers and to a significantly lesser extent to the
changes in its ammunition prepayment program.
The Company's ammunition prepayment program was revised at the beginning of
1996, in response to revisions made in similar programs offered by
competitors. These revisions lessened the incentives for customers to purchase
ammunition products prior to the fall hunting season, and accordingly resulted
in a decrease in ammunition sales and an increase in working capital financing
requirements in the first three quarters of 1996 as compared to the same
period in 1995. In response, the Company has increased its borrowings under
its revolving credit facility in order to finance its working capital needs.
While third quarter 1996 ammunition sales are up over the same period in 1995
as a result of fall hunting season purchases which had been delayed, year-to-
date ammunition sales were still lower than in 1995 primarily due to the
continuing impact of tighter inventory management practices by several
significant customers.
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LIQUIDITY AND CAPITAL RESOURCES
Cash Flows
During the year ended December 31, 1995, cash used in operations totaled
$12.5 million, primarily to finance additional working capital requirements.
Accounts receivable increased $21.2 million principally due to a shift in
sales patterns between 1994 and 1995 in the Company's firearms business.
Inventories increased $12.0 million from $100.7 million at December 31, 1994
to $112.7 million at December 31, 1995 primarily as a result of higher
firearms and ammunition inventories. Consistent with industry practice,
Remington offers a discount to ammunition customers that prepay. Customer
prepayments of $8.0 million reflected as current liabilities decreased by $2.8
million due to lower participation in the ammunition prepayment program.
See"--Seasonality; Recent Purchasing Patterns." This use of cash was partially
offset by net income adjusted for non-cash items including depreciation,
amortization and provision for deferred income taxes. Investing activities
utilized $17.5 million in 1995, principally for purchases of property, plant
and equipment, partially offset by an investment tax credit refund for the
purchase price of certain tangible assets. Financing activities utilized $10.5
million of cash, due substantially to principal payments on the Company's term
loan borrowings under its senior bank credit agreement, (as amended, the
"Credit Agreement"), partially offset by borrowings under the Company's $150.0
million revolving credit facility (the "Revolving Credit Facility").
During the nine month period ended September 30, 1996, cash used in
operations totaled $47.1 million, primarily to finance additional working
capital requirements. Accounts receivable increased $57.3 million principally
due to $38.6 million of sales on extended payment terms granted to customers
consistent with industry-wide programs and with prior year experience. The
extended sales terms provide cash discount incentives and, in the majority of
cases, required payment by November 10, 1996. The Company is using the
proceeds from these receivables to pay down the existing balance on its
revolving credit facility. Inventories increased $6.8 million, from $112.7
million at December 31, 1995 to $119.5 million at September 30, 1996 due to
lower sales volumes for firearms and ammunition. The Company believes that the
lower sales volumes that it experienced during the first nine months of 1996
were principally due to tighter inventory management practices by several key
customers. See "--Results of Operations." The Company relocated its corporate
headquarters to North Carolina during the second quarter of 1996. All of the
associated expenditures have been paid except for approximately $0.2 million.
Working Capital
Working capital decreased from $131.3 million at December 31, 1994 to $125.0
million at December 31, 1995 primarily as a result of a decline in cash and
cash equivalents partially offset by the increase in accounts receivable and
inventories discussed above.
Working capital increased from $125.0 million at December 31, 1995 to $205.5
million at September 30, 1996 primarily as a result of an increase in accounts
receivable and inventories as discussed above (funded principally with
borrowings under the Company's revolving credit facility), as well as an
increase in cash and cash equivalents.
If in the future, the Company's customers choose not to participate in the
Company's dating plan or the ammunition prepayment program, the Company would
seek to finance increased seasonal working capital requirements through
available capacity under its Revolving Credit Facility. See "--Liquidity."
Capital Expenditures
Capital expenditures in 1995, 1994 and 1993 were $18.9 million, $9.3
million, and $9.9 million, respectively. Approximately $8.0 million of the
1995 capital expenditures were for the replacement and enhancement of the
Company's management information systems and for buildings and equipment
related to the new research and development facility in Elizabethtown,
Kentucky. The remainder of the 1995 capital expenditures were for maintenance
of operations and improvement projects on existing facilities.
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Capital expenditures for the nine months ended September 30, 1996 were $12.8
million, of which approximately 53% was related to the new corporate
headquarters building in North Carolina, the new firearms manufacturing
facility in Mayfield, Kentucky, on which the Company began construction in
May, 1996 and equipment at the new research and development facility in
Elizabethtown, Kentucky. The Company estimates that capital expenditures in
1996 will be approximately $20.3 million. This amount, however, includes
approximately $11.7 million for the new firearms manufacturing facility in
Mayfield, Kentucky, the new corporate headquarters building in North Carolina
and research and development projects. The remainder of the 1996 capital
expenditures are expected to be principally for maintenance of operations and
improvement projects concentrated on enhancing the efficiency of existing
facilities. The December 1996 amendment to the Company's Credit Agreement
reduced the capital expenditure levels permitted thereunder and it is expected
that the Company's capital expenditures after 1996 should be more in line with
historical levels. The Company expects to fund capital expenditures from
operational cash flow and through borrowings under the Credit Agreement.
Liquidity
Prior to the Acquisition, the Business was subject to DuPont's centralized
cash management system, and as such its cash funding requirements were met by,
and generally all cash generated was transferred to, DuPont. During the
eleven-month period ended November 30, 1993, cash provided by operations was
the primary source of funding for the Company's capital investment program.
The Company incurred substantial indebtedness in connection with the
Acquisition. As of September 30, 1996, the Company had outstanding
approximately $288.4 million of indebtedness, consisting of approximately
$99.5 million ($100.0 million face amount) in Existing Notes, $89.8 million in
term loan borrowings and approximately $93.0 million in revolving credit
borrowings under the Credit Agreement and approximately $6.1 million in
capital lease obligations. As of September 30, 1996 the Company also had
aggregate letters of credit outstanding of $7.4 million.
At present, the principal sources of liquidity for the Company's business
and operating needs are internally generated funds from its operations and
revolving credit borrowings under the Credit Agreement. The Company believes
that cash generated from operations and borrowing resources will be adequate
to permit the Company to meet its debt service requirements and capital
expenditure and working capital needs prior to the maturity of the Revolving
Credit Facility, although no assurance can be given in this regard.
Financial Instruments
The Company has only limited involvement with financial instruments and does
not use them for trading purposes. Financial instruments, which are a type of
financial derivative instrument, are used to manage well-defined interest rate
and commodity price risks.
The Company had two interest rate cap agreements that expired in June 1996
which reduced the potential impact of increases in interest rates on
approximately 50% of the Company's variable rate term loan debt under the
Credit Agreement. As a result of additional principal payments made on such
term loan debt during the year, at June 30, 1996 approximately 55% of the
principal balance was subject to the interest rate cap. The agreements
entitled the Company to receive from major financial institutions on a
quarterly basis the amount, if any, by which the 3-month Eurodollar base rate
on the variable rate term loan borrowings exceeded 5.0%. The Company is not
currently a party to any interest rate cap, hedging or other protection
arrangements with respect to its variable rate indebtedness.
Commodity call options, swaps and futures are used to hedge the price risk
related to firm commitments and anticipated purchases of lead and copper to be
used in the manufacture of the Company's products. Call options give the
Company the right to purchase a specified amount of metal at a fixed price on
a pre-determined date for an up front fee. Swaps are purchased at a percentage
of the face amount and additional payments are then made or received based on
the differential between the face amount and the actual price of the metals
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contracts at the date sold. The future contracts are a commitment to purchase
a given amount of metal at an agreed upon price on a future date. The face
amount of commodity contracts outstanding at September 30, 1996 and December
31, 1995 was $2.6 million and $3.4 million, respectively. At September 30,
1996 and December 31, 1995 and 1994, the market value of the Company's
outstanding contracts relating to firm commitments and anticipated purchases
up to one year from the respective balance sheet date was $2.3 million, $3.4
million and $2.9 million, respectively. As of September 30, 1996, December 31,
1995 and 1994 hedging losses related to closed commodity contracts of $0.3
million, $0.1 million and $0.4 million, respectively, were included in
inventory. The Company also enters into forward purchase contracts for the
Japanese Yen from time to time in support of product supply contracts.
Credit Agreement
In connection with the Acquisition, the Company entered into the Credit
Agreement with Chemical Bank ("Chemical"), The Chase Manhattan Bank ("Chase"),
Union Bank of Switzerland ("UBS") and certain other lenders. The Credit
Agreement provides for a term loan facility (the "Term Loan Facility"),
originally in an aggregate principal amount of $130 million, in addition to
the Revolving Credit Facility. Both facilities have a final maturity of
December 31, 2000. Up to $40 million of Revolving Credit Facility availability
may be used for standby and commercial letters of credit. In addition, for at
least 30 consecutive days of each 12-month period, outstanding amounts under
the Revolving Credit Facility are limited to $60 million or less.
The obligations under the Credit Agreement are guaranteed by Holding and are
secured by a pledge of the Company's capital stock and by pledges of and
security interests in substantially all the Company's property and assets. The
Credit Agreement contains various default provisions and affirmative and
negative covenants, including a negative pledge with respect to the Company's
unencumbered assets, and certain financial covenants that require the Company
to meet certain financial ratios and tests. The Company recently obtained
three successive amendments to its Credit Agreement to modify various EBITDA
(as defined), interest expense ratio maintenance, EBITDA ratio maintenance and
net worth requirements as well as the permissable levels of capital
expenditures under the relevant financial covenants as of the end of each
fiscal quarter in 1996, as well as for all future periods. The Company sought
these modifications in part because of the current earnings impact of
decreased ammunition and firearms sales volumes and the additional interest
expense resulting from increased working capital borrowings due to changes in
customer purchasing patterns, and in part to make longer term adjustments to
the covenant requirements. As of the end of the fourth quarter of 1996, after
giving effect to these modifications, the Company was in compliance in all
material respects with the financial covenants under the Credit Agreement. See
"--Results of Operations" and "--Seasonality; Recent Purchasing Patterns."
In accordance with the Credit Agreement, the Company made scheduled
principal payments on the term loans thereunder of $13.6 million in 1996, $9.3
million in 1995 and $10.0 million in 1994. The Credit Agreement requires the
Company to make further quarterly principal payments on the term loans
thereunder (after pro rata reduction for certain prepayments and subject to
further pro rata or other reduction in the future) in an aggregate amount of
approximately $18.2 million in each of 1997 and 1998, $22.7 million in 1999
and $27.3 million in 2000 with all remaining amounts then outstanding under
the Credit Agreement to be repaid on December 31, 2000. The Credit Agreement
also requires the Company to make mandatory prepayments on the term loans
thereunder annually, in an amount equal to 50% of the Company's Excess Cash
Flow (as defined therein) for the preceding fiscal year. Any such prepayment
will result in a pro rata reduction in all subsequently scheduled principal
payments on such term loans, except that any such payment made within the
twelve months prior to the date on which an installment or other payment of
principal is scheduled to be paid on the term loans may, at the option of the
Company, be applied first to such installment or other payment. The Company
has made such a prepayment in the amount of approximately $10.7 million in
1995 for the year ended December 31, 1994. The Company did not have Excess
Cash Flow for the year ended December 31, 1995 and accordingly no such
prepayment was made in 1996.
Loans under the Credit Agreement generally bear interest, at the Company's
option, at a variable rate equal to either (i) the rate that is the highest of
the administrative agent's prime rate, or certain alternative rates, in
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each case plus up to 1.25% per annum, or (ii) the rate at which certain
Eurodollar deposits are offered in the interbank Eurodollar market plus up to
2.50% per annum. Beginning in 1995, upon the Company's delivery to the Credit
Agreement's administrative agent of the Company's quarterly financial
statements, the interest rate on the Company's Credit Agreement borrowings can
be reduced by 0.25% to 1.0% per annum from levels in effect at December 31,
1994 if the Company has met certain financial ratios, based on EBITDA and
consolidated interest expense, for the four quarters then ended. Once reduced,
such interest rate can also be increased up to the original levels if the
Company no longer meets the financial ratios making it eligible for interest
rate reduction. The interest rate currently applicable to borrowings under the
Credit Agreement is the maximum rate provided for thereunder. As prescribed in
the Credit Agreement, in January 1994, the Company entered into interest rate
cap transactions to cap the 3-month Eurodollar base rate on approximately 50%
of the principal balance of borrowings under the Term Loan Facility at 5% for
the period from July 1994 through June 1996. See "--Financial Instruments."
The weighted average interest rate per annum for term loan and revolving
credit borrowings under the Credit Agreement was 8.0% and 8.7%, respectively,
for the nine months ended September 30, 1996, as compared to 8.4% and 8.9%,
respectively, for the nine months ended September 30, 1995.
Notes
The Company issued the $100 million face amount of its outstanding Existing
Notes in connection with the Acquisition. The Notes bear interest at a fixed
rate of 9 1/2% per annum through April 30, 1994, 10% per annum from April 30,
1994 to the day before the consummation of the Exchange Offer, and 9 1/2% per
annum thereafter until maturity. Interest on the Notes is payable semi-
annually and principal is payable at maturity on December 1, 2003. The
Indenture for the Notes contains certain covenants relating to the provision
to the Note holders of certain financial and related information. As of
December 31, 1996, the Company was in compliance in all material respects with
all such reporting requirements under the Indenture.
ADOPTION OF NEW ACCOUNTING STANDARDS
Effective January 1, 1993, the Company adopted Statement of Financial
Accounting Standards (SFAS) No. 106, "Employers' Accounting for Postretirement
Benefits Other Than Pensions" and SFAS No. 112, "Employers' Accounting for
Postemployment Benefits (an amendment of FASB Statements No. 5 and 43)." The
Company recorded charges of $74.1 million to its net income for the eleven-
month period ended November 30, 1993, for the cumulative effects of transition
to these two new standards. Cash expenditures will not be affected by these
accounting changes. Prior year financial statements were not restated.
Effective January 1, 1996, the Company adopted Statement of Financial
Accounting Standards (SFAS) No. 123, "Accounting for Stock-Based
Compensation," which allows companies either to measure compensation cost in
connection with employee stock compensation plans using a fair value based
method or to continue to use an intrinsic value based method. The Company will
continue to use the intrinsic value based method, which generally does not
result in compensation cost.
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BUSINESS
GENERAL
Founded in 1816, the Company is engaged in the design, manufacture and sale
of sporting good products for the hunting, shooting sports and fishing
markets. The Company's product lines consist of firearms, ammunition and
hunting/gun care accessories sold under the Remington name and other labels,
fishing products sold under the Stren name and other labels and clay targets.
The Company is the only domestic manufacturer of both firearms and ammunition
and, according to the NSGA, is the largest U.S. manufacturer of shotguns and
rifles. The Company manufactures firearms at a one million square foot
facility in Ilion, New York, ammunition at a 750 thousand square foot plant in
Lonoke, Arkansas, and clay targets at two plants located in Findlay, Ohio and
Ada, Oklahoma. The Company has begun construction of a new 44 thousand square
foot firearms manufacturing facility in Mayfield, Kentucky at which the
Company expects to begin manufacturing rimfire rifles in March 1997. In 1995
the Company completed the consolidation of its research and development at a
new 33 thousand square foot facility in Elizabethtown, Kentucky. The Company
markets fishline sourced from third party manufacturers. The Company's
products are distributed throughout the United States and in over 50 other
countries, with distribution in the United States being primarily through
wholesalers, distributors and major retail chains. In 1995, 8% of the
Company's revenues were attributable to sales outside the United States.
Remington enjoys a domestic market leadership position for many of its
firearms product lines and is one of the three major manufacturers in the
domestic ammunition market. According to studies conducted for the Company,
among hunters and anglers, Remington and Stren are among the most-recognized
brand names in their markets. The Company believes that its substantial market
positions are attributable to the strength of the Remington brand name, the
Company's family of well-established products, the breadth of products sold by
the Company, product innovation and quality and the Company's marketing,
distribution and manufacturing expertise. In 1994, according to PPI, the
Company had the largest share of the retail shotgun market, at approximately
39%, with its nearest competitor holding a market share of approximately 25%.
Remington was also the second largest brand of rifles in the United States in
1994, according to PPI, with a market share of approximately 18%, with its
largest competitor holding a market share of approximately 25%. In the
ammunition market, the Company was the second largest manufacturer in the
United States in 1994, based on PPI data, with a share of approximately 25%,
with its nearest competitor holding a market share of approximately 35%. Sales
of firearms and ammunition comprised approximately 48% and 41%, respectively,
of the Company's sales in 1995. In the retail fishline market segment, the
Company held a share of approximately 26% in 1995, with its nearest competitor
holding a market share of approximately 36%, according to SMRG.
The Company's management team intends to continue a strategy aimed at
increasing sales and improving operating margins, focusing on the following
key elements: continuing to support the Company's brand name franchise and
maintaining its focus on its core product lines and businesses; pursuing
growth in revenues through a continuing emphasis on new product introductions
and product line extensions; continuing to pursue cost reduction and
productivity improvement measures, particularly in the Company's manufacturing
operations and in its purchasing, customer service and information systems
functions; and expanding the Company's export sales and marketing efforts.
INDUSTRY
According to ASD, approximately 23 million people in the United States enjoy
the shooting sports, including approximately 17 million who hunt annually. The
markets for shotguns and rifles and hunting-related products, such as
ammunition and accessories, are large, mature markets that the Company
believes have historically been relatively stable markets exhibiting modest
growth. Total domestic consumer expenditures in this market for 1994 are
estimated by the NSGA to have been $379 million for shotguns, $794 million for
rifles, and $916 million for ammunition. Although firearms may be used for
decades with proper maintenance, the Company believes that the used firearms
after-market historically has not undercut the new firearms market
significantly, in part because of demand by collectors for used firearms and
in part because of continuing demand for improved new products. Much of the
demand in the new firearms market comes from repeat buyers who are motivated
by new calibers and firearms technology advancement.
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The Company believes that a number of trends currently exist that are
potentially significant to the firearms and ammunition markets. First, the
Company believes that the development of rural property in many locations has
curtailed or eliminated access by hunters to private and public lands.
However, the Company also believes that the number of private hunting
facilities is increasing, as is the availability of alternatives to
traditional hunting activities, such as sporting clays and shooting games that
simulate hunting, and that these trends may help offset increasing
restrictions on access and land use. Second, environmental issues, such as
concern about lead in the environment, may also adversely affect the industry.
See "--Environmental Matters." The Company has developed a line of shotshells
that use steel shot instead of the industry standard lead shot, and that are
intended to reduce the amount of lead being introduced into the environment
and to appeal not only to the shooter legally required to use steel shot, but
also to the environmentally concerned shooter. Third, the Company believes
that safety issues may affect sales of firearms, ammunition and other hunting-
related products; in the northeastern United States, for example, some
communities permit hunters to use only shotguns (which have a shorter average
range than rifles) for deer hunting in order to minimize the possibility of
shooting accidents in more densely populated areas. The Company has developed
specialized ammunition, its Premier Copper Solid sabot slug, that is intended
for use in a shotgun but that is designed to give hunters the accuracy and
effectiveness of a rifle. Although the Company believes that these trends have
not had a material adverse effect on its business in the past, there can be no
assurance that they will not do so in the future, or that industry sales of
firearms, ammunition and other shooting-related products will continue to
grow. See "--Governmental Regulation and Licenses."
According to ASD, approximately 23% of the U.S. population (55 million
people) consider themselves anglers. Fishing is considered an inexpensive
sport that can be enjoyed by people of widely varying ages, skills and
abilities. The NSGA estimates that the retail market for recreational fishing
tackle, of which the fishline segment forms a relatively small part, exceeded
$730 million in 1995; the Company's 26% market share of the retail fishline
market in 1995 constituted approximately 3% of the total retail market in 1995
for recreational fishing tackle according to SMRG.
MARKET SHARE
Remington enjoys a domestic market leadership position for many of its
firearm product lines and is one of the three major manufacturers in the
domestic ammunition market. The Company believes that its substantial market
positions are attributable to the strength of the Remington brand name, the
Company's family of well-established products, the breadth of products sold by
the Company, product innovation and quality and the Company's marketing,
distribution and manufacturing expertise. Remington's leading position in the
domestic shotgun market and its position as one of the leading brands in the
domestic rifle market is reflected in the Company's unit share of these
respective retail markets. The Company's strong position in each of the
domestic shotgun, rifle and ammunition markets is reflected in its share of
the respective retail markets based on information provided by PPI. The
Company also has a strong market position in the monofilament fishline market,
based on SMRG information. The table below gives approximate market shares for
Remington and its nearest competitor in each of these markets in 1995:
<TABLE>
<CAPTION>
SALES DOLLARS
-----------------------------------
SHOTGUNS RIFLES AMMUNITION FISHLINE
-------- ------ ---------- --------
<S> <C> <C> <C> <C>
Remington........................... 39% 18% 25% 26%
Nearest Competitor.................. 25% 25% 35% 36%
</TABLE>
PRODUCTS
The Company's product offerings include a comprehensive line of recreational
shotguns and rifles, sporting ammunition and ammunition reloading components,
a line of hunting knives, maintenance and repair items for the Company's line
of firearms, related firearms accessories (belts, clips, and protective
cases), clay targets and other products and accessories for the recreational
hunting, target shooting and outdoor markets, as well as small metal injected
molded ("MIM") parts for the automotive and firearms industries. Under the
brand name Stren,
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the Company distributes a range of monofilament fishline, terminal tackle and
accessories. During its 180-year history, the Company has introduced to the
firearms market its versions of the autoloading shotgun (1905), the repeating
centerfire rifle (1906), the pump-action shotgun (1907) and the bolt-action
centerfire rifle (1921), all of which became standards in the industry. The
following sets forth the Company's sales for its principal product lines for
the periods shown:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
------------------------
1995 1994 1993
------- -------- -------
<S> <C> <C> <C>
Firearms............................................... $ 203 $ 176 $ 163
Ammunition............................................. 174 190 162
Other(a)............................................... 50 52 41
------- -------- -------
Total Sales.......................................... $ 427 $ 418 $ 366
======= ======== =======
</TABLE>
- --------
(a) Consists of fishline, accessories, guncare products and commercial MIM
parts.
Firearms
The Company produces and markets a broad selection of shotguns and rifles
under the Remington brand name. The Company's goal has been to market a
combination of general-purpose firearms together with more specialized
products that embody Remington's emphasis on value, performance and design. In
addition, the Company produces custom-made shotguns and rifles in the custom
shop at its Ilion facility. Historically, the Company's sales of rifles and
shotguns have tended to be approximately equal to each other. In recent years,
shotgun sales have surpassed rifle sales due in part to the Company's emphasis
on shotguns in its development of new products. More recently, the Company's
new product introductions relating to rifles have begun to improve the balance
in sales between shotguns and rifles.
Shotguns. The Company produces numerous variations of shotguns. The
Company's most popular shotguns, the Model 1100 and Model 11-87 auto-loading
and the Model 870 pump-action, range in retail list price from approximately
$300 to $800. Remington shotguns are offered in versions that are marketed to
both the novice and the experienced gun owner. Specialty shotguns focus on the
growing deer and turkey hunting markets. In addition, the Company has recently
introduced new shotguns intended for various law enforcement applications and
light contoured barrels for both auto-loading and pump-action Premier
shotguns. The Company also introduced its over-under Peerless and Model 396
shotguns, which were developed by the Company to compete in the break action
shotgun market. The Company also manufactures products for recreational and
competitive clay target shooting, such as the Sporting Clays Model 11-87 and
trap and skeet versions of the Model 11-87.
Rifles. The Company's most popular rifles are the Model 700, Model Seven,
Model 7400 and Model 7600 centerfire rifles and the Viper rimfire rifle. To
appeal to a broad range of sportsmen, the Company manufactures these rifles in
a wide variety of calibers, configurations and finishes. The Company presently
manufactures three types of centerfire rifles: bolt-action, pump-action and
auto-loading. In addition, the Company produces bolt-action, pump-action and
auto-loading .22 caliber rimfire rifles. The Company's bolt-action Model 700
rifle is a standard in the industry, and the Company has also recently
introduced new versions utilizing stainless steel barrels and synthetic stocks
for weather durability. Recent innovations include a new line of muzzleloading
rifles, a new line of .22 caliber rimfire rifles and a fine line engraving and
scrollwork process to enhance to the appearance of the existing product line.
Retail list prices for the Company's most popular rifles range from
approximately $150 to $900.
Ammunition
The Company designs, manufactures and markets a complete line of sporting
ammunition products, including shotgun shells, metallic centerfire ammunition
for use in rifles or handguns and .22 caliber rimfire
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<PAGE>
ammunition. The Company also produces and markets sporting ammunition
components used by smaller ammunition manufacturers, as well as by private
consumers engaged in the practice of reloading centerfire cases or shotgun
shells.
The Company distributes its ammunition products primarily under the brand
names Remington, Peters and UMC, through firearms dealers, sporting goods
stores and mass merchandisers. In general, Remington branded products compete
in both the middle and high performance categories, while the UMC and Peters
brands are used for popularly priced ammunition in shotshell, centerfire and
rimfire.
In recent years the Company introduced a number of new ammunition product
lines intended to satisfy the trend towards more specialized, high performance
products. Typical of Remington's more recent introductions is the Premier
Copper Solid sabot slug, a non-lead shotgun deer slug which delivers superior
accuracy and Nitro-27 for long yardage clay target shooting.
In addition, the Company is committed to maintaining a leadership position
in the design and manufacture of products that address hunting and shooting
regulations focusing on environmental issues, and in recent years introduced
the Nitro-Steel and Express-Steel hunting shotshell lines and the new line of
Premier Steel target shot shells, which use steel shot instead of the industry
standard lead shot.
Other Products
The Company's Stren fishlines offer seven families of fishline products for
the recreational fisherman. The Company also markets a limited line of fishing
accessories, including tools, knives, terminal tackle and lure accessories.
Remington produces a complete line of clay targets for use in trap and skeet
shooting activities, marketed under the Blue Rock brand name.
The Company also markets gun parts, gun safes, gun care products, hunting
knives and metal injection molded parts. In January 1995, the Company
announced it will no longer directly market a line of outerwear and clothing
designed for hunting and shooting. The Company has licensed third parties to
manufacture and market sporting and outdoor apparel products.
SERVICE AND WARRANTY
The Company supports service and repair facilities for all of its firearm
products in order to meet the service needs of its distributors and customers
nationwide. Distributors and customers may return products to the Company only
after receiving authorization for the return by the Company's customer service
department. Returns that are caused by the Company's error, such as a shipment
of the wrong product or of an incorrect quantity, are at the Company's
expense. The Company has no formal consumer warranty program for firearms or
ammunition products. The number of returns received by the Company annually in
the past has not been material.
MARKETING AND DISTRIBUTION
In the United States, Remington products are sold primarily through a
network of approximately 900 wholesalers, dealers, chains and special buying
groups who purchase the product directly from the Company for resale
predominantly to gun dealers and end users. These end users include sportsmen,
hunters, gun collectors and law enforcement and other government
organizations.
The Company's products are marketed primarily through manufacturer's
representatives and directly to mass merchandisers. In 1995, approximately 59%
of the Company's sales consisted of sales made through five domestic
manufacturer's sales representative groups who market principally to
wholesalers, dealers and regional retail chains. Such representative groups
carry substantially all of the Company's products (and are prohibited from
carrying competing goods from other manufacturers) and are paid variable
commissions based on the
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<PAGE>
product sold. The retailers, wholesalers and regional chains to which the
manufacturer's sales representatives and the Company's internal sales
personnel market the Company's products are authorized to carry specified
types of Remington products for a non-exclusive one-year term, though not all
carry the full range of products. Each retailer or wholesaler is required to
spend a minimum dollar amount for each of the Remington product lines it is
authorized to carry, which varies according to account classification. These
retailers and wholesalers generally carry broader lines of merchandise than do
the mass merchandisers and are less seasonal in the size of their firearms and
ammunition sales. Sales to wholesalers constitute one of the Company's major
distribution channels. While the wholesale channel is currently experiencing a
trend toward consolidation, the Company does not believe that this trend will
materially adversely affect the Company's distribution strategy.
The Company's in-house sales force markets the Company's product lines
directly to national accounts and to federal, state and local government
agencies. Approximately 22% of the Company's net revenues in 1995 consisted of
sales made to a mass merchandiser, Wal-Mart. Mass merchandisers and chains
generally provide convenient access for hunting and shooting consumers to the
Company's products but carry a more limited array of products and are more
seasonal in sales. The Company's sales to Wal-Mart are not governed by a
written contract between the parties. Although the Company believes its
relationship with Wal-Mart is good, the loss of this customer or a substantial
reduction in sales to this customer could adversely affect the Company's
financial condition or results of operations. During 1996, changes in the
inventory management practices and purchasing patterns of several key
customers, including Wal-Mart, have had a material effect on the Company's
financial results and cash flows. See "Management's Discussion of Financial
Condition and Results of Operations."No material portion of the Company's
business is subject to renegotiation of profits or termination of contracts at
the election of a governmental purchaser.
Foreign sales were approximately 8% the Company's total revenues for 1995
and 7% for both 1994 and 1993. Company sales personnel market directly to
foreign purchasers consisting primarily of authorized export distributors and
sales representatives, generally on a nonexclusive basis and for a one-year
term. Vios S.a.r.l., a company owned, in part, by a former Company employee,
also provided administrative support for the Company with its international
operations. See "Certain Relationships and Related Transactions--Management."
The Company also produces a catalogue of all of its products, which is
available to the general public in French, German and Spanish, as well as in
English.
In the first quarter of each year, the Company receives orders from its
customers, which are designated as firm by such customers, although the
Company generally permits adjustments in outstanding unfilled orders. The
Company also follows industry practice in canceling most orders from its
distributors that remain unfilled as of December of each year. The backlog of
unfilled firearms orders was approximately $33 million as of December 31, 1995
compared to $37 million a year earlier.
Most of the Company's products that are generally used during the fall
hunting season have been sold pursuant to a "dating" plan which allows the
purchasing distributor to buy the products commencing in December, the start
of the Company's dating plan year, and pay for them on extended terms.
Discounts are offered for early payment under this plan. In addition, the
Company has a separate program that provides an incentive to prepay for
ammunition purchases. The Company believes that allowing both extended payment
terms for early orders and discounts for prepayment helps to level out the
demand for these otherwise seasonal products throughout the year. See
"Management's Discussion of Financial Condition and Results of Operations--
Seasonality; Recent Purchasing Patterns."
For further discussion of seasonality and related matters, see "Management's
Discussion of Financial Condition and Results of Operations--Seasonality;
Recent Purchasing Patterns."
MANUFACTURING
The Company currently manufactures its firearms and ammunition products at
four plants, located within the United States. The Company's facility in
Ilion, New York, manufactures the Company's shotguns, rifles and firearms
repair and accessory parts such as clips and extra barrels, and also houses
the Company's gunsmith repair facility, custom gun shop, the Remington Country
Store and the Remington Museum. The Company also
57
<PAGE>
purchases certain component parts from third party vendors. Company products
have been continuously produced at the Ilion site since 1816. The Company's
facility in Lonoke, Arkansas, manufactures loaded ammunition and ammunition
components. The Company's clay targets are manufactured at facilities located
at Ada, Oklahoma and Findlay, Ohio. The Company has begun construction of a
new firearms manufacturing facility in Mayfield, Kentucky at which the Company
expects to begin manufacturing rimfire rifles in March 1997.
During 1996, the Company entered into contracts with five international
manufacturers of firearms and ammunition to produce Remington brand products
to the Company's specifications for sale in Europe and elsewhere.
Firearms
To manufacture the various firearm models, the Company utilizes a
combination of parts manufactured from raw materials at the Ilion facility or
components purchased from independent manufacturers. Prior to assembly,
purchased parts may be modified through several secondary processes such as
metal removal, joining, heat treating and coloring. Manufactured parts,
including many of the basic metal component parts of the firearms manufactured
by the Company, are produced from raw materials via the processes of material
removal, finishing, heat treating, assembly/gallery testing and forming using
metal and plastic injection molding techniques. Quality control processes are
employed throughout the production process, utilizing specifically tailored
testing procedures and analyses. The Company believes that its manufacturing
safety record is excellent.
Ammunition
The manufacturing of ammunition at Lonoke consists of four major production
areas: Primer, Centerfire, Shotshell and Rimfire. In the Primer area,
ingredients are manufactured on site utilizing two separate precipitation
processes and then combined with fuels and binders to form primer mixture. The
Centerfire operation consists of bullet manufacture, shell manufacture,
priming, loading and packaging. The Shotshell operation consists of shot
manufacture, head manufacture, body manufacture, assembly and prime, loading
and packaging. Lead shot is manufactured by pouring molten lead through a
screen, forming lead spheres which solidify as they fall over 150 feet into a
cushion of water. The other components of a shotshell are formed from raw
steel, brass and polyethylene pellets via several stamping and extrusion
processes. The Rimfire operation consists of shell manufacture, priming,
loading and packaging. Several continuous rotary machines form shells, insert
bullets and add smokeless powder. Throughout the various processes, Company
technicians continuously monitor and test the velocity, pressure, and accuracy
levels of the ammunition. The Company believes that its manufacturing safety
record is among the best in the U.S. ammunition market.
Clay Targets
Targets are manufactured from a mixture of limestone and melted pitch. The
mixture is fed into a continuous motion press that forms the target, cools the
target and paints the top.
SUPPLY OF RAW MATERIALS
To manufacture its various products, the Company utilizes numerous raw
materials, including steel, lead, brass, plastics and wood, as well as
manufactured parts purchased from independent manufacturers. For a number of
the Company's raw materials, it relies on one or a few suppliers. The
Company's requirements for carbon steel, stainless steel, steel shot, brass
strip and walnut gun stock blanks are each currently being met by a single
vendor. Generally, the Company has had satisfactory, long-term relationships
with these suppliers. The Company has purchase contracts with certain of these
suppliers for periods ranging from one to seven years but no formal contracts
with others.
The company that supplies walnut gun stock blanks is presently the only
known supplier of this commodity. Alternative vendors could be found for the
brass strip which the Company converts to cartridge and primer casings, carbon
steel, stainless steel and steel shot. However, any disruption in the
Company's relationships with any of these vendors or reductions in the
production of the material supplied could, in each case, adversely affect the
Company's ability to obtain an adequate supply of the material. The Company
believes that it has a good
58
<PAGE>
relationship with each of these vendors and does not currently anticipate any
material shortages or disruptions in supply from these vendors.
Three companies in the United States and Canada produce smokeless powder,
which is an indispensable component in the ammunition manufactured and sold by
the Company. The Company currently purchases powder from each of these three
suppliers. The Company believes that any two of these three companies could
supply substantially all of the Company's powder requirements. However, given
the complex formulae and production processes involved in manufacturing the
powder mixtures used by the Company, obtaining powder from sources other than
these three companies may not be feasible.
The Company purchases a number of stamped parts from one vendor. While
alternative vendors can be found to replace this supplier, any disruption in
the Company's relationship could result in substantial expenditures for
tooling. The Company believes that it has a good relationship with its current
supplier and does not currently anticipate any material shortages or
disruptions in supply of these stamped parts.
The Company purchases most of the fishline it requires for its product lines
from DuPont. Any disruption in the Company's relationship with DuPont, or
reductions in fishline production by DuPont, could adversely affect the
Company's ability to obtain an adequate supply of fishline on terms favorable
to the Company. Remington has a supply agreement with DuPont for nylon
monofilament fishline which expired in December 1996. The parties have begun
discussions with respect to a renewal of this agreement. The Company believes
it has a good relationship with the division of DuPont that produces nylon
monofilament fishline, and believes it will be able to negotiate a new supply
agreement, although there can be no assurance in this regard.
Alternative sources, many of which are foreign, exist for each of these
materials from which the Company could obtain such raw materials. Nonetheless,
the Company does not currently have significant supply relationships with any
of these alternative sources and cannot estimate with any certainty the length
of time that would be required to establish such a supply relationship, or the
sufficiency of the quantity or quality of materials that could be so obtained.
In addition, the Company may incur additional costs in sourcing raw materials
from alternative producers.
The price and availability of raw materials are affected by a wide variety
of interrelated economic and other factors, including alternative uses of
materials and their components, changes in production capacity, energy prices
and governmental regulations. Industry competition and the timing of price
increases by suppliers limits to some extent the ability of the Company and
other industry participants to pass raw material cost increases on to
customers.
The Company uses commodity futures contracts to hedge against the risk of
increased prices for raw materials. See "Management's Discussion and Analysis
of Financial Condition and Results of Operations--Liquidity and Capital
Resources--Financial Instruments."
RESEARCH AND DEVELOPMENT
The Company maintains a research and development program, with approximately
50 employees assigned to these efforts as of December 31, 1996. New products
and improvements to existing products are developed based upon the perceived
needs and demands of consumers, as well as successful products introduced to
the market by the Company's competitors. The Company's research and
development is performed primarily by an in-house team of marketing managers,
engineers, draftsmen and product testers using tools such as computer-assisted
design and a variety of consumer research techniques. Research and plant
technical staff then collaborate to produce an experimental prototype,
ensuring that products and manufacturing processes are concurrently designed.
Following a successful prototype, a pilot run is commenced to ensure that
plant personnel and equipment can manufacture the product efficiently. In
recent years, the Company introduced several new products employing
innovations in design and manufacturing, including the Viper rimfire rifle,
Peerless over-
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<PAGE>
under shotgun, Premier Copper Solid sabot slug and Golden Saber ammunition.
The Company has also directed its research efforts to developing lead-free
primer mixes and steel shot shotshells to prepare for anticipated trends
toward products that address environmental concerns.
The Company historically maintained research and development facilities at
each of its two main manufacturing facilities. In 1995, the Company completed
the consolidation of its research and development function into a new facility
in Elizabethtown, Kentucky.
Excluding the non-recurring items in both 1994 and 1995, research and
development expenditures for the continuing operations of the Company in 1993,
1994 and 1995 amounted to approximately $5.3 million, $6.0 million and $6.3
million, respectively. Research and development expenses in 1994 included $2.3
million of non-recurring costs related to the Company's consolidation of its
research and development function into a new facility in Elizabethtown,
Kentucky. Research and development costs in 1995 included a $1.0 million
benefit as the actual relocation-related severance costs were less than
estimated.
PATENTS AND TRADEMARKS
At the Closing, Sporting Goods and DuPont assigned to Remington all their
U.S. and foreign rights to patents, trademarks, proprietary information,
software, and other intellectual property primarily related to or used in the
Business. With respect to certain intellectual property relating to the
manufacture of nylon monofilament fishline, DuPont and Remington entered into
an agreement providing for the supply by DuPont of the Company's requirements
for nylon monofilament fishline, which is marketed and distributed by the
Company. See "--Supply of Raw Materials."
The Company's operations are not dependent to any significant extent upon
any single or related group of patents. The Company believes that its most
significant patents are three patents relating to the Model 700 rifle and the
Model 870 and Model 11-87 shotguns, which patents expire in 1998, 1999 and
2006, respectively. The Company does not believe that the expiration of any of
these patents will have a material adverse effect on the Company's financial
condition or its results of operations. The Company's operations are not
dependent upon any single trademark other than the Remington word mark and the
Remington logo mark, and, to a lesser extent, the Stren mark. Some of the
trademarks used by the Company, however, are identified with and important to
the sale of the Company's products. Some of the more important trademarks used
by the Company, all of which are owned by the Company, are: Remington, the
Remington scroll logo, Core-Lokt (jacketed centerfire bullets), Duplex (a
family of factory-loaded shotshells, loaded with two shot sizes layered in one
shell), Express (long range shotshells), Power Piston (shotshell wads),
Premier (the Company's highest quality shotshell ammunition), Copper Solid
(solid copper slugs), Golden Saber (high performance jacketed hollow point
bullets for pistols/revolvers), Nitro-Steel (high powered steel shotshells),
UMC (popularly priced, first quality rifle/pistol/revolver ammunition, in a
limited line of popular specifications), Leadless (reduced lead-releasing
bullets), Nitro-27 (handicap trap loads), Model 90-T (a family of single-
barrel trap guns), Model 11-87 (a family of semi-automatic shotguns), Model
7600 (a family of pump-action centerfire rifles), Model 7400 (a family of
semi-automatic centerfire rifles), Wingmaster (a family of pump-action
shotguns) and Viper (semi-automatic rimfire rifles). The Company believes it
has adequate policies and procedures in place to protect its intellectual
property.
The Company owns the Remington marks (and registrations thereof) for use in
its firearms and ammunition product lines, as well as for certain related
products associated with hunting, wildlife and the outdoors. The Company does
not own, but has the right to use, the Remington mark with respect to certain
other products marketed by it (the "Ancillary Products"), including certain
hunting knives and other merchandising items, pursuant to the Trademark
Settlement Agreement, dated December 5, 1986 (the "Trademark Settlement
Agreement"), between the Company and Remington Products, Inc. ("RPI"). The
Trademark Settlement Agreement resulted from the settlement of certain
litigation between the Company and RPI over the use of the Remington mark on
products marketed by both parties. RPI is not affiliated with Remington,
Holding, DuPont or Sporting Goods and was not involved with the Acquisition.
The Trademark Settlement Agreement provided for the formation of Remington
Licensing Corporation ("RLC"), the capital stock of which is owned equally by
the Company and an affiliate of RPI, Remington Products Company LLC ("RPC"),
which also holds as
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transferee RPI's interest in respect of the Trademark Settlement Agreement.
RLC owns the Remington marks in the United States with respect to products of
mutual interest to the Company and RPC, and licenses such marks on a royalty-
free basis to the Company and RPC for products in their respective markets.
The Trademark Settlement Agreement does limit, however, the Company's ability
to expand the use of the Remington mark into product areas claimed by RPC,
particularly personal care products. The Trademark Settlement Agreement is
currently relevant primarily to the Company's U.S. operations, but does
provide for cross-licensing between the Company and RPC outside the United
States. The Trademark Settlement Agreement also provides that, if certain
bankruptcy or insolvency-related events occur with respect to either of RLC's
shareholders, such shareholder may be contractually required to sell such
shareholder's RLC stock to RLC or RLC's other shareholder at its book value
or, under certain circumstances, at fair market value. While in some cases
such requirement may not be enforceable under the U.S. Bankruptcy Code, such a
purchase from the Company could provide RPC with greater leverage over RLC's
licensing relationship with the Company with respect to Ancillary Products.
LICENSING
The Company licenses the Remington mark to certain companies that
manufacture and market products that complement the Company's product line.
Currently, the Remington mark is licensed for use on, among other things,
sporting and outdoor apparel; caps; boots; tents; backpacks; sleeping bags;
leather products; non-prescription sun/safety eyeglasses; and certain other
nostalgia/novelty goods. The Company strives to ensure that the quality, image
and appeal of these licensed products are consistent with the high-quality
image of its core products. These licenses generally grant an exclusive right
to sell a specific product category, with the normal term being six years.
Licenses increase the market recognition of the Remington trademark and
enhance the Company's ability to market core products. Licensing facilitates
new cross-marketing promotional opportunities and generates income. Certain of
the Company's licensing efforts are carried out under terms established in the
Trademark Settlement Agreement described above.
COMPETITION
The markets in which the Company operates are highly competitive.
Competition is based primarily on quality of products, product innovation,
price and customer service and support. Product image, quality and innovation
are the dominant competitive factors in the firearms industry, with price the
dominant factor in the ammunition industry.
The Company's competitors vary according to product line. Certain of these
competitors are subsidiaries of large corporations with substantially greater
financial resources than the Company. The Company's shotgun products compete
primarily with products offered by USRAC (which produces Winchester firearms)
and Browning (both units of GIAT Industries), O.F. Mossberg & Sons, Inc.,
Sturm, Ruger & Co., Inc. and Beretta U.S.A. Corporation. The Company's rifles
compete primarily with products offered by Browning and USRAC, Marlin Firearms
Co., Sturm, Ruger & Co., Inc. and Savage Arms, Inc. In the ammunition market,
the Company competes primarily with the Winchester unit of Olin Corporation,
the Federal Cartridge Co. unit of Pentair Inc. and the CCI unit of Blount,
Inc. The Company's main competitor in the fishing line market is Berkley, Inc.
The Company believes that it competes effectively with all of its present
competitors. However, there can be no assurance that the Company will continue
to do so, and the Company's ability to compete could be adversely affected by
its leveraged condition.
EMPLOYEES
As of December 31, 1996, the Company employed approximately 2,400 full-time
employees of whom approximately 400 were salaried and approximately 2,000 were
hourly. Nearly 2,170 of the Company's employees are engaged in manufacturing,
with approximately 180 engaged in sales and general administration and
approximately 50 in research and development. The Company laid off 220
employees at its Ilion plant, 88 at its Lonoke facility and 18 at its
corporate headquarters during 1996 in response to the decline in sales of the
Company's products in the first nine months. An additional work force of
temporary employees is engaged during peak production schedules. The
Employees' Mutual Association of Ilion, Inc. ("EMA") represents hourly
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employees at the Company's plant in Ilion, New York. The collective bargaining
agreement with the EMA was renegotiated effective July 1994 for a three year
period. In July 1996, EMA voted to merge with the United Mine Workers of
America ("UMWA") and has become Local 717 of UMWA. The Company also has a
labor agreement with Local 366 of the United Automobile, Aircraft and
Agricultural Implement Workers of America, U.A.W., which represents hourly
employees at the Company's plant in Findlay, Ohio, which agreement is
terminable by either party on notice. Employees at the Company's Lonoke,
Arkansas and Ada, Oklahoma facilities are not represented by unions. In June
1994, the Labor International Union of North America ("LIUNA"), a construction
union comprised of approximately 750,000 workers, sponsored an organizing
effort at the Company's ammunition plant in Lonoke. The proposal was defeated
by a small margin. In May 1996, LIUNA made another organizing attempt at the
Lonoke plant, but this effort did not gain sufficient support to petition for
a general election and has since been abandoned. In late July 1996, UMWA
organizing teams commenced a campaign to organize the Lonoke plant. On
December 12, 1996, the employees at the Lonoke plant voted to reject the
organizing efforts of the UMWA by a margin of nearly two to one. There have
been no significant interruptions or curtailments of operations due to labor
disputes since prior to 1968 and the Company believes that relations with its
employees are satisfactory.
PROPERTIES
The Company's manufacturing operations are currently conducted at four owned
facilities. The following table sets forth certain information regarding each
of these facilities:
<TABLE>
<CAPTION>
SQUARE FEET
PLANT PRODUCT (IN THOUSANDS)
----- -------------------------------------------- --------------
<S> <C> <C>
Ilion, New York......... Shotguns; centerfire and rimfire rifles 1,000
Lonoke, Arkansas........ Shotshell; rimfire and centerfire ammunition 750
Findlay, Ohio........... Clay targets 40
Ada, Oklahoma........... Clay targets 21
</TABLE>
The Lonoke and Ilion facilities each contain enclosed ranges for testing
firearms and ammunition. The Company believes that these facilities are
suitable for the manufacturing conducted therein and have capacities
appropriate to meet existing production requirements. In May of 1996, the
Company began construction of a new 44 thousand square foot manufacturing
facility in Mayfield, Kentucky at which the Company expects to begin
manufacturing rimfire rifles in March 1997, which will allow for expansion of
sales in this product line.
The Company's headquarters and related operations are conducted in a new
office building owned by the Company in Madison, North Carolina where the
Company relocated in mid-1996. A research and development facility owned by
the Company was completed in Elizabethtown, Kentucky during 1995. All of the
real property of the Company owned at the time of the Acquisition has been
mortgaged to secure the Company's obligations under the Credit Agreement. The
Company also leases or contracts for services from various warehouses, is a
party to a leasing arrangement involving a facility operated by a Company
contractor, and leases two sales offices.
LEGAL PROCEEDINGS
Pursuant to the Asset Purchase Agreement, the Sellers retained liability
for, and are required to indemnify the Company against, (1) all product
liability cases and claims (whenever they may arise) involving discontinued
products and (2) all product liability cases and claims involving products
that had not been discontinued as of the Closing ("extant products") and
relating to occurrences that took place, but were not disclosed to the
Company, prior to the Closing. The Company assumed financial responsibility,
up to the Cap in an aggregate amount of $25.0 million, for (1) product
liability cases and claims involving extant products and relating to
occurrences that took place, and were disclosed to the Company, prior to the
Closing, and (2) any environmental liabilities relating to the ownership or
operation of the Business prior to the Closing. The Sellers retained liability
for, and are required to indemnify the Company against, all such disclosed
product liability occurrences and such environmental liabilities in excess of
the Cap. This indemnification obligation of the Sellers is not subject to any
survival period limitation. Pursuant to the Asset Purchase Agreement, the
Sellers designated $24.5 million of the
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<PAGE>
Cap for assumed product liability costs (the "Product Liability Cap") and the
remainder for environmental costs. As of October 31, 1996, pursuant to an
agreement between the Company and the Sellers, $1.9 million in assumed
product liability costs remained to be paid by the Company before the
exhaustion of the Product Liability Cap (the "Remaining Cap"). See Note 6 to
the Unaudited Condensed Consolidated Financial Statements dated September 30,
1996. Except for certain cases and claims relating to shotguns as described
below and for all cases and claims relating to discontinued products, the
Company generally bears financial responsibility for product liability cases
and claims relating to occurrences after the Closing. Because of the nature of
firearm and ammunition products, the Company anticipates that it, as well as
other manufacturers of firearm or ammunition products, will continue to be
involved in product liability cases and claims in the future.
Prior to the Acquisition, the Sellers were self-insured for product
liability obligations of the Business, with excess insurance coverage
available at $50.0 million per occurrence. Since December 1, 1993, the Company
has maintained insurance coverage for product liability claims subject to
certain self-insured retentions both on a per-occurrence basis and in the
aggregate for personal injury or property damage relating to occurrences
arising after the Closing. The Company believes its current insurance coverage
is adequate for its needs. The current insurance policy extends through
November 30, 2000.
The Company and the Sellers are engaged in the joint defense of product
liability litigation involving Remington brand firearms and Company ammunition
products. As of December 31, 1996, approximately 45 such cases were pending,
primarily alleging defective product design or manufacture, or failure to
provide adequate warnings. All but two of these cases are individual actions
alleging personal injury, and many seek punitive as well as compensatory
damages. Of these pending cases, most are subject to the Cap or involve
discontinued products or undisclosed pre-Closing occurrences, and accordingly
are cases for which the Sellers retained liability and are required to
indemnify the Company, either in full or in excess of the Cap. Fewer than 20
of the pending cases involve post-Closing occurrences for which the Company
would be responsible under the Asset Purchase Agreement. The Company has
previously disposed of a number of other cases involving post-Closing
occurrences by settlement.
Two cases, Garza and Luna, involving Company products that were pending at
the time of the Closing, and for which the Company assumed financial
responsibility up to the amount of the Cap, were asserted as class actions,
one involving shotguns and the other bolt-action rifles. In each case
certification was sought of a class of owners of Remington brand firearms,
generally claiming economic loss based on alleged product defect, and seeking
compensatory, punitive and treble damages, plus other costs. In addition to
the liabilities retained by the Sellers in excess of the Cap, the Sellers also
are required to indemnify the Company for all claims in these cases for
economic loss involving firearms similar to those involved in these cases and
shipped up to 42 calendar months after the Closing.
On February 6, 1996, the Court in San Antonio, Texas gave final approval to
a settlement of the Garza class action relating to Remington brand shotguns,
and that decision has become final and non-appealable. The Garza case involved
certain Remington brand 12-gauge shotguns, including Model 1100, 11-87 and 870
shotguns, manufactured from 1960 to 1995. That lawsuit was filed against the
Sellers in Texas state court in November 1993, and was later removed to
Federal court. Pursuant to the settlement a fund of approximately $19.0
million will be distributed to eligible shotgun owners. Notices were published
in mid-1996 informing owners how to apply for payment from the fund. The
deadline for such filing was September 30, 1996. However, the Court extended
that deadline until December 1, 1996 for certain claims. As of that date,
approximately 500,000 class members had filed claims covering approximately
800,000 guns. It is anticipated that the funds will be disbursed in the first
quarter of 1997. Defense costs associated with Garza are subject to the Cap.
However, pursuant to a separate agreement between the Company and the Sellers
as discussed below, the $19.0 million cost of the fund, as well as additional
settlement costs and court-ordered plaintiff's attorneys fees, are to be paid
by the Sellers, without regard to the Cap. Except for the very few class
members who opted out and chose not to participate, the settlement resolves
all claims that might be brought by owners of the shotguns at issue in
connection with the barrel steel formerly used in such firearms, other than
claims for personal injury.
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<PAGE>
Publicity regarding the Garza agreement led to some additional claims of
personal injury allegedly involving use of the shotguns included in the class
action lawsuit; most of which were settled in 1996 without lawsuits being
filed. The Company anticipates, at least in the short term, an increase in the
number of such claims. The Company does not believe that the disposition of
Garza (including any individual personal injury actions which might be filed
as a result of the settlement) is likely to have a material adverse effect
upon its financial condition or results of operations.
The other purported class action, Luna, filed in 1989 against the Sellers in
Texas district court in Jim Wells County, and amended in December 1993, seeks
certification of a class consisting of all Texas owners, allegedly 400,000 in
number, of Model 700 bolt-action rifles. The parties in Luna have briefed the
issue of whether class certification is appropriate in this case, and a
hearing took place on May 6, 1996. Shortly thereafter, the court issued a
ruling that certified for class treatment the limited issues of whether the
Model 700 fire control system is defective and, if so, the cost of repair.
Pursuant to Texas law, the Sellers have filed a timely appeal of this ruling
to the intermediate level state appellate court. Briefing on the merits of the
appeal has been delayed pending transcription of a hearing record and will not
begin before January 1997. The Company had not been included as a defendant at
the time of the decision or the filing of the appeal. However, on July 16,
1996, plaintiffs further amended the complaint by naming the Company, which
filed an answer in September 1996.
The representations and warranties in the Asset Purchase Agreement expired
18 months after the Closing, with certain exceptions, and claims for
indemnification with respect thereto were to be made within 30 days of such
expiration. The Company made claims for such indemnification involving product
liability issues within that time period. In connection with the consummation
of the Garza settlement, the Company and the Sellers agreed that the Sellers
shall assume financial responsibility for a portion of costs relating to
product liability claims and cases involving certain shotguns manufactured
prior to mid-1995 and based on occurrences arising prior to November 30, 1999,
and that any claims the Company and the Sellers may have against each other
under the Asset Purchase Agreement relating to shotguns (excluding various
indemnification rights and the allocation of certain costs under the Cap) are
released. See "The Acquisition." Any claims between the Company and the
Sellers relating to other product liability issues remain open.
Because the Company's assumption of financial responsibility for certain
product liability cases and claims involving pre-Acquisition occurrences is
limited to the amount of the Cap, with the Sellers retaining liability in
excess of the Cap and indemnifying the Company in respect thereof, and because
of the Company's accruals with respect to such cases and claims, the Company
believes that product liability cases and claims involving occurrences arising
prior to the Closing are not likely to have a material adverse effect upon the
financial condition or results of operations of the Company. While it is
difficult to forecast the outcome of litigation, the Company does not believe,
in light of relevant circumstances (including the current availability of
insurance with respect to cases and claims involving occurrences arising after
the Closing, the Company's accruals for the uninsured costs of such cases and
claims and the agreement that the Sellers will be responsible for certain
post-Closing shotgun-related costs, as described above), that the outcome of
all pending product liability cases and claims will be likely to have a
material adverse effect upon the financial condition or results of operations
of the Company. However, in part because of the uncertainty as to the nature
and extent of manufacturer liability for personal injury due to alleged
product defects, there can be no assurance that the Company's resources will
be adequate to cover future product liability occurrences, cases or claims, in
the aggregate, or that such a material adverse effect will not result
therefrom.
ENVIRONMENTAL MATTERS
The Company has in place programs that monitor compliance with various
federal, state and local environmental regulations. In the normal course of
its manufacturing operations, the Company is subject to occasional
governmental proceedings and orders pertaining to waste disposal, air
emissions and water discharges into the environment. The Company believes that
it is in compliance with applicable environmental regulations in all material
respects, and that the outcome of any such proceedings and orders will not
have a material adverse effect on its business.
64
<PAGE>
The Company also has directed research efforts to developing more
environmentally safe products. In particular, recent efforts to eliminate the
promulgation of lead into the environment have led to local prohibitions on
traditional lead shot shotshells in waterfowl hunting and have also forced the
closing of several prominent target shooting clubs. The Company has responded
to these concerns by adding steel shot shotshells to its product line for
hunters and by introducing steel target shooting ammunition.
The Company has not been identified by any state or federal regulatory
authorities as a potentially responsible party (a "PRP") with respect to any
sites under any applicable state or federal environmental regulations. The
Sellers retained liability for environmental losses and liabilities relating
to the ownership or operation of the Business prior to the Closing that,
together with liabilities relating to product liability cases and claims
arising from occurrences prior to Closing and disclosed to the Company, exceed
the Cap of $25 million in the aggregate, as discussed above under "Legal
Proceedings." The Sellers have informed the Company that they intend to apply
no more than $0.5 million of the Cap to environmental cases. See "The
Acquisition--Asset Purchase Agreement." Based on information known to the
Company, the Company does not expect current environmental regulations or
environmental proceedings and claims to have a material adverse effect on the
results of operations or financial condition of the Company. However, it is
not possible to predict with certainty the impact on the Company of future
environmental compliance requirements or of the cost of resolution of future
environmental proceedings and claims, in part because the scope of the
remedies that may be required is not certain, liability under federal
environmental laws is joint and several in nature, and environmental laws and
regulations are subject to modification and changes in interpretation. There
can be no assurance that environmental regulation will not become more
burdensome in the future and that any such development would not have a
material adverse effect on the Company.
GOVERNMENTAL REGULATION AND LICENSES
The purchase of firearms is subject to federal, state and local governmental
regulation. The basic federal laws are the National Firearms Act and the
Federal Firearms Act, which were originally enacted in the 1930s and which
have been amended from time to time. Federal laws generally prohibit the
private ownership of fully automatic weapons and place certain restrictions on
the interstate sale of firearms unless certain licenses are obtained. The
Company does not manufacture fully automatic weapons. The Company possesses
valid federal licenses for all of its owned and leased sites to manufacture
and/or sell firearms and ammunition.
In 1994, a federal law was enacted that generally prohibits the manufacture
of 19 models of "assault weapons" as well as the sale or possession of
"assault weapons" except for those that, prior to the law's enactment into
law, were legally in the owner's possession. This law exempts from its
prohibition approximately 650 models of firearms that are generally used by
hunters and sporting enthusiasts, including all of the Company's current
firearm products. Various bills have recently been introduced in Congress to
repeal the ban on semi-automatic assault weapons and large-capacity ammunition
feeding devices; the likelihood of their passage is uncertain. Another federal
law enacted in 1993, the so-called "Brady Bill," provides among other things
for a waiting period of five business days before a prospective purchaser of a
handgun may take possession of the handgun, in order to give law enforcement
officials time to make a background check on the prospective purchaser. The
Company does not currently produce handguns.
In addition, bills have been introduced in Congress in the past several
years that would affect the manufacture and sale of handgun ammunition,
including bills to regulate the manufacture, importation and sale of any
projectile that is capable of penetrating body armor, to impose a tax and
import controls on bullets designed to penetrate bullet-proof vests, to
prohibit the manufacture, transfer or importation of .25 caliber, .32 caliber
and 9mm handgun ammunition, to increase the tax on handgun ammunition, to
impose a special occupational tax, and regulation and registration
requirements on manufacturers of handgun ammunition, and to drastically
increase the tax on certain handgun ammunition, such as 9mm, .25 caliber, and
.32 caliber bullets. Certain of these bills would apply to handgun ammunition
of the kind produced by the Company, and accordingly, if enacted, could have a
material adverse effect on the business of the Company. The Company believes
that existing regulations applicable to handgun ammunition have not had such
an effect.
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<PAGE>
State and local laws and regulations vary significantly in the level of
restrictions they place on gun ownership and transfer. Some states have
recently enacted, and others are considering, legislation restricting or
prohibiting the ownership, use or sale of certain categories of firearms and
ammunition. Many states currently have mandatory waiting period laws for
handguns in effect similar to that imposed by the Brady Bill. Currently,
however, there are few restrictive state regulations applicable to handgun
ammunition. The Company's current firearm and ammunition products generally
are not subject to current state restrictions on ownership, use or sale of
certain categories of firearms and ammunition, and generally would not be
subject to any known proposed state legislation relating to regulation of
"assault weapons."
The Company believes that existing federal and state legislation relating to
the regulation of firearms and ammunition has not had a material adverse
effect on its sales of these products from 1993 through the first nine months
of 1996. See "Management's Discussion and Analysis of Financial Condition and
Results of Operations." However, there can be no assurance that the regulation
of firearms and ammunition will not become more restrictive in the future and
that any such development would not have a material adverse effect on the
business of the Company.
In addition, regulatory proposals, even if never enacted, may affect
firearms or ammunition sales as a result of consumer perceptions. The Company
believes that its increased ammunition sales in 1994 and early 1995 resulted
in part from consumer fear that proposed legislation would increase taxes on
ammunition and from consumer uncertainty over the Brady Bill, and that the
lessening of these consumer concerns has been a factor in decreased ammunition
sales since early 1995. See "Management's Discussion and Analysis of Financial
Condition and Results of Operations--Results of Operations."
66
<PAGE>
MANAGEMENT
DIRECTORS AND EXECUTIVE OFFICERS OF REMINGTON AND HOLDING
The names, ages and positions of the directors and executive officers of
Remington as of December 31, 1996 are set forth below. Each of the directors
of Remington is also a director of Holding. Messrs. Howe, Millner and Little
serve as executive officers in the same capacities with Holding as they do
with Remington, and Mr. Grecco serves as Secretary and Vice President of
Holding. All directors are elected annually and hold office until their
successors are elected and qualified, or until their earlier removal or
resignation.
<TABLE>
<CAPTION>
NAME AGE POSITION
- ---- --- --------
<S> <C> <C>
Hubbard C. Howe(a)...... 68 Director, Chairman and Chief Executive Officer
Stephen D. Bechtel,
Jr.(a)(b).............. 71 Director
Bobby R.
Brown(a)(b)(c)......... 64 Director
Richard C.
Dresdale(c)(d)......... 40 Director
Richard A.
Gilleland(b)(c)(d)..... 52 Director
Richard E.
Heckert(b)(d).......... 72 Director
Leon J. Hendrix,
Jr.(b)(c).............. 55 Director
Joseph L. Rice, III(a).. 64 Director
H. Norman Schwarzkopf... 62 Director
Thomas L.
Millner(a)(b).......... 43 Director, President and Chief Operating Officer
James B. Ackley......... 57 Vice President--Research and Development
Ronald H. Bristol, II... 34 Vice President--Service and Operations
Paul L. Cahan........... 55 Vice President--Ammunition
Robert L. Euritt........ 62 Vice President--Human Resources
Samuel G. Grecco........ 43 Vice President--Business Development and Planning
and Corporate Secretary
Mark A. Little.......... 49 Vice President, Controller
Ernest S. Rensi......... 49 Vice President--Firearms and International Operations
Arthur W. Wheaton....... 55 Vice President--Sales and Corporate Marketing
</TABLE>
- --------
(a) Member, Executive Committee
(b) Member, Public Policy Committee
(c) Member, Audit Committee
(d) Member, Compensation Committee
The business experience during the past five years of each of the directors
and executive officers listed above is as follows:
Hubbard C. Howe has been a director of Remington and Holding since October
1993 and became Chairman and Chief Executive Officer of Remington and Holding
upon the Closing. Mr. Howe has served as Vice Chairman since February 1994,
Chairman from April 1992 to February 1994, and Chief Executive Officer from
prior to 1992 to April 1992 of Nu-kote International, Inc., a printing
supplies manufacturer, and its parent, Nu-kote Holding, Inc., a corporation in
which an investment partnership managed by CD&R previously had an investment.
Mr. Howe has served as Chairman since August 1992 and a director since prior
to 1992 of APS Holding Corporation, a corporation in which an investment
partnership managed by CD&R has an investment, and is a director of its
subsidiary A.P.S., Inc., a distributor of automotive replacement parts. Mr.
Howe is a director of Riverwood International Corporation, and its parents RIC
Holding, Inc. and Riverwood Holding, Inc., a corporation in which an
investment partnership managed by CD&R has an investment. Mr. Howe is a
principal of CD&R and a general partner of Associates IV, the general partner
of C&D Fund IV.
Stephen D. Bechtel, Jr. has been a director of Remington and Holding since
March 1994. Since prior to 1992 Mr. Bechtel has been Chairman Emeritus of
Bechtel Corp. and of Bechtel Group, Inc., both of which are
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<PAGE>
engineering and construction companies. Mr. Bechtel had been Chairman of
Fremont Investors, Inc. (previously named Fremont Group, Inc.), a management
investment company and Sequoia Ventures, Inc., an investment company from
prior to 1992 until May 1995. Since June 1995 Mr. Bechtel has been Chairman
Emeritus of Fremont Investors, Inc. and Sequoia Ventures, Inc.
Bobby R. Brown has been a director of Remington and Holding since December
1993, having previously served as President of the Company from prior to 1992
until the Closing. From prior to 1992 to January 1992, Mr. Brown was President
and Chief Executive Officer of Consolidation Coal Company, a coal mining
company. From January 1992 to January 1995, Mr. Brown was President, and from
January 1992 to January 1996 was Chairman and Chief Executive Officer of
CONSOL Inc., the parent of Consolidation Coal Company. Mr. Brown is currently
the Chairman of CONSOL Inc. and its parent CONSOL Energy Inc. From prior to
1992 to April 1993, Mr. Brown was Vice President of CONOCO, Inc., an oil and
natural gas company. Mr. Brown is also a director of PNC Bank, N.A.
Richard C. Dresdale has been a director of Remington and Holding since
October 1993, and served as Vice President of Remington and Holding from
October 1993 to December 1993. He has been Managing Director of Fenway
Partners, Inc., a private investment firm, since March 1994. He was a
professional employee of CD&R from prior to 1992 until March 1994. He was also
a limited partner of Associates IV until March 1994. Mr. Dresdale has been a
director of Nu-kote International, Inc. and its parent Nu-Kote Holding, Inc.
since prior to 1992.
Richard A. Gilleland has been a director of Remington and Holding since
March 1994. Mr. Gilleland is now retired. He was President and Chief Executive
Officer of AMSCO International, Inc., a manufacturer of medical products, from
July 1995 to July 1996 and Chairman, President and Chief Executive Officer of
Kendall International, Inc., a manufacturer of hospital supplies, since prior
to 1992 to July 1995. Mr. Gilleland currently serves as a director of DePuy
Orthopedics, Tyco International, Ltd., Physicians Resource Group and OrNda
Healthcorp. Mr. Gilleland provides advisory and consulting services to CD&R
relating to investments and investment opportunities in healthcare-related
industries.
