<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON MAY 7, 1997
REGISTRATION NO. 333-4520, 333-4520-01
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- -------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
----------------
AMENDMENT NO. 3 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:
WAYLAND E. HUNDLEY, ESQ. DAVID A. BRITTENHAM, ESQ.
REMINGTON ARMS COMPANY, INC. DEBEVOISE & PLIMPTON
870 REMINGTON DRIVE 875 THIRD AVENUE
P.O. BOX 700 NEW YORK, NEW YORK 10022
MADISON, NORTH CAROLINA 27025-0700 (212) 909-6347
(910) 548-8515
----------------
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 MAY 7, 1997
PROSPECTUS
[LOGO]REMINGTON(R)
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
(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)
such New Notes. 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 December 31, 1996, the aggregate principal amount of Senior
Indebtedness of the Company was $145.4 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), Nitro-
27 (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), 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 recently completed construction of a new 44 thousand
square foot firearms manufacturing facility in Mayfield, Kentucky at which the
Company began manufacturing rimfire rifles in April 1997. In 1995 the Company
completed the consolidation of its research and development activities 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 1996, 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. The market share data included herein
is the most recent market share data available from third party sources. Such
data may not accurately reflect the Company's market shares for more recent
periods, although the Company believes such data is generally indicative of its
relative market share and competitive position. In 1994 according to PPI, the
Company had the largest share of the U.S. retail shotgun market, at
approximately 31%, with its nearest competitor holding a market share of
approximately 19%. Remington was also the second largest brand of rifles in the
United States in 1994, according to PPI, with a market share of approximately
12%, with its leading competitor holding a market share of approximately 18%.
In the ammunition market, the Company was the second largest brand in the
United States in 1994, based on PPI data, with a market share of approximately
25%, with its leading competitor holding a market share of approximately 35%.
Sales of firearms and ammunition comprised approximately 46% and 41%,
respectively, of the Company's sales in 1996. In the U.S. retail fishline
market segment, the Company held a share of approximately 25% in 1996, with its
leading competitor holding a market share of approximately 39%, according to
SMRG.
<PAGE>
According to ASD as of 1995, approximately 27 million people in the United
States enjoy 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 overall over the long term. Total domestic consumer expenditures in
these markets for 1995 are estimated by the NSGA to have been $362 million for
shotguns, $555 million for rifles, and $852 million for ammunition.
Additionally, according to ASD as of 1995, approximately 23% of the U.S.
population consider themselves anglers. Fishing is considered an inexpensive
sport that can be enjoyed by people of widely varying ages, skills and
abilities. The SMRG estimates that the U.S. retail market for recreational
fishline exceeded $88 million in 1996, of which the Company has a 25% market
share.
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 (as amended, 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.
2
<PAGE>
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
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
3
<PAGE>
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
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
4
<PAGE>
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.
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."
5
<PAGE>
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 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
6
<PAGE>
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.
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
7
<PAGE>
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
December 31, 1996, the aggregate amount of Senior
Indebtedness of the Company was $145.4 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 December 31,
1996, the aggregate amount of Indebtedness of
Holding ranking senior in right of payment to the
Holding Guarantee was $145.4 million.
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 Upon 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
8
<PAGE>
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.
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
9
<PAGE>
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."
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, 1996. The financial information for the four-year period ended December 31,
1996 has been derived from the Company's financial statements as audited by its
independent accountants Coopers & Lybrand L.L.P. The balance sheet and income
statement information as of and for the year ended December 31, 1992, 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
three years ended December 31, 1994, 1995 and 1996, respectively, relate to
Remington and its operations. Generally, the comparability of the Company's
results of operations for the years ended December 31, 1996, 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 year ended December 31,
1992, 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
--------------------------------------- ---------------------------
YEAR ENDED
DECEMBER 31, ONE MONTH ELEVEN MONTHS YEAR ENDED
----------------------- ENDED DEC. 31, ENDED NOV. 30, DECEMBER 31,
1996 1995 1994 1993 1993 1992
------ ------ ------ -------------- -------------- ------------
(DOLLARS IN MILLIONS EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS
DATA:
Sales (a)............... $390.4 $427.0 $417.7 $ 19.2 $346.9 $341.7
Gross Profit............ 115.3 141.7 130.6 3.4 106.0 104.5
Operating Expenses...... 101.4 100.2 94.2 5.5 99.4 80.3
Restructuring and
Nonrecurring Items..... 9.6 -- -- -- -- --
Operating Profit
(Loss)................. 4.3 41.5 36.4 (2.1) 6.6 24.2
Interest Expense........ 25.1 21.5 20.6 1.5 5.3 6.8
Profit (Loss) before
Income Taxes........... (20.8) 20.0 15.8 (3.6) 2.0 19.1
Net Income (Loss) before
Effect of Accounting
Changes................ (13.8) 11.5 9.4 (2.3) 1.4 12.0
Effect of Changes in
Accounting for
Postretirement Benefits
other than Pensions and
Postemployment Benefits
(b).................... -- -- -- -- (74.1) --
Net Income (Loss)....... (13.8) 11.5 9.4 (2.3) (72.7) 12.0
Net Income (Loss) Per
Common Share........... (18.40) 15.33 12.53 (3.07) -- --
Ratio of Earnings to
Fixed Charges (c)...... 0.2x 1.9x 1.8x -- -- 3.6x
OPERATING AND OTHER
DATA:
EBITDA (d).............. $ 29.4 $ 56.0 $ 68.0 $ 1.4 $ 16.8 $ 36.5
EBITDA Margin (d)(e).... 7.5% 13.1% 16.3% 7.3% 4.8% 10.7%
Depreciation and
Amortization (f)....... 13.9 11.7 10.4 1.0 9.5 10.6
Non-cash Charges (g).... -- -- 16.8 2.5 -- --
Nonrecurring and
Restructuring Expenses
(h).................... 11.2 2.8 4.4 -- -- --
Ratio of EBITDA to
Interest Expense (d)... 1.2x 2.6x 3.3x 0.9x 3.2x 5.4x
Consolidated Fixed
Charge Coverage Ratio
(i).................... 0.7x 2.4x 3.1x 0.9x 3.0x 5.1x
Capital Expenditures.... 22.5 18.9 9.3 0.8 9.1 9.5
Cash flows provided by
(used in):
Operating Activities... (2.7) (12.5) 48.8 30.8 23.5 29.4
Investing Activities... (22.5) (17.5) (16.2) (307.4) (9.1) (9.5)
Financing Activities... 33.4 (10.5) (9.7) 295.6 (14.4) (19.9)
BALANCE SHEET DATA (END
OF PERIOD):
Working Capital......... $136.1 $125.0 $131.3 $125.8 $ 93.9 $ 97.6
Total Assets............ 435.0 404.4 403.3 403.2 175.6 172.0
Total Debt (j).......... 253.1 213.2 219.8 229.4 -- 0.7
Shareholder's Equity.... 79.8 93.6 82.1 72.7 115.0 145.4
</TABLE>
(Footnotes on following page)
11
<PAGE>
(Footnotes)
- --------
(a) Sales are presented net of federal excise taxes. Excise taxes were $28.7
million for the year ended December 31, 1992 and $28.8 million for the
eleven-month period ended November 30, 1993, respectively, and $1.4 million
for the one-month period ended December 31, 1993, $33.7 million, $36.0
million and $31.7 million for the years ended December 31, 1994, 1995 and
1996, respectively.
(b) 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.
(c) 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 year ended December 31, 1996, the eleven month-
period ended November 30, 1993 and the one-month period ended December 31,
1993 by $22.6 million, $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.
(d) EBITDA as presented is calculated in accordance with the definition of that
term contained in the Company's Credit Agreement, and may not be comparable
to similar measures reported by other companies. Generally, the Credit
Agreement defines EBITDA to consist of net income (loss), adjusted to
exclude cash interest expense, income tax expense, depreciation,
amortization, non-cash expenses and charges, gain or loss on sale or write-
off of assets, and extraordinary, unusual or nonrecurring gains, losses,
charges or credits. EBITDA, and the Ratio of EBITDA to Interest Expense, are
presented to facilitate a more complete analysis of the Company's financial
performance, by adding back non-cash and nonrecurring items to operating
income, as an indicator of the Company's ability to generate cash to service
debt and other fixed obligations. Investors should not rely on EBITDA as an
alternative to operating income or cash flows, as determined in accordance
with generally accepted accounting principles, as an indicator of the
Company's operating performance, liquidity or ability to meet cash needs.
See "Management's Discussion of Financial Condition and Results of
Operations" for further discussion of the Company's operating income and
cash flows.
(e) Represents EBITDA as a percentage of revenues.
(f) Excludes amortization of deferred financing costs of $1.6 million, $1.5
million and $1.7 million in 1996, 1995 and 1994, respectively, which is
included in interest expense.
(g) Non-cash charges consist of an Acquisition-related inventory charge of
$16.8 million in the year ended December 31, 1994 and $2.5 million in the
one month ended December 31, 1993. See "Management's Discussion of
Financial Condition and Results of Operations--Overview--Acquisition-
Related Matters."
(h) Nonrecurring and restructuring expenses excluded in calculating EBITDA
consist of the following: (1) for 1996, $4.9 million in restructuring
charges, a $4.7 million nonrecurring charge related to resolving a dispute
with the Sellers, and $1.6 million for corporate relocation and employee
retraining; (2) for 1995, $2.8 million in nonrecurring charges for computer
system implementation and $1.0 million for corporate relocation, net of a
$1.0 million nonrecurring research and development-related benefit; and (3)
for 1994, $2.3 million for relocating and consolidating the Company's
research and development function, $1.8 million in nonrecurring charges for
computer system implementation, and $0.3 million for discontinuing the
Company's apparel business.
(i) 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
(including depreciation, amortization and other 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, if any, 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." Generally, the principal
difference between the Ratio of EBITDA to Interest Expense and the
Consolidated Fixed Charge Coverage Ratio arises from the exclusion of
nonrecurring and restructuring expenses in calculating EBITDA.
(j) 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 years ended December 31, 1996 and 1995, and accordingly no such
prepayment is required in 1997 nor was a prepayment 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.
The Company believes that based upon current levels of operations it should
be able to meet its current debt service obligations, including interest
payments on the Notes when due, prior to the maturity of the Revolving Credit
Facility under the Credit Agreement, although no assurance can be given in
this regard. See "Management's Discussion and Analysis of Financial Condition
and Results of Operations--Liquidity and Capital Resources--Liquidity." 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.
13
<PAGE>
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 December 31, 1996, the Company would not have been
permitted to incur any additional indebtedness in accordance with this fixed
charge coverage ratio test.
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. Since September
1995, the Company has obtained four amendments to its Credit Agreement which,
among other things, modified (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 initially to increase but
ultimately 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,
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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-- Subordination." As of
December 31, 1996, the aggregate principal amount of Senior Indebtedness of
the Company outstanding was $145.4 million, with an additional $91.0 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 and the remainder for environmental costs. In December 1996, the Company
and the Sellers resolved questions that had been raised by the Sellers
concerning certain product liability related costs that the Company had
allocated to the Cap or that were billed to cases for which the Sellers
assumed responsibility under the Asset Purchase Agreement. As a result of this
agreement between the Sellers and the Company, the Company recorded a
nonrecurring charge of $4.7 million. This charge in effect increased
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the product liability portion of the Cap from $24.5 million to $28.4 million.
As of December 31, 1996, the Company has charged to the Cap payments totaling
$27.1 million, of which $0.3 million was related to environmental costs and
$26.8 million to product liability costs. Based upon the incurrence of
additional product liability costs chargeable to the Cap since December 31,
the remaining product liability related portion of the Cap was exceeded in
April 1997. See Note 16 to the Audited Consolidated Financial Statements dated
December 31, 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 that its current product
liability insurance coverage for personal injury and property damage is
adequate for its needs. The Company's current product liability insurance
policy provides for a self-insured retention of $0.5 million per occurrence,
with an aggregate annual limit of $7.0 million for liability indemnity and
defense and other expenses combined, and aggregate annual sublimits of $4.5
million for indemnity and $4.5 million for expenses. The current policy has a
batch clause endorsement, which in general provides that if a batch of product
were to be defective, the Company's liability for expenses and damages related
to the entire batch would be capped at the amount of self-insured retention
for a single occurrence. The current policy excludes from coverage any
pollution-related liability. The current policy period runs from December 1,
1995 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 March 31, 1997, approximately 32 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, approximately 5 involve discontinued products
and approximately 6 involve undisclosed pre-Closing occurrences. Accordingly,
these are cases for which Sellers retained liability and are required to
indemnify the Company for the full amount. An additional approximately 6 of
the pending cases are subject to the Cap and are cases for which the Sellers
retained liability and are required to indemnify the Company for amounts in
excess of the Cap. The remaining approximately 15 of the pending cases involve
post-Closing occurrences for which the Company bears responsibility under the
Asset Purchase Agreement. The Company has previously disposed of a number of
other cases involving post-Closing occurrences by settlement. As discussed
above, based upon the incurrence of additional product liability costs
chargeable to the Cap since December 31, the remaining product liability
portion of the Cap was exceeded in April 1997. As a result, the Sellers are
required to indemnify the Company against all product liability cases and
claims other than post-Closing occurrences involving extant or new products.
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 et al. ("Luna"), involving Company products which
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.
On February 6, 1996, the Federal district 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
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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. The initial deadline for such filing, September 30,
1996, was extended to 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 second
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,
the Sellers will pay for the settlement fund of approximately $19.0 million to
be distributed to class members, related expenses of approximately $12.0
million for plaintiffs' counsel fees and costs, and more than $1 million for
costs of administering the fund, without regard to the Cap. Approximately 350
class members (including two institutions) opted out and chose not to
participate in the settlement, although approximately 15 of them (including
such institutions) have filed claims, apparently in an effort to rejoin the
settlement class. Except for these few class members who have opted out, 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, and may continue to lead, to some additional claims of personal injury
allegedly involving use of the shotguns included in the class action lawsuit.
Most of the additional claims received in 1996 were settled in 1996 without
lawsuits being filed. 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. 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. The Sellers filed their opening appellate brief on
March 17, 1997. The Company had not been named 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 to include the Company, which filed
an answer in September 1996. Plaintiffs have now moved in the district court
for class certification against the Company and requested a stay of the appeal
in the interim. The stay was opposed by the Sellers and denied by the court. A
hearing on the class certification motion is scheduled for May 21, 1997. The
Sellers' obligations with respect to Luna include a requirement that they
indemnify the Company against all claims in that case for economic loss
involving firearms similar to those involved in that case and shipped up to 42
calendar months after the Closing (prior to the end of May 1997). Any such
claims of economic loss involving such firearms shipped thereafter will be the
Company's responsibility and, to the extent that such claims do not involve
personal injury or property damage, they would not be covered by the Company's
product liability insurance.
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 the 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. 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
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<PAGE>
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 for personal
injury and property damage 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 Sellers' agreement to be
responsible for certain post-Closing firearm-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, 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 18% of the Company's total net revenues in 1996.
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 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 otherwise to
substantially reduce its relationship with the Company beyond these changes in
inventory management practices. See "Business--Marketing and Distribution."
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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 was
renewed in January 1997. The new agreement is initially for one year and
automatically renews annually unless either party notifies the other of its
intent to terminate. 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.
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 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
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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 1994 through 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."
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 currently planned offerings of
Holding common stock to Company management and to certain directors, C&D
Fund IV will continue to be Holding's majority stockholder. See "Management--
Compensation of Directors" and "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 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 and, pursuant to a
separate agreement, makes the services of Hubbard C. Howe available 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
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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.
