-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, F020WLfAFk4JVo0IwWnptPvsY88e8k2AmvXDF2CblJsv0EEQ1d0VqTDJq8VX46y7 mFbZdOba1l5gI5qlcq7UvQ== 0001005477-97-000973.txt : 19970401 0001005477-97-000973.hdr.sgml : 19970401 ACCESSION NUMBER: 0001005477-97-000973 CONFORMED SUBMISSION TYPE: 10-K405 PUBLIC DOCUMENT COUNT: 6 CONFORMED PERIOD OF REPORT: 19961231 FILED AS OF DATE: 19970331 SROS: NONE FILER: COMPANY DATA: COMPANY CONFORMED NAME: REMINGTON PRODUCTS CO LLC CENTRAL INDEX KEY: 0001017710 STANDARD INDUSTRIAL CLASSIFICATION: ELECTRIC HOUSEWARES & FANS [3634] STATE OF INCORPORATION: DE FILING VALUES: FORM TYPE: 10-K405 SEC ACT: 1934 Act SEC FILE NUMBER: 333-07429 FILM NUMBER: 97571475 BUSINESS ADDRESS: STREET 1: 60 MAIN STREET CITY: BRIDGEPORT STATE: CT ZIP: 06604 BUSINESS PHONE: 2033674400 10-K405 1 FORM 10-K405 SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-K |X| ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 - For the fiscal year ended December 31, 1996. OR |_| TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934. Commission file number 333-07429 Remington Products Company, L.L.C. ---------------------------------- (Exact name of registrant as specified in its charter) Delaware 06-1451079 -------- ------------------- (State or other jurisdiction of (IRS Employer incorporation or organization) Identification No.) 60 Main Street, Bridgeport, Connecticut 06604 - --------------------------------------- ----- (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code: (203) 367-4400 Securities registered pursuant to Section 12(b) of the Act: Title of Each class Name of each exchange on which registered None None ------------------- ----------------------------------------- Securities registered pursuant to Section 12(g) of the Act: 11% Series B Senior Subordinated Notes due 2006 ----------------------------------------------- (Title of Class) Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes |X| No |_| Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. |X| PART I ITEM 1. Business General Remington Products Company, L.L.C. (the "Company" or "Remington") is a major manufacturer and marketer of men's and women's electrical personal care appliances. The Company distributes on a worldwide basis men's and women's electric shavers and accessories, women's personal care appliances, including hairsetters, curling irons and hairdryers, men's electric grooming products, travel products and other small electric consumer appliances. The Company is a Delaware limited liability company that will continue in existence until December 31, 2016 or dissolution prior thereto as determined under the Company's LLC Agreement. Prior to May 23, 1996, the Company operated as Remington Products Company ("RPC"), a Delaware general partnership, of which RPI Corp. (formerly known as Remington Products, Inc.) ("RPI"), a company controlled by Mr. Victor K. Kiam, II and Remsen Partners ("Remsen"), an entity controlled by Mr. Isaac Perlmutter, were each 50% partners. On May 23, 1996 (the "Closing Date"), there was a reorganization of the Company (the "Reorganization"), pursuant to which: (i) RPC made a cash distribution in an amount of $56.9 million to Remsen (less estimated excluded obligations of $6.6 million) and $48.0 million to RPI (less estimated excluded obligations of $7.1 million and net of a $10.9 million reduction pursuant to the preliminary working capital adjustment); (ii) Vestar Shaver Corp. ("Vestar Corp. I") and Vestar Razor Corp. ("Vestar Corp. II" and, together with Vestar Corp. I, the "Vestar Members"), corporations controlled by Vestar Equity Partners, L.P. ("Vestar"), purchased Remsen's interest in the Company for $33.4 million (the "Vestar Investment"); (iii) certain members of senior management of the Company (the "Management Investors") acquired an equity interest of $1.1 million (including a cash purchase of $0.86 million and assuming exercise of certain management options with an aggregate exercise price of $0.26 million) in the Company; (iv) the Company paid estimated excluded obligations of approximately $10.7 million; (v) 2 RPI retained an equity investment in the Company with an implied value of $35.4 million (the "Kiam Investment and, collectively with the Vestar Investment and the Management Investment, the "Equity Investment"); and (vi) RPC was merged with and into the Company. In addition, as part of the Reorganization, $41.3 million of existing indebtedness of RPC was refinanced. The funds required to consummate the Reorganization were provided by an initial offering by the Company and its wholly owned subsidiary, Remington Capital Corp. ("Capital"), of $130 million of 11% Senior Subordinated Notes due 2006 to qualified institutional buyers pursuant to Rule 144A under the Securities Act of 1933, as amended, borrowings under a Senior Credit Agreement and the cash proceeds of the Equity Investments. On November 4, 1996, pursuant to a Registration Statement on Form S-4 under the Securities Act of 1933, the Company completed an offer to exchange its 11% Series B Senior Subordinated Notes due 2006 for all of the outstanding 11% Senior Subordinated Notes due 2006 issued in connection with the reorganization. Description of Business Products Electric Shavers. The Company is a leading distributor of men's and women's electric shavers. The Company's primary men's electric shaver lines are the Triple Foil(TM), Dual Foil/XLR(TM) , each with the Micro-Screen(R) cutting system, and rotary shavers while the primary women's electric shaver lines are the Ladies' wet/dry, the WER (Women's Electric Razor) and rotary shavers. The Company also manufactures and distributes electric shaver accessories consisting of shaver replacement parts (primarily foils and cutters), preshave products and cleaning agents. Electric shavers accounted for 37%, 44% and 47% of the Company's total net sales for the years ended December 31, 1996, 1995 and 1994 respectively. Women's Personal Care Appliances. Remington entered the women's personal care appliance market in the United States and expanded its presence overseas through the acquisition in December 1993 of the Clairol personal care appliance business from Bristol-Myers Squibb Company. These products consist primarily of hairsetters, hairdryers, make-up mirrors, curling irons and curling brushes. The 3 Company's hairsetter products include flocked rollers (both dry and mist) and Remington Express Set(R) hairsetter, which heats in 90 seconds, the Smart Setter(R) hairsetter, which incorporates a new proprietary technology that indicates to users when optimum heat levels have been reached by changing the color of the rollers. Women's personal care appliances accounted for 35%, 30% and 27% of the Company's total net sales for the years ended December 31, 1996, 1995 and 1994, respectively. Men's Grooming Products. Men's grooming products consist of beard and mustache trimmers, nose hair and ear hair trimmers and home haircut kits. Other Products. Remington's travel appliances consist of products that provide personal grooming and other general household functions for domestic and international travel. These items include travel hairdryers, steamers, irons, voltage converter/adapter plugs and shavers. In the home health appliance product category, Remington sells foot spas and back massagers outside the United States. Distribution The Company's products are sold in the United States and internationally in over 85 countries through mass merchandisers, catalog showrooms, drug store chains and department stores in addition to the Company's 96 service stores. In the United States, the Company sells products through mass-merchant retailers such as Wal-Mart, K-Mart and Target, department stores such as Sears, catalog showrooms such as Service Merchandise, drug store chains including Walgreens, Eckerd and Revco, and Remington's own service stores. Throughout the United States, the Company's products are sold in excess of 10,000 retail outlets. Wal-Mart accounted for 17%, 16% and 16% of the Company's net sales during the years ended December 31, 1996, 1995 and 1994. No other customer has accounted for more than 10% of the Company's net sales during the years ended December 31, 1996, 1995, and 1994. Service Stores Remington opened its first service store in 1981. As of March 15, 1997, the 4 Company owned and operated a chain of 96 service stores with 84 in the United States, nine in the United Kingdom and three in Australia. During 1996, the Company opened a total of four permanent and 12 seasonal service stores in the United States, two permanent stores in the United Kingdom and acquired a chain of three stores in Australia. The stores in the United States are in many of the major markets with concentrations on the East Coast and in the major cities of the South and West. The majority of the stores are located in shopping malls, outlet malls and in prime locations within large metropolitan areas. The stores sell and service a variety of Remington and non-Remington shavers, knives, scissors, clocks, personal care appliances and related products. The service stores also oversee sales of replacement parts to approximately 300 independent authorized shaver service dealers across the United States. In 1996, the Company's service stores generated worldwide net sales of $38.6 million, with $33.7 million in the U.S. and $4.9 million internationally. Remington products accounted for approximately 50% of these net sales. Manufacturing Operations Remington conducts all in-house manufacturing at its Bridgeport, Connecticut facility. The Company assembles foil shavers and manufactures foil cutting systems in Bridgeport using proprietary cutting technology and a series of specially designed machines. Remington's Bridgeport facility can produce in excess of 30,000 shavers a day, yet is flexible enough to operate economically at much lower capacities. The electric shaver business is highly seasonal, with significant production swings during the course of the year. As a result of such swings, Remington's manufacturing process has been structured to utilize temporary workers. As a result of these factors, during peak periods approximately 30% of Remington's work force (excluding that of the service stores) is composed of temporary workers. Suppliers A substantial portion of the Company's finished goods inventories are manufactured for the Company by suppliers located in China, Japan and Thailand. In determining whether to manufacture products in-house or source them from third party suppliers, the Company balances the potential cost savings in labor, materials and overhead that a foreign manufacturer can provide with the flexibility, quality control and protection of confidentiality inherent in in-house production. While Remington sources a large portion of its materials and products from third-party suppliers, it continues to manufacture its triple 5 foil and certain other shavers in-house and maintains ownership of tools and molds used by many of its suppliers. The Company's three most significant suppliers, Izumi Products, Inc. ("Izumi"), Raymond International and Fourace Industries, Ltd., accounted for approximately 44% of the Company's overall cost of sales in 1996. These three suppliers' manufacturing facilities are located in China and Japan. Since purchases by Remington account for a significant portion of the overall sales of these suppliers, the Company has generally been able to negotiate favorable purchase terms. Remington has had a relationship with these suppliers for many years and management considers its present relationships to be good. Research and Product Development Research and development efforts at Remington allow the Company to maintain its unique manufacturing strength in cutting systems for shavers. The Company is currently concentrating its efforts on a new premium line of shavers including foil improvements and new cutting and trimmer configurations. The Company also devotes resources to the development of new technology for women's personal care products, including hairsetters, hairdryers and curling irons. Patents and Trademarks The Company owns approximately 180 patent and patent applications for both design and utility that are maintained in approximately 40 countries. The Company's patents cover electric shavers, cutting and trimming mechanisms and women's personal care products such as hairsetters, hairdryers and curling irons. In addition, the Company maintains over 300 different trade names in approximately 100 countries covering a variety of products. These trade names have resulted in the issuance of over 1,300 registered trademarks. As a result of the common origins of the Company and Remington Arms, the Remington mark is owned by each company with respect to its principal products as well as associated products. Thus, the Company owns the Remington mark for shavers, shaver accessories, grooming products and health care products, while Remington Arms owns the mark for firearms, sporting goods and products for industrial use, including industrial hand tools. The terms of a 1986 agreement 6 between the Company and Remington Arms provided for their respective rights to use the Remington trademark on products which are not considered "principal products of interest" for either company. A separate company, Remington Licensing Corporation, owns the Remington trademark in the U.S. with respect to any overlapping uses and the Company and Remington Arms are each licensed to use the mark in their respective areas of interest. The Company retains the Remington trademark for nearly all products which it believes can benefit from the use of the brand name in the Company's distribution channels. The Company has aggressively enforced its ownership of the Remington brand name. Competition The Company believes that the markets for all of its product lines are highly competitive and that competition for retail sales to consumers is based on several factors, including brand name recognition, value, quality, price and availability. Primary competitive factors with respect to selling such products to retailers are brand reputation, product categories offered, broad coverage within each product category, support and service in addition to price. Remington competes with established companies, several of which have substantially greater resources than those of the Company. There are no substantial regulatory barriers to entry for new competitors in the electric personal appliance industry. However, suppliers that are able to maintain, or increase, the amount of retail shelf space allocated to their respective products may gain a competitive advantage. The Company believes that the allocation of space by retailers is influenced by many factors, including brand name recognition by consumers, product quality and prices, service levels provided by the supplier and the supplier's ability to support promotions. The rotary shaver market is significant outside the United States. The future expansion of sales of the Company's rotary shavers outside the United States will be affected by, among other factors, the outcome of ongoing legal actions against Philips Electronics, N.V. ("Philips"). Philips holds patents and trademarks outside the United States on certain of its shaver designs that restrict the Company from entering these markets. The Company is currently challenging such trademarks and patents in the United Kingdom. During 1996, in Canada, the Company successfully challenged certain of Philips' trademarks. 