Richard E. Heckert has been a director of Remington and Holding since March
1994. Mr. Heckert served as a director of DuPont from prior to 1991 to April
1994 and a director of The Seagram Company, Ltd. from prior to 1992 to April
1995. From prior to 1992 to May 1995, he served on the International Committee
of L'Air Liquide. Mr. Heckert served as a member of the International Advisory
Council of the Broken Hill Proprietary Company (BHP) from prior to 1992 to
October 1994. He is currently an advisory director of Marsh & McLennan
Companies, Inc.
Leon J. (Bill) Hendrix, Jr. has been a director of Remington and Holding
since September 1994. Mr. Hendrix joined CD&R in November 1993 as a principal
and is a general partner of Associates IV. Mr. Hendrix was Chief Operating
Officer from September 1992 to October 1993 and Executive Vice President from
prior to 1992 to October 1993 and director of Reliance Electric Company, a
manufacturing company. Mr. Hendrix currently serves as a director of Keithley
Instruments, National City Bank of Cleveland, NACCO Industries, Inc. and
Cambrex Corp. He is also a director of WESCO Distribution, Inc. and its parent
CDW Holding Corporation, a corporation in which Fund IV has an investment and
Riverwood International Corporation, and its parents RIC Holding, Inc. and
Riverwood Holding, Inc., a corporation in which an investment partnership
managed by CD&R has an investment.
Joseph L. Rice, III has been a director of Remington and Holding since
November 1993, and served as President of Remington and Holding from October
1993 until the Closing. Mr. Rice is a principal, and Chairman and Chief
Executive Officer of CD&R, which he joined in 1978, and a general partner of
Associates IV. Mr. Rice is also a director of Lexmark International, Inc. and
its parent Lexmark International Group, Inc. Mr. Rice is also a director of
Uniroyal Holding, Inc.
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<PAGE>
H. Norman Schwarzkopf has been a director of Remington and Holding since
September 1995. General Schwarzkopf retired in August 1991 following a long
and distinguished career in the U.S. Army. He currently serves as a director
of Borg-Warner Security Corporation, Washington Water Power, Pentzer
Corporation, Kuhlman Corporation and Home Shopping Network, and is a member of
the University of Richmond Board of Trustees.
Thomas L. Millner became President and Chief Operating Officer of Remington
in May 1994. Mr. Millner has been a director of Remington and Holding since
June 1994. From prior to 1991 to May 1994, Mr. Millner served as President and
Chief Executive Officer of The Pilliod Cabinet Company, a furniture
manufacturer.
James B. Ackley joined Remington in March 1996 as Vice President--Research
and Development. From prior to 1991 until joining the Company, Mr. Ackley was
the Chief, Joint Service Small Arms Program and Executive Program Manager with
the U.S. Defense Department.
Ronald H. Bristol, II joined Remington in June 1995 as Vice President--
Service and Operations. From prior to 1991 to June 1995, Mr. Bristol was a
consultant with Arthur Andersen.
Paul L. Cahan joined Remington in March 1995 as the Vice President--
Ammunition. From prior to 1991 until joining the Company, Mr. Cahan held a
number of management positions with Kennametal, Inc., which manufactures,
purchases and distributes a broad range of tools, tooling systems, supplies
and services for the metalworking, mining and highway construction industries,
most recently as Director of Steel Tooling Operations.
Robert L. Euritt joined Remington in September 1994 as Vice President--Human
Resources. From February 1993 to August 1994, Mr. Euritt was Senior Vice
President--Human Resources for Goody Products, a haircare products company.
From prior to 1991 to December 1992, Mr. Euritt was Vice President--Human
Resources for Nestle Foods, a food products company.
Samuel G. Grecco became Vice President--Business Development and Planning in
September 1996 and became Corporate Secretary in December 1996. From December
1993 until October 1996 he was Vice President and Controller of the Company,
having previously served as Controller of the Company prior to 1991 until the
Closing.
Mark A. Little joined Remington in July 1996 as Director of Planning and
Business Development, and in September 1996 he became Vice President,
Controller. From prior to 1992 until joining Remington, Mr. Little held the
position of Executive Vice President of Finance, CFO of The Pilliod Cabinet
Company, now named Pilliod Furniture, Inc. Prior to January 31, 1994, an
investment partnership managed by CD&R had an investment in Pilliod Holding
Company, the parent of The Pilliod Cabinet Company.
Ernest S. Rensi became Vice President--Firearms in March 1994. Mr. Rensi
held the position of Plant Manager--Firearms from the Closing until March
1994. Mr. Rensi held the position of Operations Superintendent--Ilion at the
Company's Ilion plant from prior to 1991 until the Closing.
Arthur W. Wheaton became Vice President--Sales and Corporate Marketing in
January 1994. From prior to 1991 to January 1994, Mr. Wheaton held the
position of Director--Marketing and Sales. Mr. Wheaton serves on the Board of
Directors of the Sporting Arms and Ammunition Manufacturer's Institute, the
National Shooting Sports Foundation, the Wildlife Management Institute,
American Shooting Sports Council and the United Conservation Alliance.
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<PAGE>
COMPENSATION OF DIRECTORS
Members of the Board of Directors of Remington and Holding who are not
employees of the Company or CD&R (each, an "Eligible Director") will receive a
per meeting fee of $1,000 for each Remington board and committee meeting
attended and an annual retainer of $20,000. An additional per meeting fee of
$1,000 is paid to the chairman of each committee. Members of the Board of
Directors of Holding will not receive any additional compensation for their
services in such capacity. All directors will be reimbursed for reasonable
travel and lodging expenses incurred to attend meetings. Each Eligible
Director will also be eligible to participate in the RACI Holding, Inc. 1994
Directors' Stock Plan (the "Directors' Plan") under which a director may
forego part or all of the annual retainer and meeting fee payable to him for
calendar year 1997 in exchange for shares of the Holding's Class A Common
Stock ("Common Stock"). The number of shares received is determined by
dividing (i) the amount of cash retainer fees foregone with respect to
services provided during a calendar year by (ii) the greater of (x) the fair
market value of a share of Common Stock as of the last day of such calendar
year and (y) $100. As of the date of this Prospectus, no Common Stock has been
issued under this Plan.
COMPENSATION OF EXECUTIVE OFFICERS
The following table summarizes the compensation paid by Remington to its
Chief Executive Officer and each of the Company's four other most highly
compensated executive officers (the "Named Executive Officers") during or with
respect to the 1996 fiscal year for services in all capacities rendered to the
Company for such fiscal year.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
1996 ANNUAL COMPENSATION ($)
-------------------------------------
OTHER ANNUAL
NAME AND PRINCIPAL POSITION SALARY BONUS COMPENSATION ALL OTHER
- --------------------------- ---------- --------- ------------- ---------
<S> <C> <C> <C> <C>
Hubbard C. Howe,
Chairman and Chief Execu-
tive Officer (1).......... -- -- -- --
Thomas L. Millner
President and Chief Operat-
ing Officer............... 337,512 -- -- 8,651(2)
Robert W. Haskin, Jr. (3)
Vice President--Marketing,
and General Counsel....... 243,756 80,000(4) 48,942(5) 4,500(6)
Robert L. Euritt
Vice President--Human Re-
sources................... 150,000 80,000(4) 39,328(5) 1,125(6)
Samuel G. Grecco
Vice President--Business
Development and Planning.. 139,167 80,000(4) 33,830(5) 4,175(6)
</TABLE>
- --------
(1) Mr. Howe is a principal of CD&R and received no compensation directly from
Remington for his services as Chairman and Chief Executive Officer.
Remington pays CD&R an annual fee for management consulting services (see
"Certain Relationships and Related Transactions" below) which include Mr.
Howe's services as Chairman and Chief Executive Officer.
(2) Amount reflects premiums paid by the Company for a Life Insurance Policy
and Remington's matching contributions on behalf of the Named Executive
Officer to the Remington Savings and Investment Plan.
(3) Mr. Haskin's employment with the Company was terminated as of December 31,
1996.
(4) Amount reflects incentive bonus paid in connection with such Named
Executive Officer's relocation to the Company's new North Carolina
headquarters.
(5) Amount reflects reimbursements for expenses incurred by the Named
Executive Officer in connection with such Named Executive Officer's
relocation to the Company's new North Carolina headquarters.
(6) Reflects Remington's matching contributions on behalf of the Named
Executive Officer to the Remington Savings and Investment Plan.
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<PAGE>
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR AND FY-END OPTION/SAR
VALUES
<TABLE>
<CAPTION>
NUMBER OF SECURITIES
UNDERLYING UNEXERCISED VALUE OF UNEXERCISED
OPTIONS/SARS AT IN-THE-MONEY OPTIONS/SARS
SHARES ACQUIRED FY-END (#) AT FY-END ($)
NAME ON EXERCISE (#) VALUE REALIZED ($) EXERCISABLE/UNEXERCISABLE EXERCISABLE/UNEXERCISABLE
- ---- --------------- ------------------ ------------------------- -------------------------
<S> <C> <C> <C> <C>
Hubbard C. Howe......... -- -- -- --
Thomas L. Miller........ -- -- 0/7,500 --
Robert W. Haskin, Jr. .. -- -- 0/3,500 --
Robert L. Euritt........ -- -- 0/1,840 --
Samuel G. Grecco........ -- -- 0/2,425 --
</TABLE>
PENSION AND RETIREMENT PLAN
The Remington Arms Company, Inc. Pension and Retirement Plan was established
effective December 1, 1993, to provide retirement income and survivor benefits
to Remington's employees and their beneficiaries through a tax qualified
program.
Retirement benefits under the Pension and Retirement Plan are generally
based on an employee's years of benefit service and highest final average
compensation. Generally, an employee's benefit service under the Pension and
Retirement Plan includes all of his service with Remington and his service, if
any, with DuPont prior to the Closing. DuPont service is not recognized for
benefit accrual or early retirement eligibility, however, in the case of
eligible employees who elected to retire from DuPont and commence receiving
retirement income from the DuPont retirement plan in connection with the
Acquisition. Retirement benefits are generally paid in annuity form, for life,
commencing at the employee's 65th birthday, although longer service employees
may elect to commence receiving retirement income at an earlier age.
<TABLE>
<CAPTION>
SALARY AND ESTIMATED ANNUAL RETIREMENT BENEFITS BASED ON SERVICE OF
50% OF INCENTIVE ----------------------------------------------------------------
COMPENSATION 15 YEARS 20 YEARS 25 YEARS 30 YEARS 35 YEARS
- ---------------- ----------- ----------- ----------- ----------- ------------
<S> <C> <C> <C> <C> <C>
100,000....... 18,000 24,084 31,194 38,412 45,660
125,000....... 22,962 31,509 40,494 49,587 58,710
150,000....... 28,512 38,934 49,794 60,762 71,760
200,000....... 39,012 53,184 67,794 82,512 97,260
250,000....... 45,096 61,441 78,224 95,115 112,036
</TABLE>
The above table illustrates the annual amounts payable under the Pension and
Retirement Plan in the form of a straight life annuity to employees retiring
at age 65 in 1996. Compensation recognized under the Pension and Retirement
Plan generally includes an employee's average compensation for the three
consecutive year period in the employee's final ten years of service for which
such compensation was the highest. Compensation for this purpose includes
overtime, shift differentials and 50% of any incentive compensation award.
Compensation does not include awards and payments under any other special
compensation plans, payments for severance, relocation or other special
payments or pay in excess of legally restricted amounts ($235,840 for plan
years beginning before 1994 and $150,000 (as adjusted pursuant to legal
regulation) for plan years beginning after 1993).
The years of benefit service recognized as of December 31, 1996, under the
Pension and Retirement Plan for Messrs. Millner, Haskin, Euritt and Grecco are
2.6, 2.7, 2.3 and 20.8, respectively. The average monthly pay, expressed as an
annual amount, recognized as of December 31, 1996, under the Pension and
Retirement Plan for Messrs. Millner, Haskin, Euritt and Grecco was
approximately $236,000, $236,000, $156,000 and $90,000, respectively, for plan
years beginning before 1994 and $150,000 each for plan years beginning after
1993. Mr. Howe is not a participant in the Pension and Retirement Plan.
EMPLOYMENT CONTRACTS AND TERMINATION AGREEMENTS
The Company has entered into a letter agreement (the "Haskin Agreement")
with Mr. Haskin concerning the termination of his employment effective
December 31, 1996. Pursuant to the Haskin Agreement, for the one
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<PAGE>
year period ending December 31, 1997, Mr. Haskin will receive continued
payments of his annual base salary, at an annual rate of $250,000 and employee
benefits (other than severance benefits). In addition, pursuant to its
relocation policy, the Company will purchase Mr. Haskin's current principal
residence for the greater of fair market value or actual investment cost. Mr.
Haskin will also receive a grant of options to purchase 5,000 shares of Common
Stock, for a purchase price per share equal to $100, having a seven year term
and becoming exercisable in three equal annual installments commencing May 1,
1997. Pursuant to the Haskin Agreement, the Management Stock Option Agreement
evidencing the options to purchase 3,500 shares of Common Stock granted to Mr.
Haskin in July 1995 is amended to eliminate the requirement that Mr. Haskin
remain employed during the vesting period and to provide that, regardless of
the termination of Mr. Haskin's employment, such options will remain
exercisable for the ten year period from the date of grant. Mr. Haskin has
agreed to refrain from engaging in competitive activity and from undertaking
certain legal representations that could be adverse to the interests of the
Company, without the Company's consent.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The Board of Directors of the Company established a Compensation Committee
to review all compensation arrangements for executive officers of the Company.
The individuals serving on the Compensation Committee during 1996 were Richard
A. Gilleland, Chairman, Richard C. Dresdale and Richard E. Heckert. Prior to
joining the Compensation Committee, Mr. Dresdale served as Vice President of
Remington and Holding from October 1993 to December 1993. Prior to joining the
Compensation Committee, Mr. Heckert served as Chairman of the Board and Chief
Executive Officer of DuPont from May 1986 to April 1989, and also served as a
director of DuPont from April 1989 to April 1994.
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<PAGE>
OWNERSHIP OF CAPITAL STOCK
Holding owns all of the outstanding common stock (par value $.01 per share)
of Remington. Each share of common stock is entitled to one vote. The
following table sets forth the beneficial ownership, as of the date of this
Prospectus, of Common Stock by each director of Holding, by all directors and
executive officers of Holding as a group, by each Named Executive Officer, and
by each person who owns beneficially more than five percent of the outstanding
shares of Common Stock:
<TABLE>
<CAPTION>
NUMBER PERCENT
NAME OF BENEFICIAL OWNER OF SHARES OF CLASS (1)
------------------------ --------- ------------
<S> <C> <C>
The Clayton & Dubilier Private Equity Fund IV Lim-
ited Partnership(2)................................ 750,000 100.0
B. Charles Ames(2)(3)............................... 750,000 100.0
William A. Barbe(2)(3).............................. 750,000 100.0
Alberto Cribiore(2)(3).............................. 750,000 100.0
Donald J. Gogel(2)(3)............................... 750,000 100.0
Leon J. Hendrix, Jr.(2)(3).......................... 750,000 100.0
Hubbard C. Howe(2)(3)............................... 750,000 100.0
Andrall E. Pearson(2)(3)............................ 750,000 100.0
Joseph L. Rice, III(2)(3)........................... 750,000 100.0
Stephen D. Bechtel.................................. -- --
Bobby R. Brown...................................... -- --
Richard C. Dresdale(4).............................. -- --
Richard A. Gilleland................................ -- --
Richard E. Heckert.................................. -- --
H. Norman Schwarzkopf............................... -- --
Thomas L. Millner................................... -- --
Robert L. Euritt.................................... -- --
Robert W. Haskin, Jr................................ -- --
Samuel G. Grecco.................................... -- --
Executive officers and directors as a
group(1)(3)(5)..................................... 750,000 100.0
</TABLE>
- --------
(1) Does not give effect to the exercise of options for 33,765 shares of
Common Stock that have been granted under the Amended and Restated RACI
Holding, Inc. Stock Option Plan, options for 32,485 shares that may be
granted in the future under such plan or 50,000 shares of Common Stock
that may be sold to eligible employees pursuant to the RACI Holding, Inc.
Stock Purchase Plan.
(2) The business address for such persons is c/o Clayton, Dubilier & Rice,
Inc., 375 Park Avenue, 18th Floor, New York, New York 10152.
(3) Messrs. Ames, Barbe, Cribiore, Gogel, Hendrix, Howe, Pearson and Rice may
be deemed to share beneficial ownership of the shares owned of record by
C&D Fund IV by virtue of their status as general partners of Associates
IV, the general partner of C&D Fund IV, but each expressly disclaims such
beneficial ownership of the shares owned by C&D Fund IV. Messrs. Ames,
Barbe, Cribiore, Gogel, Hendrix, Howe, Pearson and Rice share investment
and voting power with respect to securities owned by C&D Fund IV.
(4) Mr. Dresdale has withdrawn as a limited partner of Associates IV but
retains an economic interest in the shares owned of record by C&D Fund IV
by virtue of his status as a withdrawn limited partner. Mr. Dresdale
disclaims any beneficial ownership of such shares. Mr. Dresdale has no
investment or voting power with respect to the shares owned by C&D Fund
IV.
(5) Consists of the Common Stock owned by C&D Fund IV.
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<PAGE>
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
CD&R AND C&D FUND IV
C&D Fund IV, which currently is Holding's sole stockholder, is a private
investment fund managed by CD&R. Amounts contributed to C&D Fund IV by its
limited partners are invested at the discretion of the general partner in
equity or equity-related securities of entities formed to effect leveraged
buy-out transactions and in the equity of corporations where the infusion of
capital coupled with the provision of managerial assistance by CD&R can be
expected to generate returns on investments comparable to returns historically
achieved in leveraged buy-out transactions. The general partner of C&D Fund IV
is Associates IV. Hubbard C. Howe, a principal of CD&R and a general partner
of Associates IV, is a director and currently serves as Chairman and Chief
Executive Officer of Remington and Holding. Joseph L. Rice, III and Leon J.
Hendrix, Jr. are both principals of CD&R, general partners of Associates IV
and directors of Remington and Holding. Alberto Cribiore, Donald J. Gogel and
Joseph L. Rice, III are the sole stockholders of CD&R. Richard A. Gilleland
provides advisory and consulting services to CD&R relating to investments and
investment opportunities in healthcare-related industries and is a director of
Remington and Holding.
CD&R receives an annual fee for management and financial consulting services
provided to the Company and reimbursement of out-of-pocket expenses. Such
services include helping the Company to establish effective banking, legal and
other business relationships, and assisting management in developing and
implementing strategies for improving the operational, marketing and financial
performance of the Company. The consulting fees paid to CD&R were $33,333 for
1993 and $400,000 for each of 1994, 1995 and 1996. The consulting fees to be
paid to CD&R may not exceed $500,000 per year under the terms of the Credit
Agreement and the Indenture unless certain requirements are met. Such
consulting fees will be reviewed on an annual basis and will be calculated
with reference to the size and complexity of the Company's business, the type
and magnitude of the advisory and management consulting services being
provided, the fees being paid to CD&R by other companies for which it provides
such services and the fees charged by other managers with comparable
organizations for similar services provided to companies in which investment
funds managed by such managers have invested. In connection with the
Acquisition and arranging the financing thereof, Remington paid CD&R a fee of
$4.5 million and reimbursed CD&R for its out-of-pocket expenses of $0.2
million.
The Company paid fees to the law firm of Debevoise & Plimpton during 1996
for legal services rendered. Franci J. Blassberg, Esq., a member of Debevoise
& Plimpton, is married to Joseph L. Rice, III, a director of the Company and a
general partner of C&D Fund IV.
CD&R, C&D Fund IV, Holding and the Company have entered into an
indemnification agreement, pursuant to which Holding and the Company have
agreed to indemnify CD&R, C&D Fund IV, Associates IV and their respective
directors, officers, partners, employees, agents and controlling persons
against certain liabilities arising under the federal securities laws, other
laws regulating the business of the Company and certain other claims and
liabilities.
As noted under "Ownership of Capital Stock," C&D Fund IV currently owns 100%
of the outstanding Common Stock. C&D Fund IV and Holding have entered into a
registration rights agreement that, among other things, provides C&D Fund IV
and will provide certain other Holding equity holders with certain
registration rights with respect to their Common Stock.
MANAGEMENT
During 1996, the Company paid $847,605 to Vios S.a.r.l., a Swiss limited
liability company, which provides administrative support services for the
Company's international operations. Michael Hentschel, who was employed by the
Company from July 1995 to October 1996 owns substantially all of Vios S.a.r.l.
Steve D. Bishop, who was employed by the Company as Vice President--
International Operations from March 1995 to June 1996, owned and was President
of Vios S.a.r.l. prior to his employment with the Company.
74
<PAGE>
STOCK OPTION AND PURCHASE PLANS
The Company has reserved 132,380 shares of the Common Stock for issuance in
accordance with the terms of the Amended and Restated RACI Holding, Inc. Stock
Option Plan (the "Option Plan") and the RACI Holding, Inc. Stock Purchase Plan
(the "Purchase Plan"). To date, no awards have been made under the Purchase
Plan and no shares of Common Stock have been issued under either of the plans.
In 1995, the Board of Directors of Holding amended the Option Plan by
approving Amendment No. 1 to the Option Plan and authorized the grant of
options (the "Options") thereunder. At December 31, 1996 Options to purchase
33,765 shares of Common Stock were outstanding and the Board has approved the
grant of additional options to purchase an aggregate of 3,350 shares of Common
Stock to four additional employees, none of which options were exercisable.
The Company currently intends to offer approximately 13 key management
employees the opportunity to purchase an aggregate of 39,000 shares of Common
Stock and to grant additional options covering an aggregate of 35,415 shares
to approximately 25 key employees.
75
<PAGE>
DESCRIPTION OF CREDIT AGREEMENT
In connection with the Acquisition, the Company entered into the Credit
Agreement with Chemical, Chase, UBS, and certain other lenders. The following
summary of certain provisions of the Credit Agreement and certain related
security documents does not purport to be complete and is subject to, and is
qualified in its entirety by reference to, all the provisions of the Credit
Agreement and such security documents, copies of which are filed as Exhibits
to the Registration Statement of which this Prospectus forms a part.
The Credit Agreement provides for a Term Loan Facility of $130 million and a
Revolving Credit Facility of $150 million, with a final maturity of December
31, 2000 for both facilities (collectively, the "Facilities"). Up to $40
million of Revolving Credit Facility availability may be used for standby and
commercial letters of credit. The Company initially borrowed approximately
$141 million under the Credit Agreement, consisting of $130 million under the
Term Loan Facility and approximately $11 million under the Revolving Credit
Facility. The initial borrowing under the Credit Agreement, along with the net
proceeds of the offering of the Notes, were used to finance a portion of the
purchase price of the Acquisition and to pay certain fees and expenses related
thereto. See "Use of Proceeds." Undrawn amounts under the Revolving Credit
Facility are available for working capital and other business requirements. As
of September 30, 1996, there were borrowings of $93.0 million outstanding
under the Revolving Credit Facility, and $5.1 million in letters of credit.
On December 31, 2000 all remaining amounts then outstanding under the Credit
Agreement will become due. The Credit Agreement requires the Company to make
quarterly principal payments on the term loan borrowing thereunder, which
amounted to $10 million in the aggregate in 1994, approximately $9.3 million
in 1995 and $13.6 million in 1996. In addition, for at least 30 consecutive
days of each 12 month period following the effective date of the Credit
Agreement, outstanding amounts under the Revolving Credit Facility will be
limited to $60 million or less. The Facilities are also subject to mandatory
prepayments and reductions (to be applied first to the Term Loan Facility) in
an amount equal to, subject to certain exceptions, (a) 66 2/3% of the net
proceeds of certain offerings of equity securities by Holding and (b) 100% of
the net proceeds of (i) certain debt or preferred stock offerings by Holding,
the Company and any of their subsidiaries, (ii) certain asset sales (including
of equity securities of the Company or any of its subsidiaries), leases or
other dispositions, (iii) certain recoveries from insurance or other claims
relating to lost or damaged assets and (iv) certain post-Closing purchase
price adjustments under the Asset Purchase Agreement. The Credit Agreement
also requires the Company to make mandatory prepayments on the term loans
thereunder annually in an amount equal to 50% of the Company's Excess Cash
Flow (as defined therein) for the preceding fiscal year. Any such mandatory
prepayments of such term loans will result in pro rata reductions in all
subsequently scheduled principal payments on such term loans, except that any
such payment made within the twelve months prior to the date on which an
installment or other payment of principal is scheduled to be paid on the term
loans may, at the option of the Company, be applied first to such installment
or other payment. The Company made prepayments of approximately $10.7 million
in 1995, representing 50% of Excess Cash Flow for the year ended December 31,
1994. The Company did not have Excess Cash Flow for the year ended December
31, 1995, and accordingly no such prepayment was made in 1996. After giving
effect to the prepayment, the installment schedule for the remaining term loan
principal payments requires payments of $18.2 million in each of 1997 and
1998, $22.7 million in 1999, with the balance of the term loans and all then
outstanding revolving credit loans due in 2000.
Loans under the Facilities generally bear interest, at the Company's option,
at a variable rate equal to either (i) the rate that is the highest of the
administrative agent's prime rate, or certain alternative rates, in each case
plus up to 1.25% per annum, or (ii) the rate at which certain Eurodollar
deposits are offered in the interbank Eurodollar market plus up to 2.50% per
annum. As required by the Credit Agreement, the Company entered into certain
interest rate protection arrangements with respect to 50% of the Term Loan
Facility borrowing, for a period of two years that expired June 30, 1996.
The Company paid an initial commitment fee upon the Closing, calculated at
0.5% per annum, on the total commitment for the Facilities, accruing from
October 26, 1993. Thereafter, the Credit Agreement provides for a commitment
fee, calculated at 0.5% per annum, on the average daily unused Revolving
Credit Facility commitment, payable in arrears at the end of each quarter and
upon termination of the Revolving Credit Facility.
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<PAGE>
The Credit Agreement also provides for standby letter of credit fees equal to
2.50% per annum of the face amount of such letters of credit, payable
quarterly in arrears, and commercial letter of credit fees of 0.75% of the
face amount of such letters of credit, payable upon issuance. The co-agents
under the Credit Agreement receive agency fees of $200,000 per year in the
aggregate. The Company also paid certain facility fees in respect of the
Credit Agreement upon the Closing and a fee in connection with the most recent
amendment thereto.
The Company's obligations under the Credit Agreement are or will be secured
by a pledge of its capital stock and, to the extent the Company acquires or
forms subsidiaries in the future, by pledges of the capital stock of each such
direct and indirect U.S. subsidiary and 65% of the capital stock of certain
non-U.S. subsidiaries and by security interests in substantially all of the
properties and assets of the Company and, subject to limited exceptions, its
U.S. subsidiaries. In addition, all of the Company's obligations under the
Credit Agreement are guaranteed by Holding and, subject to limited exceptions,
will be guaranteed by its U.S. subsidiaries, if any.
The Credit Agreement contains certain financial covenants which require the
Company to meet certain financial ratios and tests, including (i) a maximum
ratio of consolidated adjusted total indebtedness to earnings which commenced
on January 1, 1997 at 12.0 to 1.0 and decreases to 4.0 to 1.0 on October 1,
2000, (ii) a minimum earnings test which commenced on January 1, 1997 at $24
million and increases to $54 million on October 1, 2000, (iii) a minimum
consolidated interest expense ratio which commenced on January 1, 1997 at 1.0
to 1.0 and increases to 2.75 to 1.0 on October 1, 2000, (iv) a minimum
consolidated net worth test which commenced on December 31, 1995 at $95
million and increases to $117 million on December 31, 1999, and (v) a minimum
consolidated working capital test of $75 million. Generally, for purposes of
these covenants, (a) consolidated adjusted total indebtedness equals the
aggregate outstanding principal amount of debt incurred under the Credit
Agreement, plus the aggregate outstanding principal amount of the Notes, plus
all indebtedness of the Company and its consolidated subsidiaries (1) which by
its terms matures more than one year after the date of determination or (2)
which matures within one year from the date of determination but which is
renewable or extendable at the option of the debtor to a date more than one
year from the date of determination; (b) earnings equals net income of the
Company and its consolidated subsidiaries adjusted to exclude the following
items (to the extent included in the calculation of such net income): (1)
consolidated interest expense, (2) non-cash expenses and charges, (3) total
income tax expense, (4) depreciation expense, (5) the expense associated with
amortization of intangible and other assets, (6) non-cash provisions for
reserves for discontinued operations, (7) any extraordinary, unusual or non-
recurring gains or losses or charges or credits, (8) any gain or loss
associated with the sale or write-down of assets and (9) any gain or loss
accounted for by the equity method of accounting; (c) consolidated interest
expense equals cash interest expense of the Company and its consolidated
subsidiaries, minus cash interest income of the Company and its consolidated
subsidiaries, in each case determined in accordance with GAAP; (d)
consolidated interest expense ratio equals the ratio of earnings to
consolidated interest expense, (e) consolidated net worth equals all items
which, in accordance with GAAP, would be classified on a consolidated balance
sheet of the Company as preferred stock, redeemable common stock issued
pursuant to the arrangements described elsewhere in this Prospectus under
"Certain Relationships and Related Transactions--Management," and common
stockholders' equity after eliminating the effect of any adjustments
pertaining to purchase accounting; and (f) consolidated working capital equals
all assets (other than cash and cash equivalents) which, in accordance with
GAAP, would be classified on a consolidated balance sheet of the Company as
current assets, minus all liabilities (other than the current portion of long-
term debt) which, in accordance with GAAP, would be classified on such balance
sheet as current liabilities.
In addition, the Credit Agreement contains (i) various default provisions,
including provisions for default if C&D Fund IV, CD&R and certain of their
affiliates cease to own a voting interest in Holding of at least 51%, if a
"Change of Control" (as defined in the Indenture) occurs, or Holding fails to
own 100% of the capital stock of the Company and (ii) various affirmative and
negative covenants, including restrictions on the ability of the Company to
incur indebtedness, prepay the Notes or any other subordinated indebtedness,
incur liens and other encumbrances, pay dividends or make other restricted
payments, become liable on guarantees and other contingent obligations, enter
into agreements with respect to mergers or consolidations, sell or transfer
assets, make investments or capital expenditures, enter into hedging
transactions, make acquisitions, make loans and advances, enter into
transactions with affiliates, create subsidiaries or engage in new types of
business, and a negative pledge with respect to unencumbered assets.
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<PAGE>
DESCRIPTION OF NOTES
The Existing Notes are and the New Notes will be issued under an Indenture
dated as of November 30, 1993 (the "Indenture") among the Company, Holding, as
guarantor, and First Trust National Association, a national association, as
trustee (the "Trustee"). A copy of the Indenture is filed as an Exhibit to the
Registration Statement of which this Prospectus forms a part. The Indenture is
subject to and governed by the Trust Indenture Act of 1939, as amended (the
"Trust Indenture Act"). The following is a summary of the material provisions
of the Indenture. This summary does not purport to be complete, and where
reference is made to particular provisions of the Indenture, such provisions,
including the definitions of certain terms, are qualified in their entirety by
reference to all of the provisions of the Indenture and those terms made a
part of the Indenture by the Trust Indenture Act. For definitions of certain
capitalized terms used in the following summary, see "--Certain Definitions."
GENERAL
The Notes will mature on December 1, 2003, are limited to $100,000,000
aggregate principal amount, and are unsecured senior subordinated obligations
of the Company. Each Note bears interest from November 30, 1993 or from the
most recent interest payment date to which interest has been paid, payable
semiannually in arrears on June 1 and December 1 each year, commencing June 1,
1994, to the Person in whose name the Note (or any predecessor Note) is
registered at the close of business on the May 15 or November 15 next
preceding such interest payment date. Interest on the Notes will be computed
on the basis of a 360-day year of twelve 30-day months. Upon any exchange of
Existing Notes for New Notes pursuant to the Exchange Offer, the Existing
Notes so exchanged shall be canceled and shall no longer be deemed outstanding
for any purpose. In no event shall the aggregate principal amount of Existing
Notes and New Notes outstanding exceed $100,000,000.
The Notes bear interest at 9 1/2% per annum, except as otherwise described
below. As discussed under "Registration Rights," pursuant to the Registration
Rights Agreement, the Company agreed for the benefit of the holders of the
Existing Notes, at the Company's cost, to effect the Exchange Offer made
hereby, or in certain circumstances, to register the Existing Notes for resale
under the Securities Act through the Shelf Registration Statement. Under the
terms of the Notes and the Indenture, in the event that either (a) the
Registration Statement was not declared effective on or prior to the 150th
calendar day following the date of original issue of the Existing Notes or (b)
the Exchange Offer was not consummated on or prior to the 180th calendar day
following the date of original issue of the Existing Notes or a Shelf
Registration Statement was not declared effective on or prior to the 210th
calendar day following the date of original issue of the Existing Notes, the
interest rate borne by the Notes increased by one-half of one percent per
annum following such 150-day period in the case of (a) above or following such
180 or 210-day period, as the case may be, in the case of clause (b) above.
Upon (x) the effectiveness of the Registration Statement in the case of clause
(a) above or (y) the consummation of the Exchange Offer or the effectiveness
of a Shelf Registration Statement, as the case may be, in the case of clause
(b) above, the interest rate borne by the Notes from the date of such
effectiveness or the day before the date of consummation, as the case may be,
will be reduced by the full amount of such increase from the original interest
rate. The aggregate amount of such increase from the original interest rate
pursuant to these provisions will in no event exceed 0.5% per annum. In
accordance with these provisions, the interest rate on the Notes increased to
10% per annum effective April 30, 1994, the 151st calendar day following the
date of original issue of the Existing Notes, and will remain at such rate
until the day before the date of consummation of the Exchange Offer, at which
time it will decrease to the original interest rate on the Notes of 9 1/2% per
annum. The additional interest paid in accordance with this provision was
approximately $0.3 million in 1994 and $0.5 million in 1995.
Principal of, premium, if any, and interest on the Notes are payable, and
the Notes are exchangeable and transferable (subject to compliance with
transfer restrictions imposed by applicable securities laws for so long as the
Existing Notes are not registered for resale under the Securities Act), at the
office or agency of the Company in the City of New York maintained for such
purposes; provided, however, that payment of interest may be made at the
option of the Company by check mailed to the Person entitled thereto as shown
on the security register (Sections 301, 305, 1002). The Notes are issuable
only in fully registered form without coupons, in
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<PAGE>
denominations of $1,000 and any integral multiple thereof (Section 302). No
service charge will be made for any registration of transfer, exchange or
redemption of Notes, except in certain circumstances for any tax or other
governmental charge that may be imposed in connection therewith (Section 305).
Existing Notes that remain outstanding after the consummation of the
Exchange Offer and New Notes issued in connection with the Exchange Offer are
treated as a single class of securities under the Indenture.
Payment of the Notes is fully and unconditionally guaranteed by Holding. The
Holding Guarantee is a senior subordinated obligation of Holding, ranking
subordinate in right of payment to all existing and future Senior Guarantor
Indebtedness of Holding, including Holding's guarantee of Indebtedness under
the Credit Agreement. Following the closing of the Acquisition and the
financing thereof, Holding had guaranteed approximately $141 million of
outstanding indebtedness pursuant to guarantees ranking senior in right of
payment to the Holding Guarantee and had no indebtedness subordinated in right
of payment to or pari passu in right of payment with the Holding Guarantee.
See "--Guarantee."
OPTIONAL REDEMPTION
The Notes are subject to redemption at any time on or after December 1,
1998, at the option of the Company, in whole or in part, on not less than 30
nor more than 60 days' prior notice in amounts of $1,000 or an integral
multiple thereof at the following redemption prices (expressed as percentages
of the principal amount), if redeemed during the 12-month period beginning
December 1 of the years indicated below:
<TABLE>
<CAPTION>
REDEMPTION
YEAR PRICE
---- ----------
<S> <C>
1998.......................... 104.5%
1999.......................... 103.0%
2000.......................... 101.5%
</TABLE>
and thereafter at 100% of the principal amount, in each case together with
accrued and unpaid interest, if any, to the redemption date (subject to the
right of holders of record on relevant record dates to receive interest due on
relevant interest payment dates).
The Notes are subject to redemption, at the option of the Company, prior to
December 1, 1998, in whole or in part, at any time within 180 days after a
Change of Control on not less than 30 nor more than 60 days' prior notice to
each holder of Notes to be redeemed, in amounts of $1,000 or an integral
multiple thereof, at a redemption price equal to the sum of (i) the principal
amount thereof plus (ii) accrued and unpaid interest, if any, to the
redemption date (subject to the right of holders of record on relevant record
dates to receive interest due on relevant interest payment dates) plus (iii)
the Applicable Premium.
If less than all of the Notes are to be redeemed in the case of any of the
foregoing redemptions, the Trustee shall select the Notes or the portion
thereof to be redeemed pro rata, by lot or by any other method the Trustee
shall deem fair and reasonable. (See Sections 203, 1101, 1105 and 1107).
MANDATORY PURCHASE UPON A CHANGE OF CONTROL
Each holder of Notes has certain rights to require the Company to purchase
such Notes upon the occurrence of a Change of Control. See "--Certain
Covenants--Purchase of Notes Upon a Change of Control."
EVENT RISK CONSIDERATIONS
Certain transactions would not constitute a Change of Control that would
otherwise entitle a holder of Notes to require the Company to purchase such
Notes, including acquisitions of Holding common stock by C&D Fund
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IV (Holding's current sole stockholder), CD&R or certain affiliates thereof;
certain acquisitions of Holding common stock not exceeding specified ownership
thresholds; and certain changes in Holding's board of directors approved by
certain incumbent directors. See "--Certain Covenants--Purchase of Notes on a
Change of Control." The Company will be permitted to merge with or consolidate
with another entity if certain requirements are met, including that the
surviving entity is Remington or is a qualifying entity and assumes the
Indenture, and that, on a pro forma basis giving effect to the transaction,
the surviving entity meets a consolidated net worth test, and could incur
indebtedness by meeting a fixed charge coverage ratio test. See "--
Consolidation, Merger, Sale of Assets." If the Company meets certain financial
tests, it is permitted to incur additional indebtedness, and to pay dividends
or distributions to stockholders, guarantee indebtedness of certain affiliates
and effect certain other restricted payments or transactions. See "--Certain
Covenants--Limitation on Indebtedness" and "--Certain Covenants--Limitation on
Restricted Payments." The Company is permitted to enter into most transactions
with certain affiliates on a specified arms-length basis, or by meeting
certain other criteria, or by obtaining the approval of a majority of
Remington's directors who have no material related financial interest. See "--
Certain Covenants--Limitation on Transactions with Affiliates." The
Indenture's covenants and other provisions accordingly may have limited
applicability to some transactions, such as certain leveraged
recapitalizations or restructurings not involving a Change of Control.
SINKING FUND
The Notes are not entitled to the benefit of any sinking fund.
SUBORDINATION
The payment of the principal of, premium, if any, and interest on, the Notes
is subordinated, as set forth in the Indenture, in right of payment to the
prior payment in full of all Senior Indebtedness in cash or Cash Equivalents
or in any other form acceptable to the holders of Senior Indebtedness. The
Notes are senior subordinated indebtedness of the Company ranking pari passu
with all other existing and future senior subordinated indebtedness of the
Company and senior to all existing and future Subordinated Indebtedness of the
Company.
Upon the occurrence and during the continuance of any default in the payment
of any Designated Senior Indebtedness beyond any applicable grace period and
after the receipt by the Trustee from representatives of holders of any
Designated Senior Indebtedness (collectively, a "Senior Representative") of a
written notice of such default, no payment (other than payments previously
made pursuant to the provisions described under "Defeasance or Covenant
Defeasance of Indenture") or distribution of any assets of the Company of any
kind or character (excluding certain permitted equity or subordinated
securities) shall be made on account of the principal of, or premium, if any,
or interest on, the Notes or on account of the purchase, redemption or other
acquisition of, the Notes unless and until such default has been cured, waived
or has ceased to exist or such Designated Senior Indebtedness shall have been
discharged or paid in full in cash or Cash Equivalents or in any other form
acceptable to the holders of Designated Senior Indebtedness.
Upon the occurrence and during the continuance of any non-payment default
with respect to any Designated Senior Indebtedness pursuant to which the
maturity thereof may be accelerated (a "Non-payment Default") and after the
receipt by the Trustee from a Senior Representative of a written notice of
such Non-payment Default, no payment (other than payments previously made
pursuant to the provisions described under "Defeasance or Covenant Defeasance
of Indenture") or distribution of any assets of the Company of any kind or
character (excluding certain permitted equity or subordinated securities) may
be made by the Company on account of the principal of, or premium, if any, or
interest on, the Notes or on account of the purchase, redemption or other
acquisition of, the Notes for the period specified below (the "Payment
Blockage Period").
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The Payment Blockage Period shall commence upon the receipt by the Trustee
of notice of the Non-payment Default and shall end on the earliest of (i) 179
days having elapsed since the receipt by the Trustee of such written notice
(provided such Designated Senior Indebtedness as to which notice was given
shall not theretofore have been accelerated), (ii) the date on which such Non-
Payment Default is cured, waived or ceases to exist or on which such
Designated Senior Indebtedness is discharged or paid in full in cash or Cash
Equivalents or in any other form acceptable to the holders of Designated
Senior Indebtedness or (iii) the date on which such Payment Blockage Period
shall have been terminated by written notice to the Company or the Trustee
from the Senior Representative initiating such Payment Blockage Period, after
which, in the case of clause (i), (ii) or (iii), the Company shall promptly
resume making any and all required payments in respect of the Notes, including
any missed payments. In no event will a Payment Blockage Period extend beyond
179 days from the date of the receipt by the Trustee of the notice initiating
such Payment Blockage Period (such 179-day period referred to as the "Initial
Blockage Period"). Any number of notices of events of Non-payment Defaults may
be given during the Initial Blockage Period; provided that no such additional
period shall extend beyond the Initial Blockage Period; provided, further,
that during any 365-consecutive-day period only one such period during which
payment of principal of, or premium, if any, or interest on, the Notes may not
be made may commence and the duration of such period may not exceed 179 days.
No Non-payment Default with respect to Designated Senior Indebtedness that
existed or was continuing on the date of the commencement of any Payment
Blockage Period will be, or can be, made the basis for the commencement of a
second Payment Blockage Period, whether or not within a period of 365
consecutive days, unless such Non-payment Default recurs after having been
cured or waived for a period of not less than 90 consecutive days (Section
1203).
If the Company fails to make any payment on the Notes when due or within any
applicable grace period, whether or not on account of the payment blockage
provisions referred to above, such failure would constitute an Event of
Default under the Indenture and would enable the holders of the Notes to
accelerate the maturity thereof. See "--Events of Default."
The Indenture provides that in the event of any insolvency or bankruptcy
case or proceeding, or any receivership, liquidation, reorganization or other
similar case or proceeding in connection therewith, relative to the Company or
its assets, or any liquidation, dissolution or other winding up of the
Company, whether voluntary or involuntary, or any assignment for the benefit
of creditors or other marshaling of assets or liabilities of the Company, all
Senior Indebtedness must be paid in full in cash or Cash Equivalents or in any
other form acceptable to the requisite holders of Senior Indebtedness, or
provision acceptable to the requisite holders of Senior Indebtedness made for
such payment, before any payment or distribution (excluding distributions of
certain permitted equity or subordinated securities) is made on account of the
principal of, or premium, if any, or interest, on the Notes.
By reason of such subordination, in the event of liquidation or insolvency,
creditors of the Company who are holders of Senior Indebtedness may recover
more, ratably, than the holders of the Notes, and funds which would be
otherwise payable to the holders of the Notes will be paid to the holders of
the Senior Indebtedness to the extent necessary to pay the Senior Indebtedness
in full, and the Company may be unable to meet its obligations fully with
respect to the Notes.
"Senior Indebtedness" is defined as the principal of, and premium, if any,
and interest (including interest, whether or not allowed, accruing after the
filing of a petition initiating any proceeding under any state, federal or
foreign bankruptcy laws) on, any Indebtedness of the Company (other than as
otherwise provided in this definition), whether outstanding on the date of the
Indenture or thereafter created, incurred or assumed, and whether at any time
owing, actually or contingent, unless, in the case of any particular
Indebtedness, the instrument creating or evidencing the same or pursuant to
which the same is outstanding expressly provides that such Indebtedness shall
not be senior in right of payment to the Notes. Without limiting the
generality of the foregoing, "Senior Indebtedness" shall include the principal
of and premium, if any, and interest (including interest, whether or not
allowed, accruing after the filing of a petition initiating any proceeding
under any state, federal or foreign bankruptcy laws) on all Indebtedness, and
all other monetary obligations, of every kind and
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nature of the Company from time to time owed to the lenders under the Credit
Agreement (collectively, "Bank Debt"); provided, however, that (A) any Bank
Debt that is Indebtedness that at the time of incurrence is issued in
violation of the provisions described under "Certain Covenants--Limitation on
Indebtedness" below shall not constitute Senior Indebtedness and (B) any
Indebtedness under any refinancing, refunding or replacement of the Credit
Agreement shall not constitute Senior Indebtedness to the extent that the
Indebtedness thereunder is by its express terms subordinate in right of
payment to any other Indebtedness of the Company. Notwithstanding the first
sentence of this paragraph, "Senior Indebtedness" shall not include (i)
Indebtedness evidenced by the Notes, (ii) Indebtedness that is expressly
subordinate in right of payment to any Indebtedness of the Company, (iii)
Indebtedness which when incurred and without respect to any election under
Section 1111(b) of Title 11 of the United States Code, is without recourse to
the Company, (iv) Indebtedness which is represented by Redeemable Capital
Stock, (v) any liability for foreign, federal, state, local or other taxes
owed or owing by the Company, (vi) Indebtedness of the Company to a Person
that at the time of the incurrence thereof is a Subsidiary or any other
Affiliate of the Company or any of such Affiliate's subsidiaries and (vii)
that portion of any Indebtedness which at the time of incurrence is issued in
violation of the Indenture.
"Designated Senior Indebtedness" is defined as (i) all Senior Indebtedness
under the Credit Agreement and (ii) any other Senior Indebtedness which, at
the time of determination, has an aggregate principal amount outstanding,
together with any commitments to lend additional amounts, of at least
$20,000,000 and is specifically designated (x) in the instrument evidencing
such Senior Indebtedness or the agreement under which such Senior Indebtedness
arises (as either may be amended or modified from time to time) or (y) by
notice to the Trustee, as, in each case, "Designated Senior Indebtedness" by
the Company.
As of September 30, 1996, the aggregate amount of Senior Indebtedness
outstanding was $182.8 million.
CERTAIN COVENANTS
The Indenture contains, among others, the following covenants:
Limitation on Indebtedness. (a) The Company will not, and will not permit
any of its Subsidiaries to, create, issue, assume, guarantee, or otherwise in
any manner become directly or indirectly liable for the payment of or
otherwise incur (collectively, "incur") any Indebtedness (including any
Acquired Indebtedness but excluding any Permitted Indebtedness) unless, and
subject to paragraph (b) below in the case of Indebtedness of a Subsidiary,
the Consolidated Fixed Charge Coverage Ratio for the Company for the four full
fiscal quarters reflected on the Company's historical financial statements
(including those of its predecessors on a pro forma basis after giving effect
to the Acquisition) immediately preceding the incurrence of such Indebtedness
taken as one period (and after giving pro forma effect to (i) the incurrence
of such Indebtedness and (if applicable) the application of the net proceeds
therefrom, including to refinance other Indebtedness, as if such Indebtedness
was incurred, and the application of such proceeds occurred, on the first day
of such four-quarter period; (ii) the incurrence, repayment or retirement of
any other Indebtedness by the Company and its Subsidiaries since the first day
of such four-quarter period as if such Indebtedness was incurred, repaid or
retired at the beginning of such four-quarter period (except that, in making
such computation, the amount of Indebtedness under any revolving credit
facility shall be computed based upon the average daily balance of such
Indebtedness during such four-quarter period); (iii) in the case of Acquired
Indebtedness, the related acquisition; and (iv) any acquisition or disposition
by the Company and its Subsidiaries of any company or any business or any
group of assets constituting an operating unit out of the ordinary course of
business, whether by merger, stock purchase or sale, or asset purchase or
sale, or any related repayment of Indebtedness, in each case since the first
day of such four-quarter period, assuming such acquisition or disposition had
been consummated on the first day of such four-quarter period) is at least
equal to 2.0:1.0.
(b) The Company will not permit any of its Subsidiaries to incur any
Indebtedness other than Permitted Subsidiary Indebtedness.
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Limitation on Restricted Payments. (a) The Company will not, and will not
permit any Subsidiary to, directly or indirectly:
(i) declare or pay any dividend on, or make any distribution to holders
of, the Company's Capital Stock (other than dividends or distributions
payable in the Qualified Capital Stock of the Company or Holding or in
options, warrants or other rights to acquire such Qualified Capital Stock);
(ii) purchase, redeem or otherwise acquire or retire for value, directly
or indirectly, the Company's Capital Stock or any Capital Stock of any
Affiliate of the Company (other than any Subsidiary of the Company or any
Affiliate of the Company which after giving effect to any such purchase,
redemption, acquisition or retirement is a Majority Owned Subsidiary) or
options, warrants or other rights to acquire such Capital Stock;
(iii) make any principal payment on, or repurchase, redeem, defease,
retire or otherwise acquire for value, prior to any scheduled principal
payment, any scheduled sinking fund payment or maturity, any Subordinated
Indebtedness;
(iv) declare or pay any dividend or distribution on any Capital Stock of
any Subsidiary to any Person (other than (x) with respect to any such
Capital Stock held by the Company or any of its Wholly Owned Subsidiaries
or (y) with respect to Capital Stock held by any other Person made on a pro
rata basis (measured by value) consistent with the ownership interests in
such Capital Stock, to the owners of such Capital Stock); or
(v) incur, create or assume any guarantee of Indebtedness of any
Affiliate (other than the Company or a Wholly Owned Subsidiary of the
Company) or make any Investment in any Person (other than, in each case,
any Permitted Investments);
(any of the foregoing payments described in clauses (i) through (v), other
than any such action that is a Permitted Payment, collectively, "Restricted
Payments") unless after giving effect to the proposed Restricted Payment
(the amount of any such Restricted Payment, if other than cash, being as
determined by the Board of Directors of the Company, whose determination
shall be conclusive and evidenced by a board resolution), (1) no Default or
Event of Default shall have occurred and be continuing; (2) immediately
before and immediately after giving effect to such transaction on a pro
forma basis, the Company could incur $1.00 of additional Indebtedness
(other than Permitted Indebtedness) under the provisions described under
"Limitation on Indebtedness"; and (3) the aggregate amount of all such
Restricted Payments declared or made after the date of the Indenture does
not exceed the sum of:
(A) 50% of the aggregate cumulative Consolidated Net Income of the
Company accrued on a cumulative basis during the period beginning on
the date of the Indenture and ending on the last day of the Company's
last fiscal quarter ending prior to the date of the Restricted Payment
(or, if such aggregate cumulative Consolidated Net Income shall be a
loss, minus 100% of such loss);
(B) the aggregate Net Cash Proceeds received after the date of the
Indenture by the Company as capital contributions to the Company;
(C) the aggregate Net Cash Proceeds received after the date of the
Indenture by the Company from the issuance or sale (other than to any
of its Subsidiaries) of shares of its Qualified Capital Stock or any
option, warrants or rights to purchase shares of such Qualified Capital
Stock of the Company (except, in each case, to the extent such proceeds
are used to purchase, redeem or otherwise retire Capital Stock or
Subordinated Indebtedness as set forth in clause (ii) or (iii) of
paragraph (b) below);
(D) the aggregate Net Cash Proceeds received after the date of the
Indenture by the Company (other than from any of its Subsidiaries) upon
the exercise of any options or warrants to purchase Qualified Capital
Stock of the Company;
(E) the aggregate Net Cash Proceeds received after the date of the
Indenture by the Company from debt securities or Redeemable Capital
Stock that have been converted into or exchanged for Qualified Capital
Stock of the Company or Holding to the extent of the amount of cash or
Cash Equivalents received from the sale of such debt securities or
Redeemable Capital Stock, including
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payments in respect of deferred payment obligations when received in
the form of, or stock or assets when disposed for, cash or Cash
Equivalents, plus the aggregate Net Cash Proceeds received by the
Company at the time of such conversion or exchange from the holder of
such debt securities or Redeemable Capital Stock; and
(F) an amount equal to the net reduction in Investments in
Unrestricted Subsidiaries resulting from payments of interest on
Indebtedness, dividends, repayments of loans or advances, or other
transfers of assets, in each case to the Company or any Subsidiary from
Unrestricted Subsidiaries, from termination or reduction of guarantees
by the Company or any Subsidiary or from redesignations of Unrestricted
Subsidiaries (valued in each case as provided in the definition of
"Investments"), or resulting from the receipt of proceeds from the sale
or other disposition of an Unrestricted Subsidiary, not to exceed in
the case of any Unrestricted Subsidiary the amount of Investments
previously made by the Company or any Subsidiary in such Unrestricted
Subsidiary which were treated as a Restricted Payment;
provided that, any Net Cash Proceeds received by the Company from Holding out
of the proceeds of the sale of Management Stock in any fiscal year shall, to
the extent of the amounts loaned, advanced, dividended or contributed by the
Company to Holding in such fiscal year pursuant to clause (vi)(c) of paragraph
(b) below, be excluded from clauses 3(C), (D) and (E) of this paragraph.
Any Investments by the Company or any Subsidiary in Unrestricted
Subsidiaries (other than Permitted Investments described in clause (xiii) of
the definition of "Permitted Investment") will be included in calculating the
amount of Restricted Payments made by the Company. For purposes of this
covenant, without duplication, (i) the initial Investment in an Unrestricted
Subsidiary acquired after the date of the Indenture from a Person other than
the Company or a Subsidiary shall be equal to the Fair Market Value (as
determined by the Company's Board of Directors as evidenced in a board
resolution delivered to the Trustee) of the purchase price paid to acquire
such Unrestricted Subsidiary, (ii) any other Investments in Unrestricted
Subsidiaries shall reflect the Fair Market Value (as determined by the
Company's Board of Directors as evidenced in a board resolution delivered to
the Trustee) of the net assets of any Subsidiary at the time that such
Subsidiary is designated an Unrestricted Subsidiary and (iii) any property
transferred to an Unrestricted Subsidiary shall be valued at Fair Market Value
(as determined by the Company's Board of Directors as evidenced in a board
resolution delivered to the Trustee) at the time of such transfer. The Company
will not, and will not permit any Subsidiary to, convey, transfer or
contribute all or substantially all of the assets constituting either the
Company's firearms business or the Company's ammunition business in a single
transaction or series of related transactions to an Unrestricted Subsidiary
unless (i) such conveyance, transfer or contribution is permitted as a
Restricted Payment pursuant to this paragraph (a) and has been approved by the
Company's Board of Directors as evidenced in a board resolution delivered to
the Trustee and (ii) the Company delivers to the Trustee a written opinion of
a nationally recognized investment banking firm or independent appraiser
stating the Fair Market Value of the assets to be conveyed, transferred or
contributed.
(b) Notwithstanding the foregoing, and, in the case of clauses (ii), (iii),
(iv), (vi) and (viii) below, so long as there is no Default or Event of
Default continuing, the foregoing provisions shall not prohibit the following
actions (the actions taken in all the clauses set forth below other than
clauses (i), (viii) and (ix)(b) being referred to as a "Permitted Payment"):
(i) the payment of any dividend or distribution within 60 days after the
date of declaration thereof, if at such date of declaration such payment
would be permitted by the provisions of paragraph (a) of this Section and
such payment shall be deemed to have been paid on such date of declaration
for purposes of the calculation required by paragraph (a) of this Section;
(ii) the repurchase, redemption, or other acquisition or retirement of
any shares of any class of Capital Stock of the Company in exchange for
(including any such exchange pursuant to the exercise of a conversion right
or privilege in connection with which cash is paid in lieu of the issuance
of fractional shares or scrip), or out of the proceeds of a substantially
concurrent issuance and sale for cash (other than
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to a Subsidiary) of, other shares of Qualified Capital Stock of the
Company; provided that the Net Cash Proceeds from the issuance of such
shares of Qualified Capital Stock are excluded from clause (3)(C) of
paragraph (a) of this Section to the extent so applied to such repurchase,
redemption or other acquisition or retirement;
(iii) the repurchase, redemption, defeasance, retirement or acquisition
for value or payment of principal of any Subordinated Indebtedness in
exchange for, or in an amount not in excess of the net proceeds of, a
substantially concurrent issuance and sale (other than to a Subsidiary) of
shares of any class of Qualified Capital Stock of the Company; provided
that the Net Cash Proceeds from the issuance of such shares of Qualified
Capital Stock are excluded from clause (3)(C) of paragraph (a) of this
Section to the extent so applied to such repurchase, redemption or other
acquisition or retirement;
(iv) the repurchase, redemption, defeasance, retirement, refinancing,
acquisition for value or payment of principal of any Subordinated
Indebtedness (other than Redeemable Capital Stock) (a "refinancing")
through the issuance of new Subordinated Indebtedness of the Company;
provided that any such new Indebtedness (1) shall be in a principal amount
that does not exceed the principal amount so refinanced (or, if such
Subordinated Indebtedness provides for an amount less than the principal
amount thereof to be due and payable upon a declaration or acceleration
thereof, then such lesser amount calculated as of the date of
determination), plus the lesser of (I) the stated amount of any premium or
other payment required to be paid in connection with such a refinancing
pursuant to the terms of the Subordinated Indebtedness being refinanced or
(II) the amount of premium or other payment actually paid at such time to
refinance the Indebtedness, plus, in either case, the amount of expenses of
the Company incurred in connection with such refinancing; (2) has an
Average Life to Stated Maturity greater than or equal to the remaining
Average Life to Stated Maturity of the Indebtedness so refinanced (or, if
shorter, the Notes); (3) has a Stated Maturity for its final scheduled
principal payment not earlier than the Stated Maturity of the Indebtedness
so refinanced (or, if shorter, the Notes); and (4) is expressly
subordinated in right of payment to the Notes at least to the same extent
as the Subordinated Indebtedness to be refinanced;
(v) (a) loans, advances, dividends or distributions by the Company to
Holding not to exceed an amount necessary to permit Holding to pay (x) its
costs (including all professional fees and expenses) incurred to comply
with its reporting obligations under federal or state laws or under the
Indenture, including as described under "Provision of Financial Statements"
or in connection with the Credit Agreement, (y) its expenses incurred in
connection with any public offering of equity securities or of Indebtedness
permitted by the Indenture which has been terminated by the Board of
Directors of Holding, in each case, the net proceeds of which were
specifically intended to be contributed or loaned to the Company and (z)
its other operational expenses (other than taxes) incurred in the ordinary
course of business and not exceeding $1,000,000 in any fiscal year, and (b)
loans or advances by the Company to Holding not to exceed an amount
necessary to permit Holding to pay its interim expenses incurred in
connection with any public offering of equity securities or of Indebtedness
permitted by the Indenture, the proceeds of which are specifically intended
to be contributed or loaned to the Company, which, unless such offering
shall have been terminated by the Board of Directors of Holding, shall be
repaid to the Company promptly out of the proceeds of such offering;
(vi) loans, advances, dividends or distributions by the Company to
Holding in order for Holding to repurchase or otherwise acquire shares of
Holding Common Stock or options, warrants or rights to purchase in respect
thereto, or the repurchase or other acquisition by the Company or any
Subsidiary of shares of Holding Common Stock or options, warrants or rights
to purchase in respect thereto, from the Management Investors but in any
event in an amount not in excess of the sum of (a) $3,000,000 in any fiscal
year, plus (b) any portion of the $3,000,000 available under the preceding
clause (a) in the prior fiscal year that was not utilized, plus (c) the Net
Cash Proceeds received during such fiscal year by the Company from Holding
as an equity contribution out of the proceeds of the sale of Management
Stock to any Management Investors;
(vii) payments by the Company to Holding to pay (a) without duplication
of amounts payable pursuant to subclause (b) of this clause (vii), any
taxes, charges or assessments (other than federal income taxes and
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withholding imposed on payments made by Holding) required to be paid by
Holding by virtue of its being incorporated or having capital stock
outstanding (but not by virtue of owning stock of any corporation other
than the Company), or being a holding company parent of the Company or
receiving dividends from or other distributions in respect of the stock of
the Company, or having guaranteed any obligations of the Company, or having
made any payment in respect to any of the items for which the Company is
permitted to make payments to Holding pursuant to clauses (v), (vi), (vii),
(viii) or (xi) hereof or (b) any other taxes for which Holding is liable up
to an amount not to exceed the amount of any such taxes which the Company
would have been required to pay on a separate company basis or on a
Consolidated basis if the Company had filed a consolidated return on behalf
of an affiliated group (as defined in Section 1504 of the Internal Revenue
Code of 1986, as amended, or an analogous provision of state, local or
foreign law) of which it were the common parent, or with respect to state
and local taxes, on a combined basis if the Company had filed a combined
return on behalf of an affiliated group of which it were a member;
(viii) loans, advances, dividends or distributions by the Company to
Holding to pay dividends on the Holding Common Stock following an initial
public offering of the Holding Common Stock in an amount not to exceed 6%
per annum of the aggregate net proceeds received by Holding in such public
offering or any additional public offerings (or if the Company and Holding
have merged, payment of such dividends by the Company);
(ix) (a) guarantees in respect of up to $10,000,000 of Indebtedness
incurred by the Management Investors to purchase Holding Common Stock and
(b) payments in discharge thereof;
(x) guarantees in respect of Indebtedness incurred by officers or
employees of the Company or any Subsidiary in the ordinary course of
business and payments in discharge thereof;
(xi) payments by the Company to Holding not to exceed an amount necessary
to permit Holding to (a) make payments in respect to its indemnification
obligations owing to directors, officers or other Persons under Holding's
charter or by-laws or pursuant to written agreements with any such Person,
(b) satisfy its obligations under the Equity Registration Rights Agreement
and the Indemnification Agreement or (c) make payments in respect of
indemnification obligations of Holding in connection with any offering of
Holding Common Stock;
(xii) the repurchase of any Subordinated Indebtedness (x) at a purchase
price not greater than 101% of the principal amount of such Indebtedness in
the event of a Change of Control pursuant to a provision similar to the
provision described under "Purchase of Notes Upon a Change of Control";
provided that prior to such repurchase the Company has made the Change of
Control Offer as provided under "Purchase of Notes Upon a Change of
Control" and has repurchased all Notes validly tendered for payment in
connection with such Change of Control Offer and (y) at a purchase price
not greater than 100% of the principal amount of such Indebtedness in the
event of an Asset Sale pursuant to a provision similar to the provision
described under "Limitation on Sale of Assets"; provided that prior to such
repurchase the Company has made an Offer as provided under "Limitation on
Sale of Assets" and has repurchased all Notes validly tendered for payment
in connection with such Asset Sale; and
(xiii) guarantees of Indebtedness of any Affiliate to the extent the
Company is able to make a "Permitted Investment" in such Affiliate pursuant
to clause (xiii) of the definition of "Permitted Investment."
Limitation on Transactions with Affiliates. The Company will not, and will
not permit any of its Subsidiaries to, directly or indirectly, enter into or
suffer to exist any transaction or series of related transactions (including,
without limitation, the sale, purchase, exchange or lease of assets, property
or services) with any Affiliate of the Company (other than the Company or a
Wholly Owned Subsidiary) unless (i) such transaction or series of transactions
is on terms that are no less favorable to the Company or such Subsidiary, as
the case may be, than would be available in a comparable transaction in arm's-
length dealings with an unrelated third party and (ii) with respect to any
transaction or series of related transactions involving aggregate payments in
excess of $2,000,000, the Company delivers an officers' certificate to the
Trustee certifying that such transaction or series of related transactions
complies with clause (i) above and such transaction or series of related
transactions
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is or has been approved by a majority of the Disinterested Directors of the
Board of Directors; provided, however, in the event no members of the Board of
Directors are Disinterested Directors with respect to such transaction or
series of transactions, the Company delivers to the Trustee a written opinion
of a nationally recognized investment banking firm or independent appraiser
stating that such transaction or transactions is fair to the Company from a
financial point of view; provided, further, that this provision shall not
apply to (a) any transaction with an officer or member of the Board of
Directors of the Company entered into in the ordinary course of business
(including compensation or employee benefit arrangements with any officer or
member of the Board of Directors of the Company); (b) any transaction arising
out of agreements in existence on the date of the Indenture; (c) any
transaction permitted under "Limitation on Restricted Payments" or clause (a)
or (b) of "Restriction on Transfer of Assets to Subsidiaries"; (d) payment to
CD&R or any Affiliate of CD&R of fees in an aggregate amount not to exceed
$500,000 in any fiscal year plus all reasonable out-of-pocket expenses
incurred by CD&R or any such Affiliate in connection with its performance of
management consulting, monitoring and financial advisory services with respect
to Holding, the Company and its Subsidiaries; (e) payment to CD&R of up to
$4,500,000 plus out-of-pocket expenses, including, but not limited to, legal
and accounting fees and disbursements, in connection with the Acquisition; (f)
the Indemnification Agreement and any payments made pursuant thereto; (g) the
Acquisition and all transactions in connection therewith (including but not
limited to the financing thereof); and (h) loans and advances (or guarantees
in respect thereof and payments thereunder) made to officers or employees of
Holding, the Company or any Subsidiary, or guarantees made on their behalf
(and payments thereunder) (x) in respect of travel, entertainment and moving-
related expenses incurred in the ordinary course of business, and (y) in
respect of moving-related expenses incurred in connection with any closing or
consolidation of any facility. For purposes of this paragraph, any transaction
or series of related transactions with any Affiliate shall be deemed to have
satisfied the standards set forth in clause (i) of this paragraph if such
transaction or series of related transactions is approved by a majority of the
Disinterested Directors of the Board of Directors of the Company (Section
1010).
Limitation on Certain Other Subordinated Indebtedness. The Company and any
Guarantor will not create, incur, issue, assume, guarantee or otherwise in any
manner become directly or indirectly liable for any Indebtedness that is
expressly subordinate in right of payment to any Indebtedness of the Company
or Guarantor unless such Indebtedness is also pari passu with the Notes or
subordinate in right of payment to the Notes to substantially the same extent
as the Notes are subordinate in right of payment to Senior Indebtedness as set
forth in the Indenture (Section 1011).