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
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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
(as of April 29, 1997, two 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
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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<PAGE>
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 recently completed construction of a new 44
thousand square foot firearms manufacturing facility in Mayfield, Kentucky at
which the Company began manufacturing rimfire rifles in April 1997. In 1995
the Company completed the consolidation of its research and development
activities 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 1996,
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. The market share data included
herein is the most recent market share data available from third party
sources. Such data may not accurately reflect the Company's market shares for
more recent periods, although the Company believes such data is generally
indicative of its relative market share and competitive position. In 1994,
according to PPI, the Company had the largest share of the U.S. retail shotgun
market, at approximately 31%, with its nearest competitor holding a market
share of approximately 19%. Remington was also the second largest brand of
rifles in the United States in 1994, according to PPI, with a market share of
approximately 12%, with its leading competitor holding a market share of
approximately 18%. In the ammunition market, the Company was the second
largest brand in the United States in 1994, based on PPI data, with a market
share of approximately 25%, with its leading competitor holding a market share
of approximately 35%. Sales of firearms and ammunition comprised approximately
46% and 41%, respectively, of the Company's sales in 1996. In the U.S. retail
fishline market segment, the Company held a share of approximately 25% in
1996, with its leading competitor holding a market share of approximately 39%,
according to SMRG.
According to ASD as of 1995, approximately 27 million people in the United
States enjoy 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 overall over the long term. Total domestic consumer expenditures in
these markets for 1995 are estimated by the NSGA to have been $362 million for
shotguns, $555 million for rifles, and $852 million for ammunition.
Additionally, according to ASD as of 1995, approximately 23% of the U.S.
population consider themselves anglers. Fishing is considered an inexpensive
sport that can be enjoyed by people of widely varying ages, skills and
abilities. The SMRG estimates that the U.S. retail market for recreational
fishline exceeded $88 million in 1996, of which the Company has a 25% market
share.
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 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
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Agent, will, in the case of certificated New Notes, have such certificated New
Notes mailed to them by the Exchange Agent, promptly after such tender is
accepted by the Company. 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 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 (as of April 29, 1997, two 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 (as of April 29, 1997, two 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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(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
29
<PAGE>
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, 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. This amount, along 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 and $75 million in
proceeds from the issuance of common stock. A post-Closing purchase price
adjustment arbitration resulted in a $0.2 million adjustment in the Company's
favor.
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.
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. The parties were unable to agree on the amount to be transferred,
although pursuant to the Asset Purchase Agreement DuPont transferred 80% of
the amount it calculated to be the PBO to the Remington plan. On December 20,
1996, the Company and DuPont agreed to a final settlement of $42.6 million,
including interest. See Note 10 to the Audited Consolidated Financial
Statements dated December 31, 1996.
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
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."
34
<PAGE>
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. 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 involving firearms similar to
those involved in Luna and shipped up to 42 calendar months after the Closing.
In addition, pursuant to the separate agreement relating to the Garza
litigation discussed under "Business--Legal Proceedings," 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. The Sellers and Remington are also party to 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."
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 under an annual, renewable supply agreement. 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 December 31, 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>
DECEMBER 31, 1996
-----------------
(IN MILLIONS)
<S> <C>
Debt:
Credit Agreement:
Term Loan Facility................................ $ 86.4
Revolving Credit Facility (a)..................... 59.0
Existing Notes (b).................................. 99.6
Capital Lease Obligations........................... 5.7
Other............................................... 2.4
------
Total debt........................................ $253.1
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................................... 4.8
------
Total Stockholder's Equity.......................... $ 79.8
------
Total Capitalization................................ $435.0
------
</TABLE>
- --------
(a) Borrowings of approximately $59.0 million and open letters of credit of
approximately $4.8 million were outstanding at December 31, 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, 1996. The financial information for the four-year period ended
December 31, 1996 has been derived from the Company's financial statements as
audited by its independent accountants Coopers & Lybrand L.L.P. The balance
sheet and income statement information as of and for the year ended December
31, 1992 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 three years ended December 31, 1994, 1995, and 1996,
respectively, relate to Remington and its operations. Generally, the
comparability of the Company's results of operations for the years ended
December 31, 1996, 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 year ended December 31, 1992, 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
--------------------------------------- ---------------------------------------
YEAR ENDED YEAR ENDED
DECEMBER 31, ONE MONTH ELEVEN MONTHS DECEMBER 31,
----------------------- ENDED DEC. 31, ENDED NOV. 30, ------------
1996 1995 1994 1993 1993 1992
------ ------ ------ -------------- -------------- ------------
(DOLLARS IN MILLIONS EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS
DATA:
Sales (a)............... $390.4 $427.0 $417.7 $ 19.2 $346.9 $341.7
Gross Profit............ 115.3 141.7 130.6 3.4 106.0 104.5
Operating Expenses...... 101.4 100.2 94.2 5.5 99.4 80.3
Restructuring and
Nonrecurring Items..... 9.6 -- -- -- -- --
Operating Profit
(Loss)................. 4.3 41.5 36.4 (2.1) 6.6 24.2
Interest Expense........ 25.1 21.5 20.6 1.5 5.3 6.8
Profit (Loss) before
Income Taxes........... (20.8) 20.0 15.8 (3.6) 2.0 19.1
Net Income (Loss) before
Effect of Accounting
Changes................ (13.8) 11.5 9.4 (2.3) 1.4 12.0
Effect of Changes in
Accounting for
Postretirement Benefits
other than Pensions and
Postemployment Benefits
(b).................... -- -- -- -- (74.1) --
Net Income (Loss)....... (13.8) 11.5 9.4 (2.3) (72.7) 12.0
Net Income (Loss) Per
Common Share........... (18.40) 15.33 12.53 (3.07) -- --
Ratio of Earnings to
Fixed Charges (c)...... 0.2x 1.9x 1.8x -- -- 3.6x
OPERATING AND OTHER
DATA:
EBITDA (d).............. $ 29.4 $ 56.0 $ 68.0 $ 1.4 $ 16.8 $ 36.5
EBITDA Margin (d)(e).... 7.5% 13.1% 16.3% 7.3% 4.8% 10.7%
Depreciation and
Amortization (f)....... 13.9 11.7 10.4 1.0 9.5 10.6
Non-cash Charges (g).... -- -- 16.8 2.5 -- --
Nonrecurring and
Restructuring Expenses
(h).................... 11.2 2.8 4.4 -- -- --
Ratio of EBITDA to
Interest Expense (d)... 1.2x 2.6x 3.3x 0.9x 3.2x 5.4x
Consolidated Fixed
Charge Coverage Ratio
(i).................... 0.7x 2.4x 3.1x 0.9x 3.0x 5.1x
Capital Expenditures.... 22.5 18.9 9.3 0.8 9.1 9.5
Cash flows provided by
(used in):
Operating Activities... (2.7) (12.5) 48.8 30.8 23.5 29.4
Investing Activities... (22.5) (17.5) (16.2) (307.4) (9.1) (9.5)
Financing Activities... 33.4 (10.5) (9.7) 295.6 (14.4) (19.9)
BALANCE SHEET DATA (END
OF PERIOD):
Working Capital......... $136.1 $125.0 $131.3 $125.8 $ 93.9 $ 97.6
Total Assets............ 435.0 404.4 403.3 403.2 175.6 172.0
Total Debt (j).......... 253.1 213.2 219.8 229.4 -- 0.7
Shareholder's Equity.... 79.8 93.6 82.1 72.7 115.0 145.4
</TABLE>
(Footnotes on following page)
37
<PAGE>
(Footnotes)
- --------
(a) Sales are presented net of federal excise taxes. Excise taxes were $28.7
million for the year ended December 31, 1992 and $28.8 million for the
eleven-month period ended November 30, 1993, respectively, and $1.4
million for the one-month period ended December 31, 1993, $33.7 million,
$36.0 million and $31.7 million for the years ended December 31, 1994,
1995 and 1996, respectively.
(b) 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.
(c) 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 year ended December 31, 1996, the eleven-month
period ended November 30, 1993 and the one month period ended December 31,
1993 by $22.6 million, $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.
(d) EBITDA as presented is calculated in accordance with the definition of
that term contained in the Company's Credit Agreement, and may not be
comparable to similar measures reported by other companies. Generally, the
Credit Agreement defines EBITDA to consist of net income (loss), adjusted
to exclude cash interest expense, income tax expense, depreciation,
amortization, non-cash expenses and charges, gain or loss on sale or write-
off of assets, and extraordinary, unusual or nonrecurring gains, losses,
charges or credits. EBITDA, and the Ratio of EBITDA to Interest Expense, are
presented to facilitate a more complete analysis of the Company's financial
performance, by adding back non-cash and nonrecurring items to operating
income, as an indicator of the Company's ability to generate cash to service
debt and other fixed obligations. Investors should not rely on EBITDA as an
alternative to operating income or cash flows, as determined in accordance
with generally accepted accounting principles, as an indicator of the
Company's operating performance, liquidity or ability to meet cash needs.
See "Management's Discussion of Financial Condition and Results of
Operations" for further discussion of the Company's operating income and
cash flows.
(e) Represents EBITDA as a percentage of revenues.
(f) Excludes amortization of deferred financing costs of $1.6 million, $1.5
million and $1.7 million in 1996, 1995 and 1994, respectively, which is
included in interest expense.
(g) Non-cash charges consist of an Acquisition-related inventory charge of
$16.8 million in the year ended December 31, 1994 and $2.5 million in the
one month ended December 31, 1993. See "Management's Discussion of
Financial Condition and Results of Operations--Overview--Acquisition-
Related Matters."
(h) Nonrecurring and restructuring expenses excluded in calculating EBITDA
consist of the following: (1) for 1996, $4.9 million in restructuring
charges, a $4.7 million nonrecurring charge related to resolving a dispute
with the Sellers, and $1.6 million for corporate relocation and employee
retraining; (2) for 1995, $2.8 million in nonrecurring charges for
computer system implementation and $1.0 million for corporate relocation,
net of a $1.0 million nonrecurring research and development-related
benefit; and (3) for 1994, $2.3 million for relocating and consolidating
the Company's research and development function, $1.8 million in
nonrecurring charges for computer system implementation, and $0.3 million
for discontinuing the Company's apparel business.
(i) 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
(including depreciation, amortization and other 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, if any, 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." Generally, the principal
difference between the Ratio of EBITDA to Interest Expense and the
Consolidated Fixed Charge Coverage Ratio arises from the exclusion of
nonrecurring and restructuring expenses in calculating EBITDA.
(j) Total debt consists of long-term debt, current portion of long-term debt,
and capital lease commitments.
38
<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
The following discussion and analysis relates to Holding, its subsidiary
Remington, and Remington's wholly owned subsidiary, Remington International,
Ltd., on a consolidated basis. 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 87% of the
Company's sales in 1996, 1995 and 1994, respectively. Other Company product
lines include firearm-related accessories, clay targets, fishline and related
fishline accessories. Historically, the Company's sales have been moderately
seasonal, with sales in the third quarter 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
Acquisition Accounting. On December 1, 1993, the Company acquired the
Business from the Sellers through the Acquisition. 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 disposal and
completion costs and the reasonable profit thereon. The resulting fair value
exceeded the replacement cost of these inventories by $19.4 million. The
Company accordingly recognized a nonrecurring inventory charge of $16.8
million, in the year ended December 31, 1994, which adversely affected the
Company's profit margins for that period. Additionally, the Company valued
acquired property, plant and equipment and revised their depreciable lives
based upon third party appraisals. Intangible assets arising from the
Acquisition, consisting principally of goodwill and trade names of $95.9
million (which was increased by $1.2 million in 1996 and reduced by $1.4
million in 1995 for tax adjustments), are being amortized over their estimated
useful lives, generally 40 years.
Taxes. Holding and Remington file a consolidated return for Federal income
tax purposes. 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.
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 statements 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, 1996, 1995
and 1994, exclusive of the nonrecurring inventory charge, accordingly reflects
historical manufacturing costs. See "--Acquisition Accounting."
39
<PAGE>
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 for personal injury and
property damage 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 Sellers' agreement to be responsible for certain post-
Closing firearm-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.
In December 1996, the Company and the Sellers resolved questions that had
been raised by the Sellers concerning certain product liability related costs
that the Company had allocated to the Cap or that were billed to cases for
which the Sellers assumed responsibility under the Asset Purchase Agreement.
As a result of this agreement between the Sellers and the Company, the Company
recorded a nonrecurring charge of $4.7 million. This charge in effect
increased the product liability portion of the Cap from $24.5 million to $28.4
million.
Since December 1, 1993, the Company has maintained insurance coverage for
product liability claims for personal injury or property damage relating to
occurrences after the Closing, subject to certain self-insured retentions both
on a per-occurrence basis and in the aggregate. The current insurance policy
extends 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
Company's liability for product liability cases and claims relating to
occurrences arising during 1996 and 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.
Management estimates that the amount of the self insured retention that was
accrued in each of 1996, 1995 and 1994 will be paid out over the following
three to five years. The Company charged $5.7 million, $6.5 million and $17.5
million of payments for product and environmental liabilities in the years
ended December 31, 1996, 1995, and 1994, respectively.
RESULTS OF OPERATIONS
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 1996
to 1995 results, and 1995 to 1994 results.
<TABLE>
<CAPTION>
HOLDING AND REMINGTON
--------------------------------------
YEAR ENDED YEAR ENDED YEAR ENDED
DECEMBER 31, DECEMBER 31, DECEMBER 31,
1996 1995 1994
------------ ------------ ------------
<S> <C> <C> <C>
Sales................................... 100% 100% 100%
Cost of Goods Sold...................... 70% 67% 69%(1)
Gross Profit............................ 30% 33% 31%
Operating Expenses...................... 26% 23% 23%
Restructuring and Nonrecurring Items.... 3% 0% 0%
Operating Profit ....................... 1% 10% 9%
Net (Loss) Income....................... (4%) 3% 2%
</TABLE>
- --------
(1) Includes $16.8 million in nonrecurring inventory charges for the year
ended December 31, 1994. See "--Overview."
40
<PAGE>
Recent Financial Results and Trends
Financial results for the year ended December 31, 1996 were adversely
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 had the effect of
reducing the Company's sales of new firearms and ammunition products during
this period in comparison to 1995. Second, firearms manufacturing costs and
research and development expenditures increased in 1996 over the 1995 period,
and together with decreased sales, resulted in a decrease in operating profit
between the two periods.
The Company believes that these customers' tighter inventory control
practices are likely to continue and may have a continuing effect on sales in
1997. While other customers could adopt similar policies leading to further
constraints on future sales, the Company does not believe that any such
development is likely to have a material impact on sales, although no
assurance can be given in this regard. However, these practices have caused,
and are likely to continue to cause, the Company to experience increased
liquidity and working capital requirements in producing and carrying inventory
for later sale.
The Company believes 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. In part as a result of this change, the
Company believes that the markets for firearms and ammunition products
generally will experience low levels of growth, at least in the near term.
In light of these market constraints on sales growth opportunities and the
Company's increased liquidity and working capital needs, the Company is
focusing on increasing market share for its products and containing costs. In
1996, the Company undertook 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 took a pre-tax restructuring expense in the fourth quarter of 1996
of approximately $3.6 million. Management will continue to review all aspects
of the Company's operations with a view towards 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.
Year Ended December 31, 1996 as Compared to Year Ended December 31, 1995
Sales. Sales for the year ended December 31, 1996 were $390.4 million, $36.6
million, or 8.6%, lower than 1995 sales of $427.0 million. The decline in
sales was primarily due to lower demand for the Company's firearms products
and ammunition products, partially offset by increased sales of accessories
products and higher firearms prices. The Company believes the decline in
demand in 1996 was primarily due to several key customers, including Wal-Mart,
instituting tighter inventory control practices to reduce inventory levels.