7 Employees As of December 31, 1996, the Company employed approximately 1,150 people in the United States and abroad of which approximately 240 were employed part-time. None of the Company's employees are represented by a union. Remington believes relations with its employees are good. Environmental Matters The Company's manufacturing operations are subject to federal, state and local environmental laws and regulations. The Company believes it is in substantial compliance with all such environmental laws which are applicable to its operations. The Company has reported to the Connecticut Department of Environmental Protection that it has detected petroleum and solvent compounds in soil and ground water samples taken from its Bridgeport facility at levels which may require further investigation or cleanup. In addition to its ongoing program of environmental compliance, the Company has provided reserves to cover the anticipated costs of remediation which may be necessary at its Bridgeport facility. The Company believes that the costs for any remediation activities which are eventually undertaken would not be material to the Company's financial position and results of operations. International Operations and Distribution Remington's international operations (excluding export sales from the U.S.) generated approximately 39%, 36% and 33% of the Company's net sales in 1996, 1995 and 1994, respectively. The Company's international network of subsidiaries and distributors currently extends to over 85 countries worldwide. The Company markets products throughout Europe, the Middle East, Africa, Asia and a portion of South America through its subsidiary in the United Kingdom, and distributes products to Japan, Central America and the remainder of South America from its United States headquarters. The Company distributes its products directly in the United Kingdom, Australia, Canada, Germany, France, New Zealand and Ireland. In all other parts of the world the Company distributes its products through strategic alliances with local distributors. Remington enjoys leading market positions in many personal grooming products in the United Kingdom and Australia, while also having a market presence in Canada. As in the United States market, the primary asset of the Company's international operations is the 8 Remington brand name. The Company distributes products internationally through electric product stores, drug stores, specialized shaver shops, catalog showrooms, department stores, mail order and television and the Company's service stores. As in the United States, Remington has established direct relationships with many of the leading international retailers. Additional financial information relating to Remington's international operations is set forth in Note 14 (Geographic Information) of the "Notes to Consolidated Financial Statements" of the Company appearing elsewhere herein. ITEM 2. Properties The Company's executive offices and sole manufacturing facility are located at 60 Main Street, Bridgeport, Connecticut, 06604. The following is additional information concerning the principal facilities of the Company. Facility Function Square Feet - -------- -------- ----------- Bridgeport, CT Headquarters (Owned) 40,000 Bridgeport, CT Manufacturing (Owned) 167,000 Milford, CT Warehouse (Leased) 100,000 Northampton, England Office and Warehouse (Leased) 52,000 In addition to these properties, Remington leases offices and warehouse space in Canada, United Kingdom, Germany, France, Australia and New Zealand, and 96 service stores, of which 84 are in the United States, nine are in the United Kingdom and three are in Australia. 9 ITEM 3. Legal Proceedings The Company and Philips are engaged in litigation in the United Kingdom relating to certain trademarks and designs issued to Philips relating to Philips' triple head rotary shaver. In these proceedings, Philips alleged infringement of its trademarks and designs by the Company and the Company counter-claimed that Philips' trademark and design registrations are invalid. Related litigation in Canada initiated by the Company with respect to Philips' trademarks was determined in favor of the Company in 1996. The costs of the U.K. litigation are, in certain circumstances, shared with Izumi, the Company's supplier of rotary shavers. Izumi is also pursuing actions against Philips in Sweden to contest the validity of certain of Philips' trademarks. If such litigation is determined adversely to the Company or Izumi, the Company's ability to sell rotary shavers in such countries could be limited or prohibited. In 1996, the Company's net sales of rotary shavers in Europe were not material. In October 1996, the Company and its wholly owned United Kingdom subsidiary ("Remington UK"), settled all litigation with Braun AG, Braun (UK) Limited and Braun Inc. which was pending in the United Kingdom Patent Court and the U.S. District Court for the District of Massachusetts. The litigation, which was commenced against Remington UK in July 1995 and against the Company in January 1996, alleged that Remington UK infringed several United Kingdom patents owned by Braun relating to a volumizing attachment and pulsating attachment packaged with certain hairdryers sold by Remington UK and that the Company infringed a U.S. patent corresponding to the UK patent relating to the same volumizing attachment. The settlement, which had no material effect on the Company's financial position or results of operations, required certain minor modifications in the volumizing attachment and granted to the Company a license on the pulsating attachment. In December 1996, a suit was filed against the Company and Pentalpha Enterprises, Ltd., in the U.S. District Court for the Eastern District of California by Dickson Industries Co., Ltd. and Charles W. Howard. The suit alleges that the Company infringed a patent owned by Mr. Howard, which was licensed to Dickson, relating to certain curling irons sold by the Company and manufactured by Pentalpha. Plaintiffs are seeking a temporary injunction to prohibit the Company from selling the allegedly infringing curling irons and damages. The parent company of Pentalpha has agreed to indemnify the Company for all losses and 10 expenses arising from the claimed infringement. The Company has denied that the curling irons in question infringes the patent and intends to defend the action fully and vigorously. The Company is a party to other lawsuits and administrative proceedings that arose in the ordinary course of business. Although the final results in such suits and proceedings cannot be predicted, the Company presently believes that any liability that may ultimately result will not have a material adverse effect on the Company's financial position or results of operations. ITEM 4. Submission of Matters to a Vote of Securities Holders No matters were submitted to a vote of securities holders. PART II ITEM 5. Market for Registrant's Common Equity and Related Stockholder Matters (a) Market Information All of the Company's outstanding equity securities are privately held. (b) Holders As of March 1, 1997, there were six holders of the common equity securities of the Company. (c) Dividends No cash distributions have been made on the common and preferred equity of the Company since the Closing Date. Prior to the reorganization, the Company operated as a general partnership and cash distributions were made to the partners. In addition, the Company's long-term debt arrangements, which are discussed in note 7 of the "Notes to Consolidated Financial Statements" of the Company 11 appearing elsewhere herein, significantly restrict the payment of dividends. (d) Recent Sales of Unregistered Securities On the Closing Date, in connection with the Reorganization, the Company issued a total of $62 million 12% Series A Preferred Equity to the Vestar Members and RPI and 77,420 common units at a price of $100 per unit to the Vestar Members, RPI and certain Management Investors in private transactions exempt from registration under Rule 701 of the Securities Act of 1933, as amended. Item 6. Selected Financial Data The following table summarizes selected financial information and should be read in conjunction with "Management's Discussion and Analysis of Financial Condition and Results of Operations" and the Financial Statements and accompanying notes thereto appearing elsewhere herein (in thousands):
Successor Predecessor --------- ---------------------------------------------------------------------------------------- 31 Weeks 21 Weeks Year Ended 3 Months Year 2 Months 10 Months Ended Ended December 31, Ended Ended Ended Ended Dec. 31, May 23, --------------------- Dec. 31, Sept. 30 Sept. 30 July 25 1996 1996 1995 1994 1993 1993 1992 1992 --------- -------- -------- -------- -------- -------- -------- --------- Statement of Operations Data: Net sales $ 185,286 $ 56,713 $255,323 $261,446 $ 71,152 $156,665 $ 32,456 $ 128,908 Operating income (loss) 12,508 (16,951) 26,516 21,228 5,459 7,681 4,187 2,294 Interest expense 12,164 2,228 7,604 6,414 1,248 4,066 1,340 8,246 Net income (loss) (3,172) (18,191) 17,240 14,725 4,024 3,021 2,559 (9,531) Balance Sheet Data (at period end): Working capital $ 77,860 N/A $ 47,223 $ 62,862 $ 70,164 $ 46,935 $ 1,603 (59,441) Total assets (1) 214,823 N/A 170,922 160,543 175,567 107,027 115,679 73,081 Total debt 171,631 N/A 56,990 55,093 71,931 41,743 45,997 62,414 Cumulative Preferred Equity Dividend (2) 4,576
12 - ---------- (1) The significant increase in assets is a result of the acquisition of the assets and liabilities of Clairol's personal care appliance business in December 1993. (2) Dividend payments are subject to restrictions by the terms of the Company's debt agreements. ITEM 7. Management's Discussion and Analysis of Financial Condition and Results of Operations Overview The Company manufactures and markets men's and women's electrical shavers and personal care appliances. In addition to its U.S. merchandising and manufacturing operations, the Company has merchandising subsidiaries in the United Kingdom, Canada, Germany, Australia and New Zealand and a branch office in France. The Company markets products throughout Europe, the Middle East, Africa, Asia and a portion of South America through its subsidiary in the United Kingdom and distributes products to Japan, Central America and the remainder of South America from its U.S. headquarters. In 1995, the Company's prior owners initiated efforts to sell the Company. The Company received several proposals from interested parties other than Vestar but was unable to reach a definitive agreement at a price and on terms acceptable to both RPI and Remsen. The Reorganization represents the culmination of this sale process. As a result of this sale process, the Predecessor Company incurred and expensed bonuses, contract termination and closing costs in the amount of $10.9 million and $0.8 million during 1996 and 1995, respectively. Results of Operations The following table sets forth the Company's statement of operations, including its net sales by its U. S. operations (including export sales from the U.S.), U.S. service stores, and international operations (including service stores in Canada, the United Kingdom and Australia) and the Company's results of operations as a percentage of net sales for the twelve months ended December 31, 1996 and the years ended December 31, 1995 and 1994. To facilitate comparison of the operating results of the periods set forth below, results of operation for the twelve months ended December 31, 1996 were obtained by combining, without adjustment, the results of operations of the predecessor company from January 1, 1996 to May 23, 1996 (the "Predecessor Period") with those of the Company for the period from May 24, 1996 to December 31, 1996 (the "Successor Period"). The discussion should be read in connection with the Financial Statements and accompanying notes thereto appearing elsewhere herein. 13
Predecessor and Successor Predecessor ------------------------- ----------- 12 Months Ended Year Ended December 31, December 31, 1996 1995 1994 ----------------- ----------------- ------------------ $ % $ % $ % ------ ------ ------ ------ ------ ------ Net Sales: U.S $113.2 46.7 $131.2 51.4 $143.8 55.0 U.S. service stores 33.7 13.9 32.9 12.9 32.4 12.4 International 95.1 39.4 91.2 35.7 85.2 32.6 ------ ------ ------ ------ ------ ------ 242.0 100.0 255.3 100.0 261.4 100.0 Cost of sales 152.7 63.1 143.2 56.1 150.1 57.4 ------ ------ ------ ------ ------ ------ Gross profit 89.3 36.9 112.1 43.9 111.3 42.6 Selling, general and administrative 91.9 37.9 83.9 32.9 88.5 33.9 Intangible amortization 1.9 0.8 1.7 0.6 1.6 0.6 ------ ------ ------ ------ ------ ------ Operating income (loss) (4.5) (1.8) 26.5 10.4 21.2 8.1 Interest expense 14.4 5.9 7.6 3.0 6.4 2.5 Other expense (income) 0.3 0.1 0.4 0.2 (1.0) 0.4 ------ ------ ------ ------ ------ ------ Income (loss) before income taxes (19.2) (7.9) 18.5 7.2 15.8 6.0 Provision for income taxes 2.2 0.9 1.3 0.5 1.1 0.4 ------ ------ ------ ------ ------ ------ Net income (loss) $(21.4) (8.8) $ 17.2 6.7 $ 14.7 5.6 ====== ====== ====== ====== ====== ======
Twelve Months December 31, 1996 compared to the year ended December 31, 1995 Net Sales. Net sales for the year ended December 31, 1996 were $242.0 million compared to $255.3 million for the previous year, a decrease of 5.0%. The decrease in net sales in 1996 was due to a decline in net sales in the United States to $113.2 million in 1996 from $131.1 million in 1995 and was partially offset by a 4.0% increase in international net sales to $95.1 million in 1996 from $91.2 million in 1995. 14 Net sales in the United States were down 14% primarily as a result of a decline in hair dryer sales due to competitive pricing and the late arrival of certain new curling irons which delayed introduction past the key fall season. In addition, lower average pricing of shaver products and inventory reduction programs instituted by certain major retailing customers also negatively impacted sales in 1996. Net sales through the Company's U.S. service stores increased 2.0% to $33.7 million in 1996 from $32.9 million in 1995. Same store sales declined 1.2% from 1995 to 1996. The decrease in same store net sales was due to a decision to eliminate certain knife product offerings and the impact of five fewer shopping days in the Thanksgiving to Christmas holiday selling season. Sales increased overall due to the opening of 4 permanent stores and 12 seasonal stores for a total of 88 stores open through the 1996 holiday shopping season. The seasonal stores were operated on a temporary basis with no future lease commitment and 8 were closed before 12/31/96. International net sales increased 4.0% to $95.1 million in 1996 from $91.3 million in 1995. Most of this increase occurred in Australia which increased 22.4% in 1996 as a result of volume increases across most product lines and the acquisition of a chain of 3 service stores in July 1996. Net sales in the United Kingdom increased 5.1% in 1996 due to strong sales of personal care products which more than offset a modest decline in shaver and accessory sales. These results were somewhat offset by lower net sales in Germany and Canada due to continued weakness in the German economy and the bankruptcy of Canada's largest customer in July 1996. Gross Profit. Gross profit decreased to $89.3 million, or 36.9% of net sales, in 1996 from $112.1 million or 43.9% of net sales in 1995. The largest factor contributing to the decline in margin was the lack of new shaver product offerings in the U.S., which resulted in reduced selling prices on certain shaver lines and higher costs associated with promotional gifts. Margins were down slightly in the United Kingdom, Germany and Canada, but were offset by strength in Australia. In addition, approximately 2.0% of the gross profit margin percentage decline is due to inventory valuation adjustments. Selling, General and Administrative. Selling, general and administrative expenses increased to $91.9 million in 1996, or 37.9% of net sales, from $83.9 million, or 32.9% of net sales in 1995. The increase was primarily due to the $10.9 million in non-recurring expenditures related to the Reorganization. In addition, advertising expenses decreased due to the year to year difference in new product introductions and selling and marketing expenses increased slightly due to costs associated with new service stores. 