Limitation on Liens with Respect to Pari Passu or Subordinated
Indebtedness. (a) The Company will not, and will not permit any Subsidiary to,
create, incur, affirm or suffer to exist any Lien of any kind securing any
Pari Passu Indebtedness or Subordinated Indebtedness (or securing the payment
of any assumption, guarantee or other incurrence of liability with respect
thereto by any Subsidiary) upon any property or assets (including any
intercompany notes) of the Company or any Subsidiary owned on the date of the
Indenture or acquired after the date of the Indenture, or any income or
profits therefrom, unless the Notes are directly secured equally and ratably
with (or, in the case of Subordinated Indebtedness prior or senior thereto,
with the same relative priority as the Notes shall have with respect to such
Subordinated Indebtedness) the obligation or liability secured by such Lien;
provided that, the foregoing shall not apply to any (x) Permitted Lien or (y)
Lien securing Acquired Indebtedness created prior to (and not created in
connection with, or in contemplation of) the incurrence of such Pari Passu
Indebtedness or Subordinated Indebtedness by the Company or any Subsidiary, in
each case, which Indebtedness is permitted under the provisions of "Limitation
on Indebtedness"; provided that any such Lien only extends to the assets that
were subject to such Lien securing such Acquired Indebtedness prior to the
related acquisition by the Company or its Subsidiaries.
(b) Notwithstanding the foregoing, any Lien created for the benefit of the
holders of the Notes pursuant to the foregoing paragraph (a) shall provide by
its terms that such Lien shall be automatically and unconditionally released
and discharged upon (i) any sale, exchange or transfer, to any Person not an
Affiliate of the Company, of all of the Capital Stock held by the Company or
any Subsidiary in, or all or substantially all the assets of, any Subsidiary
creating such Lien, which is in compliance with the Indenture or (ii) the
release by the holders of the
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Pari Passu Indebtedness or Subordinated Indebtedness described in paragraph
(a) above of their Lien (including any deemed release upon payment in full of
all obligations under such Pari Passu Indebtedness or Subordinated
Indebtedness), which release occurs at a time when (A) no other Pari Passu
Indebtedness or Subordinated Indebtedness of the Company remains secured by
the Company or such Subsidiary, as the case may be (other than as described in
the proviso to paragraph (a) above), or (B) the holders of all such other Pari
Passu Indebtedness or Subordinated Indebtedness which is secured by the
Company or such Subsidiary (other than as described in the proviso to
paragraph (a) above) also release their security interest in the Company or
such Subsidiary (including any deemed release upon payment in full of all
obligations under such Pari Passu Indebtedness or Subordinated Indebtedness)
(Section 1012).
Limitation on Issuances of Guarantees of Indebtedness. (a) The Company will
not permit any Subsidiary, directly or indirectly, to guarantee, assume or in
any other manner become liable with respect to any Indebtedness of the Company
(other than Permitted Guarantees) unless (i) such Subsidiary simultaneously
executes and delivers a supplemental indenture to the Indenture providing for
a guarantee of the Notes on terms substantially similar to the guarantee of
such Indebtedness except that (A) if the Notes are subordinated in right of
payment to such Indebtedness, the guarantee under the supplemental indenture
shall be subordinated to such Subsidiary's guarantee with respect to such
Indebtedness (if such guarantee constitutes Senior Guarantor Indebtedness)
substantially to the same extent as the Notes are subordinated to such
Indebtedness under the Indenture and (B) if such Indebtedness is by its
express terms subordinated in right of payment to the Notes, any such
assumption, guarantee or other liability of such Subsidiary with respect to
such Indebtedness shall be subordinated in right of payment to such
Subsidiary's assumption, guarantee or other liability with respect to the
Notes substantially to the same extent as such Indebtedness is subordinated to
the Notes and (ii) such Subsidiary waives and will not in any manner
whatsoever claim or take the benefit or advantage of, any rights of
reimbursement, indemnity or subrogation or any other rights against the
Company or any other Subsidiary as a result of any payment by such Subsidiary
under its Guarantee.
(b) Each guarantee created pursuant to the provisions described in the
foregoing paragraph (a) or pursuant to the provisions under "Restriction on
Transfer of Assets to Subsidiaries" is referred to as a "Guarantee" and the
issuer of each such Guarantee is referred to as a "Guarantor." Any such
Guarantee shall be subordinated to Senior Guarantor Indebtedness and such
guarantee shall provide that the holders of Designated Senior Guarantor
Indebtedness shall have the same rights with respect to such Guarantee as
holders of Designated Senior Indebtedness have with respect to the Notes.
Notwithstanding the foregoing, any Guarantee by a Subsidiary of the Notes
shall provide by its terms that such Guarantee shall be automatically and
unconditionally released and discharged upon (i) any sale, exchange or
transfer, to any Person not an Affiliate of the Company, of all of the Capital
Stock held by the Company or any Subsidiary in, or all or substantially all
the assets of, such Subsidiary, which is in compliance with the Indenture or
(ii) the release by the holders of the Indebtedness of the Company described
in paragraph (a) above of their guarantee by such Subsidiary (including any
deemed release upon payment in full of all obligations under such
Indebtedness), which release occurs at a time when (A) no other Indebtedness
of the Company remains guaranteed by such Subsidiary (other than pursuant to
Permitted Guarantees), as the case may be, or (B) the holders of all such
other Indebtedness which is guaranteed by such Subsidiary (other than pursuant
to Permitted Guarantees) also release their guarantee by such Subsidiary
(including any deemed release upon payment in full of all obligations under
such Indebtedness) (Section 1013).
Limitation on Sale of Assets. (a) The Company will not, and will not permit
any of its Subsidiaries to, directly or indirectly, consummate an Asset Sale
unless (i) at least 75% of the proceeds from such Asset Sale are received in
cash and Cash Equivalents and (ii) the Company or such Subsidiary receives
consideration at the time of such Asset Sale at least equal to the fair market
value of the shares or assets sold (as determined by the Board of Directors of
the Company, whose determination shall be conclusive, and, in the case of an
Asset Sale in excess of $1,000,000, evidenced in a board resolution).
(b) If all or a portion of the Net Cash Proceeds of any Asset Sale is not
required to be applied to repay permanently any Senior Indebtedness then
outstanding as required by the terms thereof, or the Company determines not to
apply such Net Cash Proceeds to the permanent prepayment of such Senior
Indebtedness or if
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no such Senior Indebtedness is then outstanding, then the Company or a
Subsidiary may, within 12 months of the Asset Sale, invest the Net Cash
Proceeds in properties and assets that replace the properties and assets that
were the subject of the Asset Sale or in properties and assets that will be
used in the businesses of the Company or its Subsidiaries existing on the date
of the Indenture or in businesses reasonably related thereto. An amount equal
to the amount of such Net Cash Proceeds neither used to permanently repay or
prepay Senior Indebtedness nor used or invested as set forth in this paragraph
constitutes "Excess Proceeds."
(c) When the aggregate amount of Excess Proceeds equals $10,000,000 or more,
the Company shall apply the Excess Proceeds to the repayment of the Notes and
any Pari Passu Indebtedness required to be repurchased under the instrument
governing such Pari Passu Indebtedness as follows: (i) the Company shall make
an offer to purchase (an "Offer") from all holders of the Notes in accordance
with the procedures set forth in the Indenture in the maximum principal amount
(expressed as a multiple of $1,000) of Notes that may be purchased out of an
amount (the "Note Amount") equal to the product of such Excess Proceeds
multiplied by a fraction, the numerator of which is the outstanding principal
amount of the Notes, and the denominator of which is the sum of the
outstanding principal amount of the Notes and such Pari Passu Indebtedness
(subject to proration in the event such Note Amount is less than the aggregate
Offered Price (as defined herein) of all Notes tendered) and (ii) to the
extent required by such Pari Passu Indebtedness to permanently reduce the
principal amount of such Pari Passu Indebtedness, the Company shall make an
offer to purchase or otherwise repurchase or redeem Pari Passu Indebtedness (a
"Pari Passu Offer") in an amount (the "Pari Passu Debt Amount") equal to the
excess of the Excess Proceeds over the Note Amount; provided that in no event
shall the Company be required to make a Pari Passu Offer in a Pari Passu Debt
Amount exceeding the principal amount of such Pari Passu Indebtedness plus the
amount of any premium required to be paid to repurchase such Pari Passu
Indebtedness. The offer price shall be payable in cash in an amount equal to
100% of the principal amount of the Notes plus accrued and unpaid interest, if
any (the "Offered Price"), to the date (the "Offer Date") such Offer is
consummated, in accordance with the procedures set forth in the Indenture. To
the extent that the aggregate Offered Price of the Notes tendered pursuant to
the Offer is less than the Note Amount relating thereto or the aggregate
amount of Pari Passu Indebtedness that is purchased is less than the Pari
Passu Debt Amount (the amount of such shortfall, if any, in either case
constituting a "Deficiency"), the Company shall use such Deficiency in any
manner. Upon completion of the purchase of all the Notes tendered pursuant to
an Offer and repurchase of the Pari Passu Indebtedness pursuant to a Pari
Passu Offer, the amount of Excess Proceeds, if any, shall be reset at zero.
(d) Whenever the Excess Proceeds received by the Company exceed $10,000,000,
such Excess Proceeds shall, prior to the purchase of Notes or any Pari Passu
Indebtedness described in paragraph (c) above, be set aside by the Company in
a separate account pending (i) deposit with the depositary or a paying agent
of the amount required to purchase the Notes or Pari Passu Indebtedness
tendered in an Offer or a Pari Passu Offer, respectively, (ii) delivery by the
Company of the Offered Price to the holders of the Notes or Pari Passu
Indebtedness tendered in an Offer or a Pari Passu Offer, respectively, and
(iii) application, as set forth in paragraphs (c) and (g) hereof, of Excess
Proceeds in the business of the Company and its Subsidiaries. Such Excess
Proceeds may be invested in Temporary Cash Investments; provided that the
maturity date of any such investment shall not be later than (A) in the event
the amount of Excess Proceeds equals $10,000,000 or more, the Offer Date, or
(B) in any other event, six months. The Company shall be entitled to any
interest or dividends accrued, earned or paid on such Temporary Cash
Investments; provided that the Company shall not be entitled to such interest
and shall not withdraw such interest from the separate account, if an Event of
Default has occurred and is continuing.
(e) If the Company becomes obligated to make an Offer pursuant to paragraph
(c) above, the Notes tendered shall be purchased by the Company, at the option
of the holders thereof, in whole or in part, in integral multiples of $1,000,
on a date that is not earlier than 45 days and not later than 60 days from the
date the notice is given to holders, or such later date as may be necessary
for the Company to comply with the requirements under the Exchange Act or any
other applicable securities laws or regulations, subject to proration in the
event the Note Amount is less than the aggregate Offered Price of all Notes
tendered.
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(f) The Company shall comply with the applicable tender offer rules,
including Rule 14e-1 under the Exchange Act, and any other applicable
securities laws or regulations in connection with an Offer.
(g) In the event that the Company shall be unable to purchase Notes from the
holders thereof in an Offer because of the provisions of applicable law, the
Company need not make an Offer. The Company shall then be obligated to apply
the Excess Proceeds to (i) invest in properties and assets that will be used
in the businesses of the Company and its Subsidiaries existing on the date of
the Indenture or in businesses reasonably related thereto or (ii) reduce the
principal amount of Senior Indebtedness; provided that any lender's commitment
with respect to such repaid Senior Indebtedness under this clause (ii) shall
be permanently reduced by the amount of any payment (in each case, to the
extent permitted by law) (Section 1014).
Restriction on Transfer of Assets to Subsidiaries. The Company will not
sell, convey, transfer or otherwise dispose of its assets or property to any
of its Subsidiaries, except for sales, conveyances, transfers or other
dispositions (a) made in the ordinary course of business, (b) made to any
Wholly Owned Subsidiary if such Wholly Owned Subsidiary (x) simultaneously
with such sale, conveyance, transfer or disposal executes and delivers a
supplemental indenture to the Indenture providing for the unconditional
guarantee of payment of the Notes by such Wholly Owned Subsidiary, which
guarantee shall be subordinated to any guarantee of such Wholly Owned
Subsidiary of Senior Indebtedness of the Company and shall be subordinated to
any other Indebtedness of such Wholly Owned Subsidiary (which is not
subordinated to any other Indebtedness of such Wholly Owned Subsidiary or
which is designated by such Wholly Owned Subsidiary as being senior in right
of payment to such guarantee), in each case to the same extent as the Notes
are subordinated to the Senior Indebtedness of the Company under the Indenture
and (y) waives and will not in any manner whatsoever claim or take the benefit
or advantage of, any rights of reimbursement, indemnity or subrogation or any
rights against the Company or any other Subsidiary as a result of any payment
by such Wholly Owned Subsidiary under its Guarantee, (c) made in compliance
with the provisions described under "Limitation on Restricted Payments" or (d)
of assets or property of the Fishline Business or Apparel Business to a
Subsidiary of the Company. (Section 1015)
Purchase of Notes Upon a Change of Control. If a Change of Control shall
occur at any time, then each holder of Notes shall have the right to require
that the Company purchase such holder's Notes, in whole or in part, in
integral multiples of $1,000, at a purchase price (the "Change of Control
Purchase Price") in cash in an amount equal to 101% of the principal amount of
such Notes, plus accrued and unpaid interest, if any, to the date of purchase
(the "Change of Control Purchase Date"), pursuant to the offer described below
(the "Change of Control Offer") and the other procedures set forth in the
Indenture; provided, however, that notwithstanding the occurrence of a Change
of Control, the Company shall not be obligated to make a Change of Control
Offer in the event that it has exercised its rights to redeem all of the Notes
as described under "Optional Redemption."
Within 15 days following any Change of Control, the Company shall notify the
Trustee thereof and give written notice of such Change of Control to each
holder of Notes, by first-class mail, postage prepaid, at his address
appearing in the security register, stating, among other things, the purchase
price and that the purchase date shall be a Business Day no earlier than 45
days nor later than 60 days from the date such notice is mailed, or such later
date as is necessary to comply with requirements under the Exchange Act or any
applicable securities laws or regulations; that any Note not tendered will
continue to accrue interest; that, unless the Company defaults in the payment
of the purchase price, any Notes accepted for payment pursuant to the Change
of Control Offer shall cease to accrue interest after the Change of Control
Purchase Date; and certain other procedures that a holder of Notes must follow
to accept a Change of Control Offer or to withdraw such acceptance (Section
1012).
If a Change of Control occurs, whether or not a Change of Control Offer is
made, there can be no assurance that the Company will have available funds
sufficient to pay the Change of Control Purchase Price for all of the Notes
that might be delivered by holders of the Notes seeking to accept the Change
of Control Offer. The failure of the Company to make or consummate the Change
of Control Offer or pay the Change of Control Purchase Price when due will
give the Trustee and the holders of the Notes the rights described under
"Events of Default."
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A Change of Control can occur as a result of a single transaction or a
series of transactions, whether related or unrelated. Under the definition of
a Change of Control, set forth in "Certain Definitions" below, certain
transactions will not constitute or result in a Change of Control, including
(1) acquisitions of beneficial ownership of Voting Stock of the Company or
Holding by C&D Fund IV, CD&R and their respective Affiliates; (2) acquisitions
of beneficial ownership of Voting Stock of the Company or Holding by other
persons or entities that do not exceed the specified ownership thresholds; (3)
certain changes in the composition of the Board of Directors of the Company or
Holding (whether in connection with a proxy contest or otherwise) that receive
requisite approval of certain incumbent directors or that do not result in a
change in a majority of such Board; (4) certain mergers of, or transfers of
substantially all assets by, the Company or Holding, where the Voting Stock of
the Company or Holding remains outstanding, and a Change of Control does not
otherwise occur; (5) certain mergers of, or transfers of substantially all
assets by, the Company or Holding, where its Voting Stock is changed into or
exchanged for qualifying Voting Stock of the surviving corporation, or
permissible amounts of other assets, and no person or entity other than C&D
Fund IV, CD&R and their respective Affiliates beneficially owns Voting Stock
of the surviving corporation in excess of the specified ownership thresholds;
and (6) a liquidation or dissolution of the Company or Holding in connection
with a transaction that complies with certain Indenture provisions restricting
the merger or transfer of substantially all assets by the Company or Holding.
See "--Consolidation, Merger, Sale of Assets."
The term "all or substantially all" as used in the definition of "Change of
Control" has not been interpreted under New York law (which is the governing
law of the Indenture) to represent a specific quantitative test. As a
consequence, in the event the holders of the Notes elected to exercise their
rights under the Indenture and the Company elected to contest such election,
there could be no assurance as to how a court interpreting New York law would
interpret the phrase.
The existence of a holder's right to require the Company to repurchase such
holder's Notes upon a Change of Control may deter a third party from acquiring
the Company in a transaction which constitutes a Change of Control.
In addition to the obligations of the Company under the Indenture with
respect to the Notes in the event of a "Change of Control," under the Credit
Agreement the Company is required to prepay amounts outstanding thereunder
upon the happening of a "Change of Control." The Company's obligations under
the Credit Agreement represent obligations senior in right of payment to the
Notes and, accordingly, upon an event of default under the Credit Agreement
resulting from a failure to make such payment, the lenders thereunder may
commence a payment blockage with respect to the Notes. See "Subordination."
Moreover, the Credit Agreement prohibits the repayment of the Notes prior to
maturity. Accordingly, the Company would either be required to obtain the
consent of the lenders under the Credit Agreement for the repayment of the
Notes upon a Change of Control or be in default thereunder. See "Description
of Credit Agreement."
The Company will comply with the applicable tender offer rules, including
Rule 14e-1 under the Exchange Act, and any other applicable securities laws or
regulations in connection with a Change of Control Offer (section 1016).
Limitation on Preferred Stock of Subsidiaries. The Company will not permit
(i) any Subsidiary to issue any Preferred Stock (other than to the Company or
any Wholly Owned Subsidiary) or (ii) any Person (other than the Company or a
Wholly Owned Subsidiary) to acquire any Preferred Stock of any Subsidiary from
the Company or any Wholly Owned Subsidiary except upon the sale of all the
outstanding Capital Stock of such Subsidiary in accordance with the terms of
the Indenture; provided that the foregoing provisions shall not apply to
Permitted Subsidiary Preferred Stock (Section 1017).
Limitation on Dividends and Other Payment Restrictions Affecting
Subsidiaries. The Company will not, and will not permit any of its
Subsidiaries to, directly or indirectly, create or otherwise cause or suffer
to exist or become effective any consensual encumbrance or restriction on the
ability of any Subsidiary to (a) pay dividends or make any other distribution
on its Capital Stock to the Company or any other Subsidiary, (b) pay any
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Indebtedness owed to the Company or a Subsidiary, (c) make any Investment in
the Company or (d) transfer any of its properties or assets to the Company or
any Subsidiary, except for (i) any encumbrance or restriction pursuant to an
agreement in effect on the date of the Indenture; (ii) any encumbrance or
restriction, with respect to a Subsidiary that is not a Subsidiary of the
Company on the date of the Indenture, in existence at the time such Person
becomes a Subsidiary of the Company and not incurred in connection with, or in
contemplation of, such Person becoming a Subsidiary; (iii) customary
provisions restricting subletting or assignment of any lease or assignment of
any other contract to which the Company or any Subsidiary is a party or to
which any of their respective properties or assets are subject; (iv) any
encumbrance or restriction contained in contracts for sales of assets
permitted by "Limitation on Sale of Assets" with respect to the assets to be
sold pursuant to such contract; (v) any encumbrance or restriction contained
in security agreements securing Indebtedness of a Subsidiary to the extent the
security agreement is permitted under "Limitation on Liens with Respect to
Pari Passu or Subordinated Indebtedness" and such restrictions restrict only
the transfer of property subject to such agreements; (vi) customary provisions
restricting dispositions of real property interests set forth in any
reciprocal easement agreements of the Company or any Subsidiary; (vii) any
encumbrance or restriction contained in any foreign Indebtedness incurred by
any Non-U.S. Subsidiary; (viii) any encumbrance or restriction required by any
regulatory authority having jurisdiction over the Company or any Subsidiary or
any of their businesses; and (ix) any encumbrance or restriction existing
under any agreement that extends, renews, refinances or replaces the
agreements containing the encumbrances or restrictions in the foregoing
clauses (i) and (ii), provided that the terms and conditions of any such
encumbrances or restrictions are not materially less favorable to the holders
of the Notes than those under or pursuant to the agreement evidencing the
Indebtedness so extended, renewed, refinanced or replaced (Section 1018).
Provision of Financial Statements. Whether or not the Company is subject to
Section 13(a) or 15(d) of the Exchange Act, the Company will, to the extent
permitted under the Exchange Act, file with the Commission the annual reports,
quarterly reports and other documents which the Company would have been
required to file with the Commission pursuant to such Section 13(a) or 15(d)
if the Company were so subject, such documents to be filed with the Commission
on or prior to the respective dates (the "Required Filing Dates") by which the
Company would have been required so to file such documents if the Company were
so subject. The Company will also in any event (x) within 15 days of each
Required Filing Date (i) transmit by mail to all holders of Notes, as their
names and addresses appear in the security register, without cost to such
holders of Notes, and (ii) file with the Trustee, copies of the annual
reports, quarterly reports and other documents which the Company has filed
with the Commission or would have been required to file with the Commission
pursuant to Section 13(a) or 15(d) of the Exchange Act if the Company were
subject to such Sections and (y) if filing such documents by the Company with
the Commission is not permitted under the Exchange Act, promptly upon written
request and payment of the reasonable cost of duplication and delivery, supply
copies of such documents to any prospective holder of Notes at the Company's
cost. If any Guarantor's financial statements would be required to be included
in the financial statements filed or delivered pursuant hereto if the Company
were subject to Section 13(a) or 15(d) of the Exchange Act, the Company shall
include such Guarantor's financial statements in any filing or delivery
pursuant hereto. The Company will be deemed to have satisfied the requirements
set forth above if (a) Holding prepares, files, mails and supplies reports and
other documents prepared on a Consolidated basis of the types required above,
in each case within the applicable time periods, (b) the Company is not
required to file such reports and other documents separately under the
applicable rules and regulations of the Commission (after giving effect to any
exemptive relief) because of the filings by Holding, (c) Holding does not have
outstanding Indebtedness (other than guarantees by Holding of Indebtedness of
the Company) in excess of $10,000,000 and (d) Holding does not own assets
(other than cash and Temporary Cash Investments) in excess of $10,000,000
other than the Capital Stock of the Company (Section 1019).
Additional Covenants. The Indenture also contains covenants with respect to
the following matters: (i) payment of principal, premium and interest; (ii)
maintenance of an office or agency in the City of New York; (iii) arrangements
regarding the handling of money held in trust; (iv) maintenance of corporate
existence; (v) payment of taxes and other claims; (vi) maintenance of
properties; and (vii) maintenance of insurance.
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CONSOLIDATION, MERGER, SALE OF ASSETS
From and after the closing date of the Acquisition, the Company shall not,
in a single transaction or a series of related transactions, consolidate with
or merge with or into any other Person or sell, assign, convey, transfer,
lease or otherwise dispose of all or substantially all of its properties and
assets to any Person or group of affiliated Persons, or permit any of its
Subsidiaries to enter into any such transaction or transactions if such
transaction or transactions, in the aggregate, would result in a sale,
assignment, conveyance, transfer, lease or disposition of all or substantially
all of the properties and assets of the Company and its Subsidiaries on a
Consolidated basis to any other Person or group of affiliated Persons, unless:
(i) at the time of and immediately after giving effect to such transaction,
either (a) the Company shall be the continuing corporation or (b) the Person
(if other than the Company) formed by such consolidation or into which the
Company is merged or the Person which acquires by sale, assignment,
conveyance, transfer, lease or disposition all or substantially all of the
properties and assets of the Company and its Subsidiaries on a Consolidated
basis (the "Surviving Entity") shall be a corporation or partnership duly
organized and validly existing under the laws of the United States of America,
any state thereof or the District of Columbia, and such Person assumes by a
supplemental indenture in a form reasonably satisfactory to the Trustee, all
the obligations of the Company under the Notes and the Indenture, and the
Indenture shall remain in full force and effect; (ii) immediately before and
after giving effect to such transaction on a pro forma basis, no Default or
Event of Default shall have occurred and be continuing; (iii) immediately
after giving effect to such transaction on a pro forma basis, the Consolidated
Net Worth of the Company (or the Surviving Entity if the Company is not the
continuing obligor under the Indenture) is equal to or greater than the
Consolidated Net Worth of the Company immediately prior to such transaction;
(iv) immediately before and immediately after giving effect to such
transaction on a pro forma basis (on the assumption that the transaction
occurred on the first day of the four-quarter period immediately prior to the
consummation of such transaction with the appropriate adjustments with respect
to the transaction being included in such pro forma calculation), the Company
(or the Surviving Entity if the Company is not the continuing obligor under
the Indenture) could incur $1.00 of additional Indebtedness under the
provisions of "Certain Covenants--Limitation on Indebtedness" (other than
Permitted Indebtedness); (v) each Guarantor, if any, unless it is the other
party to the transactions described above, shall have by supplemental
indenture confirmed that its Guarantee shall apply to such Person's
obligations under the Indenture and the Notes; (vi) if any of the property or
assets of the Company or any of its Subsidiaries would thereupon become
subject to any Lien, the provisions of "Certain Covenants--Limitation on Liens
with Respect to Pari Passu or Subordinated Indebtedness" are complied with;
and (vii) the Company or the Surviving Entity shall have delivered, or caused
to be delivered, to the Trustee, in form and substance reasonably satisfactory
to the Trustee, an officers' certificate and an opinion of counsel, each to
the effect that such consolidation, merger, transfer, sale, assignment, lease
or other transaction and the supplemental indenture in respect thereto comply
with the provisions described herein and that all conditions precedent herein
provided for relating to such transaction have been complied with (Section
801).
Each Guarantor shall not, and the Company will not permit a Guarantor to, in
a single transaction or series of related transactions, merge or consolidate
with or into any other corporation (other than the Company or any other
Guarantor) or other entity, or sell, assign, convey, transfer, lease or
otherwise dispose of all or substantially all of its properties and assets on
a Consolidated basis to any entity (other than the Company or any other
Guarantor) unless: (i) either (1) such Guarantor shall be the continuing
corporation or (2) the entity (if other than such Guarantor) formed by such
consolidation or into which such Guarantor is merged or the entity which
acquires by sale, assignment, conveyance, transfer, lease or disposition all
or substantially all of the properties and assets of such Guarantor shall be a
corporation duly organized and validly existing under the laws of the United
States, any state thereof or the District of Columbia and (unless such entity
is the Company) shall expressly assume by a supplemental indenture, executed
and delivered to the Trustee, in a form reasonably satisfactory to the
Trustee, all the obligations of such Guarantor under its Guarantee and the
Indenture; (ii) immediately before and after giving effect to such transaction
on a pro forma basis, no Default or Event of Default shall have occurred and
be continuing; and (iii) such Guarantor shall have delivered, or caused to be
delivered, to the Trustee, in form and substance reasonably satisfactory to
the Trustee, an officers' certificate and an opinion of counsel, each to the
effect that such consolidation, merger, sale, assignment, conveyance,
transfer, lease or disposition and such supplemental indenture comply with the
Indenture, and thereafter all obligations of
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the predecessor shall terminate. In the event Holding shall merge or
consolidate with or into the Company, the provisions of the first paragraph of
this Section are required to be satisfied (Section 801).
Notwithstanding the foregoing, any Guarantee by a Subsidiary of the Notes
shall provide by its terms that it shall be automatically and unconditionally
released in certain circumstances as described in paragraph (b) under "Certain
Covenants--Limitation on Issuances of Guarantees of Indebtedness."
None of the foregoing provisions shall be deemed to prohibit or restrict any
Subsidiary from merging or consolidating with or into, or selling all or
substantially all of its assets to, any other Subsidiary or the Company.
In the event of any transaction (other than a lease) described in and
complying with the conditions listed in the immediately preceding paragraphs
in which the Company or any Guarantor is not the continuing corporation, the
successor Person formed or remaining shall succeed to, and be substituted for,
and may exercise every right and power of, the Company or such Guarantor, as
the case may be, and the Company or such Guarantor, as the case may be, would
be discharged from all obligations and covenants under the Indenture and the
Notes.
EVENTS OF DEFAULT
An Event of Default will occur under the Indenture if:
(i) there shall be a default in the payment of any interest on any Note
when it becomes due and payable, and such default shall continue for a
period of 30 days;
(ii) there shall be a default in the payment of the principal of (or
premium, if any, on) any Note when and as the same shall become due as
payable at maturity, upon acceleration, optional or mandatory redemption,
required repurchase or otherwise;
(iii) (a) there shall be a default in the performance, or a breach, of
any covenant or agreement of the Company or any Guarantor under the
Indenture (other than a default in the performance, or a breach, of a
covenant or agreement which is specifically dealt with in clause (i) or
(ii) or in clauses (b), (c) and (d) of this clause (iii)) and such default
or breach shall continue for a period of 30 days after written notice has
been given, by certified mail, (x) to the Company by the Trustee or (y) to
the Company and the Trustee by the holders of at least 25% in aggregate
principal amount of the outstanding Notes; (b) there shall be a default in
the performance or a breach of the provisions described in "Consolidation,
Merger, Sale of Assets"; (c) the Company shall have failed to make or
consummate an Offer in accordance with the provisions of "Certain
Covenants--Limitation on Sale of Assets"; or (d) the Company shall have
failed to make or consummate a Change of Control Offer in accordance with
the provisions of "Certain Covenants--Purchase of Notes Upon a Change of
Control";
(iv) one or more defaults shall have occurred under any agreements,
indentures or instruments under which the Company, any Guarantor or any
Subsidiary then has outstanding Indebtedness in excess of $7,500,000 in the
aggregate and, if not already matured at its final maturity in accordance
with its terms, such Indebtedness shall have been accelerated;
(v) any Guarantee issued by a Material Subsidiary shall for any reason
cease to be, or be asserted in writing by such Subsidiary or the Company
not to be, in full force and effect, enforceable in accordance with its
terms, for a period of 10 days, except to the extent contemplated by the
Indenture and any such Guarantee;
(vi) one or more judgments, orders or decrees for the payment of money in
excess of $7,500,000, either individually or in the aggregate (net of
amounts paid within 20 days of any such judgment, order or decree under any
insurance, indemnity, bond, surety or similar instrument), shall be entered
against the Company, any Guarantor or any Subsidiary or any of their
respective properties and shall not be discharged and either (a) any
creditor shall have commenced an enforcement proceeding upon such judgment,
order or decree or (b) there shall have been a period of 60 consecutive
days during which a stay of enforcement of such judgment or order, by
reason of an appeal or otherwise, shall not be in effect;
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(vii) there shall have been the entry by a court of competent
jurisdiction of (a) a decree or order for relief in respect of the Company,
any Guarantor or any Material Subsidiary in an involuntary case or
proceeding under any applicable Bankruptcy Law or (b) a decree or order
adjudging the Company, any Guarantor or any Material Subsidiary bankrupt or
insolvent, or seeking reorganization, arrangement, adjustment or
composition of or in respect of the Company, any Guarantor or any Material
Subsidiary under any applicable Federal or state law, or appointing a
custodian, receiver, liquidator, assignee, trustee, sequestrator (or other
similar official) of the Company, any Guarantor or any Material Subsidiary
or of any substantial part of its property, or ordering the winding up or
liquidation of its affairs, and any such decree or order for relief shall
continue to be in effect, or any such other decree or order shall be
unstayed and in effect, for a period of 60 consecutive days; or
(viii) (a) the Company, any Guarantor or any Material Subsidiary
commences a voluntary case or proceeding under any applicable Bankruptcy
Law or any other case or proceeding to be adjudicated bankrupt or
insolvent, (b) the Company, any Guarantor or any Material Subsidiary
consents to the entry of a decree or order for relief in respect of such
Person in an involuntary case or proceeding under any applicable Bankruptcy
Law or to the commencement of any bankruptcy or insolvency case or
proceeding against it, (c) the Company, any Guarantor or any Material
Subsidiary files a petition or answer or consent seeking reorganization or
relief under any applicable federal or state law, (d) the Company, any
Guarantor or any Material Subsidiary (x) consents to the filing of such
petition or the appointment of, or taking possession by, a custodian,
receiver, liquidator, assignee, trustee, sequestrator or similar official
of the Company, any Guarantor or such Material Subsidiary or of any
substantial part of its property, (y) makes a general assignment for the
benefit of creditors or (z) admits in writing its inability to pay its
debts generally as they become due or (e) the Company, any Guarantor or any
Material Subsidiary takes any corporate action in furtherance of any such
actions in this paragraph (viii).
If an Event of Default (other than as specified in clauses (vii) and (viii)
(a), (b), (c) or (d)(x) of the prior paragraph that occurs with respect to the
Company) shall occur and be continuing, the Trustee or the holders of not less
than 25% in aggregate principal amount of the Notes then outstanding may
declare the Notes due and payable immediately at their principal amount
together with accrued and unpaid interest, if any, to the date the Notes
become due and payable and thereupon the Trustee may, at its discretion,
proceed to protect and enforce the rights of the holders of Notes by
appropriate judicial proceeding. If an Event of Default specified in clause
(vii) or (viii) (a), (b), (c) or (d)(x) of the prior paragraph occurs with
respect to the Company and is continuing, then all the Notes shall ipso facto
become and be immediately due and payable, in an amount equal to the principal
amount of the Notes, together with accrued and unpaid interest, if any, to the
date the Notes become due and payable, without any declaration or other act on
the part of the Trustee or any holder.
After a declaration of acceleration has been made, but before a judgment or
decree for payment of the money due has been obtained by the Trustee, the
holders of greater than 50% in aggregate principal amount of Notes
outstanding, by written notice to the Company and the Trustee, may annul such
declaration and its consequences if (a) the Company has paid or deposited with
the Trustee a sum sufficient to pay (i) all sums paid or advanced by the
Trustee under the Indenture and the reasonable compensation, expenses,
disbursements and advances of the Trustee, its agents and counsel, (ii) all
overdue interest and principal, if any, on all Notes, and (iii) to the extent
that payment of such interest is lawful, interest upon overdue interest at the
rate borne by the Notes; and (b) all Events of Default, other than the non-
payment of principal of the Notes which have become due solely by such
declaration of acceleration, have been cured or waived (Section 502).
The holders of greater than 50% in aggregate principal amount of the Notes
outstanding may on behalf of the holders of all the Notes waive any past
default under the Indenture and its consequences, except a default in the
payment of the principal of, premium, if any, or interest on any Note, or in
respect of a covenant or provision which under the Indenture cannot be
modified or amended without the consent of the holder of each Note outstanding
and affected by such modification or amendment (Section 513).
The Company is also required to notify the Trustee within ten business days
of the occurrence of any Default.
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The Trust Indenture Act contains limitations on the rights of the Trustee,
should it become a creditor of the Company or any Guarantor, to obtain payment
of claims in certain cases or to realize on certain property received by it in
respect of any such claims, as security or otherwise. The Trustee is permitted
to engage in other transactions, provided that if it acquires any conflicting
interest it must eliminate such conflict upon the occurrence of an Event of
Default or else resign.
DEFEASANCE OR COVENANT DEFEASANCE OF INDENTURE
The Company may, at its option and at any time, elect to have the
obligations of the Company and any Guarantor discharged with respect to the
outstanding Notes ("defeasance"). Such defeasance means that the Company and
any Guarantor shall be deemed to have paid and discharged the entire
indebtedness represented by the outstanding Notes, except for (i) the rights
of holders of outstanding Notes to receive payments, solely from the trust
fund described in the immediately succeeding paragraph, in respect of the
principal of, premium, if any, and interest on such Notes when such payments
are due, (ii) the Company's obligations with respect to the Notes concerning
issuing temporary Notes, registration of Notes, mutilated, destroyed, lost or
stolen Notes, and the maintenance of an office or agency for payment and money
for security payments held in trust, (iii) the rights, powers, trusts, duties,
indemnities and immunities of the Trustee, and (iv) the defeasance provisions
of the Indenture. In addition, the Company may, at its option and at any time,
elect to have the obligations of the Company and any Guarantor released with
respect to certain covenants that are described in the Indenture ("covenant
defeasance") and any omission to comply with such obligations shall not
constitute a Default or an Event of Default with respect to the Notes. In the
event covenant defeasance occurs, certain events (not including non-payment,
enforceability of any Guarantee, bankruptcy and insolvency events) described
under "Events of Default" will no longer constitute an Event of Default with
respect to the Notes (Sections 401, 402 and 403).
In order to exercise either defeasance or covenant defeasance, (i) the
Company must irrevocably deposit with the Trustee, in trust, for the benefit
of the holders of the Notes, cash in United States dollars, U.S. Government
Obligations (as defined in the Indenture), or a combination thereof, in such
amounts as will be sufficient, in the opinion of a nationally recognized firm
of independent public accountants, to pay and discharge the principal of,
premium, if any, and interest on the outstanding Notes on the Stated Maturity
of such principal or installment of interest (except lost, stolen or destroyed
Notes which have been replaced or repaid); (ii) in the case of defeasance, the
Company shall have delivered to the Trustee an opinion of independent counsel
in the United States stating that (A) the Company has received from, or there
has been published by, the Internal Revenue Service a ruling or (B) since the
date of the Indenture, there has been a change in the applicable federal
income tax law, in either case to the effect that, and based thereon such
opinion of counsel in the United States shall confirm that, the holders of the
outstanding Notes will not recognize income, gain or loss for federal income
tax purposes as a result of such defeasance and will be subject to federal
income tax on the same amounts, in the same manner and at the same times as
would have been the case if such defeasance had not occurred; (iii) in the
case of covenant defeasance, the Company shall have delivered to the Trustee
an opinion of independent counsel in the United States to the effect that the
holders of the outstanding Notes will not recognize income, gain or loss for
federal income tax purposes as a result of such covenant defeasance and will
be subject to federal income tax on the same amounts, in the same manner and
at the same times as would have been the case if such covenant defeasance had
not occurred; (iv) no Default or Event of Default shall have occurred and be
continuing on the date of such deposit or insofar as clauses (vii) and (viii)
(a), (b), (c) or (d)(x) under the first paragraph under "Events of Default"
are concerned, at any time during the period ending on the 91st day after the
date of deposit; (v) such defeasance or covenant defeasance shall not result
in a material breach or violation of, or constitute a Default under, the
Indenture or any other material agreement or instrument to which either the
Company or any Guarantor is a party or by which it is bound; (vi) in the case
of defeasance or covenant defeasance, the Company shall have delivered to the
Trustee an opinion of independent counsel in the United States to the effect
that (A) the trust funds will not be subject to any rights of holders of
Senior Indebtedness under the subordination provisions of the Indenture and
(B) after the 91st day following the deposit or after the date such opinion is
delivered, the trust funds will not be subject to the effect of any applicable
bankruptcy, insolvency, reorganization or similar laws affecting creditors'
rights generally; (vii) the Company shall have delivered to the Trustee an
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officers' certificate stating that the deposit was not made by the Company
with the intent of preferring the holders of the Notes or of any Guarantee
over the other creditors of either the Company or any Guarantor with the
intent of hindering, delaying or defrauding creditors of either the Company or
any Guarantor; and (viii) the Company shall have delivered to the Trustee an
officers' certificate and an opinion of independent counsel, each to the
effect that all conditions precedent provided for relating to either the
defeasance or the covenant defeasance, as the case may be, have been complied
with (Section 404).
SATISFACTION AND DISCHARGE
The Indenture will cease to be of further effect (except as to surviving
rights of registration of transfer or exchange of the Notes, as expressly
provided for in the Indenture) as to all outstanding Notes when (i) either
(a) all the Notes theretofore authenticated and delivered (except lost, stolen
or destroyed Notes which have been replaced or paid) have been delivered to
the Trustee for cancellation or (b) all Notes not theretofore delivered to the
Trustee for cancellation (x) have become due and payable or (y) will become
due and payable at their Stated Maturity within one year or (z) are to be
called for redemption within one year under arrangements satisfactory to the
Trustee for the giving of notice of redemption by the Trustee in the name, and
at the expense of, the Company and any Guarantor and, in each case, either the
Company or any Guarantor has irrevocably deposited or caused to be deposited
with the Trustee funds in an amount sufficient to pay and discharge the entire
indebtedness on the Notes (except lost, stolen or destroyed Notes which have
been replaced or paid) not theretofore delivered to the Trustee for
cancellation, including principal, premium, if any, and interest at such
Stated Maturity or redemption date; (ii) either the Company or any Guarantor
or Guarantors or any combination thereof has paid all other sums payable under
the Indenture by the Company and any Guarantor; and (iii) the Company and any
Guarantor have delivered to the Trustee an officers' certificate and an
opinion of counsel each to the effect that all conditions precedent under the
Indenture relating to the satisfaction and discharge of the Indenture have
been complied with (Section 1301).
MODIFICATIONS AND AMENDMENTS
Modifications and amendments of the Indenture may be made by the Company,
any Guarantor, if any, and the Trustee with the consent of the holders of
greater than 50% in aggregate principal amount of the Notes then outstanding;
provided, however, that no such modification or amendment may, without the
consent of the holder of each outstanding Note affected thereby: (i) change
the Stated Maturity of the principal of, or any installment of interest on,
any Note or reduce the principal amount thereof or the rate of interest
thereon or any premium payable upon the redemption thereof, or change the coin
or currency in which the principal of any Note or any premium or the interest
thereon is payable, or impair the right to institute suit for the enforcement
of any such payment after the Stated Maturity thereof; (ii) amend, change or
modify the obligation of the Company to make and consummate a Change of
Control Offer in the event of a Change of Control in accordance with "Certain
Covenants--Purchase of Notes Upon a Change of Control," including amending,
changing or modifying any definitions with respect thereto; (iii) reduce the
percentage in principal amount of outstanding Notes, the consent of whose
holders is required for any such supplemental indenture, or the consent of
whose holders is required for any waiver; (iv) modify any of the provisions
relating to supplemental indentures requiring the consent of holders or
relating to the waiver of past defaults or relating to the waiver of certain
covenants, except to increase the percentage of outstanding Notes required for
such actions or to provide that certain other provisions of the Indenture
cannot be modified or waived without the consent of the holder of each Note
affected thereby; (v) except as otherwise permitted under "Consolidation,
Merger, Sale of Assets," consent to the assignment or transfer by either the
Company or any Guarantor of any of its rights and obligations under the
Indenture; or (vi) amend or modify any of the provisions of the Indenture
relating to the subordination of the Notes or any Guarantee in any manner
adverse to the holders of the Notes or any Guarantee (Section 902).
Notwithstanding the foregoing, without the consent of any holders of the
Notes, the Company, any Guarantor, if any, and the Trustee may modify or amend
the Indenture (a) to evidence the succession of another Person to the Company
or a Guarantor, and the assumption by any such successor of the covenants of
the Company or such Guarantor in the Indenture and in the Notes and in any
Guarantee in accordance with
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"Consolidation, Merger, Sale of Assets"; (b) to add to the covenants of the
Company or any Guarantor for the benefit of the holders of the Notes, or to
surrender any right or power conferred upon the Company or any Guarantor, as
applicable, in the Indenture, in the Notes or in any Guarantee; (c) to cure
any ambiguity, or to correct or supplement any provision in the Indenture, the
Notes or any Guarantee which may be defective or inconsistent with any other
provision in the Indenture, the Notes or any Guarantee; (d) to make any other
provisions with respect to matters or questions arising under the Indenture,
the Notes or any Guarantee; provided that, in each case, such provisions shall
not adversely affect the interests of the holders of the Notes; (e) to comply
with the requirements of the Commission in order to effect or maintain the
qualification of the Indenture under the Trust Indenture Act; (f) to add a
Guarantor under the Indenture; (g) to evidence and provide the acceptance of
the appointment of a successor Trustee under the Indenture; or (h) to
mortgage, pledge, hypothecate or grant a security interest in favor of the
Trustee for the benefit of the holder of the Notes as additional security for
the payment and performance of the Company's and Holding's obligations under
the Indenture, in any property, or assets, including any of which are required
to be mortgaged, pledged or hypothecated, or in which a security interest is
required to be granted to the Trustee pursuant to the Indenture or otherwise
(Section 901).
The holders of greater than 50% in aggregate principal amount of the Notes
outstanding may waive compliance with certain restrictive covenants and
provisions of the Indenture (Section 1021).
GUARANTEE
Holding has unconditionally guaranteed the due and punctual payment of
principal, premium, if any, and interest on the Notes on a senior subordinated
basis pursuant to the Holding Guarantee. The Notes may also be guaranteed by
one or more Subsidiaries from time to time under certain circumstances. See
"Certain Covenants--Limitation on Issuances of Guarantees of Indebtedness" and
"Restriction on Transfer of Assets to Subsidiaries" herein. Each Guarantee of
a Guarantor will be an unsecured senior subordinated obligation of such
Guarantor, ranking pari passu with, or senior in right of payment to, all
other existing and future Indebtedness of such Guarantor that is expressly
subordinated to Senior Guarantor Indebtedness. The Indebtedness evidenced by
the Guarantees will be subordinated to Senior Guarantor Indebtedness to the
same extent as the Notes are subordinated to Senior Indebtedness and holders
of certain Designated Senior Guarantor Indebtedness will be able to initiate
payment blockage periods, upon terms substantially comparable to the rights to
initiate payment blockage periods held by holders of Designated Senior
Indebtedness. The Holding Guarantee ranks subordinate to the guarantee issued
by Holding in respect of the Credit Agreement.
Each Guarantee, if any, will provide that upon any voluntary or involuntary
liquidation or dissolution of any such Guarantor or any bankruptcy,
reorganization, insolvency, receivership or similar proceeding relating to any
such Guarantor or its respective property, all Senior Indebtedness guaranteed
by any such Guarantor must be paid in full or provision made for such payment,
before any payment or distribution is made upon principal of, or premium, if
any, or interest on, the Notes. By reason of such subordination, in the event
of liquidation or insolvency, creditors of any such Guarantor, as the case may
be, who are holders of guarantees of Senior Indebtedness by any such
Guarantor, as the case may be, may recover more ratably than the holders of
the Notes.
NO PERSONAL LIABILITY OF STOCKHOLDER, OFFICERS, DIRECTORS
A director, officer, employee or stockholder, as such, of the Company,
Holding or any other obligor on the Notes shall not have any liability for any
obligations of the Company, Holding or any other obligor, as the case may be,
under the Notes, the Indenture or any Guarantee or for any claim based on, in
respect of or by reason of such obligations or their creation.
THE TRUSTEE
The First Trust National Association is the Trustee under the Indenture.
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The Indenture provides that, except during the continuance of a Default or
an Event of Default, the Trustee need perform only those duties as are
specifically set forth in the Indenture. If a Default or an Event of Default
has occurred and is continuing, the Trustee shall exercise the rights and
powers vested in it by the Indenture and use the same degree of care and skill
in its exercise thereof as a prudent person would exercise or use under the
circumstances in the conduct of his own affairs.
GOVERNING LAW
The Indenture and the Notes are governed by, and construed in accordance
with, the law of the State of New York, without giving effect to the conflict
of laws principles thereof.
CERTAIN DEFINITIONS
"Acquired Indebtedness" means Indebtedness of a Person (i) existing at the
time such Person becomes a Subsidiary or (ii) assumed in connection with the
acquisition of assets from such Person, in each case, other than Indebtedness
incurred in connection with, or in contemplation of, such Person becoming a
Subsidiary or such acquisition. Acquired Indebtedness shall be deemed to be
incurred on the date of the related acquisition of assets from any Person or
the date the acquired Person becomes a Subsidiary.
"Acquisition" means the acquisition of substantially all of the assets of
Sporting Goods Properties, Inc. (formerly named Remington Arms Company, Inc.)
("Sporting Goods"), a Delaware corporation, and of certain other assets of
E.I. du Pont de Nemours and Company, a Delaware corporation ("DuPont"), by
Remington pursuant to the Asset Purchase Agreement, dated as of November 24,
1993, among Sporting Goods, Remington and DuPont, as amended, modified, waived
or supplemented from time to time.
"Affiliate" means, with respect to any specified Person, (i) any other
Person directly or indirectly controlling or controlled by or under direct or
indirect common control with such specified Person or (ii) any other Person
that owns, directly or indirectly, 10% or more of such Person's Voting Stock
or any executive officer or director of either of such other Persons. For the
purposes of this definition, "control" when used with respect to any specified
Person means the power to direct the management and policies of such Person
directly or indirectly, whether through ownership of voting securities, by
contract or otherwise; and the terms "controlling" and "controlled" have
meanings correlative to the foregoing.
"Apparel Business" means the Company's business of manufacturing and/or
selling apparel designed for hunting, shooting, fishing and other sports, and
related products.
"Applicable Premium" means, with respect to any Note, the greater of (i)
1.0% of the then outstanding principal amount of such Note and (ii) (a) the
sum of the present values, discounted for all full semiannual periods at a
discount rate equal to one-half multiplied by the sum of (A) the Treasury Rate
plus (B) 75 basis points (provided, however, that the discount rate for the
period from the redemption date to the next interest payment date shall equal
the result of multiplying the Treasury Rate plus 75 basis points by the Day
Count Fraction), of (I) the remaining payments of interest on such Note and
(II) the payment of the principal amount that, but for such redemption, would
have been payable on such Note at Stated Maturity, minus (b) the then
outstanding principal amount of such Note, minus (c) accrued and unpaid
interest paid on the redemption date.
"Asset Sale" means any sale, issuance, conveyance, transfer, lease or other
disposition (including, without limitation, by way of merger, consolidation or
sale and leaseback transaction) (collectively, a "transfer"), directly or
indirectly, in one or a series of related transactions, of (i) any Capital
Stock of any Subsidiary; (ii) all or substantially all of the properties and
assets of any division or line of business of the Company or its Subsidiaries;
or (iii) any other properties or assets of the Company or any subsidiary,
other than in the ordinary course of business. For the purposes of this
definition, the term "Asset Sale" shall not include any transfer of (A)
properties and assets that is governed by the provisions described under the
first and second paragraph of "Consolidation, Merger, Sale of Assets"; (B)
properties and assets of the Company to any Wholly Owned
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Subsidiary of the Company, or of any Subsidiary to the Company or any other
Subsidiary in accordance with the terms of the Indenture; (C) (i) Capital
Stock of a Subsidiary pursuant to an agreement or other obligation with or to
a Person (other than the Company or a Subsidiary) from whom such Subsidiary
was acquired, or from whom such Subsidiary acquired its business and assets
(having been newly formed in connection with such acquisition), entered into
in connection with such acquisition; (ii) not more than five percent of the
outstanding Capital Stock of a Non-U.S. Subsidiary pursuant to an agreement or
arrangement with an officer, employee or member of the management of such Non-
U.S. Subsidiary that has been approved by the Company's Board of Directors; or
(iii) properties and assets by the Company to any Subsidiary in accordance
with clause (c) or (d) of the covenant described in "Certain Covenants --
Restriction on Transfer of Assets to Subsidiaries;" or (D) in addition to any
conveyance, transfer, lease or dispositions excluded from the definition of
"Asset Sale" by any of the foregoing clauses (A) through (C), properties or
assets, the net proceeds of which do not exceed $1,000,000 per transaction or
series of related transactions in any fiscal year.
"Average Life to Stated Maturity" means, as of the date of determination
with respect to any Indebtedness, the quotient obtained by dividing (i) the
sum of the products of (a) the number of years from the date of determination
to the date or dates of each successive scheduled principal payment of such
Indebtedness multiplied by (b) the amount of each such principal payment by
(ii) the sum of all such principal payments.
"Bankruptcy Law" means Title 11 of the United States Code, as amended, or
any similar United States Federal or state law relating to bankruptcy,
insolvency, receivership, winding-up, liquidation, reorganization or relief of
debtors or any amendment to, succession to or change in any such law.
"Board of Directors" means the board of directors of the Company or any duly
authorized committee of such board.
"C&D Fund IV" means The Clayton & Dubilier Private Equity Fund IV Limited
Partnership, a Connecticut limited partnership.
"CD&R" means Clayton, Dubilier & Rice, Inc., a Delaware corporation.
"Capital Lease Obligation" of any Person means any obligations of such
Person and its Consolidated Subsidiaries on a Consolidated basis under any
capital lease of real or personal property which, in accordance with GAAP, has
been recorded as a capitalized lease obligation.
"Capital Stock" of any Person means any and all shares, interests,
participations or other equivalents (however designated) of such Person's
capital stock, including any Preferred Stock.
"Cash Equivalents" means (A) any security, maturing not more than six months
after the date of acquisition, issued by the United States of America, or an
instrumentality or agency thereof and guaranteed fully as to principal,
premium, if any, and interest by the United States of America, (B) any
certificate of deposit, time deposit or bankers' acceptance, maturing not more
than six months after the day of acquisition, issued by any commercial banking
institution that is a member of the Federal Reserve System or a commercial
banking institution organized and located in a country recognized by the
United States of America, in each case having combined capital and surplus and
undivided profits of not less than $500,000,000 (or the equivalent thereof),
whose short-term debt (other than short-term debt of a lender under the Credit
Agreement) has a rating, at the time as of which any investment therein is
made, of "P-1" (or higher) according to Moody's Investors Service, Inc. or any
successor rating agency ("Moody's"), or "A-1" (or higher) according to
Standard and Poor's Corporation or any successor rating agency ("S&P"), (C)
commercial paper maturing not more than three months after the date of
acquisition, issued by a corporation (other than an Affiliate or Subsidiary of
the Company) organized and existing under the laws of the United States of
America with a rating, at the time as of which any investment therein is made,
of "P-1" (or higher) according to Moody's or "A-1" (or higher) according to
S&P, or (D) any money market deposit accounts issued or offered by a domestic
commercial bank having capital and surplus in excess of $500,000,000 (or the
equivalent thereof).
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"Change of Control" means an event as a result of which: (i) any "person" or
"group" (as such terms are used in Sections 13(d) and 14(d) of the Exchange
Act), other than C&D Fund IV, CD&R and their respective Affiliates, is or
becomes the "beneficial owner" (as defined in Rule 13d-3 under the Exchange
Act), directly or indirectly, of more than (A) 35% of the total outstanding
Voting Stock of the Company or Holding, and (B) the total outstanding Voting
Stock of the Company or Holding beneficially owned by C&D Fund IV, CD&R and
their respective Affiliates; (ii) during any period of two consecutive years,
individuals who at the beginning of such period constituted the Board of
Directors of the Company or Holding (together with any new directors whose
election to such Board or whose nomination for election by the shareholders of
the Company or Holding, as the case may be, was approved by a vote of 66 2/3%
of the directors then still in office who were either directors at the
beginning of such period or whose election or nomination for election was
previously so approved) cease for any reason to constitute a majority of such
Board of Directors then in office; (iii) the Company or Holding consolidates
with or merges with or into any Person or conveys, transfers or leases all or
substantially all of its assets to any Person, or any corporation consolidates
with or merges into or with the Company or Holding, in any such event pursuant
to a transaction in which the outstanding Voting Stock of the Company or
Holding, as the case may be, is changed into or exchanged for cash, securities
or other property, other than any such transaction where the outstanding
Voting Stock of the Company or Holding, as the case may be, is not changed or
exchanged at all (except to the extent necessary to reflect a change in the
jurisdiction of incorporation of the Company or Holding) or where (A) the
outstanding Voting Stock of the Company or Holding, as the case may be, is
changed into or exchanged for (x) Voting Stock of the surviving corporation
which is not Redeemable Capital Stock or (y) cash, securities and other
property (other than Capital Stock of the surviving corporation) in an amount
which could be paid by the Company as a Restricted Payment as described under
"Certain Covenants--Limitation on Restricted Payments" (and such amount shall
be treated as a Restricted Payment subject to the provisions in the Indenture
described under "Certain Covenants--Limitation on Restricted Payments") and
(B) no "person" or "group" other than C&D Fund IV, CD&R and their respective
Affiliates own immediately after such transaction, directly or indirectly,
more than the greater of (1) 35% of the total outstanding Voting Stock of the
surviving corporation and (2) the percentage of the outstanding Voting Stock
of the surviving corporation owned, directly or indirectly, by C&D Fund IV,
CD&R and their respective Affiliates immediately after such transaction; or
(iv) the Company or Holding is liquidated or dissolved or adopts a plan of
liquidation or dissolution other than in a transaction which complies with the
provisions described under "Consolidation, Merger, Sale of Assets."
"Code" means the Internal Revenue Code of 1986, as amended.
"Commission" means the Securities and Exchange Commission, as from time to
time constituted, created under the Exchange Act, or if at any time after the
execution of the Indenture such Commission is not existing and performing the
duties now assigned to it under the Trust Indenture Act, then the body
performing such duties at such time.
"Commodities Agreements" means one or more of the following agreements which
shall be entered into by one or more financial institutions: commodity future
contracts, forward contracts, options or other similar agreements or
arrangements designed to protect against fluctuations in the price of, or the
shortage of supply of, commodities from time to time.
"Company" or "Remington" means Remington Arms Company, Inc. (formerly named
RACI Acquisition Corporation), a Delaware corporation, until a successor
Person shall have become such pursuant to the applicable provisions of the
Indenture, and thereafter "Company" shall mean such successor Person.
"Consolidated Fixed Charge Coverage Ratio" of any Person means, for any
period, the ratio of (a) the sum of Consolidated Net Income, Consolidated
Interest Expense, Consolidated Income Tax Expense and Consolidated Non-Cash
Charges deducted in computing Consolidated Net Income (Loss), in each case for
such period, of such Person and its Consolidated Subsidiaries on a
Consolidated basis, all determined in accordance with GAAP to (b) the sum of
Consolidated Interest Expense of such Person for such period and cash
dividends paid on any Preferred Stock of such Person during such period;
provided that (i) in making such computation,
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the Consolidated Interest Expense attributable to interest on any Indebtedness
computed on a pro forma basis and (A) bearing a floating interest rate shall
be computed as if the rate in effect on the date of computation had been the
applicable rate for the entire period and (B) which was not outstanding during
the period for which the computation is being made but which bears, at the
option of the Company, a fixed or floating rate of interest, shall be computed
by applying, at the option of such Person, either the fixed or floating rate,
(ii) in making such computation, the Consolidated Interest Expense of such
Person attributable to interest on any Indebtedness under a revolving credit
facility computed on a pro forma basis shall be computed based upon the
average daily balance of such Indebtedness during the applicable period and
(iii) in making any calculation of the Consolidated Fixed Charge Coverage
Ratio for any period prior to the date of Closing of the Acquisition, the
Acquisition shall be deemed to have taken place on the first day of such
period.
"Consolidated Income Tax Expense" means for any period, as applied to any
Person, the provision for federal, state, local and foreign income taxes of
such Person and its Consolidated Subsidiaries for such period as determined in
accordance with GAAP.
"Consolidated Interest Expense" of any Person means, without duplication,
for any period, as applied to any Person, the sum of (a) the interest expense
of such Person and its Consolidated Subsidiaries for such period, on a
Consolidated basis, including, without limitation, (i) amortization of debt
discount, (ii) the net cost under interest rate contracts (including
amortization of discounts), (iii) the interest portion of any deferred payment
obligation and (iv) accrued interest, plus (b) the interest expense
attributable to Capital Lease Obligations paid, accrued and/or scheduled to be
paid or accrued by such Person during such period in each case as determined
in accordance with GAAP.
"Consolidated Net Income (Loss)" of any Person means, for any period, the
Consolidated net income (or loss) of such Person and its Consolidated
Subsidiaries for such period, on a Consolidated basis, as determined in
accordance with GAAP, adjusted, to the extent included in calculating such net
income (loss), by excluding, without duplication, (i) all extraordinary gains
and losses (less all fees and expenses relating thereto), (ii) the portion of
net income (or loss) of such Person and its Consolidated Subsidiaries
allocable to minority interests in unconsolidated Persons to the extent that
cash dividends or distributions have not actually been received by such Person
or one of its Consolidated Subsidiaries, (iii) net income (or loss) of any
Person combined with such Person or any of its Subsidiaries on a "pooling of
interests" basis attributable to any period prior to the date of combination,
(iv) any gain or loss, net of taxes, realized upon the termination of any
employee pension benefit plan, (v) net gains or losses (less all fees and
expenses relating thereto) net of taxes in respect of dispositions of assets
other than in the ordinary course of business, (vi) the net income of any U.S.
Subsidiary to the extent that the declaration of dividends or similar
distributions by that Subsidiary of that income is not at the time permitted,
directly or indirectly, by operation of the terms of its charter or any
agreement, instrument, judgment, decree, order, statute, rule or governmental
regulations applicable to that U.S. Subsidiary or its shareholders, and (vii)
in connection with any computation made under the covenant entitled "Certain
Covenants--Limitation on Restricted Payments," any non-cash charges resulting
from any write-up of assets of such Person or any of its Consolidated
Subsidiaries in connection with the Acquisition.
"Consolidated Net Worth" of any Person means the Consolidated stockholders'
equity (excluding Redeemable Capital Stock) of such Person and its
Consolidated Subsidiaries, on a Consolidated basis, as determined in
accordance with GAAP, without giving effect to charges resulting from the
write-up in book value of inventory resulting from, and the depreciation and
amortization of fixed assets and intangible assets pertaining to, adjustments
required or permitted by Accounting Principles Bulletin Opinion Nos. 16 and 17
in connection with the Acquisition.
"Consolidated Non-Cash Charges" of any Person means, for any period, the
aggregate depreciation, amortization and other non-cash charges of such Person
and its Consolidated Subsidiaries for such period, on a Consolidated basis, as
determined in accordance with GAAP (excluding any non-cash charge which
requires an accrual or reserve for cash charges for any future period, other
than accruals for future retiree medical obligations made pursuant to SFAS No.
106, as amended or modified), including any non-cash charges resulting from
any write-up of assets of such Person or any of its Consolidated Subsidiaries
in connection with the Acquisition.
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"Consolidation" means, with respect to any Person, the consolidation of the
accounts of such Person and each of its subsidiaries if and to the extent the
accounts of such Person and each of its subsidiaries would normally be
consolidated with those of such Person, all in accordance with GAAP. The term
"Consolidated" shall have a similar meaning.
"Credit Agreement" means the Credit Agreement, dated as of November 30,
1993, among the Company, The Chase Manhattan Bank, N.A., Chemical Bank and
Union Bank of Switzerland, as co-agents, Chemical Bank, as administrative
agent, and the lenders party thereto, as such agreement, in whole or in part,
may be amended, renewed, extended, substituted, refinanced, restructured,
replaced, supplemented or otherwise modified from time to time (including,
without limitation, any successive renewals, extensions, substitutions,
refinancings, restructurings, replacements, supplementations or other
modifications of the foregoing).
"Currency Hedging Arrangements" means one or more of the following
agreements which shall be entered into by one or more financial institutions:
foreign exchange contracts, currency swap agreements or other similar
agreements or arrangements designed to protect against fluctuations in
currency values from time to time.
"Day Count Fraction" means the number of days from the redemption date to
(but excluding) the next scheduled interest payment date divided by 360 (which
assumes a 360-day year composed of twelve 30-day months).
"Default" means any event which is, or after notice or passage of time or
both would be, an Event of Default.
"Designated Senior Guarantor Indebtedness" of any Subsidiary Guarantor means
(i) all Senior Guarantor Indebtedness which guarantees Indebtedness or other
monetary obligations under the Credit Agreement and (ii) any other Senior
Guarantor Indebtedness which at the time of determination, has an aggregate
principal amount outstanding, together with any commitments to lend additional
amounts, of at least $20,000,000, and is specifically designated (x) in the
instrument evidencing such Senior Guarantor Indebtedness or the agreement
under which such Senior Guarantor Indebtedness arises (as either may be
amended or modified from time to time) or (y) by notice to the Trustee, as, in
each case, "Designated Senior Guarantor Indebtedness" by the Subsidiary
Guarantor. "Designated Senior Guarantor Indebtedness" of Holding means any
guarantee by Holding of Designated Senior Indebtedness.
"Directors Qualifying Shares" means shares of Capital Stock of a Person held
by nominees, directors or trustees pursuant to the requirements of the law of
the jurisdiction in which such Person is organized.
"Disinterested Director" means, with respect to any transaction or series of
related transactions, a member of the Board of Directors who does not have any
material direct or indirect financial interest in or with respect to such
transaction or series of related transactions.
"Equity Registration Rights Agreement" means the Registration and
Participation Agreement, dated as of November 30, 1993, as amended and in
effect from time to time, among Holding and one or more of its stockholders,
providing among other things for certain registration rights in respect of
Holding Common Stock.
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"Exchange Notes" means the Notes issued pursuant to the Exchange Offer.
"Exchange Offer" means the exchange offer which may be effected pursuant to
the Registration Rights Agreement.
"Fair Market Value" means, with respect to any asset or property, the sale
value that would be obtained in an arm's length transaction between an
informed and willing seller and an informed and willing buyer.
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"Fishline Business" means the Company's business of manufacturing and/or
selling fishing lines, other fishing products and related products.
"GAAP" means generally accepted accounting principles in the United States,
consistently applied, which are in effect on the date of the Indenture.
"Guarantee" means the guarantee by any Guarantor of the Indenture
Obligations, including the Holding Guarantee.
"Guaranteed Debt" of any Person means, without duplication, all Indebtedness
of any other Person guaranteed directly or indirectly in any manner by such
Person, or in effect guaranteed directly or indirectly by such Person through
an agreement enforceable by or for the benefit of the holder of such
Indebtedness (i) to pay or purchase such Indebtedness or to advance or supply
funds for the payment or purchase of such Indebtedness, (ii) to purchase, sell
or lease (as lessee or lessor) property, or to purchase or sell services,
primarily for the purpose of enabling the debtor to make payment of such
Indebtedness or to assure the holder of such Indebtedness against loss, (iii)
to supply funds to, or in any other manner invest in, the debtor (including
any agreement to pay for property or services without requiring that such
property be received or such services be rendered), (iv) to maintain working
capital or equity capital of the debtor, or otherwise to maintain the net
worth, solvency or other financial condition of the debtor or (v) otherwise to
assure a creditor against loss; provided that the term "guarantee" shall not
include endorsements for collection or deposit, in either case in the ordinary
course of business.
"Guarantor" means Holding and any other guarantor of the Notes.
"Holding" means RACI Holding, Inc., a Delaware corporation, and its
successors and permitted assigns.
"Holding Common Stock" means the common stock, par value $0.01 per share, of
Holding.
"Holding Guarantee" means the guarantee by Holding of the Company's
Indenture Obligations pursuant to the guarantee included in the Indenture.