These changes had the effect of reducing the Company's sales of new firearms
and ammunition products during 1996 in comparison to 1995.
Firearms sales decreased $24.4 million or 12.0% to $178.2 million for the
year ended December 31, 1996 from $202.6 million in 1995. The decrease was
primarily due to decreased sales of the Company's less expensive shotguns and
rifles, partially offset by increased sales of black powder guns and higher
firearms prices. The Company believes that lower demand for its less expensive
shotguns and rifles is due to tighter inventory management practices by
several key customers, which are the Company's primary customers for such less
expensive firearms.
Ammunition sales for 1996 were $160.2 million, $13.6 million, or 7.8%, lower
than 1995 sales of $173.8 million. The Company believes that the sales decline
for 1996 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
41
<PAGE>
experienced in 1994, and that a portion of the decline between the two years
was due to the exceptional results in the first quarter of 1995.
Fishline product sales decreased between 1995 and 1996 primarily due to
lower volumes and prices. Sales of accessory products increased primarily due
to increased sales of gun safes.
Cost of Goods Sold. Cost of goods sold for 1996 was $275.1 million, a
decrease of $10.2 million, or 3.6%, versus $285.3 million for 1995. Cost of
goods sold increased between the two periods as a percentage of sales from
66.8% in 1995 to 70.5% in 1996. Cost of goods sold increased as a percentage
of sales primarily due to lower sales volumes of both firearms and ammunition
products and higher manufacturing costs in 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 costs
related to the lengthening of the traditional end-of-year shutdown period,
were the primary factors contributing to the higher overall manufacturing
costs.
Gross Profit. Gross profit was $115.3 million for 1996, a decrease of $26.4
million, or 18.6%, from 1995 gross profit of $141.7 million. Gross profit
margins declined from 33.2% in 1995 to 29.5% in 1996 as a percentage of sales.
The decrease in gross profit dollars between the two periods was 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 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 in 1996 were
$101.4 million, an increase of $1.2 million, or 1%, from $100.2 million for
1995. This increase resulted from a $4.9 million increase in research and
development expenses and a $1.2 million increase in other expenses, partially
offset by a $4.2 million decrease in selling, marketing and distribution
expense and a $0.7 million decrease in general and administrative expense.
Selling, marketing and distribution expenses for 1996 were $55.4 million, a
decrease of $4.2 million, or 7.0%, from $59.6 million in 1995. The decrease
was primarily the result of a reduction in bad debt expense and reduced
marketing expenditures. Bad debt expense in 1996 was lower than 1995 due to
increased efforts in the collection and resolution of disputed amounts.
General and administrative expenses were $26.3 million for 1996, a decrease
of $0.7 million, or 2.6%, from $27.0 million in 1995. The decrease in expenses
between the periods was primarily attributable to lower incentive compensation
charges and elimination of transitional service 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. These decreases were
partially offset by continued costs associated with the implementation of a
new computer system and higher outside professional fees. As a percentage of
sales, general and administrative expenses increased from 6.3% of sales in
1995 to 6.7% of sales in 1996 primarily as a result of the lower sales
discussed above.
Research and development expenses were $10.2 million for 1996, an increase
of $4.9 million from $5.3 million in 1995. Research and development expenses
for 1995, however, include a benefit of $1.0 million, as the actual relocation
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 1995, research and development expense
increased $3.9 million. This increase 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.
Restructuring and Nonrecurring Items. The Company recorded charges for
restructuring in 1996 of $4.9 million. The restructuring was undertaken to
reduce production levels, plant overhead expenses and other costs to
correspond with current sales volumes, and to reorganize the Company's
international marketing efforts. The company-wide plan resulted in reductions
of approximately 325 salaried, hourly and bargaining unit
42
<PAGE>
employees during the year. The charges incurred include estimated costs for
employee severance and other benefits of $3.2 million, lease costs of $0.7
million and other expenses of $1.0 million.
In December 1996, the Company and the Sellers resolved questions that had
been raised by the Sellers concerning certain product liability related costs
that the Company had allocated to the Cap or that were billed to cases for
which the Sellers assumed responsibility under the Asset Purchase Agreement.
As a result of this agreement between the Sellers and the Company, the Company
recorded a nonrecurring charge of $4.7 million. See "Business--Legal
Proceedings".
Operating Profit. Operating profit declined to $4.3 million for 1996, a
$37.2 million or 89.6% decrease from 1995's operating profit of $41.5 million,
primarily due to lower gross profit and the impact of restructuring and
nonrecurring items, as discussed above.
Interest Expense. Interest expense for the year ended December 31, 1996 was
$25.1 million, an increase of $3.6 million, or 16.7%, from the 1995 level of
$21.5 million. The increase in interest expense was primarily due to
additional borrowings on the Company's Revolving Credit Facility and slightly
higher interest rates on the Company's term loan and revolving credit
borrowings, partially offset by lower interest on the Company's term loan
borrowings due to scheduled debt repayments.
Net Income/Loss. Net loss for 1996 was $13.8 million, a decrease of $25.3
million from 1995 net income of $11.5 million. However, excluding the
restructuring and nonrecurring charges from 1996 results, net loss was $8.0
million for 1996 compared to net income of $11.5 million for 1995, decreasing
$19.5 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 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. Apparel sales in 1995 were not material.
43
<PAGE>
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. 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.
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 as a percentage
of sales for the reasons noted above.
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 provided by
DuPont pending the implementation of the Company's new computer system which
occurred during the second quarter of 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
44
<PAGE>
Acquisition-related purchase accounting charge for the step up in basis of
acquired inventories, 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%.
TAXES
The Company's balance sheet as of December 31, 1996 includes net deferred
tax assets in the amount of $27.4 million. See Note 17 to the Company's
financial statements as of and for the year ended December 31, 1996. The
Company's ability to realize these deferred tax assets will be dependent on
the generation of future taxable income of approximately $50 million by the
Company. 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 1996 is 33.7% which approximates the
Federal statutory rate. At December 31, 1996, the Company had an $8.1 million
net operating loss carryforward for income tax purposes that expires in 2011.
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 third quarter of each year, and generally
lower sales during the other quarters, principally due to the need to meet
customer requirements for firearms and ammunition during the primary hunting
season.
Firearms 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 in
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 $4.6 million, $4.1 million and $4.1 million were given
in 1996, 1995 and 1994, respectively. In addition, the Company had a separate
program in 1996, 1995 and 1994, now discontinued, that provided 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. In recent years, use of the dating plan has had the effect of shifting
some firearms sales from the second and third quarters to the first quarter.
The Company believes that the dating plan helps facilitate a more efficient
manufacturing schedule, and that the ammunition prepayment program, in
addition to similarly aiding manufacturing efficiency, also helped facilitate
working capital management. Use of the dating plan, however, also results in
significant deferral of collection of accounts receivable until the latter
part of the year.
In 1996, fewer of the Company's customers chose to participate in the
ammunition prepayment program. The Company believes this decrease in
participation was a result of the Company's changing its payment terms to meet
those offered by certain competitors, which lessened the effect of the
incentives offered under the ammunition prepayment plan. This decreased
participation resulted in an increase in seasonal working capital
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<PAGE>
financing requirements in 1996 as compared to 1995. In response, the Company
increased its borrowings under its Revolving Credit Facility in order to
finance its working capital needs.
In response to competitive actions, the Company discontinued the ammunition
prepayment program effective as of December 1, 1996, the start of the 1997
sales year. The Company is selling the majority of its ammunition products on
terms of 90 days or less and offering cash discounts for earlier payments on
certain ammunition sales. In addition, the Company has changed the early order
program for ammunition sales to provide discounts on orders shipped through
May, in contrast to the previous program which offered extended payment terms
with cash discounts for early payment. As a result, the Company expects to
increase its seasonal borrowings under its Revolving Credit Facility to cover
the additional working capital needs.
As a result of the seasonal nature of the 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 tend to be greatest during the spring and
summer months, decreasing during the fall and reaching their lowest point
during the winter.
In 1995 and 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 to a lesser extent the changes in its ammunition prepayment program.
LIQUIDITY AND CAPITAL RESOURCES
Cash Flows
Net cash used in operating activities for the year ended December 31, 1996
was $2.7 million, resulting primarily from elimination of the Company's
ammunition prepayment program as discussed above, nonrecurring cash payments
(consisting primarily of $4.7 million for the relocation of the Company's
corporate headquarters and $1.5 million in restructuring costs) and an
increase in inventories (as a result of lower demand for the Company's
products) in response to which the Company undertook a number of cost
containment initiatives. See "--Recent Financial Results and Trends." These
uses of cash were substantially offset by extended payment terms which the
Company negotiated with many of its major suppliers in 1996 that increased
accounts payable from $14.6 million at December 31, 1995 to $32.9 million at
December 31, 1996. The Company estimates spending approximately $3.4 million
in 1997 for the remaining charges associated with restructuring initiatives.
Net cash used in investing activities in 1996 was $22.5 million, principally
consisting of investments in property and facilities in Mayfield and
Elizabethtown, Kentucky and Madison, North Carolina. Net cash provided by
financing activities in 1996 was $33.4 million, primarily resulting from
increased revolving credit borrowings of approximately $50 million offset in
part by $15 million in principal payments on term loan borrowings under the
Company's Credit Agreement.
Net cash used in operating activities for the year ended December 31, 1995
was $12.5 million, resulting primarily from an increase in accounts receivable
at year-end which was the result of sales in November and December 1995 being
approximately $16 million higher than the same period in 1994 and also due to
extended terms given to international customers under a Winter Sales Program
on November and December 1995 sales. Net cash used in investing activities in
1995 was $17.5 million, principally consisting of the Company's investment in
a new computer system, and buildings and equipment related to the new research
and development facility in Elizabethtown, Kentucky. Net cash used in
financing activities in 1995 was $10.5 million, principally consisting of
principal payments on term loan borrowings offset in part by increased
revolving credit borrowings.
Net cash provided by operating activities for the year ended December 31,
1994, was $48.8 million, primarily reflecting lower inventories and non-cash
charges related to depreciation, amortization, deferred taxes and retiree
benefits, partially offset by payments of $17.6 million of assumed pre-
Acquisition product liabilities.
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<PAGE>
Net cash used in investing activities utilized $16.2 million in 1994,
principally for purchases of property, plant and equipment and payments for
Acquisition-related costs. Net cash used in financing activities in 1994
utilized $9.7 million of cash, due substantially to principal payments on the
Company's term loan borrowings under the Credit Agreement.
While the Company has used cash in operations in the past two years, the
Company believes that cost savings initiatives implemented as a part of the
Company's 1996 restructuring efforts, planned improvements in working capital
management and the absence in future periods of restructuring and nonrecurring
charges of the kind experienced in 1996 will assist the Company in improving
operating cash flow in the future, although there can be no assurance as to
the timing or amount of the effect of these cash flow initiatives.
Working Capital
Working capital increased from $125.0 million at December 31, 1995 to $136.1
million at December 31, 1996 primarily as a result of an increase in cash and
cash equivalents and reductions in customer prepayments, taxes payable and
other accrued liabilities, partially offset by an increase in accounts
payable. Customer prepayments of $0.2 million reflected as current liabilities
on the 1996 balance sheet decreased by $7.8 million due to the discontinuance
of the ammunition prepayment program for the 1997 sale years in response to
competitive actions. See "--Seasonality; Recent Purchasing Patterns." During
the fourth quarter of 1996, the
Company implemented an ongoing working capital management program to help
maximize cash from operations. This program includes improved collection of
accounts receivable, maintaining inventory levels in line with sales
projections and increased focus on management of accounts payable.
Capital Expenditures
Capital expenditures in 1996, 1995, 1994 were $22.5 million, $18.9 million,
and $9.3 million, respectively. Approximately $13.5 million of the 1996
capital expenditures were for the new firearms manufacturing facility in
Mayfield, Kentucky, on which the Company began construction in May, 1996, the
new corporate headquarters building in North Carolina, and equipment at the
new research and development facility in Elizabethtown, Kentucky. The
remainder of the 1996 capital expenditures were principally for maintenance of
operations and for projects to improve the efficiency of existing facilities.
The December 1996 amendment to the Company's Credit Agreement reduced the
capital expenditures levels permitted thereunder for future periods. The
Company anticipates that capital expenditures in 1997 will be approximately
$10.4 million, principally for maintenance of operations and improvement
projects concentrated on enhancing the efficiency of existing facilities. The
Company expects to fund capital expenditures primarily from operational cash
flow.
Liquidity
The Company incurred substantial indebtedness in connection with the
Acquisition. As of December 31, 1996, the Company had outstanding
approximately $253.1 million of indebtedness, consisting of approximately
$99.6 million ($100.0 million face amount) in Existing Notes, $86.4 million in
term loan borrowings, $59.0 million in revolving credit borrowings under the
Credit Agreement, $5.7 million in capital lease obligations, and $2.4 million
of other long-term debt. As of December 31, 1996 the Company also had
aggregate letters of credit outstanding of $7.1 million.
At present, the principal sources of liquidity of 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 it will be able to meet its debt service obligations and fund its
operating requirements with cash flow from operations and revolving credit
borrowings prior to the maturity of the Revolving Credit Facility, although no
assurance can be given in this regard. In addition, the Company has
implemented certain programs and initiatives in order to improve cash flow
from operations. See "--Cash Flows." The Company expects that it will have to
replace the existing Revolving Credit Facility and refinance any outstanding
amounts thereunder
47
<PAGE>
upon its maturity on December 31, 2000. No assurance can be given that the
Company will be able to obtain such a replacement working capital facility or
refinance such amounts on terms acceptable to the Company.
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. The estimated fair value of the caps at December 31, 1995
was approximately $0.1 million. At December 31, 1996 the Company was not 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
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 December 31, 1996 and December
31, 1995 was $1.3 million and $3.4 million, respectively. At December 31, 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 $1.2 million, $3.4 million and
$2.9 million, respectively. As of December 31, 1995 and 1994 hedging losses
related to closed commodity contracts of $0.1 million and $0.4 million,
respectively, were included in inventory. There were no hedging losses
included in inventory at December 31, 1996.
Credit Agreement
The Company is currently party to the Credit Agreement with The Chase
Manhattan Bank ("Chase"), Union Bank of Switzerland ("UBS") and certain other
lenders which was initially entered into in connection with the Acquisition.
The Credit Agreement provides for a 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 commencing on December 1, 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. Since September 1995, the Company
has obtained four amendments to its Credit Agreement, which, among other
things, modified (i) the minium 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 initially to increase but ultimately to reduce
the permissible capital expenditure levels. 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 December 31, 1996, after giving effect to these
modifications, the Company was in compliance in all material
48
<PAGE>
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, if any, 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 made 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 years ended December 31, 1996 or 1995 and accordingly no such prepayment
is required in 1997 nor was a prepayment 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 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. The weighted
average interest rate per annum for term loan and revolving credit borrowings
under the Credit Agreement was 8.1% and 8.4%, respectively, as of December 31,
1996, as compared to 8.4% and 9.0%, respectively, as of December 31, 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, 1996, the Company adopted Statement of Financial
Accounting Standards (SFAS) No. 123, "Accounting for Stock-Based
Compensation". As permitted under this new standard, the Company will continue
to use the intrinsic value based method for determining compensation costs.
Accordingly, since options granted will be at estimated fair value, no
compensation cost is expected to be recognized for stock options granted in
the future.