15 Operating Income (Loss). Operating income decreased to a loss of $(4.5) million, or (1.8)% of net sales, in 1996 from income of $26.5 million, or 10.4% of net sales, in 1995. Interest Expense. Interest expense increased to $14.4 million in 1996 from $7.6 million in 1995. Approximately $8.7 million of this increase is due to the new senior subordinated notes issued May 23, 1996. The remaining difference is primarily attributable to lower rates on the refinanced term and revolving credit borrowings. Provision for Income Taxes. The provision for income taxes was $2.2 million in 1996 as compared to $1.3 million in 1995. The 1996 provision for foreign income taxes increased by $0.8 million primarily due to the benefit in 1995 from the utilization of foreign net operating loss carryforwards and the reversal of valuation allowances on foreign deferred tax asset balances. Year Ended December 31, 1995 compared to Year Ended December 31, 1994 Net Sales. Net sales for the year ended December 31, 1995 were $255.3 million compared to $261.4 million for the previous year, a decrease of 2.3%. The decrease in net sales in 1995 was due to a decline in net sales in the United States to $131.2 million in 1995 from $143.8 million in 1994, partially offset by a 7.0% increase in international net sales to $91.2 million in 1995 from $85.2 million in 1994. The decline in the United States was almost entirely attributable to a decrease in electric shaver and shaver accessory sales. Management believes that this decrease was a result of: (I) a decline in the net sales to certain of the Company's smaller customers due to uncertainty regarding the Company's ownership status, (ii) a conservative buying policy on the part of many of the Company's customers who anticipated a disappointing Christmas retail season, and (iii) a reduction in net sales to Wal-Mart principally due to a reduction by Wal-Mart in its inventory levels and the consolidation of the number of its warehouses stocking shavers. Despite these inventory management initiatives, Wal-Mart point of sale data indicate that retail sales of the Company's products increased approximately 17% in 1995 from 1994. Net sales through the Company's U.S. service stores increased to $32.9 million in 1995 from $32.4 million in 1994, an increase of 1.5%. Same store sales increased 7.1% from 1994 to 1995. The increase in same store net sales was offset by the closing of six stores with one new store opening in 1995 and the discontinuation of a direct mail catalog that was distributed in 1994. 16 International net sales increased 7.0% to $91.2 million in 1995 from $85.2 million in 1994. Most of this increase occurred in the United Kingdom as a result of the opening of two new service stores in 1995, an increase in net sales to United Kingdom export markets and the strengthening of the Pound Sterling relative to the U.S. dollar. Substantial increases in net sales of women's personal care products and men's grooming products more than offset a modest decline in shaver and accessory sales. Gross Profit. Gross profit increased to $112.1 million, or 43.9% of net sales, in 1995 from $111.3 million, or 42.6% of net sales, in 1994 despite the decline in worldwide net sales. The increase in gross profit was primarily attributable to the elimination of certain charges incurred in 1994, including: (i) a $2.2 million inventory writedown of a discontinued product, (ii) approximately $1.5 million of air freight expenses incurred due to manufacturing delays that occurred at a former supplier, and (iii) close-out sales of Clairol branded products prior to changing the brand name to Remington. These eliminations were offset in part by a decrease in gross profit due to the increased percentage of net sales generated by women's personal care products, which typically sell at lower gross margins than the Company's traditional shaver products. Selling, General and Administrative. Selling, general and administrative expense decreased to $83.9 million, or 32.9% of sales in 1995 from $88.5 million, or 33.9% of sales in 1994. This decrease was primarily attributable to a $2.9 million reduction in advertising expenditures during the 1995 Christmas retail season as a result of below-normal purchases by the Company's customers in anticipation of disappointing Christmas retail sales in the United States. Decreases in general and administrative expenses were the result of headcount reductions and purchasing efficiencies on certain services. Operating Income. Operating income increased to $26.5 million, or 10.4% of net sales, in 1995 from $21.2 million, or 8.1% of net sales, in 1994. Interest Expense. Interest expense increased to $7.6 million in 1995 from $6.4 million in 1994. Approximately $0.8 million of this increase was primarily due to an increase in interest rates in 1995 from 1994. In addition, average borrowings increased in 1995 by $4.2 million due to an approximate $13.2 million increase in average inventories. Average inventories were higher in 1995 due to the aforementioned decline in net sales which occurred after production schedules and inventory purchases had been committed. Provision for Income Taxes. The provision for income taxes was $1.3 million in 1995 as compared to $1.1 million in 1994. The 1995 provision for foreign income taxes was reduced 17 by $1.3 million due to utilization of foreign net operating loss carryforwards and an additional $0.6 million for the reversal of valuation allowances on 1995 foreign deferred tax asset balances. Due to improvements in operating performance at the Company's United Kingdom subsidiary, management believes such deferred tax assets are likely to be realized in future periods. Effects of Changes in Exchange Rates The Company's results of operations are affected by changes in exchange rates as the Company prices its products in Europe, Canada and Australia in local currency. While many of the Company's selling and distribution costs are also denominated in these currencies, a large portion of the product costs are U.S. dollar denominated. As a result, a decline in the value of the U.S. dollar relative to these other currencies can have a favorable effect on the profitability of the Company and, conversely, an increase in the value of the U.S. dollar relative to these other currencies can have a negative effect on the profitability of the Company. The Company takes precautions against these fluctuations by entering into foreign exchange forward contracts, which, in effect, lock in the cost for products the Company's foreign subsidiaries purchase. The Company experienced a $1.5 million unrealized loss as of December 31, 1996 related to marking certain forward contracts to market. This loss was somewhat offset by realized and unrealized transaction gains. Liquidity and Capital Resources During the twelve-month period ended December 31, 1996 and the years ended 1995 and 1994, the Company generated approximately $6.0 million, $0.7 million and $14.8 million, respectively, in cash from operating activities. The increase in 1996 net cash flows from operating activities is principally due to a decrease in receivables of $13.8 million, increases in accounts payable of $6.6 million and accrued liabilities of $9.8 million offset by an increase in inventory of $10.9 million during 1996 as compared to 1995. The decrease in receivables and increase in inventories is largely due to the lower sales levels in 1996. The Company's operations are not capital intensive. During 1996, 1995 and 1994, the Company purchased property, plant and equipment of $3.7 million, $3.3 million and $4.4 million, respectively. The Company's 1997 capital expenditure budget is $7.0 million, of which approximately $3.0 million will be used for purchases of tools and molds for new products. During 1996, the Company repaid aggregate principal amounts on term loans of $4.6 million (not including a $2.5 million net reduction in term loans outstanding as a result of the 18 Reorganization). During 1995 and 1994, the Company repaid $13.6 million and $3.5 million, respectively, with cash generated from operations or increases in net borrowings under the Company's revolving credit agreements. The Company's primary sources of liquidity are funds generated from operations and borrowings available pursuant to the Senior Credit Agreement. The Senior Credit Agreement provides for $70 million in Revolving Credit Facilities and $10 million in Term Loans. The Term Loans are repayable quarterly over six years. Borrowings under the Revolving Credit Facilities mature in six years. The Company believes that cash generated from operations and borrowing resources will be adequate to permit the Company to meet both its debt service requirements and capital requirements for the next twelve months, although no assurance can be given in this regard. Seasonality Sales of the Company's products are highly seasonal, with a large percentage of net sales occurring during the Christmas selling season. The Company typically derives more than 40% of its annual net sales in the fourth quarter of each year. As a result of this seasonality, the Company's inventory and working capital needs fluctuate substantially during the year. In addition, Christmas orders from retailers are often made late in the year, making forecasting of production schedules and inventory purchases difficult. Any adverse change in the Company's results of operations in the fourth quarter would have a material adverse effect on the Company's financial condition and results of operations. Inflation In recent years, inflation has not had a material impact upon the results of the Company's operations. ITEM 8. Financial Statements and Supplementary Data The Company's financial statements and supplementary data are included elsewhere herein as outlined on page F-1. ITEM 9. Changes in and Disagreements With Accountants on Accounting and Financial Disclosure None 19 PART III ITEM 10. Directors and Executive Officers. The following table sets forth certain information (ages as of March 15, 1997) with respect to individuals who are members of Remington's Management Committee and each executive officer of the Company. Name Age Positions and Offices ---- --- --------------------- Neil P. DeFeo 50 Chief Executive Officer, President and Director of Remington Alexander R. Castaldi 46 Executive Vice President and Chief Financial Officer Lawrence D. Handler 51 President, Remington Service Stores Geoffrey L. Hoddinott 53 Vice President, Remington Europe, Africa & Middle East H. Graham Kimpton 61 Vice President, Remington Australia & Asia Michael A. Linton 40 Vice President, Marketing Allen S. Lipson 54 Vice President, Administration, General Counsel and Secretary of Remington 20 Jack W. Waller 51 Vice President, Manufacturing Victor K. Kiam, II 70 Chairman and Director of Remington Norman W. Alpert 38 Director of Remington William B. Connell 56 Director of Remington Victor K. Kiam, III 37 Vice President Corporate Development and Director of Remington Kevin A. Mundt 43 Director of Remington Arthur J. Nagle 58 Director of Remington Daniel S. O'Connell 42 Director of Remington Robert L. Rosner 37 Director of Remington Neil P. DeFeo has served as President, Chief Executive Officer and a Director of the Company and President and a director of Capital since January 1997. From 1993 to 1996, Mr. DeFeo was Group Vice President, U.S. Operations for The Clorox Company. For over 20 years prior to 1993, Mr. DeFeo worked for Procter & Gamble in various executive positions, including Vice President and Managing Director, Worldwide Strategic Planning, Laundry and Cleaning Products from 1990 to 1993. Alexander R. Castaldi has been the Executive Vice President and Chief Financial Officer of the Company since November 1996. From 1995 to 1996, Mr Castaldi was Vice President and Chief Financial Officer of Uniroyal Chemical and from 1990 to 1995, he was Senior Vice President and Chief Financial Officer of Kendall International, Inc. Mr Castaldi is a director of Freedom Chemical Inc. Lawrence D. Handler, has been President, Remington Service Stores, since 21 June 1996 and was Vice President and Chief Financial Officer of the Service Stores from January 1995 when he joined the Company until June 1996. From January 1994 until December 1994, Mr. Handler was a private financial consultant, specializing in retail operations and from May 1993 until December 1993 he was Vice President and Chief Financial Officer of Terrific Promotions, Inc. From March 1992 until May 1993, he was Vice President and Controller of Value Merchants, Inc. Geoffrey L. Hoddinott is Vice President, Remington Europe, Africa & Middle East. Mr. Hoddinott has been managing director of the United Kingdom operation since he joined the Company in November 1981. H. Graham Kimpton is Vice President, Remington Australia & Asia. Mr. Kimpton joined the Company in April 1988 and has been managing the Australian/New Zealand operation since that time. Michael A. Linton, was appointed Vice President Marketing in March 1997. Prior to joining the Company, he was with James River Corporation since 1993 as Marketing Director and most recently as Vice President, General Manager, Towel and Tissue Category. From 1987 to 1993, Mr. Linton held various positions with Progressive Insurance Company, including Division General Manager and Assistant Vice President. Allen S. Lipson is Vice President, Administration, General Counsel and Secretary of Remington and has been Secretary and a director of Capital since May 1996. Mr. Lipson has been the General Counsel of the Company since October 1988. Jack W. Waller joined Remington in 1993 as Vice President, Manufacturing. From 1988 to 1993, Mr. Waller was Vice President Operations at Corbin/Russwin, a Black & Decker company. Victor K. Kiam, II has served as Chairman since 1979 and served as Chief Executive Officer of the Company from 1979 to 1996. Mr. Kiam is a director of Citadel Computer Inc. Norman W. Alpert has been a Director of Remington since May 1996. Mr. Alpert is a Managing Director of Vestar Capital Partners and was a founding partner of Vestar at its inception in 1988. Mr. Alpert is Chairman of the Board of Directors 22 of International AirParts Corporation and a director of Aearo Corporation, Clark-Schwebel, Inc., Prestone Products Corporation and Russell Stanley Corporation, all companies in which Vestar or its affiliates have a significant equity interest. William B. Connell has been a Director of Remington since 1990. Mr. Connell is currently Chairman of EBD Holdings, Inc., a private venture capital group. Mr. Connell previously served as Vice Chairman of Whittle Communications, L.P. from 1992 to 1994 and served as its President and Chief Operating Officer from 1990 to 1992. In addition to Remington, Mr. Connell is currently a director of Baldwin Piano & Organ Company, Dolphin Software, Inc., EDB Holdings, Inc. and New Day Schools, Inc. and is currently a member of the management committee of College View. Victor K. Kiam, III is Executive Vice President of RPI Corp. and has been a Director of Remington since 1992. Mr. Kiam was with the Company since 1986 and has held a variety of positions in manufacturing, sales and marketing. He was promoted to Vice President in 1990. Mr. Kiam ceased to be employed by the Company in May 1996, although he remains an officer. He is the son of Victor K. Kiam, II. Kevin A. Mundt has been a Director of Remington since July 1996. Mr. Mundt is co-founder and has been Managing Director of Corporate Decisions, Inc. since its inception in 1983. Mr. Mundt is a director of Prestone Products Corporation, a company in which Vestar or its affiliates have a significant equity interest. Arthur J. Nagle has been a Director of Remington since May 1996. Mr. Nagle is a Managing Director of Vestar Capital Partners and was a founding partner of Vestar at its inception in 1988. Mr. Nagle is a director of Aearo Corporation, Chart House Enterprises, Inc., Clark-Schwebel, Inc., La Petite Holdings Corporation, Prestone Products Corporation, Russell-Stanley Corporation and Super D Drugs, Inc., all companies (other than Chart House Enterprises, Inc.) in which Vestar or its affiliates have a significant equity interest. Daniel S. O'Connell has been a Director of Remington since May 1996. Mr. O'Connell is founder and the Chief Executive Officer of Vestar Capital Partners. Mr. O'Connell is a director of Anvil Knitwear, Inc., Aearo Corporation, Clark-Schwebel, Inc., Pinnacle Automation, Inc., Prestone Products Corporation 23 and Russell-Stanley Corporation, all companies in which Vestar or its affiliates have a significant equity interest. Robert L. Rosner has been a Director of Remington since May 1996. Mr. Rosner is a Managing Director of Vestar Capital Partners and was a founding partner of Vestar at its inception in 1988. Mr. Rosner is a director of Prestone Products Corporation and Russell-Stanley Corporation, both companies in which Vestar or its affiliates have a significant equity interest. ITEM 11. Executive Compensation Compensation of Executive Officers The following Summary Compensation Table includes individual compensation information for each individual who served in the position of the Company's Chief Executive Officer ("CEO") during 1996 and each of the four other most highly compensated executive officers of the Company during each of the years ended December 31, 1995 and 1996 who were serving as executive officers of the Company at the end of 1996 (collectively, the "Named Executive Officers") for services rendered in all capacities to the Company or its subsidiaries during 1996.