"Indebtedness" means, with respect to any Person, without duplication, (i)
all indebtedness of such Person for borrowed money or for the deferred
purchase price of property or services, excluding any trade payables and other
accrued current liabilities arising in the ordinary course of business, but
including, without limitation, all obligations, contingent or otherwise, of
such Person in connection with any letters of credit issued under letter of
credit facilities, acceptance facilities or other similar facilities, (ii) all
obligations of such Person evidenced by bonds, notes, debentures or other
similar instruments, (iii) all indebtedness created or arising under any
conditional sale or other title retention agreement with respect to property
acquired by such Person (even if the rights and remedies of the seller or
lender under such agreement in the event of default are limited to
repossession or sale of such property), but excluding trade payables and other
accrued current liabilities relating to the payment of the purchase price for
such property provided such payments are required to be made over a period of
less than one year, in each case arising in the ordinary course of business,
(iv) all obligations under Interest Rate Agreements of such Person, (v) all
Capital Lease Obligations of such Person, (vi) all Indebtedness referred to in
clauses (i) through (v) above of other Persons and all dividends of other
Persons, the payment of which is secured by (or for which the holder of such
Indebtedness has an existing right, contingent or otherwise, to be secured by)
any Lien, upon or with respect to property (including, without limitation,
accounts and contract rights) owned by such Person, even though such Person
has not assumed or become liable for the payment of such Indebtedness, (vii)
all Guaranteed Debt of such Person, (viii) all Redeemable Capital Stock valued
at its involuntary maximum fixed repurchase price plus accrued and unpaid
dividends, and (ix) any amendment, supplement, modification, deferral,
renewal, extension, refunding or refinancing of any liability of the types
referred to in clauses (i) through (viii) above. For purposes hereof, the
"maximum fixed repurchase price" of any Redeemable Capital Stock which does
not have a fixed repurchase price shall be calculated in accordance with the
terms of such Redeemable Capital Stock as if such Redeemable Capital Stock
were purchased on any
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date on which Indebtedness shall be required to be determined pursuant to the
Indenture, and if such price is based upon, or measured by, the fair market
value of such Redeemable Capital Stock, such fair market value to be
determined in good faith by the Board of Directors.
"Indemnification Agreement" means the Indemnification Agreement, dated as of
November 30, 1993, among Holding, the Company, CD&R, and C&D Fund IV, pursuant
to which among other things the Company and Holding agree to indemnify C&D
Fund IV, CD&R, their respective Affiliates and certain other Persons in
certain circumstances.
"Indenture Obligations" means the obligations of the Company and any other
obligor under the Indenture or under the Notes, including any Guarantor, to
pay principal of, and premium, if any, and interest on, the Notes when due and
payable, and all other amounts due or to become due under or in connection
with the Indenture, the Notes and the performance of all other obligations to
the Trustee and the holders under the Indenture and the Notes, according to
the terms thereof.
"Indenture Payment Default" means any default in the payment of any amounts
owing under the Notes as they become due and payable on any interest payment
date, at maturity, upon acceleration, optional or mandatory redemption,
required repurchase or otherwise.
"Interest Rate Agreements" means one or more of the following agreements
which shall be entered into by one or more financial institutions: interest
rate protection agreements (including, without limitation, interest rate
swaps, caps, floors, collars and similar agreements) and/or other types of
interest rate hedging agreements from time to time.
"Investments" means, with respect to any Person, directly or indirectly, any
advance, loan (including guarantees of Indebtedness), or other extension of
credit or capital contribution to (by means of any transfer of cash or other
property to others or any payment for property or services for the account or
use of others), or any purchase, acquisition or ownership by such Person of
any Capital Stock, bonds, notes, debentures or other securities issued by any
other Person. "Investments" shall exclude extensions of trade credit in the
ordinary course of business. For purposes of the definition of "Unrestricted
Subsidiary" and the covenant described under "Certain Covenants--Limitation on
Restricted Payments" only, (i) "Investment" shall include the portion
(proportionate to the Company's equity interest in such Subsidiary) of the
fair market value of the net assets of any Subsidiary at the time that such
Subsidiary is designated an Unrestricted Subsidiary and shall exclude the
portion (proportionate to the Company's equity interest in such Subsidiary) of
the fair market value of the net assets of any Unrestricted Subsidiary at the
time that such Unrestricted Subsidiary is designated a Subsidiary of the
Company; and (ii) any property transferred to or from an Unrestricted
Subsidiary shall be valued at its fair market value at the time of such
transfer, in each case as determined by the Board of Directors in good faith.
"Lien" means any mortgage, charge, pledge, lien (statutory or otherwise),
security interest, hypothecation or other encumbrance upon or with respect to
any property of any kind, real or personal, movable or immovable, now owned or
hereafter acquired.
"Majority Owned Subsidiary" means any Person at least 80% of the equity
ownership or the Voting Stock of which is at the time owned, directly or
indirectly, by the Company or by one or more other Majority Owned
Subsidiaries, or by the Company and one or more other Majority Owned
Subsidiaries; provided that an Unrestricted Subsidiary shall not be deemed a
Majority Owned Subsidiary for purposes of the Indenture.
"Management Investors" means the officers, directors, employees and other
members of the management of the Company or a Subsidiary, or family members or
relatives thereof or trusts for the benefit of any of the foregoing, who at
any particular date shall beneficially own or have the right to acquire,
directly or indirectly, Holding Common Stock.
"Management Stock" means Holding Common Stock, or options, warrants or
rights to purchase Holding Common Stock, held by any of the Management
Investors.
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"Material Subsidiary" means any Subsidiary of the Company that would be a
"significant subsidiary" of the Company as defined in Rule 1-02 of Regulation
S-X under the Securities Act and the Exchange Act.
"Maturity" when used with respect to any Note means the date on which the
principal of such Note becomes due and payable as therein provided or as
provided in the Indenture, whether at Stated Maturity, the "Offer Date" or the
redemption date and whether by declaration of acceleration, Offer in respect
of Excess Proceeds, Change of Control, call for redemption or otherwise.
"Net Cash Proceeds" means (a) with respect to any Asset Sale by any Person,
the proceeds thereof (without duplication in respect of any other Asset Sale)
in the form of cash or Cash Equivalents, including payments in respect of
deferred payment obligations when received in the form of, or stock or other
assets when disposed for, cash or Cash Equivalents (except to the extent that
such obligations are financed or sold with recourse to the Company or any
Subsidiary) net of (i) brokerage commissions and other reasonable fees and
expenses (including fees and expenses of counsel and investment bankers)
related to such Asset Sale, (ii) provisions for all taxes payable as a result
of such Asset Sale, (iii) payments made, and installment payments required to
be made, to retire indebtedness where payment of such indebtedness is secured
by the assets or properties the subject of such Asset Sale, including payments
made in respect of principal, interest and prepayment premiums and penalties,
(iv) amounts required to be paid to any Person (other than the Company or any
Subsidiary) owning a beneficial interest in the assets subject to the Asset
Sale and (v) appropriate amounts to be provided by the Company or any
Subsidiary, as the case may be, as a reserve, in accordance with generally
accepted accounting principles in effect on the date of determination, against
any liabilities associated with such Asset Sale and retained by the Company or
any Subsidiary, as the case may be, after such Asset Sale, including, without
limitation, pension and other post-employment benefit liabilities, liabilities
related to environmental matters and liabilities under any indemnification
obligations associated with such Asset Sale, all as reflected in an officers'
certificate delivered to the Trustee, and (b) with respect to any issuance or
sale of Capital Stock or options, warrants or rights to purchase Capital
Stock, or debt securities or Capital Stock that have been converted into or
exchanged for Capital Stock, as referred to under "Certain Covenants--
Limitation on Restricted Payments," the proceeds of such issuance or sale in
the form of cash or Cash Equivalents, including payments in respect of
deferred payment obligations when received in the form of, or stock or other
assets when disposed for, cash or Cash Equivalents (except to the extent that
such obligations are financed or sold with recourse to the Company or any
Subsidiary), net of attorneys' fees, accountants' fees and brokerage,
consultation, underwriting and other fees and expenses actually incurred in
connection with such issuance or sale and net of taxes paid or payable as a
result thereof.
"Non-U.S. Subsidiary" means any Subsidiary which is not a U.S. Subsidiary.
"Pari Passu Indebtedness" means any Indebtedness of the Company that is pari
passu in right of payment to the Notes.
"Permitted Guarantees" shall mean guarantees of Indebtedness of the Company
under the Credit Agreement given by a Subsidiary which owns the assets of, and
conducts the business related to, the Fishline Business and/or the Apparel
Business.
"Permitted Indebtedness" means the following:
(i) Indebtedness of the Company under the Credit Agreement, in an
aggregate principal amount at any one time outstanding not to exceed (a)
$130,000,000 under any term loan portion thereof minus all scheduled
principal payments actually made in respect of such term loans, plus (b)
$210,000,000 under any revolving credit agreement portion thereof minus the
amount by which any commitments thereunder are permanently reduced;
(ii) Indebtedness of the Company pursuant to the Notes and Indebtedness
of any Subsidiary pursuant to a Guarantee;
(iii) Indebtedness of the Company or any of its Subsidiaries outstanding
on the date of the Indenture and listed on a schedule thereto;
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(iv) Indebtedness of the Company owing to a Subsidiary; provided that any
such Indebtedness is made pursuant to an intercompany note in the form
attached to the Indenture and, in the case of Indebtedness owing to a U.S.
Subsidiary, is subordinated in right of payment from and after such time as
the Notes shall become due and payable (whether at Stated Maturity,
acceleration or otherwise) to the payment and performance of the Company's
obligations under the Notes; provided that any disposition, pledge or
transfer of any such Indebtedness to a Person (other than a Subsidiary or a
pledge to or for the benefit of the lenders under the Credit Agreement)
shall be deemed to be an incurrence of such Indebtedness by the obligor not
permitted by this clause (iv);
(v) Indebtedness of a Majority Owned Subsidiary owing to the Company or
another Majority Owned Subsidiary; provided that (x) any such Indebtedness
is made pursuant to an intercompany note in the form attached to the
Indenture and (y) any Indebtedness of a Guarantor owing to a Majority Owned
Subsidiary which is a U.S. Subsidiary and is not a Guarantor shall be
subordinated in right of payment from and after such time as the
obligations under the Guarantee by such Majority Owned Subsidiary shall
become due and payable to the payment and performance of such Majority
Owned Subsidiary's obligations under its Guarantee; provided further that
(a) any disposition, pledge or transfer of any such Indebtedness to a
Person (other than the Company or a Majority Owned Subsidiary or a pledge
to or for the benefit of the lenders under the Credit Agreement) shall be
deemed to be an incurrence of such Indebtedness by the obligor not
permitted by this clause (v); and (b) any transaction pursuant to which any
Majority Owned Subsidiary, which has Indebtedness owing to the Company or
any other Majority Owned Subsidiary, ceases to be a Majority Owned
Subsidiary shall be deemed to be the incurrence of Indebtedness by such
Majority Owned Subsidiary that is not permitted by this clause (v);
(vi) obligations of the Company or any Subsidiary entered into in the
ordinary course of business (a) pursuant to Interest Rate Agreements
designed to protect the Company or any Subsidiary against fluctuations in
interest rates in respect of Indebtedness of the Company or any of its
Subsidiaries, which obligations do not exceed the aggregate principal
amount of such Indebtedness, (b) pursuant to Currency Hedging Arrangements
entered into by the Company or any of its Subsidiaries in respect of its
(x) assets or (y) obligations, as the case may be, denominated in a foreign
currency and (c) pursuant to Commodities Agreements;
(vii) Indebtedness of the Company or any Subsidiary consisting of
guarantees, indemnities, or obligations in respect of purchase price
adjustments, in connection with the acquisition or disposition of assets
permitted under the Indenture;
(viii) Indebtedness of the Company or any Subsidiary with respect to (a)
letters of credit securing obligations under or relating to (x) insurance
contracts entered into in the ordinary course of business and (y) expenses
under leases pursuant to which the Company or any Subsidiary is lessee and
(b) other letters of credit not to exceed $10,000,000 in the aggregate
amount outstanding at any given time;
(ix) Indebtedness of the Company or any Subsidiary consisting of Capital
Lease Obligations not to exceed $10,000,000 in the aggregate amount
outstanding at any given time;
(x) Indebtedness of the Company consisting of guarantees of up to an
aggregate principal amount of $10,000,000 of borrowings by Management
Investors in connection with Management Stock in accordance with "Certain
Covenants--Limitation on Restricted Payments";
(xi) obligations of the Company or any Subsidiary in respect of judgment,
performance, surety and other bonds provided by the Company or any
Subsidiary in the ordinary course of business;
(xii) Indebtedness of any Non-U.S. Subsidiary not to exceed $10,000,000
in the aggregate principal amount outstanding at any given time;
(xiii) Indebtedness of the Company or any Subsidiary arising from the
honoring of a check, draft or similar instrument drawn against insufficient
funds, provided that such Indebtedness is extinguished within two business
days of its incurrence;
(xiv) Indebtedness under the Permitted Guarantees;
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(xv) Indebtedness of the Company consisting of guarantees of Indebtedness
incurred in accordance with the Indenture of a Subsidiary which owns the
assets of, and conducts the business related to, the Fishline Business
and/or the Apparel Business;
(xvi) Indebtedness of the Company or any Subsidiary in addition to that
described in clauses (i) through (xv) of this definition of "Permitted
Indebtedness" not to exceed $25,000,000 in an aggregate principal amount
outstanding at any given time;
(xvii) guarantees of any Subsidiary made in accordance with the provision
of "Certain Covenants-- Limitation on Issuances of Guarantees of
Indebtedness" and "Restriction on Transfer of Assets to Subsidiaries"; and
(xviii) any renewals, extensions, substitutions, refundings, refinancings
or replacements (collectively, a "refinancing") of any Indebtedness
described in clauses (ii) and (iii) of this definition of "Permitted
Indebtedness," including any successive refinancings so long as the
aggregate principal amount of Indebtedness represented thereby does not
exceed (a) the principal amount so refinanced plus (b) the lesser of (I)
the stated amount of any premium or other payment required to be paid in
connection with such a refinancing pursuant to the terms of the
Indebtedness being refinanced or (II) the amount of premium or other
payment actually paid at such time to refinance the Indebtedness, plus, in
either case, the amount of expenses of the Company incurred in connection
with such refinancing and, in the case of Pari Passu or Subordinated
Indebtedness, such refinancing does not reduce the Average Life to Stated
Maturity or the Stated Maturity of such Indebtedness to less than that of
the Indebtedness thus refinanced (or, if shorter, that of the Notes).
"Permitted Investment" means (i) Investments in any Majority Owned
Subsidiary (including any Person that thereby becomes a Majority Owned
Subsidiary); (ii) Investments in the Notes; (iii) Indebtedness (or guarantee
of Indebtedness) of the Company or any Subsidiary permitted under clause (iv),
(v), (vii), (x), (xiv) or (xvii) of the definition of "Permitted
Indebtedness"; (iv) Temporary Cash Investments; (v) Investments acquired by
the Company or any Subsidiary in connection with an Asset Sale permitted under
"Certain Covenants--Limitation on Sale of Assets" to the extent such
Investments are non-cash consideration as permitted under such covenant; (vi)
Investments in existence or made pursuant to legally binding written
commitments in existence on the date of the Indenture; (vii) loans or advances
provided by the Company in the ordinary course of its business to its officers
and employees; (viii) receivables owing to the Company or any Subsidiary
created in the ordinary course of business; (ix) evidences of Indebtedness,
securities or other property received from another Person by the Company or
any Subsidiary in connection with any bankruptcy proceeding or other
reorganization of such other Person or as a result of foreclosure, perfection
or enforcement of any Lien in exchange for evidences of Indebtedness,
securities or other property of such other Person held by the Company or any
Subsidiary in accordance with the terms of the Indenture, or for other
liabilities or obligations of such other Person to the Company or any
Subsidiary; (x) (A) Interest Rate Agreements designed to protect the Company
or any Subsidiary against fluctuations in interest rates in respect of
Indebtedness of the Company or any of its Subsidiaries, which obligations do
not exceed the aggregate nominal amount of such Indebtedness, (B) Currency
Hedging Arrangements entered into by the Company or any of its Subsidiaries in
respect of its (1) assets or (2) obligations, as the case may be, denominated
in a foreign currency and (C) Commodities Agreements; (xi) deposits with
respect to leases or utilities provided to third parties in the ordinary
course of business; (xii) Investments of the Company or any Wholly Owned
Subsidiary in a Subsidiary which owns the assets of, and conducts the business
related to, the Fishline Business or the Apparel Business; and (xiii)
Investments in any Person in addition to those described in clauses (i) though
(xii) of this definition of "Permitted Investment" not to exceed $10,000,000
in the aggregate at any time outstanding.
"Permitted Lien" means the following:
(i) any Lien existing, or provided for under arrangements existing, as of
the date of the Indenture;
(ii) any Lien arising by reason of (1) any judgment, decree or order of
any court or other governmental authority, if appropriate legal proceedings
which may have been duly initiated for the review of such
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judgment, decree or order shall not have been finally terminated or the
period within which such proceedings may be initiated shall not have
expired; (2) taxes, assessments or similar charges not yet delinquent or
which are being contested in good faith; (3) security for the payment of
insurance-related obligations (including but not limited to in respect of
deductibles, self-insured retention amounts and premiums and adjustments
thereto); (4) deposits or pledges in connection with bids, tenders, leases
and contracts (other than contracts for the payment of money); (5) zoning
restrictions, easements, licenses, reservations, provisions, covenants,
conditions, waivers, restrictions on the use of property or minor
irregularities of title (and with respect to leasehold interests,
mortgages, obligations, liens and other encumbrances incurred, created,
assumed or permitted to exist and arising by, through or under a landlord
or owner of the leased property, with or without consent of the lessee),
none of which materially impairs the use of any parcel of property material
to the operation of the business of the Company and its Subsidiaries taken
as a whole or the value of such property for the purpose of such business;
(6) deposits or pledges to secure public or statutory obligations, progress
payments, surety and appeal bonds or other obligations of like nature
incurred in the ordinary course of business; (7) certain surveys,
exceptions, title defects, encumbrances, easements, reservations of, or
rights of others for, rights of way, sewers, electric lines, telegraph or
telephone lines and other similar purposes or zoning or other restrictions
as to the use of real property not materially interfering with the ordinary
conduct of the business of the Company and its Subsidiaries taken as a
whole; or (8) operation of law, in favor of landlords, mechanics, carriers,
warehousemen, materialmen, laborers, employees, suppliers, banks or others,
incurred in the ordinary course of business for sums which are not yet
delinquent or are being contested in good faith by negotiations or by
appropriate proceedings which suspend the collection thereof;
(iii) any Lien on any computer or management information systems
equipment acquired after the date of the Indenture;
(iv) any Lien on stock or other securities of an Unrestricted Subsidiary
that secures Unrestricted Subsidiary Indebtedness; and
(v) any extension, renewal, refinancing or replacement, in whole or in
part, of any Lien described in the foregoing clause (i) (in addition to any
such extension, renewal, refinancing or replacement permitted pursuant to
such clause) so long as the amount of security is not increased thereby.
"Permitted Subsidiary Indebtedness" means Indebtedness of any Subsidiary
that is (a) Permitted Indebtedness or (b) incurred under paragraph (a) of
"Certain Covenants--Limitation on Indebtedness" consisting of (i) Acquired
Indebtedness or (ii) Indebtedness not to exceed $20,000,000 plus 10% of the
Company's Consolidated Net Worth in an aggregate principal amount outstanding
at any given time.
"Permitted Subsidiary Preferred Stock" means, with respect to any
Subsidiary, any Preferred Stock of such Subsidiary that (x) is Redeemable
Capital Stock or (y) is not Redeemable Capital Stock and no dividends or
distributions thereon are paid (to any Person other than the Company or any
Wholly Owned Subsidiary) other than as permitted by the provisions described
under "Certain Covenants--Limitation on Restricted Payments"; provided that,
in each case, such Subsidiary would be entitled to incur Permitted
Indebtedness in an aggregate principal amount equal to the aggregate
involuntary maximum fixed repurchase price of such Preferred Stock.
"Person" means any individual, corporation, limited liability company,
partnership, joint venture, association, joint-stock company, trust,
unincorporated organization or government or any agency or political
subdivisions thereof.
"Preferred Stock" means, with respect to any Person, any and all shares,
interests, participations or other equivalents (however designated) of such
Person's preferred stock whether now outstanding, or issued after the date of
the Indenture, and including, without limitation, all classes and series of
preferred or preference stock.
"Public Offering" means an offer and sale of common stock (which is
Qualified Capital Stock) of any corporation that is a successor to, or parent
entity of, the Company pursuant to a registration statement that has been
declared effective by the Commission pursuant to the Securities Act (other
than a registration statement on
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Form S-8 or otherwise relating to equity securities issuable under any
employee benefit plan of such corporate entity).
"Qualified Capital Stock" of any Person means any and all Capital Stock of
such Person other than Redeemable Capital Stock.
"Redeemable Capital Stock" means any Capital Stock that, either by its terms
or by the terms of any security into which it is convertible or exchangeable
or otherwise, is or upon the happening of an event or passage of time would
be, required to be redeemed prior to any Stated Maturity of the principal of
the Notes or is redeemable at the option of the holder thereof at any time
prior to any such Stated Maturity, or is convertible into or exchangeable for
debt securities at any time prior to any such Stated Maturity at the option of
the holder thereof, but excluding Management Stock.
"Registration Rights Agreement" means the agreement between the Company and
the Initial Purchasers, dated November 30, 1993, as amended, as described in
the "Registration Rights" section of this Prospectus.
"Securities Act" means the Securities Act of 1933, as amended.
"Senior Guarantor Indebtedness" with respect to a Subsidiary Guarantor means
the principal of, and premium, if any, and interest (including interest,
whether or not allowed, accruing after the filing of a petition initiating any
proceeding under any state, federal or foreign bankruptcy laws) on, any
Indebtedness of a Subsidiary Guarantor (other than as otherwise provided in
this definition), whether outstanding on the date of this Indenture or
thereafter created, incurred or assumed, and whether at any time owing,
actually or contingent, unless, in the case of any particular Indebtedness,
the instrument creating or evidencing the same or pursuant to which the same
is outstanding expressly provides that such Indebtedness shall not be senior
in right of payment to such Subsidiary Guarantor's Guarantee. Without limiting
the generality of the foregoing, "Senior Guarantor Indebtedness" shall include
the principal of and premium, if any, and interest (including interest,
whether or not allowed, accruing after the filing of a petition initiating any
proceeding under any state, federal or foreign bankruptcy laws) on all
Indebtedness, and all other monetary obligations, of every kind and nature of
any Subsidiary Guarantor from time to time owed to the lenders under the
Credit Agreement pursuant to a guarantee by such Subsidiary Guarantor of the
Company's obligations in respect of the Credit Agreement (collectively, "Bank
Debt"); provided, however, that (A) any such guarantee of a Subsidiary
Guarantor of Bank Debt that is Indebtedness that at the time of incurrence is
issued in violation of the provisions described under "Certain Covenants--
Limitation on Indebtedness" shall not constitute Senior Guarantor Indebtedness
and (B) any Indebtedness under any refinancing, refunding or replacement of
any such guarantee of such Subsidiary Guarantor shall not constitute Senior
Guarantor Indebtedness to the extent that such Indebtedness is by its express
terms subordinate in right of payment to any other Indebtedness of the
Subsidiary Guarantor. Notwithstanding the first sentence of this paragraph,
"Senior Guarantor Indebtedness" shall not include (i) Indebtedness evidenced
by any Guarantee of a Subsidiary, (ii) Indebtedness that is expressly
subordinate in right of payment to any Indebtedness of the Subsidiary
Guarantor, (iii) Indebtedness which when incurred and without respect to any
election under Section 1111(b) of Title 11 of the United States Code, is
without recourse to the Subsidiary Guarantor, (iv) Indebtedness which is
represented by Redeemable Capital Stock of the Subsidiary Guarantor, (v) any
liability for foreign, federal, state, local or other taxes owed or owing by
the Subsidiary Guarantor, (vi) Indebtedness of the Subsidiary Guarantor to a
Person that at the time of the incurrence thereof is a Subsidiary or any other
Affiliate of the Subsidiary Guarantor or any of such Affiliate's subsidiaries,
(vii) Indebtedness evidenced by any guarantee of any Subordinated Indebtedness
or Pari Passu Indebtedness and (viii) that portion of any Indebtedness which
at the time of incurrence is issued in violation of this Indenture. "Senior
Guarantor Indebtedness" with respect to Holding means Indebtedness represented
by any guarantee by Holding of any Senior Indebtedness.
"Stated Maturity" when used with respect to any Indebtedness or any
installment of interest thereon, means the dates specified in such
Indebtedness as the fixed date on which the principal of such Indebtedness or
such installment of interest is due and payable.
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"Subordinated Indebtedness" means Indebtedness of the Company that by its
express terms is subordinated in right of payment to the Notes.
"Subsidiary" means any Person a majority of the equity ownership or the
Voting Stock of which is at the time owned, directly or indirectly, by the
Company or by one or more other Subsidiaries, or by the Company and one or
more other Subsidiaries; provided that an Unrestricted Subsidiary shall not be
deemed a Subsidiary for purposes of the Indenture.
"Subsidiary Guarantor" means any Subsidiary which has issued a Guarantee.
"Temporary Cash Investments" means (i) any evidence of Indebtedness,
maturing not more than one year after the date of acquisition, issued by the
United States of America, or an instrumentality or agency thereof and
guaranteed fully as to principal, premium, if any, and interest by the United
States of America, (ii) any certificate of deposit or bankers' acceptance,
maturing not more than one year after the date of acquisition, issued by, or
time deposit of, a commercial banking institution that is a member of the
Federal Reserve System and that has combined capital and surplus and undivided
profits of not less than $500,000,000 (or the equivalent thereof); provided
that the short-term debt of such commercial bank (other than the short-term
debt of a lender under the Credit Agreement) has a rating, at the time as of
which any investment therein is made, of "P-1" (or higher) according to
Moody's or "A-1" (or higher) according to S&P, (iii) commercial paper,
maturing not more than one year after the date of acquisition, issued by a
corporation (other than an Affiliate or Subsidiary of the Company or Holding)
organized and existing under the laws of the United States of America with a
rating, at the time as of which any investment therein is made, of "P-1" (or
higher) according to Moody's or "A-1" (or higher) according to S&P, (iv) any
money market deposit accounts issued or offered by a domestic commercial bank
having capital and surplus in excess of $500,000,000 or the equivalent
thereof; provided that the short-term debt of such commercial bank (other than
the short-term debt of a lender under the Credit Agreement) has a rating, at
the time of investment, of "P-1" (or higher) according to Moody's or "A-1" (or
higher) according to S&P and (v) repurchase obligations with a term of not
more than seven days for underlying securities of the types described in
clause (i) above entered into with any financial institution.
"Treasury Rate" means the yield to maturity at the time of computation of
United States Treasury securities with a constant maturity (as compiled by,
and published in, the most recent Federal Reserve Statistical Release H.15
(519) which has become publicly available at least two business days prior to
the date fixed for redemption of the Notes following a Change of Control (or,
if such Statistical Release is no longer published, any publicly available
source of similar market data)) most nearly equal to the then remaining
Average Life to Stated Maturity of the Notes; provided, however, that if the
Average Life to Stated Maturity of the Notes is not equal to the constant
maturity of a United States Treasury security for which a weekly average yield
is given, the Treasury Rate shall be obtained by linear interpolation
(calculated to the nearest one-twelfth of a year) from the weekly average
yields of United States Treasury securities for which such yields are given,
except that if the Average Life to Stated Maturity of the Notes is less than
one year, the weekly average yield on actually traded United States Treasury
securities adjusted to a constant maturity of one year shall be used.
"Trust Indenture Act" means the Trust Indenture Act of 1939, as amended.
"U.S. Subsidiary" means any Subsidiary organized under the laws of the
United States of America, any state thereof or the District of Columbia.
"Unrestricted Subsidiary" means any subsidiary of the Company that would but
for this definition of "Unrestricted Subsidiary" be a Subsidiary, organized or
acquired after the date of the Indenture, as to which all of the following
conditions apply: (a) neither the Company nor any of its other Subsidiaries
(other than Unrestricted Subsidiaries) provides credit support for any
Indebtedness of such subsidiary (including any undertaking, agreement or
instrument evidencing such Indebtedness), except to the extent the Company
would otherwise be permitted to make a Restricted Payment pursuant to, or an
Investment in such subsidiary permitted by, the provisions described under
"Certain Covenants--Limitation on Restricted Payments"; (b) such
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subsidiary is not liable, directly or indirectly, with respect to any
Indebtedness other than Unrestricted Subsidiary Indebtedness; (c) neither the
Company nor any of its Subsidiaries (other than Unrestricted Subsidiaries) has
made an Investment in such subsidiary unless such Investment was permitted by
the provisions described under "Certain Covenants--Limitation on Restricted
Payments"; and (d) the Board of Directors, as provided below, shall have
designated such subsidiary to be an Unrestricted Subsidiary on or prior to the
date of organization or acquisition of such subsidiary. Any such designation
by the Board of Directors shall be evidenced to the Trustee by filing with the
Trustee a board resolution giving effect to such designation and an officers'
certificate certifying that such designation complies with the foregoing
conditions. The Board of Directors may designate any Unrestricted Subsidiary
as a Subsidiary; provided that (i) immediately after giving pro forma effect
to such designation, the Company could incur $1.00 of additional Indebtedness
(other than Permitted Indebtedness) pursuant to the restrictions under
"Certain Covenants--Limitation on Indebtedness"; and (ii) all Indebtedness of
such Unrestricted Subsidiary shall be deemed to be incurred on the date such
Unrestricted Subsidiary becomes a Subsidiary. Any subsidiary of an
Unrestricted Subsidiary shall be an Unrestricted Subsidiary for purposes of
the Indenture.
"Unrestricted Subsidiary Indebtedness" of any Unrestricted Subsidiary means
Indebtedness of such Unrestricted Subsidiary (a) as to which neither the
Company nor any Subsidiary is directly or indirectly liable (by virtue of the
Company or any such Subsidiary being the primary obligor on, guarantor of, or
otherwise liable in any respect to, such Indebtedness), except to the extent
the Company or any Subsidiary is permitted to incur Guaranteed Debt as to an
Affiliate pursuant to the provisions under "Certain Covenants--Limitation on
Restricted Payments," in which case the Company shall be deemed to have made a
Restricted Payment or, if applicable, a Permitted Investment equal to the
principal amount of any such Indebtedness to the extent guaranteed and (b)
which, upon the occurrence of a default with respect thereto, does not result
in, or permit any holder of any Indebtedness of the Company or any Subsidiary
to declare, a default on such Indebtedness of the Company or any Subsidiary or
cause the payment thereof to be accelerated or payable prior to its Stated
Maturity.
"Voting Stock" means stock of the class or classes pursuant to which the
holders thereof have the general voting power under ordinary circumstances to
elect at least a majority of the board of directors, managers or trustees of a
corporation (irrespective of whether or not at the time stock of any other
class or classes shall have or might have voting power by reason of the
happening of any contingency).
"Wholly Owned Subsidiary" means a Subsidiary all the outstanding Capital
Stock (other than directors' qualifying shares) of which is owned by the
Company or another Wholly Owned Subsidiary.
BOOK-ENTRY DELIVERY AND FORM
The certificates representing the Existing Notes were issued in fully
registered form, without coupons. Except as described in the next paragraph,
the Existing Notes were registered in the name of Cede & Co., as nominee for
The Depository Trust Company, New York, New York ("DTC"), and remain in the
custody of the Trustee in the form of a global Note certificate (the "Existing
Global Certificate") pursuant to a FAST Balance Certificate Agreement between
DTC and the Trustee.
Existing Notes originally purchased by or transferred to (i) institutional
"accredited investors" (as defined in Rule 501(a)(1), (2), (3) or (7) under
the Securities Act) who are not "qualified institutional buyers" (as defined
in Rule 144A under the Securities Act) ("QIBs"), (ii) except as described
below, Persons outside the United States pursuant to sales in accordance with
Regulation S under the Securities Act or (iii) any other Persons who are not
QIBs (collectively, "Non-Global Purchasers") were issued in registered,
certificated form without coupons (the "Certificated Existing Notes"). Upon
the transfer to a QIB of Certificated Existing Notes initially issued to a
Non-Global Purchaser, such Certificated Existing Notes will be exchanged for
an interest in the Existing Notes in the custody of the Trustee representing
the principal amount of Notes being transferred. Such Certificated Existing
Notes are subject to certain restrictions on transfer as described under "Risk
Factors--Risks Relating to Restrictions on Resale."
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Except for New Notes issued to Non-Global Purchasers, the New Notes will be
initially represented either by one or more fully-registered global notes
(collectively, the "New Global Certificate" and together with the Existing
Global Certificate, the "Global Certificates") with respect to New Notes
issued to QIBs. The New Global Certificate will be registered in the name of
DTC or a nominee of DTC and will remain in the custody of the Trustee pursuant
to a FAST Balance Certificate Agreement. Beneficial interests in the New
Global Certificate will be shown on, and transfers thereof will be effected
only through, records maintained by DTC and its participants. Except in the
limited circumstances described below, the New Global Certificates may be
transferred, in whole and not in part, only to another nominee of DTC or to a
successor of DTC or its nominee. After the initial issuance of each global
security, New Notes in certificated form will be issued in exchange for the
global securities only as set forth in the Indenture. New Notes issued to Non-
Global Purchasers will be issued in registered, certificated form without
coupons (the "Certificated New Notes"). Upon the transfer to a QIB of
Certificated New Notes initially issued to a Non-Global Purchaser, such
Certificated New Notes will be exchanged for an interest in the New Global
Certificate representing the principal amount of Notes being transferred.
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REGISTRATION RIGHTS
In connection with the initial sale of the Existing Notes, the Company
entered into the Registration Rights Agreement with the Initial Purchasers,
pursuant to which the Company agreed, for the benefit of the holders of the
Existing Notes, at the Company's cost, to undertake certain obligations with
respect to the filing and effectiveness of the Registration Statement under
the Securities Act, and the consummation of the Exchange Offer.
In the event that any changes in law or the applicable interpretations of
the staff of the Commission do not permit the Company to effect the Exchange
Offer or if for any other reason the Registration Statement is not declared
effective (or upon the request of the Initial Purchasers under certain
circumstances, which the Company believes no longer apply), the Company will,
in lieu of effecting the registration of the New Notes pursuant to the
Registration Statement and at its cost, (a) as promptly as practicable, file
with the Commission the Shelf Registration Statement covering resales of the
Existing Notes, (b) use its best efforts to cause the Shelf Registration
Statement to be declared effective under the Securities Act and (c) use its
best efforts to keep effective the Shelf Registration Statement until three
years after its effective date (or until one year after such effective date if
such Shelf Registration Statement is filed at the request of the Initial
Purchasers), or if earlier, until the Existing Notes covered thereby have been
sold thereunder or pursuant to Rule 144 under the Securities Act or otherwise
cease to be Registrable Securities (as defined in the Registration Rights
Agreement). The Company will, in the event of the filing of a Shelf
Registration Statement, provide to each holder of the Existing Notes copies of
the prospectus which is a part of the Shelf Registration Statement, notify
each such holder when the Shelf Registration Statement for the Existing Notes
has become effective and take certain other actions as are required to permit
unrestricted resales of the Existing Notes. A holder of Existing Notes who
sells such Existing Notes pursuant to the Shelf Registration Statement
generally will be required to be named as a selling security holder in the
related prospectus and to deliver the prospectus to purchasers, will be
subject to certain of the civil liability provisions under the Securities Act
in connection with such sales and will be bound by the provisions of the
Registration Rights Agreement which are applicable to such a holder (including
certain indemnification obligations). In addition, each holder of the Existing
Notes will be required to deliver information to be used in connection with
the Shelf Registration Statement and to provide comments on the Shelf
Registration Statement within the time periods set forth in the Registration
Rights Agreement in order to have their Existing Notes included in the Shelf
Registration Statement and to benefit from the provisions regarding liquidated
damages set forth in the following paragraph. An amendment to the Registration
Rights Agreement dated as of May 6, 1994, which extended by 45 days the
deadline for effectiveness of the Registration Statement, did not alter the
Company's obligation to pay additional interest on the Existing Notes if the
Registration Statement was not declared effective on or prior to April 30,
1994, the 150th calendar day following the date of original issue of the
Existing Notes. Because the Registration Statement was not declared effective
on or prior to April 30, 1994, the interest rate borne by the Notes increased
by one-half of one percent per annum to 10% per annum, effective April 30,
1994, following such 150-day period. Upon the day before the date of the
consummation of the Exchange Offer the interest rate borne by the Notes from
the date of such effectiveness will be reduced by the full amount of such
increase from the original interest rate, to 9-1/2% per annum. See
"Description of Notes--General."
Upon consummation of the Exchange Offer, Remington believes that it will
have no further obligation to register the Existing Notes, except upon the
request of the Initial Purchasers and only with respect to Existing Notes (if
any) owned by the Initial Purchasers and acquired directly from the Company.
The Company believes that the Initial Purchasers do not hold any such Existing
Notes. By acceptance of the Exchange Offer, each holder of Existing Notes
confirms that such holder agrees that the Company is not obligated to file the
Shelf Registration Statement once the Exchange Offer is consummated (except
with respect to any such Existing Notes held by the Initial Purchasers), and
consents to waive any requirement that the Company do so and certain other
provisions of the Registration Rights Agreement effective upon the
consummation of the Exchange Offer. If holders of at least a majority in
aggregate principal amount of Existing Notes that are Registrable Securities
(as defined in the Registration Rights Agreement) so consent, such waiver will
be binding on all holders of Registrable Securities
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under the terms of the Registration Rights Agreement. If any broker-dealer
that acquired Existing Notes from the Company in the initial offering of the
Existing Notes were to exchange such Existing Notes for New Notes pursuant to
the Exchange Offer, such a broker-dealer would be required to comply with the
registration and prospectus delivery requirements of the Securities Act in
connection with any sale or transfer of New Notes, unless such sale or
transfer is made pursuant to an exemption from such requirements. Except with
respect to Existing Notes held by the Initial Purchasers, as discussed above,
the Company would have no obligation to effect such a registration.
The summary herein of certain provisions of the Registration Rights
Agreement does not purport to be complete and is subject to, and is qualified
in its entirety by reference to, all the provisions of the Registration Rights
Agreement, a copy of which is filed as an Exhibit to the Registration
Statement of which this Prospectus forms a part.
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CERTAIN FEDERAL TAX CONSIDERATIONS
In the view of the Company, which is based on the advice of Debevoise &
Plimpton, special counsel to the Company, the principal United States federal
income tax consequences of the acquisition, ownership and disposition of the
New Notes to the initial acquirors thereof and the principal United States
federal estate tax consequences of the ownership of the New Notes to acquirors
who are Foreign Holders (as defined below) are set forth in the following
discussion. This discussion is based on currently existing provisions of the
Internal Revenue Code of 1986, as amended (the "Code"), existing and proposed
Treasury regulations promulgated thereunder, and administrative and judicial
interpretations thereof, all as in effect or as proposed on the date hereof
and all of which are subject to change, possibly with retroactive effect, or
different interpretations. In particular, the discussion is based in part on
certain Treasury regulations relating to original issue discount issued in
January 1994 (the "1994 Final OID Regulations") and, regulations relating to
debt instruments with contingent payments issued in June 1996 (the "1996 Final
Contingent Payment Regulations"). The Existing Notes were originally issued on
December 1, 1993. The 1994 Final OID Regulations apply by their terms to debt
instruments issued on or after April 4, 1994. However, taxpayers may rely on
the 1994 Final OID Regulations for debt instruments issued after December 31,
1992 and before April 4, 1994. The 1996 Final Contingent Payment Regulations
apply by their terms to debt instruments issued on or after August 13, 1996.
However, taxpayers may rely on the 1996 Final Contingent Payment Regulations
in determining a reasonable method to account for debt instruments issued
before that date.
This discussion does not address the tax consequences to subsequent
purchasers of New Notes, and is limited to acquirors who hold the New Notes as
capital assets. Moreover, the discussion is for general information only, and
does not address all of the tax consequences that may be relevant to
particular acquirors in light of their personal circumstances, or to certain
types of acquirors (such as certain financial institutions, insurance
companies, tax-exempt entities, dealers in securities or persons who have
hedged the interest rate on the New Notes).
PROSPECTIVE ACQUIRORS ARE URGED TO CONSULT THEIR OWN TAX ADVISORS AS TO THE
PARTICULAR TAX CONSEQUENCES TO THEM OF THE ACQUISITION, OWNERSHIP AND
DISPOSITION OF THE NEW NOTES, INCLUDING THE APPLICABILITY OF ANY FEDERAL
ESTATE OR GIFT TAX LAWS OR ANY STATE, LOCAL OR FOREIGN TAX LAWS, CHANGES IN
APPLICABLE TAX LAWS AND ANY PENDING OR PROPOSED LEGISLATION OR REGULATIONS.
EXCHANGE OFFER
Final regulations relating to modifications of debt instruments (the "1996
Debt Modification Regulations") were issued in June 1996. Under the 1996 Debt
Modification Regulations, the exchange of an Existing Note for a New Note
pursuant to the Exchange Offer should not constitute a taxable exchange of the
Existing Notes. As a result, the New Notes should have the same issue price
(and adjusted issue price immediately after the exchange) and the same amount
of original issue discount, if any, as the Existing Notes, and each holder
should have the same adjusted basis and holding period in the New Notes as it
had in the Existing Notes immediately before the exchange. The following
discussion assumes that the exchange of Existing Notes for New Notes pursuant
to the Exchange Offer will not be treated as a taxable exchange and that the
Existing Notes and the New Notes will be treated as the same security for
federal income tax purposes.
UNITED STATES TAXATION OF UNITED STATES HOLDERS
As used herein, the term "United States Holder" means a holder of a New Note
that is for United States federal income tax purposes, (a) a citizen or
resident of the United States, (b) a corporation, partnership or other entity
created or organized in or under the laws of the United States or of any
political subdivision thereof or (c) an estate or trust the income of which is
subject to United States federal income taxation regardless of source.
Payment of Interest Other Than Additional Interest
In general, interest paid on a New Note (other than the additional interest
discussed below) will be taxable to a United States Holder as ordinary
interest income, as received or accrued, in accordance with such holder's
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method of accounting for federal income tax purposes. Assuming that original
issue discount on an Existing Note is not greater than a de minimis amount
equal to 0.25% of its stated principal amount multiplied by the number of
complete years to its maturity, any such discount will be deemed to be equal
to zero, and a holder will not be required to accrue a portion of such
discount as income in each taxable year. See, however, the discussion below
under "Payment of Additional Interest." Holders should consult their tax
advisors as to the possible effect of the payment of additional interest on
the treatment of original issue discount on the Notes, if any.
Payment of Additional Interest
Pursuant to the provisions of the Registration Rights Agreement, because the
Registration Statement was not declared effective under the Securities Act on
or prior to April 30, 1994, the 150th calendar day following the date of the
original issue of the Existing Notes, the interest rate on the Notes increased
by one-half of one percent per annum, to 10% per annum, effective April 30,
1994. Upon the day before the date of the consummation of the Exchange Offer,
the interest rate on the notes from the date of such effectiveness will be
reduced by the full amount of such increase from the original interest rate,
to 9-1/2% per annum. See "Description of Notes--General" and "Registration
Rights." Additional interest paid in the first nine months of 1996, and in
1995 and 1994 amounted to $0.38 million, $0.5 million and $0.32 million,
respectively.
In general, additional interest paid on a New Note should be taxable to a
United States Holder as ordinary interest income, as received or accrued, in
accordance with such holder's method of accounting for federal income tax
purposes. However, if the provisions of the 1996 Final Contingent Payment
Regulations were to apply, and if such additional interest were treated as a
contingent payment payable on the occurrence of an "incidental contingency,"
then the additional interest would be includible in a holder's gross income in
the taxable year in which such additional interest were paid, regardless of
the tax accounting method used by such holder. If such additional interest
were treated as a contingent payment but not treated as payable on the
occurrence of an "incidental contingency" under the 1996 Final Contingent
Payment Regulations, then (a) all payments (including any projected payments
of such additional interest) on a Note in excess of its issue price would
effectively be treated as original issue discount, and (b) a holder would be
required to include an allocable portion of such amounts in gross income on a
constant yield basis whether or not the payment of such additional interest
were fixed or determinable in the taxable year. If such additional interest
were treated as a contingent payment and if the provisions of the 1996 Final
Contingent Payment Regulations were not to apply, then the treatment of such
additional interest would be uncertain, and the payment of such additional
interest could cause the de minimis exception for original issue discount not
to apply.
The 1996 Final Contingent Payment Regulations generally apply to debt
instruments issued on or after August 13, 1996. For debt instruments issued
before August 13, 1996, the preamble to the 1996 Final Contingent Payment
Regulations provides that taxpayers may use any reasonable method to account
for a debt instrument with contingent payments, including a method that would
have been required under the proposed regulations in existence at the time
that the debt instrument was issued. Holders should consult their tax advisors
as to the tax considerations relating to debt instruments providing for
payments such as the additional interest and the impact of their choice of a
method to account for such payments.
The Company has reported and will continue to report to holders and to the
Internal Revenue Service in a manner consistent with the position that such
additional interest should not be treated as a contingent payment, and instead
should be taxable to holders as received or accrued, in accordance with each
holder's method of accounting.
Sale, Exchange or Retirement of New Notes
Upon the sale, exchange, redemption, retirement at maturity or other
disposition of a New Note, a United States Holder will generally recognize
taxable gain or loss equal to the difference between the sum of cash plus the
fair market value of all other property received on such disposition (except
to the extent such cash or property is attributable to accrued interest, which
will be taxable as ordinary income) and such holder's adjusted tax basis in
the New Note.
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Gain or loss recognized on the disposition of a New Note generally will be
capital gain or loss (except to the extent the gain is attributable to accrued
market discount, as described below) and will be long-term capital gain or
loss if, at the time of such disposition, the United States Holder's holding
period for the New Note is more than one year.
Market Discount
A holder (other than a holder who makes the election described below) that
acquires a New Note with market discount that is not de minimis, except in
certain non-recognition transactions, generally will be required to treat any
gain realized upon the disposition of the New Note as interest income to the
extent of the market discount that accrued during the period such holder held
such New Note. (For this purpose a person disposing of a market discount New
Note in a transaction other than a sale, exchange or involuntary conversion
generally is treated as realizing an amount equal to the fair market value of
the New Note.) A holder may also be required to recognize as ordinary income
any principal payments with respect to a New Note to the extent such payments
do not exceed the accrued market discount on the New Note. For these purposes,
market discount generally equals the excess of the stated redemption price of
the New Note over the basis of the New Note in the hands of the holder
immediately after its acquisition. However, market discount is deemed not to
exist if the market discount is less than a statutorily defined de minimis
amount equal to 1/4 of 1 percent of the New Note's contract redemption price
at maturity multiplied by the number of complete years to the New Note's
maturity after the holder acquired the New Note (or, in the case of a holder
that acquires a New Note pursuant to the Exchange Offer, the Existing Note
exchanged for such New Note).
The market discount rules also provide that any holder of New Notes that
were acquired at a market discount may be required to defer the deduction of a
portion of the interest on any indebtedness incurred or maintained to acquire
or carry the New Notes, until the New Notes are disposed of.
A holder of a New Note acquired at market discount may elect to include
market discount in income as the discount accrues. In such a case, the
foregoing rules with respect to the recognition of ordinary income on
dispositions and with respect to the deferral of interest deductions on
indebtedness related to such New Note would not apply. The current inclusion
election applies to all market discount obligations acquired on or after the
first day of the first taxable year to which the election applies, and may not
be revoked without the consent of the IRS.
Amortizable Bond Premium
Generally, if the tax basis of an obligation held as a capital asset exceeds
the amount payable at maturity of the obligation, such excess may constitute
amortizable bond premium that the holder of such obligation may elect to
amortize under the constant interest rate method and deduct over the period
from the holder's acquisition date to the obligation's maturity date. A holder
that elects to amortize bond premium must reduce its tax basis in the related
obligation by the amount of the aggregate deductions allowable for the
amortizable bond premium. Any election to amortize bond premium applies to all
bonds (other than bonds the interest in which is excludible from gross income)
held by the holder at the beginning of the first taxable year to which the
election applies or thereafter acquired by the holder, and the election may
not be revoked without the consent of the IRS.
In the case of an obligation, such as a New Note, that may be called at a
premium prior to maturity, an earlier call date is treated as its maturity
date, and the amount of bond premium is determined by treating the amount
payable on such call date as the amount payable at maturity if such a
calculation produces a smaller amortizable bond premium than any other call
date or the method described in the preceding paragraph. If a holder of a New
Note is required to amortize and deduct bond premium by reference to a call
date, the New Note will be treated as maturing on such date for the amount
payable, and, if not redeemed on such date, the New Note will be treated as
reissued on such date for the amount so payable. If a New Note purchased at a
premium is redeemed pursuant to a call prior to such early call date or its
maturity, a purchaser who has elected to deduct bond premium may deduct the
excess of its adjusted basis in the New Note over the amount received on
redemption (or, if greater, the amount payable on maturity) as an ordinary
loss in the taxable year of redemption.
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The amortizable bond premium deduction is treated as a reduction of interest
on the bond instead of as a deduction, except as Treasury regulations may
otherwise provide. Proposed regulations relating to the amortization of bond
premium were issued in June 1996. The proposed regulations, which apply by
their terms to bonds acquired on or after the date 60 days after the date
final regulations are published, provide that the offset of amortizable bond
premium against interest income on the bond occurs when income is taxable to a
holder as received or accrued, in accordance with such holder's method of
accounting for such income.
Transfer
The New Notes have been issued in registered form and will be transferable
only upon their surrender for registration of transfer. Under proposed
Treasury regulations, a holder (other than an individual) who transfers a New
Note through another method may be subject to an excise tax equal to the
product of (i) 1% of the principal amount of the obligation transferred and
(ii) the number of calendar years (or portions thereof) remaining until the
maturity of such obligation.
Backup Withholding and Information Reporting
In general, a United States Holder of a New Note will be subject to backup
withholding at the rate of 31% with respect to interest, principal and
premium, if any, paid on a New Note, unless the holder (a) is an entity
(including corporations, tax-exempt organizations and certain qualified
nominees) which is exempt from withholding and, when required, demonstrates
this fact, or (b) provides the Company with its Taxpayer Identification Number
("TIN") (which for an individual would be the holder's Social Security
Number), certifies that the TIN provided to the Company is correct and that
the holder has not been notified by the IRS that it is subject to backup
withholding due to underreporting of interest or dividends, and otherwise
complies with applicable requirements of the backup withholding rules. In
addition, such payments of principal, premium and interest to United States
Holders that are not corporations, tax-exempt organizations or qualified
nominees will generally be subject to information reporting requirements. A
holder of New Notes who does not provide the Company with his correct TIN may
be subject to penalties imposed by the IRS.
The Company will report to holders of the New Notes and the IRS the amount
of any "reportable payments" (including any interest paid) and any amount
withheld with respect to the New Notes during the calendar year.
The amount of any backup withholding from a payment to a holder will be
allowed as a credit against such holder's federal income tax liability and may
entitle such holder to a refund, provided that the required information is
furnished to the IRS.
UNITED STATES TAXATION OF FOREIGN HOLDERS
Payment of Interest on New Notes
In general, payments of interest received by any holder that is not a United
States Holder (a "Foreign Holder") will not be subject to a United States
federal withholding tax, provided that (a)(i) the holder does not actually or
constructively own 10% or more of the total combined voting power of all
classes of stock of the Company entitled to vote, (ii) the holder is not a
controlled foreign corporation that is related to the Company actually or
constructively through stock ownership and (iii) either (x) the beneficial
owner of the New Note, under penalties of perjury, provides the Company or its
agent with the beneficial owner's name and address and certifies that it is
not a United States Holder on IRS Form W-8 (or a suitable substitute form) or
(y) a securities clearing organization, bank or other financial institution
that holds customers' securities in the ordinary course of its trade or
business (a "financial institution") holds the New Note and certifies to the
Company or its agent under penalties of perjury that such a Form W-8 (or
suitable substitute form) has been received by it from the beneficial owner or
qualifying intermediary and furnishes the payor a copy thereof, (b) the
Foreign Holder is subject to United States federal income tax with respect to
the New Note on a net basis because payments
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received with respect to the New Note are effectively connected with a U.S.
trade or business of the Foreign Holder (in which case the Foreign Holder may
also be subject to "branch profits tax" under section 884 of the Code) and
provides the Company with a properly executed IRS Form 4224, or (c) the
Foreign Holder is entitled to the benefits of an income tax treaty under which
the interest is exempt from United States withholding tax and the Foreign
Holder or such Holder's agent provides a properly executed IRS Form 1001
claiming the exemption. Payments of interest not exempt from U.S. federal
withholding tax as described above will be subject to such withholding tax at
the rate of 30% (subject to reduction under an applicable income tax treaty).
In April 1996, the IRS issued proposed regulations that would change certain
of the certification and other procedures described in the preceding paragraph
(the "1996 Proposed Regulations"). The changes set forth in the 1996 Proposed
Regulations would not materially affect a Foreign Holder's ability to qualify
for an exemption from withholding tax with respect to payments of interest on
the New Note. Under the 1996 Proposed Regulations, a Foreign Holder claiming
the benefit of an income tax treaty as described in clause (c) of the
preceding paragraph (but not a Foreign Holder claiming the portfolio interest
exemption described in clause (a)) would be required to provide its TIN to the
payor. The 1996 Proposed Regulations would apply to payments of interest made
after December 31, 1997.
Sale, Exchange or Retirement of the New Notes
A Foreign Holder generally will not be subject to United States federal
income tax (and generally no tax will be withheld) with respect to gain
realized on the sale, exchange, redemption, retirement at maturity or other
disposition of New Notes, unless (i) the gain is effectively connected with a
United States trade or business conducted by the Foreign Holder, or (ii) the
Foreign Holder is an individual who is present in the United States for a
period or periods aggregating 183 or more days in the taxable year of the
disposition and certain other conditions are met.
With respect to a Foreign Holder subject to United States federal income tax
as described in the preceding paragraph, an exchange of an Existing Note for a
New Note should not constitute a taxable exchange of the Existing Note (see
"Exchange Offer" described above). As described under "United States Taxation
of United States Holders--Payment of Additional Interest," the 1996 Final
Contingent Payment Regulations generally apply to debt instruments issued on
or after August 13, 1996. For debt instruments issued before August 13, 1996,
the preamble to the 1996 Final Contingent Payment Regulations provides that
taxpayers may use any reasonable method to account for a debt instrument with
contingent payments, including a method that would have been required under
the proposed regulations when the debt instrument was issued. Holders should
consult their tax advisors as to the tax considerations relating to the
disposition of debt instruments providing for payments such as the additional
interest and the impact of their choice of a method to account for such
payments.
Backup Withholding and Information Reporting
Under current Treasury regulations, backup withholding and information
reporting do not apply to payments made by the Company or a paying agent to
Foreign Holders if the certification described under "--Payment of Interest on
New Notes" is received, provided that the payor does not have actual knowledge
that the holder is a United States person. If any payments of principal and
interest are made to the beneficial owner of a New Note by or through the
foreign office of a foreign custodian, foreign nominee or other foreign agent
of such beneficial owner, or if the foreign office of a foreign "broker" (as
defined in applicable Treasury regulations) pays the proceeds of the sale of a
New Note or a coupon to the seller thereof, backup withholding and information
reporting will not apply. Information reporting requirements (but not backup
withholding) will apply, however, to a payment by a foreign office of a broker
that is a United States person, that derives 50% or more of its gross income
for certain periods from the conduct of a trade or business in the United
States, or that is a "controlled foreign corporation" (generally, a foreign
corporation controlled by United States shareholders) with respect to the
United States, unless the broker has documentary evidence in its records that
the holder is a Foreign Holder and certain other conditions are met, or the
holder otherwise establishes an exemption. Payment by a United States office
of a broker is subject to both backup withholding at a rate of 31% and
information reporting unless
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the holder certifies under penalties of perjury that it is a Foreign Holder,
or otherwise establishes an exemption. A Foreign Holder may obtain a refund or
a credit against such Holder's U.S. federal income tax liability of any
amounts withheld under the backup withholding rules, provided the required
information is furnished to the IRS.
In addition, in certain circumstances interest on a New Note owned by a
Foreign Holder will be required to be reported annually on IRS Form 1042S, in
which case such form will be filed with the IRS and furnished to the Foreign
Holder.
Federal Estate Taxes
Subject to applicable estate tax treaty provisions, New Notes held at the
time of death (or theretofore transferred subject to certain retained rights
or powers) by an individual who at the time of death is a Foreign Holder will
not be included in such Holder's gross estate for United States federal estate
tax purposes provided that (a) the individual does not actually or
constructively own 10% or more of the total combined voting power of all
classes of stock of the Company entitled to vote and (b) the income and the
New Notes are not effectively connected with the conduct of a United States
trade or business by the individual.
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PLAN OF DISTRIBUTION
Each broker-dealer that receives New Notes for its own account pursuant to
the Exchange Offer in exchange for Existing Notes, where such Existing Notes
were acquired by such broker-dealer as a result of market-making activities or
other trading activities, must acknowledge and agree that it will deliver a
prospectus in connection with any resale of such New Notes. This Prospectus,
as it may be amended or supplemented from time to time, may be used for a
period of 90 days after the Expiration Date by a broker-dealer in connection
with resales of New Notes received in exchange for Existing Notes where such
Existing Notes were acquired as a result of market-making activities or other
trading activities. Any such broker-dealer that is a Participating Broker-
Dealer will have certain additional rights pursuant to the Registration Rights
Agreement, including that, for a period of 90 days after the Expiration Date,
the Company will make this Prospectus (as it may be amended or supplemented)
available to any Participating Broker-Dealer for use in connection with such
resale. Broker-dealers, if any, that acquired their Existing Notes from the
Company in the initial offering of the Existing Notes cannot use the
Prospectus, but must comply with the registration and prospectus delivery
requirements of the Securities Act in connection with any sale or transfer of
New Notes, unless such sale or transfer is made pursuant to an exemption from
such requirements.
The Company will not receive any proceeds from any sale of New Notes by
broker-dealers. New Notes received by broker-dealers for their own account
pursuant to the Exchange Offer may be sold from time to time in one or more
transactions in the over-the-counter market, in negotiated transactions,
through the writing of options on the New Notes or a combination of such
methods of resale, at market prices prevailing at the time of resale, at
prices related to such prevailing market prices or negotiated prices. Any such
resale may be made directly to purchasers or to or through broker-dealers who
may receive compensation in the form of commissions or concessions from any
such broker-dealer and/or the purchasers of any such New Notes. Any broker-
dealer that resells New Notes that were received by it for its own account
pursuant to the Exchange Offer and any person that participates in the
distribution of such New Notes may be deemed to be an "underwriter" within the
meaning of the Securities Act, and must deliver a prospectus meeting the
requirements of the Securities Act in connection with such resale or
distribution. Any profit on any such resale of New Notes and any commissions
or concessions received by any such persons may be deemed to be underwriting
compensation under the Securities Act. The Letter of Transmittal states that
by acknowledging and agreeing that it will deliver and by delivering this
Prospectus, a broker-dealer will not be deemed to admit that it is an
"underwriter" within the meaning of the Securities Act.
For a period of 90 days after the Expiration Date, the Company will promptly
send additional copies of this Prospectus and any amendment or supplement to
this Prospectus to any Participating Broker-Dealer that requests such
documents in the Letter of Transmittal. The Company has agreed to pay all
expenses incident to the Exchange Offer other than fees and expenses of
counsel to the Note holders or underwriting discounts and commissions, and the
Company and Holding will indemnify the Participating Broker-Dealers holding
New Notes against certain liabilities, including certain liabilities under the
Securities Act, pursuant to the Registration Rights Agreement.
By acceptance of this Exchange Offer, each broker-dealer that receives New
Notes pursuant to the Exchange Offer agrees to notify the Company, in writing,
prior to using the Prospectus in connection with the sale or transfer of New
Notes, and agrees that, upon receipt of notice from the Company of the
happening of any event which makes any statement in the Prospectus untrue in
any material respect or which requires the making of any changes in the
Prospectus in order to make the statements therein not misleading, such
broker-dealer will suspend use of the Prospectus until (i) the Company has
amended or supplemented the Prospectus to correct such misstatement or
omission and (ii) either the Company has furnished copies of the amended or
supplemented Prospectus to such broker-dealer or, if the Company has not
otherwise agreed to furnish such copies and declines to do so after such
broker-dealer so requests, such broker-dealer has obtained a copy of such
amended or supplemented Prospectus as filed with the Commission. The Company
has agreed to deliver such notice and such amended or supplemented Prospectus
promptly to any Participating Broker-Dealer that has so notified the Company.
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Pursuant to the Registration Rights Agreement, Remington and Holding have
jointly and severally agreed to indemnify the Initial Purchasers against
certain liabilities, including certain liabilities incurred in connection with
the offering of the Existing Notes, and contribute to payments the Initial
Purchasers may be required to make in respect thereof.
The New Notes will be new securities for which there currently is no market.
The Existing Notes are eligible for trading in the PORTAL market, the National
Association of Securities Dealers' screenbased, automated market for trading
of securities eligible for resale under Rule 144A; however, no assurance can
be given as to the liquidity of, or trading market for, the Notes.
LEGAL MATTERS
Certain legal matters with respect to the legality of the issuance of the
New Notes offered hereby will be passed upon for Remington and Holding by
Debevoise & Plimpton, 875 Third Avenue, New York, New York 10022. Franci J.
Blassberg, Esq., a member of Debevoise & Plimpton, is married to Joseph L.
Rice, III, who is a general partner of Associates IV and a director of each of
Holding and Remington.
EXPERTS
The consolidated balance sheets of RACI Holding, Inc. and subsidiary as of
December 31, 1995, 1994 and 1993, and the consolidated statements of
operations, retained earnings, and cash flows for the year ended December 31,
1995 and 1994 and one month period ended December 31, 1993, included in this
prospectus, have been included herein in reliance on the report of Coopers &
Lybrand L.L.P., independent accountants, given on the authority of that firm
as experts in accounting and auditing. The statement of net assets to be sold
to RACI Acquisition Corporation of the DuPont Sporting Goods Business of E. I.
du Pont de Nemours and Company at November 30, 1993, and the related statement
of operations and cash flows for the eleven month period then ended,
incorporated by reference in this prospectus have been included in reliance on
the report, which includes an explanatory paragraph regarding the uncertainty
of the ultimate outcome of various product liability proceedings, of Coopers &
Lybrand L.L.P., independent accountants, given on the authority of that firm
as experts in accounting and auditing.
AVAILABLE INFORMATION
The Company has filed with the Commission a Registration Statement on Form
S-4 (together with any amendments thereto, the "Registration Statement") under
the Securities Act with respect to the New Notes offered hereby. This
Prospectus, which constitutes a part of the Registration Statement, omits
certain information contained in the Registration Statement as permitted by
the rules and regulations of the Commission. For further information with
respect to the Company and the New Notes offered hereby, reference is made to
the Registration Statement and the exhibits and the financial statements,
notes and schedules filed as a part thereof, which may be inspected at the
public reference facilities of the Commission, at the addresses set forth
below. Statements made in this Prospectus concerning the provisions of any
documents referred to herein do not necessarily describe such provisions in
their entirety, and in each instance are qualified in all respects by
reference to the copy of such document filed as an exhibit to the Registration
Statement. While any Existing Notes remain outstanding, the Company will make
available, upon the request of any holder of an Existing Note, such
information as is specified in paragraph (d)(4) of Rule 144A, to such holder
or to a prospective purchaser of such Existing Note who such holder informs
the Company such holder reasonably believes is a qualified institutional buyer
within the meaning of Rule 144A, in order to permit compliance by such holder
with Rule 144A in connection with the resale of such Existing Note by such
holder unless, at the time of such request, the Company is subject to the
reporting requirements of Section 13 or 15(d) of the Securities Exchange Act
of 1934, as amended (the "Exchange Act"). Any such request should be directed
to the Vice President, Controller of the Company.
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The Company is currently not subject to the informational requirements of
the Exchange Act. Upon consummation of the Exchange Offer, the Company will
become subject to the informational requirements of the Exchange Act, and in
accordance therewith the Company (or, under certain circumstances, Holding)
will file periodic reports, proxy statements and other information with the
Commission relating to its business, financial statements and other matters.
Reports, proxy statements and other information may be inspected and copied at
the public reference facilities maintained by the Commission at Room 1024, 450
Fifth Street, N.W., Judiciary Plaza, Washington, D.C. 20549 and at the
regional offices of the Commission located at 7 World Trade Center, 13th
Floor, New York, New York 10048 and Suite 1400, Northwestern Atrium Center,
14th Floor, 500 West Madison Street, Chicago, Illinois 60661. Copies of such
material can also be obtained at prescribed rates by writing to the
Commission, Public Reference Section, 450 Fifth Street, N.W., Washington, D.C.
20549. In addition, the Commission maintains a Web site at http://www.sec.gov
that contains reports, proxy and information statements and other information
regarding registrants that file electronically with the Commission.
The Indenture provides that the Company will furnish copies of the periodic
reports required to be filed with the Commission under the Exchange Act to the
holders of the Notes. If the Company is not subject to the periodic reporting
and informational requirements of the Exchange Act, the Company (or, under
certain circumstances, Holding) will, to the extent permitted under the
Exchange Act, and whether or not it is subject to Section 13(a) or 15(d) of
the Exchange Act, file with the Commission, and the Company will provide the
Trustee and the holders of the Notes with, annual reports containing the
information required to be contained in Form 10-K promulgated under the
Exchange Act, which will contain financial information that has been examined
and reported upon, with an opinion expressed by, an independent public or
certified public accountant, quarterly reports containing the information
required to be contained in Form 10-Q promulgated under the Exchange Act, and
from time to time such other information as is required to be contained in
Form 8-K promulgated under the Exchange Act. If filing such documents is not
permitted under the Exchange Act, the Company will provide copies of such
reports, at its cost, to the Trustee and authorize the Trustee to provide a
copy of such documents to prospective purchasers of the Notes upon request.
EXCHANGE AGENT
First Trust National Association has agreed to provide certain services as
Exchange Agent in connection with the Exchange Offer. Owners of Existing Notes
who require assistance should contact the Exchange Agent at First Trust
National Association, 180 East Fifth Street, St. Paul, Minnesota 55101,
Attention: Corporate Trust Division, telephone: (612) 244-1197.
124
<PAGE>
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGES
-----
<S> <C>
RACI HOLDING, INC. AND SUBSIDIARY
Report of Independent Accountants....................................... F-2
Consolidated Balance Sheets as of December 31, 1995 and 1994............ F-3
Consolidated Statements of Operations and Retained Earnings for the
years ended December 31, 1995 and 1994 and one month period ended
December 31, 1993...................................................... F-4
Consolidated Statements of Cash Flows for the year ended December 31,
1995 and 1994 and one month period ended December 31, 1993............. F-5
Notes to Consolidated Financial Statements.............................. F-6
DUPONT SPORTING GOODS BUSINESS
Report of Independent Accountants....................................... F-20
Statements of Net Assets Sold to RACI Acquisition Corporation as of
November 30, 1993...................................................... F-21
Statements of Operations for the eleven month period ended November 30,
1993................................................................... F-22
Statements of Cash Flows for the eleven month period ended November 30,
1993................................................................... F-23
Notes to Financial Statements........................................... F-24
RACI HOLDING, INC. AND SUBSIDIARIES UNAUDITED INTERIM FINANCIALS
Condensed Consolidated Balance Sheets as of September 30, 1996
(unaudited) and December 31, 1995...................................... F-32
Condensed Consolidated Statements of Operations for the three and nine
month periods ended September 30, 1996 and 1995 (unaudited)............ F-33
Condensed Consolidated Statements of Cash Flows for the nine month
periods ended September 30, 1996 and 1995 (unaudited).................. F-34
Notes to Condensed Consolidated Financial Statements (unaudited)........ F-35
</TABLE>
F-1
<PAGE>
RACI HOLDING, INC. AND SUBSIDIARY
REPORT OF INDEPENDENT ACCOUNTANTS
To The Board of Directors and Stockholder of RACI Holding, Inc.