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<PAGE>
INFORMATION CONCERNING FORWARD-LOOKING STATEMENTS
Certain of the statements contained in this Prospectus (other than the
historical financial data and other statements of historical fact), including
without limitation statements as to management's expectations and belief
presented in this "Management's Discussion and Analysis of Financial Condition
and Results of Operations", are forward-looking statements. Forward-looking
statements are made based upon management's expectations and belief concerning
future developments and their potential effect upon the Company. There can be
no assurance that future developments will be in accordance with management's
expectations or that the effect of future developments on the Company will be
those anticipated by management. There are certain important factors that
could cause actual results to differ materially from estimates reflected in
such forward-looking statements, including the outcome of pending or future
product liability cases and claims, competitive pressures on pricing and
sales, more restrictive practices at certain of the Company's key customers,
disruption in the Company's supply of raw materials, increased government
regulation, economic conditions such as inflation, interest rate fluctuations
or reduction in consumer spending, as well as the other factors discussed in
this Prospectus and in the Company's other public filings and statements.
While the Company periodically reassesses material trends and uncertainties
affecting the Company's financial condition and results of operations in
connection with its preparation of management's discussion and analysis of
financial condition and results of operations contained in its quarterly and
annual reports, the Company does not intend to review or revise any forward-
looking statement referenced in this Prospectus in light of future events.
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<PAGE>
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 recently completed construction of a new 44
thousand square foot firearms manufacturing facility in Mayfield, Kentucky at
which the Company began manufacturing rimfire rifles in April 1997. In 1995
the Company completed the consolidation of its research and development
activities 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 1996,
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. The market share data included
herein is the most recent market share data available from third party
sources. Such data may not accurately reflect the Company's market shares for
more recent periods, although the Company believes such data is generally
indicative of its relative market share and competitive position. In 1994,
according to PPI, the Company had the largest share of the U.S. retail shotgun
market, at approximately 31%, with its nearest competitor holding a market
share of approximately 19%. Remington was also the second largest brand of
rifles in the United States in 1994, according to PPI, with a market share of
approximately 12%, with its leading competitor holding a market share of
approximately 18%. In the ammunition market, the Company was the second
largest brand in the United States in 1994, based on PPI data, with a market
share of approximately 25%, with its leading competitor holding a market share
of approximately 35%. Sales of firearms and ammunition comprised approximately
46% and 41%, respectively, of the Company's sales in 1996. In the U.S. retail
fishline market segment, the Company held a share of approximately 25% in
1996, with its leading competitor holding a market share of approximately 39%,
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 as of 1995, approximately 27 million people in the United
States enjoy 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 overall over the long term. Total domestic consumer expenditures in
these markets for 1995 are estimated by the NSGA to have been $362 million for
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shotguns, $555 million for rifles, and $852 million for ammunition. Much of
the demand in the new firearms market comes from repeat buyers who are
motivated by new calibers and firearms technology advancement.
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 as of 1995, approximately 23% of the U.S. population
consider themselves anglers. Fishing is considered an inexpensive sport that
can be enjoyed by people of widely varying ages, skills and abilities. The
SMRG estimates that the U.S. retail market for recreational fishline exceeded
$88 million in 1996, of which the Company has a 25% market share.
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. 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 1994 information provided by
PPI. The Company also has a strong market position in the monofilament
fishline market, based on 1996 SMRG information. The table below gives
approximate market shares for Remington and its nearest competitor (in the
case of shotguns) or the leading competitor (in all other cases) in each of
these markets:
<TABLE>
<CAPTION>
SALES DOLLARS
-----------------------------------
SHOTGUNS RIFLES AMMUNITION FISHLINE
-------- ------ ---------- --------
<S> <C> <C> <C> <C>
Remington........................... 31% 12% 25% 25%
Competitor.......................... 19% 18% 35% 39%
</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
52
<PAGE>
metal injected molded ("MIM") parts for the automotive and firearms
industries. In addition, the Company distributes a range of monofilament
fishline, terminal tackle and accessories under the brand name Stren. 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,
------------------------
1996 1995 1994
------- ------- --------
<S> <C> <C> <C>
Firearms............................................... $ 178 $ 203 $ 176
Ammunition............................................. 160 174 190
Other(a)............................................... 52 50 52
------- ------- --------
Total Sales.......................................... $ 390 $ 427 $ 418
======= ======= ========
</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 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 shooters, 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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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 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 product line offers seven families of fishline 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 1996, approximately 64%
of the Company's sales consisted of sales made through five
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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 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 18% of the Company's total net revenues in 1996
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 both
1996 and 1995 and 7% for 1994. 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."
Vios S.a.r.l. is expected to be dissolved in 1997 and certain of its
operations will be taken over by a branch of the Company located in
Switzerland. In 1995, Remington formed a wholly owned subsidiary, Remington
International, Ltd., that is a foreign sales corporation. The Company produces
a catalogue of all of its products in French, German and Spanish, as well as
in English.
Most of the Company's firearms 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 at the beginning of
the Company's dating plan year, and pay for them on extended terms. Discounts
are offered for early payment under this plan. In the first quarter of each
dating plan 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 firearms orders from its distributors that remain
unfilled at the end of each dating plan year. The backlog of unfilled firearms
orders was approximately $27 million as of November 30, 1996 compared to $33
million as of December 31, 1995. The 1997 dating plan year began December 1,
1996 and the 1996 dating plan year began January 1, 1996.
In addition, the Company formerly maintained a separate program that
provided an incentive to prepay for ammunition purchases. While 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 discontinued the ammunition
prepayment program effective with the 1997 sales year in response to
competitive actions. For further discussion of seasonality and related
matters, see "Management's Discussion of Financial Condition and Results of
Operations--Seasonality; Recent Purchasing Patterns."
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MANUFACTURING
The Company currently manufactures its firearms and ammunition products at
five 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 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 recently completed construction of a new firearms
manufacturing facility in Mayfield, Kentucky at which the Company began
manufacturing rimfire rifles in April 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. One of these
manufacturers recently ceased operations and the Company believes such
manufacturer may be subject to receivership or similar proceedings. At this
time the Company is evaluating its options in connection with this
development, including with respect to replacement of the planned production
by this manufacturer.
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
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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 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 with this supplier 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 under a supply agreement that was renewed in January, 1997. The
new agreement is initially for one year and automatically renews annually
unless either party notifies the other of its intent to terminate. 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.
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
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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 new
Model 597 family of autoloading rimfire rifles and a new product offering in
the black powder rifle category. 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 Ilion, New York and Lonoke, Arkansas manufacturing facilities. In
1995, the Company completed the consolidation of its research and development
function into a new facility in Elizabethtown, Kentucky.
Research and development expenses in 1994 included $2.3 million of
nonrecurring 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. Excluding these
nonrecurring items in both 1994 and 1995, research and development
expenditures for the continuing operations of the Company in 1994, 1995 and
1996 amounted to approximately $6.0 million, $6.3 million and $10.2 million,
respectively.
PATENTS AND TRADEMARKS
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, Stren, 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 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 700 (a
family of bolt-action centerfire rifles); Model 870 (a family of autoloading
shotguns), 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
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the Company and an affiliate of RPI, Remington Products Company LLC ("RPC"),
which also holds as 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.
The Company does not own any patents or other intellectual property with
respect to the manufacture of the nylon monofilament fishline products that it
markets and distributes. The Company purchases most of its fishline
requirements under a supply agreement with DuPont. See "--Supply of Raw
Materials."
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
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employees are engaged in manufacturing, with approximately 180 engaged in
sales and general administration and approximately 50 in research and
development. An additional work force of temporary employees is engaged during
peak production schedules. 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 during that
year.
The Employees' Mutual Association of Ilion, Inc. ("EMA") represents hourly
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 expiring in July of 1997. Delay in renewing or inability to renew this
agreement on satisfactory terms could have a material adverse effect on the
Company. 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 five 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
Mayfield, Kentucky...... Rimfire rifles 44
Findlay, Ohio........... Clay targets 40
Ada, Oklahoma........... Clay targets 21
</TABLE>
The Company believes that these facilities are suitable for the
manufacturing conducted therein and have capacities appropriate to meet
existing production requirements. In February 1997, the Company completed
construction of a new 44 thousand square foot manufacturing facility in
Mayfield, Kentucky at which the Company began manufacturing rimfire rifles in
April 1997, which will allow for expansion of sales in this product line. The
Lonoke, Ilion and Mayfield facilities each contain enclosed ranges for testing
firearms and ammunition.
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 owned by the Company 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 one sales
office.
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
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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 Cap for assumed product liability costs and the remainder for
environmental costs. In December 1996, the Company and the Sellers resolved
questions that had been raised by the Sellers concerning certain product
liability related costs that the Company had allocated to the Cap or that were
billed to cases for which the Sellers assumed responsibility under the Asset
Purchase Agreement. As a result of this agreement between the Sellers and the
Company, the Company recorded a nonrecurring charge of $4.7 million. This
charge in effect increased the product liability portion of the Cap from $24.5
million to $28.4 million. As of December 31, 1996, the Company has charged to
the Cap payments totaling $27.1 million, of which $0.3 million was related to
environmental costs and $26.8 million to product liability costs. Based upon
the incurrence of additional product liability costs chargeable to the Cap
since December 31, the remaining product liability related portion of the Cap
was exceeded in April 1997. See Note 16 to the Audited Consolidated Financial
Statements dated December 31, 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 that its current product
liability insurance coverage for personal injury and property damage is
adequate for its needs. The Company's current product liability insurance
policy provides for a self-insured retention of $0.5 million per occurrence,
with an aggregate annual limit of $7.0 million for liability indemnity and
defense and other expenses combined, and aggregate annual sublimits of $4.5
million for indemnity and $4.5 million for expenses. The current policy has a
batch clause endorsement, which in general provides that if a batch of product
were to be defective, the Company's liability for expenses and damages related
to the entire batch would be capped at the amount of self-insured retention
for a single occurrence. The current policy excludes from coverage any
pollution-related liability. The current policy period runs from December 1,
1995 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 March 31, 1997, approximately 32 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, approximately 5 involve discontinued products
and approximately 6 involve undisclosed pre-Closing occurrences. Accordingly,
these are cases for which Sellers retained liability and are required to
indemnify the Company for the full amount. An additional approximately 6 of
the pending cases are subject to the Cap and are cases for which the Sellers
retained liability and are required to indemnify the Company for amounts in
excess of the Cap. The remaining approximately 15 of the pending cases involve
post-Closing occurrences for which the Company bears responsibility under the
Asset Purchase Agreement. The Company has previously disposed of a number of
other cases involving post-Closing occurrences by settlement. As discussed
above, based upon the incurrence of additional product liability costs
chargeable to the Cap since December 31, the remaining product liability
portion of the Cap was exceeded in April 1997. As a result, the Sellers are
required to indemnify the Company against all product liability cases and
claims other than post-Closing occurrences involving extant or new products.
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Two cases, Garza and Luna, involving Company products which 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.
On February 6, 1996, the Federal district 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. The initial
deadline for such filing, September 30, 1996, was extended to 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 second 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, the Sellers will pay for the settlement
fund of approximately $19.0 million to be distributed to class members, related
expenses of approximately $12.0 million for plaintiffs' counsel fees and costs,
and more than $1 million for costs of administering the fund, without regard to
the Cap. Approximately 350 class members (including two institutions) opted out
and chose not to participate in the settlement, although approximately 15 of
them (including such institutions) have filed claims, apparently in an effort
to rejoin the settlement class. Except for these few class members who have
opted out, 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, and may continue to lead, to some additional claims of
personal injury allegedly involving use of the shotguns included in the class
action lawsuit. Most of the additional claims received in 1996 were settled in
1996 without lawsuits being filed. 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. 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. The Sellers filed their opening appellate brief on March
17, 1997. The Company had not been named 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 to include the Company, which filed an answer in
September 1996. Plaintiffs have now moved in the district court for class
certification against the Company and requested a stay of the appeal in the
interim. The stay was opposed by the Sellers and denied by the court. A hearing
on the class certification motion is scheduled for May 21, 1997. The Sellers'
obligations with respect to Luna include a requirement that they indemnify the
Company against all claims in that case for economic loss involving firearms
similar to those involved in that case and shipped up to 42 calendar months
after the Closing (prior to the end of May 1997). Any such claims of economic
loss involving such firearms shipped thereafter will be the Company's
responsibility and, to the extent that such claims do not involve personal
injury or property damage, they would not be covered by the Company's product
liability insurance.
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 the costs relating to
product liability
62
<PAGE>
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. 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 for personal injury and property damage 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 Sellers' agreement to
be responsible for certain post-Closing firearm-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.
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, 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.
63
<PAGE>
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 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 1994 through 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."
64
<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 Corporate 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(b)......... 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--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 Corporate
Secretary
Mark A. Little.......... 49 Vice President, Controller
Ernest S. Rensi......... 49 Vice President--Firearms, International and Research &
Development
Arthur W. Wheaton....... 55 Vice President--Sales and 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 as 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. In
March 1997, Mr. Howe became the interim Chief Executive Officer of APS Holding
Corporation and A.P.S., Inc., positions that he is expected to hold until
those companies complete their search for a new Chief Executive Officer. 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
65
<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. Mr. Bechtel has been Chairman Emeritus of
Fremont Investors, Inc. and Sequoia Ventures, Inc. since June 1995, and
Chairman Emeritus of Fremont Group, L.L.C. since April 1996.
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, from prior
to 1992 to July 1995. Mr. Gilleland currently serves as a director of DePuy
Orthopedics, Tyco International, Ltd. and Physicians Resource Group. 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 1992 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 C&D Fund IV has an investment,
and 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.
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 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 Uniroyal Holding, Inc., a corporation in which
an investment partnership managed by CD&R has an investment.
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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 1992 to May 1994, Mr. Millner served as President and
Chief Executive Officer of The Pilliod Cabinet Company, a furniture
manufacturer. 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.
James B. Ackley joined Remington in March 1996 as Vice President--Research
and Development. From prior to 1992 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--
Operations. From prior to 1992 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 1992 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 1992 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 Vice President--Business Development and Corporate
Secretary in December 1996. From December 1993 until September 1996 he was
Vice President and Controller of the Company, having previously served as
Controller of the Company prior to 1992 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, Chief Financial Officer of
The Pilliod Cabinet Company, now named Pilliod Furniture, Inc.
Ernest S. Rensi became Vice President--Firearms, International and Research
& Development in December 1996. From March 1994 to December 1996 he was Vice
President--Firearms. 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 1992 until
the Closing.
Arthur W. Wheaton became Vice President--Sales and Marketing in December
1996. From March 1995 until December 1996 he was Vice President--Corporate
Marketing. From March 1994 until March 1995 he was Vice President. From prior
to 1992 to March 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.
67
<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. The Company currently intends to offer Eligible
Directors the opportunity to purchase up to 2,500 shares of Common Stock at a
purchase price per share of $100.
COMPENSATION OF EXECUTIVE OFFICERS
The following table summarizes the compensation paid by Remington to its
Chief Executive Officer and each of the Company's four other most highly
compensated executive officers (the "Named Executive Officers") during or with
respect to the 1996 fiscal year for services in all capacities rendered to the
Company for such fiscal year.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
1996 ANNUAL COMPENSATION ($)
-------------------------------------
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
Corporate Secretary....... 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 (amounting to $400,000 in 1996) for
management consulting services (see "Certain Relationships and Related
Transactions" below) which include Mr. Howe's services as Chairman and
Chief Executive Officer.
(2) Amount reflects premiums paid by the Company for a Life Insurance Policy
and Remington's matching contributions on behalf of the Named Executive
Officer to the Remington Savings and Investment Plan.