Annual Compensation All Other Name and Principal Position Year Salary ($) Bonus ($)(1) Compensation ($) - --------------------------- ---- ---------- ------------ ---------------- F. Peter Cuneo, President, CEO 1996 418,200 -- 6,156(3) and Director(2) 1995 394,078 225,200 6,156(3) Victor K. Kiam, II, Chairman(4) 1996 384,600 -- 63,234(5) 1995 1,000,000 -- 109,469(5) James J. Vatrt ,Pres., Sales 1996 210,900 -- 3,902(7) & Marketing, North America(6) 1995 196,617 85,920 2,871(7) Allen S. Lipson, VP, Administration 1996 188,900 -- 5,521(8) General Counsel & Secretary 1995 175,986 69,756 4,153(8) Jack W. Waller, VP, Manufacturing 1996 174,100 -- 2,968(9) 1995 163,048 74,316 2,838(9)
24 Geoffrey L. Hoddinott, VP, Remington 1996 129,600 54,768 13,906(11) Europe, Asia and Middle East(10) 1995 118,400 68,956 9,440(11)
- ---------- (1) Bonus amounts shown are those accrued for and paid in or after the end of the year. (2) Mr. Cuneo ceased to be employed by the Company in January 1997. (3) The amounts shown include Company matching contributions to the Company's 401 (k) Employee Savings Plan of $2,250 and 1,925 in 1996 and 1995 and disability insurance premium payments of $3,906 and $4,231 in 1996 and 1995. (4) Mr. Kiam relinquished his title of Chief Executive Officer on May 23, 1996. (5) The amount shown includes insurance and premiums on life and disability insurance policies of $ 48,069 and $48,068 in 1996 and 1995, medical payments under an executive medical reimbursement plan of $15,165 and $26,401 in 1996 and 1995 and automobile-related expenses of $35,000 in 1995. (6) Mr. Vatrt ceased to be employed by the Company in March 1997. (7) The amounts shown include Company matching contributions to the Company's 401 (k) Employee Savings Plan of $3,145 and $1,925 for 1996 and 1995 and disability insurance premium payments of $ 757 and $946 for 1996 and 1995. (8) The amounts shown include Company matching contributions to the Company's 401 (k) Employee Savings Plan of $ 3,738 and $1,925 for 1996 and 1995 and disability insurance premium payments of $3,738 and $2,228 for 1996 and 1995. (9) The amounts shown include Company matching contributions to the Company's 401 (k) Employee Savings Plan of $2074 and $1,720 for 1996 and 1995 and disability insurance premium payments of $895 and $1,118 for 1996 and 1995. (10) Mr. Hoddinott is employed by the Remington Consumer Products, Ltd., the Company's wholly-owned subsidiary located in the United Kingdom. (11) The amounts shown include automobile related expenses of $13,278 and $4,240 in 1996 and 1995 and medical insurance premium payments of $626 and $520 for 1996 and 1995. Compensation of Directors Messrs. William B. Connell and Kevin A. Mundt, Directors of the Company, each receive annual compensation of $20,000 payable quarterly for services in such capacity. No other Director of the Company receives any compensation for services in such capacity. Each of the Directors of Remington are reimbursed for out-of-pocket expenses incurred in connection with attending meetings. Compensation Committee Interlocks and Insider Participation 25 The compensation committee of the Management Committee of Remington is comprised of Messrs. Arthur J. Nagle, Robert L. Rosner and Victor K. Kiam, III. None of these individuals, other than Mr. Kiam, was an officer of or employed by the Company. Mr. Kiam was employed by the Company prior to the Reorganization. Other Arrangements Change of Control and Severance Arrangements. In June 1995, the Company entered into change of control agreements with various employees, including Messrs. Vatrt, Lipson, Waller and Hoddinott, whereby such employees would receive cash bonuses upon a sale of the Company and would also be entitled to salary continuation for a specified period if their employment was terminated within one year after such change of control. The agreements further provide that any employment agreement then existing between the Company and the employee would terminate upon the payment of such cash bonus. Pursuant to such agreements, at the Closing Date, cash payments of $550,411, $452,123, $420,671 and $157,260 were paid to Mr. Vatrt, Mr. Lipson, Mr. Waller and Mr. Hoddinott, respectively. Messrs. Cuneo, Vatrt, Waller, Lipson, and Hoddinott are each entitled to 12 months of salary continuation in the event their employment is involuntarily terminated other than for cause during the 36 months immediately following the Closing Date. Cuneo Stock Option. Pursuant to the terms of an employment agreement between the Company and F. Peter Cuneo dated April 23, 1993, Mr. Cuneo was employed as the President and Chief Operating Officer of the Company and was granted by the Company an option to purchase 2.5% of the common equity of the Company exercisable immediately prior to the sale of the Company or the sale of more than a 51% equity interest in the Company. The exercise price of the option was an amount equal to 2.5% of the net worth of the Company as of April 23, 1993. In April 1996, the employment agreement was amended to provide that upon the consummation of the Reorganization, Mr. Cuneo would receive a cash payment of $3.35 million in payment of his option and, upon payment of such amount, the employment agreement would terminate. The cash payment due to Mr. Cuneo on the Closing Date was paid by the Company and reduced the amount distributed to Remsen and RPI. Bonus Plan The Company has an annual bonus plan (the "Bonus Plan") which is designed to motivate each employee participant. Approximately 125 employees in the United States and 125 employees in the international operations participate in the Bonus Plan. Under the Bonus Plan, each participating employee is assigned a target bonus award, 26 representing up to 50% of his or her annual base salary that will be paid if predetermined performance goals are achieved. Future performance goals for the various areas of the Company will be established by the Compensation Committee of the Company. Management Equity Participation In connection with the Reorganization, the Company: (i) entered into management subscription agreements with certain of the Management Investors (the "Management Subscription Agreements") for the purchase of Common Units, (ii) issued options for the purchase of Common Units to certain other Management Investors (the "Management Options"), and (iii) will adopt an Incentive Option Plan (the "Incentive Option Plan") to provide for the grant of options ("Incentive Options") to purchase the Company's Common Units from time to time. Purchased Units. On the Closing Date, certain of the Management Investors purchased an aggregate of $0.86 million of Common Units representing, in the aggregate, 11.13% of the common equity (10.77% on a fully diluted basis) of the Company. Upon the termination of employment of the holder, the purchased Common Units are subject to certain call provisions exercisable by the Company and certain put provisions exercisable by the holder. Management Options. In connection with the Reorganization, the Company granted to certain Management Investors the Management Options to purchase, in the aggregate, approximately 3.23% of the fully diluted common equity of the Company at an aggregate exercise price of approximately $0.26 million (the equivalent per Common Unit subscription price of the purchased Common Units). The Management Options and the Common Units purchased upon the exercise thereof are subject to similar rights and restrictions as contained in the Management Subscription Agreements. The exercise price of the Management Options is $100 per share, the fair market value of the Common Units at the Closing Date. In November 1996, the Company granted to Mr. Castaldi an option to purchase 1,623 Common Units at $100 per share, subject to substantially the same rights and restrictions as contained in the Management Subscription Agreements. 401(k) Plan The Company maintains a savings plan (the "Savings Plan") qualified under Sections 401 (a) and 401(k) of the Internal Revenue Code. Generally, all employees of the 27 Company in the United States who have completed one year of service are eligible to participate in the Savings Plan. For each employee who elects to participate in the Savings Plan and makes a contribution thereto, the Company makes a matching contribution of 40% of the first 5% of annual compensation contributed. The maximum contribution for any participant for any year is 15% of such participant's eligible compensation. UK Pension Plan Remington Consumer Products, Limited, the Company's wholly owned United Kingdom subsidiary, maintains a contributory defined benefit pension plan for all employees. The following table sets forth the estimated annual benefits payable under the plan at age 65 to persons in specified compensation and years-of-service classifications, based on straight-life annuity form of retirement income. Pension Plan Table Years of Service ------------------------------------------------------ Remuneration 10 15 20 25 100,000 $20,000 $30,000 $ 40,000 $ 50,000 125,000 25,000 37,500 50,000 62,500 150,000 30,000 45,000 60,000 75,000 175,000 35,000 52,500 70,000 87,500 200,000 40,000 60,000 80,000 100,000 250,000 50,000 75,000 100,000 125,000 300,000 60,000 90,000 120,000 150,000 - ---------- All amounts shown above have been converted to US dollars and are not not subject to any offsets. The annual benefit under the pension plan is based upon highest average pension compensation received during any consecutive three years during the ten years immediately prior to retirement and years of credited service. Pension compensation for a particular year as used for the calculation of retirement benefits includes salaries and annual bonuses. As of December 31, 1996, Mr. Hoddinott, the only Named Executive Officer covered under the plan, had 15 years of credited service . 28 ITEM 12. Security Ownership of Certain Beneficial Owners and Management Set forth below is certain information regarding the ownership of the Preferred Equity and Common Units of Remington by each person known by Remington to beneficially own 5.0% or more of the outstanding interests of either the Preferred Equity or Common Units, each Director and Named Executive Officer and all Directors and executive officers as a group as of March 15, 1997. Except as indicated below, the address for each of the persons listed below is c/o Remington Products Company, L.L.C., 60 Main Street, Bridgeport, Connecticut, 06604.
Preferred Equity Common Units Name Capital (1) Percentage Number Percentage - ---- ----------- ---------- ------ ---------- Vestar Equity Partners (2)(3) $30,000,000 48.4% 34,400 44.4% 245 Park Avenue, 41 st Floor New York, New York 10167 RPI Corp. (3) 32,000,000 51.6% 34,400 44.4% 350 Fifth Avenue, Suite 5408 New York, New York 10 1 18 F. Peter Cuneo (3) 0 0.0% 3,200 4.1% James J. Vatrt (3) 0 0.0% 1,500 1.9% Allen S. Lipson (3) 0 0.0% 1,500 1.9% Jack W. Waller (3) 0 0.0% 1,500 1.9% Victor K. Kiam, II (3)(4) 32,000,000 51.6% 34,400 44.4% Norman W. Alpert (5) 30,000,000 48.4% 34,400 44.4% Arthur J. Nagle (5) 30,000,000 48.4% 34,400 44.4% Daniel S. O'Connell (5) 30,000,000 48.4% 34,400 44.4% Robert L. Rosner (5) 30,000,000 48.4% 34,400 44.4% Directors and executive officers as a group (12 persons) $62,000,000 100.0% 72,720 93.9%
- ---------- (1) Amounts, in dollars, represent the capital contribution to the Preferred Equity beneficially owned by each person and entity set forth below. The Preferred Equity has not been denominated in units or other shares. (2) Vestar's interest in the Company is owned by the Vestar Members, which are controlled by Vestar. The Vestar Members have assigned a portion of their interests in the Company to certain coinvestors, although such co-investors 29 will not directly hold any Common Units. The general partner of Vestar is Vestar Associates L.P., a limited partnership whose general partner is Vestar Associates Corporation ("VAC"). In such capacity, VAC exercises sole voting and investment power with respect to all of the equity interests held of record by the Vestar Members. Messrs. Alpert, Nagle, O'Connell, and Rosner, who are Directors of Remington, are affiliated with Vestar in the capacities described under Item 10 Directiors and Executive Officers, and are stockholders of VAC. Individually, no stockholder, director or officer of VAC is deemed to have or share such voting or investment power within the meaning of Rule 13d-3 under the Exchange Act. Accordingly, no part of the Preferred Equity or Common Units is beneficially owned by Messrs. Alpert, Nagle, O'Connell or Rosner or any other stockholder, director or officer of VAC. (3) The Vestar Members, RPI and Messrs. Cuneo, Vatrt, Lipson and Waller have entered into the LLC Agreement which gives Vestar effective control over the management of the Company. (4) Mr. Kiam's interest in the Company is owned by RPI. The shareholders of RPI are Mr. Kiam and two Kiam family trusts. Mr. Kiam is a trustee of each of these trusts. Mr. Kiam disclaims beneficial ownership of the shares of Remington owned by RPI. The address of Mr. Kiam is 11097 Isle Brook Court, West Palm Beach, Florida, 33414. (5) Messrs. Alpert, Nagle, O'Connell and Rosner are affiliated with Vestar in the capacities described in Item 10 Directors and Executive Officers. Ownership of Remington equity interests for these individuals includes the $30,000,000 of Preferred Equity and 34,440 Common Units included in the above table beneficially owned by Vestar through the Vestar Members, of which such persons disclaim beneficial ownership. Each such person's business address is c/o Vestar Equity Partners, L.P., 245 Park Avenue, 41st Floor, New York, New York 10167. ITEM 13. Certain Relationships and Related Transactions Pursuant to a management agreement (the "Management Agreement") entered into as of the Closing Date, Vestar Capital Partners ("Vestar Capital") will receive an annual advisory fee equal to the greater of $500,000 and 1.5% of EBITDA (as defined in such agreement) of the Company on a consolidated basis for rendering advisory and consulting services in relation to strategic financial planning and other affairs of the Company. Vestar Capital will also be paid reasonable and customary investment banking fees in connection with an initial public offering, sale of the Company and other financings. In addition, Vestar Capital received a fee in the amount of $2.0 million from the Company on the Closing Date. The Management Agreement will be in effect until the tenth anniversary of the Closing Date, provided that the Management Agreement will terminate on the earlier to occur of: (i) a qualified public offering or (ii) the first date that Vestar Capital owns less than 25% of the number of the Company's Common Units owned by Vestar Capital on the Closing Date, and provided further that Vestar Capital may terminate the Management Agreement at any time. Vestar Capital owns, indirectly through Vestar Corp., 44.4% (43.0% on a fully diluted basis) of the Common Units of the Company and possesses the right to designate five of the nine individuals who comprise the Management Committee of the Company. 