We have audited the accompanying consolidated balance sheets of RACI
Holding, Inc. and Subsidiary as of December 31, 1995 and 1994, and the related
consolidated statements of operations and cash flows for the years ended
December 31, 1995 and 1994 and the one month period ended December 31, 1993.
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, the financial statements referred to above present fairly,
in all material respects, the consolidated financial position of RACI Holding,
Inc. and Subsidiary as of December 31, 1995 and 1994, and the consolidated
results of their operations and their cash flows for the years ended December
31, 1995 and 1994 and the one month period ended December 31, 1993, in
conformity with generally accepted accounting principles.
/s/ Coopers & Lybrand L.L.P.
New York, New York
April 2, 1996, except
for Note 9 for which
the date is December
20, 1996
F-2
<PAGE>
RACI HOLDING, INC. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
(DOLLARS IN MILLIONS EXCEPT SHARE AND PER SHARE DATA)
<TABLE>
<CAPTION>
DECEMBER 31, DECEMBER 31,
1995 1994
------------ ------------
<S> <C> <C>
ASSETS
CURRENT ASSETS
Cash and Cash Equivalents............................ $ 1.4 $ 41.9
Accounts Receivable Trade--net of allowance of $5.2
and $2.4, respectively.............................. 70.4 49.2
Inventories.......................................... 112.7 100.7
Prepaid Expenses and Other Current Assets............ 7.7 10.6
Deferred Income Taxes................................ 12.1 13.7
------ ------
Total Current Assets............................... 204.3 216.1
Property, Plant and Equipment--net................... 85.1 71.8
Intangibles and Debt Issuance Costs--net............. 98.7 103.5
Deferred Income Taxes................................ 11.7 11.9
Other Noncurrent Assets.............................. 4.6 --
------ ------
Total Assets....................................... $404.4 $403.3
====== ======
LIABILITIES AND SHAREHOLDER'S EQUITY
CURRENT LIABILITIES
Accounts Payable..................................... $ 14.6 $ 15.7
Short-Term Debt...................................... 4.5 3.6
Current Portion of Long-Term Debt.................... 14.6 18.1
Customer Prepayments................................. 8.0 10.8
Product and Environmental Liabilities................ 5.3 4.9
Income Taxes......................................... 5.4 --
Other Accrued Liabilities............................ 26.9 31.7
------ ------
Total Current Liabilities.......................... 79.3 84.8
Long-Term Debt....................................... 198.6 201.7
Retiree Benefits..................................... 28.4 24.4
Product and Environmental Liabilities................ 4.5 7.2
Other Non-Current Liabilities........................ -- 3.1
------ ------
Total Liabilities.................................. 310.8 321.2
Commitments and Contingencies
SHAREHOLDER'S EQUITY
Common Stock, par value $.01; 2,500,000 shares and
10,000,000 shares authorized, respectively, 750,000
issued and outstanding.............................. -- --
Paid in Capital...................................... 75.0 75.0
Retained Earnings.................................... 18.6 7.1
------ ------
Total Shareholder's Equity......................... 93.6 82.1
Total Liabilities and Shareholder's Equity....... $404.4 $403.3
====== ======
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-3
<PAGE>
RACI HOLDING, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF OPERATIONS AND RETAINED EARNINGS
(DOLLARS IN MILLIONS EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
YEAR YEAR ONE MONTH
ENDED ENDED ENDED
DECEMBER 31, DECEMBER 31, DECEMBER 31,
1995 1994 1993
------------ ------------ ------------
<S> <C> <C> <C>
Sales(1)............................... $427.0 $417.7 $ 19.2
Cost of Goods Sold..................... 285.3 287.1 15.8
------ ------ ------
Gross Profit......................... 141.7 130.6 3.4
Selling, Marketing and Distribution
Expense............................... 59.6 52.0 2.8
General and Administrative Expense..... 27.0 23.6 1.8
Research & Development Expense......... 5.3 8.3 0.3
Other Expenses, net.................... 8.3 10.3 0.6
------ ------ ------
Operating Profit (Loss).............. 41.5 36.4 (2.1)
Interest Expense....................... (21.5) (20.6) (1.5)
------ ------ ------
Profit (Loss) before Income Taxes.... 20.0 15.8 (3.6)
Provision (Benefit) for Income Taxes... 8.5 6.4 (1.3)
------ ------ ------
Net Income (Loss).................... $ 11.5 $ 9.4 $ (2.3)
------ ------ ------
Retained Earnings (deficit), beginning
of period............................. 7.1 (2.3) --
------ ------ ------
Retained Earnings (deficit), end of
period................................ $ 18.6 $ 7.1 $ (2.3)
====== ====== ======
Per Share Data:
Net Income (Loss) Per Share............ $15.33 $12.53 $(3.07)
====== ====== ======
</TABLE>
- --------
(1) Sales are presented net of Federal Excise Taxes of $36.0, $33.7 and $1.4,
respectively.
The accompanying notes are an integral part of these consolidated financial
statements.
F-4
<PAGE>
RACI HOLDING, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
(DOLLARS IN MILLIONS)
<TABLE>
<CAPTION>
YEAR YEAR ONE MONTH
ENDED ENDED ENDED
DECEMBER 31, DECEMBER 31, DECEMBER 31,
1995 1994 1993
------------ ------------ ------------
<S> <C> <C> <C>
OPERATING ACTIVITIES
Net Income (Loss)....................... $ 11.5 $ 9.4 $ (2.3)
Adjustments to reconcile Net Income
(Loss) to Net Cash (used in) provided
by Operating Activities:
Depreciation........................... 9.7 7.7 0.7
Amortization........................... 3.5 4.4 0.3
Loss on disposal of Property, Plant
and Equipment......................... 0.6 -- --
Provision for Retiree Benefits......... 0.2 6.7 0.5
Provision (Benefit) for Deferred
Income Taxes.......................... 1.8 6.4 (1.3)
Changes in Operating Assets and
Liabilities (Net of Effect of
Acquisition of DuPont Sporting Goods
Business):
(Increase) decrease in Accounts
Receivable Trade--Net............... (21.2) (3.3) 17.0
(Increase) decrease in Inventories... (12.0) 22.6 (0.6)
Decrease (increase) in Prepaid
Expenses and Other Current Assets... 2.9 (7.7) 0.3
(Increase) in Other Noncurrent
Assets.............................. (4.6) -- --
(Decrease) increase in Accounts
Payable............................. (1.1) (1.1) 9.1
(Decrease) increase in Customer
Prepayments......................... (2.8) 7.5 2.6
Increase in Product and Environmental
Liabilities......................... 3.3 4.6 0.3
Increase in Income Taxes Payable..... 5.4 -- --
(Decrease) increase in Other Accrued
Liabilities......................... (4.1) 9.2 4.4
Payments for Assumed Pre-Acquisition
Product and Environmental
Liabilities........................... (5.6) (17.6) (0.2)
------- ------- -------
Net Cash (used in) provided by
Operating Activities.................. (12.5) 48.8 30.8
INVESTING ACTIVITIES
Purchase of Property, Plant and
Equipment.............................. (18.9) (9.3) (0.8)
Purchase of DuPont Sporting Goods
Business............................... 1.4 (6.9) (306.6)
------- ------- -------
Net Cash used in Investing
Activities............................ (17.5) (16.2) (307.4)
FINANCING ACTIVITIES
Proceeds from Revolving Line of Credit.. 278.4 153.8 10.7
Principal Payments on Revolving Line of
Credit................................. (269.0) (153.8) (10.7)
Principal Payments on Long-Term Debt.... (20.8) (10.0) --
Proceeds from Short-Term Debt........... 4.5 4.0 1.8
Principal Payments on Short-Term Debt... (3.6) (2.0) (0.2)
Debt Issuance Costs..................... -- (1.7) (10.4)
Proceeds from Term Loan................. -- -- 130.0
Proceeds from Issuance of 9.5% Senior
Subordinated Notes..................... -- -- 99.4
Proceeds from Issuance of Common Stock.. -- -- 75.0
------- ------- -------
Net Cash (used in) provided by
Financing Activities.................. (10.5) (9.7) 295.6
------- ------- -------
(Decrease) Increase in Cash and Cash
Equivalents............................ (40.5) 22.9 19.0
Cash and Cash Equivalents at beginning
of period.............................. 41.9 19.0 --
------- ------- -------
Cash and Cash Equivalents at end of
period................................. $ 1.4 $ 41.9 $ 19.0
======= ======= =======
Supplemental cash flow information:
Cash paid during the year for:
Interest............................. $ 21.7 $ 19.0 $ 0.2
Income Taxes......................... $ 0.8 $ 1.7 $ --
Noncash activities:
Capital lease obligations incurred... $ 4.7 $ -- $ --
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-5
<PAGE>
RACI HOLDING, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN MILLIONS, EXCEPT SHARE AND PER SHARE DATA)
NOTE 1--BASIS OF PRESENTATION
The accompanying consolidated financial statements include the accounts of
Remington Arms Company, Inc. ("Remington") and its parent company, RACI
Holding, Inc. ("Holding"), (collectively the "Company"). Holding has no
material assets other than its investment in Remington. All intercompany
accounts and transactions have been eliminated in consolidation.
Certain reclassifications were made to the prior year's financial
information to conform with the current presentation format.
NOTE 2--DESCRIPTION OF THE BUSINESS
The Company is engaged in the design, manufacture and sale of sporting goods
products for the hunting, shooting sports and fishing markets. The Company's
product lines consist of firearms, ammunition, and hunting/gun care
accessories, sold under the Remington name and other labels, and fishing
products, sold under the Stren name and other labels.
Holding was formed to effect the acquisition, through Remington, of certain
assets and liabilities of the Sporting Goods Business ("Sporting Goods"),
formerly operated by E. I. du Pont de Nemours and Company ("DuPont"), and one
of DuPont's subsidiaries ("Old Remington," and together with DuPont, the
"Sellers"). This acquisition (the "Acquisition") was completed on December 1,
1993 for a cash purchase price of $300.0, and was accounted for using the
purchase method of accounting. Accordingly, the purchase price (net of a $0.2
post-closing purchase price adjustment in the Company's favor) and other
acquisition costs, together totaling $313.5, have been allocated to the
acquired assets and liabilities based on their fair values as of December 1,
1993. This allocation was finalized during 1994 upon completion of appraisals
and other studies of fair value.
The Company acquired substantially all the assets (other than discontinued
properties, certain real property, and certain other assets) of Old Remington
and certain other assets of the Sellers used in connection with the marketing
of fishline and fishline accessories (collectively, the "Business"). The
Company also assumed certain specified liabilities, including trade payables,
postretirement benefits for certain retained employees and certain other
contractual obligations of the Sellers, totaling $55.8. In addition, the
Company assumed financial responsibility up to a maximum aggregate amount of
$25.0 for certain product liability related claims involving pre-Acquisition
occurrences, including two lawsuits seeking certification as class actions,
and for certain environmental liabilities. Liabilities for costs in excess of
$25.0 for such matters, including the two class action lawsuits, were retained
by the Sellers, as were liabilities for discontinued products. The Sellers
also retained pension and postretirement benefit liabilities for all retirees
as of the Acquisition date as well as the postretirement benefit liability for
those employees eligible to retire as of that date.
The unaudited consolidated sales and net loss for the year ended December
31, 1993 on a pro-forma basis as though the Acquisition occurred January 1,
1993 are $366.1 and $3.3, respectively. This pro-forma financial information
is presented for informational purposes only and is not necessarily indicative
of the operating results that would have occurred had the Acquisition been
consummated January 1, 1993, nor is it necessarily indicative of future
operating results.
NOTE 3--SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Cash and Cash Equivalents:
Cash and cash equivalents include demand deposits with banks and highly
liquid investments with remaining maturities, when purchased, of three months
or less.
F-6
<PAGE>
RACI HOLDING, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(DOLLARS IN MILLIONS, EXCEPT SHARE AND PER SHARE DATA)
Inventories:
Inventories are stated at the lower of cost or market. The cost of
inventories other than stores and supplies is determined by the first-in,
first-out ("FIFO") method. The cost of stores and supplies is determined by
the average cost method. The operating profit for 1994 and the operating loss
for the one month period 1993 were adversely impacted by $16.8 and $2.5,
respectively, attributable to charges resulting from the purchase accounting
adjustment to reflect the fair value of inventory as of December 1, 1993.
Property, Plant and Equipment:
Investments in land, buildings and improvements, and machinery and equipment
are stated at cost. Property, plant and equipment obtained through the
Acquisition were recorded at their appraised values on the Acquisition date.
Depreciation is determined on a straight-line basis over the estimated lives
of the assets. Assets obtained through the Acquisition are being depreciated
over their remaining useful lives as determined by appraisal. The estimated
useful lives are principally 20 to 40 years for buildings and improvements,
and 5 to 8 years for machinery and equipment. Maintenance and repairs are
charged to operations; replacements and betterments are capitalized. Computer
hardware and software costs under capital leases are amortized over the term
of the lease.
Intangibles and Debt Issuance Costs:
Intangibles, consisting primarily of goodwill and trade names, are amortized
on a straight-line basis over their estimated useful lives of 40 years. Debt
issuance costs are being amortized over the life of the related debt.
Management assesses goodwill for impairment whenever facts and circumstances
indicate that the carrying amount may not be fully recoverable. To analyze
recoverability, management projects future cash flows, undiscounted and before
interest, over the remaining life of the goodwill. If these projected cash
flows are less than the carrying amount of the goodwill, an impairment loss
would be recognized, resulting in a writedown of goodwill with a corresponding
charge to income. The impairment loss would be measured based upon the
difference between the carrying amount of the goodwill and the present value
of future cash flows before interest. The Company uses a discount rate equal
to its average cost of funds to discount the expected future cash flows.
Financial Instruments:
Premiums paid for purchased interest rate cap agreements are amortized to
interest expense over the term of the agreements. Unamortized premiums are
included in prepaid expenses and other current assets on the balance sheet.
Amounts received under interest rate cap agreements are accrued as a reduction
of interest expense. Gains and losses on commodity futures contracts
qualifying as hedges are deferred and recognized as a component of the cost of
acquiring the related inventory.
Income Taxes:
The Company accounts for income taxes in accordance with the method
prescribed by Statement of Financial Accounting Standards ("SFAS") No. 109,
"Accounting for Income Taxes", which requires recognition of deferred tax
assets and liabilities based on the difference between the financial reporting
and tax bases of assets and liabilities, applying tax rates applicable to the
year in which the differences are expected to reverse.
F-7
<PAGE>
RACI HOLDING, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(DOLLARS IN MILLIONS, EXCEPT SHARE AND PER SHARE DATA)
Product Liability:
The Company provides for estimated defense and settlement costs related to
product liabilities when it becomes probable that a liability has been
incurred and reasonable estimates of such costs are available. The Company
maintains insurance coverage for product liability claims, subject to certain
policy limits and to certain self-insured retentions for personal injury or
property damage relating to occurrences arising after the Closing. The current
insurance policy extends through November 30, 1998.
Revenue Recognition:
Sales and related cost of sales are included in income when goods are
shipped to the customer. Customer prepayments represent advances for
ammunition products to be shipped in the subsequent year.
Advertising Costs:
Advertising costs are expensed as incurred. In 1995, 1994 and in the one
month period 1993, advertising costs totaled $18.2, $14.5 and $0.1,
respectively.
Self-Insurance:
The Company is self-insured for elements of its employee benefit plans
including, among others, workers compensation and elements of its property and
liability insurance programs, but limits its liability through stop-loss
insurance and annual plan maximum coverage limits. Self-insurance liabilities
are based on claims filed and estimates for claims incurred but not yet
reported.
Industry Segment:
The Company operates within a single industry segment. Sales outside the
United States of product manufactured in and exported from the United States
were $32.8 in 1995, $29.3 in 1994, and $0.8 for the one month period 1993.
Use of Estimates:
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements, and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
Net Income (Loss) Per Share:
Net income (loss) per share is computed by dividing net income (loss)
applicable to common share owners by the weighted average number of common
shares outstanding.
NOTE 4--CONCENTRATIONS OF CREDIT RISK
Concentrations of credit risk with respect to trade accounts receivable are
generally diversified, except as noted below, due to the large number of
customers comprising the Company's customer base. The Company reviews a
customer's credit history before extending credit and establishes an allowance
for doubtful accounts based upon factors surrounding the credit risk of
specific customers, historical trends and other information. The charge for
doubtful accounts in 1995, 1994 and in the one month period 1993 were $3.9,
$2.7 and $0.2, respectively.
F-8
<PAGE>
RACI HOLDING, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(DOLLARS IN MILLIONS, EXCEPT SHARE AND PER SHARE DATA)
The Company's cash and cash equivalents are invested in high-quality
securities placed with institutions with high credit ratings. This investment
policy limits the Company's exposure to concentrations of credit risk.
Sales to the Company's largest customer approximated 22% and 19% of sales in
1995 and 1994, respectively.
NOTE 5--INVENTORIES
At December 31, Inventories consist of the following:
<TABLE>
<CAPTION>
1995 1994
------ ------
<S> <C> <C>
Raw Materials................................................ $ 17.2 $ 15.4
Semi-Finished Products....................................... 23.9 21.3
Finished Products............................................ 56.2 49.8
Stores and Supplies.......................................... 15.4 14.2
------ ------
Total...................................................... $112.7 $100.7
====== ======
</TABLE>
NOTE 6--PROPERTY, PLANT AND EQUIPMENT
At December 31, Property, Plant and Equipment consist of the following:
<TABLE>
<CAPTION>
1995 1994
------ ------
<S> <C> <C>
Land....................................................... $ 1.2 $ 1.0
Building and Improvements.................................. 17.4 13.6
Leased Assets.............................................. 5.0 0.3
Machinery and Equipment.................................... 73.9 59.7
Construction in Progress................................... 5.5 5.6
------ ------
Subtotal................................................. 103.0 80.2
Less: Accumulated Depreciation............................. (17.9) (8.4)
------ ------
Total.................................................... $ 85.1 $ 71.8
====== ======
</TABLE>
NOTE 7--INTANGIBLES AND DEBT ISSUANCE COSTS
At December 31, Intangibles and Debt Issuance Costs consist of the
following:
<TABLE>
<CAPTION>
1995 1994
------ ------
<S> <C> <C>
Intangibles................................................ $ 94.7 $ 96.1
Debt Issuance Costs........................................ 12.1 12.1
------ ------
Subtotal................................................. 106.8 108.2
Less: Accumulated Amortization............................. (8.1) (4.7)
------ ------
Total.................................................... $ 98.7 $103.5
====== ======
</TABLE>
F-9
<PAGE>
RACI HOLDING, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(DOLLARS IN MILLIONS, EXCEPT SHARE AND PER SHARE DATA)
NOTE 8--OTHER ACCRUED LIABILITIES
At December 31, Other Accrued Liabilites consist of the following:
<TABLE>
<CAPTION>
1995 1994
------ ------
<S> <C> <C>
Marketing.................................................... 7.0 6.7
Compensation................................................. 3.8 6.3
Retiree Benefits............................................. 0.4 4.2
Corporate Relocation......................................... 4.0 --
Health Costs................................................. 4.0 2.7
Other........................................................ 7.7 11.8
------ ------
Total...................................................... $ 26.9 $ 31.7
====== ======
</TABLE>
NOTE 9--RETIREE BENEFITS
Pension Plan
The Company sponsors a defined benefit pension plan (the "Plan") which
covers substantially all employees. The Plan provides retirement benefits
based on years of service and compensation during the last years of
employment. The Company intends to fund this Plan consistent with the
requirements of federal laws and regulations.
Pension cost consists of:
<TABLE>
<CAPTION>
1995 1994 1993
----- ----- -----
<S> <C> <C> <C>
Service Costs........................................ $ 4.3 $ 4.3 $ 0.3
Interest Costs....................................... 4.0 3.3 0.2
Return on plan assets................................ (8.6) (3.4) (0.2)
Net Amortization and Deferral........................ 4.8 -- --
----- ----- -----
Net Pension Costs................................... $ 4.5 $ 4.2 $ 0.3
===== ===== =====
</TABLE>
The funded status of the Plan at December 31, was as follows:
<TABLE>
<CAPTION>
1995 1994
----- -----
<S> <C> <C>
Accumulated benefit obligation including vested benefits
of $26.9 and $15.2, respectively......................... $42.1 $27.0
===== =====
Projected benefit obligation.............................. $60.2 $47.9
Less: plan assets at fair value........................... (58.7) (43.3)
----- -----
Deficiency of assets over projected benefit obligations... 1.5 4.6
Unrecognized net gain from experience differences......... 5.1 4.4
----- -----
Pension Liability......................................... $ 6.6 $ 9.0
===== =====
Actuarial Assumptions:
Discount Rate........................................... 7.2% 8.5%
Rate of Compensation Increase........................... 4.0% 5.0%
Long-term rate of return on plan assets................. 8.5% 8.5%
</TABLE>
F-10
<PAGE>
RACI HOLDING, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(DOLLARS IN MILLIONS, EXCEPT SHARE AND PER SHARE DATA)
Under the Acquisition agreement, DuPont is required to transfer funds to the
Plan in an amount equal to the actuarial present value of the projected
pension benefit obligation as of December 1, 1993 related to transferred
employees. Management estimated the amount of such assets to be transferred to
the Plan by DuPont to be $39.8, plus interest of $4.7. These amounts were
included in the plan assets at fair value above. As of April 7, 1996, DuPont
had transferred $25.7 (including interest of $1.8) to the Plan which had been
invested in a fixed income portfolio consisting of government and corporate
bonds. On December 20, 1996, the Company and DuPont agreed to a final
settlement of $42.6 million, including interest.
In addition to the defined benefit pension plan, the Company also sponsors a
qualified defined contribution plan covering substantially all employees. The
Company matches 50% of a participant's contribution up to a maximum of 6% of a
participant's compensation. The Company's contribution to this plan was $1.4
and $1.5 in 1995 and 1994, respectively.
Postretirement Benefit Plan:
The Company sponsors a postretirement defined benefit plan which provides
certain employees, their covered dependents and beneficiaries with retiree
health and welfare benefits. Generally, employees who have attained a certain
age and who have rendered a minimum required term of service, on or after
December 1, 1993 (including service rendered prior to the Acquisition), will
be eligible for these benefits. The Company will fund postretirement benefits
claims as they are incurred. Postretirement benefits for employees who were
eligible to retire under the DuPont postretirement benefits scheme are covered
by that scheme.
In 1995, the Company amended its retiree medical program by changing the
cost sharing provisions including the introduction of a cap on the Company's
share of Medicare eligible retiree costs. These changes reduced the
accumulated postretirement obligation by approximately $5.2.
During 1995, the Company analyzed actual costs incurred for its active and
retiree medical plans. As a result of this study, the Company revised certain
actuarial assumptions.
Postretirement benefit cost consists of:
<TABLE>
<CAPTION>
1995 1994 1993
----- ---- ----
<S> <C> <C> <C>
Service Costs.......................................... $ 1.4 $1.2 $0.1
Interest Costs......................................... 1.4 1.6 0.1
Amortization........................................... (0.2) -- --
----- ---- ----
Postretirement benefit costs........................... $ 2.6 $2.8 $0.2
===== ==== ====
</TABLE>
Accumulated postretirement benefit obligation at December 31, consists of:
<TABLE>
<CAPTION>
1995 1994
----- -----
<S> <C> <C>
Retirees.................................................... $ 0.1 $ --
Active plan participants.................................... 15.7 21.3
Unrecognized prior service cost............................. 5.2 --
Unrecognized net gain (loss)................................ 1.2 (1.7)
----- -----
Accrued postretirement benefit liability.................... $22.2 $19.6
===== =====
</TABLE>
F-11
<PAGE>
RACI HOLDING, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(DOLLARS IN MILLIONS, EXCEPT SHARE AND PER SHARE DATA)
The assumed health care trend rate used in measuring the accumulated
postretirement benefit obligation was 10.5% for 1994 and 9.5% for 1995
declining to 5.5% ultimately in 2005. A one-percentage-point increase in the
assumed health care trend rate would increase both the accumulated
postretirement benefit obligation as of December 31, 1995 and the
postretirement health care cost for the year then ended by approximately 9.7%.
The assumed discount rate used to determine the accumulated postretirement
benefit obligation was 7% and 8.5% at December 31, 1995 and 1994,
respectively.
NOTE 10--DEBT
Short-term debt consists of unsecured, fixed interest rate agreements for
financing insurance premiums. The interest rate under these agreements at
December 31, 1995 and 1994 was 6.7% and 6.5%, respectively.
Long-Term Debt at December 31, consists of the following:
<TABLE>
<CAPTION>
1995 1994
------ ------
<S> <C> <C>
Credit Agreement:
Term Loans................................................ $100.0 $120.0
Revolving Credit Facility................................. 9.4 --
9.5% Senior Subordinated Notes due 2003..................... 99.5 99.4
Capital Lease Obligations................................... 4.3 0.4
------ ------
Subtotal................................................ $213.2 $219.8
Less: Current Portion....................................... 14.6 18.1
------ ------
Total................................................... $198.6 $201.7
====== ======
</TABLE>
The Company has a Credit Agreement, as amended, with certain lending
institutions (the "Credit Agreement") that provides for aggregate borrowings
of $280.0, including a Term Loan facility of $130.0 and a Revolving Credit
facility of $150.0. All borrowings under the Credit Agreement are guaranteed
by Holding, and are collateralized by substantially all of the assets of the
Company. The Term Loan facility was fully drawn in connection with the closing
of the Acquisition. The Company may borrow up to $150.0 (including certain
letters of credit) under the Revolving Credit facility through 2000, provided
that such borrowings are annually reduced for a period of 30 consecutive days
to $60.0 or less. The weighted average interest rate for borrowings under the
Term Loan and Revolving Credit facility were 8.4% and 9.0% per annum,
respectively, in 1995. As of December 31, 1994, the weighted average interest
rate on borrowings under the Term Loan and Revolving Credit Facility was 6.9%
and 7.8% per annum, respectively. As prescribed in the Credit Agreement, in
January, 1994, the Company entered into interest rate cap transactions to cap
the 3-month Eurodollar base rate on approximately 50% of the principal balance
of borrowings under the Term Loan facility at 5% for the period from July,
1994 through June, 1996. Commitment fees of 1/2 of 1% are payable on the
average daily unused portion of the Revolving Credit facility. At December 31,
1995, the Company had $4.6 in letters of credit and $9.4 of borrowings
outstanding with the remaining $136.0 of the Company's Revolving Credit
Facility available for borrowing. Borrowings under the Revolving Credit
Facility are classified as long-term as the Company has the intent and
ability, supported by the terms of the Credit Agreement, to maintain amounts
outstanding through the year 2000. At December 31, 1994, the Company had $6.0
in letters of credit outstanding with the remaining $144.0 of the Company's
Revolving Credit facility available for borrowing. The maximum amount
outstanding under the facility during 1995 and 1994 was $36.6 and $62.0,
respectively.
In accordance with the Credit Agreement, the Company made scheduled
principal payments on the term loans thereunder of $9.3 in 1995 and $10.0 in
1994. The Credit Agreement requires the Company to make further
F-12
<PAGE>
RACI HOLDING, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(DOLLARS IN MILLIONS, EXCEPT SHARE AND PER SHARE DATA)
quarterly principal payments on the term loans thereunder (after pro rata
reduction for certain prepayments and subject to further pro rata or other
reduction in the future) in an aggregate amount of approximately $13.6 in
1996, $18.2 in each of 1997 and 1998, $22.7 in 1999 and $27.3 in 2000 with all
remaining amounts then outstanding under the Credit Agreement to be repaid on
December 31, 2000. The Credit Agreement also requires the Company to make
mandatory prepayments on the term loans thereunder annually in an amount equal
to 50% of the Company's Excess Cash Flow (as defined therein) for the
preceding fiscal year. Any such prepayment will result in a pro rata reduction
in all subsequently scheduled principal payments on such term loans provided,
however, that any such payment made within the twelve months prior to the date
on which an installment or other payment of such principal is scheduled to be
paid on the term loans may, at the option of the Company, be applied first to
such installment or other payment. During 1995, the Company prepaid
approximately $10.7 for fiscal year 1994. No such prepayment will be required
in 1996.
Loans under the Credit Agreement generally bear interest, at the Company's
option, at a variable rate equal to either (i) the rate that is the highest of
the administrative agent's prime rate, or certain alternative rates, in each
case plus up to 1.25% per annum, or (ii) the rate at which certain Eurodollar
deposits are offered in the interbank Eurodollar market plus up to 2.50% per
annum. Beginning in 1995, upon the Company's delivery to the Credit
Agreement's administrative agent of the Company's quarterly financial
statements the interest rate on the Company's Credit Agreement borrowings can
be reduced by 0.25% to 1.0% per annum from levels in effect at December 31,
1995 if the Company has met certain financial ratios, based on EBITDA and
consolidated interest expense, for the four quarters then ended. One reduced,
such interest rate can also be increased up to the original levels if the
Company no longer meets the financial ratios making it eligible for interest
rate reduction.
Mandatory prepayments of borrowings are also required under the Credit
Agreement upon the occurrence of any of the following: certain changes in
control, the issuance of new equity or debt securities, certain sales of
assets other than in the normal course of business and any receipt of certain
insurance or litigation proceeds relating to the loss of or damage to any
assets in amounts exceeding $5.0.
The Company's 9.5% Senior Subordinated Notes (the "Notes"), in an aggregate
$100.0 principal amount, mature on December 1, 2003. The Notes are redeemable
at the option of the Company, in whole or in part, any time on or after
December 1, 1998. The redemption price ranges from 104.5% of the principal
amounts in 1998 to 101.5% in the year 2000. In addition, up to 25% of the
aggregate principal amount of the Notes will be redeemable on or prior to
December 1, 1996 at the option of the Company, following a public offering of
Holding common stock, at a redemption price of 108.5% of the principal amount.
In the event of a change in control, the Notes may be redeemed at the option
of the Company for the principal amount plus applicable interest and premium
at that date. The Notes are subordinate to borrowings under the Credit
Agreement and are guaranteed on a subordinated basis by Holding. The Notes are
not collateralized by any of the Company's assets. Effective from April 30,
1994 and until the day preceding the date of consummation of an offer for the
exchange of registered Notes for unregistered Notes, pursuant to a
Registration Statement on Form S-4, the interest rate on the Notes is 10%. The
original issue discounts on the Notes of $0.6 are being amortized at 9.56% per
annum. As of year ended December 31, 1995, the total amount amortized was
$0.1.
The Indenture for the Notes and the Credit Agreement contain various
restrictions on the Company's ability to incur debt, pay dividends and enter
into certain other transactions. In addition, the Credit Agreement contains
certain requirements with respect to minimum working capital, net worth and
earnings levels, as well as minimum ratios regarding profitability and
interest expense. Under the Credit Agreement, dividends by Remington to
Holding are not to exceed $1.0 annually unless for certain specific purposes,
as defined in the Credit Agreement.
As of December 31, 1995, the Company also had additional letters of credit
outstanding of $2.1.
F-13
<PAGE>
RACI HOLDING, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(DOLLARS IN MILLIONS, EXCEPT SHARE AND PER SHARE DATA)
NOTE 11--LEASES
Future minimum lease payments under capital leases and operating leases,
together with the present value of the net minimum capital lease payments at
December 31, 1995, are as follows:
<TABLE>
<CAPTION>
CAPITAL OPERATING
LEASES LEASES
------- ---------
<S> <C> <C>
Minimum Lease Payments for Years Ending December 31:
1996................................................. $ 1.3 $1.0
1997................................................. 1.3 0.4
1998................................................. 1.1 0.3
1999................................................. 1.1 0.2
2000................................................. 0.1 0.2
----- ----
Total minimum lease payments......................... 4.9 $2.1
====
Less amount representing interest...................... (0.6)
-----
Present value of net minimum lease payments............ $ 4.3
=====
</TABLE>
NOTE 12--STOCK PURCHASE AND OPTION PLANS
The Company has reserved 116,250 shares of the Class A Common Stock, par
value $.01 per share, of Holding ("Common Stock") for issuance in accordance
with the terms of the RACI Holding, Inc. Stock Option Plan (the "Option
Plan"), the RACI Holding, Inc. Stock Purchase Plan (the "Purchase Plan") and
the RACI Holding, Inc. 1994 Directors' Stock Plan (the "Directors' Plan"). To
date, no awards have been made under either the Purchase Plan or the
Directors' Plan and no shares of Common Stock have been issued under any of
the plans.
In 1995, the Board of Directors of Holding amended the Option Plan by
approving the Amended and Restated RACI Holding, Inc. Stock Option Plan and
authorized the grant of options (the "Options"). Options were granted to
officers and key employees of the Company to purchase Common Stock at the then
estimated fair value of $100 per share. The Options will become exercisable in
three equal annual installments, beginning on the second anniversary of the
date of grant, subject to the continued employment of any employee
optionholder. The vesting of Options may be accelerated upon the occurrence of
certain events specified in the Option Plan, as amended, including a change in
control as defined therein. Options not exercised will expire on the tenth
anniversary of the date of grant. At December 31, 1995 Options to purchase
35,905 shares of Common Stock were outstanding, none of which were
exercisable.
NOTE 13--SHAREHOLDER'S EQUITY
In June 1995, Holding amended its certificate of incorporation to reduce the
number of shares of Common Stock authorized from 10,000,000 shares to
2,500,000 shares, consisting of 1,250,000 shares of Class A Common Stock, par
value $.01 per share, and 1,250,000 shares of Class B Common Stock, par value
$.01 per share. The Class A Common Stock is voting stock and the Class B
Common Stock is non-voting stock. None of the Class B Common Stock has been
issued.
NOTE 14--CORPORATE RELOCATION
On September 19, 1995, the Board of Directors authorized management to
relocate the Company's corporate headquarters from Wilmington, Delaware to
Madison, North Carolina. Approximately $3.1 was
F-14
<PAGE>
RACI HOLDING, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(DOLLARS IN MILLIONS, EXCEPT SHARE AND PER SHARE DATA)
accrued as a noncurrent liability for estimated costs related to the
relocation as part of the accounting for the Acquisition. The Company accrued
an additional $1.0 in 1995 based on current estimates of costs to relocate
approximately 60 employees, and for the payment of severance benefits to
approximately 70 employees who will not be relocated. The relocation will be
completed during 1996.
NOTE 15--COMMITMENTS AND CONTINGENCIES
The Company has various purchase commitments approximating $4.1 million, for
materials, supplies, property and equipment incidental to the ordinary conduct
of business. Such commitments are not at prices in excess of current market
prices.
Pursuant to the Asset Purchase Agreement, the Sellers retained liability
for, and are required to indemnify the Company against, (1) all product
liability cases and claims (whenever they may arise) involving discontinued
products and (2) all product liability cases and claims involving products
that had not been discontinued as of the Acquisition closing ("extant
products") and relating to occurrences that took place, but were not disclosed
to the Company, prior to such closing (the "Closing"). The Company assumed
financial responsibility, up to an aggregate amount of $25.0 (the "Cap"), for
(1) product liability cases and claims involving extant products and relating
to occurrences that took place, and were disclosed to the Company, prior to
the Closing, and (2) any environmental liabilities relating to the ownership
or operation of Sporting Goods prior to the Closing. The Sellers retained
liability for, and are required to indemnify the Company against, all such
disclosed product liability occurrences and such environmental liabilities in
excess of the Cap. As of December 31, 1995, the Company has made payments
totaling $23.4 with respect to product liability cases and claims and
environmental costs subject to the Cap. Except for certain cases and claims
relating to shotguns as described below, and for all cases and claims relating
to discontinued products and claims relating to occurrences that took place,
but were not disclosed to the Company, prior to the Closing, the Company will
bear financial responsibility for product liability cases and claims relating
to occurrences after the Closing. Because of the nature of firearm and
ammunition products, the Company anticipates that it, as well as other
manufacturers of firearm or ammunition products, will continue to be involved
in product liability litigation in the future.
Since December 1, 1993, the Company has maintained insurance coverage for
product liability claims subject to certain self-insured retentions both on a
per-occurrence basis and in the aggregate for personal injury or property
damage relating to occurrences arising after the Closing. The current
insurance policy extends through November 30, 1998. Based on actual defense
and disposition costs incurred by the Company and Sporting Goods with respect
to product liability cases and claims in recent years, management estimates
that the ultimate liability for product liability cases and claims relating to
occurrences arising during 1995 will be in the range of $4.5 to $9.0, and $4.3
to $8.1 for occurrences during 1994. The Company charged $6.5 and $17.5 of
payments against the accrual for product and environmental liabilities in the
years ended December 31, 1995, and 1994, respectively. Management estimates
that the amount of the self insured retention accrued ($4.5 in 1995, and $4.3
in 1994) will be paid out over the following three to five years.
The Company and the Sellers are engaged in the joint defense of product
liability litigation involving Remington brand firearms and ammunition.
Approximately 50 such cases are pending, primarily alleging defective product
design or manufacture, or failure to provide adequate warnings. Almost all of
these cases are individual actions alleging personal injury, and many seek
punitive as well as compensatory damages. Of these pending cases,
approximately 43 are subject to the Cap or involve discontinued products or
undisclosed pre-Closing occurrences, and accordingly are cases for which the
Sellers retained liability and are required to indemnify the Company, either
in full or in excess of the Cap. Approximately 7 of the pending cases involve
post-Closing occurrences for which the Company would be responsible. The
Company had previously disposed of a number of other cases involving post-
Closing occurrences by settlement.
F-15
<PAGE>
RACI HOLDING, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(DOLLARS IN MILLIONS, EXCEPT SHARE AND PER SHARE DATA)
Two cases involving Company products that were pending at the time of the
Closing, were asserted as class actions, one involving shotguns and the other
bolt-action rifles. In each case certification was sought of a class of owners
of Remington brand firearms, generally claiming economic loss based on alleged
product defect, and seeking compensatory, punitive and treble damages, plus
other costs. In addition to the liabilities retained by the Sellers in excess
of the Cap, the Sellers also are required to indemnify the Company for all
claims in these cases for economic loss involving firearms similar to those
involved in these cases and shipped up to 42 calendar months after the
Closing.
On February 6, 1996, the federal district court in San Antonio gave final
approval to a settlement of the class action relating to Remington brand
shotguns, Leonel Garza et al. v. Sporting Goods Properties Inc. et al.
("Garza"). The Garza case involved certain Remington brand 12-gauge shotguns,
including Model 1100, 11-87 and 870 shotguns, manufactured from 1960 to 1995.
That lawsuit was filed against the Sellers in Texas state court in November,
1993, and was later removed to federal court. Plaintiffs amended the complaint
in 1994 to assert a nationwide class action and to name as additional
defendants both the Company and the DuPont subsidiary that had directly owned
Sporting Goods prior to the Acquisition. The settlement resolves claims
alleging economic loss that might be brought by owners of the shotguns at
issue in connection with the barrel steel formerly used in such firearms;
however it does not resolve claims for personal injury. Pursuant to the
settlement, once the district court's decision is no longer subject to appeal,
a fund of approximately $19.0 will be distributed to eligible shotgun owners.
As of March, 1996, no appeals have been filed. Notices are expected to be
published in mid-1996 informing owners how to apply for payment for the fund.
Defense costs associated with Garza are subject to the Cap. However, pursuant
to a separate agreement between the Company and the Sellers, the $19.0 million
cost of the fund, as well as additional settlement costs and court-ordered
attorneys fees, are to be paid by the Sellers, without regard to the Cap.
Publicity regarding the Garza agreement has led to some additional reports of
personal injury allegedly involving use of the shotguns included in the class
action lawsuit. The Company anticipates, at least in the short term, an
increase in the number of such claims. The Company does not believe that the
disposition of Garza (including any individual personal injury actions which
might be filed as a result of the settlement) is likely to have a material
adverse effect upon its financial condition or results of operations.
The other purported class action, Joe Luna, et al. v. Remington Arms
Company, Inc. and E. I. du Pont de Nemours and Company ("Luna"), filed in 1989
against the Sellers in Texas state court, and amended in December 1993, seeks
certification of a class consisting of all Texas owners, allegedly 400,000 in
number, of Model 700 bolt-action rifles. The parties in Luna have briefed the
issue of whether class certification is appropriate in this case, and a
hearing is scheduled for May 6, 1996. The Company has not been named as a
defendant in this case.
The representations and warranties in the Asset Purchase Agreement expired
18 months after the Closing, with certain exceptions, and claims for
indemnification with respect thereto were to be made within 30 days of such
expiration. The Company made claims for such indemnification involving product
liability issues within that time period. The Company and the Sellers have
agreed that, should the Garza settlement become final, the Sellers shall
assume financial responsibility for a portion of costs relating to product
liability claims and cases involving certain shotguns manufactured prior to
mid-1995 and based on occurrences arising prior to November 30, 1999, and that
any claims the Company and the Sellers may have against each other under the
Asset Purchase Agreement relating to shotguns (excluding their various
indemnification rights and the allocation of certain costs under the Cap) will
be released.
Because the Company's assumption of financial responsibility for certain
product liability cases and claims involving pre-Acquisition occurrences is
limited to the amount of the Cap, with the Sellers retaining liability in
F-16
<PAGE>
RACI HOLDING, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(DOLLARS IN MILLIONS, EXCEPT SHARE AND PER SHARE DATA)
excess of the Cap and indemnifying the Company in respect thereof, and because
of the Company's accruals with respect to such cases and claims, the Company
believes that cases and claims involving occurrences arising prior to the
Closing are not likely to have a material adverse effect upon the financial
condition or results of operations of the Company. While it is difficult to
forecast the outcome of litigation, the Company does not believe, in light of
relevant circumstances (including the availability of insurance with respect
to cases and claims involving occurrences arising after the Closing and the
Company's accruals for the uninsured costs of such cases and claims), that the
resolution of all product liability cases and claims involving post-
Acquisition occurrences, which occurrences have arisen prior to April 2, 1996,
individually or in the aggregate, will have a material adverse effect upon the
financial condition or results of operations of the Company. Because of the
nature of its products, the Company anticipates that it will continue to be
involved in product liability litigation in the future.
The Company does not expect current environmental regulations to have a
material adverse effect on the results of operations and has not been
identified by regulatory authorities as a potentially responsible party.
However, the Company's liability for future environmental remediation costs is
subject to considerable uncertainty due to the complex, ongoing and evolving
process of identifying the necessity for, and generating cost estimates for,
remedial work. Furthermore, there can be no assurance that environmental
regulations will not become more restrictive in the future.
NOTE 16--INCOME TAXES
The provision (benefit) for income taxes consists of the following
components:
<TABLE>
<CAPTION>
1995 1994 1993
---- ---- -----
<S> <C> <C> <C>
Federal:
Current................................................. $5.7 $-- $ --
Deferred................................................ 1.1 5.4 (1.1)
State:
Current................................................. 1.0 -- --
Deferred................................................ 0.7 1.0 (0.2)
---- ---- -----
$8.5 $6.4 $(1.3)
==== ==== =====
</TABLE>
The tax effects of temporary differences that give rise to significant
portions of the deferred tax assets and deferred tax liabilities are presented
below:
<TABLE>
<CAPTION>
1995 1994
----- -----
<S> <C> <C>
Deferred tax assets:
Accrued Employee and Retiree Benefits...................... $14.3 $13.0
Product, Environmental and Other Liabilities............... 7.3 7.5
Receivables and Inventory.................................. 3.5 2.7
Tax Credits................................................ 3.6 --
Net Operating Losses....................................... -- 4.2
Other...................................................... 0.6 0.8
----- -----
29.3 28.2
Deferred tax liabilities:
Property, Plant and Equipment.............................. (4.4) (1.7)
Intangibles................................................ (1.1) (0.9)
----- -----
(5.5) (2.6)
Net deferred tax assets...................................... $23.8 $25.6
===== =====
</TABLE>
F-17
<PAGE>
RACI HOLDING, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(DOLLARS IN MILLIONS, EXCEPT SHARE AND PER SHARE DATA)
The Company has not established a valuation allowance against the net
deferred tax assets as it is more likely than not that the assets will be
fully utilized against future taxable income.
The following is a reconciliation of the statutory federal income tax rate
to the Company's effective income tax rates:
<TABLE>
<CAPTION>
1995 1994 1993
---- ---- -----
<S> <C> <C> <C>
Federal statutory rate................................. 35.0% 35.0% (35.0)%
State income taxes, net of federal benefits............ 5.4 3.8 (3.8)
Nondeductible expenses................................. 2.8 2.1 1.3
Other.................................................. (0.7) (0.7) 1.4
---- ---- -----
Effective income tax rate.............................. 42.5% 40.2% (36.1)%
==== ==== =====
</TABLE>
NOTE 17--RELATED PARTY AND DUPONT TRANSACTIONS
The Clayton & Dubilier Private Equity Fund IV Limited Partnership ("C&D Fund
IV"), which is the sole stockholder of Holding, is a private investment fund
managed by Clayton, Dubilier and Rice, Inc. ("CD&R"). CD&R receives an annual
fee for management and financial consulting services provided to the Company
and reimbursement of related out-of-pocket expenses. Fees and out of pocket
expenses paid to CD&R were $0.4 in 1995 and $0.5 in 1994. In connection with
the Acquisition and arranging the financing thereof, the Company paid CD&R a
fee of $4.5.
Coincident with the Acquisition, the Company entered into a transitional
service agreement with DuPont under which DuPont provided various services
(e.g., cash management, vendor payment, benefits administration and payroll
and information systems support services) for a transitional period after the
closing of the Acquisition. All of these services have now been taken over by
the Company. Costs under the transitional services agreement were $1.4, $3.6
and $0.4 for 1995, 1994 and 1993, respectively.
In addition, the Company has entered into a supply agreement with DuPont
through 1996 for the supply of fishline. Purchases under the supply agreement
were $3.8, $4.6 and $0.2 for the years ended 1995, 1994 and the one month
period ended 1993, respectively.
NOTE 18--FINANCIAL INSTRUMENTS
The Company has only limited involvement with financial instruments and does
not use them for trading purposes. Financial instruments are used to manage
well-defined interest rate and commodity price risks.
Based on borrowing rates currently available to the Company for debt with
similar terms and maturities, the estimated fair value of the Company's debt
at December 31, 1995 and 1994 is equal to the carrying amount.
Interest rate cap agreements are used to reduce the potential impact of
increases in interest rates on approximately 50% of the Company's variable
rate term loan debt under the Credit Agreement. As a result of additional
principal payments during the year, approximately 55% of the principal balance
was subject to the interest rate cap at December 31, 1995. At December 31,
1995 the Company was a party to two interest rate cap agreements, each with
remaining terms of 6 months. These agreements were effective July, 1994 and
entitle the Company to receive from major financial institutions on a
quarterly basis the amount, if any, by which the Eurodollar base rate on the
variable rate term loan borrowings exceeds 5.0%. At December 31, 1995, the 3-
month Eurodollar base rate was 5.7%. Based on terms currently available for
interest rate caps with similar terms and maturities, the estimated fair
market value of the caps at December 31, 1995 was approximately $0.1 million.
F-18
<PAGE>
RACI HOLDING, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(DOLLARS IN MILLIONS, EXCEPT SHARE AND PER SHARE DATA)
Commodity futures contracts are used to hedge the price risk related to firm
commitments and anticipated purchases of lead and copper to be used in the
manufacture of the Company's products. These contracts are purchased at a
percentage of the face amount and additional payments are then made or
received based on the differential between the face amount and the actual
price of the metals contracts at the date sold. The face amount of commodity
contracts outstanding at December 31, 1995 was $3.4. At December 31, 1995 and
1994, the market value of the Company's outstanding contracts relating to firm
commitments and anticipated purchases up to one year from the respective
balance sheet date was $3.4 and $2.9 respectively. As of December 31, 1995 and
1994 hedging losses related to closed commodity futures contracts of $0.1 and
$0.4, respectively, were included in inventory. The Company also enters into
forward purchase contracts for the Japanese Yen from time to time in support
of product supply contracts.
NOTE 19--RESEARCH AND DEVELOPMENT
Research and development expenses of $8.3 for 1994 include $2.3 of
nonrecurring costs related to the Company's consolidation of its research and
development function into a new facility in Elizabethtown, Kentucky, including
estimated severance costs of $1.6 million to be paid to approximately 40
employees. Research and development expenses of $5.3 for 1995 includes $1.0
benefit as the actual severance costs were less than estimated.
NOTE 20--QUARTERLY FINANCIAL DATA (UNAUDITED)
<TABLE>
<CAPTION>
QUARTER
---------------------------
FIRST SECOND THIRD FOURTH TOTAL
------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C>
1995
Sales.................................. $114.2 $95.9 $123.5 $ 93.4 $427.0
Gross Profit........................... 43.1 30.3 38.6 29.7 141.7
Net Income (Loss)...................... $ 8.0 $ 1.8 $ 4.1 $ (2.4) $ 11.5
Net Income (Loss)
Per Share............................. $10.67 $2.40 $ 5.46 $(3.20) $15.33
</TABLE>
The results of operations for the second quarter ended June 30, 1995 were
favorably impacted by a $1.0 per-tax benefit as the actual research and
development relocation costs were less than estimated. The results of
operations in the third quarter ended September 30, 1995 were negatively
impacted by an additional pre-tax charge of $1.4 related to the relocation of
the corporate headquarters to Rockingham County, North Carolina, which was
reduced in the fourth quarter by $0.4.
<TABLE>
<CAPTION>
QUARTER
---------------------------
FIRST SECOND THIRD FOURTH TOTAL
------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C>
1994
Sales.................................. $109.2 $101.6 $130.0 $ 76.9 $417.7
Gross Profit........................... 24.7 34.9 46.6 24.4 130.6
Net Income (Loss)...................... $ 0.7 $ 5.0 $ 9.3 $ (5.6) $ 9.4
Net Income (Loss)
Per Share............................. $ 0.93 $ 6.67 $12.40 $(7.47) $12.53
</TABLE>
The results of operations for the fourth quarter ended December 31, 1994
were negatively impacted by pre-tax charges of $2.3 and $1.8 related to the
relocation of the Company's research and development facility and
implementation of new management information systems, respectively. These
charges, net of tax benefits totaled $2.5. Gross profit for the first quarter,
the second quarter and the fourth quarter includes nonrecurring pre-tax
inventory charges relating to the acquisition accounting of $13.7, $2.1 and
$1.0, respectively.
F-19
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To The Board of Directors and Stockholder of RACI Holding, Inc.
We have audited the accompanying statement of net assets sold to RACI
Acquisition Corporation of the DuPont Sporting Goods Business (the "Business")
of E.I. du Pont de Nemours and Company ("DuPont") at November 30, 1993, and
the related statements of operations and cash flows of the business for the
eleven month period ended November 30, 1993. These financial statements are
the responsibility of the Business' management. Our responsibility is to
express an opinion on these financial statements based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audit provides a reasonable basis
for our opinion.
The accompanying financial statements were prepared as described in Note 1
to present the net assets of the Business sold to RACI Acquisition
Corporation, and the related results of operations and cash flows of the
Business, and are not intended to be a complete presentation of the Business'
financial position.
In our opinion, the financial statements audited by us present fairly, in
all material respects, the net assets sold to RACI Acquisition Corporation of
the Business at November 30, 1993, and the related results of operations and
cash flows for the eleven month period ended November 30, 1993, in conformity
with generally accepted accounting principles.
As more fully discussed in Note 8, the Business is a defendant in various
product liability proceedings. The ultimate outcome of these proceedings,
including two lawsuits seeking certification as class actions, can not
presently be determined. Accordingly, no provision for the ultimate outcome
that may result upon resolution of such proceedings subsequent to November 30,
1993, other than defense and indemnity costs incurred through December 31,
1994 and estimated defense costs to be incurred subsequent to December 31,
1994, has been made in the accompanying financial statements.
Coopers & Lybrand L.L.P.
New York, New York
December 31, 1994
F-20
<PAGE>
DUPONT SPORTING GOODS BUSINESS
STATEMENT OF NET ASSETS SOLD TO RACI ACQUISITION CORPORATION (SEE NOTE 1)
(DOLLARS IN MILLIONS)
<TABLE>
<CAPTION>
NOVEMBER 30,
1993
------------
<S> <C>
ASSETS
Current Assets
Accounts Receivable Trade--Net of Allowances of $6.4............... $ 63.8
Inventories........................................................ 60.3
Prepaid Expenses and Other Current Assets.......................... 3.2
------
Total Current Assets........................................... 127.3
Property, Plant and Equipment--Net................................. 45.9
Other Assets....................................................... 2.4
------
Total Assets................................................... $175.6
======
LIABILITIES AND OWNER'S NET INVESTMENT
Current Liabilities
Accounts Payable................................................... $ 7.7
Product and Environmental Liabilities.............................. 15.4
Accrued Employee Costs............................................. 2.5
Accrued Marketing Costs............................................ 4.3
Other Current Liabilities.......................................... 3.5
------
Total Current Liabilities...................................... 33.4
Retiree Benefits................................................... 17.2
Product and Environmental Liabilities.............................. 9.6
Other Non-Current Liabilities...................................... 0.4
------
Total Liabilities.............................................. 60.6
Commitments and Contingencies......................................
Owner's Net Investment............................................. 115.0
------
Total Liabilities and Owner's Net Investment................... $175.6
======
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-21
<PAGE>
DUPONT SPORTING GOODS BUSINESS
STATEMENTS OF OPERATIONS (SEE NOTE 1)
(DOLLARS IN MILLIONS)
<TABLE>
<CAPTION>
ELEVEN MONTH
PERIOD ENDED
NOVEMBER 30,
1993
------------
<S> <C>
Sales*............................................................ $346.9
Cost of Goods Sold................................................ 240.9
------
Gross Profit...................................................... 106.0
Selling, Marketing and Distribution Expense....................... 72.8
General and Administrative Expense................................ 15.0
Research & Development Expense.................................... 5.0
Other Expenses.................................................... 6.6
------
Operating Profit.................................................. 6.6
Interest Expense.................................................. (5.3)
Other Income...................................................... 0.7
------
Profit Before Income Taxes and the Effect of Accounting Changes... 2.0
Provision for Income Taxes........................................ (0.6)
------
Income Before Effect of Accounting Changes........................ 1.4
Effect of Changes in Accounting for Postretirement Benefits Other
than Pensions and Postemployment Benefits, net of tax benefit.... (74.1)
------
Net (Loss) Income................................................. $(72.7)
======
</TABLE>
- --------
* Sales are presented net of Federal Excise Taxes of $28.8.
The accompanying notes are an integral part of these financial statements.
F-22
<PAGE>
DUPONT SPORTING GOODS BUSINESS
STATEMENTS OF CASH FLOWS [SEE NOTE 1]
<TABLE>
<CAPTION>
ELEVEN MONTH
PERIOD ENDED
NOVEMBER 30
1993
------------
<S> <C>
Operating Activities
Net (Loss) Income................................................ $(72.7)
Adjustments to reconcile Net (Loss) Income to Cash Provided by
Operating Activities
Transition Effect of Accounting Change......................... 74.1
Depreciation................................................... 9.5
Other Noncash Charges and Credits.............................. 0.8
Changes in Operating Assets and Liabilities
(Increase) in Accounts Receivable Trade--Net................. (19.4)
Decrease in Inventories...................................... 14.1
Decrease in Prepaid Expenses and Other Current Assets........ 0.3
(Decrease) in Accounts Payable............................... (2.2)
Increase in Product and Environmental Liabilities............ 18.8
Increase in Accrued Employee Costs........................... 2.5
Increase in Accrued Marketing Costs.......................... 1.1
(Decrease) in Other Current Liabilities...................... (3.4)
------
Cash Provided by Operating Activities............................ 23.5
Investing Activities
Purchase of Property, Plant and Equipment........................ (9.1)
------
Net Cash (used in) Investing Activities.......................... (9.1)
Financing Activities
Net Cash Settlements To Owner, Including Deemed Cash Portion of
Transition Effect of Accounting Changes......................... (14.4)
------
Cash and Cash Equivalents at Beginning and End of Period......... $ --
======
</TABLE>
- --------
Note: Interest paid was $5.3. Estimated income taxes paid were $0.6.
The accompanying notes are an integral part of these financial statements.
F-23
<PAGE>
DUPONT SPORTING GOODS BUSINESS
NOTES TO FINANCIAL STATEMENTS
(DOLLARS IN MILLIONS)
NOTE 1--BASIS OF PRESENTATION
The Sporting Goods Business (the "Business") of E. I. du Pont de Nemours and
Company ("DuPont") is principally conducted through Remington Arms Company,
Inc. ("Remington"), a wholly-owned subsidiary of DuPont. The Business is
engaged in the design, manufacture, and sale of sporting goods products for
the hunting, shooting sports, and fishing markets. The product lines of the
Business consist of firearms, ammunition, and hunting/gun care accessories,
sold under the Remington name and other labels, and fishing products, sold
under the Stren name and other labels.
On December 1, 1993 (the "Closing Date"), DuPont sold the assets of the
Business to RACI Acquisition Corporation ("RACI"), a new company organized by
Clayton, Dubilier & Rice, Inc. to effect the acquisition. Under the terms of
the asset purchase agreement and related ancillary agreements (collectively,
the "Agreements") for the sale of the Business, RACI purchased the assets and
assumed specified liabilities of the Business:
I. excluding all assets and liabilities associated with (a) certain
powder metals operations conducted by Remington at its Hazen, Arkansas
facility, (b) sites where Remington ceased operations, including those
sites where it ceased operation in 1985 and 1989, and (c) the Remington
Farms property (collectively, the "Excluded Operations"); and
II. excluding, among other things, cash and cash equivalents; all assets
and liabilities of the Business with respect to taxes (including current
and deferred income taxes and taxes other than on income) relating to
operations of the Business prior to the Closing Date, except for prepaid
property taxes and prepaid payroll taxes; all liabilities of the Business
with respect to retirees and former employees of the Business; all
liabilities with respect to current employees of the Business relating to
service with the Business prior to the Closing Date, except for accrued but
unpaid salaries, wages, sick pay, 1993 incentive compensation, pension
liabilities for employees of the Business who have not retired as of the
Closing Date (under the Acquisition Agreement, Remington has assumed
liability for and DuPont is required to transfer funds to a new pension
plan to be established by Remington in an amount equal to the actuarial
present value of the accumulated pension obligations as of the Closing Date
for such employees), and other postretirement benefits for employees of the
Business not eligible to retire as of the Closing Date; certain rights or
obligations of the Business under specified contracts with DuPont or its
affiliates; liabilities in excess of $25.0, in total, for (a) environmental
liabilities relating to operation of the Business prior to the Closing
Date, and/or (b) product-related liabilities for personal injury, wrongful
death, economic loss or property damage ("Product Liability Losses")
resulting from events disclosed to RACI and occurring prior to the Closing
Date; Liabilities for Product Liability Losses for undisclosed events
occurring prior to the Closing Date or resulting from discontinued
products; expenses relating to the Agreements; accounts payable to DuPont,
other than trade accounts payable; and certain real property, plant and
equipment at the Business's Lonoke, Arkansas and Findlay, Ohio sites, and
the environmental liabilities associated therewith (collectively, the
"Excluded Assets and Liabilities").
Historically, financial statements were not prepared for the Business. These
financial statements have been carved out from the historical accounting
records of Remington and DuPont. The results of operations include all
revenues and costs directly attributable to the Business sold to RACI. The
results of operations also include allocations of (a) costs for administrative
functions and services performed on behalf of the Business by centralized
staff groups with DuPont, (b) DuPont general corporate expense, and (c)
pension and postretirement benefit costs (See Note 2 for a description of the
allocation methodologies employed), and charges from Consol, Inc., a 50% owned
affiliate of DuPont, for executive and other management services (See Note
10). Interest expense is determined based on the consolidated indebtedness of
DuPont, and, in these financial statements, has been allocated to the Business
on the basis of the Business's proportionate share of the identifiable
operating
F-24
<PAGE>
DUPONT SPORTING GOODS BUSINESS
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
(DOLLARS IN MILLIONS)
assets of DuPont. As more fully described in Note 2, current and deferred
income tax expense has been determined as if the Business were a separate
taxpayer. The results of the Excluded Operations are not included in the
results of operations.
The Business's manufacturing operations are conducted at sites used
exclusively by the Business. However, the Business's headquarters was located
at a site where other DuPont operations not included in the Business are
present. At this shared site, only the assets used exclusively by the Business
were included in the Statement of Net Assets Sold to RACI. The Statement of
Net Assets Sold to RACI excludes the assets and liabilities of the Excluded
Operations and the Excluded Assets and Liabilities.
Throughout the period covered by these financial statements, the Business
participated in DuPont's centralized cash management system and, as such, its
cash funding requirements were met by, and generally all cash generated was
transferred to, DuPont. Because RACI acquired only certain specified assets of
the Business and assumed only certain specified liabilities of the Business,
for the purpose of these financial statements, all costs and benefits
allocated to the Business and all charges, costs, expenses and benefits
related to the Excluded Assets and Liabilities are deemed to have been paid or
received by the Business, in cash, in the period such charges, costs, expenses
or benefits were recognized in the Statement of Operations of the Business.
All of the allocations and estimates in the financial statements are based
on assumptions that management believes are reasonable under the
circumstances. However, these allocations and estimates are not necessarily
indicative of the costs and expenses that would have results if the Business
had been operated as a separate entity.
NOTES 2--SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Accounting Changes:
Effective January 1, 1993, for the purpose of these financial statements,
the Business adopted Statement of Financial Accounting Standards (SFAS) No.
106, "Employers' Accounting for Postretirement Benefits Other than Pensions,"
and SFAS No. 112, "Employers' Accounting for Postemployment Benefits". The
Business recorded charges to net income of $15.1 and $2.0, net of deferred tax
benefit of $8.0 and $0.8, respectively, for the net effects of transition to
these two new standards as of January 1, 1993 with respect to those employees
of the Business who remained active employees and were not eligible for
retirement benefits as of November 30, 1993.
The Business also recorded a charge of $101.6, net of deferred tax benefit
of $35.4, for the estimated SFAS No. 106 transition effect with respect to
retirees of the Business as of January 1, 1993 and active employees who were
fully eligible for retirement benefits prior to 1993 or became eligible during
1993. These amounts, and the $2.0 accrued liability for the adoption of SFAS
No. 112, are all components of the Excluded Assets and Liabilities, as is the
deferred tax asset related to the transition charge. As such, $59.0 of the
$74.1 transition charge is deemed to have resulted in a cash payment by the
Business (See Note 1). This deemed cash payment has been offset against cash
provided by DuPont in the Statement of Cash Flows in order to better reflect
the substance of this item.
Inventories:
Inventories are valued at the lower of cost or market. The cost of the
majority of inventories other than stores and supplies is determined by the
last-in, first-out (LIFO) method. The cost of stores and supplies is
determined by the average cost method.
Property, Plant and Equipment:
Property, plant and equipment is carried at cost and is generally classified
in depreciable groups and depreciated using accelerated methods that produce
results substantially similar to the sum-of-the-years digits
F-25
<PAGE>
DUPONT SPORTING GOODS BUSINESS
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
(DOLLARS IN MILLIONS)
method. Depreciation rates generally range from 4% to 12% per annum on direct
manufacturing facilities and from 2% to 10% per annum on other facilities; in
some instances, appropriately higher or lower rates are used. In general, the
gross carrying value of property, plant and equipment surrendered, retired,
sold, or otherwise disposed of is charged to accumulated depreciation and any
salvage or other recovery therefrom is credited to accumulated depreciation.
Maintenance and repairs are charged to operations; replacements and
betterments are capitalized.
Financial Instruments:
The Business purchases publicly traded futures contracts for lead, zinc, and
copper to hedge a portion of anticipated raw material purchases during the
ensuing twelve month period. Gains or losses from these contracts are deferred
until the actual purchase of the hedged raw material, at which time such gains
or losses are included in determining the purchase cost of such materials. At
November 30, 1993, the Business had approximately $18.6 of these contracts
open, with settlement dates through December 15, 1994. Deferred hedging losses
relating to futures contracts were $0.6 at November 30, 1993. DuPont provided
a financial guarantee of the Business's performance under these contracts up
to $10.0, which terminated as of the Closing Date.
Income Taxes:
The taxable income of the Business was included in the tax returns of
DuPont. As such, separate income tax returns were not prepared or filed by the
Business. Current and deferred income tax expense of the Business has been
determined by applying the asset and liability approach set forth in SFAS No.
109, "Accounting for Income Taxes," as if the Business were a separate
taxpayer. All tax expense is deemed to have been paid by the Business, in
cash, in the period such expense is recorded by the Business.
Product Liability:
The Business provides for estimated defense and indemnity costs related to
product liabilities when it becomes probable that a liability has been
incurred and reasonable estimates of such costs are available. Costs for
defense and indemnity included in selling, marketing and distribution expense
were $30.2 for the period.
Pensions:
DuPont has non-contributory defined benefit plans covering substantially all
U.S. employees, including the employees of the Business. The plans provide
retirement benefits based on years of service and compensation during the last
years of employment. The cost of these plans for active employees was
allocated to the Business (See Note 7) and is generally included in cost of
goods sold.
Pension cost allocated to the Business is deemed to have resulted in a cash
contribution between the Business and DuPont in the period the pension cost
was incurred, and, in return, DuPont is deemed to have assumed all
responsibility for pension payments to retirees. Accordingly, no pension
related assets or liabilities are included in the statement of net assets sold
to RACI.
Other Postretirement Benefits:
DuPont and certain of its subsidiaries provide medical, dental, and life
insurance benefits to pensioners and survivors. In 1992, these benefits were
paid and accounted for as the costs were incurred. Benefit costs under these
plans were allocated to the Business based principally on the business
location of the employee at the time of retirement.
F-26
<PAGE>
DUPONT SPORTING GOODS BUSINESS
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
(DOLLARS IN MILLIONS)
As discussed above, effective January 1, 1993, for the purpose of these
financial statements, the Business adopted the accrual method of accounting
for the cost of these benefit plans as prescribed by SFAS No. 106. The
Business accrued benefit costs during the period with respect to employees of
the Business who were active and not retirement eligible as of the Closing
Date of $4.7, and was allocated a charge of $5.9 during the period with
respect to retirees and retirement-eligible employees of the Business. These
costs are included in cost of goods sold. These costs are not necessarily
indicative of the postretirement benefit costs that would have been incurred
if the Business had operated as a separate entity.
Revenue Recognition:
Sales and related cost of goods sold are included in income when goods are
shipped to the customer.
Advertising Costs:
Advertising costs are expensed as incurred. Such costs were $12.0 for the
period.