(3) Mr. Haskin's employment with the Company was terminated as of December 31,
1996.
(4) Amount reflects incentive bonus paid in connection with such Named
Executive Officer's relocation to the Company's new North Carolina
headquarters.
(5) Amount reflects reimbursements for expenses incurred by the Named
Executive Officer in connection with such Named Executive Officer's
relocation to the Company's new North Carolina headquarters.
(6) Reflects Remington's matching contributions on behalf of the Named
Executive Officer to the Remington Savings and Investment Plan.
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<PAGE>
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR AND FY-END OPTION/SAR
VALUES
<TABLE>
<CAPTION>
NUMBER OF SECURITIES
UNDERLYING UNEXERCISED VALUE OF UNEXERCISED
OPTIONS/SARS AT IN-THE-MONEY OPTIONS/SARS
SHARES ACQUIRED FY-END (#) AT FY-END ($)
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
69
<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 becoming involved in certain
matters 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(3)(4)............................... 750,000 100.0
William A. Barbe(3)(4).............................. 750,000 100.0
Alberto Cribiore(3)(4).............................. 750,000 100.0
Donald J. Gogel(3)(4)............................... 750,000 100.0
Leon J. Hendrix, Jr.(3)(4).......................... 750,000 100.0
Hubbard C. Howe(3)(4)............................... 750,000 100.0
Andrall E. Pearson(3)(4)............................ 750,000 100.0
Joseph L. Rice, III(3)(4)........................... 750,000 100.0
Stephen D. Bechtel.................................. -- --
Bobby R. Brown...................................... -- --
Richard C. Dresdale(5).............................. -- --
Richard A. Gilleland................................ -- --
Richard E. Heckert.................................. -- --
H. Norman Schwarzkopf............................... -- --
Thomas L. Millner................................... -- --
Robert L. Euritt.................................... -- --
Robert W. Haskin, Jr.(6)............................ 1,666 *
Samuel G. Grecco.................................... -- --
Executive officers and directors as a
group(1)(4)(7)..................................... 750,000 100.0
</TABLE>
- --------
* Less than 1%
(1) Does not give effect to any exercise of options for 30,415 shares of
Common Stock that have been granted under the Amended and Restated RACI
Holding, Inc. Stock Option Plan, options for 51,965 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 C&D Fund IV is 270 Greenwich Avenue, Greenwich,
Connecticut 05830.
(3) The business address for such persons is c/o Clayton, Dubilier & Rice,
Inc., 375 Park Avenue, 18th Floor, New York, New York 10152.
(4) 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. Mr.
Cribiore has indicated his intention to withdraw as a general partner of
Associates IV effective as of March 31, 1997, but will retain his economic
interest in Associates IV with respect to investments made by C&D Fund IV
while Mr. Cribiore was a partner of Associates IV, including his indirect
interest in the shares owned of record by C&D Fund IV.
(5) Mr. Dresdale has withdrawn as a limited partner of Associates IV but
retains an economic interest in the shares of Common Stock 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 of
Common Stock owned by C&D Fund IV.
(6) One third of the options to be granted to Mr. Haskin are to be exercisable
as of May 1, 1997 for 1,666 shares of Common Stock.
(7) 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, pursuant
to a consulting agreement among Holding, the Company and CD&R. 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. In addition, CD&R has agreed to furnish the
services of Mr. Howe to serve as Chairman and Chief Executive Officer of the
Company and Holding as part of the services provided pursuant to that
consulting agreement. Mr. Howe's compensation from CD&R is established without
regard to the extent of particular services provided by Mr. Howe to the
Company. The number of CD&R employees, and the amount of time spent by them,
working with a particular portfolio company varies from time to time with the
scope and type of services provided. 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 Associates 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.
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<PAGE>
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. Mr. Bishop was not
separately compensated by Vios S.a.r.l. during the time he was employed by the
Company.
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 1996, 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
30,415 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, at a per share exercise price of $100, of
which no options were exercisable. As of the date hereof, the additional
options have not been granted. However, the Company intends to grant such
options in the near future. 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 5,000 shares to one former employee.
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<PAGE>
DESCRIPTION OF CREDIT AGREEMENT
In connection with the Acquisition, the Company entered into the Credit
Agreement with 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 December 31, 1996, there were borrowings of $59.0 million outstanding under
the Revolving Credit Facility, and $4.8 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 prepayment
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 a prepayment 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 years ended December 31, 1996 or 1995, and
accordingly no prepayment is required in 1997 nor was a prepayment 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
74
<PAGE>
commitment, payable in arrears at the end of each quarter and upon termination
of the Revolving Credit Facility. 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 the following
covenants (in each case after giving effect to various amendments thereto):
(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
nonrecurring 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 each of 1995 and 1996.
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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<PAGE>
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 Upon
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.
As of December 31, 1996, the aggregate amount of Senior Indebtedness
outstanding was $145.4 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
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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.
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
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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 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
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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 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
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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
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
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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 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
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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 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,
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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 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,
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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.
(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."
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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."
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
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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
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
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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.
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).
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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 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";
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(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;
(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.
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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.
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
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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 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
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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 "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.
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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.
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.
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"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 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.
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"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).
"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
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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, 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,
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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.
"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.
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"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.
"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.
"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.
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"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 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
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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.
"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
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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;
(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
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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;
(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).
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"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 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;
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(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 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
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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.
"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 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.
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"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.
"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
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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 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
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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."
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 1996, 1995 and 1994 amounted to $0.5
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 subsidiaries as of
December 31, 1996 and 1995 and the consolidated statements of operations and
retained earnings, and cash flows for the years ended December 31, 1996, 1995
and 1994, 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.
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.
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
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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.
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RACI HOLDING, INC. AND SUBSIDIARIES
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGES
-----
<S> <C>
Report of Independent Accountants....................................... F-2
Consolidated Balance Sheets as of December 31, 1996 and 1995............ F-3
Consolidated Statements of Operations and Retained Earnings for the
years ended December 31, 1996, 1995 and 1994........................... F-4
Consolidated Statements of Cash Flows for the years ended December 31,
1996,
1995 and 1994.......................................................... F-5
Notes to Consolidated Financial Statements.............................. F-6
</TABLE>
F-1
<PAGE>
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 Subsidiaries as of December 31, 1996 and 1995, and the
related consolidated statements of operations and retained earnings, and cash
flows for each of the three years in the period ended December 31, 1996. These
consolidated financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these consolidated
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 consolidated financial statements referred to above
present fairly, in all material respects, the consolidated financial position
of RACI Holding, Inc. and Subsidiaries as of December 31, 1996 and 1995, and
the consolidated results of their operations and their cash flows for each of
the three years in the period ended December 31, 1996, in conformity with
generally accepted accounting principles.
/s/ Coopers & Lybrand L.L.P.
Greensboro, North Carolina
March 14, 1997
F-2
<PAGE>
RACI HOLDING, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(DOLLARS IN MILLIONS EXCEPT SHARE AND PER SHARE DATA)
<TABLE>
<CAPTION>
DECEMBER 31, DECEMBER 31,
1996 1995
------------ ------------
<S> <C> <C>
ASSETS
CURRENT ASSETS
Cash and Cash Equivalents........................... $ 9.6 $ 1.4
Accounts Receivable Trade--net of allowances of $5.7
and $5.2, respectively............................. 71.1 70.4
Inventories......................................... 101.9 97.3
Supplies............................................ 13.9 15.4
Prepaid Expenses and Other Current Assets........... 10.7 7.7
Deferred Income Taxes............................... 13.4 12.1
------ ------
Total Current Assets.............................. 220.6 204.3
Property, Plant and Equipment--net.................. 98.4 85.1
Intangibles and Debt Issuance Costs--net............ 96.4 98.7
Deferred Income Taxes............................... 14.0 11.7
Other Noncurrent Assets............................. 5.6 4.6
------ ------
Total Assets...................................... $435.0 $404.4
====== ======
LIABILITIES AND SHAREHOLDER'S EQUITY
CURRENT LIABILITIES
Accounts Payable.................................... $ 32.9 $ 14.6
Short-Term Debt..................................... 1.2 4.5
Current Portion of Long-Term Debt................... 20.9 14.6
Customer Prepayments................................ 0.2 8.0
Product and Environmental Liabilities............... 7.2 5.3
Income Taxes........................................ -- 5.4
Other Accrued Liabilities........................... 22.1 26.9
------ ------
Total Current Liabilities......................... 84.5 79.3
Long-Term Debt...................................... 232.2 198.6
Retiree Benefits.................................... 31.9 28.4
Product and Environmental Liabilities............... 6.6 4.5
------ ------
Total Liabilities................................. 355.2 310.8
Commitments and Contingencies
SHAREHOLDER'S EQUITY
Class A Common Stock, par value $.01; 1,250,000
shares authorized 750,000 issued and outstanding... -- --
Class B Common Stock, par value $.01; 1,250,000
shares authorized, none issued and outstanding..... -- --
Paid in Capital..................................... 75.0 75.0
Retained Earnings................................... 4.8 18.6
------ ------
Total Shareholder's Equity........................ 79.8 93.6
Total Liabilities and Shareholder's Equity...... $435.0 $404.4
====== ======
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-3
<PAGE>
RACI HOLDING, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS AND RETAINED EARNINGS
(DOLLARS IN MILLIONS EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED YEAR ENDED
DECEMBER 31, DECEMBER 31, DECEMBER 31,
1996 1995 1994
------------ ------------ ------------
<S> <C> <C> <C>
Sales(1)............................... $ 390.4 $427.0 $417.7
Cost of Goods Sold..................... 275.1 285.3 287.1
------- ------ ------
Gross Profit......................... 115.3 141.7 130.6
Selling, Marketing and Distribution
Expense............................... 55.4 59.6 52.0
General and Administrative Expense..... 26.3 27.0 23.6
Research & Development Expense......... 10.2 5.3 8.3
Other Expenses, net.................... 9.5 8.3 10.3
Restructuring and Non-Recurring Items.. 9.6 -- --
------- ------ ------
Operating Profit .................... 4.3 41.5 36.4
Interest Expense....................... (25.1) (21.5) (20.6)
------- ------ ------
(Loss) Profit before Income Taxes... (20.8) 20.0 15.8
(Benefit) Provision for Income Taxes... (7.0) 8.5 6.4
------- ------ ------
Net (Loss) Income.................... $ (13.8) $ 11.5 $ 9.4
------- ------ ------
Retained Earnings (deficit), beginning
of period............................. 18.6 7.1 (2.3)
------- ------ ------
Retained Earnings, end of period....... $ 4.8 $ 18.6 $ 7.1
======= ====== ======
Per Share Data:
Net (Loss) Income Per Share............ $(18.40) $15.33 $12.53
======= ====== ======
</TABLE>
- --------
(1) Sales are presented net of Federal Excise Taxes of $31.7, $36.0 and $33.7,
respectively.
The accompanying notes are an integral part of these consolidated financial
statements.
F-4
<PAGE>
RACI HOLDING, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(DOLLARS IN MILLIONS)
<TABLE>
<CAPTION>
YEAR YEAR YEAR
ENDED ENDED ENDED
DECEMBER 31, DECEMBER 31, DECEMBER 31,
1996 1995 1994
------------ ------------ ------------
<S> <C> <C> <C>
OPERATING ACTIVITIES
Net (Loss) Income....................... $(13.8) $ 11.5 $ 9.4
Adjustments to reconcile Net (Loss)
Income to Net Cash (used in) provided
by Operating Activities:
Restructuring.......................... 3.4 -- --
Depreciation........................... 11.5 9.7 7.7
Amortization........................... 4.0 3.5 4.4
Loss on disposal of Property, Plant
and Equipment......................... 0.4 0.6 --
Provision for Retiree Benefits......... 3.1 0.2 6.7
Provision (Benefit) for Deferred
Income Taxes.......................... (4.8) 1.8 6.4
Changes in Operating Assets and
Liabilities:
Accounts Receivable Trade--Net....... (0.7) (21.2) (3.3)
Inventories.......................... (4.6) (10.8) 23.3
Supplies............................. 1.5 (1.2) (0.7)
Prepaid Expenses and Other Current
Assets.............................. (3.0) 2.9 (7.7)
Other Noncurrent Assets.............. (1.0) (4.6) --
Accounts Payable..................... 18.3 (1.1) (1.1)
Customer Prepayments................. (7.8) (2.8) 7.5
Product and Environmental
Liabilities......................... 7.7 3.3 4.6
Income Taxes Payable................. (5.4) 5.4 --
Other Accrued Liabilities............ (7.8) (4.1) 9.2
Payments for Assumed Pre-Acquisition
Product and Environmental
Liabilities........................... (3.7) (5.6) (17.6)
------ ------- -------
Net Cash (used in) provided by
Operating Activities.................. (2.7) (12.5) 48.8
INVESTING ACTIVITIES
Purchase of Property, Plant and
Equipment.............................. (22.5) (18.9) (9.3)
Purchase of DuPont Sporting Goods
Business............................... -- 1.4 (6.9)
------ ------- -------
Net Cash used in Investing
Activities............................ (22.5) (17.5) (16.2)
FINANCING ACTIVITIES
Proceeds from Revolving Credit
Facility............................... 416.3 278.4 153.8
Principal Payments on Revolving Credit
Facility............................... (366.7) (269.0) (153.8)
Proceeds from Issuance of Long-Term
Debt................................... 2.5 -- --
Principal Payments on Long-Term Debt.... (15.0) (20.8) (10.0)
Proceeds from Short-Term Debt........... 1.3 4.5 4.0
Principal Payments on Short-Term Debt... (4.6) (3.6) (2.0)
Debt Issuance Costs..................... (0.4) -- (1.7)
------ ------- -------
Net Cash provided by (used in)
Financing Activities.................. 33.4 (10.5) (9.7)
------ ------- -------
Increase (Decrease) in Cash and Cash
Equivalents............................ 8.2 (40.5) 22.9
Cash and Cash Equivalents at beginning
of period.............................. 1.4 41.9 19.0
------ ------- -------
Cash and Cash Equivalents at end of
period................................. $ 9.6 $ 1.4 $ 41.9
====== ======= =======
Supplemental cash flow information:
Cash paid during the year for:
Interest............................. $ 24.0 $ 21.7 $ 19.0
Income Taxes......................... $ 6.1 $ 0.8 $ 1.7
Noncash activities:
Capital lease obligations incurred... $ 2.7 $ 4.7 $ --
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-5
<PAGE>
RACI HOLDING, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN MILLIONS, EXCEPT SHARE AND PER SHARE DATA)
NOTE 1--BASIS OF PRESENTATION
The accompanying consolidated financial statements of RACI Holding, Inc.
("Holding") include the accounts of its subsidiary, Remington Arms Company,
Inc. ("Remington") and Remington's wholly owned subsidiary, 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.
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 pursuant to an asset purchase agreement (the "Asset Purchase Agreement")
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 (the "Cap") 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.
Pursuant to the Asset Purchase Agreement, the Sellers designated $24.5 of the
Cap for assumed product liability costs and the remainder for environmental
costs. 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.
In December 1996, the Company and the Sellers resolved questions that had
been raised by the Sellers concerning certain product liability related costs
that the Company had allocated to the Cap or which were billed to cases for
which the Sellers assumed responsibility under the Asset Purchase Agreement.
As a result of this agreement between the Sellers and the Company, the Company
recorded a non-recurring charge of $4.7, which in effect increased the product
liability portion of the Cap from $24.5 to $28.4. Included within the $4.7
non-recurring charge is $0.8 of certain other product liability related
defense costs that the Company agreed to pay.