30 Pursuant to a consulting and transitional services agreement (the "Consulting Agreement") entered into as of the Closing Date, RPI will receive an aggregate annual fee equal to the sum of: (i) the greater of $500,000 and 1.5% of EBITDA (as defined in such agreement) of the Company on a consolidated basis and (ii) $250,000 in 1996, 1997 and 1998 if the Company's net revenues or EBITDA (as defined in such agreement) exceed certain targets in such years, for rendering advisory and consulting services in relation to strategic financial planning, product development and evaluation of mergers, acquisitions and divestitures. The Consulting Agreement will be in effect until the tenth anniversary of the Closing Date, provided that the Consulting Agreement will terminate on the earlier to occur of: (i) a qualified public offering or (ii) the first date that RPI owns less than 25% of the number of the Company's Common Units owned by RPI on the Closing Date, and provided further that Vestar Capital may terminate the Consulting Agreement at any time (but only to the extent that Vestar Capital also terminates similar provisions of the Management Agreement). RPI, an entity controlled by the Kiams, owns 44.4% (43.0% on a fully diluted basis) of the Common Units of the Company and possesses the right to designate two of the nine individuals who comprise the Management Committee of the Company. Pursuant to a Non-Competition Agreement (the "Non-Competition Agreement") entered into as of the Closing Date between the Company, Vestar Corp. and Victor K. Kiam, II and Victor K. Kiam, III (the "Kiams"), the Kiams may not compete with, solicit any customers of, own, manage or operate any business in competition with or perform any action substantially detrimental to the Company's businesses. The provisions of the Non-Competition Agreement will apply during the period the Kiams have a Significant Interest (as defined in the Non-Competition Agreement) in the Company and thereafter for: (i) five years, with respect to electric shavers, shaver accessories and men's grooming products, and (ii) three years, with respect to women's personal care appliances, home health appliances, travel appliances, environmental products, dental products and small kitchen appliances. The Non-Competition Agreement allows the Kiams to continue to market certain competing travel appliance products developed by an affiliate of the Kiams. Pursuant to the terms of agreements originally entered into between the Company and Remington Apparel Corporation ("Remington Apparel") and Remington Equities in 1984 and with Act II Corporation ("Act II") in 1986, each controlled by Victor K. Kiam, II, the Company granted a license to Remington Apparel to permit such company to use the Remington name as part of its corporate name, granted to Remington Equities a non-exclusive, worldwide license to use the Remington trademark for apparel products and granted to Act II the exclusive worldwide license to use the trademark Lady Remington for jewelry products. Each of these agreements are for terms of two years and renew automatically for consecutive two-year periods unless terminated at the option of the licensee. The amount of royalties received by the 31 Company under these license agreements was less than $5,000 during each of 1996, 1995 and 1994. The Company continued these arrangements after the consummation of the Reorganization on substantially the same terms and conditions. The Company, however, required each of RPI and Remington Equities to exclude the word "Remington" from their corporate names after the Closing Date. In 1995, the Company entered into a media barter agreement with Tangible Media, Inc. ("TMI"), a corporation controlled by Isaac Perlmutter, pursuant to which TMI acquired from the Company a discontinued product line of personal safety products in exchange for media barter credits with a stated value of $4.3 million which the Company can use to purchase advertising media from TMI over a three-year period that (subject to certain conditions) has been extended for an additional year. At the time of the purchase of advertising media, the Company will pay a portion in cash and the balance with the media barter credits. During the period January 1, 1996 to the Closing Date, the Company purchased $0.3 million in advertising media from TMI, paying $0.2 million in cash and $0.1 million in barter credits. In addition, during 1996, TMI provided financial, marketing and security services for the Company for which the Company paid TMI of less than $0.1 million. In November 1994, the Company loaned F. Peter Cuneo, President, Chief Executive Officer and Director of the Company until January 1997, the sum of $200,000 in exchange for a note bearing interest at the rate of 1.75% plus the prime commercial rate as from time to time announced by CoreStates Bank, N.A. Mr. Cuneo used the proceeds of this loan to finance the purchase of a house. The total amount owed, including accrued interest, was repaid on the Closing Date. Pursuant to the terms of an employment agreement dated August 1992, Victor K. Kiam, II was employed as Chief Executive Officer of the Company for a period of five years for an annual salary of $300,000 and an annual talent fee of $700,000 plus certain health, medical and other specified benefits. In addition, pursuant to the terms of a separate employment agreement dated August 1992, as amended, Victor K. Kiam, III was employed as Vice President of the Company for a period of five years at an annual salary of $100,000 plus other incentive based compensation. In connection with the Reorganization, the employment agreements with the Kiams were terminated in exchange for lump sum cash payments to the Kiams in the aggregate amount of $1.7 million. Such cash payments were paid by the Company and reduced the amounts distributed to Remsen and RPI. 32 PART IV ITEM 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K (a) 1. Financial Statements 2. Financial Statement Schedule 3. Exhibits 3.1 Amended and Restated Limited Liability Company Agreement dated as of May 16, 1996, by and among Vestar Shaver Corp. (formerly Vestar/Remington Corp.) ("Vestar Corp. I"), Vestar Razor Corp. ("Vestar Corp. II" and, together with Vestar Corp. I, the "Vestar Members"), RPI Corp. (formerly known as Remington Products, Inc.)("RPI"), and certain members of senior management of the Company is incorporated herein by reference to Registration Statement on Form S-4(File Number 333-07429). 3.2 Certificate of Formation of Remington Products Company, L.L.C. ("Remington") is incorporated herein by reference to Registration Statement on Form S-4(File Number 333-07429). 4.1 Indenture dated as of May 23, 1996 between Remington, Remington Capital Corp. ("Capital") and The Bank of New York, as trustee is incorporated herein by reference to Registration Statement on Form S-4(File Number 333-07429). 4.2 Form of 11% Series B Senior Subordinated Notes is incorporated herein by reference to Registration Statement on Form S-4(File Number 333-07429). 4.3 Purchase Agreement dated May 16, 1996 between Remington, Capital and Bear, Sterns & Co. Inc. is incorporated herein by reference to Registration Statement on Form S-4(File Number 333- 07429). 33 4.4 Registration Rights Agreement dated as of May 23, 1996 between Remington, Capital and Bear Stearns & Co. Inc. is incorporated herein by reference to Registration Statement on Form S-4(File Number 333-07429). 10.1 Credit and Guarantee Agreement dated as of May 23, 1996 among Remington, certain of its subsidiaries, varius lending institutions, Fleet National Bank and Banque Nationale de Paris, as co-documentation agents, and Chemical Bank, as administrative agent (the "Agent") is incorporated herein by reference to Registration Statement on Form S-4(File Number 333-07429).. 10.2 Company Security Agreement dated as of May 23, 1996 made by Remington in favor of the Agent is incorporated herein by reference to Registration Statement on Form S-4(File Number 333-07429). 10.3 Form of Subsidiaries Security Agreement dated as of May 23, 1996 made by each of Capital, Remington Corporation, L.L.C. ("IP Subsidiary") and Remington Rand Corporation ("Rand") in favor of the Agent is incorporated herein by reference to Registration Statement on Form S-4(File Number 333-07429). 10.4 Conditional Assignment of and Security Interest in Patent Rights (United States) dated as of May 23, 1996 made by IP Subsidiary in favor of the Agent is incorporated herein by reference to Registration Statement on Form S-4(File Number 333-07429). 10.5 Conditional Assignment of and Security Interest in Patent Rights (United Kingdom) dated as of May 23, 1996 made by IP Subsidiary in favor of the Agent is incorporated herein by reference to Registration Statement on Form S-4(File Number 333-07429). 10.6 Conditional Assignment of and Security Interest in Trademark Rights (United States) dated as of May 23, 1996 made by IP Subsidiary in favor of the Agent is incorporated herein by reference to Registration Statement on Form S-4(File Number 333-07429). 10.7 Conditional Assignment of and Security Interest in Trademark Rights 34 (United Kingdom) dated as of May 23, 1996 made by IP Subsidiary in favor of the Agent is incorporated herein by reference to Registration Statement on Form S-4(File Number 333-07429). 10.8 Members Limited Recourse Pledge Agreement dated as of May 23, 1996 made by Remington in favor of the Agent is incorporated herein by reference to Registration Statement on Form S-4(File Number 333-07429). 10.9 Company Pledge Agreement dated as of May 23, 1996 made by Remington in favor of the Agent is incorporated herein by reference to Registration Statement on Form S-4(File Number 333-07429). 10.10 Subsidiaries Pledge Agreement dated as of May 23, 1996 made by Rand in favor of the Agent is incorporated herein by reference to Registration Statement on Form S-4(File Number 333-07429). 10.11 Subsidiaries Guarantee dated as of May 23, 1996 made by Capital, IP subsidiary and Rand in favor of the Agent is incorporated herein by reference to Registration Statement on Form S-4(File Number 333- 07429). 10.12 Purchase Agreement dated as of May 1, 1996 by and among Vestar Corp I., Remington, Remsen, Isaac Perlmutter, RPI and Victor K. Kiam, II is incorporated herein by reference to Registration Statement on Form S-4(File Number 333-07429). 10.13 Agreement and Plan of Merger dated as of May 23, 1996 between Remington Products Company and Remington is incorporated herein by reference to Registration Statement on Form S-4(File Number 333-07429). 10.14 Securityholders Agreement dated as of May 16, 1996 among the Vestar Members, Vestar Equity Partners, L.P. ("Vestar"), RPI, Victor K. Kiam, II and the other parties signatory thereto is incorporated herein by reference to Registration Statement on Form S-4(File Number 333-07429). 35 10.15 Management Agreement dated as of May 23, 1996 between Remington and Vestar Capital Partners is incorporated herein by reference to Registration Statement on Form S-4(File Number 333- 07429). 10.16 Consulting and Transitional Services Agreement dated as of May 23, 1996 between Remington and RPI is incorporated herein by reference to Registration Statement on Form S-4(File Number 333-07429). 10.17 Form of Management Common Units Subscription Agreement dated as of May 23, 1996 by and between Remington and each of F. Peter Cuneo, James J. Vatrt, Jack W. Waller, Allen S. Lipson, H. Graham Kimpton and Geoffrey L. Hoddinott is incorporated herein by reference to Registration Statement on Form S-4(File Number 333- 07429). 10.18 Form of Option Agreement dated as of May 23, 1996 by and between Remington and certain members of senior management of the Company is incorporated herein by reference to Registration Statement on Form S-4(File Number 333-07429). 10.19 Form of Executive Severance Agreement dated as of May 23, 1996 by and between Remington or certain of its subsidiaries and each of F. Peter Cuneo, James J. Vatrt, Jack W. Waller, Allen S. Lipson, H. Graham Kimpton and Geoffrey L. Hoddinott is incorporated herein by reference to Registration Statement on Form S-4(File Number 333-07429). 10.20 Executive Severance Agreement dated as of November 25, 1996 between Remington and Alexander R. Castaldi. 10.21 Option Agreement dated as of November 25, 1996 between Remington and Alexander R. Castaldi. 10.22 Non-Competition Agreement dated as of May 23, 1996 among Victor K. Kiam, II, Victor K. Kiam, III, Remington and the Vestar Members is incorporated herein by reference to Registration Statement on Form S-4(File Number 333-07429). 36 10.23 License Agreement made May 23, 1996 by and between IP Subsidiary and Act II Jewelry, Inc is incorporated herein by reference to Registration Statement on Form S-4 (File Number 333-07429). 10.24 License Agreement made May 23, 1996 by and between IP Subsidiary and VKK Equities Corporation is incorporated herein by reference to Registration Statement on Form S-4 (File Number 333-07429). 10.25 Tradename Agreement made May 23, 1996 by and between IP Subsidiary and Remington Apparel Company, Inc. is incorporated herein by reference to Registration Statement on Form S-4 (File Number 333-07429). 10.26 License Agreement dated as of May 23, 1996 by and between Remington and IP Subsidiary is incorporated herein by reference to Registration Statement on Form S-4 (File Number 333-07429). 10.27 1997 Remington Bonus Plan. 21 Subsidiaries of Remington is incorporated herein by reference to Registration Statement on Form S-4 (File Number 333-07429). 24. Powers of Attorney. 27 Financial Data Schedule. 37 SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. REMINGTON PRODUCTS COMPANY, L.L.C. By: /s/ Kris J. Kelley ---------------------- Kris J. Kelley, Vice President and Controller Date: March 31, 1997 Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities on March 31, 1997. * * - --------------------------------------- ------------------------------------- Neil F. DeFeo, Chief Executive Officer, Alexander R. Castaldi, Executive Vice President and Director President and Chief Financial Officer /s/ Kris J. Kelley * - --------------------------------------- ------------------------------------- Kris J. Kelley, Vice President and Victor K. Kiam II, Chairman and Controller Director 38 * * - --------------------------------------- ------------------------------------- Victor K. Kiam III, Director Norman W. Alpert, Director * * - --------------------------------------- ------------------------------------- Arthur J. Nagle, Director Daniel S. O'Connell, Director * - --------------------------------------- ------------------------------------- Robert L. Rosner, Director William B. Connell, Director * - --------------------------------------- Kevin A. Mundt, Director *By /s/ Allen S. Lipson ------------------------------------ Allen S. Lipson, as Attorney-in-Fact 39 INDEX TO FINANCIAL STATEMENTS
Pages ----- Financial Statements Reports of Independent Accountants F-2 Consolidated Balance Sheets as of December 31, 1996 (Successor) and 1995 (Predecessor) F-4 Consolidated Statements of Operations for the thirty-one weeks ended December 31, 1996 (Successor), and for the twenty-one weeks ended May 23, 1996 and the years ended December 31, 1995 and 1994 (Predecessor) F-5 Consolidated Statement of Members' Deficit for the thirty-one weeks ended December 31, 1996 (Successor), and Consolidated Statements of Total Partners' Capital for the twenty-one weeks ended May 23, 1996 and the years ended December 31, 1995 and 1994 (Predecessor) F-6 Consolidated Statements of Cash Flows for the thirty-one weeks ended December 31, 1996 (Successor), and for the twenty-one weeks ended May 23, 1996 and the years ended December 31, 1995 and 1994 (Predecessor) F-7 Notes to Consolidated Financial Statements F-8 Financial Statement Schedule Report of Independent Accountants on Supplemental Schedule S-1 Schedule II - Valuation and Qualifying Accounts S-2
Certain schedules are omitted because they are not applicable or the required information is provided in the Financial Statements or related notes thereto. F-1 Independent Auditors' Report To the Management Committee of REMINGTON PRODUCTS COMPANY, L.L.C.: We have audited the accompanying consolidated balance sheet of Remington Products Company, L.L.C. and subsidiaries (Company) as of December 31, 1996, and the related consolidated statements of operations, members' deficit/partners' capital and cash flows of Remington Products Company and subsidiaries (Predecessor Company) for the twenty-one week period ended May 23, 1996 and for the Company for the thirty-one week period ended December 31, 1996. Our audits also included the consolidated financial statement schedule listed in the index to the consolidated financial statements. The 1996 consolidated financial statements and financial statement schedule are the responsibility of the Company's management. Our responsibility is to express an opinion on these consolidated financial statements and financial statement schedule based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provides a reasonable basis for our opinion. In our opinion, such consolidated financial statements referred to above present fairly, in all material respects, the consolidated financial position of Remington Products Company, L.L.C. and subsidiaries as of December 31, 1996, and the consolidated results of their operations and their cash flows of Predecessor Company for the twenty-one week period ended May 23, 1996 and of the Company for the thirty-one week period ended December 31, 1996, in conformity with generally accepted accounting principles. Also, in our opinion, such 1996 consolidated financial statement schedule when considered in relation to the basic consolidated financial statements taken as a whole, presents fairly in all material respects, the information set forth therein. DELOITTE & TOUCHE L.L.P. Stamford, Connecticut March 7, 1997 F-2 Report of Independent Accountants To the Management Committee of REMINGTON PRODUCTS COMPANY: We have audited the accompanying consolidated balance sheets of Remington Products Company and Subsidiaries (the "Company") as of December 31, 1995, and the related consolidated statements of operations, total partners' capital and cash flows for the years ended December 31, 1995 and 1994. These financial statements are the responsibility of management of the Company. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of Remington Products Company and Subsidiaries as of December 31, 1995, and the consolidated results of their operations and their cash flows for the years ended December 31, 1995 and 1994, in conformity with generally accepted accounting principles. COOPERS & LYBRAND L.L.P. Stamford, Connecticut March 4, 1996. F-3 Remington Products Company, L.L.C. Consolidated Balance Sheets As of December 31, 1996 (Successor) and 1995 (Predecessor) (in thousands)
Successor Predecessor 1996 1995 --------- --------- ASSETS Current assets: Cash and cash equivalents $ 7,199 $ 6,804 Accounts receivable, less allowance for doubtful accounts of $1,340 in 1996 and $1,366 in 1995 54,262 69,414 Inventories 63,785 53,739 Prepaid and other current assets 4,212 3,853 --------- --------- Total current assets 129,458 133,810 Property, plant and equipment, net 13,982 14,544 Intangibles, net 62,520 21,082 Other assets 8,863 1,486 --------- --------- Total assets $ 214,823 $ 170,922 ========= ========= LIABILITIES AND MEMBERS' DEFICIT/ PARTNERS' CAPITAL Current Liabilities: Accounts payable $ 16,414 $ 9,835 Short-term borrowings 1,153 1,488 Current portion of long-term debt 1,067 48,952 Accrued liabilities 32,964 26,312 --------- --------- Total current liabilities 51,598 86,587 Long-term debt 169,411 6,550 Other liabilities 1,521 1,840 Commitments and contingencies Members' deficit/partners' capital: Members' deficit/partners' capital (7,351) 76,736 Cumulative translation adjustment (356) (791) --------- --------- Total members' deficit/partners' capital (7,707) 75,945 --------- --------- Total liabilities and members' deficit/partners' capital $ 214,823 $ 170,922 ========= =========