Environmental Costs:
The Business accrues for certain environmental remediation activities
relating to past operations, including Comprehensive Environmental Response
Compensation and Liability Act (CERCLA) cleanup and certain Resource
Conservation and Recovery Act (RCRA) and related compliance activities, for
which commitments have been made, and reasonable estimates are possible. Where
feasible, these costs are assigned to the business unit responsible for the
conditions being remediated. Such costs are exclusive of possible recoveries
from third parties and are not discounted. There were no environmental
remediation costs during the period.
Industry Segment:
The Business operates within a single industry segment. Sales of products
manufactured in and exported from the United States were $24.9 for the period.
Sales to a major retail chain represented approximately 19% of total sales.
NOTE 3--CONCENTRATION OF CREDIT RISK
Concentrations of credit risk with respect to trade accounts receivable are
generally diversified due to the large number of customers comprising the
Business's customer base. The Business reviews a customer's credit history
before extending credit and establishes an allowance for doubtful accounts
based upon factors surrounding the credit risk of specific customers,
historical trends and other information. The charges for doubtful accounts
were $3.9 for the period.
NOTE 4--INTEREST EXPENSE
Interest expense is determined based on consolidated indebtedness of DuPont
and, in these financial statements, has been determined on the basis of the
Business's proportionate share of the identifiable operating assets of DuPont.
F-27
<PAGE>
DUPONT SPORTING GOODS BUSINESS
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
(DOLLARS IN MILLIONS)
NOTE 5--INVENTORIES
Inventories consist of the following:
<TABLE>
<S> <C>
Raw Materials...................................................... $ 19.1
Semi-Finished Product.............................................. 23.0
Finished Product................................................... 57.6
Stores and Supplies.............................................. 12.7
------
Subtotal......................................................... 112.4
LIFO Reserve....................................................... (52.1)
------
Total............................................................ $ 60.3
======
</TABLE>
The excess of replacement or current cost over stated value of inventories
for which cost has been determined under the LIFO method approximated $52.1 at
November 30, 1993. Inventories valued at LIFO comprised 75% of total
inventories before LIFO adjustment. The effect of LIFO decrements was to
reduce cost of goods sold by $3.3 for the period.
NOTE 6--PROPERTY, PLANT AND EQUIPMENT
Plant and Equipment consist of the following:
<TABLE>
<S> <C>
Land.............................................................. $ 1.7
Buildings and Equipment........................................... 196.4
Construction in Progress.......................................... 6.0
-------
Subtotal........................................................ 204.1
Less: Accumulated Depreciation.................................... (158.2)
-------
Total........................................................... $ 45.9
=======
</TABLE>
NOTE 7--PENSION COST
Pension cost for active employees was determined by measuring the projected
benefit obligation for such employees as of December 31, 1992 using an assumed
discount rate of 8.5%, and an assumed long-term rate of compensation increase
of 5%. The Projected Benefit Obligation (PBO) so measured was $72.2 as of
December 31, 1992. The PBO was assumed to be fully funded by plan assets with
an assumed long-term rate of return of 9% allocated from the DuPont plan. The
elements of pension cost allocated to the Business using this method were:
<TABLE>
<S> <C>
Service Cost........................................................ $ 3.2
Interest cost on Projected Benefit Obligation....................... 5.6
Return on plan assets............................................... (6.0)
-----
Net Pension Cost.................................................... $ 2.8
=====
</TABLE>
NOTE 8--COMMITMENTS AND CONTINGENCIES
The Business has various purchase commitments for materials, supplies, and
items of permanent investment incident to the ordinary conduct of business. In
the aggregate, such commitments are not at prices in excess of current
markets.
F-28
<PAGE>
DUPONT SPORTING GOODS BUSINESS
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
(DOLLARS IN MILLIONS)
At November 30, 1993, the Business's purchases of fishline filament from a
Japanese supplier were supported by a 740 million Yen ($6.8) DuPont letter of
credit. Under the terms of the Agreements, this letter of credit was
terminated as of the Closing Date.
The Business is subject to various lawsuits and claims with respect to such
matters as product liability, government regulations, and other actions
arising in the normal course of business including two class-action product
liability lawsuits.
At November 30, 1993, 60 product liability actions were pending involving
firearm or ammunition products manufactured and/or sold by the Business. Of
the 60 product liability actions, 42 were assumed by RACI subject to a $25.0
cap on product liability costs (See Note 1). As of December 31, 1994, as a
result of claim resolutions (both settlements and dismissals) as well as
filing of additional cases, 45 product liability cases involving firearms or
ammunition products of the Business were pending. These product liability
actions primarily allege defective product design or manufacture, or failure
to provide adequate warnings. In many cases, punitive damages, as well as
compensatory damages, are demanded.
Two of the pending product liability actions seek certification as class
actions. On November 24, 1993, a complaint was filed in a Texas state court
against DuPont and Remington requesting certification of a class of owners of
Remington shotguns, including Model 870, Model 1100 and Model 11-87 shotguns,
alleging product defect and seeking to recover damages (on a variety of
theories), including "mental anguish" damages, exemplary and treble damages
and other costs. The Business estimates that, as of November 30, 1993,
approximately 10.5 million such shotguns have been shipped since 1955. The
action, Leonel Garza, Jr. et al. v. Remington Arms Company, Inc. and E.I. du
Pont de Nemours and Company, was removed to the United States District Court
in San Antonio, Texas, in December, 1993. In November, 1994, an amended
complaint was filed, specifically seeking certification of a national class of
shotgun owners and naming as additional defendants RACI and the DuPont
subsidiary which was the direct owner of Remington prior to the Acquisition.
The parties in Garza have been engaged in discussions regarding a possible
settlement of the action and have executed a non-binding Memorandum of
Understanding setting forth the general terms necessary for such a settlement,
which is subject to material contingencies and uncertainties as well as the
requirement of detailed agreement among the parties concerned.
A second class action complaint, Joe Luna, et. al. v. Remington Arms
Company, Inc. and E.I. du Pont de Nemours and Company, originally filed in
1989 in a Texas state court and amended in December, 1993, seeks certification
of a class of all Texas owners of Model 700 bolt-action rifles. Luna alleges
product defects and seeks to recover the cost of repair or modification of
such products, as well as punitive and treble damages and other costs. The
amended Luna complaint alleges that 400,000 Texas residents own Model 700
rifles. A hearing on plaintiffs' motion for class certification is expected to
be scheduled for 1995.
On November 19, 1993, a state court jury in Wisconsin returned a $2.5
verdict against Remington (of which $2.0 represented punitive damages) in a
personal injury product liability case involving a Model 870 shotgun. The case
was settled on appeal.
Subsequent to the closing of this Acquisition, RACI discovered new
information that may have a detrimental effect upon certain defenses to
product liability cases and claims involving the Business's firearm products.
Due to this information and the uncertain nature of the two product liability
class action lawsuits and other pending product liability lawsuits, management
is uncertain whether such remaining lawsuits and claims will have a materially
adverse effect upon the result of operations of the Business for the period.
Furthermore, management is unable to make a meaningful estimate of the amount
or range of loss that could result from an unfavorable outcome of all pending
product liability claims and proceedings as of November 30, 1993.
F-29
<PAGE>
DUPONT SPORTING GOODS BUSINESS
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
(DOLLARS IN MILLIONS)
Accordingly, as of November 30, 1993, the Business has provided $30.2 in
respect of amounts paid for indemnity and defense costs through December 31,
1994, inclusive of $8.2 for estimated defense costs to be incurred subsequent
to December 31, 1994 for product liability actions pending as of November 30,
1993.
The maximum liability to be assumed by RACI (See Note 1) for such product
and/or environmental liabilities, as included in the statement of net assets
to be sold to RACI, is $25.0.
During the period covered by the financial statements, DuPont did not insure
for property damage losses. Liability insurance was purchased with high
deductible limits.
NOTE 9--INCOME TAXES
The Benefit for Income Taxes consists of the following:
<TABLE>
<S> <C>
Federal:
Current......................................................... $ 6.5
Deferred........................................................ (7.0)
State:
Current......................................................... 1.2
Deferred........................................................ (0.1)
------
Provision for Income Taxes Excluding Transition Effect of
Accounting Changes............................................... 0.6
Transition Effect of Changes in Accounting for Postretirement
Benefits Other than Pensions and Postemployment Benefits......... (44.6)
------
Total Benefit................................................. $(44.0)
======
</TABLE>
Deferred income taxes reflect the net tax effects of temporary differences
between the carrying amounts of assets and liabilities for financial reporting
purposes and the amounts used for income tax purposes. The tax effects of
these temporary differences included in the Benefit for Income Taxes are as
follows:
<TABLE>
<S> <C>
Depreciation....................................................... $ 1.5
Allowances for Doubtful Accounts................................... 0.8
Inventory.......................................................... 0.4
Accrued Liabilities................................................ (6.2)
Other Retirement Benefits.......................................... (2.7)
Other.............................................................. (0.9)
-----
Total Deferred Tax Benefit included in Provision for Income
Taxes........................................................... $(7.1)
=====
The following is a reconciliation of the statutory federal income tax
provision to the Business' book provision.
</TABLE>
<TABLE>
<S> <C>
Income Before Income Taxes.......................................... $ 2.0
-----
Tax at Statutory Federal Tax Rate................................... 0.7
State Taxes, Net of Federal Benefit................................. 0.1
Other--Net.......................................................... (0.2)
-----
Provision for Income Taxes.......................................... $ 0.6
=====
</TABLE>
F-30
<PAGE>
DUPONT SPORTING GOODS BUSINESS
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
(DOLLARS IN MILLIONS)
NOTE 10--RELATED PARTY TRANSACTIONS
As discussed in Note 1, the Business purchases bulk fishline filament from
DuPont operations outside the scope of the Business. Due to the proprietary
nature of this product and the absence of third-party sales, it is not
practicable to determine a market price for such filament. Accordingly, for
purposes of these financial statements, purchases of filament are recorded at
the fully absorbed average cost of the DuPont-producing unit plus an
allocation of non-inventoriable period costs associated with the manufacture
of such filament. Purchases of fishline filament from these other DuPont
business units were $2.7 for the period. The Agreements provide that DuPont
will continue to sell fishline filament to RACI after the Closing Date at
specified prices.
The results of operations include significant transactions with DuPont
business units, including Consol, Inc., that are outside the defined scope of
the Business. These transactions involve functions and services (such as
executive management, cash management, tax administration and data processing)
that were provided to the Business by these other DuPont units. The costs of
these functions and services have been directly charged and/or allocated to
the Business using methods that management believes are reasonable. Such
charges and allocations are not necessarily indicative of the costs that would
have been incurred if the Business had been a separate entity. Such charges
and/or allocations aggregated $5.2. These charges and/or allocations are
principally included in the caption general and administrative expense. In
addition, general and administrative expense includes $5.3 for the period
representing allocations of general DuPont corporate expenses to the Business.
Management believes these allocations are reasonable, but they are not
necessarily indicative of the costs that would have been incurred if the
Business had been operated as a separate entity. RACI has contracted with
DuPont for the continuation of certain services after the Closing Date at
specified prices.
F-31
<PAGE>
RACI HOLDING, INC. AND SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS
(DOLLARS IN MILLIONS EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
SEPTEMBER 30 DECEMBER 31
1996 1995
------------ -----------
(UNAUDITED)
ASSETS
- ------
<S> <C> <C>
Current Assets
Cash and Cash Equivalents........................... $ 9.9 $ 1.4
Accounts Receivable Trade--Net...................... 127.7 70.4
Inventories......................................... 119.5 112.7
Prepaid Expenses and Other Current Assets........... 8.8 7.7
Deferred Income Taxes............................... 16.4 12.1
------ ------
Total Current Assets.............................. 282.3 204.3
Property, Plant and Equipment--Net.................... 92.0 85.1
Intangibles and Debt Issuance Costs--Net.............. 96.0 98.7
Deferred Income Taxes................................. 7.3 11.7
Other Noncurrent Assets............................... 2.8 4.6
------ ------
Total Assets...................................... $480.4 $404.4
====== ======
<CAPTION>
LIABILITIES AND SHAREHOLDER'S EQUITY
- ------------------------------------
<S> <C> <C>
Current Liabilities
Accounts Payable.................................... $ 18.8 $ 14.6
Short-Term Debt..................................... 0.4 4.5
Current Portion of Long-Term Debt................... 18.6 14.6
Customer Prepayments................................ 1.5 8.0
Product and Environmental Liabilities............... 4.8 5.3
Income Taxes........................................ -- 5.4
Other Accrued Liabilities........................... 32.7 26.9
------ ------
Total Current Liabilities......................... 76.8 79.3
Retiree Benefits...................................... 33.1 28.4
Long-term Debt:
Revolving Credit Facility & Other................... 97.6 12.7
Term Loan and Notes................................. 172.2 185.9
Product and Environmental Liabilities................. 7.4 4.5
------ ------
Total Liabilities................................. 387.1 310.8
Commitments and Contingencies
Shareholder's Equity
Common Stock, par value $.01; 2,500,000 shares
authorized, 750,000 issued and outstanding......... -- --
Paid in Capital..................................... 75.0 75.0
Accumulated Earnings................................ 18.3 18.6
------ ------
Total Shareholder's Equity........................ 93.3 93.6
Total Liabilities and Shareholder's Equity........ $480.4 $404.4
====== ======
</TABLE>
The accompanying notes are an integral part of these condensed consolidated
financial statements.
F-32
<PAGE>
RACI HOLDING, INC. AND SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(DOLLARS IN MILLIONS EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
QUARTER ENDED YEAR-TO-DATE
SEPTEMBER 30 SEPTEMBER 30
--------------- ---------------
1996 1995(2) 1996 1995(2)
------ ------- ------ -------
UNAUDITED
<S> <C> <C> <C> <C>
Sales (1).................................... $139.4 $123.5 $316.5 $333.6
Cost of Goods Sold........................... 99.5 84.9 219.4 221.6
------ ------ ------ ------
Gross Profit............................... 39.9 38.6 97.1 112.0
Selling, Marketing and Distribution Expense.. 14.6 15.3 43.0 43.5
General and Administrative Expense........... 7.0 7.4 20.6 18.9
Research & Development Expense............... 2.4 1.5 7.4 3.0
Other Expenses............................... 2.4 2.0 7.5 7.2
------ ------ ------ ------
Operating Profit............................. 13.5 12.4 18.6 39.4
Interest Expense............................. (6.9) (5.5) (19.2) (16.1)
------ ------ ------ ------
Profit/(Loss) Before Income Taxes............ 6.6 6.9 (0.6) 23.3
Provision/(Credit) for Income Taxes.......... 2.9 2.8 (0.3) 9.4
------ ------ ------ ------
Net Income/(Loss).......................... $ 3.7 $ 4.1 $ (0.3) $ 13.9
====== ====== ====== ======
EBITDA....................................... $ 17.7 $ 17.2 $ 30.9 $ 50.4
====== ====== ====== ======
Per Share Data:
Net Income/(Loss).......................... $ 4.93 $ 5.46 $(0.40) $18.53
====== ====== ====== ======
</TABLE>
- --------
(1) Sales are presented net of Federal Excise Taxes of $12.3 and $11.2 for the
quarter, and $26.5 and $27.8 for the year-to-date period ended September
30, 1996 and 1995, respectively.
(2) Certain reclassifications were made to the prior period's financial
information to conform with the current presentation format.
The accompany notes are an integral part of these condensed consolidated
financial statements.
F-33
<PAGE>
RACI HOLDING, INC. AND SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(DOLLARS IN MILLIONS EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
UNAUDITED
--------------------------
YEAR-TO-DATE SEPTEMBER 30
--------------------------
1996 1995
------------ ------------
<S> <C> <C>
Net Cash used in Operating Activities.............. $ (47.1) $ (31.1)
Investing Activities
Capital Expenditures............................. (12.8) (13.3)
Purchase of DuPont Sporting Goods Business....... -- 1.4
------------ ------------
Net cash used in Investing activities.......... (12.8) (11.9)
Financing Activities
Net borrowings under Revolving Credit Facility 83.6 24.0
Principal payments on Long-Term Debt............. (11.1) (16.3)
Principal payments on Short-Term Debt............ (4.1) (3.3)
------------ ------------
Net cash provided by financing activities...... 68.4 4.4
------------ ------------
Increase (Decrease) in cash and cash equivalents... 8.5 (38.6)
Cash and cash equivalents at beginning of period... 1.4 41.9
------------ ------------
Cash and cash equivalents at end of period......... $ 9.9 $ 3.3
============ ============
</TABLE>
The accompanying notes are an integral part of these condensed consolidated
financial statements.
F-34
<PAGE>
RACI HOLDING, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 1996
(DOLLARS IN MILLIONS, EXCEPT PER SHARE AND SHARE DATA)
1. BASIS OF PRESENTATION
The condensed consolidated financial statements of RACI Holding, Inc.
("Holding") include the accounts of its subsidiaries, Remington Arms Company,
Inc. ("Remington") and Remington International, Ltd. (together with Remington
and Holding, the "Company"). Holding has no material assets other than its
investment in Remington. All intercompany accounts and transactions have been
eliminated in consolidation.
The accompanying unaudited condensed consolidated financial statements of
Holding have been prepared by the Company in accordance with generally
accepted accounting principles for interim financial information. Accordingly,
they do not include all of the information and footnotes required by generally
accepted accounting principles for complete financial statements. In the
opinion of management, all adjustments (consisting of items of a normal
recurring nature) considered necessary for a fair presentation have been
included. Operating results for the three and nine months ended September 30,
1996 are not necessarily indicative of the results that may be expected for
the year ended December 31, 1996.
Pursuant to an asset purchase agreement (the "Asset Purchase Agreement"), on
December 1, 1993, the Company acquired certain assets and assumed certain
liabilities of the Sporting Goods Business (the "Business" or the
"Predecessor") formerly operated by E.I. du Pont de Nemours and Company, Inc.
("DuPont") and one of DuPont's subsidiaries ("Sporting Goods," and together
with DuPont, the "Sellers"), for a cash purchase price of $299.8 as adjusted
subsequent to the closing of such acquisition (the "Acquisition").
Certain reclassifications were made to the prior period's financial
information to conform with the current presentation format.
These financial statements should be read in conjunction with the audited
consolidated financial statements of RACI Holding, Inc. and Subsidiary as of
and for the year ended December 31, 1995.
2. INVENTORIES
<TABLE>
<CAPTION>
SEPTEMBER 30 DECEMBER 31
1996 1995
------------ -----------
<S> <C> <C>
Raw Materials.................................... $ 16.8 $ 17.2
Semi-Finished Product............................ 23.3 23.9
Finished Product................................. 65.0 56.2
Stores and Supplies.............................. 14.4 15.4
------ ------
Total.......................................... $119.5 $112.7
====== ======
</TABLE>
3. DEBT
<TABLE>
<CAPTION>
SEPTEMBER 30 DECEMBER 31
1996 1995
------------ -----------
<S> <C> <C>
Credit Agreement:
Term Loans.................................... $ 89.8 $100.0
Revolving Credit Facility..................... 93.0 9.4
9.5% Senior Subordinated Notes due 2003......... 99.5 99.5
Capital Lease Obligations....................... 6.1 4.3
------ ------
Subtotal.................................... $288.4 $213.2
Less: Current Portion........................... 18.6 14.6
------ ------
Total....................................... $269.8 $198.6
====== ======
</TABLE>
F-35
<PAGE>
RACI HOLDING, INC. AND SUBSIDIARY
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
4. RECENTLY ADOPTED FINANCIAL ACCOUNTING PRONOUNCEMENTS
Effective January 1, 1996, the Company adopted Statement of Financial
Accounting Standards ("SFAS") No. 123, "Accounting for Stock-Based
Compensation," which allows companies either to measure compensation cost in
connection with employee stock compensation plans using a fair value based
method or to continue to use an intrinsic value based method. The Company will
continue to use the intrinsic value based method, which generally does not
result in compensation cost.
5. COMMITMENTS AND CONTINGENCIES
The Company is subject to various lawsuits and claims with respect to
product liabilities, governmental regulations, and other matters arising in
the normal course of business. Under the Asset Purchase Agreement, the Company
has assumed financial responsibility for certain product liability claims
involving pre-Acquisition occurrences and certain pre-Acquisition
environmental liabilities up to a maximum aggregate amount of $25.0 (the
"Cap"). Because the Company's assumption of financial responsibility for
certain product liability cases and claims involving pre-Acquisition
occurrences is limited to the amount of the Cap, with the Sellers retaining
liability in excess of the Cap and indemnifying the Company in respect
thereof, and because of the Company's accruals with respect to such cases and
claims, the Company believes that product liability cases and claims involving
occurrences arising prior to the closing of the Acquisition are not likely to
have a material adverse effect upon the financial condition or results of
operations of the Company. While it is difficult to forecast the outcome of
litigation, the Company does not believe, in light of relevant circumstances
(including the current availability of insurance with respect to cases and
claims involving occurrences arising after the closing of the Acquisition, the
Company's accruals for the uninsured costs of such cases and claims and the
agreement that the Sellers will be responsible for certain post-Acquisition
shotgun-related costs) that the resolution of all product liability cases and
claims involving post-Acquisition occurrences, which occurrences have arisen
prior to September 30, 1996, individually or in the aggregate, will be likely
to have a material adverse effect upon the financial condition or results of
operations of the Company. Because of the nature of its products, the Company
anticipates that it will continue to be involved in product liability
litigation in the future.
6. SUBSEQUENT EVENTS
A plan was announced and implemented in October 1996 to reduce production
levels and overhead expenses primarily through workforce reductions. This will
result in the recognition of a pre-tax restructuring expense in the fourth
quarter of 1996 approximating $2.6 million.
As of December 30, 1996, certain financial covenants in the Company's bank
credit agreement were modified.
The Company and the Sellers have agreed upon the handling of certain costs,
which the Company and the Sellers have agreed to share in connection with the
joint defense of certain product liability litigation. As a result, the
Company will record a nonrecurring charge of approximately $4.7 million in the
fourth quarter of 1996.
F-36
<PAGE>
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY REPRE-
SENTATIONS OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS AND THE ACCOMPANYING
LETTER OF TRANSMITTAL, AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTA-
TIONS MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED. NEITHER THIS PROSPEC-
TUS NOR THE ACCOMPANYING LETTER OF TRANSMITTAL NOR BOTH TOGETHER CONSTITUTE AN
OFFER TO SELL OR THE SOLICITATION OF AN OFFER TO BUY ANY SECURITIES OTHER THAN
THE SECURITIES TO WHICH THE PROSPECTUS RELATES OR AN OFFER TO SELL OR THE SO-
LICITATION OF AN OFFER TO BUY SUCH SECURITIES IN ANY CIRCUMSTANCES IN WHICH
SUCH OFFER OR SOLICITATION IS UNLAWFUL. NEITHER THE DELIVERY OF THIS PROSPEC-
TUS OR THE LETTER OF TRANSMITTAL OR BOTH TOGETHER NOR ANY EXCHANGE MADE HERE-
UNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THERE HAS
BEEN NO CHANGE IN THE AFFAIRS OF THE COMPANY SINCE THE DATE HEREOF OR THAT THE
INFORMATION CONTAINED HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO ITS DATE.
---------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Summary.................................................................. 1
Risk Factors............................................................. 13
The Company.............................................................. 23
The Exchange Offer....................................................... 24
The Acquisition.......................................................... 34
Use of Proceeds.......................................................... 36
Capitalization of Holding................................................ 36
Selected Financial Information........................................... 37
Management's Discussion and Analysis of Financial Condition and Results
of Operations........................................................... 39
Business................................................................. 53
Management............................................................... 67
Ownership of Capital Stock............................................... 73
Certain Relationships and Related Transactions........................... 74
Description of Credit Agreement.......................................... 76
Description of Notes..................................................... 78
Registration Rights...................................................... 114
Certain Federal Tax Considerations....................................... 116
Plan of Distribution..................................................... 122
Legal Matters............................................................ 123
Experts.................................................................. 123
Available Information.................................................... 123
Exchange Agent........................................................... 124
Index to Financial Statements............................................ F-1
</TABLE>
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
[LOGO]
REMINGTON ARMS COMPANY, INC.
$100,000,000
9 1/2% SENIOR SUBORDINATED NOTES DUE 2003
-------------
PROSPECTUS
-------------
, 1997
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Section 145 of the Delaware General Corporation Law, as amended, provides in
regards to indemnification of directors and officers as follows:
145. Indemnification of Officers, Directors, Employees and Agents;
Insurance.
(a) A corporation may indemnify any person who was or is a party or is
threatened to be made a party to any threatened, pending or completed action,
suit or proceeding, whether civil, criminal, administrative or investigative
(other than an action by or in the right of the corporation) by reason of the
fact that he is or was a director, officer, employee or agent of the
corporation, or is or was serving at the request of the corporation as a
director, officer, employee or agent of another corporation, partnership,
joint venture, trust or other enterprise, against expenses (including
attorneys' fees), judgments, fines and amounts paid in settlement actually and
reasonably incurred by him in connection with such action, suit or proceeding
if he acted in good faith and in a manner he reasonably believed to be in or
not opposed to the best interests of the corporation, and, with respect to any
criminal action or proceeding, had no reasonable cause to believe his conduct
was unlawful. The termination of any action, suit or proceeding by judgment,
order, settlement, conviction, or upon a plea of nolo contendere or its
equivalent, shall not, of itself, create a presumption that the person did not
act in good faith and in a manner which he reasonably believed to be in or not
opposed to the best interests of the corporation, and, with respect to any
criminal action or proceeding, had reasonable cause to believe that his
conduct was unlawful.
(b) A corporation may indemnify any person who was or is a party or is
threatened to be made a party to any threatened, pending or completed action
or suit or in the right of the corporation to procure a judgment in its favor
by reason of the fact that he is or was a director, officer, employee or agent
of the corporation, or is or was serving at the request of the corporation as
a director, officer, employee or agent of another corporation, partnership,
joint venture, trust or other enterprise against expenses (including
attorneys' fees) actually and reasonably incurred by him in connection with
the defense of settlement of such action or suit if he acted in good faith and
in a manner he reasonably believed to be in or not opposed to the best
interests of the corporation and except that no indemnification shall be made
in respect of any claim, issue or matter as to which such person shall have
been adjudged to be liable to the corporation unless and only to the extent
that the Court of Chancery or the court in which such action or suit was
brought shall determine upon application that, despite the adjudication of
liability but in view of all the circumstances of the case, such person is
fairly and reasonably entitled to indemnity for such expenses which the Court
of Chancery or such other court shall deem proper.
(c) To the extent that a director, officer, employee or agent of a
corporation has been successful on the merits or otherwise in defense of any
action, suit or proceeding referred to in subsections (a) and (b), or in
defense of any claim, issue or matter therein, he shall be indemnified against
expenses (including attorneys' fees) actually and reasonably incurred by him
in connection therewith.
(d) Any indemnification under subsections (a) and (b) (unless ordered by a
court) shall be made by the corporation only as authorized in the specific
case upon a determination that indemnification of the director, officer,
employee or agent is proper in the circumstances because he has met the
applicable standard of conduct set forth in subsections (a) and (b). Such
determination shall be made (1) by a majority vote of the directors who are
not parties to such action, suit or proceeding, even though less than a
quorum, or (2) if there are no such directors or if such directors so direct,
by independent legal counsel in a written opinion, or (3) by the stockholders.
(e) Expenses (including attorneys' fees) incurred by an officer or director
in defending any civil, criminal, administrative, or investigative action,
suit or proceeding may be paid by the corporation in advance of the final
disposition of such action, suit or proceeding upon receipt of an undertaking
by or on behalf of such director or
II-1
<PAGE>
officer to repay such amount if it shall ultimately be determined that he is
not entitled to be indemnified by the corporation as authorized in this
section. Such expenses (including attorneys' fees) incurred by other employees
and agents may be so paid upon such terms and conditions, if any, as the board
of directors deems appropriate.
(f) The indemnification and advancement of expenses provided by, or granted
pursuant to, the other subsections of this section shall not be deemed
exclusive of any other rights to which those seeking indemnification or
advancement of expenses may be entitled under any bylaw, agreement, vote of
stockholders or disinterested directors or otherwise, both as to action in his
official capacity and as to action in another capacity while holding such
office.
(g) A corporation shall have power to purchase and maintain insurance on
behalf of any person who is or was a director, officer, employee or agent of
the corporation, or is or was serving at the request of the corporation as a
director, officer, employee or agent of another corporation, partnership,
joint venture, trust or other enterprise against any liability asserted
against him and incurred by him in any such capacity, or arising out of his
status as such, whether or not the corporation would have the power to
indemnify him against such liability under this section.
* * * *
(j) The indemnification and advancement of expenses provided by, or granted
pursuant to, this section shall, unless otherwise provided when authorized or
ratified, continue as to a person who has ceased to be a director, officer,
employee or agent and shall inure to the benefit of the heirs, executors and
administrators of such a person.
Article VI of the Company's By-Laws provides in regard to indemnification of
directors and officers as follows:
Section 6.01. Nature of Indemnity. The Corporation shall indemnify any
person who was or is a party or is threatened to be made a party to any
threatened, pending or completed action, suit or proceeding, whether civil,
criminal, administrative or investigative, by reason of the fact that he is or
was or has agreed to become a director, officer, employee or agent of the
Corporation, or is or was serving or has agreed to serve at the request of the
Corporation as a director, officer, employee or agent, of another corporation,
partnership, joint venture, trust or other enterprise, or by reason of any
action alleged to have been taken or omitted in such capacity, and may
indemnify any person who was or is a party or is threatened to be made a party
to such an action, suit or proceeding by reason of the fact that he is or was
or has agreed to become an employee or agent of the Corporation, or is or was
serving or has agreed to serve at the request of the Corporation as an
employee or agent of another corporation, partnership, joint venture, trust or
other enterprise, against expenses (including attorneys' fees), judgments,
fines and amounts paid in settlement actually and reasonably incurred by him
or on his behalf in connection with such action, suit or proceeding and any
appeal therefrom, if he acted in good faith and in a manner he reasonably
believed to be in or not opposed to the best interests of the Corporation,
and, with respect to any criminal action or proceeding had no reasonable cause
to believe his conduct was unlawful; except that in the case of an action or
suit by or in the right of the Corporation to procure a judgment in its favor
(1) such indemnification shall be limited to expenses (including attorneys'
fees) actually and reasonably incurred by such person in the defense or
settlement of such action or suit, and (2) no indemnification shall be made in
respect of any claim, issue or matter as to which such person shall have been
adjudged to be liable to the Corporation unless and only to the extent that
the Delaware Court of Chancery or the court in which such action or suit was
brought shall determine upon application that, despite the adjudication of
liability but in view of all the circumstances of the case, such person is
fairly and reasonably entitled to indemnity for such expenses which the
Delaware Court of Chancery or such other court shall deem proper.
The termination of any action, suit or proceeding by judgment, order,
settlement, conviction, or upon a plea of nolo contendere or its equivalent,
shall not, of itself, create a presumption that the person did not act in good
faith and in a manner which he reasonably believed to be in or not opposed to
the best interests of the Corporation, and, with respect to any criminal
action or proceeding, had reasonable cause to believe that his conduct was
unlawful.
II-2
<PAGE>
Section 6.02. Successful Defense. To the extent that a director, officer,
employee or agent of the Corporation has been successful on the merits or
otherwise in defense of any action, suit or proceeding referred to in Section
6.01 hereof or in defense of any claim, issue or matter therein, he shall be
indemnified against expenses (including attorneys' fees) actually and
reasonably incurred by him in connection therewith.
Section 6.03. Determination That Indemnification Is Proper. Any
indemnification under Section 6.01 hereof (unless ordered by a court) shall be
made by the Corporation unless a determination is made that indemnification of
the director, officer, employee or agent is not proper in the circumstances
because he has not met the applicable standard of conduct set forth in Section
6.01 hereof. Any such determination shall be made (1) by a majority vote of
the directors who are not parties to such action, suit or proceeding, even
though less than a quorum, or (2) if there are no such directors, or, if such
directors so direct, by independent legal counsel in a written opinion, or (3)
by the stockholders.
Section 6.04. Advance Payment of Expenses. Expenses (including attorneys'
fees) incurred by a director or officer in defending any civil, criminal,
administrative or investigative action, suit or proceeding shall be paid by
the Corporation in advance of the final disposition of such action, suit or
proceeding upon receipt of an undertaking by or on behalf of the director or
officer to repay such amount if it shall ultimately be determined that he is
not entitled to be indemnified by the Corporation as authorized in this
Article. Such expenses (including attorneys' fees) incurred by other employees
and agents may be so paid upon such terms and conditions, if any, as the Board
of Directors deems appropriate. The Board of Directors may authorize the
Corporation's counsel to represent such director, officer, employee or agent
in any action, suit or proceeding, whether or not the Corporation is a party
to such action, suit or proceeding.
Section 6.05. Procedure for Indemnification of Directors and Officers. Any
indemnification of a person seeking indemnification of the Corporation under
Sections 6.01 and 6.02, or advance of costs, charges and expenses to such
person under Section 6.04 of this Article, shall be made promptly, and in any
event within 30 days, upon the written request of such person. If a
determination by the Corporation that such person is entitled to
indemnification pursuant to this Article is required, and the Corporation
fails to respond within sixty days to a written request for indemnity, the
Corporation shall be deemed to have approved such request. If the Corporation
denies a written request for indemnity or advancement of expenses, in whole or
in part, or if payment in full pursuant to such request is not made within 30
days, the right to indemnification or advances as granted by this Article
shall be enforceable by the indemnified person in any court of competent
jurisdiction. Such person's cost and expenses incurred in connection with
successfully establishing his right to indemnification, in whole or in part,
in any such action shall also be indemnified by the Corporation. It shall be a
defense to any such action (other than an action brought to enforce a claim
for the advance of costs, charges and expenses under Section 6.04 of this
Article where the required undertaking, if any, has been received by the
Corporation) that the claimant has not met the standard of conduct set forth
in Section 6.01 of this Article, but the burden of proving such defense shall
be on the Corporation. Neither the failure of the Corporation (including its
Board of Directors, its independent legal counsel, and its stockholders) to
have made a determination prior to the commencement of such action that
indemnification of the claimant is proper in the circumstances because he has
met the applicable standard of conduct set forth in Section 6.01 of this
Article, nor the fact that there has been an actual determination by the
Corporation (including its Board of Directors, its independent legal counsel,
and its stockholders) that the claimant has not met such applicable standard
of conduct, shall be a defense to the action or create a presumption that the
claimant has not met the applicable standard of conduct.
Section 6.06. Survival; Preservation of Other Rights. The foregoing
indemnification provisions shall be deemed to be a contract between the
Corporation and each director, officer, employee and agent who serves in any
such capacity at any time while these provisions as well as the relevant
provisions of the Delaware Corporation Law are in effect and any repeal or
modification thereof shall not affect any right or obligation then existing
with respect to any state of facts then or previously existing or any action,
suit or proceeding previously or thereafter brought or threatened based in
whole or in part upon any such state of facts. Such a "contract right" may not
be modified retroactively without the consent of such director, officer,
employee or agent.
II-3
<PAGE>
The indemnification and advancement of expenses provided by this Article VI
shall not be deemed exclusive of any other rights to which those indemnified
may be entitled under any by-law, agreement, vote of stockholders or
disinterested directors or otherwise, both as to action in his official
capacity and as to action in another capacity while holding such office, and
shall continue as to a person who has ceased to be a director, officer,
employee or agent and shall inure to the benefit of the heirs, executors and
administrators of such a person.
Section 6.07. Insurance. The Corporation shall purchase and maintain
insurance on behalf of any person who is or was or has agreed to become a
director or officer of the Corporation, or is or was serving at the request of
the Corporation as a director or officer of another corporation, partnership,
joint venture, trust or other enterprise against any liability asserted
against him and incurred by him or on his behalf in any such capacity, or
arising out of his status as such, whether or not the Corporation would have
the power to indemnify him against such liability under the provisions of this
Article, provided that such insurance is available on acceptable terms, which
determination shall be made by a vote of a majority of the entire Board of
Directors.
Section 6.08. Severability. If this Article or any portion hereof shall be
invalidated on any ground by any court of competent jurisdiction, then the
Corporation shall nevertheless indemnify each director or officer and may
indemnify each employee or agent of the Corporation as to costs, charges and
expenses (including attorneys' fees), judgments, fines and amounts paid in
settlement with respect to any action, suit or proceeding, whether civil,
criminal, administrative or investigative, including an action by or in the
right of the Corporation, to the fullest extent permitted by any applicable
portion of this Article that shall not have been invalidated and to the
fullest extent permitted by applicable law.
Section 102(b)(7) of the Delaware General Corporation Law, as amended,
provides in regard to the limitation of liability of directors and officers as
follows:
(b) In addition to the matters required to be set forth in the certificate
of incorporation by subsection (a) of this section, the certificate of
incorporation may also contain any or all of the following matters:
* * * *
(7) A provision eliminating or limiting the personal liability of a director
to the corporation or its stockholders for monetary damages for breach of
fiduciary duty as a director, provided that such provision shall not eliminate
or limit the liability of a director: (i) for any breach of the director's
duty of loyalty to the corporation or its stockholders; (ii) for acts or
omissions not in good faith or which involve intentional misconduct or a
knowing violation of law; (iii) under section 174 of this Title; or (iv) for
any transaction from which the director derived an improper personal benefit.
No such provision shall eliminate or limit the liability of a director for any
act or omission occurring prior to the date when such provision becomes
effective. All references in this paragraph to a director shall also be deemed
to refer (x) to a member of the governing body of a corporation which is not
authorized to issue capital stock and (y) to such other person or persons, if
any, who, pursuant to a provision of the certificate of incorporation in
accordance section 141(a) of this title, exercise or perform any of the powers
or duties otherwise conferred or imposed upon the board of directors by this
title.
Article SIXTH (e) of the Company's Certificate of Incorporation, as amended,
provides in regard to the limitation of liability of directors and officers as
follows:
(e) No director of the Corporation shall be liable to the Corporation or its
stockholders for monetary damages for breach of his or her fiduciary duty as a
director, provided that nothing contained in this Certificate of Incorporation
shall eliminate or limit the liability of a director (i) for any breach of the
director's duty of loyalty to the Corporation or its stockholders, (ii) for
acts or omissions not in good faith or which involve intentional misconduct or
a knowing violation of the law, (iii) under Section 174 of the General
Corporation Law of the State of Delaware or (iv) for any transaction from
which the Director derived an improper personal benefit.
II-4
<PAGE>
ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
(A) LIST OF EXHIBITS.
<TABLE>
<CAPTION>
LOCATION OF
EXHIBIT
IN SEQUENTIAL
EXHIBIT NO. DESCRIPTION NUMBER SYSTEM
----------- ----------- -------------
<C> <S> <C>
2.1 --Asset Purchase Agreement, dated as of November
24, 1993, among Remington Arms Company Inc.,
formerly named RACI Acquisition Corporation
("Remington"), E.I. du Pont de Nemours and
Company ("DuPont") and Sporting Goods Products,
Inc., formerly named Remington Arms Company,
Inc. ("Sporting Goods").*+
2.2 --Polymer Fishline Products Supply, Research and
Technical Support Agreement, dated as of
December 1, 1993, between DuPont and
Remington.*+
2.3 --Non-Competition Agreement, dated as of December
1, 1993, among DuPont, Sporting Goods and
Remington.+
2.4 --Product Liability Services and Defense
Coordination Agreement, dated as of December 1,
1993, among DuPont, Sporting Goods and
Remington.+
2.5 --Environmental Liability Services Agreement,
dated as of December 1, 1993, between DuPont and
Remington.+
3.1 --Certificate of Incorporation of RACI Holding,
Inc. ("Holding"), dated October 21, 1993, as
amended on June 21, 1995.+
3.2 --By-Laws of Holding, as amended and restated on
April 23, 1996.+
3.3 --Certificate of Incorporation of Remington,
dated October 21, 1993, as amended on December
1, 1993.+
3.4 --By-Laws of Remington, as amended and restated
on April 23, 1996.+
4.1 --Indenture, dated as of November 30, 1993 (the
"Indenture"), among Remington, First Trust
National Association, as Trustee, and Holding,
as Guarantor, with respect to Remington's 9 1/2%
Senior Subordinated Notes due 2003 (the
"Notes").+
4.2 --Purchase Agreement, dated November 19, 1993,
among Remington, Holding, Merrill Lynch & Co.,
Merrill Lynch, Pierce, Fenner & Smith
Incorporated ("Merrill Lynch"), and CS First
Boston Corporation ("First Boston" and, together
with Merrill Lynch, the "Initial Purchasers").+
4.3 --Registration Rights Agreement, dated as of
November 30, 1993, among Remington, Holding and
the Initial Purchasers.+
4.4 --Credit Agreement, dated as of November 30,
1993, among Remington, the lenders named
therein, The Chase Manhattan Bank, N.A.,
Chemical Bank ("Chemical"), and Union Bank of
Switzerland, as co-agents, and Chemical, as
administrative agent (the "Administrative
Agent").+
4.5 --First Amendment, dated as of September 29,
1995, to the Credit Agreement referred to as
Exhibit 4.4 above.+
4.6 --Second Amendment, dated as of March 29, 1996,
to the Credit Agreement referred to as Exhibit
4.4 above.+
4.7 --Third Amendment, dated as of June 28, 1996, to
the Credit Agreement referred to as Exhibit 4.4
above.
4.8 --Fourth Amendment, dated as of December 30, 1996
to the Credit Agreement referred to as Exhibit
4.4 above.
4.9 --Borrower Stock Pledge Agreement, dated as of
November 30, 1993, between Remington and the
Administrative Agent.+
4.10 --Borrower Stock Pledge Agreement, dated as of
March 30, 1996, between Remington and the
Administrative Agent.
</TABLE>
- --------
* Includes list of omitted schedules (and similar attachments) and agreement to
furnish supplementally such schedules and attachments to the Securities and
Exchange Commission upon its request.
+ Previously filed.
II-5
<PAGE>
<TABLE>
<CAPTION>
LOCATION OF
EXHIBIT
IN SEQUENTIAL
EXHIBIT NO. DESCRIPTION NUMBER SYSTEM
----------- ----------- -------------
<C> <S> <C>
4.11 --Borrower Security Agreement, dated as of
November 30, 1993, between Remington and the
Administrative Agent.+
4.12 --Borrower Patent and Trademark Security
Agreement, dated as of November 30, 1993,
between Remington and the Administrative Agent.+
4.13 --Holding Stock Pledge Agreement, dated as of
November 30, 1993, between Holding and the
Administrative Agent.+
4.14 --Holding Guarantee, dated as of November 30,
1993, by Holding to the Administrative Agent.+
4.15 --Sublease, dated as of March 1, 1987, between
S&K Industries, Inc., as lessor, and Remington
as assignee of DuPont, as lessee (agreement to
furnish such sublease to the Securities and
Exchange Commission upon its request).+
5.1 --Opinion of Debevoise & Plimpton regarding the
legality of the Notes being registered.
10.1 --Filed as Exhibit 2.1.+
10.2 --Filed as Exhibit 2.2.+
10.3 --Filed as Exhibit 2.3.+
10.4 --Filed as Exhibit 2.4.+
10.5 --Filed as Exhibit 2.5.+
10.6 --Filed as Exhibit 4.4.+
10.7 --Filed as Exhibit 4.5.+
10.8 --Filed as Exhibit 4.6.+
10.9 --Filed as Exhibit 4.7.
10.10 --Filed as Exhibit 4.8.
10.11 --Filed as Exhibit 4.9.+
10.12 --Filed as Exhibit 4.10.
10.13 --Filed as Exhibit 4.11.+
10.14 --Filed as Exhibit 4.12.+
10.15 --Filed as Exhibit 4.13.+
10.16 --Filed as Exhibit 4.14.+
10.17 --Registration and Participation Agreement, dated
as of November 30, 1993, between Holding and The
Clayton & Dubilier Private Equity Fund IV
Limited Partnership (the "C&D Fund").+
10.18 --Stock Subscription Agreement, dated as of
November 30, 1993, between Holding and the C&D
Fund.+
10.19 --Indemnification Agreement, dated as of November
30, 1993, among Remington, Holding, Clayton,
Dubilier & Rice, Inc. and the C&D Fund.+
10.20 --Letter, dated December 5, 1996 from the Company
and Holding to Robert W. Haskin, Jr.
10.21 --Letter, dated December 11, 1996 from Robert W.
Haskin, Jr. to the Company.
10.22 --RACI Holding, Inc. 1994 Directors' Stock Plan,
adopted on June 2, 1994.+
10.23 --RACI Holding, Inc. Stock Purchase Plan, adopted
on June 2, 1994.+
10.24 --Amended and Restated RACI Holding, Inc. Stock
Option Plan, adopted as of July 17, 1995.+
10.25 --Amendment No. 1, dated as of July 19, 1996, to
the Amended and Restated RACI Holding, Inc.
Stock Option Plan referred to as Exhibit 10.24
above.
10.26 --Form of Management Stock Option Agreement.+
10.27 --RACI Holding, Inc. Director Stock Option Plan,
adopted on July 22, 1996.
12.1 --Computation of Ratio of Earnings to Fixed
Charges.
</TABLE>
- --------
+ Previously filed.
II-6
<PAGE>
<TABLE>
<CAPTION>
LOCATION OF
EXHIBIT
IN SEQUENTIAL
EXHIBIT NO. DESCRIPTION NUMBER SYSTEM
----------- ----------- -------------
<C> <S> <C>
21.1 --List of Subsidiaries.+
23.1 --Consent of Coopers & Lybrand.
23.2 --Consent of Debevoise & Plimpton (included in
Exhibit 5.1).
24.1 --Power of Attorney executed by Hubbard C. Howe.+
24.2 --Power of Attorney executed by Thomas L.
Millner.+
24.3 --Power of Attorney executed by Richard M.
Applegate.+
24.4 --Power of Attorney executed by Samuel G.
Grecco.+
24.5 --Power of Attorney executed by Stephen D.
Bechtel, Jr.+
24.6 --Power of Attorney executed by Bobby R. Brown.+
24.7 --Power of Attorney executed by Richard C.
Dresdale.+
24.8 --Power of Attorney executed by Richard A.
Gilleland+
24.9 --Power of Attorney executed by Richard E.
Heckert.+
24.10 --Power of Attorney executed by Leon J. Hendrix,
Jr.+
24.11 --Power of Attorney executed by Joseph L. Rice,
III.+
24.12 --Power of Attorney executed by H. Norman
Schwartzkopf.+
24.13 --Power of Attorney executed by Mark A. Little.
25.1 --Statement on Form T-1, of the Eligibility of
First Trust National Association, as Trustee
under the Indenture relating to the Notes (bound
separately).+
27. --Financial Data Schedule.
99.1 --Form of Letter of Transmittal.
99.2 --Form of Notice of Guaranteed Delivery.
99.3 --Form of Instruction to Registered Holder and/or
Book-Entry Transfer Facility Participant from
Owner.
</TABLE>
- --------
+ Previously filed.
(B)FINANCIAL STATEMENT SCHEDULES.
Financial statement schedules of the Company for which provision is made in
the applicable accounting regulations of the Commission are not required, are
inapplicable or have been disclosed in the notes to the financial statements
and therefore have been omitted.
ITEM 22. UNDERTAKINGS.
The Registrants hereby undertake:
(1) To file, during any period in which offers or sales are being made, a
post-effective amendment to this registration statement:
(i) To include any prospectus required by section 10(a)(3) of the
Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events arising after the
effective date of the registration statement (or the most recent post-
effective amendment thereof) which, individually or in the aggregate,
represent a fundamental change in the information set forth in the
registration statement. Notwithstanding the foregoing, any increase or
decrease in volume of securities offered (if the total dollar value of
securities offered would not exceed that which was registered) and any
deviation from the low or high end of the estimated maximum offering range
may be reflected in the form of prospectus filed with the Commission
pursuant to Rule 424(b) if, in the aggregate, the changes in volume and
price represent no more than a 20% change in the maximum aggregate offering
price set forth in the "Calculation of Registration Fee" table in the
effective registration statement;
(iii) To include any material information with respect to the plan of
distribution not previously disclosed in the registration statement or any
material change to such information in the registration statement;
II-7
<PAGE>
(2) That, for the purpose of determining any liability under the Securities
Act of 1933, each such post-effective amendment shall be deemed to be a new
registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial
bona fide offering thereof.
(3) To remove from registration by means of a post-effective amendment any
of the securities being registered which remain unsold at the termination of
the offering.
(4) That prior to any public reoffering of the securities registered
hereunder through use of a prospectus which is a part of this Registration
Statement by any person or party who is deemed to be an underwriter within the
meaning of Rule 145(c), the issuer undertakes that such reoffering prospectus
will contain the information called for by the applicable registration form
with respect to reofferings by persons who may be deemed underwriters, in
addition to the information called for by the other Items of the applicable
form.
(5) That every prospectus (i) that is filed pursuant to paragraph (4)
immediately preceding, or (ii) that purports to meet the requirements of
Section 10(a)(3) of the Securities Act and is used in connection with an
offering of securities subject to Rule 415 will be filed as a part of an
amendment to the registration statement and will not be used until such
amendment is effective, and that, for purposes of determining any liability
under the Securities Act, each such post-effective amendment shall be deemed
to be a new registration statement relating to the securities offering
therein, and the offering of such securities at that time shall be deemed to
be the initial bona fide offering thereof.
(6) Insofar as indemnification for liabilities arising under the Securities
Act may be permitted to directors, officers, and controlling persons of the
Registrants pursuant to the foregoing provisions or otherwise, the Registrants
have been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the
Securities Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
Registrants of expenses incurred or paid by a director, officer or controlling
person of the Registrants 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 Registrants will, unless
in the opinion of their 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
Securities Act and will be governed by the final adjudication of such issue.
(7) To respond to requests for information that is incorporated by reference
into the Prospectus pursuant to Items 4, 10(b), 11 or 13 of this form, within
one business day of receipt of such request, and to send the incorporated
documents by first-class mail or equally prompt means. This includes
information contained in documents filed subsequent to the effective date of
the registration statement through the date of responding to the request.
(8) To supply by means of a post-effective amendment all information
concerning a transaction, and the company being acquired involved therein,
that was not the subject of and included in the registration statement when it
became effective.
II-8
<PAGE>
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THE REGISTRANT,
HAS DULY CAUSED THIS AMENDMENT NO. 1 TO THE REGISTRATION STATEMENT TO BE
SIGNED ON ITS BEHALF BY THE UNDERSIGNED, THEREUNTO DULY AUTHORIZED, IN THE
CITY OF MADISON, STATE OF NORTH CAROLINA, ON JANUARY 10, 1997.
RACI HOLDING, INC.
/s/ Hubbard C. Howe
By: _________________________________
HUBBARD C. HOWE
CHAIRMAN, CHIEF EXECUTIVE OFFICER
AND DIRECTOR
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THIS AMENDMENT
NO. 1 TO THE REGISTRATION STATEMENT HAS BEEN SIGNED BY THE FOLLOWING PERSONS
IN THE CAPACITIES INDICATED ON JANUARY 10, 1997.
Chairman, Chief Executive Officer
/s/ Hubbard C. Howe and Director (Principal Executive
- ------------------------------------- Officer)
HUBBARD C. HOWE
Director, President and Chief
/s/ Thomas L. Millner Operating Officer
- -------------------------------------
THOMAS L. MILLNER
/s/ Mark A. Little Vice President, Controller
- ------------------------------------- (Principal Financial and Accounting
MARK A. LITTLE Officer)
/s/ Stephen D. Bechtel, Jr.* Director
- -------------------------------------
STEPHEN D. BECHTEL, JR.
/s/ Bobby R. Brown* Director
- -------------------------------------
BOBBY R. BROWN
/s/ Richard C. Dresdale* Director
- -------------------------------------
RICHARD C. DRESDALE
/s/ Richard A. Gilleland* Director
- -------------------------------------
RICHARD A. GILLELAND
/s/ Richard E. Heckert* Director
- -------------------------------------
RICHARD E. HECKERT
/s/ Leon J. Hendrix, Jr.* Director
- -------------------------------------
LEON J. HENDRIX, JR.
/s/ Joseph L. Rice, III* Director
- -------------------------------------
JOSEPH L. RICE, III
/s/ H. Norman Schwarzkopf* Director
- -------------------------------------
H. NORMAN SCHWARZKOPF
/s/ Samuel G. Grecco
*By: ________________________________
SAMUEL G. GRECCO
ATTORNEY-IN-FACT
II-9
<PAGE>
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THE REGISTRANT
HAS DULY CAUSED THIS AMENDMENT NO. 1 TO THE REGISTRATION STATEMENT TO BE
SIGNED ON ITS BEHALF BY THE UNDERSIGNED, THEREUNTO DULY AUTHORIZED, IN THE
CITY OF MADISON, STATE OF NORTH CAROLINA, ON JANUARY 10, 1997.
REMINGTON ARMS COMPANY, INC.
/s/ Hubbard C. Howe
By: _________________________________
HUBBARD C. HOWE
CHAIRMAN, CHIEF EXECUTIVE OFFICER
AND DIRECTOR
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THIS AMENDMENT
NO. 1 TO THE REGISTRATION STATEMENT HAS BEEN SIGNED BY THE FOLLOWING PERSONS
IN THE CAPACITIES INDICATED ON JANUARY 10, 1997.
Chairman, Chief Executive Officer
/s/ Hubbard C. Howe and Director (Principal Executive
- ------------------------------------- Officer)
HUBBARD C. HOWE
Director, President and Chief
/s/ Thomas L. Millner Operating Officer
- -------------------------------------
THOMAS L. MILLNER
/s/ Mark A. Little Vice President, Controller
- ------------------------------------- (Principal Financial and Accounting
MARK A. LITTLE Officer)
/s/ Stephen D. Bechtel, Jr.* Director
- -------------------------------------
STEPHEN D. BECHTEL, JR.
/s/ Bobby R. Brown* Director
- -------------------------------------
BOBBY R. BROWN
/s/ Richard C. Dresdale* Director
- -------------------------------------
RICHARD C. DRESDALE
/s/ Richard A. Gilleland* Director
- -------------------------------------
RICHARD A. GILLELAND
/s/ Richard E. Heckert* Director
- -------------------------------------
RICHARD E. HECKERT
/s/ Leon J. Hendrix, Jr.* Director
- -------------------------------------
LEON J. HENDRIX, JR.
/s/ Joseph L. Rice, III* Director
- -------------------------------------
JOSEPH L. RICE, III
/s/ H. Norman Schwarzkopf* Director
- -------------------------------------
H. NORMAN SCHWARZKOPF
/s/ Samuel G. Grecco
*By: ________________________________
SAMUEL G. GRECCO
ATTORNEY-IN-FACT
II-10
<PAGE>
EXHIBIT 4.7
THIRD AMENDMENT, dated as of June 28, 1996 (this "Amendment"), to the
---------
CREDIT AGREEMENT, dated as of November 30, 1993 (as the same may be amended,
supplemented or otherwise modified from time to time, the "Credit Agreement"),
----------------
among Remington Arms Company, Inc. (f/k/a RACI Acquisition Corporation), a
Delaware corporation (the "Borrower"), the several banks and other financial
--------
institutions from time to time parties thereto (the "Lenders"), Chemical Bank
-------
("Chemical"), The Chase Manhattan Bank, N.A., and Union Bank of Switzerland,
--------
New York Branch, as co-agents, and Chemical, as administrative agent for the
Lenders thereunder (in such capacity, the "Administrative Agent").
--------------------
W I T N E S S E T H :
- - - - - - - - - -
WHEREAS, the Borrower has requested the Lenders to amend the Credit
Agreement in certain respects;
WHEREAS, the Lenders have agreed to amend the Credit Agreement to the
extent and upon the terms and conditions set forth herein;
NOW, THEREFORE, in consideration of the premises and the mutual agreements
contained herein, the parties hereto agree as follows:
SECTION 1. DEFINITIONS
1.1 Defined Terms. Unless otherwise defined herein, terms defined in the
-------------
Credit Agreement shall be used herein as defined therein.
SECTION 2. AMENDMENT OF CREDIT AGREEMENT
2.1 Amendment of Section 8.1(a) of the Credit Agreement. Section 8.1(a)
---------------------------------------------------
of the Credit Agreement is hereby amended by deleting such Section and
substituting therefor the following:
"(a) Maintenance of EBITDA Ratio. Permit, at the last day of any
---------------------------
period of four consecutive fiscal quarters of the Borrower ending during
any test period set forth below, the EBITDA Ratio of the Borrower and its
consolidated Subsidiaries as of such day to be greater than the ratio set
forth opposite such test period below:
Test Period Ratio
----------- -----
April 1, 1996 - June 30, 1996 7.4 to 1.0
July 1, 1996 - September 30, 1996 7.0 to 1.0
October 1, 1996 - September 30, 1997 5.7 to 1.0
October 1, 1997 - September 30, 1998 4.25 to 1.0
October 1, 1998 - September 30, 1999 3.75 to 1.0
October 1, 1999 - December 31, 2000 3.25 to 1.0"
<PAGE>
2
2.2 Amendment of Section 8.1(b) of the Credit Agreement. Section
---------------------------------------------------
8.1(b) of the Credit Agreement is hereby amended by deleting such Section and
substituting therefor the following:
"(b) Maintenance of EBITDA. Permit, for any period of four
---------------------
consecutive fiscal quarters of the Borrower ending during any test period
set forth below, the amount of EBITDA of the Borrower and its consolidated
Subsidiaries at the last day of such consecutive fiscal quarter period, to
be less than the amount set forth opposite such test period below:
Test Period Amount
----------- ------
April 1, 1996 - June 30, 1996 $ 32,000,000
July 1, 1996 - September 30, 1996 $ 36,000,000
October 1, 1996 - September 30, 1997 $ 46,000,000
October 1, 1997 - September 30, 1998 $ 56,000,000
October 1, 1998 - September 30, 1999 $ 58,000,000
October 1, 1999 - September 30, 2000 $ 60,000,000
October 1, 2000 - December 31, 2000 $ 62,000,000"
2.3 Amendment of Section 8.1(c) of the Credit Agreement. (a)
---------------------------------------------------
Section 8.1(c) of the Credit Agreement is hereby amended by deleting such
Section and substituting therefor the following:
"(c) Maintenance of Interest Expense Ratio. Permit, for any period
-------------------------------------
of four consecutive fiscal quarters of the Borrower ending during any test
period set forth below, the Consolidated Interest Expense Ratio at the last
day of such consecutive fiscal quarter period, to be less than the ratio
set forth opposite such test period below:
Test Period Ratio
----------- -----
April 1, 1996 - June 30, 1996 1.4 to 1.0
July 1, 1996 - September 30, 1996 1.4 to 1.0
October 1, 1996 - September 30, 1997 1.8 to 1.0
October 1, 1997 - September 30, 1998 2.3 to 1.0
October 1, 1998 - September 30, 1999 2.5 to 1.0
October 1, 1999 - September 30, 2000 2.8 to 1.0
October 1, 2000 - December 31, 2000 3.0 to 1.0"
SECTION 3. MISCELLANEOUS
3.1 Limited Effect. Except as expressly amended hereby, the Credit
--------------
Agreement is, and shall remain, in full force and effect in accordance with
its terms.
<PAGE>
3
3.2 Effectiveness. This Amendment shall become effective as of the
-------------
date hereof upon receipt by the Administrative Agent of a counterpart hereof
duly executed by the Borrower and the Required Lenders.
3.3 Counterparts. This Amendment may be executed by one or more of
------------
the parties hereto on any number of separate counterparts, and all of said
counterparts taken together shall be deemed to constitute one and the same
instrument.
3.4 GOVERNING LAW. THIS AMENDMENT SHALL BE GOVERNED BY, CONSTRUED
-------------
AND INTERPRETED IN ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK.
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to
be duly executed and delivered by their proper and duly authorized officers as
of the day and year first above written.
REMINGTON ARMS COMPANY, INC. (f/k/a
RACI Acquisition Corporation)
By:/s/ Richard M. Applegate
------------------------
Title: Vice President & CFO
The Administrative Agent and a Lender:
-------------------------------------
CHEMICAL BANK
By:/s/ William J. Caggiano
-----------------------
Title: Managing Director
The Lenders:
-----------
THE BANK OF NEW YORK
By:/s/ H.S. Griffith
-----------------
Title: Senior Vice President
<PAGE>
4
BANK OF SCOTLAND
By:/s/ Catherine M. Oniffrey
-------------------------
Title: Vice President
BANQUE FRANCAISE DU COMMERCE EXTERIEUR
By:
--------------------------
Title:
BANQUE PARIBAS
By:
--------------------------
Title:
By:
--------------------------
Title:
BAYBANK
By:/s/ Hope L. Hayden Kelley
-------------------------
Title: Vice President
THE CHASE MANHATTAN BANK, N.A.
By:
--------------------------
Title:
THE CIT GROUP/BUSINESS CREDIT, INC.
By:/s/ Jon F. Oldham
-----------------
Title: Assistant Secretary
COMERICA BANK
By:
--------------------------
Title:
<PAGE>
5
CREDIT LYONNAIS, NEW YORK BRANCH
By:
--------------------------
Title:
FLEET NATIONAL BANK OF
MASSACHUSETTS (formerly known
as Shawmut Bank, N.A.)
By:/s/ Patrick A. Godfrey
----------------------------------
Title: Senior Vice President
FIRST UNION NATIONAL BANK
By:/s/ William E. Sonon
----------------------------------
Title: Vice President
GIROCREDIT BANK
By:/s/ John P. Redding
----------------------------------
Title: Vice President
IBJ SCHRODER BANK & TRUST COMPANY
By:/s/ Charles B. Fears
----------------------------------
Title: Vice President
MIDLAND BANK PLC
By:/s/ Christopher F. French
----------------------------------
Title: Director
NATIONAL CITY BANK
By:/s/ Robert C. Rowe
----------------------------------
Title: Vice President
<PAGE>
6
NATIONSBANK
By:/s/ Loy D. Thompson
----------------------------------
Title: Senior Vice President
PNC BANK - DELAWARE
By:/s/ Bruce H. Colbourn
----------------------------------
Title: Vice President
SOCIETE GENERALE
By:/s/ John J. Wagner
----------------------------------
Title: Vice President
UNION BANK OF SWITZERLAND, NEW YORK BRANCH
By:/s/ Jeffrey W. Wald
----------------------------------
Title: Vice President
By:/s/ David A. Drabik
----------------------------------
Title: Assistant Treasurer
U.S. NATIONAL BANK OF OREGON
By:
----------------------------------
Title:
WELLS FARGO BANK NATIONAL ASSOCIATION
By:/s/ Katherine Wheelock
----------------------------------
Title: Vice President
<PAGE>
EXHIBIT 4.8
FOURTH AMENDMENT, dated as of December 30, 1996 (this "Amendment"), to the
---------
CREDIT AGREEMENT, dated as of November 30, 1993 (as the same may be amended,
supplemented or otherwise modified from time to time, the "Credit Agreement"),
----------------
among Remington Arms Company, Inc. (f/k/a RACI Acquisition Corporation), a
Delaware corporation (the "Borrower"), the several banks and other financial
--------
institutions from time to time parties thereto (the "Lenders"), The Chase
-------
Manhattan Bank ("Chase"), and Union Bank of Switzerland, New York Branch, as co-
-----
agents, and Chase, as administrative agent for the Lenders thereunder (in such
capacity, the "Administrative Agent").
--------------------
W I T N E S S E T H :
- - - - - - - - - -
WHEREAS, the Borrower has requested the Lenders to amend the Credit
Agreement in certain respects;
WHEREAS, the Lenders have agreed to amend the Credit Agreement to the
extent and upon the terms and conditions set forth herein;
NOW, THEREFORE, in consideration of the premises and the mutual agreements
contained herein, the parties hereto agree as follows:
SECTION 1. DEFINITIONS
1.1 Defined Terms. Unless otherwise defined herein, terms defined in the
-------------
Credit Agreement shall be used herein as defined therein.
SECTION 2. AMENDMENT OF CREDIT AGREEMENT
2.1 Amendment of Section 8.1(a) of the Credit Agreement. Section 8.1(a)
---------------------------------------------------
of the Credit Agreement is hereby amended by deleting such Section and
substituting therefor the following:
"(a) Maintenance of EBITDA Ratio. Permit, for any period of four
---------------------------
consecutive fiscal quarters of the Borrower ending on any date set forth
below, the EBITDA Ratio of the Borrower and its consolidated Subsidiaries
at the last day of such period, to be greater than the ratio set forth
opposite such date below:
<PAGE>
2
Period Ended Ratio
- ------------------------- ------------
December 31, 1996 10.5 to 1.0
March 31, 1997 12.0 to 1.0
June 30, 1997 12.0 to 1.0
September 30, 1997 9.0 to 1.0
December 31, 1997 8.0 to 1.0
March 31, 1998 8.0 to 1.0
June 30, 1998 8.0 to 1.0
September 30, 1998 8.0 to 1.0
December 31, 1998 5.75 to 1.0
March 31, 1999 5.75 to 1.0
June 30, 1999 5.75 to 1.0
September 30, 1999 5.75 to 1.0
December 31, 1999 5.0 to 1.0
March 31, 2000 5.0 to 1.0
June 30, 2000 5.0 to 1.0
September 30, 2000 5.0 to 1.0
December 31, 2000 4.0 to 1.0"
2.2 Amendment of Section 8.1(b) of the Credit Agreement. Section
---------------------------------------------------
8.1(b) of the Credit Agreement is hereby amended by deleting such Section and
substituting therefor the
following:
"(b) Maintenance of EBITDA. Permit, for any period of four
---------------------
consecutive fiscal quarters of the Borrower ending on any date set forth
below, the amount of EBITDA of the Borrower and its consolidated
Subsidiaries for such period, to be less than the amount set forth opposite
such date below:
Period Ending Amount
------------------ ------------
December 31, 1996 $ 24,000,000
March 31, 1997 $ 24,000,000
June 30, 1997 $ 24,000,000
September 30, 1997 $ 30,000,000
December 31, 1997 $ 36,000,000
March 31, 1998 $ 36,000,000
June 30, 1998 $ 36,000,000
September 30, 1998 $ 36,000,000
December 31, 1998 $ 44,000,000
March 31, 1999 $ 44,000,000
June 30, 1999 $ 44,000,000
September 30, 1999 $ 44,000,000
December 31, 1999 $ 48,000,000
<PAGE>
3
March 31, 2000 $ 48,000,000
June 30, 2000 $ 48,000,000
September 30, 2000 $ 48,000,000
December 31, 2000 $ 54,000,000"
2.3 Amendment of Section 8.1(c) of the Credit Agreement. Section
---------------------------------------------------
8.1(c) of the Credit Agreement is hereby amended by deleting such Section and
substituting therefor the following:
"(c) Maintenance of Interest Expense Ratio. Permit, for any period
-------------------------------------
of four consecutive fiscal quarters of the Borrower ending on any date set
forth below, the Consolidated Interest Expense Ratio at the last day of
such period, to be less than the ratio set forth opposite such date below:
Period Ending Ratio
- ------------------------- ------------
December 31, 1996 1.0 to 1.0
March 31, 1997 1.0 to 1.0
June 30, 1997 1.0 to 1.0
September 30, 1997 1.2 to 1.0
December 31, 1997 1.4 to 1.0
March 31, 1998 1.4 to 1.0
June 30, 1998 1.4 to 1.0
September 30, 1998 1.4 to 1.0
December 31, 1998 1.8 to 1.0
March 31, 1999 1.8 to 1.0
June 30, 1999 1.8 to 1.0
September 30, 1999 1.8 to 1.0
December 31, 1999 2.15 to 1.0
March 31, 2000 2.15 to 1.0
June 30, 2000 2.15 to 1.0
September 30, 2000 2.15 to 1.0
December 31, 2000 2.75 to 1.0"
2.4 Amendment of Section 8.1(d) of the Credit Agreement. Section
---------------------------------------------------
8.1(d) of the Credit Agreement is hereby amended by deleting such Section and
substituting therefor the following:
"(d) Maintenance of Net Worth. Permit, at any time during any test
------------------------
period set forth below, Consolidated Net Worth of the Borrower and its
consolidated Subsidiaries to be less than the amount set forth opposite
such test period below:
<PAGE>
4
Test Period Amount
----------- ------
December 31, 1995 - December 30, 1996 $ 95,000,000
December 31, 1996 - December 30, 1997 $ 95,000,000
December 31, 1997 - December 30, 1998 $ 100,000,000
December 31, 1998 - December 30, 1999 $ 107,700,000
December 31, 1999 - December 30, 2000 $ 117,000,000"
2.5 Amendment of Section 8.9 of the Credit Agreement. Section 8.9 of
------------------------------------------------
the Credit Agreement is hereby amended by deleting such Section and substituting
therefor the following:
"8.9 Limitation on Capital Expenditures. Make or commit to make any
----------------------------------
Capital Expenditures (excluding (x) any expenses incurred in connection
with normal replacement and maintenance programs properly charged to
current operations, (y) any reinvestments of Net Cash Proceeds (or amounts
equal thereto) not to exceed $15,000,000 in the aggregate during the term
of this Agreement received with respect to any Asset Sale which
reinvestments are made in accordance with Section 8.6(g) and (z) any
reinvestments of Net Cash Proceeds (or amounts equal thereto) received with
respect to any Recovery Event which reinvestments are made in accordance
with Section 4.4(e)) exceeding in the aggregate for the Borrower and its
consolidated Subsidiaries, for any fiscal year of the Borrower (and, with
respect to fiscal year 1993, of Remington) set forth below, the amount set
forth opposite such fiscal year below:
Fiscal Year Amount
--------------------- -----------
1993 $11,500,000
1994 $21,000,000
1995 $25,000,000
1996 $20,000,000
1997 $12,000,000
1998 $12,000,000
1999 $15,000,000
2000 $15,000,000
provided that (i) any Capital Expenditures permitted to be made during any
--------
fiscal year (and not carried over from a prior fiscal year) and not made
during such fiscal year may be carried over and expended during the next
succeeding fiscal year and (ii) Capital Expenditures made during any fiscal
year shall be first deemed made in respect of amounts carried over from the
prior fiscal year and then deemed made in respect of amounts permitted for
such fiscal year."