F-6
<PAGE>
RACI HOLDING, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(DOLLARS IN MILLIONS, EXCEPT SHARE AND PER SHARE DATA)
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.
Inventories:
Inventories are stated at the lower of cost or market. The cost of
inventories is determined by the first-in, first-out ("FIFO") method. The
operating profit for 1994 was adversely impacted by $16.8, attributable to
charges resulting from the purchase accounting adjustment to reflect the fair
value of inventory as of December 1, 1993.
Supplies:
The cost of supplies is determined by the average cost method.
Property, Plant and Equipment:
Investments in land, buildings and improvements, and machinery and equipment
acquired subsequent to the Acquisition 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 15 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. The cost and related
accumulated depreciation applicable to assets sold or retired are removed from
the accounts and the gain or loss on disposition is recognized in income.
Interest is capitalized in connection with the construction of major
facilities. The capitalized interest is recorded as part of the asset to which
it relates and is amortized over the asset's useful life. In 1996, $0.2 of
interest cost was capitalized. No interest cost was capitalized in 1995 or
1994.
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 receivable under interest rate cap agreements are accrued as a
reduction of interest
F-7
<PAGE>
RACI HOLDING, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(DOLLARS IN MILLIONS, EXCEPT SHARE AND PER SHARE DATA)
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. Market values of financial instruments were estimated based
on quoted market prices, where available, or on current rates offered to the
Company for debt with similar terms and maturities. Unless otherwise
disclosed, the fair value of financial instruments approximates their recorded
values.
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.
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, 2000. Product liabilities are
not recorded net of recoveries that are probable of realization. At December
31, 1996 and 1995, no recoveries have been recorded.
Revenue Recognition:
Sales, net of an estimate for discounts, returns and allowances, 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 1996, 1995, and 1994
advertising costs totaled $18.3, $18.2, and $14.5, 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.
Pension and Postretirement:
Unrecognized prior service costs are being amortized over the estimated
remaining service lives of employees. The unrecognized net gain or loss
resulting from changes in the amount of either the projected benefit
obligation or plan assets from experience different from that assumed are
amortized over five years.
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 $32.1 in 1996, $32.8 in 1995, and $29.3 in 1994.
F-8
<PAGE>
RACI HOLDING, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(DOLLARS IN MILLIONS, EXCEPT SHARE AND PER SHARE DATA)
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.
New Accounting Pronouncements:
Effective January 1, 1996, the Company adopted Statement of Financial
Accounting Standards ("SFAS") No. 123, "Accounting for Stock-Based
Compensation". As permitted under this new standard, the Company decided to
continue to use the intrinsic value based method for determining compensation
costs; therefore, adoption did not have any effect on results of operations
for 1996. However, disclosure requirements under this new standard are set
forth in Note 13.
NOTE 4--RESTRUCTURING AND NON-RECURRING ITEMS
The Company recorded charges for restructuring in 1996 of $4.9. The
restructuring was necessary to reduce production levels, plant overhead
expenses, corporate administrative expense and other costs to correspond with
current sales volumes and to reorganize the Company's international marketing
efforts. The company-wide plan resulted in reductions of approximately 325
salaried and hourly (including bargaining unit) employees during the year. The
charges incurred include estimated costs for employee severance and other
benefits of $3.2, lease costs of $0.7 and other expenses of $1.0. The majority
of the spending is expected to be completed by the end of 1997.
Components of the restructuring provision recorded in 1996 and utilized
through December 31, 1996 are as follows:
<TABLE>
<CAPTION>
SEVERANCE
AND
TERMINATION LEASE OTHER
BENEFITS COSTS EXPENSES TOTAL
----------- ----- -------- -----
<S> <C> <C> <C> <C>
Original Provision.......................... $ 3.2 $ 0.7 $ 1.0 $ 4.9
Payments in 1996............................ 1.3 0.1 0.1 1.5
----- ----- ----- -----
Balance, December 31, 1996.................. $ 1.9 $ 0.6 $ 0.9 $ 3.4
===== ===== ===== =====
</TABLE>
The Company and the Sellers resolved questions that had been raised by the
Sellers concerning certain product liability related costs that the Company
had allocated to the Cap or which were billed to cases for which the Sellers
assumed responsibility under the Asset Purchase Agreement. As a result of this
agreement, the Company recorded a non-recurring charge of $4.7 (See Notes 2
and 16).
NOTE 5--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
F-9
<PAGE>
RACI HOLDING, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(DOLLARS IN MILLIONS, EXCEPT SHARE AND PER SHARE DATA)
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 1996, 1995 and 1994 were $1.9, $3.9 and $2.7,
respectively.
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 18%, 22% and 19% of
sales in 1996, 1995 and 1994, respectively.
NOTE 6--INVENTORIES
At December 31, Inventories consist of the following:
<TABLE>
<CAPTION>
1996 1995
------ -----
<S> <C> <C>
Raw Materials................................................... $ 16.0 $17.2
Semi-Finished Products.......................................... 22.9 23.9
Finished Products .............................................. 63.0 56.2
------ -----
Total......................................................... $101.9 $97.3
====== =====
</TABLE>
NOTE 7--PROPERTY, PLANT AND EQUIPMENT
At December 31, Property, Plant and Equipment consist of the following:
<TABLE>
<CAPTION>
1996 1995
------ ------
<S> <C> <C>
Land......................................................... $ 1.5 $ 1.2
Building and Improvements.................................... 20.5 17.4
Leased Assets................................................ 7.7 5.0
Machinery and Equipment...................................... 84.1 73.9
Construction in Progress..................................... 13.8 5.5
------ ------
Subtotal................................................... 127.6 103.0
Less: Accumulated Depreciation............................... (29.2) (17.9)
------ ------
Total...................................................... $ 98.4 $ 85.1
====== ======
</TABLE>
NOTE 8--INTANGIBLES AND DEBT ISSUANCE COSTS
At December 31, Intangibles and Debt Issuance Costs consist of the
following:
<TABLE>
<CAPTION>
1996 1995
------ ------
<S> <C> <C>
Intangibles (Note 17)........................................ $ 95.9 $ 94.7
Debt Issuance Costs.......................................... 12.5 12.1
------ ------
Subtotal................................................... 108.4 106.8
Less: Accumulated Amortization............................... (12.0) (8.1)
------ ------
Total...................................................... $ 96.4 $ 98.7
====== ======
</TABLE>
F-10
<PAGE>
RACI HOLDING, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(DOLLARS IN MILLIONS, EXCEPT SHARE AND PER SHARE DATA)
NOTE 9--OTHER ACCRUED LIABILITIES
At December 31, Other Accrued Liabilities consist of the following:
<TABLE>
<CAPTION>
1996 1995
----- -----
<S> <C> <C>
Marketing........................................................ $ 7.1 $ 7.0
Health Costs..................................................... 4.9 4.0
Restructuring.................................................... 3.4 --
Compensation..................................................... 0.5 3.8
Corporate Relocation............................................. 0.2 4.0
Retiree Benefits................................................. -- 0.4
Other............................................................ 6.0 7.7
----- -----
Total.......................................................... $22.1 $26.9
===== =====
</TABLE>
NOTE 10--RETIREE BENEFITS
Pension Plans
The Company sponsors a defined benefit pension plan (the "Plan") which
covers substantially all employees hired prior to June 1, 1996. 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>
1996 1995 1994
----- ----- -----
<S> <C> <C> <C>
Service costs........................................... $ 4.9 $ 4.3 $ 4.3
Interest costs.......................................... 4.2 4.0 3.3
Return on plan assets................................... (1.1) (8.6) (3.4)
Net amortization and deferral........................... (5.0) 4.8 --
----- ----- -----
Net pension costs..................................... $ 3.0 $ 4.5 $ 4.2
===== ===== =====
</TABLE>
The funded status of the Plan at December 31, was as follows:
<TABLE>
<CAPTION>
1996 1995
------ ------
<S> <C> <C>
Accumulated benefit obligation including vested benefits
of $28.8 and $26.9, respectively......................... $ 44.8 $ 42.1
====== ======
Projected benefit obligation.............................. 59.8 60.2
Less: plan assets at fair value........................... (56.4) (58.7)
------ ------
Deficiency of assets over projected benefit obligations... 3.4 1.5
Unrecognized prior service cost........................... 2.3 --
Unrecognized net gain from experience differences......... 3.5 5.1
------ ------
Pension liability......................................... $ 9.2 $ 6.6
====== ======
Actuarial assumptions:
Discount rate........................................... 7.8% 7.2%
Rate of compensation increase........................... 4.0% 4.0%
Long-term rate of return on plan assets................. 8.5% 8.5%
</TABLE>
F-11
<PAGE>
RACI HOLDING, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(DOLLARS IN MILLIONS, EXCEPT SHARE AND PER SHARE DATA)
Under the Acquisition agreement, DuPont was 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 at December 31, 1995.
These amounts were included in the plan assets at fair value as of that date
as referenced in the previous table. The Company and DuPont were unable to
agree upon this amount, and the parties initiated the process to arbitrate the
matter pursuant to the terms of the Acquisition agreement. On December 20,
1996, the Company and DuPont agreed to a final settlement of $42.6, including
interest. The difference of $1.9 between the final settlement and the amount
estimated by management is being treated as an adjustment to plan assets
resulting from experience different from that assumed, and accordingly will be
amortized into income over a five year period in accordance with the Company's
policy for recording pension costs.
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 contributions up to a maximum of 6% of
a participant's compensation. All employees hired after May 31, 1996 are also
eligible for a discretionary contribution. The Company's contribution to this
plan was $1.4, $1.4, and $1.5 in 1996, 1995 and 1994, respectively.
Postretirement Benefit Plan:
The Company sponsors a postretirement defined benefit plan which provides
certain employees hired prior to June 1, 1996, 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 benefit claims as they are incurred. Postretirement benefits
for employees who were eligible to retire under the DuPont postretirement
benefit 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.
Postretirement benefit cost consists of :
<TABLE>
<CAPTION>
1996 1995 1994
----- ----- -----
<S> <C> <C> <C>
Service costs .......................................... $ 0.9 $ 1.4 $ 1.2
Interest costs.......................................... 0.9 1.4 1.6
Amortization............................................ (1.3) (0.2) --
----- ----- -----
Postretirement benefit cost............................. $ 0.5 $ 2.6 $ 2.8
===== ===== =====
</TABLE>
Accumulated postretirement benefit obligation at December 31, consists of:
<TABLE>
<CAPTION>
1996 1995
----- -----
<S> <C> <C>
Retirees........................................................ $ 0.3 $ 0.1
Fully eligible active plan participants......................... 0.1 --
Other active plan participants.................................. 8.2 15.7
----- -----
Total accumulated postretirement obligation..................... $ 8.6 $15.8
Unrecognized prior service cost................................. 8.2 5.2
Unrecognized net gain........................................... 5.9 1.2
----- -----
Accrued postretirement benefit liability........................ $22.7 $22.2
===== =====
</TABLE>
F-12
<PAGE>
RACI HOLDING, INC. AND SUBSIDIARIES
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 9.5% for 1995 and 8.9% for 1996
declining to 5.5% ultimately in 2006. A one-percentage-point increase in the
assumed health care cost trend rate would increase both the accumulated
postretirement benefit obligation as of December 31, 1996 and the
postretirement health care cost for the year then ended by approximately 7.9%.
The assumed discount rate used to determine the accumulated postretirement
benefit obligation was 7.8% and 7.0% at December 31, 1996 and 1995,
respectively.
NOTE 11--DEBT
Short-term debt consists of unsecured, fixed interest rate agreements for
financing insurance premiums. The interest rate under these agreements at
December 31, 1996 and 1995 was 6.1% and 6.7%, respectively.
Long-Term Debt at December 31, consists of the following:
<TABLE>
<CAPTION>
1996 1995
------ ------
<S> <C> <C>
Credit Agreement:
Term Loans................................................ $ 86.4 $100.0
Revolving Credit Facility................................. 59.0 9.4
9.5% Senior Subordinated Notes due 2003..................... 99.6 99.5
Capital Lease Obligations................................... 5.7 4.3
Other....................................................... 2.4 --
------ ------
Subtotal................................................ $253.1 $213.2
Less: Current Portion....................................... 20.9 14.6
------ ------
Total................................................... $232.2 $198.6
====== ======
</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 (the "Term Loan Facility")
and a revolving credit facility of $150.0 (the "Revolving Credit Facility").
All borrowings under the Credit Agreement are guaranteed by Holding, and are
collateralized by substantially all of the assets of the Company. 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
reduced for a period of 30 consecutive days of each 12-month period commencing
on December 1 to $60.0 or less. The weighted average interest rate for
borrowings under the Term Loan and Revolving Credit Facilities were 8.1% and
8.4%, and 8.4% and 9.0 % per annum, in 1996 and 1995, 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. The interest
rate cap agreements expired in June, 1996. The Company is not currently a
party to any interest rate cap, hedging or other protection arrangements with
respect to its variable rate indebtedness. Commitment fees of 1/2 of 1% are
payable on the average daily unused portion of the Revolving Credit Facility.
At December 31, 1996, the Company had $4.8 in letters of credit and $59.0 of
borrowings outstanding with the remaining $86.2 of the Company's Revolving
Credit Facility available for borrowing. 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.
In accordance with the Credit Agreement, the Company has made all scheduled
principal payments on the term loans through December 31, 1996. 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
F-13
<PAGE>
RACI HOLDING, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(DOLLARS IN MILLIONS, EXCEPT SHARE AND PER SHARE DATA)
further pro rata or other reduction in the future) in an aggregate amount of
approximately $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, 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 in 1995 for the year ended December 31, 1994.
The Company did not have Excess Cash Flow for the years ended December 31,
1996 and 1995 and accordingly no such prepayment is required in 1997, nor was
any such prepayment 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 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. 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. 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 permissible levels
of capital expenditures under the relevant financial covenants as of the end
of each fiscal quarter in 1996, as well as in 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.
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
amount in 1998 to 101.5% in the year 2000. 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,
issued by Remington, are subordinate to borrowings under the Credit Agreement
and are fully and unconditionally guaranteed on a subordinated basis by
Holding. See Note 22 for Holding's Consolidating Condensed Financial Data. 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
F-14
<PAGE>
RACI HOLDING, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(DOLLARS IN MILLIONS, EXCEPT SHARE AND PER SHARE DATA)
issue discounts on the Notes of $0.6 are being amortized at 9.56% per annum.
As of December 31, 1996, the total accumulated amortization was $0.2.
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, 1996 and 1995, the Company also had additional letters of
credit outstanding of $2.3 and $2.1, respectively.
The aggregate payments of long-term debt outstanding at December 31, 1996,
for the next five years are $20.9, $21.0, $24.4, $87.0 and $0.2, respectively.