See notes to consolidated financial statements. F-4 Remington Products Company, L.L.C. Consolidated Statements of Operations For the thirty-one weeks ended December 31, 1996 (Successor), and for the twenty-one weeks ended May 23, 1996, and the years ended December 31, 1995 and 1994 (Predecessor) (in thousands)
Successor Predecessor --------- ------------------------------------ 31 Weeks 21 Weeks Ended Ended Year Ended December 31, May 23, December 31, 1996 1996 1995 1994 --------- -------- -------- --------- Net sales $ 185,286 $ 56,713 $255,323 $ 261,446 Cost of sales 117,723 35,102 143,203 150,104 --------- -------- -------- --------- Gross profit 67,563 21,611 112,120 111,342 --------- -------- -------- --------- Selling, general and administrative 53,860 37,912 83,949 88,534 Amortization of intangibles 1,195 650 1,655 1,580 --------- -------- -------- --------- Operating income (loss) 12,508 (16,951) 26,516 21,228 Interest expense 12,164 2,228 7,604 6,414 Other expense (income) 498 (115) 408 (997) --------- -------- -------- --------- Income (loss) before income taxes (154) (19,064) 18,504 15,811 Provision (benefit) for income taxes 3,018 (873) 1,264 1,086 --------- -------- -------- --------- Net income (loss) $ (3,172) $(18,191) $ 17,240 $ 14,725 ========= ======== ======== ========= Net loss applicable to common units $ (7,748) =========
See notes to consolidated financial statements. F-5 Remington Products Company, L.L.C. Consolidated Statement of Members' Deficit For the thirty-one weeks ended December 31, 1996 (Successor), and Consolidated Statements of Total Partners' Capital for the twenty-one weeks ended May 23, 1996, and the years ended December 31, 1995 and 1994 (Predecessor) (in thousands)
Total Partners' Cumulative Capital/ Preferred Common Other Accumulated Translation Members' Equity Units Capital Deficit Adjustments Deficit ------ ----- ------- ------- ----------- ------- PREDECESSOR Balance, December 31, 1993 $ 45,172 $(1,377) $43,795 Net income 14,725 14,725 Partners' distribution (401) (401) Foreign currency translation 1,845 1,845 -------- ----- ----- Balance, December 31, 1994 59,496 468 59,964 Net income 17,240 17,240 Foreign currency translation (1,259) (1,259) ------ ------ Balance, December 31, 1995 76,736 (791) 75,945 Net loss (18,191) (18,191) Foreign currency translation (217) (217) Effects of recapitalization: Issuance of equity units $62,000 $7,742 69,742 Excess of fair value over predecessor basis (73,921) (73,921) Cancellation of predecessor partners' capital (58,545) (58,545) Elimination of cumulative translation 1,008 1,008 ------- ------ -------- ----- ----- Balance, May 23, 1996 $62,000 $7,742 $(73,921) $ - $ (4,179) ======= ====== ======== ====== ======== SUCCESSOR Balance, May 24, 1996 $62,000 $7,742 $(73,921) $ (4,179) Net loss $(3,172) (3,172) Preferred dividend 4,576 (4,576) - Foreign currency translation $ (356) (356) ------- ------ -------- ------- --------- -------- Balance December 31, 1996 $66,576 $7,742 $(73,921) $(7,748) $ (356) $ (7,707) ======= ====== ======== ======= ========= ========
See notes to consolidated financial statements. F-6 Remington Products Company, L.L.C. Consolidated Statements of Cash Flows For the thirty-one weeks ended December 31, 1996 (Successor), and for the twenty-one weeks ended May 23, 1996, and for the years ended December 31, 1995 and 1994 (Predecessor) (in thousands)
Successor Predecessor --------- ------------------------------------ 31 Weeks 21 Weeks Ended Ended Year Ended December 31, May 23, December 31, 1996 1996 1995 1994 --------- -------- -------- -------- Cash flows from operating activities: Net income (loss) $ (3,172) $(18,191) $ 17,240 $ 14,725 Adjustment to reconcile net income (loss) to net cash provided by (used in) operating activities: Depreciation 1,184 1,355 3,283 2,663 Amortization of intangibles 1,195 650 1,655 1,580 Amortization of deferred financing fees 1,260 262 690 688 Deferred income taxes 1,251 (561) (735) -- Foreign currency forward loss 1,501 -- -- -- Changes in assets and liabilities: Accounts receivable (27,291) 41,043 (13,955) 8,446 Inventories (2,546) (8,339) 299 (3,578) Accounts payable 5,392 1,187 (11,605) (604) Accrued liabilities 10,731 (933) 3,579 (10,966) Other, net 433 (372) 253 1,875 --------- -------- -------- -------- Cash provided by (used in) operating activities (10,062) 16,101 704 14,829 --------- -------- -------- -------- Cash flows from investing activities: Capital expenditures (2,399) (1,310) (3,291) (4,356) Payment for purchase of Company, net (139,750) -- -- -- Proceeds from acquisition-related receivable -- -- -- 9,260 Other (181) -- -- -- --------- -------- -------- -------- Cash provided by (used in) investing activities (142,330) (1,310) (3,291) 4,904 --------- -------- -------- -------- Cash flows from financing activities: Proceeds from sale of senior subordinated notes 129,026 -- -- -- Net repayments under term loan facilities (3,463) (3,600) (13,550) (3,475) Net borrowings (repayments) under credit facilities 1,564 (12,353) 14,965 (13,569) Equity investments/(distributions) 34,302 -- -- (401) Debt issuance costs (9,075) -- -- -- Other, net 1,595 -- 354 319 --------- -------- -------- -------- Cash provided by (used in) financing activities 153,949 (15,953) 1,769 (17,126) --------- -------- -------- -------- Increase (decrease) in cash and cash equivalents 1,557 (1,162) (818) 2,607 Cash and cash equivalents, beginning of period 5,642 6,804 7,622 5,015 --------- -------- -------- -------- Cash and cash equivalents, end of period $ 7,199 $ 5,642 $ 6,804 $ 7,622 ========= ======== ======== ======== Supplemental cash flow information: Interest paid $ 9,121 $ 1,874 $ 6,936 $ 5,244 Income taxes paid $ 1,563 $ 440 $ 1,073 $ 995
See notes to consolidated financial statements. F-7 Remington Products Company, L.L.C. and Subsidiaries Notes to Consolidated Financial Statements 1. Summary of Significant Accounting Policies Remington Products Company, L.L.C. and its wholly-owned subsidiaries, (the "Company") manufacture and market electrical personal care appliances. The Company distributes on a worldwide basis men's and women's electrical shavers and accessories, women's personal care appliances, including hairsetters, curling irons and hair dryers, men's electrical grooming products, travel products and other small electrical consumer appliances. The Company's products are sold worldwide through mass merchandisers, catalog showrooms, drugstore chains and department stores in addition to the Company's own service stores. Organization: Remington Products Company, L.L.C., a Delaware limited liability company, was formed by Vestar Shaver Corp. ("Vestar Corp. I") and RPI Corp. ("RPI") to acquire (the "Reorganization") the operations of Remington Products Company and its subsidiaries ("RPC"). In May 1996, Vestar Razor Corp. ("Vestar Corp. II") was formed to hold an interest in the Company, Vestar Corp. I and Vestar Corp. II (together, the "Vestar Members") are wholly owned by Vestar Equity Partners, L.P. Basis of Presentation: The consolidated balance sheet as of December 31, 1996 includes the accounts of Remington Products Company, L.L.C. and Subsidiaries, the "Successor" company following the change in ownership on May 23, 1996 (the "Closing Date") (see Note 2) and the consolidated results of operations and cash flows include the accounts for the successor company for the period from May 24, 1996 to F-8 Remington Products Company, L.L.C. and Subsidiaries Notes to Consolidated Financial Statements (continued) December 31, 1996. The statements also include the balance sheet and results of operations and cash flows of RPC, the "Predecessor" company, prior to the Closing Date. All significant intercompany accounts and transactions are eliminated in consolidation. The preparation of financial statements in conformity with generally accepted accounting principles requires management to make certain estimates and assumptions that affect the reported amount of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reported periods. Actual results could differ from those estimates. Cash and Cash Equivalents: All highly liquid debt instruments purchased with a maturity of three months from their date of acquisition or less are considered cash equivalents. Inventories: The inventories of foreign subsidiaries and purchased product for resale by the merchandising and service store operations are valued at the lower of cost or market utilizing the first-in, first-out (FIFO) method. Domestic manufactured inventories which represent approximately 28% of the consolidated inventories as of December 31, 1996 and 1995 are stated at the lower of cost or market, with cost determined by the last-in, first-out (LIFO) method. As of December 31, 1996 and 1995, the excess of current replacement cost over LIFO cost of inventories was not significant. In the fourth quarter of 1996, the Company recorded a charge of approximately $3.9 million for certain inventory valuation adjustments. F-9 Remington Products Company, L.L.C. and Subsidiaries Notes to Consolidated Financial Statements (continued) Property, Plant and Equipment: Property, plant and equipment is recorded primarily at cost. In conjunction with the Reorganization, property, plant and equipment was restated to reflect fair value excluding the ownership percentage retained by RPI. Depreciation is provided for principally on a straight-line basis over the estimated useful lives of the assets, which range from 5 to 20 years. Leasehold improvements are amortized over the lesser of the lease term or the estimated useful lives of the improvements. Intangibles: Patents are being amortized on a straight-line basis over a period of ten years. All other intangibles are amortized on a straight-line basis over 40 years. The Company periodically evaluates the recoverability of goodwill and measures the amount of impairment, if any, by assessing whether the amortization of the goodwill balance over its remaining life can be recovered through undiscounted future operating cash flows. Cost associated with obtaining financing arrangements are included in other assets and are being amortized over the term of the related borrowings. Options: Financial Accounting Statement No. 123, "Accounting for Stock Based Compensation", (SFAS 123) requires expanded disclosures of employee stock based compensation arrangements and encourages, but does not require, employers to adopt a fair value based method of accounting for employee stock based compensation. Under the fair value based method, compensation cost is measured F-10 Remington Products Company, L.L.C. and Subsidiaries Notes to Consolidated Financial Statements (continued) at the grant date based on the value of the option and is recognized over the service period, which is usually the vesting period. As provided by SFAS 123, the Company follows Accounting Principles Board Opinion No. 25, "Accounting for Stock Issued to Employees", for employee stock compensation measurement, which does not require compensation expense recognition when the exercise price of stock options is greater than or equal to current market value at the date of the stock option grant. Research and Development Research and development costs related to both present and future products are expensed as incurred. Such costs totalled $1.3 million for the thirty-one weeks ended December 31, 1996; $0.8 million for the twenty-one weeks ended May 23, 1996; and $1.9 million and $1.6 million for the years ended December 1995 and 1994, respectively. Income Taxes: In jurisdictions where Partnership status is not recognized or foreign corporate subsidiaries exist, deferred taxes on income are provided for temporary differences between the financial and tax bases of assets and liabilities. Translation of Foreign Currencies: Assets and liabilities of the Company's foreign subsidiaries are translated at the exchange rate in effect at each balance sheet date. Statement of operations accounts are translated at the weighted average exchange rate for the period. Translation adjustments arising from the use of differing exchange F-11 Remington Products Company, L.L.C. and Subsidiaries Notes to Consolidated Financial Statements (continued) rates from period to period are included in the cumulative translation adjustment account in members' deficit or total partners' capital. Foreign currency transaction gains and losses, including mark-to-market gains and losses on forward contracts are recognized in earnings and totalled $(0.7) million for the thirty-one weeks ended December 31, 1996, $(0.1) million for the twenty-one weeks ended May 23, 1996 and $0.2 and $0.6 million for the years ended December 31, 1995 and 1994, respectively. Reclassifications: Certain prior year amounts have been reclassified to conform with the current year presentation. 2. Reorganization RPC was a general partnership, jointly owned and controlled by RPI and Remsen Partners ("Remsen"). As a result of the Reorganization of RPC, the following transactions occurred: (i) RPC made cash payments to Remsen and RPI totalling $135.4 million (less the amount of certain excluded obligations and net of a working capital adjustment), (ii) the Vestar Members purchased Remsen's interest in RPC for $33.4 million in cash; (iii) certain members of senior management of RPC (the "Management Investors") acquired an equity interest in the Company, for $1.12 million (including a cash purchase of $0.86 million and assuming exercise of certain management options with an aggregate exercise price of $0.26 million), (iv) RPI retained an equity investment in the Company with an implied value of $35.4 million, and (v) RPC merged with and into the Company. In addition, $41.3 million of existing indebtedness of RPC was refinanced. F-12 Remington Products Company, L.L.C. and Subsidiaries Notes to Consolidated Financial Statements (continued) The Reorganization has been accounted for as a purchase transaction effective as of the Closing Date, in accordance with Accounting Principles Board Opinion No. 16, Business Combinations, and EITF Issue No. 88-16, Basis in Leveraged Buyout Transactions, and accordingly, consolidated financial statements for periods subsequent to the Closing Date reflect the purchase price, including transaction costs, allocated to tangible and intangible assets acquired and liabilities assumed, based on their estimated fair values as of the Closing Date. The valuation of assets and liabilities acquired reflect carryover basis for the percentage ownership retained by RPI. The Reorganization reflected the following adjustments (in thousands): Cash payments and distributions (1) $139,750 Implied fair value of equity interests issued to RPI (2) 35,440 --------- Total consideration and direct acquisition costs 175,190 Less RPC's historical cost of net assets acquired (3) (71,246) --------- Excess of consideration paid over RPC's historical cost 103,944 Less excess of fair value over predecessor basis (4) (73,921) --------- 30,023 Debt issuance costs 9,075 --------- Net adjustment $ 39,098 ======== F-13 Remington Products Company, L.L.C. and Subsidiaries Notes to Consolidated Financial Statements (continued) Allocation of net adjustment (5): Inventories (865) Prepaid and other current assets (1,752) Property, plant and equipment, net (1,554) Goodwill 11,387 Tradenames 26,534 Patents 4,670 Other assets (6) 8,463 Accrued liabilities (7,785) --------- $ 39,098 ======== (1) Consists of cash payments to Remsen and RPI of $90,351 and $45,049 (net of the final working capital adjustment), respectively, which were reduced by $13,708 for certain excluded obligations, and $4,350 of direct acquisition costs. (2) The fair value of equity interests issued to RPI consists of Preferred Equity with a liquidation preference of $32,000 and Common Units with a fair value of $3,400, based on the cash paid by the Vestar members and certain Management Investors for their respective equity interests. RPI's predecessor basis in RPC was $8,208. (3) Represents historical total partners' capital of RPC adjusted to reflect $13,708 for certain excluded obligations. (4) Represents adjustments to decrease the fair value of the interests retained by RPI and certain Management Investors to reflect their carryover basis. F-14 Remington Products Company, L.L.C. and Subsidiaries Notes to Consolidated Financial Statements (continued) (5) Represents the adjustments required to record the allocation of the excess of the consideration paid over RPC's historical basis in the net assets acquired, adjusted to reflect their carryover basis. The acquired assets are recorded 53.07% at fair value (for the common equity interest acquired by the Vestar members and certain of the Management Investors) and 46.93% at carryover basis (for the residual common equity interests retained by RPI and certain of the Management Investors). (6) Represents debt issuance costs of $9,075 net of a $612 write-off of deferred financing costs related to existing debt being repaid. 