<PAGE>
5
SECTION 3. MISCELLANEOUS
3.1 Amendment Work Fee. In connection with the preparation,
------------------
execution, and delivery of this Amendment, the Borrower agrees to pay to the
Administrative Agent, for the account of each Lender ("Amendment Lender") who
----------------
executes and delivers this Amendment on or prior to the close of business on
Monday, December 23, 1996, an amendment fee (the "Amendment Fee") in an amount
-------------
equal to 0.125% of the sum, for each such Amendment Lender, of (x) the aggregate
unpaid principal amount of its Term Loan and (y) its aggregate Revolving Credit
Commitment. The Amendment Fee shall be payable in full promptly after the
Effective Date.
3.2 Limited Effect. Except as expressly amended, modified and
--------------
supplemented hereby, the Credit Agreement is, and shall remain, in full force
and effect in accordance with its terms.
3.3 Effectiveness. This Amendment shall become effective as of the
-------------
date hereof (the "Effective Date") upon receipt by the Administrative Agent of a
--------------
counterpart hereof duly executed by the Borrower and the Required Lenders. The
Administrative Agent shall notify the Borrower and each Lender of such Effective
Date.
3.4 Counterparts. This Amendment may be executed by one or more of
------------
the parties hereto on any number of separate counterparts, and all of said
counterparts taken together shall be deemed to constitute one and the same
instrument. A set of the copies of this Amendment signed by all the parties
shall be lodged with the Borrower and the Agent. This Amendment may be
delivered by facsimile transmission of the relevant signature pages hereof.
3.5 GOVERNING LAW. THIS AMENDMENT SHALL BE GOVERNED BY, CONSTRUED
-------------
AND INTERPRETED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK.
<PAGE>
6
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to
be duly executed and delivered by their proper and duly authorized officers as
of the day and year first above written.
REMINGTON ARMS COMPANY, INC. (f/k/a
RACI Acquisition Corporation)
By: /s/ Mark Little
-----------------
Title: Vice President
The Administrative Agent and a Lender:
-------------------------------------
THE CHASE MANHATTAN BANK
By: /s/ William J. Caggiano
-------------------------
Title: Managing Director
The Lenders:
-----------
THE BANK OF NEW YORK
By: /s/ Gregory L. Batson
-----------------------
Title: Vice President
BANK OF SCOTLAND
By: /s/ Elizabeth Wilson
------------------------
Title: Vice President and Branch Manager
BANQUE FRANCAISE DU COMMERCE EXTERIEUR
By: _______________________
Title:
<PAGE>
7
BANQUE PARIBAS
By: ________________________
Title:
By: ________________________
Title:
BAYBANK, N.A.
By: /s/ Hope L. Hayden Kelley
-----------------------------
Title: Vice President
THE CIT GROUP/BUSINESS CREDIT, INC.
By: /s/ Jon Oldham
----------------
Title: Assistant Secretary
COMERICA BANK
By: /s/ John Costa
------------------
Title: Vice President
CREDIT LYONNAIS, NEW YORK BRANCH
By: _________________________
Title:
FLEET NATIONAL BANK (formerly known
as Shawmut Bank, N.A.)
By: /s/ P.A. Godfrey
------------------
Title: Managing Director
<PAGE>
8
FIRST UNION NATIONAL BANK
By: /s/ Thomas Molitor
--------------------
Title: Vice President
GIROCREDIT BANK
By: /s/ John Redding
------------------
Title: Vice President
By: /s/ Richard Stone
-------------------
Title: First Vice President
IBJ SCHRODER BANK & TRUST COMPANY
By: ______________________________
Title:
MARINE MIDLAND BANK
By: /s/ Thomas McGann
---------------------
Title: Senior Vice President
NATIONAL CITY BANK
By: /s/ Robert C. Rowe
--------------------
Title: Vice President
NATIONSBANK
By: /s/ Loy D. Thompson
---------------------
Title: Senior Vice President
PNC BANK - DELAWARE
By: Bruce H. Colbourn
-------------------
Title: Vice President
<PAGE>
9
SOCIETE GENERALE
By: /s/ John J. Wagner
--------------------
Title: Vice President
UNION BANK OF SWITZERLAND, NEW YORK BRANCH
By: /s/ Jeffrey W. Wald
---------------------
Title: Vice President
By: /s/ Ruth Y. Webster
---------------------
Title: Assistant Treasurer
U.S. NATIONAL BANK OF OREGON
By: _________________________
Title:
WELLS FARGO BANK, N.A.
By: /s/ Alan W. Wray
------------------
Title: Vice President
<PAGE>
EXHIBIT 4.10
BORROWER STOCK PLEDGE AGREEMENT
-------------------------------
PLEDGE AGREEMENT, dated as of March 30, 1996, made by Remington Arms
Company, Inc. (formerly named RACI Acquisition Corporation), a Delaware
corporation (the "Borrower") in favor of CHEMICAL BANK, a New York banking
--------
corporation, as administrative agent (in such capacity, the "Administrative
--------------
Agent") for the several banks and other financial institutions (collectively,
- -----
the "Lenders") from time to time parties to the Credit Agreement, dated as of
-------
November 30, 1993 (as the same may be amended, supplemented, waived or otherwise
modified from time to time, the "Credit Agreement"), among the Borrower, the
----------------
Administrative Agent, The Chase Manhattan Bank, N.A., Chemical Bank and Union
Bank of Switzerland, New York Branch, as co-agents (each, individually a "Co-
--
Agent"; collectively, the "Co-Agents") and the Lenders.
- ----- ---------
W I T N E S S E T H :
-------------------
WHEREAS, pursuant to the Credit Agreement, the Lenders have severally
agreed to make Extensions of Credit (as defined in the Credit Agreement) to the
Borrower upon the terms and subject to the conditions set forth in the Credit
Agreement;
WHEREAS, the Borrower is the legal and beneficial owner of the shares
of Pledged Stock (as hereinafter defined) issued by the Issuer (as hereinafter
defined); and
WHEREAS, Borrower has agreed pursuant to the Credit Agreement to
execute and deliver this Pledge Agreement to the Administrative Agent, for the
ratable benefit of the Lenders;
NOW, THEREFORE, in consideration of the premises the Borrower hereby
agrees with the Administrative Agent, for the ratable benefit of the Lenders, as
follows:
1. Defined Terms. (a) Unless otherwise defined herein, capitalized
-------------
terms defined in the Credit Agreement are used herein as defined therein.
(b) The following terms shall have the following meanings:
"Additional Pledged Stock": as defined in Section 5(a).
------------------------
"Agreement": this Pledge Agreement, as the same may be amended,
---------
supplemented, waived or otherwise modified from time to time.
<PAGE>
2
"Code": the Uniform Commercial Code from time to time in effect in
----
the State of New York.
"Collateral": all of the Borrower's right, title and interest in and
----------
to the Pledged Stock and all Proceeds thereof.
"Issuer": Remington International, Ltd., a Barbados corporation.
------
"Obligations": the collective reference to the unpaid principal of
-----------
and interest on (including, without limitation, interest accruing after the
maturity of the Loans and Reimbursement Obligations and interest accruing
after the filing of any petition in bankruptcy, or the commencement of any
insolvency, reorganization or like proceeding, relating to the Borrower,
whether or not a claim for post-filing or post-petition interest is allowed
in such proceeding) the Loans, the Reimbursement Obligations and all other
obligations and liabilities of the Borrower to the Administrative Agent,
the Co-Agents and the Lenders, whether direct or indirect, absolute or
contingent, due or to become due, or now existing or hereafter incurred,
which may arise under, out of, or in connection with, the Credit Agreement,
the Notes, the Letters of Credit, the other Loan Documents, any Interest
Rate Agreement entered into with any Lender, any Guarantee Obligations of
the Borrower referred to in Section 8.4(b) of the Credit Agreement as to
which any Lender is a beneficiary and any other document made, delivered or
given in connection with any of the foregoing, in each case whether on
account of principal, interest, reimbursement obligations, amounts payable
in connection with a termination of any transaction entered into pursuant
to an Interest Rate Agreement entered into with any Lender, amounts payable
to any Lender in connection with any such Guarantee Obligation, fees,
indemnities, costs, expenses or otherwise (including, without limitation,
all reasonable fees and disbursements of counsel to the Administrative
Agent, any Co-Agent or any Lender that are required to be paid by the
Borrower pursuant to the terms of the Credit Agreement or any other Loan
Document).
"Pledged Stock": the shares of capital stock listed on Schedule 1
------------- ----------
hereto, together with all stock certificates, stock options or similar
rights of any nature whatsoever that may be issued or granted by the Issuer
to the Borrower while this Agreement is in effect, including Additional
Pledged Stock.
"Proceeds": all "proceeds" as such term is defined in Section 9-
--------
306(1) of the Code and, in any event, shall
<PAGE>
3
include, without limitation, all dividends or other income from the Pledged
Stock, collections thereon or distributions with respect thereto.
"Securities Act": the Securities Act of 1933, as amended.
--------------
(c) The words "hereof," "herein" and "hereunder" and words of similar
import when used in this Agreement shall refer to this Agreement as a whole and
not to any particular provision of this Agreement, and section and paragraph
references are to this Agreement unless otherwise specified.
(d) The meanings given to terms defined herein shall be equally
applicable to both the singular and plural forms of such terms.
2. Pledge; Grant of Security Interest. The Borrower hereby grants to
----------------------------------
the Administrative Agent, for the ratable benefit of the Lenders, a security
interest in the Collateral, as collateral security for the prompt and complete
payment and performance when due (whether at the stated maturity, by
acceleration or otherwise) of the Obligations, and hereby agrees that it will
deliver or cause to be delivered to the Administrative Agent, for the ratable
benefit of the Lenders, all certificates representing the Pledged Stock no later
than the second Business Day following the date hereof.
3. Stock Powers; Acknowledgment and Consent. Concurrently with the
----------------------------------------
delivery to the Administrative Agent of each certificate representing any
Pledged Stock pursuant to paragraph 2 above, the Borrower shall deliver (i) an
undated stock power covering such certificate, duly executed in blank by the
Borrower with, if the Administrative Agent so requests, signature guaranteed and
(ii) an Acknowledgment and Consent, substantially in the form attached hereto as
Exhibit A, duly executed by the Issuer.
4. Representations and Warranties. The Borrower represents and
------------------------------
warrants that:
(a) The shares of Pledged Stock constitute 65% of the issued and
outstanding shares of all classes of the capital stock of the Issuer held
by the Borrower on the date hereof.
(b) All the shares of the Pledged Stock issued by the Issuer have
been (or, with respect to Additional Pledged Stock, when pledged to the
Administrative Agent, will be) duly and validly issued and are (or, with
respect to Additional Pledged Stock, when pledged to the Administrative
Agent, will be) fully paid and nonassessable.
<PAGE>
4
(c) The Borrower is (or, with respect to Additional Pledged Stock,
when pledged to the Administrative Agent, will be) the record and
beneficial owner of, and has (or, with respect to Additional Pledged Stock,
when pledged to the Administrative Agent will have) good and marketable
title to, the Pledged Stock, free of any and all Liens or options in favor
of, or material adverse claims on any of the Pledged Stock by, any other
Person, except the security interest created by this Agreement and Liens
arising by operation of law.
(d) Upon delivery to the Administrative Agent of all stock
certificates evidencing any Pledged Stock, the security interest created by
this Agreement, assuming the continuing possession of the Pledged Stock by
the Administrative Agent, will constitute a valid and perfected first
priority security interest in the Collateral to the extent provided in the
Code, enforceable in accordance with its terms against all creditors of the
Borrower and any Persons purporting to purchase any Collateral from the
Borrower, except as affected by bankruptcy, insolvency, fraudulent
conveyance, reorganization, moratorium and other similar laws relating to
or affecting creditors' rights generally, general equitable principles
(whether considered in a proceeding in equity or at law) and an implied
covenant of good faith and fair dealing; provided, however, that the above
-------- -------
representation and warranty does not apply to any Lien arising by operation
of law and entitled to a priority over the security interest created by
this Agreement.
5. Covenants. The Borrower covenants and agrees with the
---------
Administrative Agent and the Lenders that, from and after the date of this
Agreement until payment in full of the Notes, the Reimbursement Obligations and
the other Obligations then due and owing, the termination of the Commitments and
the expiration, termination or return to the Issuing Lender of the Letters of
Credit:
(a) If the Borrower shall, as a result of its ownership of the
Pledged Stock, become entitled to receive or shall receive any stock
certificate (including, without limitation, any certificate representing a
stock dividend or a distribution in connection with any reclassification,
increase or reduction of capital or any certificate issued in connection
with any reorganization), stock option or similar rights, whether in
addition to, in substitution of, as a conversion of, or in exchange for any
Pledged Stock, or otherwise in respect thereof (collectively, the
"Additional Pledged Stock"), the Borrower shall accept the same as the
agent of the Administrative Agent and the Lenders, hold the same in trust
for the Administrative Agent, the Co-Agents
<PAGE>
5
and the Lenders and deliver the same forthwith to the Administrative Agent
in the exact form received, duly indorsed by the Borrower to the
Administrative Agent, if required, together with an undated stock power
covering such certificate duly executed in blank by the Borrower and with,
if the Administrative Agent so requests, signature guaranteed, to be held
by the Administrative Agent, subject to the terms hereof, as additional
collateral security for the Obligations; provided, however, that in no
-------- -------
event shall the aggregate amount of Pledged Stock be greater than 65% of
the issued and outstanding shares of all classes of the Capital Stock of
the Issuer. Any sums paid upon or in respect of the Pledged Stock upon the
liquidation or dissolution of the Issuer (other than pursuant to a
transaction permitted under Section 8.5 or 8.6 of the Credit Agreement)
shall be paid over to the Administrative Agent to be held by it hereunder
as additional collateral security for the Obligations, and in case any
property shall be distributed upon or with respect to the Pledged Stock
pursuant to the recapitalization or reclassification of the capital of the
Issuer or pursuant to the reorganization thereof (other than pursuant to a
transaction permitted under Section 8.5 or 8.6 of the Credit Agreement),
the property so distributed shall be delivered to the Administrative Agent
to be held by it hereunder as additional collateral security for the
Obligations. If any such sums of money or property so paid or distributed
in respect of the Pledged Stock shall be received by the Borrower, the
Borrower shall, until such money or property is paid or delivered to the
Administrative Agent, hold such money or property in trust for the
Administrative Agent, the Co-Agents and the Lenders, segregated from other
funds of the Borrower, as additional collateral security for the
Obligations.
(b) Without the prior written consent of the Administrative Agent,
the Borrower will not (1) vote to enable, or take any other action to
permit, the Issuer to issue any stock or other equity securities of any
nature or to issue any other securities convertible into or granting the
right to purchase or exchange for any stock or other equity securities of
any nature of the Issuer, to any Person other than the Borrower, except as
permitted under the Credit Agreement, (2) sell, assign, transfer, exchange,
or otherwise dispose of, or grant any option with respect to, the
Collateral, except as permitted by Section 8.5 or 8.6 of the Credit
Agreement, or (3) create, incur or permit to exist any Lien or option in
favor of, or any material adverse claim of any Person with respect to, any
of the Collateral, or any interest therein, except for the security
<PAGE>
6
interests created by this Agreement and Liens arising by operation of law.
(c) The Borrower shall defend the security interest created by this
Agreement as a perfected security interest against claims and demands of
all Persons whomsoever. At any time and from time to time, upon the
written request of the Administrative Agent, and at the sole expense of the
Borrower, the Borrower will promptly and duly execute and deliver such
further instruments and documents and take such further actions as the
Administrative Agent may reasonably request for the purposes of obtaining
or preserving the full benefits of this Agreement and of the rights and
powers herein granted. In the event that an Event of Default has occurred
and is continuing, if any amount payable under or in connection with any of
the Collateral shall be or become evidenced by any instrument (including
any promissory note) or chattel paper (in each case as defined in the
Code), such instrument or chattel paper shall be immediately delivered to
the Administrative Agent, duly endorsed in a manner satisfactory to the
Administrative Agent, to be held as Collateral pursuant to this Agreement.
Prior to such delivery, the Pledgor shall hold all such instruments and
chattel paper in trust for the Administrative Agent, for the ratable
benefit of the Lenders, and shall not commingle any of the foregoing with
any assets of the Pledgor.
(d) The Borrower shall pay, and save the Administrative Agent, the
Co-Agents and the Lenders harmless from, any and all liabilities with
respect to, or resulting from any delay in paying, any and all stamp,
excise, sales or other similar taxes which may be payable or determined to
be payable with respect to any of the Collateral or in connection with any
of the transactions contemplated by this Agreement.
6. Cash Dividends; Voting Rights. Unless an Event of Default shall
-----------------------------
have occurred and be continuing and the Administrative Agent shall have given
notice to the Borrower of the Administrative Agent's intent to exercise its
corresponding rights pursuant to paragraph 7 below, the Borrower shall be
permitted to receive all dividends and distributions paid or made in respect of
the Pledged Stock and to exercise all voting and corporate and other rights with
respect to the Pledged Stock; provided, however, that no vote shall be cast or
-------- -------
corporate right exercised or other action taken which would materially impair
the Collateral (other than pursuant to a transaction permitted under the Credit
Agreement) or result in any violation of any provision of the Credit Agreement,
the Notes, this Agreement or any other Loan Document.
<PAGE>
7
7. Rights of the Lenders, the Co-Agents and the Administrative Agent.
-----------------------------------------------------------------
If an Event of Default shall occur and be continuing and the Administrative
Agent shall give notice to the Borrower of its intent to exercise such rights,
(i) the Administrative Agent shall have the right to receive any and all cash
dividends paid in respect of the Pledged Stock and make application thereof to
the Obligations in such order as the Administrative Agent may determine and (ii)
the Administrative Agent shall have the right to cause all of the Pledged Stock
to be registered in the name of the Administrative Agent or its nominee, and the
Administrative Agent or its nominee may thereafter exercise (x) all voting,
corporate and other rights pertaining to such Pledged Stock at any meeting of
shareholders of the Issuer or otherwise and (y) any and all rights of
conversion, exchange, subscription and any other rights, privileges or options
pertaining to such Pledged Stock as if it were the absolute owner thereof
(including, without limitation, the right to exchange at its discretion any and
all of the Pledged Stock upon the merger, consolidation, reorganization,
recapitalization or other fundamental change in the corporate structure of the
Issuer, or upon the exercise by the Borrower or the Administrative Agent of any
right, privilege or option pertaining to such Pledged Stock, and in connection
therewith, the right to deposit and deliver any and all of the Pledged Stock
with any committee, depositary, transfer agent, registrar or other designated
agency upon such terms and conditions as the Administrative Agent may
determine), all without liability (other than for its gross negligence or
willful misconduct) except to account for property actually received by it, but
the Administrative Agent shall have no duty to the Borrower to exercise any such
right, privilege or option and shall not be responsible for any failure to do so
or delay in so doing; provided that the Administrative Agent shall not exercise
--------
any voting or other consensual rights pertaining to the Pledged Stock in any way
that would constitute an exercise of the remedies described in paragraph 8 other
than in accordance with such paragraph 8.
8. Remedies. If an Event of Default shall occur and be continuing,
--------
the Administrative Agent, on behalf of the Lenders, may exercise all rights and
remedies of a secured party under the Code, and, to the extent permitted by law,
all other rights and remedies granted in this Agreement and in any other
instrument or agreement securing, evidencing or relating to the Obligations.
Without limiting the generality of the foregoing, the Administrative Agent,
without demand of performance or other demand, presentment, protest,
advertisement or notice of any kind (except any notice required by law referred
to below) to or upon the Borrower or any other Person (all and each of which
demands, defenses, advertisements and notices are hereby waived), may in such
circumstances, to the extent permitted by law, forthwith
<PAGE>
8
collect, receive, appropriate and realize upon the Collateral, or any part
thereof, and/or may forthwith sell, assign, give option or options to purchase
or otherwise dispose of and deliver the Collateral or any part thereof (or
contract to do any of the foregoing), in one or more parcels at public or
private sale or sales, in the over-the-counter market, at any exchange, broker's
board or office of the Administrative Agent, any Co-Agent or any Lender or
elsewhere upon such terms and conditions as it may deem advisable and at such
prices as it may deem best, for cash or on credit or for future delivery without
assumption of any credit risk. The Administrative Agent, any Co-Agent or any
Lender shall have the right, to the extent permitted by law, upon any such sale
or sales, to purchase the whole or any part of the Collateral so sold, free of
any right or equity of redemption in the Borrower, which right or equity is
hereby waived or released. The Administrative Agent shall apply any Proceeds
from time to time held by it and the net proceeds of any such collection,
recovery, receipt, appropriation, realization or sale, after deducting all
reasonable costs and expenses of every kind incurred in respect thereof or
incidental to the care or safekeeping of any of the Collateral or in any way
relating to the Collateral or the rights of the Administrative Agent, the Co-
Agents and the Lenders hereunder, including, without limitation, reasonable
attorneys' fees and disbursements of counsel to the Administrative Agent, to the
payment in whole or in part of the Obligations, in such order as the
Administrative Agent may elect, and only after such application and after the
payment by the Administrative Agent of any other amount required by any
provision of law, including, without limitation, Section 9-504(1)(c) of the
Code, need the Administrative Agent account for the surplus, if any, to the
Borrower. To the extent permitted by applicable law, the Borrower waives all
claims, damages and demands it may acquire against the Administrative Agent, any
Co-Agent or any Lender arising out of the repossession, retention or sale of the
Collateral, other than any such claims, damages and demands that may arise from
the gross negligence or willful misconduct of any of them. If any notice of a
proposed sale or other disposition of Collateral shall be required by law, such
notice shall be deemed reasonable and proper if given at least 10 days before
such sale or other disposition. The Borrower shall remain liable for any
deficiency if the proceeds of any sale or other disposition of Collateral are
insufficient to pay the then outstanding Obligations and the fees and
disbursements of any attorneys employed by the Administrative Agent, any Co-
Agent or any Lender to collect such deficiency.
<PAGE>
9
9. Registration Rights; Private Sales. (a) If the Administrative
----------------------------------
Agent shall determine to exercise its right to sell any or all of the Pledged
Stock pursuant to paragraph 8 hereof, and if in the reasonable opinion of the
Administrative Agent it is necessary or reasonably advisable to have the Pledged
Stock, or that portion thereof to be sold, registered under the provisions of
the Securities Act, provided that such registration and sale are otherwise
permitted under applicable law, the Borrower will use its best efforts to cause
the Issuer thereof (i) to execute and deliver, and cause the directors and
officers of the Issuer to execute and deliver, all such instruments and
documents, and do or cause to be done all such other acts as may be, in the
reasonable opinion of the Administrative Agent, necessary or reasonably
advisable to register the Pledged Stock to be sold, or that portion thereof to
be sold under the provisions of the Securities Act, (ii) to use its best efforts
to cause the registration statement relating thereto to become effective and to
remain effective for a period of not more than one year from the date of the
first public offering of the Pledged Stock, or that portion thereof to be sold,
ending when all such Pledged Stock is sold, and (iii) to make all amendments
thereto and/or to the related prospectus which, in the reasonable opinion of the
Administrative Agent, are necessary or reasonably advisable, all in conformity
with the requirements of the Securities Act and the rules and regulations of the
Securities and Exchange Commission applicable thereto. If the Administrative
Agent shall determine to exercise its right to sell any or all of the Pledged
Stock pursuant to paragraph 8 hereof, and if in the reasonable opinion of the
Administrative Agent it is necessary or reasonably advisable to comply with the
provisions of the securities or "Blue Sky" laws of any jurisdiction, the
Borrower agrees to use its best efforts to cause the Issuer to comply with the
provisions of the securities or "Blue Sky" laws of any and all jurisdictions
which the Administrative Agent shall reasonably designate and to make available
to its security holders, as soon as practicable, an earnings statement (which
need not be audited) which will satisfy the provisions of Section 11(a) of the
Securities Act.
(b) The Borrower recognizes that the Administrative Agent may be
unable to effect a public sale of any or all the Pledged Stock, by reason of
certain prohibitions contained in the Securities Act and applicable state
securities laws or otherwise, and may be compelled to resort to one or more
private sales thereof to a restricted group of purchasers which will be obliged
to agree, among other things, to acquire such securities for their own account
for investment and not with a view to the distribution or resale thereof. The
Borrower acknowledges and agrees that any such private sale may result in prices
and other terms less favorable than if such sale were a public sale and,
notwithstanding such circumstances, agrees that any such private
<PAGE>
10
sale shall be deemed to have been made in a commercially reasonable manner. The
Administrative Agent shall be under no obligation to delay a sale of any of the
Pledged Stock for the period of time necessary to permit the Issuer thereof to
register such securities for public sale under the Securities Act, or under
applicable state securities laws, even if such Issuer would agree to do so.
(c) The Borrower further agrees to use its best efforts to do or
cause to be done all such other acts as may be necessary to make such sale or
sales of all or any portion of the Pledged Stock pursuant to this paragraph 9
valid and binding and in compliance with any and all other applicable
Requirements of Law. The Borrower further agrees that a breach of any of the
covenants contained in this Section will cause irreparable injury to the
Administrative Agent, the Co-Agents and the Lenders, that the Administrative
Agent and the Lenders have no adequate remedy at law in respect of such breach
and, as a consequence, that each and every covenant contained in this Section
shall be specifically enforceable against the Borrower, and, to the extent
permitted by law, the Borrower hereby waives and agrees not to assert any
defenses against an action for specific performance of such covenants except for
a defense that no Event of Default has occurred and is continuing under the
Credit Agreement.
10. Irrevocable Authorization and Instruction to the Issuer. The
-------------------------------------------------------
Borrower hereby authorizes and instructs the Issuer to comply with any
instruction received by it from the Administrative Agent in writing that (a)
states that an Event of Default has occurred and is continuing and (b) is
otherwise in accordance with the terms of this Agreement, without any other or
further instructions from the Borrower, and the Borrower agrees that the Issuer
shall be fully protected in so complying.
11. Administrative Agent's Appointment as Attorney-in-Fact. (a) The
------------------------------------------------------
Borrower hereby irrevocably constitutes and appoints the Administrative Agent
and any officer or agent of the Administrative Agent, with full power of
substitution, as its true and lawful attorney-in-fact with full irrevocable
power and authority in the place and stead of the Borrower and in the name of
the Borrower or in the Administrative Agent's own name, from time to time in the
Administrative Agent's discretion, in the event that an Event of Default has
occurred and is continuing, and to the extent permitted by law, to take any and
all appropriate action and to execute any and all documents and instruments
which may be necessary or reasonably desirable to accomplish the purposes of
this Agreement, including, without limitation, any financing statements,
endorsements, assignments or other instruments of transfer.
<PAGE>
11
(b) The Borrower hereby ratifies all that said attorneys shall
lawfully do or cause to be done pursuant to the power of attorney granted in
paragraph 11(a). All powers, authorizations and agencies contained in this
Agreement with respect to the Collateral are powers coupled with an interest and
are irrevocable until payment in full of the Notes, the Reimbursement
Obligations and the other Obligations then due and owing, the termination of the
Commitments and the expiration, termination or return to the Issuing Lender of
the Letters of Credit.
12. Duty of Administrative Agent. The Administrative Agent's sole
----------------------------
duty with respect to the custody, safekeeping and physical preservation of the
Collateral in its possession, under Section 9-207 of the Code or otherwise,
shall be to deal with it in the same manner as the Administrative Agent deals
with similar securities and property for its own account. None of the
Administrative Agent, any Co-Agent, any Lender nor any of their respective
directors, officers, employees or agents shall be liable for failure to demand,
collect or realize upon any of the Collateral or for any delay in doing so or
shall be under any obligation to sell or otherwise dispose of any Collateral
upon the request of the Borrower or any other Person or to take any other action
whatsoever with regard to the Collateral or any part thereof.
13. Execution of Financing Statements. Pursuant to Section 9-402 of
---------------------------------
the Code, the Borrower authorizes the Administrative Agent to file financing
statements with respect to the Collateral without the signature of the Borrower
in such form and in such filing offices as the Administrative Agent reasonably
determines appropriate to perfect the security interests of the Administrative
Agent under this Agreement. A carbon, photostatic or other reproduction of this
Agreement shall be sufficient as a financing statement for filing in any
jurisdiction.
14. Authority of Administrative Agent. The Borrower acknowledges
---------------------------------
that the rights and responsibilities of the Administrative Agent under this
Agreement with respect to any action taken by the Administrative Agent or the
exercise or non-exercise by the Administrative Agent of any option, voting
right, request, judgment or other right or remedy provided for herein or
resulting or arising out of this Agreement shall, as among the Administrative
Agent, the Co-Agents and the Lenders, be governed by the Credit Agreement and by
such other agreements with respect thereto as may exist from time to time among
them, but, as between the Administrative Agent and the Borrower, the
Administrative Agent shall be conclusively presumed to be acting as agent for
the Lenders with full and valid authority so to act or refrain from acting, and
neither the Borrower nor the Issuer
<PAGE>
12
shall be under any obligation to make any inquiry respecting such authority.
15. Notices. All notices, requests and demands under this Agreement
-------
shall be given in accordance with Section 11.2 of the Credit Agreement, except
that notices to the Issuer shall be given at the address set forth under its
signature on Exhibit A attached hereto.
---------
16. Release of Collateral and Termination. (a) At such time as the
-------------------------------------
payment in full of the Notes, the Reimbursement Obligations and the other
Obligations then due and owing shall have occurred, the Commitments have been
terminated and the Letters of Credit have expired, terminated or been returned
to the Issuing Lender, the Collateral shall be released from the Liens created
hereby, and this Agreement and all obligations (other than those expressly
stated to survive such termination) of the Administrative Agent and the Borrower
hereunder shall terminate, all without delivery of any instrument or performance
of any act by any party, and all rights to the Collateral shall revert to the
Borrower. Upon request of the Borrower following any such termination, the
Administrative Agent shall deliver (at the sole cost and expense of the
Borrower) to the Borrower any Collateral held by the Administrative Agent
hereunder, and execute and deliver (at the sole cost and expense of the
Borrower) to the Borrower such documents as the Borrower shall reasonably
request to evidence such termination.
(b) If any of the Collateral shall be sold, transferred or otherwise
disposed of by the Borrower in a transaction permitted by the Credit Agreement,
then the Administrative Agent shall execute and deliver to the Borrower (at the
sole cost and expense of the Borrower) all releases or other documents necessary
or reasonably desirable for the release of the Liens created hereby on such
Collateral.
17. Severability. Any provision of this Agreement which is
------------
prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction,
be ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions hereof, and any such prohibition or
unenforceability in any jurisdiction shall not invalidate or render
unenforceable such provision in any other jurisdiction.
18. Amendments in Writing; No Waiver; Cumulative Remedies. (a)
-----------------------------------------------------
None of the terms or provisions of this Agreement may be waived, amended,
supplemented or otherwise modified except by a written instrument executed by
the Borrower and the Administrative Agent in accordance with Section 11.1 of the
Credit Agreement.
<PAGE>
13
(b) Neither the Administrative Agent, any Co-Agent nor any Lender
shall by any act (except by a written instrument pursuant to paragraph 18(a)
hereof), delay, indulgence, omission or otherwise be deemed to have waived any
right or remedy hereunder or to have acquiesced in any Default or Event of
Default or in any breach of any of the terms and conditions hereof. No failure
to exercise, nor any delay in exercising, on the part of the Administrative
Agent, any Co-Agent or any Lender, any right, power or privilege hereunder shall
operate as a waiver thereof. No single or partial exercise of any right, power
or privilege hereunder shall preclude any other or further exercise thereof or
the exercise of any other right, power or privilege. A waiver by the
Administrative Agent, any Co-Agent or any Lender of any right or remedy
hereunder on any one occasion shall not be construed as a bar to any right or
remedy which the Administrative Agent, such Co-Agent or such Lender would
otherwise have on any future occasion.
(c) The rights and remedies herein provided are cumulative, may be
exercised singly or concurrently and are not exclusive of any other rights or
remedies provided by law.
19. Section Headings. The section headings used in this Agreement
----------------
are for convenience of reference only and are not to affect the construction
hereof or to be taken into consideration in the interpretation hereof.
20. Successors and Assigns. This Agreement shall be binding upon the
----------------------
successors and assigns of the Borrower and shall inure to the benefit of the
Administrative Agent, the Co-Agents and the Lenders and their successors and
assigns.
<PAGE>
14
21. GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY, AND
-------------
CONSTRUED AND INTERPRETED IN ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK
WITHOUT REGARD TO THE PRINCIPLES OF CONFLICT OF LAWS THEREOF.
IN WITNESS WHEREOF, the undersigned has caused this Agreement to be
duly executed and delivered as of the date first above written.
REMINGTON ARMS COMPANY, INC.
By: /s/ Samuel G. Grecco
-------------------------------
Title: Vice President & Controller
ACKNOWLEDGED AND AGREED AS OF
THE DATE HEREOF BY:
CHEMICAL BANK, as Administrative Agent
By: /s/ William J. Caggiano
------------------------
Title: Managing Director
<PAGE>
SCHEDULE 1
TO PLEDGE AGREEMENT
DESCRIPTION OF PLEDGED STOCK
Stock
Class of Certificate No. of
Issuer Stock* No. Shares
- ------------------------------- -------- ----------- ------
Remington International, Ltd. 650
- ----------
* Stock is common stock unless otherwise indicated.
<PAGE>
ACKNOWLEDGMENT AND CONSENT
The undersigned is the Issuer referred to in the Pledge Agreement, dated
March 30, 1996, made by the Borrower (as defined therein) for the benefit of
Chemical Bank, as Administrative Agent (as amended, supplemented or otherwise
modified from time to time, the "Pledge Agreement") and the undersigned hereby
----------------
acknowledges receipt of a copy of the Pledge Agreement. The undersigned agrees
for the benefit of the Administrative Agent and the Lenders as follows:
1. The undersigned will be bound by the terms of the Pledge Agreement and
will comply with such terms insofar as such terms are applicable to the
undersigned.
2. The undersigned will notify the Administrative Agent promptly in
writing of the occurrence of any of the events described in subsection 5(a) of
the Pledge Agreement.
3. (i) The terms of subsection 9(c) of the Pledge Agreement shall apply to
it, mutatis mutandis, with respect to all actions that may be required of it
------- --------
under or pursuant to or arising out of Section 9 of the Pledge Agreement.
(ii) Notwithstanding the foregoing, the undersigned (A) does not and shall
not hereby, directly or indirectly, guarantee, assume or in any other manner
become liable for any of the Obligations or any other Indebtedness of the
Borrower, and (B) shall not be bound hereby or obligated hereunder to the extent
that being so bound or obligated would cause the undersigned so to guarantee,
assume or become liable for any of such Obligations or Indebtedness.
REMINGTON INTERNATIONAL, LTD.
By: /s/ Samuel G. Grecco
-----------------------
[Name] Samuel G. Grecco
[Title] Vice President
Address for Notices:
P.O. Box 700
--------------------------
Madison, N.C. 27025-0700
--------------------------
Fax: (910) 548-8629
---------------------
<PAGE>
EXHIBIT 5.1
DEBEVOISE & PLIMPTON
875 THIRD AVENUE
NEW YORK, NY 10022
(212) 909-6000
, 1997
RACI Holding, Inc.
Remington Arms Company, Inc.
870 Remington Drive
P.O. Box 700
Madison, North Carolina 27025-0700
Offer to Exchange $100,000,000 Senior
Subordinated Notes of Remington Arms Company, Inc.
Ladies and Gentlemen:
We have acted as special counsel to Remington Arms Company, Inc., a Delaware
corporation ("Remington") and RACI Holding, Inc., a Delaware corporation
("Holding"), in connection with the preparation and filing with the Securities
and Exchange Commission (the "Commission") under the Securities Act of 1933,
as amended (the "Act"), of a Registration Statement on Form S-4 (as amended,
the "Registration Statement"), which includes a form of prospectus (the
"Prospectus") relating to the proposed offering of $100,000,000 aggregate
principal amount of Remington's 9 1/2% Senior Subordinated Notes Due 2003,
Series B (the "New Notes"), which are to be registered under the Act, in
exchange for an equal principal amount of its outstanding 9 1/2% Senior
Subordinated Notes Due 2003, Series A (the "Existing Notes").
In so acting, we have examined and relied upon the originals, or copies
certified or otherwise identified to
our satisfaction, of such corporate records, documents, certificates and other
instruments as in our judgment are necessary or appropriate to enable us to
render the opinion expressed below.
We are of the opinion that the New Notes to be offered pursuant to the
Registration Statement have been duly authorized by all necessary corporate
action on the part of Remington and Holding and, upon the issuance of the New
Notes by Remington and authentication by The First Trust National Association
(the "Trustee") pursuant to the Indenture, dated as of November 30, 1993,
among Remington, as issuer, Holding, as Guarantor, and the Trustee, the New
Notes will be validly issued and will be legal, valid and binding obligations
of Remington, enforceable against Remington in accordance with their terms,
except as may be limited by bankruptcy, insolvency, reorganization, moratorium
or similar laws relating to or affecting creditors' rights generally or by
general principles of equity (regardless of whether such enforceability is
considered in an action at law or in equity).
We express no opinion as to the effect of any Federal or state laws
regarding fraudulent transfers or conveyances.
We express no opinion as to the laws of any jurisdiction other than the
Federal laws of the United States, the laws of the State of New York and the
General Corporation Law of the State of Delaware.
We consent to the filing of this opinion as an exhibit to the Registration
Statement and to the use of our name under the headings "Legal Matters" and
"Certain Federal Tax Consequences" in the Prospectus. In giving such consent,
we do not hereby concede that we are within the category of persons whose
consent is required under Section 7 of the Act or the rules and regulations of
the Commission thereunder.
Very truly yours,
<PAGE>
EXHIBIT 10.20
REMINGTON
REMINGTON ARMS COMPANY, INC.
870 REMINGTON DRIVE
P.O. BOX 700
MADISON, NC 27025-0700
1-910-548-8700
December 5, 1996
Robert W. Haskin, Jr.
3501 Bromley Woods Lane
Greensboro, North Carolina 27410
Dear Bob:
This letter agreement (the "Agreement") sets forth the agreements between
you and Remington Arms Company, Inc. ("Employer") and RACI Holding, Inc.
("Holding") in connection with (i) the termination of your employment as Vice
President, General Counsel and Secretary of Holding and Employer and all other
offices held by you with Holding, Employer or any of their respective
subsidiaries, effective as of December 31, 1996 (the "Date of Termination"), as
provided in Paragraph 1 below, (ii) the amendment of the 1995 Option Agreement
(as defined below) to, among other things, eliminate certain provisions relating
to the vesting, exercisability and purchase of options granted to you thereunder
in connection with or following a termination of your employment, as provided in
Paragraph 3 below, (iii) the grant to you of options to purchase the number of
shares of Class A Common Stock of Holding specified in Paragraph 4 below, and
(iv) the mutual releases set forth in Paragraph 7 and 8 hereof.
1. You hereby agree (i) to resign from your positions as Vice President,
General Counsel and Secretary of Holding and Employer and from each other office
with Holding, Employer or any of their respective subsidiaries held by you and
(ii) that your employment with Holding, Employer and each of their respective
subsidiaries will terminate, in each such case, effective on the Date of
Termination.
2. Employer will pay or provide to you the following amounts and benefits
subject, in each case, to your continued compliance with your covenants and
obligations hereunder, as determined in good faith by the Board of Directors of
Holding (the "Holding Board").
(a) For the period commencing on the Date of Termination and ending
on the first anniversary thereof, Employer shall continue to pay you (or, in the
event of your
<PAGE>
Robert W. Haskin, Jr.
December 5, 1996
Page 2
death, to your estate) installments of $20,834.00 per month representing your
normal monthly salary.
(b) Until other employment is obtained, you will continue to be
eligible to particpate in those of Employer's employee benefit plans, other than
severance, bonus or other incentive compensation plans, in which you are a
participant as of the date hereof.
(c) In accordance with Employer's Home Purchase Policy and in
connection with your relocation, Employer shall purchase your principal
residence located in Greensboro, North Carolina for fair market value with a
minimum guarantee of actual investment cost.
3. Effective as of the date hereof, the Management Stock Option
Agreement, dated as of July 17, 1995, between Holding and you (the "1995 Option
Agreement") is hereby amended to (i) eliminate the requirement thereunder that
you continue in the employment of Holding or its subsidiaries as a condition to
the vesting and exercisability of the options granted to you thereunder (the
"Existing Options") (Section 2), and (ii) delete all provisions of the 1995
Option Agreement relating to the early termination of the period for exercise of
the Existing Options or the repurchase of such Existing Options in connection
with or following any termination of your employment with Holding and its
subsidiaries (Sections 3b, 4(c) through 4(e) and 4(g) through 4(i).
4. Holding will grant to you options (the "New Options") to purchase up
to 5,000 shares of its Class A Common, par value $.01 per share (the "Common
Stock"), at a per share purchase price of the lesser of $100.00 or the amount at
which stock is offered to Remington's key executives and in accordance with the
terms of the Holding Amended and Restated Stock Option Plan. The New Options
will (i) have a 7 year term from date of vesting, (ii) become vested and
exercisable in three equal annual installments commencing May 1, 1997, (iii) be
immediately canceled and forfeited in the event that the Holding Board
determines in good faith that you have breached any of your covenants or
obligations hereunder and (iv) otherwise be subject to the terms and conditions
set forth in a Management Stock Option Agreement to be entered into by and
between Holding and you upon, and as a condition to, the grant of the New
Options (the "New Option Agreement").
5. You hereby waive any and all claims or rights that you may have,
currently or in the future, to be offered the opportunity to purchase any shares
of capital stock of Holding or to receive a grant of options or other rights in
respect of the Common Stock, including without limitation, any and all claims or
rights pursuant to or under any of (i) the letter from Hubbard C. Howe to you,
dated March 29, 1994, (ii) the letter from you to Hubbard C. Howe, dated April
12, 1994, and (iii) the Registration and Participation Agreement, dated as of
November 30, 1993, between Holding and The Clayton & Dubilier Private Equity
Fund IV Limited Partnership, as such agreement may
<PAGE>
Robert W. Haskin, Jr.
December 5, 1996
Page 3
be amended from time to time after the date of this Agreement, or (iv) any and
all resolutions, actions or commitments of the Board of Directors of Holding or
any committee thereof or any officer, director, shareholder, agent or other
representative of Holding or any of its subsidiaries or affiliates, other than
your opportunity to purchase shares of Common Stock covered by the Existing
Options or the New Options in accordance with the terms and subject to the
conditions thereof.
6. Any accrued benefits payable to you under any applicable plan, policy
or practice of Employer (other than any severance, bonus or other incentive
compensation plan, policy or practice) shall be payable to you in accordance
with the applicable terms thereof.
7. In consideration of Employer's and Holding's promises to pay you the
amounts and provide you the benefits and awards specified herein you, on behalf
of yourself, your agents, representatives, assigns, heirs, executors and
administrators (individually and collectively, the "Employee Releasor"), hereby
release and forever discharge Holding, Employer, each of their respective
subsidiaries and affiliates, and each of their respective officers, directors,
trustees, employees, successors and assigns (individually and collectively, the
"Employee Releasee") from and against any and all claims, liabilities,
obligations, demands or causes of action, however denominated, whether known or
unknown, whether at law or equity, and whether or not previously asserted, that
Employee Releasor has or could have against any Employee Releasee (individually
and collectively the "Claims"), including, without limitation, any and all such
Claims arising out of or in any way connected with or related to the employment
or termination of Employee Releasor's offices or employment with Holding,
Employer or any of their respective subsidiaries or affiliates, other than
Claims against Holding or Employer (x) for any amounts, benefits or awards
payable pursuant to this letter agreement, the 1995 Option Agreement, as amended
pursuant to Paragraph 3 hereof or the New Option Agreement or (y) to enforce any
of the covenants or obligations of Holding, Employer or any other Employee
Releasor under this letter agreement, the 1995 Option Agreement, as amended
pursuant to Paragraph 3 hereof, or the New Option Agreement.
8. In consideration of your promises and covenants under Paragraphs 1, 6
and 10 of this Agreement, Holding, Employer and each of their respective
subsidiaries and affiliates and each of their respective officers, directors,
trustees, employees, agents, representatives, successors and assigns
(individually and collectively, the "Employer Releasor"), hereby release and
forever discharge you, your agents, representatives, assigns, heirs, executors
and administrators (individually and collectively, the "Employer Releasee") from
and against any and all claims, liabilities, obligations, demands or causes of
action, however denominated, whether known or unknown, whether at law or equity,
and whether or not previously asserted, that Employer Releasor has or could have
against Employer Releasee arising out of or in any way connected with or related
to the employment or termination of employment with Holding, Employer or their
respective
<PAGE>
Robert W. Haskin, Jr.
December 5, 1996
Page 4
subsidiaries and affiliates or arising out of or related to your gross
negligence or willful misconduct, other than Claims against the Employer
Releasee to enforce any of your covenants or obligations under this letter
agreement, the 1995 Option Agreement, as amended pursuant to Paragraph 3 hereof,
the New Option Agreement or the letter agreement, dated as of the date hereof,
from Holding to you concerning your agreement to refrain from engaging in
certain legal activities for the period specified therein (the "Side Letter").
9. This Agreement, together with the Side Letter, sets forth the entire
agreement and understanding of the parties hereto with respect to the subject
matter hereof and supersede any and all prior agreements and understandings,
oral or written, relating to the subject matter hereof.
10. This Agreement does not reduce or enlarge in any way any rights of
indemnification or any insurance coverage to which you may be entitled under any
applicable by-law of Holding or Employer.
11. Any notice or other communication required or permitted to be given or
made under this Agreement by one party to the other party shall be in writing
and shall be deemed to have been duly given and effective (i) on the date of
delivery if delivered personally, (ii) ten days after being sent by registered
or certified mail, return receipt requested and postage prepaid, or (iii) upon
transmission by telecopy with confirming copy sent concurrently by registered or
certified mail, return receipt requested and postage prepaid, as follows (or to
such other address as shall be given in writing by one party to the other party
in accordance herewith):
If to you, to:
Robert W. Haskin, Jr.
3501 Bromley Woods Lane
Greensboro, North Carolina 27410
Telephone: 910-286-0653
If to Employer or Holding, to:
Attention: Robert L. Euritt
Telephone: 910-548-8519
Telecopy: 910-548-7719
12. This Agreement shall be construed in accordance with and governed by
the laws of the State of North Carolina. The parties hereto hereby irrevocably
submit to the jurisdiction of the courts of the State of North Carolina and the
Federal courts of the United States of America, in each case located in the
State, City and County of North Carolina, solely in respect of the
interpretation and enforcement of the provisions of this
<PAGE>
Robert W. Haskin, Jr.
December 5, 1996
Page 5
Agreement, and hereby waive, and agree not to assert, as a defense in any
action, suit or proceeding for the interpretation or enforcement hereof, that it
is not subject thereto or that such action, suit or proceeding may not be
brought or is not maintainable in such courts or that the venue thereof may not
be appropriate or that this Agreement may not be enforced in or by such courts,
and the parties hereto irrevocably agree that all claims with respect to such
action or proceeding shall be heard and determined in such a North Carolina
State or Federal court. The parties hereto hereby consent to and grant any such
court jurisdiction over the person of such parties and over the subject matter
of any such dispute and agree that mailing of process or other papers in
connection with any such action or proceeding in the manner provided in Section
11, or in such other manner as may be permitted by law, shall be valid and
sufficient service thereof.
13. In the event of any litigation or any other legal proceeding,
including arbitration, relating to this Agreement, including without limitation,
any action to interpret or enforce this Agreement, the prevailing party shall be
entitled to reasonable attorneys' fees and costs of suit.
14. If any provision of this Agreement shall be prohibited by or invalid
under applicable law, such provision shall be ineffective to the extent of such
prohibition or invalidity, without invalidating the remainder of such provision
or the remaining provisions of this Agreement.
15. No waiver or modification of any provision of this Agreement shall be
valid unless in writing duly executed by the party sought to be charged with
such waiver or modification. No failure or delay in exercising any right, power
or privilege hereunder shall operate as a waiver thereof, nor shall any single
or partial exercise thereof preclude any other or further exercise thereof or
the exercise of any other right, power or privilege. The rights and remedies
provided herein shall be cumulative and not exclusive of any rights or remedies
that any party may otherwise have at law or in equity or otherwise.
16. This Agreement shall be binding upon and inure to the benefit of the
parties hereto and their respective heirs, successors and permitted assigns.
<PAGE>
Robert W. Haskin, Jr.
December 5, 1996
Page 6
Please confirm your agreement and acceptance of the terms of this Agreement
by signing, dating and returning the enclosed copy of this letter to Employer
immediately.
REMINGTON ARMS COMPANY, INC.
By: /s/ Robert L. Euritt
---------------------------------------
Name: Robert L. Euritt
Title: Vice President Human Resources
RACI HOLDING, INC.
By: /s/ Thomas L. Millner
---------------------------------------
Name: Thomas L. Millner
Title: President & Chief Operating
Officer
I hereby confirm, accept and
agree with and to the terms,
covenants and obligations set
forth in this letter agreement:
/s/ Robert W. Haskin, Jr.
- ---------------------------------
[Employee]
Date: 12-11-96
----------------------------
a:\rwh1296\letter agt
<PAGE>
EXHIBIT 10.21
Remington Arms Company, Inc.
870 Remington Drive
P.O. Box 700
Madison, N.C. 27025-0700
1-910-548-8700
December 11, 1996
Mr. Thomas L. Millner
President
Remington Arms Company, Inc.
870 Remington Drive
Madison, NC 27025
Dear Tommy:
This letter memorializes the understanding I have reached with Remington Arms
Company, Inc. ("Remington"), and RACI Holding, Inc. ("Holding") (collectively,
with me, the "Parties") regarding legal work I may undertake after my
resignation as General Counsel of Remington becomes effective on December 31,
1996.
This letter supplements the letter agreement between me and Remington, dated
December 5, 1996 (the "Agreement"), and all capitalized terms contained herein
and not otherwise defined shall have the meaning ascribed to them in the
Agreement.
1. Scope of undertaking as counsel. As General Counsel from May 1, 1994
-------------------------------
through the effective date of my resignation, I acted as attorney-at-law for
Remington and provided it with a full range of legal services on a variety of
legal matters, including but not limited to litigations, transactions, and
general corporate matters. In addition, I was frequently called upon to address
legal issues which arose in the context of my concurrent role as Vice President
of Marketing.
The legal matters which I dealt with during my tenure at Remington included:
a. Product liability counseling and litigation;
b. Counseling concerning manufacturing, supply, distribution,
advertising, sales, marketing, licensing arrangements and other
contracts;
<PAGE>
Mr. Thomas L. Millner 2 December 11, 1996
c. Anti-trust counseling and litigation;
d. Counseling regarding regulatory and legislative matters;
e. Trademark and patent counseling and litigation; and
f. Labor and employee relations counseling and litigation.
The types of matters listed above related to the products manufactured,
distributed, licenses and/or sold by Remington, or contemplated by Remington for
manufacture, distribution, licensing, and/or sale, including but not limited to
firearms and ammunition, and equipment used in hunting, shooting, fishing,
camping and other outdoor and sporting activities.
2. Restrictions imposed by the ethical rules. As used in this letter the term
-----------------------------------------
"Rules" shall refer to the various rules of professional conduct imposed on
members of the legal profession. Moreover, to the extent that the Rules of more
than one jurisdiction governing conduct of lawyers may apply to my
representation of Remington and to the work I may undertake after December 31,
1996, and notwithstanding any contrary provision of the Letter Agreement
regarding forum selection or choice of law, the Parties intend that the term
"Rules" shall mean the most restrictive standard of conduct potentially
applicable.
I acknowledge that under the Rules, an attorney may not undertake a
representation adverse to the interests of a former client in a matter
substantially related to a matter in which the attorney represented the former
client and that an attorney may not use information obtained in connection with
such past representation to the disadvantage of the former client. I further
acknowledge that the categories of matters listed in Section 1, above, are among
------
the types of matters substantially related (as that term is used under the Rules
restricting an attorney's ability to undertake a representation that may be
adverse to the interests of a former client) to my service as General Counsel of
Remington and about which I have gained information provided in confidence for
the purpose of obtaining my legal advice. I hereby represent that I have no
intention to, and will not, engage in any conduct which may so violate the
Rules.
The Parties acknowledge that the Rules also limit the ability of lawyers to
enter into employment agreements which restrict the right to practice after
termination of employment. It is the intention of the Parties that nothing in
this letter, or the Letter Agreement, shall impose, or be read to impose,
greater or different restrictions on my ability to practice law than those which
may be imposed by the Rules, given the facts and circumstances described above.
3. Consent to limited waiver. The Parties also acknowledge that the Rules
-------------------------
establish imputed disqualifications preventing any lawyer in a firm from
<PAGE>
Mr. Thomas L. Millner 3 December 11, 1996
undertaking a representation which, because of one lawyer's former
representation, might be prohibited by the Rules, without the former client's
prior consent.
Remington represents that it will consent, upon reasonable prior notice and
opportunity to consult with legal counsel, to my association with a law firm
that may be retained in matters substantially related to those for which I
provided legal services to Remington (including but not limited to those
described in Section 1, above), provided, however, that both I and such law firm
----- --------- --------
shall provide Remington with written and binding assurance that, should the
firm's representation involve any matters adverse to Remington which may be or
may become substantially related to the matters I handled as General Counsel
(including but not limited to those described in Section 1, above), (a) I will
-----
not be in any way involved, and appropriate measures will be implemented to
ensure that I do not become in any way involved, in such representation and (b)
any information I acquired in my employment as General Counsel of Remington
(including but not limited to information relating to the subjects described in
Section 1, above) will be protected, and appropriate measures will be
------
implemented to ensure such protection, from use in connection with such matters.
Remington has agreed that its consent under this Section shall not be
unreasonably withheld.
4. Supplement to Letter Agreement. This letter adopts by reference Sections 11
-------------------------------
and 16 of the Letter Agreement. Except as may be specifically stated to the
contrary, the Supplemental Agreement does not in any way, and shall not in any
way be read to, limit, alter, or extinguish the provisions of the Letter
Agreement. In particular, nothing in this letter shall affect any restrictions
otherwise imposed by applicable law or the Letter Agreement on my future
employment or my use of information gained in the course of my employment with
Remington, in my capacity other than that as an attorney.
5. Breach of Terms of This Letter. If the Holding Board determines in good
-------------------------------
faith that I have failed to comply with my obligations under this letter,
Remington and Holding shall be released of their obligations under the Letter
Agreement as if I had failed to comply with my obligations and covenants under
the Letter Agreement.
I hereby confirm, accept and agree with and to the terms, covenants and
obligations set forth in this Supplemental Agreement. Please confirm your
agreement and acceptance of the same by signing, dating and returning the
enclosed copy of this letter to me.
Sincerely yours,
/s/ Robert W. Haskin, Jr.
-------------------------
Robert W. Haskin, Jr.
<PAGE>
Mr. Thomas L. Millner 4 December 11, 1996
The following hereby confirm, accept and agree with and to the terms, covenants
and obligations set forth in this Supplemental Agreement:
REMINGTON ARMS COMPANY, INC.
By: /s/ Robert L. Euritt
--------------------
Name: Robert L. Euritt
Title: Vice President Human Resources
RACI HOLDING, INC.
By: /s/ Thomas L. Millner
---------------------
Name: Thomas L. Millner
Title: President and Chief Operating Officer
<PAGE>
EXHIBIT 10.25
AMENDMENT NO. 1 TO THE AMENDED AND RESTATED
RACI HOLDING, INC. STOCK OPTION PLAN
--------------------------------------------
WHEREAS, pursuant to resolution of the Board of Directors (the "Board") of
RACI Holding, Inc. (the "Corporation") adopted and approved as of July 22, 1996,
the Board authorized and approved the amendment (the "Amendment") of the Amended
and Restated RACI Holding, Inc. Stock Option Plan (the "Plan") to increase the
number of shares of Class A common stock, par value of $.01 per share, of the
Corporation (the "Common Stock") available for grant under the Plan from 66,250
shares to 82,380 shares; and
WHEREAS, the Board authorized the President, the Secretary, any Assistant
Secretary, the Treasurer or any Assistant Treasurer of the Corporation
(individually, an "Authorized Officer" and, collectively, the "Authorized
Officers") to execute and deliver such Amendment.
NOW, THEREFORE, the Plan is hereby amended as follows:
The first sentence of Section 5.1 of the Plan, is hereby amended to
substitute "82,380" for "66,250."
IN WITNESS WHEREOF, RACI Holding, Inc. has caused
its duly Authorized Officer to execute this Amendment as of August 30, 1996.
RACI HOLDING, INC.
By: /s/ Thomas L. Millner
-----------------------
Title: President
--------------------
<PAGE>
EXHIBIT 10.27
RACI HOLDING, INC.
DIRECTOR STOCK OPTION PLAN
--------------------------
Section 1. Purpose
-------------------
The purpose of this RACI Holding, Inc. Director Stock Option Plan is to
foster and promote the long-term financial success of Holding and the Company
and to increase materially stockholder value by (a) motivating superior
-
performance by participants in the Plan, (b) providing participants in the Plan
-
with an ownership interest in Holding and (c) enabling the Company to attract
-
and retain the services of outstanding directors upon whose judgment, interest
and special effort the successful conduct of its operations is largely
dependent.
Section 2. Definitions
-----------------------
2.1. Definitions. Whenever used herein, the following terms shall have
-----------
the respective meanings set forth below:
(1) "Alternative Option" has the meaning given in Section 8.2.
(2) "Board" means the Board of Directors of Holding.
(3) "C&D Fund" means The Clayton & Dubilier Private Equity Fund IV Limited
Partnership, a Connecticut limited partnership, and any successor investment
vehicle managed by Clayton, Dubilier & Rice, Inc.
(4) "Change in Control" means the first to occur of the following events
after the Effective Date:
<PAGE>
(i) the acquisition by any person, entity or "group" (as defined in
Section 13(d) of the Securities Exchange Act of 1934, as amended), other
than Holding, the Company, any Subsidiary, any employee benefit plan of
Holding, the Company or any Subsidiary, or the C&D Fund, of 50% or more of
the combined voting power of Holding's or the Company's then outstanding
voting securities;
(ii) the merger or consolidation of Holding or the Company, as a
result of which persons who were stockholders of Holding or the Company, as
the case may be, immediately prior to such merger or consolidation, do not,
immediately thereafter, own, directly or indirectly, more than 50% of the
combined voting power entitled to vote generally in the election of
directors of the merged or consolidated company;
(iii) the liquidation or dissolution of Holding or the Company; or
(iv) the sale, transfer or other disposition of all or substantially
all of the assets of Holding or the Company to one or more persons or
entities that are not, immediately prior to such sale, transfer or other
disposition, affiliates of Holding or the Company.
(5) "Change in Control Price" means the price per share of Common Stock
offered in conjunction with any transaction resulting in a Change in (as
determined in good faith by the Board if any part of the offered price is
payable other than in cash).
(6) "Common Stock" means the Class A Common Stock, par value $.01 per
share, of Holding.
2
<PAGE>
(7) "Company" means Remington Arms Company, Inc., a Delaware corporation
formerly named RACI Acquisition Corporation, and any successor thereto.
(8) "Effective Date" means July 1, 1996.
(9) "Eligible Director" means any director of Holding who is neither an
employee of Holding, the Company or any Subsidiary or affiliated with Clayton,
Dubilier & Rice, Inc.
(10) "Exercise Shares" means shares of Common Stock that may be purchased
by an Eligible Director upon the exercise of his Options.
(11) "Fair Market Value" means, as of any date, the fair market value on
such date per share of Common Stock as determined in good faith by the Board.
In making a determination of Fair Market Value, the Board shall give due
consideration for such factors as it deems appropriate, including, without
limitation, the earnings and certain other financial and operating information
of the Company in recent periods, the potential value of the Company as a whole,
the future prospects of the Company and the industries in which it competes, the
history and management of the Company, the general condition of the securities
markets, the fair market value of securities of companies engaged in businesses
similar to those of the Company and, if a valuation of the Common Stock shall
have been performed by an independent valuation firm, such valuation. Nothing
herein shall obligate the Board to obtain any such independent valuation. The
determination of Fair Market Value will not give effect to any restrictions on
transfer of the Shares or the fact that such Shares would represent a minority
interest in Holding. The Fair Market Value as determined in good faith by the
Board and in the absence of fraud shall be binding and conclusive upon Holding
and each Eligible Director.
3
<PAGE>
(12) "Grant Date" means, with respect to any Option, the date on which such
Option is granted pursuant to the Plan.
(13) "Holding" means RACI Holding, Inc., a Delaware corporation, and any
successor thereto.
(14) "Involuntary Termination" means a termination of an Eligible
Director's membership on the Board for any reason.
(15) "New Entity" means the entity that succeeds to the business and/or
assets of Holding and the Company, or the parent of such entity, immediately
following a Change in Control.
(16) "Option" means the right granted pursuant to the Plan to purchase one
share of Common Stock at a price determined in accordance with Section 6.2.
(17) "Option Agreement" means an agreement between Holding and the Eligible
Director embodying the terms of any Options granted hereunder, which agreement
shall, unless the Board otherwise determines, be substantially in the form of
the Director Stock Option Agreement attached hereto as Exhibit B.
(18) "Permanent Disability" means a physical or mental disability or
infirmity that prevents the performance of an Eligible Director's duties on the
Board lasting (or likely to last, based on competent medical evidence presented
to the Board) for a continuous period of six months or longer.
(19) "Plan" means this RACI Holding, Inc. Director Stock Option Plan.
(20) "Public Offering" means the first day as of which sales of Common
Stock are made to the public in the United States pursuant to an underwritten
public
4
<PAGE>
offering of the Common Stock led by one or more underwriters at least one of
which is an underwriter of nationally recognized standing.
(21) "Retirement" means an Eligible Director's retirement from the Board at
age 65 or later.
(22) "Subscription Agreement" means a stock subscription agreement between
Holding and the Eligible Director embodying the terms of any stock purchase made
pursuant to the Plan, which agreement shall, unless the Board otherwise
determines, be in substantially in the form of the director stock subscription
agreement attached hereto as Exhibit A.
(23) "Subsidiary" means any corporation, a majority of whose outstanding
voting securities is owned, directly or indirectly, by the Company or Holding.
2.2. Gender and Number. Except when otherwise indicated by the context,
-----------------
words in the masculine gender used in the Plan shall include the feminine
gender, the singular shall include the plural, and the plural shall include the
singular.
Section 3. Eligibility and Participation
-----------------------------------------
All Eligible Directors shall be elibible to participate in the Plan by
reason of their expected contribution to the growth and success of Holding, the
Company and their Subsidiaries.
Section 4. Powers of the Board
-------------------------------
4.1. Administration. The Board shall be responsible for the
--------------
administration of the Plan. Any authority exercised by the Board under the Plan
shall be exercised by the Board in its sole discretion. Subject to the terms of
5
<PAGE>
the Plan, the Board, by majority action thereof, is authorized to prescribe,
amend and rescind rules and regulations relating to the administration of the
Plan, to provide for conditions and assurances deemed necessary or advisable to
protect the interests of Holding and the Company, and to make all other
determinations necessary or advisable for the administration and interpretation
of the Plan in order to carry out its provisions and purposes. Determinations,
interpretations or other actions made or taken by the Board pursuant to the
provisions of the Plan shall be final, binding and conclusive for all purposes
and upon all persons.
4.2. Delegation by the Board. All of the powers, duties and
-----------------------
responsibilities of the Board specified in this Plan may, to the full extent
permitted by applicable law, be exercised and performed by any duly constituted
committee thereof to the extent authorized by the Board to exercise and perform
such powers, duties and responsibilities.