NOTE 12--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, 1996, are as follows:
<TABLE>
<CAPTION>
CAPITAL OPERATING
LEASES LEASES
------- ---------
<S> <C> <C>
Minimum Lease Payments for Years
Ending December 31:
1997................................................ $2.0 $1.0
1998................................................ 1.8 0.7
1999................................................ 1.8 0.7
2000................................................ 0.7 0.4
2001................................................ 0.3 0.4
---- ----
Total minimum lease payments...................... 6.6 $3.2
====
Less amount representing interest..................... (0.9)
----
Present value of net minimum lease payments........... $5.7
====
</TABLE>
NOTE 13--STOCK PURCHASE AND OPTION PLANS
As of December 31, 1996, the Company had reserved 132,380 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"). The Options are 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. The following is a summary of stock option
activity:
F-15
<PAGE>
RACI HOLDING, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(DOLLARS IN MILLIONS, EXCEPT SHARE AND PER SHARE DATA)
<TABLE>
<CAPTION>
NUMBER OF SHARES
($100 PER SHARE)
----------------
<S> <C>
Balance at December 31, 1995.............................. 35,905
Forfeited................................................. (5,490)
------
Balance at December 31, 1996.............................. 30,415
======
</TABLE>
The Company has adopted the disclosure-only provision of Statement of
Financial Accounting Standards No. 123 "Accounting for Stock-Based
Compensation." Accordingly, since options granted will be at estimated fair
value, no compensation cost is expected to be recognized for stock options
granted to date and in the future. Had compensation cost for the Company's
stock option plan been determined based on the fair value at the grant date
for awards in 1995 consistent with the provisions of SFAS No. 123, the
Company's net earnings and earnings per share on a pro forma basis would have
been as follows:
<TABLE>
<CAPTION>
1996 1995
------- ------
<S> <C> <C>
Net (Loss)/Income--as reported.............................. $ (13.8) $ 11.5
======= ======
Net (Loss)/Income--pro forma................................ $ (13.9) $ 11.4
======= ======
(Loss)/Earnings Per Share--as reported...................... $(18.40) $15.33
======= ======
(Loss)/Earnings Per Share--pro forma........................ $(18.53) $15.20
======= ======
Value of Option Grant Per Share............................. n/a $24.68
======
</TABLE>
The fair value of each option grant is estimated on the date of grant using
a modified-Black Scholes Option Model with the following weighted average
assumptions used: expected dividend yields of 0%; expected option life of 4.5
years; expected volatility of 0%; and risk free interest rate of 6.4%.
NOTE 14--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 15--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 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
were not relocated. The relocation was substantially completed during the
second quarter of 1996.
NOTE 16--COMMITMENTS AND CONTINGENCIES
The Company has various purchase commitments approximating $3.1 for 1997,
$3.7 for 1998, $4.0 for 1999, $0.2 for 2000 and $0.2 for 2001 for services
incidental to the ordinary conduct of business. Such
F-16
<PAGE>
RACI HOLDING, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(DOLLARS IN MILLIONS, EXCEPT SHARE AND PER SHARE DATA)
commitments are not at prices in excess of current market prices. In addition,
the Company is required to pay a minimum termination fee of $0.5 should there
be a termination prior to the close of one of the agreements.
The Company has a union contract with the hourly employees at its Ilion
facility, which expires in July of 1997. If this contract is not renewed prior
to its expiration, the lack of such contract could have a material effect on
the future results of operations of the Company.
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 at the Acquisition (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 (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. 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 of the
Cap for assumed product liability costs and the remainder for environmental
costs. In December 1996, the Company and the Sellers resolved questions that
had been raised by the Sellers concerning certain product liability related
costs that the Company had allocated to the Cap or which were billed to cases
for which the Sellers assumed responsibility under the Asset Purchase
Agreement. As a result of this agreement between the Sellers and the Company,
the Company recorded a non-recurring charge of $4.7 which in effect increased
the product liability portion of the Cap from $24.5 to $28.4. Included within
the $4.7 non-recurring charge is $0.8 of certain other product liability
related defense costs that the Company agreed to pay. As of December 31, 1996,
the Company had charged to the Cap payments totaling $27.1, of which $0.3 was
related to environmental costs and $26.8 to product liability costs. Based
upon the incurrence of additional product liability costs chargeable to the
Cap since December 31, the Company expects that the remaining product
liability basket will be exhausted in April 1997. 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
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, 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 liability for product liability cases and claims relating to
occurrences arising during 1996 and 1995 will be in the range of $4.5 to $9.0
per year, and $4.3 to $8.1 for occurrences during 1994. The Company charged
$5.7, $6.5 and $17.5 of payments against the accrual for product and
environmental liabilities in the years ended December 31, 1996, 1995, and
1994, respectively. Management estimates that the amount of the self insured
retention accrued 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 Company ammunition
products. Approximately 50 such cases are pending, primarily alleging
defective product design or manufacture, or failure to provide adequate
warnings. All but two
F-17
<PAGE>
RACI HOLDING, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(DOLLARS IN MILLIONS, EXCEPT SHARE AND PER SHARE DATA)
of these cases are individual actions alleging personal injury, and many seek
punitive as well as compensatory damages. The majority of these pending cases
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 half of the pending cases involve post-Closing
occurrences for which the Company would be responsible. 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 et al. ("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 Remington brand 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 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 early in the second 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 cost of the fund, as well as additional settlement
costs and court-ordered plaintiffs' 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 and lawsuits for 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. A class certification 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, a timely appeal of this ruling was filed in intermediate level
state appellate court. The Sellers filed their opening appellate brief on
March 17, 1997. The Company had not been named 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 to include the Company, which filed
an answer in September 1996. Plaintiffs have recently indicated that they may
move to stay the appeal while they seek an order certifying the claims against
the Company.
F-18
<PAGE>
RACI HOLDING, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(DOLLARS IN MILLIONS, EXCEPT SHARE AND PER SHARE DATA)
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 "Note 2." 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. 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 17--INCOME TAXES
The provision (benefit) for income taxes consists of the following
components:
<TABLE>
<CAPTION>
1996 1995 1994
----- ---- ----
<S> <C> <C> <C>
Federal:
Current................................................. $(2.2) $5.7 $--
Deferred................................................ (4.6) 1.1 5.4
State:
Current ................................................ -- 1.0 --
Deferred................................................ (0.2) 0.7 1.0
----- ---- ----
$(7.0) $8.5 $6.4
===== ==== ====
</TABLE>
F-19
<PAGE>
RACI HOLDING, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(DOLLARS IN MILLIONS, EXCEPT SHARE AND PER SHARE DATA)
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>
1996 1995
------ -----
<S> <C> <C>
Deferred tax assets:
Accrued employee and retiree benefits..................... $1 4.7 $14.3
Product, environmental and other liabilities.............. 8.2 7.3
Receivables and inventory................................. 6.0 3.5
Tax credits............................................... 4.2 3.6
Net operating losses...................................... 3.3 --
Other..................................................... -- 0.6
------ -----
36.4 29.3
------ -----
Deferred tax liabilities:
Property, plant and equipment (7.1) (4.4)
Intangibles............................................... (1.9) (1.1)
------ -----
(9.0) (5.5)
------ -----
Net deferred tax assets..................................... $ 27.4 $23.8
====== =====
</TABLE>
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.
At December 31, 1996 the Company has the following carryforwards for tax
purposes:
<TABLE>
<S> <C> <C>
Net operating loss...................................... $8.1 Expires 2011
Research & development tax credit....................... $0.1 Expires 2010
Alternative minimum tax credit.......................... $4.2 No Expiration
</TABLE>
The following is a reconciliation of the statutory federal income tax rate
to the Company's effective income tax rates:
<TABLE>
<CAPTION>
1996 1995 1994
----- ---- ----
<S> <C> <C> <C>
Federal statutory rate.. (35.0)% 35.0 % 35.0 %
State income taxes, net
of federal benefits.... (2.8) 5.4 3.8
Nondeductible expenses.. 2.8 2.8 2.1
Other................... 1.3 (0.7) (0.7)
----- ---- ----
Effective income tax
rate................... (33.7)% 42.5 % 40.2 %
===== ==== ====
</TABLE>
In 1996, the Company made certain adjustments to the deferred tax balance
related to the Acquisition resulting in an increase to goodwill and a
reduction in the net deferred tax asset by $1.2.
NOTE 18--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, $0.4 and $0.5 in 1996, 1995 and 1994,
respectively. In connection with the Acquisition and arranging the financing
thereof, the Company paid CD&R a fee of $4.5.
F-20
<PAGE>
RACI HOLDING, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(DOLLARS IN MILLIONS, EXCEPT SHARE AND PER SHARE DATA)
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. All of these services have now been assumed by the Company. Costs
under the transitional services agreement were $1.4 for 1995 and $3.6 for
1994.
In addition, the Company entered into a supply agreement with DuPont through
1996 for the supply of fishline. Purchases under the supply agreement were
$3.6, $3.8 and $4.6 for the years ended 1996, 1995 and 1994, respectively. A
new supply agreement was signed for calendar year 1997. The agreement will
automatically renew annually unless either party notifies the other of its
intent to terminate.
NOTE 19--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 estimated fair value of the Company's debt at December 31, 1995 and 1994
was equal to the carrying amount. The estimated value of the Company's debt at
December 31, 1996 was $234.5 compared to a carrying value of $253.1.
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. At December 31, 1996 the Company was not a party to any
interest rate cap, hedging or other protection arrangements with respect to
its variable rate indebtedness. The estimated fair value of the caps at
December 31, 1995 was approximately $0.1.
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
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 December 31, 1996 and 1995 was
$1.3 and $3.4, respectively. At December 31, 1996, 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 $1.2, $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. There were no hedging losses
included in inventory at December 31, 1996.
NOTE 20--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 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. Research and development
expenses for 1996 were $10.2
F-21
<PAGE>
RACI HOLDING, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(DOLLARS IN MILLIONS, EXCEPT SHARE AND PER SHARE DATA)
NOTE 21--QUARTERLY FINANCIAL DATA (UNAUDITED)
<TABLE>
<CAPTION>
QUARTER
-------------------------------------
1996 FIRST SECOND THIRD FOURTH TOTAL
---- ----- ------ ------ ------- -------
<S> <C> <C> <C> <C> <C>
Sales................................. $96.3 $ 80.8 $139.4 $ 73.9 $ 390.4
Gross Profit.......................... 33.7 23.9 40.0 17.7 115.3
Net Income (Loss)..................... $ 0.6 $ (4.6) $ 3.7 $ (13.5) $ (13.8)
Net Income (Loss)
Per Share........................... $0.80 $(6.13) $ 4.93 $(18.00) $(18.40)
</TABLE>
The Company recorded charges of $1.2, $0.1 and $3.6 for restructuring in the
second, third and fourth quarters of 1996, respectively. Additionally, the
Company recorded a non-recurring charge of $4.7 in the fourth quarter of 1996
as a result of an agreement reached with the Sellers relating to product
liability costs.
<TABLE>
<CAPTION>
QUARTER
-----------------------------------
1995 FIRST SECOND THIRD FOURTH TOTAL
---- ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C>
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 pre-tax benefit as the actual R & D 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, (adjusted in the fourth quarter by $0.4).
F-22
<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................................................................. 51
Management............................................................... 65
Ownership of Capital Stock............................................... 71
Certain Relationships and Related Transactions........................... 72
Description of Credit Agreement.......................................... 74
Description of Notes..................................................... 76
Registration Rights...................................................... 112
Certain Federal Tax Considerations....................................... 114
Plan of Distribution..................................................... 120
Legal Matters............................................................ 121
Experts.................................................................. 121
Available Information.................................................... 121
Exchange Agent........................................................... 122
Index to Financial Statements............................................ F-1
</TABLE>
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
REMINGTON(R)[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 shall have power to 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 the person 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 the person in connection with such action,
suit or proceeding if the person acted in good faith and in a manner the
person 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 the person's 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 the person 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 the person's conduct was
unlawful.
(b) A corporation shall have power to 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 by or in the right of the corporation to procure a
judgment in its favor by reason of the fact that the person 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 the person in connection with the defense or settlement of such action or
suit if the person acted in good faith and in a manner the person 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) of this
section, 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) of this section
(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 the person has met the applicable standard of conduct set forth in
subsections (a) and (b) of this section. 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>
EXHIBIT NO. DESCRIPTION
----------- -----------
<C> <S>
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 --Understanding and Agreement Regarding Product Liability
Litigation, dated as of June 1, 1996 between DuPont and
Remington.+
2.3 --Polymer Fishline Products Supply, Research and Technical
Support Agreement, dated as of December 1, 1993, between DuPont
and Remington.*+
2.4 --Non-Competition Agreement, dated as of December 1, 1993, among
DuPont, Sporting Goods and Remington.+
2.5 --Product Liability Services and Defense Coordination Agreement,
dated as of December 1, 1993, among DuPont, Sporting Goods and
Remington.+
2.6 --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 December 10,
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 December 10,
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.+
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.+
</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>
EXHIBIT NO. DESCRIPTION
----------- -----------
<C> <S>
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, effective as of July 22, 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.+
10.28 --Consulting Agreement, dated as of December 1, 1993, among
Holding, Remington and Clayton, Dubilier & Rice, Inc.+
10.29 --Loan-Out Agreement, dated as of December 1, 1993, among
Holding, Remington and Clayton, Dubilier & Rice, Inc.+
12.1 --Computation of Ratio of Earnings to Fixed Charges.+
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.+
</TABLE>
- --------
+ Previously filed.
II-6
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
----------- -----------
<C> <S>
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;
(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
II-7
<PAGE>
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. 3 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 MAY 7, 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. 3 TO THE REGISTRATION STATEMENT HAS BEEN SIGNED BY THE FOLLOWING PERSONS
IN THE CAPACITIES INDICATED ON MAY 7, 1997.
/s/ Hubbard C. Howe Chairman, Chief Executive Officer
- ------------------------------------- and Director (Principal Executive
HUBBARD C. HOWE Officer)
/s/ Thomas L. Millner Director, President and Chief
- ------------------------------------- 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. 3 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 MAY 7, 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. 3 TO THE REGISTRATION STATEMENT HAS BEEN SIGNED BY THE FOLLOWING PERSONS
IN THE CAPACITIES INDICATED ON MAY 7, 1997.
/s/ Hubbard C. Howe Chairman, Chief Executive Officer
- ------------------------------------- and Director (Principal Executive
HUBBARD C. HOWE Officer)
/s/ Thomas L. Millner Director, President and Chief
- ------------------------------------- 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 INDEX
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
----------- -----------
<C> <S>
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 --Understanding and Agreement Regarding Product Liability
Litigation, dated as of June 1, 1996 between DuPont and
Remington.+
2.3 --Polymer Fishline Products Supply, Research and Technical
Support Agreement, dated as of December 1, 1993, between DuPont
and Remington.*+
2.4 --Non-Competition Agreement, dated as of December 1, 1993, among
DuPont, Sporting Goods and Remington.+
2.5 --Product Liability Services and Defense Coordination Agreement,
dated as of December 1, 1993, among DuPont, Sporting Goods and
Remington.+
2.6 --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 December 10,
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 December 10,
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.+
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.+
</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.
<PAGE>
EXHIBIT 5.1
DEBEVOISE & PLIMPTON
875 THIRD AVENUE
NEW YORK, NY 10022
(212) 909-6000
May 7, 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,
/s/ Debevoise & Plimpton
<PAGE>
[COOPERS & LYBRAND LETTERHEAD]
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the inclusion in this registration statement on Form S-4 (File
No. 333-4520, 333-4520-01) of our report dated, March 14, 1997, on our audits
of the consolidated financial statements of RACI Holding, Inc., and
Subsidiaries as of December 31, 1996 and 1995, and for the years ended
December 31, 1996, 1995 and 1994. We also consent to the reference to our firm
under the caption "Experts."
/s/ COOPERS AND LYBRAND L.L.P.
Greensboro, North Carolina
May 7, 1997
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<CIK> 0000916504
<NAME> REMINGTON ARMS COMPANY, INC.