3. Inventories Inventories were comprised of the following as of December 31, 1996 and 1995 (in thousands): Successor Predecessor 1996 1995 --------- ----------- Finished goods $59,205 $46,524 Work in process 4,556 7,177 Raw materials 24 38 --------- --------- $63,785 $53,739 ========= ========= F-15 Remington Products Company, L.L.C. and Subsidiaries Notes to Consolidated Financial Statements (continued) 4. Property, Plant and Equipment Property, plant and equipment as of December 31, 1996 and 1995 consisted of (in thousands): Successor Predecessor 1996 1995 --------- ----------- Land and buildings $ 5,071 $ 6,263 Leasehold improvements 1,737 1,945 Machinery, equipment and tooling 7,083 10,915 Furniture, fixtures and other 1,301 2,184 ------- ------- 15,192 21,307 Less accumulated depreciation (1,210) (6,763) ------- ------- $13,982 $14,544 ======= ======= 5. Intangibles Intangibles were comprised of the following (net of accumulated amortization of $1,195 and $4,078) as of December 31, 1996 and 1995, respectively (in thousands): Successor Predecessor 1996 1995 --------- ----------- Goodwill $31,994 $ 21,082 Tradenames 26,136 - F-16 Remington Products Company, L.L.C. and Subsidiaries Notes to Consolidated Financial Statements (continued) Patents 4,390 - ------- -------- $62,520 $ 21,082 ======= ======== 6. Accrued Liabilities Accrued liabilities were comprised of the following as of December 31, 1996 and 1995 (in thousands): Successor Predecessor 1996 1995 --------- ----------- Advertising and promotion expenses $10,012 $ 9,673 Compensation and benefits 4,787 3,264 Income and other taxes payable 3,855 4,077 Interest 2,454 662 Other 11,856 8,636 ------- ------- $32,964 $26,312 ======= ======= 7. Debt Senior Credit Agreement F-17 Remington Products Company, L.L.C. and Subsidiaries Notes to Consolidated Financial Statements (continued) On the Closing Date, the Company entered into a credit agreement (the "Senior Credit Agreement") with a syndicate of banks. The Senior Credit Agreement, as amended, provides for a term loan of $5.0 million to the Company and $5.0 million to the Company's U.K. subsidiary (the "Term Loans") and a revolving credit facility of $50.0 million to the Company and $20.0 million to the Company's U.K. subsidiary (the "Revolving Credit Facilities"). The Senior Credit Agreement expires on June 30, 2002. The initial borrowings under the Senior Credit Agreement, along with the proceeds of the Senior Subordinated Notes, were used to repay the debt of the predecessor company. The Revolving Credit Facilities are subject to a borrowing base of 85% of eligible accounts receivable and 60% of eligible inventory for the applicable borrower. As of December 31, 1996, availability under the Revolving Credit Facilities was approximately $34.9 million. The term loans under the Senior Credit Agreement are payable in quarterly installments. Aggregate scheduled installments over the next five years ending December 31, 2001 are $1.1, $1.4, $1.6, $1.9 and $3.2 million, respectively. The obligations under the Senior Credit Agreement are guaranteed by each of the Company's domestic subsidiaries and secured by their assets and properties and pledge of the common equity interests. At the Company's option, the interest rates per annum applicable to the loans under the Senior Credit Agreement will be based upon (a) in the case of the Company, a Eurodollar rate ("LIBOR") plus 2.25% or the greater of (i) the prime rate plus 1.0% and (ii) the federal funds rate plus 1.5% and (b) in the case of loans to the Company's U.K. subsidiary, a EuroSterling Rate (the F-18 Remington Products Company, L.L.C. and Subsidiaries Notes to Consolidated Financial Statements (continued) "EuroSterling Rate") plus 2.25% or the Sterling Base Rate plus 1.0%; provided, however, the interest rates are subject to reduction if certain requirements of financial performance are met. Interest is payable quarterly in arrears, including a commitment fee of 0.5% on the average daily unused portion of the Revolving Credit Facilities. 11% Senior Subordinated Notes The 11% Series B Senior Subordinated Notes due 2006 (the "Senior Subordinated Notes") are general unsecured obligations of the Company which mature on May 15, 2006. Interest accrues at the rate of 11% per annum and is payable semi-annually in arrears. The Senior Subordinated Notes are redeemable, in whole or in part, at the option of the Company at any time on or after May 15, 2001 at a redemption price ranging from 105.5% to 100.0% of the Principal amount then outstanding plus accrued and unpaid interest, depending when redeemed, and any applicable damages. In addition, on or prior to May 15, 1999, the Company may redeem up to 35% in aggregate principal amount of the Senior Subordinated Notes at a redemption price of 111.0% of the principal amount plus accrued and unpaid interest and any applicable damages with the net proceeds of one or more offerings of capital stock subject to certain terms and conditions. Short Term Borrowings Short Term Borrowings consist of local revolving credit lines at certain of the Company's foreign subsidiaries'. These facilities are collateralized by assets of the subsidiaries or are guaranteed by the Company. The weighted average interest rate under these facilities was approximately 5.1% in 1996 and 1995. F-19 Remington Products Company, L.L.C. and Subsidiaries Notes to Consolidated Financial Statements (continued) Debt Covenants The Senior Credit Agreement requires the Company to meet certain financial tests, the more restrictive of which require the Company to maintain certain interest coverage and leverage ratios, as defined. The Senior Subordinated Note indenture and the Senior Credit Agreement also contain a number of operating covenants which limit the discretion of Management with respect to certain business matters, including the amount and terms under which the Company can obtain additional financing in the future. In addition, these agreements limit the amount of dividends that the Company is permitted to pay. Details of long-term debt at December 31, 1996 and 1995 are as follows (in thousands): Successor Predecessor 1996 1995 --------- ----------- Revolving credit facilities $ 30,224 $ 39,252 Senior Subordinated Notes 130,000 - F-20 Remington Products Company, L.L.C. and Subsidiaries Notes to Consolidated Financial Statements (continued) Term loans 10,254 16,250 -------- ------- 170,478 55,502 Less current portion (1,067) (48,952) -------- -------- $169,411 $ 6,550 ======== ======== 8. Membership Interests The Vestar Members, RPI and certain Management Investors (collectively the "Members") have entered into an Amended and Restated Limited Liability Company Agreement (the "LLC Agreement"). The Company was organized as a limited liability company because such an entity would (i) shield the members from unlimited liability and (ii) qualify as a pass-through entity for tax purposes. The LLC Agreement will govern the relative rights and duties of the Members. The ownership interests of the Members in the Company consist of preferred membership interests (the "Preferred Equity") and common units (the "Common Units"). The Common Units represent the common equity of the Company. The Preferred Equity is entitled to a preferred yield of 12% per annum, compounded quarterly, and to an aggregate liquidation preference of $62 million (net of any prior repayments of Preferred Equity) plus any accrued but unpaid preferred yield. As of December 31, 1996 the aggregate unpaid Preferred Equity dividend amounted to $4.6 million. F-21 Remington Products Company, L.L.C. and Subsidiaries Notes to Consolidated Financial Statements (continued) As a result of the Reorganization, on the Closing Date, RPI has a $35.4 million equity interest in the Company ($32.0 million in Preferred Equity) and the Vestar Members have a $33.4 million equity interest in the Company ($30.0 million in Preferred Equity). As of December 31, 1996, the Company's Common Units were owned 44.3% by the Vestar Members, 44.3% by RPI and 11.13% by certain Management Investors (43.0%, 43.0% and 14%, respectively, on a fully diluted basis). Vestar Corp. I controls the Management Committee and the affairs and policies of the Company. On the Closing Date, certain Management Investors were granted options (the "Management Options") to acquire in the aggregate, up to 2,580 Common Units at an exercise price of $100 per unit, the fair market value of the Common Units as of the Closing Date. Subsequent to the Closing Date an additional 1,600 Management Options were granted and none were cancelled. The Management Options, which are fully vested at the time of grant, are exercisable only under certain conditions. The shares purchased upon exercise of the options are subject to certain call provisions exercisable by the Company and certain put provisions exercisable by the holder. The Company applies APB Opinion 25 "Accounting for Stock Issued to Employees", in accounting for the Management Options. Had compensation cost for the Management Options been determined based on the fair value of the Management Options at date of grant consistent with the requirements of SFAS No. 123, "Accounting for Stock Based Compensation", the Company's net loss for the thirty-one weeks ended December 31, 1996 would have increased by approximately $0.1 million. The fair value of the Management Options granted during 1996 have been estimated at the respective dates of grant using the Black-Scholes option pricing model with the following assumptions: (i) a risk factor interest rate of 6.1%; (ii) an expected life F-22 Remington Products Company, L.L.C. and Subsidiaries Notes to Consolidated Financial Statements (continued) of five years; (iii) an expected dividend yield of zero; and (iv) an expected volatility of zero. 9. Income Taxes Federal income taxes on net earnings of the Company are payable directly by the partners pursuant to the Internal Revenue Code. Accordingly, no provision has been made for Federal income taxes for the Company. However, certain state and local jurisdictions do not recognize partnership status for taxing purposes and require taxes be paid on net earnings. Furthermore, earnings of certain foreign operations are taxable under local statutes. Foreign pretax earnings/(losses) were $7,785, $(2,433), $7,632 and $3,232 thousand for the 31 weeks ended December 31, 1996, the 21 weeks ended May 23, 1996, and the years ended December 31, 1995 and 1994, respectively. The provision (benefit) for income taxes consists of the following (in thousands):
Successor Predecessor --------- --------------------------------- 31 Weeks 21 Weeks Ended Ended Year Ended December 31, May 23, December 31, 1996 1996 1995 1994 ------- ------- ------- ------- Current: State and local $ 5 $ -- $ 40 $ 19 Foreign 1,762 (312) 1,959 1,067 Deferred:
F-23 Remington Products Company, L.L.C. and Subsidiaries Notes to Consolidated Financial Statements (continued)
Foreign 1,251 (561) (735) -- ------- ------- ------- ------- Total $ 3,018 $ (873) $ 1,264 $ 1,086 ======= ======= ======= ======= Income Taxes computed at statutory U.S. Federal income tax rate $ (54) $(6,672) $ 6,476 $ 5,534 Partnership status for U.S. federal income tax purposes 2,779 5,821 (3,805) (4,403) State and local income taxes 5 -- 40 19 Adjustment for foreign income tax rates 288 (22) 506 (33) Utilization of foreign net operating loss carryforwards -- -- (1,340) (31) Recognition of foreign deferred tax asset -- -- (613) -- ------- ------- ------- ------- Income taxes as reported $ 3,018 $ (873) $ 1,264 $ 1,086 ------- ------- ------- -------
Deferred tax accounts of the foreign subsidiaries as of December 31, 1996 and 1995 comprise the following (in thousands): F-24 Remington Products Company, L.L.C. and Subsidiaries Notes to Consolidated Financial Statements (continued) Successor Predecessor 1996 1995 --------- ----------- Current: Deferred tax assets: Deductible interest $624 Lease costs 153 Other $101 15 ---- ---- Current deferred tax assets 101 792 ---- ---- Non-Current: Deferred tax assets: Fixed asset depreciation - 136 Deferred tax liability: Pension surplus - (40) ---- ---- Non-Current deferred tax assets - 96 ---- ---- Net deferred tax assets $101 $888 ==== ==== 10. Commitments and Contingencies The Company is liable under the terms of noncancelable operating leases of real estate and equipment for minimum annual rent payments as follows (in thousands): F-25 Remington Products Company, L.L.C. and Subsidiaries Notes to Consolidated Financial Statements (continued) 1997 $ 3,686 1998 3,038 1999 2,548 2000 1,557 2001 1,077 2002 and thereafter 748 ------- $12,654 ======= Rent expense was $3,760, $2,095, $5,469 and $5,605 thousand for the thirty-one weeks ended December 31, 1996, the twenty-one weeks ended May 23, 1996 and for the years ended December 31, 1995 and 1994, respectively. The majority of the leases contain escalation clauses which provide for increases in base rentals to recover future increases in certain operating costs. The future minimum rental payments shown above include base rentals with known escalations. Lease agreements may include renewal options and usually require that the Company pay for utilities, taxes, insurance and maintenance expenses. The Company is involved in legal and administrative proceedings and claims of various types. While any litigation contains an element of uncertainty, management believes that the outcome of each such proceeding or claim which is pending or known to be threatened, or all of them combined, will not have a material adverse effect on the Company's consolidated financial position or results of operations. F-26 Remington Products Company, L.L.C. and Subsidiaries Notes to Consolidated Financial Statements (continued) 11. Employee Benefit Plans UK Pension Plan. The Company's UK subsidiary has a contributory defined benefit pension plan which covers substantially all of the UK subsidiary's employees. Pension benefits are based upon length of service and compensation under a final compensation averaging formula. The Company's funding policy is to make contributions consistent with statutory requirements. The plan's assets are primarily invested in equity instruments. Net pension cost for the year ended December 31, 1996 was approximately $388 thousand. The plan's funded status as of December 31, 1996 is as follows (in thousands): Accumulated benefit obligations $(4,446) ------- Projected benefit obligation $(4,788) Plan assets at fair value (principally marketable securities) 5,369 Plan assets in excess of projected benefit ------- obligation 581 Unrecognized gain (480) ------- Prepaid pension cost $ 101 ------- Comparable information for the year ended December 31, 1995 was not available. Employee Savings Plan. The Company has a savings accumulation plan (the "Plan") under Section 401(k) of the Internal Revenue Code covering substantially all regular employees. The Plan is subject to the provisions of ERISA and has been updated for subsequent amendments. The Plan allows for employees to defer up to the lesser of 15% of their annual earnings or within limitations on a pre-tax basis through voluntary contributions to the plan. The Plan provides for contributions in an amount equal to 40% of their employees' contributions up to a maximum of 5% of their total salary. The Company's matching contributions were $94, $52, $104 and $114 thousand for the thirty-one weeks ended December 31, 1996, the twenty-one weeks ended May 23, 1996 and for the years ended December 31, 1995 and 1994 respectively. 12. Financial Instruments, Credit Risk and Other Fair Value of Financial Instruments: The carrying amounts for cash and cash equivalents, accounts receivable, short-term borrowings, accounts payable and accrued liabilities approximate fair value due to the short maturities of these instruments. At December 31, 1996, the net accrued unrealized loss on foreign currency forward contracts was approximately $1.5 million and the fair value of long-term debt was approximately $149.9 million (book value of $169.4 million). At December 31, 1995, the net accrued unrealized loss on foreign currency forward contracts was not material and the carrying value of long-term debt approximated fair value. Concentration of Credit Risk: Financial instruments, which potentially subject the Company to concentration of credit risk, consist principally of cash and accounts receivable. The Company places its cash with high credit quality institutions. At times such amounts may be in excess of the FDIC insurance limits. As of F-27 Remington Products Company, L.L.C. and Subsidiaries Notes to Consolidated Financial Statements (continued) December 31, 1996, the Company had uncollateralized receivables with two mass-merchant retailers which represented approximately 21% of the Company's accounts receivable balance. During calendar 1996, 1995 and 1994, sales to these two customers represented approximately 25%, 21% and 21%, respectively, of the Company's net sales. The Company performs ongoing credit evaluations of its customers' financial condition but does not require collateral to support customer receivables. The Company establishes an allowance for doubtful accounts based upon factors surrounding the credit risk of specific customers, historical trends and other information. Foreign Currency Exposure Management: The Company has entered into foreign currency forward contracts to mitigate the effect of fluctuating foreign currencies on intercompany transactions and balances between U.S. and foreign operations. Realized and unrealized gains and losses on such contracts are recognized in income as an offset to gains or losses on the underlying intercompany transactions. At December 31, 1996, forward contracts to sell 18.7 million UK Pounds Sterling were outstanding, all of which mature in 1997. At December 31, 1995, forward contracts to sell 9.6 million UK Pounds Sterling and 3.0 million German Marks were outstanding and matured at various dates through June 30, 1996. Other A substantial portion of the Company's finished goods are manufactured for the Company by certain third-party suppliers located in China, Japan and Thailand. Although the Company considers its present relationships with these F-28 Remington Products Company, L.L.C. and Subsidiaries Notes to Consolidated Financial Statements (continued) suppliers to be good, any adverse change in the relationships with these suppliers, the financial condition of such suppliers, the Company's ability to import outsourced products or the suppliers' ability to manufacture and deliver outsourced products on a timely basis would have a material adverse effect on the Company. 