Section 5. Options Subject to Plan
-----------------------------------
5.1. Number. Subject to the provisions of Sections 5.2 and 5.3, the
------
maximum number of Options (and the maximum number of shares of Common Stock
subject to Options) granted under the Plan may not exceed [12,500]. The shares
of Common Stock to be delivered upon the exercise of Options granted under the
Plan may consist, in whole or in part, of treasury Common Stock or authorized
but unissued Common Stock, not reserved for any other purpose.
5.2. Cancelled, Terminated or Forfeited Options. Any Option which for any
------------------------------------------
reason is cancelled, terminated or otherwise forfeited, in whole or in part,
without having been exercised, shall again be available for grant under the
Plan.
5.3. Adjustment in Capitalization. The number and class of Options (and
----------------------------
the number of shares of Common
6
<PAGE>
Stock available for issuance upon exercise of such Options) granted under the
Plan, and the number, class and exercise price of any outstanding Options (and
the number of shares of Common Stock subject to outstanding Options), may be
adjusted by the Board, in its sole discretion, if it shall deem such an
adjustment to be necessary or appropriate to reflect any Common Stock dividend,
stock split or share combination or any recapitalization, merger, consolidation,
exchange of shares, liquidation or dissolution of Holding.
Section 6. Terms of Options
----------------------------
6.1. Grant of Options. Options may be granted to Eligible Directors at
----------------
such time or times as shall be determined by the Board. The Options will not
be qualified as incentive stock options under the Internal Revenue Code. Each
Option granted to an Eligible Director shall be evidenced by an Option Agreement
that shall specify the number of shares of Common Stock that may be purchased
pursuant to such Option, the exercise price at which a share of Common Stock may
be purchased pursuant to such Option, the duration of such Option and such other
terms consistent with the Plan, in each case, as the Board shall determine,
including customary representations, warranties and covenants with respect to
securities law matters. Unless otherwise determined by the Board at the Grant
Date, such Option Agreement shall also state that in respect of any Shares
purchased upon exercise of all or any portion of his Options, the Eligible
Director is entitled to the benefits of and bound by the obligations set forth
in the Registration and Participation Agreement, dated as of November 30, 1993,
among Holding and certain stockholders of Holding (as the same may be amended,
waived, modified or supplemented from time to time) to the extent set forth in
such Option Agreement.
6.2. Exercise Price. The exercise price per share of Common Stock to be
--------------
purchased upon exercise of an
7
<PAGE>
Option shall be determined by the Board but shall not be less than the Fair
Market Value on the Grant Date.
6.3. Exercise of Options. The Options granted to an Eligible Director at
-------------------
any time shall become exercisable in accordance with the vesting schedule
specified by the Board on the Grant Date, provided that (a) 100% of such Options
-------- -
shall become exercisable to the extent provided in Section 8.1 and (b) the Board
-
may accelerate the exercisability of any Option, all Options or any class of
Options, at any time and from time to time. No Options may be exercised until
all requisite governmental approvals and consents have been obtained and the
Exercise Shares to be issued in connection with the exercise of such Options
have been registered under the applicable securities laws or the issuance of
such Exercise Shares is exempt from such registration. On or before the date
upon which any Eligible Director will exercise any Option, Holding and such
Eligible Director shall entered into a Subscription Agreement. Notwithstanding
any other provision of the Plan, each Option shall terminate and shall not be
exercisable on or after the tenth anniversary of the Grant Date of such Option.
6.4. Payment. The Board shall establish procedures governing the exercise
-------
of Options, which procedures shall generally require that written notice of the
exercise thereof be given and that the exercise price thereof be paid in full in
cash or cash equivalents, including by personal check, at the time of exercise.
However, in the event that shares of Common Stock are listed for trading on a
national securities exchange or bid and ask prices for shares of Common Stock
are quoted over the NASDAQ National Market System operated by the National
Association of Securities Dealers, Inc., the Eligible Director may, in lieu of
cash, tender shares of Common Stock having a market price on the date of
exercise of his option equal to the purchase price of such Exercise Shares or
may deliver a combination of cash and shares of Common Stock having a market
price equal to the difference between the exercise price and the amount of such
cash being delivered as payment for the purchase price
8
<PAGE>
of such Exercise Shares, subject to such rules and regulations as may be adopted
by the Board to provide for the compliance of such payment procedure with
applicable law, including Section 16(b) of the Securities Exchange Act of 1934,
as amended. Holding may require the Eligible Director to furnish or execute
such other documents as Holding shall reasonably deem necessary (i) to evidence
-
such exercise, (ii) to determine whether registration is then required under the
--
U.S. federal securities laws, and (iii) to comply with or satisfy the
---
requirements of the U.S. federal securities laws, applicable state or non-U.S.
securities laws or any other law. As soon as practicable after receipt of a
written exercise notice and payment in full of the exercise price of any Covered
Options, Holding shall deliver to the Eligible Director a certificate or
certificates representing the shares of Common Stock acquired upon the exercise
thereof.
Section 7. Termination of Service on the Board
-----------------------------------------------
7.1. Death, Permanent Disability or Retirement. Unless otherwise provided
-----------------------------------------
in the Option Agreement or otherwise determined by the Board at the Grant Date,
in the event that an Eligible Director's service on the Board terminates by
reason of the Eligible Direcotr's death, Permanent Disability or Retirement
(each a "Special Termination"), then any Options held by the Eligible Director
shall immediately vest and become exercisable and shall remain exercisable until
the first to occur of (i) the 180th day following the date of the Eligible
-
Director's termination of service on the Board or (ii) the expiration of the
--
term of such Options. Any Options described in the preceding sentence that are
not exercised within the period specified shall terminate and be cancelled upon
the expiration of such period.
7.2. Other Termination of Employment. Unless otherwise provided in the
-------------------------------
Option Agreement or otherwise determined by the Board at or after the Grant
Date, in the
9
<PAGE>
event that an Eligible Director's service on the Board terminates for any reason
other than a Special Termination, any Options held by such Eligible Director
that have become exercisable on or prior to the date of such termination shall
remain exercisable for a period of 60 days (or, if shorter, during the remaining
term of the Options). Any Options held by the Elibible Director that are not
exercisable at the date of the Eligible Director's termination shall terminate
and be cancelled immediately upon such termination, and any Options described in
the preceding sentence that are not exercised within the period specified shall
terminate and be cancelled upon the expira tion of such period.
Section 8. Change in Control
-----------------------------
8.1. Accelerated Vesting and Payment. Unless the Board shall otherwise
-------------------------------
determine in the manner set forth in Section 8.2, in the event of a Change in
Control, each Option shall be cancelled in exchange for a payment in cash of an
amount equal to the excess, if any, of the Change in Control Price over the
exercise price for such Option.
8.2. Alternative Options. Notwithstanding Section 8.1, no cancellation,
-------------------
acceleration of exercisability, vesting or cash settlement or other payment
shall occur with respect to any Option if the Board reasonably determines in
good faith, prior to the occurrence of a Change in Control, that such Option
shall be honored or assumed, or new rights substituted therefor (such honored,
assumed or substituted Option being hereinafter referred to as an "Alternative
Option") by the New Entity, provided that any such Alternative Option must:
--------
(a) provide the Eligible Director that held such Option with rights and
entitlements substantially equivalent to or better than the rights, terms and
conditions applicable under such Option, including, but not limited to, an
identical or better exercise and
10
<PAGE>
vesting schedule and identical or better timing and methods of payment;
(b) have substantially equivalent economic value to such Option
(determined at the time of the Change in Control); and
(c) have terms and conditions which provide that in the event that such
Eligible Director suffers an Involuntary Termination within two years following
a Change in Control:
(i) any conditions on such Eligible Director's rights under, or any
restrictions on transfer or exercisability applicable to, each such
Alternative Option shall be waived or shall lapse, as the case may be; or
(ii) such Eligible Director shall have the right to surrender such
Alternative Option within 30 days following such termination in exchange
for a payment in cash equal to the excess of the Fair Market Value of the
Common Stock subject to the Alternative Option over the price, if any, that
such Eligible Director would be required to pay to exercise such
Alternative Option.
Section 9. Amendment, Modification, and
----------------------------------------
Termination of the Plan
-----------------------
The Board at any time may terminate or suspend the Plan, and from time to
time may amend or modify the Plan. No amendment, modification, termination or
suspension of the Plan shall in any manner adversely affect any Option
theretofore granted under the Plan without the consent of the Eligible Director
holding such Option. Shareholder approval of any such amendment, modification,
termination or suspension shall be obtained to the extent mandated by
11
<PAGE>
applicable law, or if otherwise deemed appropriate by the Board.
Section 10. Miscellaneous Provisions
-------------------------------------
10.1. Nontransferability of Options. No Options granted under the Plan
-----------------------------
may be sold, transferred, pledged, assigned, encumbered or otherwise alienated
or hypothecated, other than by will or by the laws of descent and distribution
and provided that the deceased Eligible Director's beneficiary or the
representative of his estate acknowledges and agrees in writing, in a form
reasonably acceptable to Holding, to be bound by the provisions of the Plan and
the Option Agreement covering such Options as if such beneficiary or estate were
the Eligible Director. All rights with respect to Options granted to an
Eligible Director under the Plan shall be exercisable during his life-time by
such Eligible Director only. Following an Eligible Director's death, all rights
with respect to Options that were exercisable at the time of such Eligible
Director's death and have not terminated shall be exercised by his designated
beneficiary or by his estate.
10.2. Beneficiary Designation. Each Eligible Director under the Plan may
-----------------------
from time to time name any beneficiary or beneficiaries (who may be named
contingently or successively) by whom any right under the Plan is to be
exercised in case of his death. Each designation will revoke all prior
designations by the same Eligible Director, shall be in a form reasonably
prescribed by the Board, and will be effective only when filed by the Eligible
Director in writing with the Board during his lifetime.
10.3. Indemnification. Each person who is or shall have been a member of
---------------
the Board or any committee of the Board shall be indemnified and held harmless
by the Company and Holding to the fullest extent permitted by law from and
against any and all losses, costs, liabilities and expenses (including any
related attorneys' fees and advances
12
<PAGE>
thereof) in connection with, based upon or arising or resulting from any claim,
action, suit or proceeding to which he may be made a party or in which he may be
involved by reason of any action taken or failure to act under or in connection
with the Plan and from and against any and all amounts paid by him in settlement
thereof, with the Company's approval, or paid by him in satisfaction of any
judgment in any such action, suit or proceeding against him, provided that he
--------
shall give the Company an opportunity, at its own expense, to defend the same
before he undertakes to defend it on his own behalf. The foregoing right of
indemnification shall not be exclusive and shall be independent of any other
rights of indemnification to which such persons may be entitled under Holding's
or the Company's Certificate of Incorporation or By-laws, by contract, as a
matter of law, or otherwise.
10.4. No Limitation on Compensation. Nothing in the Plan shall be
-----------------------------
construed to limit the right of Holding, the Company or any Subsidiary to
establish other plans or to pay compensation to its directors, in cash or
property, in a manner that is not expressly authorized under the Plan.
10.5. Requirements of Law. The granting of Options and the issuance of
-------------------
shares of Common Stock pursuant to such Options shall be subject to all
applicable laws, rules and regulations, and to such approvals by any
governmental agencies or national securities exchanges as may be required. No
Options shall be granted under the Plan, and no shares of Common Stock shall be
issued upon exercise of any Options granted under the Plan, if such grant or
exercise would result in a violation of applicable law, including the federal
securities laws and any applicable state securities laws.
10.6. Freedom of Action. Subject to Section 9, nothing in the Plan or any
-----------------
Option Agreement shall be construed as limiting or preventing Holding, the
Company or any Subsidiary from taking any action that it deems appropriate or in
its best interest.
13
<PAGE>
10.7. Term of Plan. The Plan shall be effective as of the Effective Date.
------------
The Plan shall continue in effect, unless sooner terminated pursuant to Section
9, until the tenth anniversary of the Effective Date. The provisions of the
Plan, however, shall continue thereafter to govern all outstanding Options
theretofore granted.
10.8. No Voting Rights. Except as otherwise required by law, no Eligible
----------------
Director holding any Options granted under the Plan shall have any right, in
respect of such Options, to vote on any matter submitted to Holding's
stockholders until such time as he has purchased the shares of Common Stock
issuable upon exercise of such Options.
10.9. Governing Law. The Plan, and all agreements hereunder, shall be
-------------
governed by and construed in accordance with the law of the State of New York,
except to the extent that the corporate law of the State of Delaware
specifically and mandatorily applies.
14
<PAGE>
Exhibit 12.1
RACI HOLDING, INC. AND REMINGTON ARMS COMPANY, INC.
STATEMENT RE: COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES
(Dollars in millions)
<TABLE>
<CAPTION>
Sporting Goods Business Remington
-------------------------------- ------------------------------------------------------
Eleven One
Year Ended Months Month Year Ended Nine Months Ended
December 31, Ended Ended December 31, Sept. 30,
------------------ Nov. 30, Dec. 31, ----------------- ------------------
1991 1992 1993 1993 1994 1995 1996 1995
----- ----- ---- ---- ----- ----- ----- -----
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Earnings:
- ---------
Net Income (Loss) $ 3.5 $12.0 $(72.7) $(2.3) $ 9.4 $11.5 $(0.3) $13.9
Add:
Income Taxes 1.9 7.1 0.6 (1.3) 6.4 8.5 (0.3) 9.4
Interest Expense(a) 7.2 6.8 5.3 1.5 20.6 21.5 19.2 16.1
Portion of Rents
Representative of
Interest Factor 0.3 0.4 0.4 0.0 0.3 0.3 0.2 0.2
----- ----- ------ ----- ----- ----- ----- -----
$12.9 $26.3 $(66.4) $(2.1) $36.7 $41.8 $18.8 $39.6
===== ===== ====== ===== ===== ===== ===== =====
Fixed Charges:
- --------------
Interest Expense(a) $ 7.2 $ 6.8 $ 5.3 $ 1.5 $20.6 $21.5 $19.2 $16.1
Capitalized Interest - 0.1 - - - - - -
Portion of Rents
Representative of
Interest Factor 0.3 0.4 0.4 0.0 0.3 0.3 0.2 0.2
----- ----- ------ ----- ----- ----- ----- -----
$ 7.5 $ 7.3 $ 5.7 $ 1.5 $20.9 $21.8 $19.4 $16.3
===== ===== ====== ===== ===== ===== ===== =====
Ratio of Earnings to Fixed
Charges 1.7x 3.6x - - 1.8x 1.9x 1.0x 2.4x
</TABLE>
- ------------------
(a) Includes amortization of discount on indebtedness and excludes capitalized
interest.
<PAGE>
EXHIBIT 23.1
[LETTERHEAD OF COOPERS & LYBRAND]
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the inclusion in this registration statement on Form S-4 (File
No. 333-4520-01, 333-4520) of: (i) our report dated, April 2, 1996, on our
audits of the consolidated financial statements of RACI Holding, Inc., and
Subsidiary as of December 31, 1995 and 1994, and for the years ended December
31, 1995 and 1994, and for the one month period ended December 31, 1993, and
(ii) our report, which includes an explanatory paragraph regarding the
uncertainty of the ultimate outcome of various product liability proceedings,
dated December 31, 1994, on our audit of the net assets sold to RACI
Acquisition Corporation of the DuPont Sporting Goods Business (the "Business")
of E.I. du Pont de Nemours and Company at November 30, 1993, and the related
statements of operations and cash flows of the Business for the eleven month
period ended November 30, 1993. We also consent to the reference to our firm
under the caption "Experts."
/s/ Coopers & Lybrand L.L.P.
New York, New York
January 10, 1997
<PAGE>
EXHIBIT 24.13
POWER OF ATTORNEY
-----------------
KNOW ALL PERSONS BY THESE PRESENTS: That the undersigned hereby
constitutes and appoints Samuel G. Grecco, Robert W. Haskin, Jr., Richard M.
Applegate and Thomas L. Millner and each of them (with full power to act alone)
the undersigned's true and lawful attorney-in-fact and agent, with full power of
substitution and resubstitution, for and in the name and on behalf of the
undersigned, to execute any and all instruments and documents, and to do any and
all other acts and things, that any such attorney-in-fact and agent may deem
necessary or advisable, in compliance with the Securities Act of 1933, as
amended (the "Securities Act"), and any rules, regulations and requirements of
the Securities and Exchange Commission (the "Commission") in respect thereof, in
connection with the registration under the Securities Act of $100,000,000
aggregate principal amount of 9 1/2% Senior Subordinated Notes due 2003, Series
B, of Remington Arms Company, Inc. ("Remington"), payment of which is guaranteed
by RACI Holding, Inc. ("Holding"), pursuant to a Registration Statement on Form
S-4 (the "Registration Statement") to be filed with the Commission relating to
an offer to exchange such Notes for Remington's outstanding 9 1/2% Senior
Subordinated Notes due 2003, Series A, payment of which is guaranteed by
Holding; including specifically, but without limiting the generality of the
foregoing, the power and authority to execute, for and in the name and on behalf
of the undersigned in any and all capacities, the Registration Statement, any
and all supplements and amendments (including, without limitation, post-
effective amendments) to such Registration Statement, and any and all other
instruments or documents filed as a part of, or in connection with, such
Registration Statement and supplements and amendments thereto; and the
undersigned hereby ratifies and confirms all that such attorneys-in-fact and
agents, or any of them, shall do or cause to be done by virtue hereof.
Signed this 18th day of September, 1996.
/S/ Mark A. Little
---------------------------------
MARK A. LITTLE
Vice President, Controller
13
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<CIK> 0000916504
<NAME> REMINGTON ARMS CO, INC.
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> SEP-30-1996
<CASH> 9,900
<SECURITIES> 0
<RECEIVABLES> 135,600
<ALLOWANCES> 7,900
<INVENTORY> 119,500
<CURRENT-ASSETS> 282,300
<PP&E> 118,200
<DEPRECIATION> 26,200
<TOTAL-ASSETS> 480,400
<CURRENT-LIABILITIES> 76,800
<BONDS> 269,800
0
0
<COMMON> 0
<OTHER-SE> 75,000
<TOTAL-LIABILITY-AND-EQUITY> 480,400
<SALES> 316,500
<TOTAL-REVENUES> 316,500
<CGS> 219,400
<TOTAL-COSTS> 219,400
<OTHER-EXPENSES> 76,600
<LOSS-PROVISION> 1,900
<INTEREST-EXPENSE> 19,200
<INCOME-PRETAX> (600)
<INCOME-TAX> (300)
<INCOME-CONTINUING> (300)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (300)
<EPS-PRIMARY> (0.40)
<EPS-DILUTED> (0.40)
</TABLE>
<PAGE>
EXHIBIT 99.1
LETTER OF TRANSMITTAL
REMINGTON ARMS COMPANY, INC.
OFFER TO EXCHANGE ITS
9 1/2% SENIOR SUBORDINATED NOTES DUE 2003, SERIES B
("NEW NOTES"), WHICH HAVE BEEN REGISTERED UNDER THE
SECURITIES ACT, FOR ANY AND ALL OF ITS OUTSTANDING
9 1/2% SENIOR SUBORDINATED NOTES DUE 2003, SERIES A ("EXISTING NOTES"),
PURSUANT TO THE PROSPECTUS DATED , 1997
THE EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M., NEW YORK CITY TIME, ON ,
1997 OR SUCH LATER DATE AND TIME TO WHICH THE EXCHANGE OFFER MAY BE EXTENDED
(THE "EXPIRATION DATE"). TENDERS MAY BE WITHDRAWN PRIOR TO THE EXPIRATION
DATE.
To: FIRST TRUST NATIONAL ASSOCIATION, Exchange Agent
By Registered or Certified Mail: By Facsimile:
First Trust New York First Trust New York
100 Wall Street, 20th Floor (212) 509-4529
New York, N.Y. 10005 Attention: Cathy Donohue
Attention: Cathy Donohue
By Overnight Courier: By Hand:
First Trust New York First Trust New York
100 Wall Street, 20th Floor 100 Wall Street, 20th Floor
New York, N.Y. 10005 New York, N.Y. 10005
Attention: Cathy Donohue Attention: Cathy Donohue
For Information Call:
(212) 361-2546
DELIVERY OF THIS LETTER OF TRANSMITTAL TO AN ADDRESS OTHER THAN AS SET FORTH
ABOVE OR TRANSMISSION OF INSTRUCTIONS VIA FACSIMILE OTHER THAN AS SET FORTH
ABOVE DOES NOT CONSTITUTE A VALID DELIVERY.
PLEASE READ THIS ENTIRE LETTER OF TRANSMITTAL
CAREFULLY BEFORE COMPLETING ANY BOX BELOW
---------------
List below the Existing Notes to which this Letter of Transmittal relates.
If the space provided below is inadequate, the certificate number(s) and
principal amount of Existing Notes should be listed on a separate signed
schedule affixed hereto.
DESCRIPTION OF EXISTING NOTES (1) (2) (3) (4)
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL AMOUNT
PRINCIPAL OF EXISTING NOTES
AGGREGATE AMOUNT OF TENDERED IN
NAME(S) AND ADDRESS(ES) OF PRINCIPAL EXISTING NOTES EXCHANGE FOR
REGISTERED HOLDER(S) CERTIFICATE AMOUNT OF TENDERED (IF CERTIFICATED NEW
(PLEASE FILL IN, IF BLANK) NUMBER(S)* EXISTING NOTES LESS THAN ALL)** NOTES***
- ---------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
</TABLE>
- -------------------------------------------------------------------------------
* Need not be completed by book-entry holders.
** Unless otherwise indicated, the holder will be deemed to have tendered
the full aggregate principal amount represented by such Existing Notes.
*** Unless otherwise indicated, the holder will be deemed to have tendered
Existing Notes in exchange for a beneficial interest in one or more
fully registered global notes, which will be deposited with, or on
behalf of, The Depository Trust Company and registered in the name of
Cede & Co., its nominee.
<PAGE>
The undersigned acknowledges that he, she or it has received and reviewed
the Prospectus, dated , 1997 (the "Prospectus"), of Remington Arms
Company, Inc., a Delaware corporation formerly named RACI Acquisition
Corporation ("Remington") and RACI Holding, Inc., a Delaware corporation
("Holding"), and this Letter of Transmittal (the "Letter of Transmittal"),
which together constitute Remington's offer to exchange up to $100,000,000
aggregate principal amount of its New Notes, which will have been registered
under the Securities Act of 1933, as amended (the "Securities Act"), for a
like principal amount of its outstanding Existing Notes and Holding's offer to
exchange its guarantee of the New Notes for its guarantee of the Existing
Notes (the "Exchange Offer").
The undersigned has completed the appropriate boxes above and below and
signed this Letter of Transmittal to indicate the action the undersigned
desires to take with respect to the Exchange Offer.
This Letter of Transmittal is to be used either if certificates of Existing
Notes are to be forwarded herewith or if delivery of Existing Notes is to be
made by book-entry transfer to an account maintained by the Exchange Agent at
The Depository Trust Company, pursuant to the procedures set forth in "The
Exchange Offer--How to Tender" in the Prospectus. Delivery of this Letter of
Transmittal and any other required documents should be made to the Exchange
Agent. Delivery of documents to a book-entry transfer facility does not
constitute delivery to the Exchange Agent.
Holders whose Existing Notes are not immediately available or who cannot
deliver their Existing Notes and all other documents required hereby to the
Exchange Agent on or prior to the Expiration Date must tender their Existing
Notes according to the guaranteed delivery procedure set forth in the
Prospectus under the caption "The Exchange Offer--How to Tender." See
Instruction 1.
[_]CHECK HERE IF TENDERED EXISTING NOTES ARE BEING DELIVERED TO THE EXCHANGE
AGENT IN EXCHANGE FOR CERTIFICATED NEW NOTES.
Unless the undersigned (i) has completed item (4) in the box entitled
"Description of Existing Notes" and (ii) has checked the box above, the
undersigned will be deemed to have tendered Existing Notes in exchange for a
beneficial interest in one or more fully registered global notes, which will
be deposited with, or on behalf of, DTC and registered in the name of Cede &
Co., its nominee. Beneficial interests in such registered global notes will be
shown on, and transfers thereof will be effected only through, records
maintained by DTC and its participants. See "Description of the Notes--Book-
Entry Delivery and Form" as set forth in the Prospectus.
[_]CHECK HERE IF TENDERED EXISTING NOTES ARE BEING DELIVERED BY BOOK-ENTRY
TRANSFER MADE TO AN ACCOUNT MAINTAINED BY THE EXCHANGE AGENT WITH A BOOK-
ENTRY TRANSFER FACILITY AND COMPLETE THE FOLLOWING:
Name of Tendering Institution __________________________
[_] The Depository Trust Company
Account Number ________________________________________________________________
Transaction Code Number _______________________________________________________
[_]CHECK HERE IF TENDERED EXISTING NOTES ARE BEING DELIVERED PURSUANT TO A
NOTICE OF GUARANTEED DELIVERY PREVIOUSLY SENT TO THE EXCHANGE AGENT AND
COMPLETE THE FOLLOWING:
Name of Registered Holder(s) __________________________________________________
Window Ticket Number (if any) _________________________________________________
Date of Execution of Notice of Guaranteed Delivery ____________________________
Name of Eligible Institution that Guaranteed Delivery _________________________
If delivered by book-entry transfer:
Account Number _____________ Transaction Code Number __________________________
[_]CHECK HERE IF YOU ARE A BROKER-DEALER MAKING A MARKET IN EXISTING NOTES
WITH REMINGTON'S PRIOR WRITTEN CONSENT AND WISH TO RECEIVE 10 ADDITIONAL
COPIES OF THE PROSPECTUS AND 10 COPIES OF ANY AMENDMENTS OR SUPPLEMENTS
MADE THERETO WITHIN 90 DAYS AFTER THE EXPIRATION DATE.
Name __________________________________________________________________________
Address _______________________________________________________________________
--------------------------------------------------------------------------
2
<PAGE>
PLEASE READ THE ACCOMPANYING INSTRUCTIONS CAREFULLY
Ladies and Gentlemen:
Upon the terms and subject to conditions of the Exchange Offer, the
undersigned hereby tenders to Remington the aggregate principal amount of
Existing Notes indicated above. Subject to, and effective upon, the acceptance
for exchange of the Existing Notes tendered hereby, the undersigned hereby
sells, assigns and transfers to, or upon the order of, the Exchange Agent, as
agent of Remington, all right, title and interest in and to such Existing
Notes as are being tendered hereby, and irrevocably constitutes and appoints
the Exchange Agent as the agent and attorney-in-fact of the undersigned to
cause the Existing Notes tendered hereby to be transferred and exchanged.
The undersigned hereby represents and warrants that the undersigned has full
power and authority to tender, exchange, sell, assign and transfer the
Existing Notes tendered hereby and to acquire the New Notes issuable upon the
exchange of such tendered Existing Notes, and that the Exchange Agent, as
agent of Remington, will acquire good and unencumbered title thereto, free and
clear of all liens, restrictions, charges and encumbrances and not subject to
any adverse claim when the same are accepted by the Exchange Agent, as agent
of Remington. The undersigned will, upon request, execute and deliver any
additional documents deemed by Remington or the Exchange Agent to be necessary
or desirable to complete the exchange, sale, assignment and transfer of the
Existing Notes tendered hereby.
The undersigned also acknowledges that this Exchange Offer is being made in
reliance on the interpretation of the staff of the Securities and Exchange
Commission (the "SEC"), as set forth in Exxon Capital Holdings Corporation
(available May 13, 1988) or similar no-action letters issued to third parties.
Based on such interpretation of the staff of the SEC set forth in such no-
action letters, Remington believes that the New Notes issued in exchange for
the Existing Notes pursuant to the Exchange Offer may be offered for resale,
resold and otherwise transferred by a holder thereof (other than any such
holder that is an "affiliate" of Remington within the meaning of Rule 405
under the Securities Act of 1933, as amended (the "Securities Act")) without
compliance with the registration and prospectus delivery provisions of the
Securities Act, provided that such New Notes are acquired in the ordinary
course of such holder's business and such holder has no arrangement or
understanding with any person to participate in a distribution of such New
Notes. If the undersigned is not a broker-dealer or is a broker-dealer but
will not receive New Notes for its own account in exchange for Existing Notes,
the undersigned represents that it is not engaged in, and does not intend to
engage in, a distribution of New Notes.
If the undersigned is a broker-dealer that will receive New Notes for its
own account in exchange for Existing Notes, where such Existing Notes were
acquired as a result of market-making activities or other trading activities,
it acknowledges that it will deliver a prospectus meeting the requirements of
the Securities Act in connection with any resale of such New Notes; however,
by so acknowledging and by delivering a prospectus, the undersigned will not
be deemed to admit that it is an "underwriter" within the meaning of the
Securities Act. The SEC has taken the position that such broker-dealers may
fulfill their prospectus delivery requirements with respect to the New Notes
(other than a resale of New Notes received in exchange for an unsold allotment
from the original sale of the Existing Notes) with the Prospectus. The
Prospectus, as it may be amended or supplemented from time to time, may be
used by such broker-dealers for a period of 90 days after the Expiration Date
in connection with the sale or transfer of such New Notes. Remington has
agreed that, for such 90-day period, it will make the Prospectus (as it may be
amended or supplemented) available to Merrill Lynch & Co., Merrill Lynch,
Pierce, Fenner & Smith Incorporated, CS First Boston Corporation and any other
broker-dealer which, with Remington's prior written consent, makes a market in
the Existing Notes and receives New Notes pursuant to the Exchange Offer (each
a "Participating Broker-Dealer") for use in connection with any resale of such
New Notes. By acceptance of the Exchange Offer, each broker-dealer that
receives New Notes pursuant to the Exchange Offer hereby acknowledges and
agrees to notify Remington prior to using the Prospectus in connection with
the sale or transfer of New Notes and that, upon receipt of notice from
Remington of the happening of any event which makes any statement in the
Prospectus untrue in any material respect or which requires the making of any
changes in the Prospectus in order to make the statements therein not
misleading, such broker-dealer will suspend use of the Prospectus until (i)
Remington has amended or supplemented the Prospectus to correct such
misstatement or omission and (ii) either the Company has furnished copies of
the amended or supplemented Prospectus to such broker-dealer or, if Remington
has not otherwise agreed to furnish such copies and declines to do so after
such broker-dealer so requests, such broker-dealer has obtained a copy of such
amended or supplemented Prospectus as filed with the SEC. Remington agrees to
deliver such notice and such amended or supplemented Prospectus promptly to
any
3
<PAGE>
Participating Broker-Dealer that has so notified Remington. Except as
described above, the Prospectus may not be used for or in connection with an
offer to resell, a resale or any other retransfer of New Notes.
The undersigned represents that (i) the New Notes acquired pursuant to the
Exchange Offer are being obtained in the ordinary course of such holder's
business, (ii) such holder has no arrangements with any person to participate
in the distribution of such New Notes or, if such holder intends to
participate in the Exchange Offer for the purpose of distributing the New
Notes, such holder will comply with the registration and prospectus delivery
requirements of the Securities Act to the extent applicable, and (iii) (x)
such holder is not (a) a broker-dealer that will receive New Notes for its own
account in exchange for Existing Notes that were acquired as a result of
market-making activities or other trading activities, or (b) an "affiliate,"
as defined in Rule 405 under the Securities Act, of Remington or (y) if such
holder is such a broker-dealer or an affiliate, such holder will comply with
the registration and prospectus delivery requirements of the Securities Act to
the extent applicable.
The undersigned, if a California resident, hereby further represents and
warrants that the undersigned (or the beneficial owner of the Existing Notes
tendered hereby, if not the undersigned) (i) is a bank, savings and loan
association, trust company, insurance company, investment company registered
under the Investment Company Act of 1940, pension or profit-sharing trust
(other than a pension or profit-sharing trust of Remington, a self-employed
individual retirement plan, or individual retirement account), a corporation
which has a net worth on a consolidated basis according to its most recent
audited financial statements of not less than $14,000,000, or a wholly owned
subsidiary of any of the foregoing, and (ii) is acquiring the New Notes for
its own account for investment purposes (or for the account of the beneficial
owner of such New Notes for investment purposes).
All authority conferred or agreed to be conferred in this Letter of
Transmittal and every obligation of the undersigned hereunder shall be binding
upon the successors, assigns, heirs, executors, administrators, trustees in
bankruptcy and legal representatives of the undersigned and shall not be
affected by, and shall survive, the death or incapacity of the undersigned.
This tender may be withdrawn only in accordance with the procedures set forth
in the instructions contained in this Letter of Transmittal.
The undersigned understands that tenders of the Existing Notes pursuant to
any one of the procedures described under "The Exchange Offer--How to Tender"
in the Prospectus and in the instructions hereto will constitute a binding
agreement between the undersigned and Remington in accordance with the terms
and subject to the conditions of the Exchange Offer.
The undersigned understands that if its Existing Notes are accepted for
exchange, such holder will not receive accrued interest thereon on the date of
exchange. Instead, interest will be payable on the New Notes from the most
recent date to which interest has been paid on the corresponding Existing
Notes or, if no interest has been paid on such Existing Notes, from November
30, 1993.
The undersigned recognizes that unless the holder of Existing Notes (i)
completes item (4) of the Box entitled "Description of Existing Notes" above
and (ii) checks the box entitled "Check here if tendered Existing Notes are
being delivered to the Exchange Agent in exchange for certificated New Notes"
above, such holder, when tendering such Existing Notes, will be deemed to have
tendered such Existing Notes in exchange for a beneficial interest in one or
more fully registered global notes, which will be deposited with, or on behalf
of, DTC and registered in the name of Cede & Co., its nominee. Beneficial
interests in such registered global notes will be shown on, and transfers
thereof will be effected only through, records maintained by DTC and its
participants. See "Description of the Notes--Book-Entry Delivery and Form" in
the Prospectus.
The undersigned recognizes that, under certain circumstances set forth in
the Prospectus under "The Exchange Offer--Conditions," Remington may not be
required to accept for exchange any of the Existing Notes tendered. Existing
Notes not accepted for exchange or withdrawn will be returned to the
undersigned at the address set forth below unless otherwise indicated under
"Special Delivery Instructions" below.
The undersigned acknowledges that by tendering the Existing Notes pursuant
to any one of the procedures described under "The Exchange Offer--How to
Tender" in the Prospectus and in the instructions hereto, the undersigned
agrees that,
4
<PAGE>
except with respect to Existing Notes held by Merrill Lynch & Co., Merrill
Lynch, Pierce, Fenner & Smith Incorporated and CS First Boston Corporation
(collectively, the "Initial Purchasers"), once the Exchange Offer is
consummated, Remington and Holding shall not be obligated to file or prepare a
Shelf Registration Statement (as defined in the Registration Rights Agreement,
dated as of November 30, 1993, as amended (the "Registration Rights
Agreement"), among Remington (formerly named RACI Acquisition Corporation),
RACI Holding, Inc., and the Initial Purchasers), or take any other action
provided in Sections 2 or 3 of the Registration Rights Agreement with respect
to a Shelf Registration Statement, and the undersigned hereby waives any
requirement of the Registration Rights Agreement that Remington or Holding
file, prepare or take any other action relating to a Shelf Registration
Statement once the Exchange Offer is consummated.
All questions as to the validity, form, eligibility (including time of
receipt) and acceptability of any tender will be determined by Remington, in
its sole discretion, and such determination will be final and binding. Unless
waived by Remington, irregularities and defects must be cured by the
Expiration Date. Remington shall not be obligated to give notice of any
defects or irregularities in tenders and shall not incur any liability for
failure to give any such notice.
Unless otherwise indicated herein in the box entitled "Special Issuance
Instructions" below, the undersigned hereby requests that the New Notes (and,
if applicable, substitute certificates representing Existing Notes for any
Existing Notes not exchanged) be issued in the name of the undersigned.
Similarly, unless otherwise indicated under the box entitled "Special Delivery
Instructions" below, the undersigned hereby requests that the New Notes (and,
if applicable, substitute certificates representing Existing Notes for any
Existing Notes not exchanged) be sent to the undersigned at the address shown
above in the box entitled "Description of Existing Notes."
THE UNDERSIGNED, BY COMPLETING THE BOX ENTITLED "DESCRIPTION OF EXISTING
NOTES" ABOVE AND SIGNING THIS LETTER, WILL BE DEEMED TO HAVE TENDERED THE
EXISTING NOTES AS SET FORTH IN SUCH BOX(ES) ABOVE.
5
<PAGE>
PLEASE SIGN HERE
(TO BE COMPLETED BY ALL TENDERING HOLDERS)
(COMPLETE ACCOMPANYING SUBSTITUTE FORM W-9)
X
----------------------------------- ------------------------------------
X
----------------------------------- ------------------------------------
Signature(s) of Owner(s) Date
Area Code and Telephone Number ______________
If a holder is tendering any Existing Notes, this Letter of Transmittal
must be signed by the registered holders(s) as the name(s) appear(s) on the
certificate(s) for the Existing Notes or by any person(s) authorized to
become registered holders(s) by endorsements and documents transmitted
herewith. If signature is by a trustee, executor, administrator, guardian,
officer or other person acting in a fiduciary or representative capacity,
please set forth full title below. See Instruction 3.
Name(s): _______________________________________________________________
________________________________________________________________________
(Please Type or Print)
Capacity: ______________________________________________________________
Address: _______________________________________________________________
________________________________________________________________________
(Include Zip Code)
SIGNATURE GUARANTEE
(IF REQUIRED BY INSTRUCTION 3)
Signature(s) Guaranteed by
an Eligible Institution:
-----------------------------------------------
(Authorized Signature)
------------------------------------------------------------------------
(Title)
------------------------------------------------------------------------
(Name of Firm)
Dated:
-----------------------------------------------------------------
<PAGE>
SPECIAL ISSUANCE INSTRUCTIONS SPECIAL DELIVERY INSTRUCTIONS
(SEE INSTRUCTIONS 3 AND 4) (SEE INSTRUCTIONS 3 AND 4)
To be completed ONLY if To be completed ONLY if
certificates for New Notes are to certificates for New Notes are to
be issued in the name of and sent be sent to someone other than the
to someone other than the person or person or persons whose
persons whose signature(s) signature(s) appear(s) on this
appear(s) on this Letter of Letter of Transmittal above or to
Transmittal above. such person or persons at an
address other than shown in the box
entitled "Description of Existing
Notes" on this Letter of
Transmittal above.
Issue New Notes to:
Name(s): Mail New Notes to:
----------------------------
Name(s)
----------------------------- -----------------------------
(Please Type or Print)
-----------------------------
----------------------------- (Please Type or Print)
(Please Type or Print)
-----------------------------
Address: (Please Type or Print)
----------------------------
---------------------------- Address:
(Zip Code) ----------------------------
-----------------------------
(Complete Substitute Form W-9) (Zip Code)
IMPORTANT: UNLESS GUARANTEED DELIVERY PROCEDURES ARE COMPLIED WITH, THIS
LETTER OF TRANSMITTAL OR A FACSIMILE HEREOF (TOGETHER WITH THE CERTIFICATE(S)
FOR EXISTING NOTES OR A CONFIRMATION OF BOOK-ENTRY TRANSFER OF SUCH EXISTING
NOTES AND ALL OTHER REQUIRED DOCUMENTS) MUST BE RECEIVED BY THE EXCHANGE AGENT
PRIOR TO 5:00 P.M., NEW YORK CITY TIME, ON THE EXPIRATION DATE.
<PAGE>
TO BE COMPLETED BY ALL TENDERING HOLDERS
(SEE INSTRUCTION 5)
PAYERS' NAMES: RACI HOLDING, INC. AND
REMINGTON ARMS COMPANY, INC.
Part I--Taxpayer
Identification Number
SUBSTITUTE
FORM W-9 Enter your taxpayer -----------------------
DEPARTMENT OF identification number in Social Security Number
THE TREASURY the appropriate box. For
INTERNAL REVENUE most individuals, this is
SERVICE your social security
number. If you do not have
a number, see how to obtain
a "TIN" in the enclosed
Guidelines.
OR
-----------------------
Employer Identification
Number
- -------------------------------------------------------------------------------
NOTE: If the account is in
more than one name, see the
chart on page 2 of the
enclosed Guidelines to
determine what number to
give.
Part II--For Payees Exempt from Backup Withholding
(See enclosed Guidelines)
PAYER'S REQUEST --------------------------------------------------------
FOR TAXPAYER
IDENTIFICATION
NUMBER (TIN) AND
CERTIFICATION
CERTIFICATION--UNDER THE PENALTIES OF PERJURY, I
CERTIFY THAT:
(1) the number shown on this form is my correct
Taxpayer Identification Number (or I am waiting
for a number to be issued to me), and
(2) I am not subject to backup withholding either
because I have not been notified by the Internal
Revenue Service (the "IRS") that I am subject to
backup withholding as a result of a failure to
report all interest or dividends or the IRS has
notified me that I am no longer subject to backup
withholding.
--------------------------------------------------------
SIGNATURE DATE
------------------ -------------------
- -------------------------------------------------------------------------------
Certification Guidelines--You must cross out item (2) of the above
certification if you have been notified by the IRS that you are subject to
backup withholding because of underreporting of interest or dividends on your
tax return. However, if after being notified by the IRS that you were subject
to backup withholding you received another notification from the IRS that you
are no longer subject to backup withholding, do not cross out item (2).
CERTIFICATION OF PAYEE AWAITING TAXPAYER IDENTIFICATION NUMBER
I certify, under penalties of perjury, that a Taxpayer Identification Number
has not been issued to me, and that I mailed or delivered an application to
receive a Taxpayer Identification Number to the appropriate Internal Revenue
Service Center or Social Security Administration Office (or I intend to mail
or deliver an application in the near future). I understand that if I do not
provide a Taxpayer Identification Number to the payer, 31 percent of all
payments made to me on account of the New Notes shall be retained until I
provide a Taxpayer Identification Number to the payer and that, if I do not
provide my Taxpayer Identification Number within sixty (60) days, such
retained amounts shall be remitted to the Internal Revenue Service as backup
withholding and 31 percent of all reportable payments made to me thereafter
will be withheld and remitted to the Internal Revenue Service until I provide
a Taxpayer Identification Number.
SIGNATURE DATE
-------------------------- -------------------------------
NOTE: FAILURE TO COMPLETE AND RETURN THIS FORM MAY RESULT IN BACKUP
WITHHOLDING OF 31% OF ANY PAYMENTS MADE TO YOU ON ACCOUNT OF THE NEW
NOTES. PLEASE REVIEW THE ENCLOSED GUIDELINES FOR CERTIFICATION OF
TAXPAYER IDENTIFICATION NUMBER ON SUBSTITUTE FORM W-9 FOR ADDITIONAL
DETAILS.
<PAGE>
INSTRUCTIONS
FORMING PART OF THE TERMS AND CONDITIONS OF THE EXCHANGE OFFER
1. DELIVERY OF THIS LETTER OF TRANSMITTAL AND EXISTING NOTES; GUARANTEED
DELIVERY PROCEDURE
The Letter of Transmittal is to be used to forward, and must accompany, all
certificates representing Existing Notes tendered pursuant to the Exchange
Offer. Certificates representing the Existing Notes in proper form for
transfer (or a confirmation of book-entry transfer of such Existing Notes into
the Exchange Agent's account at the book-entry transfer facility) as well as a
properly completed and duly executed copy of this Letter of Transmittal and
all other documents required by this Letter of Transmittal, must be received
by the Exchange Agent at its address set forth herein prior to 5:00 p.m., New
York City time, on the Expiration Date. Existing Notes tendered hereby must be
in denominations of $1,000 and any integral multiple thereof.
The method of delivery of this Letter of Transmittal, the Existing Notes and
all other required documents is at the election and risk of the tendering
holders, but the delivery will be deemed made only when actually received or
confirmed by the Exchange Agent. If such delivery is by mail, it is
recommended that registered or certified mail properly insured, with return
receipt requested, be used. In all cases, sufficient time should be allowed to
permit timely delivery.
If a holder desires to tender Existing Notes and such holder's Existing
Notes are not immediately available or time will not permit such holder's
Letter of Transmittal, Existing Notes (or a confirmation of book-entry
transfer of Existing Notes into the Exchange Agent's account at the book-entry
transfer facility) or other required documents to reach the Exchange Agent
prior to 5:00 p.m., New York City time, on the Expiration Date, or such holder
cannot complete the procedure of book-entry transfer on a timely basis, such
holder may nevertheless tender Existing Notes if:
(a) such tender is made by or through an Eligible Institution (as defined
below);
(b) the Exchange Agent has received from such Eligible Institution prior
to 5:00 p.m., New York City time, on the Expiration Date, a properly
completed and duly executed Notice of Guaranteed Delivery, in substantially
the form provided by Remington, setting forth the name and address of the
holder of such Existing Notes and the principal amount of Existing Notes
tendered and stating that the tender is being made thereby and guaranteeing
that, within five New York Stock Exchange, Inc. trading days after the date
of execution of such Notice of Guaranteed Delivery, a duly executed Letter
of Transmittal, or facsimile thereof, together with the Existing Notes (or
a confirmation of book-entry transfer of such Existing Notes into the
Exchange Agent's account at the book-entry transfer facility), and any
other documents required by this Letter of Transmittal and the instructions
hereto, will be deposited by such Eligible Institution with the Exchange
Agent; and
(c) this Letter of Transmittal, or a facsimile hereof, properly completed
and duly executed, together with Existing Notes in proper form for transfer
(or a confirmation of book-entry transfer of such Existing Notes into the
Exchange Agent's account at the book-entry transfer facility) and all other
required documents are received by the Exchange Agent within five New York
Stock Exchange, Inc. trading days after the date of execution of such
Notice of Guaranteed Delivery.
A tender will be deemed to have been received as of the date when the
tendering holder's duly signed Letter of Transmittal accompanied by Existing
Notes (or a timely confirmation of a book-entry transfer of Existing Notes
into the Exchange Agent's account at the book-entry transfer facility) or a
Notice of Guaranteed Delivery from an Eligible Institution is received by the
Exchange Agent.
See "The Exchange Offer" in the Prospectus.
2. WITHDRAWALS
Any holder who has tendered Existing Notes may withdraw the tender by
delivering written notice of withdrawal to the Exchange Agent prior to
acceptance of such tender on the Expiration Date. For a withdrawal to be
effective, a written notice of withdrawal must be timely received by the
Exchange Agent at its address set forth herein. Any such notice of withdrawal
must (i) specify the name of the holder having tendered the Existing Notes to
be withdrawn (the "Depositor"), (ii) identify
<PAGE>
the Existing Notes to be withdrawn (including the certificate number or
numbers, if the Existing Notes were physically delivered to the Exchange
Agent, or the name and number of the participant's account at the book-entry
transfer facility to be credited with the withdrawn Existing Notes, in the
case of delivery pursuant to book-entry procedures, as well as the principal
amount of such Existing Notes to be withdrawn), (iii) be signed by the
Depositor in the same manner as the original signature on the Letter of
Transmittal by which such Existing Notes were tendered or as otherwise set
forth in Instruction 3 below (including any required signature guarantees), or
be accompanied by documents of transfer sufficient to have the Trustee (as
defined in the Prospectus) register the transfer of such Existing Notes into
the name of the person withdrawing the tender and (iv) specify the name in
which any such Existing Notes are to be registered, if different from that of
the Depositor. The Exchange Agent will return properly withdrawn Existing
Notes as soon as practicable following receipt of notice of withdrawal. All
questions as to the validity (including time of receipt) of notices of
withdrawals will be determined by Remington, in its sole discretion, and such
determination will be final and binding on all parties. See "The Exchange
Offer--Withdrawal Rights" in the Prospectus. If Existing Notes have been
tendered pursuant to the procedures for book-entry transfer, any notice of
withdrawal must specify the name and number of the participant's account at
DTC to be credited with the withdrawn Existing Notes or otherwise comply with
DTC's procedures. See "The Exchange Offer--Withdrawal Rights" in the
Prospectus.
3. SIGNATURES ON THIS LETTER OF TRANSMITTAL; BOND POWERS AND ENDORSEMENTS;
GUARANTEE OF SIGNATURES
If this Letter of Transmittal is signed by the registered holder of the
Existing Notes tendered hereby, the signature must correspond exactly with the
name as written on the face of the certificates without any change whatsoever.
If any tendered Existing Notes are owned of record by two or more joint
owners, all such owners must sign this Letter of Transmittal.
If any tendered Existing Notes are registered in different names on several
certificates, it will be necessary to complete, sign and submit as many
separate copies of this Letter of Transmittal as there are different
registrations of certificates.
If this Letter of Transmittal or any Existing Notes or powers of attorney
are signed by trustees, executors, administrators, guardians, attorneys-in-
fact, officers of corporations or others acting in a fiduciary or
representative capacity, such persons should indicate when signing, and unless
waived by Remington, proper evidence satisfactory to Remington of their
authority so to act must be submitted.
The signatures on this Letter of Transmittal or a notice of withdrawal, as
the case may be, must be guaranteed unless the Existing Notes surrendered for
exchange pursuant thereto are tendered (i) by a registered holder of the
Existing Notes who has not completed the box entitled "Special Issuance
Instructions" or "Special Delivery Instructions" in this Letter of Transmittal
or (ii) for the account of an Eligible Institution. In the event that the
signatures in this Letter of Transmittal or a notice of withdrawal, as the
case may be, are required to be guaranteed, such guarantees must be by a firm
which is a member of a registered national securities exchange or a member of
the National Association of Securities Dealers, Inc., or by a commercial bank
or trust company having an office or correspondent in the United States, in
each case which is a member of the Medallion Signature Program (each an
"Eligible Institution"). If Existing Notes are registered in the name of a
person other than the signer of this Letter of Transmittal, the Existing Notes
surrendered for exchange must be endorsed by, or be accompanied by a written
instrument or instruments of transfer or exchange, in satisfactory form as
determined by Remington in its sole discretion, duly executed by the
registered holder with the signature thereon guaranteed by an Eligible
Institution.
4. SPECIAL ISSUANCE AND DELIVERY INSTRUCTIONS
Tendering holders of Existing Notes should indicate in the applicable box
the name and address to which New Notes issued pursuant to the Exchange Offer
are to be issued or sent, if different from the name or address of the person
signing this Letter of Transmittal. In the case of issuance in a different
name, the employer identification or social security number of the person
named must also be indicated. If no such instructions are given, any New Notes
will be issued in the name of, and delivered to, the name or address of the
person signing this Letter of Transmittal and any Existing Notes not accepted
for exchange will be returned to the name or address of the person signing
this Letter of Transmittal.
2
<PAGE>
5. BACKUP FEDERAL INCOME TAX WITHHOLDING AND SUBSTITUTE FORM W-9
Under the federal income tax laws, payments that may be made by Remington or
Holding (as the case may be) on account of New Notes issued pursuant to the
Exchange Offer may be subject to backup withholding at the rate of 31%. In
order to avoid such backup withholding, each tendering holder should complete
and sign the Substitute Form W-9 included in this Letter of Transmittal and
either (a) provide the correct taxpayer identification number ("TIN") and
certify, under penalties of perjury, that the TIN provided is correct and that
(i) the holder has not been notified by the Internal Revenue Service (the
"IRS") that the holder is subject to backup withholding as a result of failure
to report all interest or dividends or (ii) the IRS has notified the holder
that the holder is no longer subject to backup withholding; or (b) provide an
adequate basis for exemption. If the tendering holder has not been issued a
TIN and has applied for one, or intends to apply for one in the near future,
such holder should write "Applied For" in the space provided for the TIN in
Part I of the Substitute Form W-9, sign and date the Substitute Form W-9 and
sign the Certificate of Payee Awaiting Taxpayer Identification Number. If
"Applied For" is written in Part I, Remington, Holding or the Paying Agent
under the Indenture governing the New Notes (as the case may be) shall retain
31% of the payments made to the tendering holder during the sixty (60) day
period following the date of the Substitute Form W-9. If the holder furnishes
the Exchange Agent or Remington with its TIN within sixty (60) days after the
date of the Substitute Form W-9, Remington, Holding or the Paying Agent (as
the case may be) shall remit such amounts retained during the sixty (60) day
period to the holder and no further amounts shall be retained or withheld from
payments made to the holder thereafter. If, however, the holder has not
provided the Exchange Agent or Remington with its TIN within such sixty (60)
day period, Remington or Holding or the Paying Agent (as the case may be)
shall remit such previously retained amounts to the IRS as backup withholding.
In general, if a holder is an individual, the taxpayer identification number
is the Social Security number of such individual. If the Exchange Agent or
Remington is not provided with the correct TIN, the holder may be subject to a
$50 penalty imposed by the IRS. Certain holders (including, among others, all
corporations and certain foreign individuals) are not subject to these backup
withholding and reporting requirements. In order for a foreign individual to
qualify as an exempt recipient, such holder must submit a statement
(generally, IRS Form W-8), signed under penalties of perjury, attesting to
that individual's exempt status. Such statements can be obtained from the
Exchange Agent. For further information concerning backup withholding and
instructions for completing the Substitute Form W-9 (including how to obtain a
taxpayer identification number if you do not have one and how to complete the
Substitute Form W-9 if Existing Notes are registered in more than one name),
consult the enclosed Guidelines for Certification of Taxpayer Identification
Number on Substitute Form W-9.
Failure to complete the Substitute Form W-9 will not, by itself, cause
Existing Notes to be deemed invalidly tendered, but may require Remington or
Holding or the Paying Agent (as the case may be) to withhold 31% of the amount
of any payments made on account of the New Notes. Backup withholding is not an
additional federal income tax. Rather, the federal income tax liability of a
person subject to backup withholding will be reduced by the amount of tax
withheld. If withholding results in an overpayment of taxes, a refund may be
obtained from the IRS.
6. TRANSFER TAXES
Remington will pay all transfer taxes, if any, applicable to the transfer of
Existing Notes to it or its order pursuant to the Exchange Offer. If, however,
New Notes and/or substitute Existing Notes not exchanged are to be delivered
to, or are to be registered or issued in the name of, any person other than
the registered holder of the Existing Notes tendered hereby, or if tendered
Existing Notes are registered in the name of any person other than the person
signing this Letter of Transmittal, or if a transfer tax is imposed for any
reason other than the transfer of Existing Notes to Remington or its order
pursuant to the Exchange Offer, the amount of any such transfer taxes (whether
imposed on the registered holder or any other person) will be payable by the
tendering holder. If satisfactory evidence of payment of such taxes or
exemption therefrom is not submitted herewith, the amount of such transfer
taxes will be billed directly to such tendering holder.
Except as provided in this Instruction 6, it will not be necessary for
transfer tax stamps to be affixed to the Existing Notes specified in this
Letter of Transmittal.
7. WAIVER OF CONDITIONS
Remington reserves the absolute right to waive satisfaction of any or all
conditions enumerated in the Prospectus.
3
<PAGE>
8. NO CONDITIONAL TENDERS
No alternative, conditional, irregular or contingent tenders will be
accepted. All tendering holders of Existing Notes, by execution of this Letter
of Transmittal, shall waive any right to receive notice of the acceptance of
their Existing Notes for exchange.
Neither Holding nor Remington nor any other person is obligated to give
notice of defects or irregularities in any tender, nor shall any of them incur
any liability for failure to give any such notice.
9. INADEQUATE SPACE
If the space provided herein is inadequate, the aggregate principal amount
of Existing Notes being tendered and the certificate number or numbers (if
available) should be listed on a separate schedule attached hereto and
separately signed by all parties required to sign this Letter of Transmittal.
10. MUTILATED, LOST, STOLEN OR DESTROYED EXISTING NOTES
Any holder whose Existing Notes have been mutilated, lost, stolen or
destroyed should contact the Exchange Agent at the address indicated above for
further instructions.
11. REQUESTS FOR ASSISTANCE OR ADDITIONAL COPIES
Questions relating to the procedure for tendering, as well as requests for
additional copies of the Prospectus and this Letter of Transmittal, may be
directed to the Exchange Agent at the address and telephone number indicated
above.
4
<PAGE>
EXHIBIT 99.2
NOTICE OF GUARANTEED DELIVERY
WITH RESPECT TO
REMINGTON ARMS COMPANY, INC.
9 1/2% SENIOR SUBORDINATED NOTES DUE 2003, SERIES A
This form must be used by a holder of the 9 1/2% Senior Subordinated Notes
due 2003, Series A (the "Existing Notes") of Remington Arms Company, Inc., a
Delaware corporation formerly named RACI Acquisition Corporation ("Remington")
and the guarantee thereof of RACI Holding, Inc., a Delaware corporation
("Holding"), that wishes to tender Existing Notes to the Exchange Agent
pursuant to the guaranteed delivery procedures described in "The Exchange
Offer--How to Tender" of the Prospectus dated , 1997 (the "Prospectus")
and in Instruction 1 to the accompanying Letter of Transmittal. Any holder
that wishes to tender Existing Notes pursuant to such guaranteed delivery
procedures must ensure that the Exchange Agent receives this Notice of
Guaranteed Delivery prior to 5:00 p.m., New York City time, on the Expiration
Date of the Exchange Offer. Capitalized terms not defined herein have the
meaning ascribed to them in the Prospectus or the Letter of Transmittal.
To : First Trust National Association, Exchange Agent
By Registered or Certified Mail: By Facsimile:
First Trust New York First Trust New York
100 Wall Street, 20th Floor (212) 509-4529
New York, N.Y. 10005 Attention: Cathy Donohue
Attention: Cathy Donohue
(For Eligible Institutions Only)
Confirm by Telephone:
(212) 815-2742
By Overnight Courier By Hand
First Trust New York First Trust New York
100 Wall Street, 20th Floor 100 Wall Street, 20th Floor
New York, N.Y. 10005 New York, N.Y. 10005
Attention: Cathy Donohue Attention: Cathy Donohue
For Information Call:
(212) 361-2546
DELIVERY OF THIS NOTICE OF GUARANTEED DELIVERY TO AN ADDRESS OTHER THAN
AS SET FORTH ABOVE OR TRANSMISSION VIA A FACSIMILE NUMBER OTHER THAN
AS SET FORTH ABOVE WILL NOT CONSTITUTE A VALID DELIVERY.
PLEASE READ THE ACCOMPANYING INSTRUCTIONS CAREFULLY
<PAGE>
Ladies and Gentlemen:
The undersigned hereby tenders to Remington, upon the terms and subject to
the conditions set forth in the Prospectus and the related Letter of
Transmittal, receipt of which is hereby acknowledged, the principal amount of
Existing Notes specified below pursuant to the guaranteed delivery procedures
set forth in the Prospectus and in Instruction 1 of the Letter of Transmittal.
The undersigned hereby tenders the Existing Notes listed below:
<TABLE>
<CAPTION>
Crtificate Number(s)e Certificate Number(s)
(f known) of Existingi (if known) of Existing
Notes or Account Notes or Account
umber at the Book-N Aggregate Principal Aggregate Principal Number at the Book- Aggregate Principal
Entry Facility Amount Represented Amount Tendered Entry Facility Amount Represented
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
- -----------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------
</TABLE>
All authority herein conferred or agreed to be conferred shall survive the
death or incapacity of the undersigned and every obligation of the undersigned
hereunder shall be binding upon the heirs, personal representatives,
successors and assigns of the undersigned.
SIGN HERE
Name of Registered or Acting Holder: ________________________________________
Signature(s): _______________________________________________________________
Name(s) (please print): _____________________________________________________
Address: ____________________________________________________________________
____________________________________________________________________
Telephone Number: ___________________________________________________________
Date: _______________________________________________________________________
GUARANTEE
(Not to be used for signature guarantee)
The undersigned, a firm which is a member of a registered national
securities exchange or of the National Associates of Securities Dealers, Inc.,
or is a commercial bank or trust company having an office or correspondent in
the United States, or is otherwise an "eligible guarantor institution" within
the meaning of Rule 17Ad-15 under the Securities Exchange Act of 1934, as
amended, guarantees deposit with the Exchange Agent of the Letter of
Transmittal (or facsimile thereof), together with the Existing Notes tendered
hereby in
2
<PAGE>
proper form for transfer (or confirmation of the book-entry transfers of such
Existing Notes into the Exchange Agent's account at the book-entry transfer
facility described in the Prospectus under the caption "The Exchange Offer--
How to Tender" and in the Letter of Transmittal) and any other required
documents, all by 5:00 p.m., New York City time, on the fifth New York Stock
Exchange, Inc. trading day following the date of execution of this Notice of
Guaranteed Delivery.
SIGN HERE
Name of firm: ________________________________________________________________
Authorized Signature: ________________________________________________________
Name (please print): _________________________________________________________
Address: _____________________________________________________________________
_____________________________________________________________________
_____________________________________________________________________
Telephone Number: ____________________________________________________________
Date: ________________________________________________________________________
DO NOT SEND EXISTING NOTES WITH THIS FORM. ACTUAL SURRENDER OF EXISTING NOTES
MUST BE MADE PURSUANT TO, AND BE ACCOMPANIED BY, AN EXECUTED LETTER OF
TRANSMITTAL.
INSTRUCTIONS FOR NOTICE OF GUARANTEED DELIVERY
1. Delivery of this Notice of Guaranteed Delivery. A properly completed and
duly executed copy of this Notice of Guaranteed Delivery and any other
documents required by this Notice of Guaranteed Delivery must be received by
the Exchange Agent at its address set forth herein prior to 5:00 p.m., New
York City time, on the Expiration Date. The method of delivery of this Notice
of Guaranteed Delivery and any other required documents to the Exchange Agent
is at the election and risk of the holder and the delivery will be deemed made
only when actually received by the Exchange Agent. If delivery is by mail,
registered or certified mail properly insured, with return receipt requested,
is recommended. In all cases sufficient time should be allowed to assure
timely delivery. For a description of the guaranteed delivery procedure, see
Instruction 1 of the Letter of Transmittal.
2. Signatures on this Notice of Guaranteed Delivery. If this Notice of
Guaranteed Delivery is signed by the registered holder(s) of the Existing
Notes referred to herein, the signature must correspond with the name(s)
written on the face of the Existing Notes without alteration, enlargement, or
any change whatsoever. If this Notice of Guaranteed Delivery is signed by a
participant of the book-entry transfer facility whose name appears on a
security position listing as the owner of Existing Notes, the signature must
correspond with the name shown on the security position listing as the owner
of the Existing Notes.
3
<PAGE>
If this Notice of Guaranteed Delivery is signed by a person other than the
registered holder(s) of any Existing Notes listed or a participant of the
book-entry transfer facility, this Notice of Guaranteed Delivery must be
accompanied by appropriate bond powers, signed as the name of the registered
holder(s) appears on the Existing Notes or signed as the name of the
participant shown on the book-entry transfer facility's security position
listing.
If this Notice of Guaranteed Delivery is signed by a trustee, executor,
administrator, guardian, attorney-in-fact, officer of a corporation, or other
person acting in a fiduciary or representative capacity, such person should so
indicate when signing.
3. Requests for Assistance or Additional Copies. Questions and requests for
assistance and requests for additional copies of the Prospectus may be
directed to the Exchange Agent at the address specified in the Prospectus.
Holders may also contact their broker, dealer, commercial bank, trust company,
or other nominee for assistance concerning the Exchange Offer.
4
<PAGE>
EXHIBIT 99.3
INSTRUCTION TO REGISTERED HOLDER AND/OR BOOK-ENTRY TRANSFER FACILITY
PARTICIPANT FROM OWNER
OF
REMINGTON ARMS COMPANY, INC.
9 1/2% SENIOR SUBORDINATED NOTES DUE 2003, SERIES A
To Registered Holder and/or Participant of the Book-Entry Transfer Facility:
The undersigned hereby acknowledges receipt of the Prospectus dated
, 1997 (the "Prospectus") of Remington Arms Company, Inc., a
Delaware corporation formerly named RACI Acquisition Corporation ("Remington")
and RACI Holding, Inc. a Delaware corporation ("Holding"), and the
accompanying Letter of Transmittal (the "Letter of Transmittal"), that
together constitute Remington's offer to exchange up to $100,000,000 aggregate
principal amount of their 9 1/2% Senior Subordinated Notes due 2003, Series B
(the "New Notes"), which will have been registered under the Securities Act of
1933, as amended (the "Securities Act"), for a like principal amount of their
outstanding 9 1/2% Senior Subordinated Notes due 2003, Series A (the "Existing
Notes") and Holding's offer to exchange its guarantee of New Notes for its
guarantee of the Existing Notes (the "Exchange Offer"). Capitalized terms used
but not defined herein have the meanings ascribed to them in the Prospectus.
This will instruct you, the registered holder and/or book-entry transfer
facility participant, as to the action to be taken by you relating to the
Exchange Offer with respect to the Existing Notes held by you for the account
of the undersigned.
The aggregate face amount of the Existing Notes held by you for the account
of the undersigned is (fill in amount):
$ of the 9 1/2% Senior Subordinated Notes due 2003, Series A.
With respect to the Exchange Offer, the undersigned hereby instructs
you (check appropriate box):
[_] To TENDER the following Existing Notes held by you for the account
of the undersigned (insert principal amount of Existing Notes to
be tendered, if any):
$ of the 9 1/2% Senior Subordinated Notes due 2003, Series A.
[_] To TENDER the following Existing Notes held by you for the account
of the undersigned in exchange for certificated New Notes (insert
principal amount of Existing Notes to be so tendered, if any):
$ of the 9 1/2% Senior Subordinated Notes due 2003.
[_]NOT to TENDER any Existing Notes held by you for the account of the
undersigned.
If the undersigned instructs you to tender the Existing Notes held by you
for the account of the undersigned, it is understood that you are authorized
(a) to make, on behalf of the undersigned (and the undersigned, by its
signature below, hereby makes to you), the representation and warranties
contained in the Letter of Transmittal that are to be made with respect to the
undersigned as a beneficial owner, including but not limited to the
representations that (i) the undersigned's principal residence is in the state
of (fill in state) , (ii) the undersigned is neither an "affiliate" of
the Company within the meaning of Rule 405 under the Securities Act of 1933,
as amended (the "Securities Act"), nor a broker-dealer tendering Existing
Notes acquired directly from the Company for its own account, (iii) the
undersigned is acquiring the New Notes in the ordinary course of business of
the undersigned, (iv) the undersigned is not participating, does not intend to
participate, and has no arrangement or understanding with any person to
participate, in a distribution of the New Notes, and (v) the
<PAGE>
undersigned acknowledges that any person participating in the Exchange Offer
for the purpose of distributing the New Notes must comply with the
registration and prospectus delivery requirements of the Securities Act of
1933, as amended, in connection with a secondary resale transaction of the New
Notes acquired by such person and cannot rely on the position of the staff of
the Securities and Exchange Commission set forth in no-action letters that are
discussed in the section of the Prospectus entitled "The Exchange Offer--
Resales of the New Notes;" (b) to agree, on behalf of the undersigned, as set
forth in the Letter of Transmittal; and (c) to take such other action as
necessary under the Prospectus or the Letter of Transmittal to effect the
valid tender of such Existing Notes.
SIGN HERE
Name of beneficial owner(s): _________________________________________________
Signature(s): ________________________________________________________________
Name(s) (please print): ______________________________________________________
Address: _____________________________________________________________________
---------------------------------------------------------------------------
Telephone Number: ____________________________________________________________
Taxpayer identification or Social Security Number: ___________________________
Date: _______________________________________________________________________