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> DEC-31-1996
<CASH> 9,600
<SECURITIES> 0
<RECEIVABLES> 76,800
<ALLOWANCES> 5,700
<INVENTORY> 101,900
<CURRENT-ASSETS> 220,600
<PP&E> 127,600
<DEPRECIATION> 29,200
<TOTAL-ASSETS> 435,000
<CURRENT-LIABILITIES> 84,500
<BONDS> 232,200
0
0
<COMMON> 0
<OTHER-SE> 75,000
<TOTAL-LIABILITY-AND-EQUITY> 435,000
<SALES> 390,400
<TOTAL-REVENUES> 390,400
<CGS> 275,100
<TOTAL-COSTS> 275,100
<OTHER-EXPENSES> 109,000
<LOSS-PROVISION> 2,000
<INTEREST-EXPENSE> 25,100
<INCOME-PRETAX> (20,800)
<INCOME-TAX> (7,000)
<INCOME-CONTINUING> (13,800)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (13,800)
<EPS-PRIMARY> (18.40)
<EPS-DILUTED> (18.40)
</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 MAY , 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 or (612) 244-1197
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 May , 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 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 interpretations 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 interpretations 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 (and any other person
accepting the Exchange Offer on behalf of 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 a resale of 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 Remington 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
3
<PAGE>
Prospectus as filed with the SEC. Remington agrees to deliver such notice and
such amended or supplemented Prospectus promptly to any Participating Broker-
Dealer that has so notified Remington. Broker-dealers, if any, that acquired
their Existing Notes from Remington in the initial offering of the Existing
Notes cannot use the 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, 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.
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 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.
4
<PAGE>
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, 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 consents to
waive 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. 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.
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 INTERNAL REVENUE SERVICE 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:
(Please Type or Print)
Name(s)_____________________________
_____________________________
(Please Type or Print) _____________________________
Address:____________________________ (Please Type or Print)
_____________________________ _____________________________
(Zip Code) (Please Type or Print)
(Complete Internal Revenue Service Address:____________________________
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>
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 INTERNAL REVENUE SERVICE 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 Internal Revenue Service Form W-9 (the "IRS 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 IRS Form W-9, sign and date the
IRS Form W-9. 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 IRS Form W-9. If the holder
furnishes the Exchange Agent or Remington with its TIN within sixty (60) days
after the date of the IRS 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 IRS Form W-9 (including how to obtain a
taxpayer identification number if you do not have one and how to complete the
IRS Form W-9 if Existing Notes are registered in more than one name), consult
the enclosed instructions to the IRS Form W-9.
Failure to complete the IRS 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. However, if such waiver constitutes a
material change to the Exchange Offer or in the information previously
disclosed to the holders of the Existing Notes, Remington will, in accordance
with the applicable rules of the SEC, 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, Remington will extend the Exchange
Offer to permit an adequate time for holders of the existing Notes to consider
the additional information.
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>
Form W-9 GIVE FORM TO THE
REQUESTER. DO NOT
(Rev. December 1996) SEND TO THE IRS.
Department of the Treasury
Internal Revenue Service
REQUEST FOR TAXPAYER
IDENTIFICATION NUMBER AND CERTIFICATION
- --------------------------------------------------------------------------------
PLEASE PRINT OR TYPE
- --------------------
Name (If a joint account or you changed your name, See Specific Instructions on
page 2.)
- --------------------------------------------------------------------------------
Business name, if different from above. (See Specific Instructions on page 2.)
- --------------------------------------------------------------------------------
Check appropriate box: [ ] Individual/Sole proprietor [ ] Corporation
[ ] Partnership [ ] Other
|> _______
- --------------------------------------------------------------------------------
Address (number, street, and apt. or suite no.)
- --------------------------------------------------------------------------------
City, state, and ZIP code
- --------------------------------------------------------------------------------
Requester's name and address (optional)
- --------------------------------------------------------------------------------
List account number(s) here (optional)
- --------------------------------------------------------------------------------
PART I. TAXPAYER IDENTIFICATION NUMBER (TIN)
- --------------------------------------------------------------------------------
Enter your TIN in the appropriate box. For individuals, this is your social
security number (SSN). However, if you are a resident alien OR a sole
proprietor, see the instructions on page 2. For other entities, it is your
employer identification number (EIN). If you do not have a number, see HOW TO
GET A TIN on page 2.
NOTE: If the account is in more than one name, see the chart on page 2 for
guidelines on whose number to enter.
SOCIAL SECURITY NUMBER
[ ]
or
EMPLOYER IDENTIFICATION NUMBER
[ ]
- --------------------------------------------------------------------------------
PART II. FOR PAYEES EXEMPT FROM BACKUP WITHHOLDING (See the Instructions on page
2.)
- --------------------------------------------------------------------------------
|>
- --------------------------------------------------------------------------------
PART III. CERTIFICATION
- --------------------------------------------------------------------------------
Under 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 because: (a) I am exempt from backup
withholding, or (b) I have not been notified by the Internal Revenue Service
(IRS) that I am subject to backup withholding as a result of a failure to
report all interest or dividends, or (c) the IRS has notified me that I am no
longer subject to backup withholding.
CERTIFICATION INSTRUCTIONS. -- You must cross out item 2 above if you have been
notified by the IRS that you are currently subject to backup withholding because
you have failed to report all interest and dividends and your tax return. For
real estate transactions, item 2 does not apply. For mortgage interest paid,
acquisition or abandonment of secured property, cancellation of debt,
contributions to an individual retirement arrangement (IRA), and generally,
payments other than interest and dividends, you are not required to sign the
Certification, but you must provide your correct TIN. (See the Instructions on
page 2.)
- --------------------------------------------------------------------------------
SIGN
HERE SIGNATURE |> DATE |>
- --------------------------------------------------------------------------------
PURPOSE OF FORM. -- A person who is required to file an information return with
the IRS must get your correct taxpayer identification number (TIN) to report,
for example, income paid to you, real estate transactions, mortgage interest you
paid, acquisition or abandonment of secured property, cancellation of debt, or
contributions you made to an IRA.
Use Form W-9 to give your correct TIN to the person requesting it, (the
requester) and, when applicable, to: (1) certify the TIN you are giving is
correct (or you are waiting for a number to be issued), (2) certify you are not
subject to backup withholding, or (3) claim exemption from backup withholding if
you are an exempt payee.
NOTE: If a requester gives you a form other than a W-9 to request your TIN, you
must use the requester's form if it is substantially similar to this Form W-9.
WHAT IS BACKUP WITHHOLDING? -- Persons making certain payments to you must
withhold and pay to the IRS 31% of such payments under certain conditions. This
is called "backup withholding." Payments that may be subject to backup
withholding include interest, dividends, broker and barter exchange
transactions, rents, royalties, nonemployee pay, and certain payments from
fishing boat operators. Real estate transactions are not subject to backup
withholding.
If you give the requester your correct TIN, make the proper certifications, and
report all your taxable interest and dividends on your tax return, payments you
receive will not be subject to backup withholding. Payments you receive will be
subject to backup withholding if :
1. You do not furnish your TIN to the requester, or
2. The IRS tells the requester that you furnished an incorrect TIN, or
3. The IRS tells you that you are subject to backup withholding because you
did not report all your interest and dividends on your tax return
(for reportable interest and dividends only), or
4. You do not certify to the requester that you are not subject to backup
withholding under 3 above (for reportable interest and dividend accounts opened
after 1983 only), or
5. You do not certify your TIN when required. See the Part III instructions
on page 2 for details.
Certain payees and payments are exempt from backup withholding. See the Part
II instructions and the separate INSTRUCTIONS FOR THE
REQUESTER OF FORM W-9.
- --------------------------------------------------------------------------------
Cat. No. 10231X Form W-9 (Rev. 12-96)
<PAGE>
Form W-9(Rev 12-96) Page 2
- --------------------------------------------------------------------------------
PENALTIES
FAILURE TO FURNISH TIN. -- If you fail to furnish your correct
TIN to a requester, you are subject to a penalty of $50 for each such failure
unless your failure is due to reasonable cause and not to willful neglect.
CIVIL PENALTY FOR FALSE INFORMATION WITH RESPECT TO WITHHOLDING. -- If you
make a false statement with no reasonable basis that results in no backup
withholding, you are subject to a $500 penalty.
CRIMINAL PENALTY FOR FALSIFYING INFORMATION. -- Willfully falsifying
certifications or affirmations may subject you to criminal penalties including
fines and/or imprisonment.
MISUSE OF TINs. -- If the requestor discloses or uses TINs in violation of
Federal law, the requester may be subject to civil and criminal penalties.
SPECIFIC INSTRUCTIONS
NAME. -- If you are an individual, you must generally enter the name shown on
your social security card. However, if you have changed your last name, for
instance, due to marriage, without informing the Social Security Administration
of the name change, enter your first name, the last name shown on your social
security card, and your new last name.
If the account is in joint names, list first and then circle the name of the
person or entity whose number you enter in Part I of the form.
Sole Proprietor.--You must enter your INDIVIDUAL name as shown on your social
security card. You may enter your business or "doing business as" name on the
business name line.
Other Entities.--Enter the business name as shown on required Federal tax
documents. This name should match the name shown on the charter or other legal
document creating the entity. You may enter any business, trade, or "doing
business as" name on the business name line.
PART I--TAXPAYER IDENTIFICATION NUMBER (TIN)
You must enter your TIN in the appropriate box. If you are a resident alien and
you do not have and are not eligible to get an SSN, your TIN is your IRS
individual taxpayer indentification number (ITIN). Enter it in the social
security number box. If you do not have an ITIN, see HOW TO GET A TIN below.
If you are a sole proprietor and you have an EIN, you may enter either your
SSN or EIN. However, using your EIN may result in unnecessary notices to the
requester.
Note: See the chart on this page for further clarification of name and TIN
combinations.
HOW TO GET A TIN.-- If you do not have a TIN, apply for one immediately. To
apply for an SSN, get Form SS-5 from your local Social Security Administration
office. Get Form W-7 to apply for an ITIN or Form SS-4 to apply for an EIN.
You can get Forms W-7 and SS-4 from the IRS by calling 1-800-TAX-FORM
(1-800-829-3676).
If you do not have a TIN, write "Applied For" in the space for the TIN, sign and
date the form, and give it to the requester. For interest and dividend payments,
and certain payments made with respect to readily tradable instruments, you will
generally have 60 days to get a TIN and give it to the requester. Other payments
are subject to backup withholding.
NOTE: Writing "Applied For" means that you have already applied for a TIN OR
that you intend to apply for one soon.
PART II--FOR PAYEES EXEMPT FROM BACKUP WITHHOLDING
Individuals (including sole proprietors) are NOT exempt from backup withholding.
Corporations are exempt from backup withholding for certain payments, such as
interest and dividends. For more information on exempt payees, see the separate
Instructions for the Requester of Form W-9.
If you are exempt from backup withholding, you should still complete this form
to avoid possible erroneous backup withholding. Enter your correct TIN in Part
I, write "Exempt" in Part II, and sign and date the form.
If you are a nonresident alien or a foreign entity not subject to backup
withholding, give the requester a completed FORM W-8, Certificate of Foreign
Status.
PART III--CERTIFICATION
For a joint account, only the person whose TIN is shown in Part 1 should sign
(when required).
1. INTEREST, DIVIDEND, AND BARTER EXCHANGE ACCOUNTS OPENED BEFORE 1984 AND
BROKER ACCOUNTS CONSIDERED ACTIVE DURING 1983. You must give your correct TIN,
but you do not have to sign the certification.
2. INTEREST, DIVIDEND, BROKER, AND BARTER EXCHANGE ACCOUNTS OPENED AFTER 1983
AND BROKER ACCOUNTS CONSIDERED INACTIVE DURING 1983. You must sign the
certification or backup withholding will apply. If you are subject to backup
withholding and you are merely providing your correct TIN to the requester, you
must cross out item 2 in the certification before signing the form.
3. REAL ESTATE TRANSACTIONS. You must sign the certification. You may cross
out item 2 of the certification.
4. OTHER PAYMENTS. You must give your correct TIN, but you do not have to sign
the certification unless you have been notified that you have previously given
an incorrect TIN. "Other payments" include payments made in the course of the
requester's trade or business for rents, royalties, goods (other than bills for
merchandise), medical and health care services (including payments to
corporations), payments to a nonemployee for services (including attorney and
accounting fees), and payments to certain fishing boat crew members.
5. MORTGAGE INTEREST PAID BY YOU, ACQUISITION OR ABANDONMENT OF SECURED
PROPERTY, CANCELLATION OF DEBT, OR IRA CONTRIBUTIONS. You must give your correct
TIN, but you do not have to sign the certification.
PRIVACY ACT NOTICE
Section 6109 of the Internal Revenue Code requires you to give your correct TIN
to persons who must file information returns with the IRS to report interest,
dividends, and certain other income paid to you, mortgage interest you paid, the
acquisition or abandonment of secured property, cancellation of debt, or
contributions you made to an IRA. The IRS uses the numbers for identification
purposes and to help verify the accuracy of your tax return. The IRS may also
provide this information to the Department of Justice for civil and criminal
litigation and to cities, states, and the District of Columbia to carry out
their tax laws.
You must provide your TIN whether or not you are required to file a tax return.
Payers must generally withhold 31% of taxable interest, dividend, and certain
other payments to a payee who does not give a TIN to a payer. Certain penalities
may also apply.
WHAT NAME AND NUMBER TO GIVE THE REQUESTER
- ----------------------------------------------------------------------
FOR THIS TYPE OF ACCOUNT: GIVE NAME AND SSN OF:
- -------------------------------- ------------------------------------
1. Individual The individual
2. Two or more individuals The actual owner of the
(joint account) account or, if combined
funds, the first individual
on the account/1/
3. Custodian account of The minor/2/
a minor (Uniform Gift
to Minors Act)
4. a. The usual The grantor-trustee/1/
revocable savings
trust (grantor is
also trustee)
b. So-called trust The actual owner/1/
account that is not
a legal or valid trust
under state law
5. Sole proprietorship The owner/3/
- -----------------------------------------------------------------------
FOR THIS TYPE OF ACCCOUNT: GIVE NAME AND EIN OF:
- ------------------------------ -------------------------------------
6. Sole proprietorship The owner/3/
7. A valid trust, estate, or Legal entity/4/
pension trust
8. Corporate The corporation
9. Association, club, The organization
religious, charitable,
educational, or other
tax-exempt
organization
10. Partnership The partnership
11. A broker or registered The broker or nominee
nominee
12. Account with the The public entity
Department of
Agriculture in the name
of a public entity (such
as a state or local
government, school
district, or prison) that
receives agricultural
program payments
- --------------------------------------------------------------------------------
/1/List first and circle the name of the person whose number you furnish.
If only one person on a joint account has an SSN, that person's number must
be furnished.
/2/Circle the minor's name and furnish the minor's SSN.
/3/You must show your individual name, but you may also enter your business or
"doing business as" name. You may use either your SSN or EIN (if you have
one).
/4/List first and circle the name of the legal trust, estate, or pension
trust. (Do not furnish the TIN of the personal representative or trustee
unless the legal entity itself is not designated in the account title.)
Note: If no name is circled when more than one name is listed, the number will
be considered to be that of the first name listed.
<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 May , 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
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 or (612) 244-1197
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>
Certificate Number(s)
(if known) of Existing
Notes or Account Aggregate Principal
Number at the Book- Aggregate Principal Amount Tendered
Entry Facility Amount Represented (if less than all)*
- -----------------------------------------------------------------------------------
<S> <C> <C>
- -----------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------
</TABLE>
* Unless otherwise indicated, the holder will be deemed to have tendered the
full aggregate principal amount represented by such existing notes.
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 May ,
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, Series A.
[_]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 interpretations of the
staff of the Securities and Exchange Commission set forth in no-action letters
issued to third parties (b) to agree, on behalf of the undersigned, as set
forth in the Letter of Transmittal; and (c) to take such other actions 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: ________________________________________________________________________