13. Related Party Transactions Pursuant to a management agreement (the "Management Agreement") entered into by the Company as of the Closing Date, Vestar Capital Partners ("Vestar Capital"), an affiliate of the Vestar Members, will receive an annual advisory fee equal to the greater of $500 thousand and 1.5% of EBITDA (as defined in such agreement) of the company on a consolidated basis for rendering advisory and consulting services in relation to strategic financial planning and other affairs of the Company. Vestar Capital will also be paid reasonable and customary investment banking fees in connection with an initial public offering, sale of the Company and other financing. In addition, Vestar Capital received a fee in the amount of $2.0 million from the Company on the Closing Date. The Management Agreement will be in effect until the tenth anniversary of the Closing Date, provided that the Management Agreement will terminate on the earlier to occur of: (i) a qualified public offering or (ii) the first date that an affiliate of Vestar Capital owns less than 25% of the number of the Company's Common Units owned by Vestar Capital on the Closing Date, and provided further that Vestar Capital may terminate the Management Agreement at any time. Pursuant to a consulting and transitional services agreement (the "Consulting Agreement") entered into by the Company as of the closing Date, RPI will receive an aggregate annual fee equal to the sum of (i) the greater of $500 thousand and 1.5% F-29 Remington Products Company, L.L.C. and Subsidiaries Notes to Consolidated Financial Statements (continued) of EBITDA (as defined in such agreement) of the Company on a consolidated basis and (ii) $250 thousand in 1996, 1997 and 1998 if the Company's net revenues or EBITDA (as defined in such agreement) exceed certain targets in such years, for rendering advisory and consulting services in relation to strategic financial panning, product development and evaluation of mergers, acquisitions and divestitures. The Consulting Agreement will be in effect until the tenth anniversary of the Closing Date, provided that the Consulting Agreement will terminate on the earlier to occur of: (I) a qualified public offering or (ii) the first date that RPI owns less than 25% of the number of the Company's Common Units owned by RPI on the Closing Date, and provided further that Vestar Capital may terminate the Consulting Agreement at any time (but only to the extent that Vestar Capital also terminates similar provisions of the Management Agreement). The Company utilized consultants from an entity controlled by a director of the Company for a limited duration project during 1996. The Company recorded fees to the consultants of $323 thousand for this project which has been completed. During January 1995, RPC entered into a barter transaction with an entity controlled by one of RPC's partners. RPC exchanged inventory with a cost of $4,275 for barter credits that can be used to pay for media advertising at a predetermined rate of cash and barter credits. The transaction resulted in the recording in 1994 of an inventory writedown of $2,137 to reduce the bartered inventory to its net realizable value and prepaid advertising of $2,138, representing management's estimate of the net realizable value of the inventory exchanged. During 1995, RPC incurred $2,948 for media advertising purchased through the related entity, of which $521 represented utilization of the barter credits. TMI ceased being a related party as of the Closing Date. F-30 Remington Products Company, L.L.C. and Subsidiaries Notes to Consolidated Financial Statements (continued) RPC utilized various consultants (principally in its computer and service store operations) from an entity controlled by one of RPC's partners. RPC was billed based upon a prearranged hourly amount and was charged $37, $381 and $375 thousand for related services during the twenty-one weeks ended May 23, 1996 and for the years ended December 31, 1995 and 1994, respectively. Fees paid to an entity controlled by the other RPC partner amounted to $54 thousand for transportation services and reimbursement of the partner's expenses during the year ended December 31, 1995. RPC acquired certain products for resale in its service stores from companies owned by each of RPC's partners. Such purchases aggregated approximately $80, $94 and $45 thousand during the twenty-one weeks ended May 23, 1996 and for the years ended December 31, 1995 and 1994, respectively. Included in accounts receivable is $27 thousand owed by a partner and related affiliates at December 31, 1995. Included in other assets is $200 thousand owed by an officer at December 31, 1995. In 1995, RPC paid $984 thousand of costs incurred on behalf of the partners. Approximately $800 thousand of such costs relate to various change in ownership transactions, which were not completed. The remaining $184 thousand re presents payments to one of RPC's partners. 14. Geographic Information F-31 Remington Products Company, L.L.C. and Subsidiaries Notes to Consolidated Financial Statements (continued) The Company operates in one industry segment, the manufacture and marketing of electrical personal care appliances. The Company sells its products principally through mass merchandisers and its own service stores in the United States and also has merchandising operations in Europe (principally U.K. and Germany) and other countries (principally Canada and Australia). Information by geographical location is as follows (in thousands):
Successor Predecessor --------- -------------------------------------------- 31 Weeks 21 Weeks Ended Ended Year Ended December 31, May 23, December 31, 1996 1996 1995 1994 --------- --------- --------- --------- Net sales*: United States $112,153 $ 34,747 $164,080 $176,230 Europe 50,122 13,927 62,288 57,757 Other 23,011 8,039 28,955 27,459 --------- --------- --------- --------- $185,286 $ 56,713 $255,323 $261,446 ======== ======== ======== ======== Operating profit (loss): United States $ 2,749 $(14,745) $ 18,402 $ 17,225 Europe 6,394 (1,168) 4,914 1,267 Other 3,365 (1,038) 3,200 2,736 -------- --------- ---------- ---------- $12,508 $(16,951) $ 26,516 $ 21,228 ======= ========= ======== ========
F-32 Remington Products Company, L.L.C. and Subsidiaries Notes to Consolidated Financial Statements (continued) Identifiable assets: United States $143,581 $106,606 $ 99,486 Europe 48,193 45,366 40,898 Other 23,049 18,950 20,159 --------- ---------- --------- $214,823 $170,922 $160,543 ======== ======== ========
*Net Sales exclude sales from the United States to affiliate companies of $7,812, $2,716, $11,366 and $12,700 thousand for the 31 weeks ended December 31, 1996, the 21 weeks ended May 23, 1996 and the years ended December 31, 1995 and 1994, respectively. Export sales to unaffiliated customers are included in the United States and are not significant. Identifiable assets in the United States includes the majority of the Company's intangible assets. F-33 Report of Independent Accountants To the Management Committee of REMINGTON PRODUCTS COMPANY: In connection with our audits of the consolidated financial statements of Remington Products Company and Subsidiaries as of December 31, 1995 and for the years ended December 31, 1995 and 1994, which financial statements are included in the Form 10-K, we have also audited the financial statement schedule for the years ended December 31, 1995 and 1994 listed in item 21(b) herein. In our opinion, this financial statement schedule, when considered in relation to the basic financial statements taken as a whole, presents fairly, in all material respects, the information required to be included therein. COOPERS & LYBRAND L.L.P. Stamford, Connecticut March 4, 1996 S-1 REMINGTON PRODUCTS COMPANY Schedule II--Valuation & Qualifying Accounts (dollars in thousands)
Additions Balance of Charged to Balance at Beginning Costs and End of Period Expenses Deductions of Period --------- -------- ---------- --------- Successor 31 Weeks Ended December 31, 1996 (12 months) Allowance for doubtful accounts $2,487 $1,038 $2,185 $1,340 Allowance for cash discounts and returns 3,937 14,123 8,641 9,419 Predecessor 21 Weeks Ended May 23, 1996 Allowance for doubtful accounts 1,366 1,914 793 2,487 Allowance for cash discounts and returns 7,852 4,331 8,246 3,937 Year Ended December 31, 1995 Allowance for doubtful accounts 1,461 159 254 1,366 Allowance for cash discounts and returns 7,917 16,075 16,660 7,852 Year Ended December 31, 1994 Allowance for doubtful accounts 451 1,336 326 1,461 Allowance for cash discounts and returns 5,795 18,977 16,855 7,917
S-2 EX-20 2 EXECUTIVE SEVERANCE AGREEMENT EXHIBIT 10.20 EXECUTIVE SEVERANCE AGREEMENT This EXECUTIVE SEVERANCE AGREEMENT (this "Agreement") is made as of November 25, 1996, by and between the entity named on the signature page hereto (the "Company"), Alexander R. Castaldi (the "Executive"). In order to induce Executive to accept employment with the Company and in consideration of the covenants and agreements contained herein, the parties hereto agree as follows: 1. Definitions. "Cause" shall mean a termination of the employment of Executive by the Company or any subsidiary thereof due to (i) the commission by Executive of an act of fraud or embezzlement (including the unauthorized disclosure of confidential or proprietary information of the Company or any of its subsidiaries which results in material financial loss to the Company or any of its subsidiaries), (ii) the commission by Executive of a felony, (iii) the willful misconduct of Executive as an employee of the Company or any of its subsidiaries which is reasonably likely to result in material injury or financial loss to the Company or any of its subsidiaries or (iv) the willful failure of Executive to render services to the Company or any of its subsidiaries in accordance with the terms of Executive's employment which failure amounts to a material neglect of Executive's duties to the Company or any of its subsidiaries. "Change of Control" shall mean a transaction as a result of which any person or entity not controlled by persons currently owning Common Units acquires more than 60% of the outstanding Common Units or of the common stock of a corporation that either controls the Company, directly or indirectly, or is the successor to the Company. "Common Units" shall mean the common units of the Company, together with any securities issued in exchange therefor. "Confidential Information" shall have the meaning set forth in Section 6 below. "Good Reason" shall mean the assignment to Executive of duties materially and adversely inconsistent with Executive's position, duties or responsibilities as in effect immediately after the date of execution of this Agreement including, but not limited to, any material reduction in such positions, duties or responsibilities, or a change in Executive's titles or offices, as then in effect, or any removal of Executive from, or any failure to reelect Executive to, any of such positions. "Health Benefits" shall have the meaning set forth in Section 3(b) below. "Insured Benefits" shall have the meaning set forth in Section 3(b) below. "Senior Executive" shall mean any employee of the Company with significant managerial responsibility over material areas of the business of the Company, including, without limitation, financial, marketing, sales, distribution or manufacturing. "Severance Term" shall have the meaning set forth in Section 3(a) below. "Termination Date" shall have the meaning set forth in Section 4(a) below. 2. Job Elimination. If, within the period commencing 90 days from the date hereof and for so long as Executive is employed by the Company, there shall occur: (a) any involuntary termination of Executive's employment (other than for Cause or Disability); (b) the resignation of Executive for Good Reason; (c) any reduction in Executive's annual base salary in effect on the date hereof; or (d) any failure by the Company to provide Executive with benefits at least as favorable as those enjoyed by Executive under any of the pension, life insurance, medical, health and accident, disability or other employee plans of the Company on the date hereof, or the taking of any action that would materially reduce any of such benefits in effect on the date hereof (unless this reduction relates to a reduction in benefits applicable to all employees generally); then, at Executive's option, exercisable by Executive within thirty (30) days of the occurrence of each and every of the foregoing events, Executive may resign from employment (or, if involuntarily terminated, give notice of intention to collect benefits hereunder) by delivering a notice in writing to the Company, and the provisions of Section 2 of this Agreement shall apply. The events described in clause (b) above shall be deemed to occur in the event of a Change of Control which results in the Company being (1) a member of a different consolidated group and (2) controlled, directly or indirectly by another entity which actively conducts an operating business. 3. Continuing Compensation and Benefits. (a) The Company will continue to pay to Executive his annual base salary at Executive's rate of pay in effect on the date hereof for a period of twelve (12) months after the effective date of the termination of Executive's employment (the "Severance Term"). Subject to Section 6 below, during the Severance Term, Executive will be free to seek, accept and engage in other full-time employment. (b) During the Severance Term, the Company will continue to provide to Executive the medical benefits Executive was entitled to on the date hereof (hereinafter "Health Benefits") and to the extent the Company's insurance plans permit, the long-term disability and life insurance benefits Executive was entitled to on the date hereof (hereinafter "Insured Benefits"), -2- except that the amount of coverage under the Insured Benefits will be based on the rate of pay Executive is receiving from the Company at the time of the event that gives rise to a claim under the Insured Benefits. The continued provision of the Health Benefits and the Insured Benefits will cease (i) when payments to Executive cease under Section 3(a) above or (ii) when Executive becomes employed on a full-time basis, whichever occurs first. (c) On the effective date of termination of Executive's employment, the Company will pay Executive for accrued but unused vacation (at his rate of pay in effect on the date hereof), if any, to the extent provided in the Company's policies on the date hereof, but Executive shall not accrue any vacation during the period referred to in Section 3(a) above. 4. Accrued Bonuses. (a) If the effective date of the termination of Executive's employment (the "Termination Date") is on or before the end of the second quarter of the Company's fiscal year and after December 31, 1997, then the Company shall pay to Executive a bonus in an amount equal to the bonus paid to Executive for the prior fiscal year under the Company's Bonus Plan multiplied by a fraction, the numerator of which is the number of completed fiscal quarters which have elapsed in the Company's current fiscal year through and including the termination date, and the denominator of which is 4. (b) If the Termination Date is after the end of the second quarter of the Company's fiscal year or occurs at any time prior to December 31, 1997, then the Company shall, at the time bonuses for such fiscal year are paid to employees of the Company, pay to Executive a bonus in an amount equal to the lesser of (i) the bonus for the such fiscal year to which Executive would have been entitled had he not been terminated multiplied by a fraction, the numerator of which is the number of completed fiscal quarters which have elapsed in the Company's current fiscal year through and including the termination date, and the denominator of which is 4, and (ii) the bonus paid to Executive for the prior fiscal year under the Company's Bonus Plan multiplied by a fraction, the numerator of which is the number of completed fiscal quarters which have elapsed in the Company's current fiscal year through and including the termination date, and the denominator of which is 4, provided that, in the event of a Termination occurring at any time during the period ending December 31, 1997, the amount payable under this paragraph 3(b) shall be determined solely under clause (i) of this paragraph 3(b). The Company shall pay one-half of the projected amount payable under this paragraph 3(b) at the end of the Company's fiscal year and the remainder at completion of the Company's year end audit. (c) If the Termination Date occurs within 12 months of a Change of Control, then the Company shall, within 5 business days of the Termination Date, pay to Executive 100% of the greater of (i) the targeted bonus that Executive would have received in respect of such fiscal year had he not been terminated and (ii) the bonus paid to Executive in respect of the prior fiscal year. (d) The provisions of this Section 3 will be effective beginning 90 days after the date hereof. -3- 5. Termination for Cause. If Executive's employment is terminated for Cause, all of Executive's rights under paragraphs 2 and 3 shall cease as of the effective date of the Termination Date, except that Executive (i) shall be entitled to receive accrued salary through the Termination Date and (ii) shall be entitled to receive the payments and benefits to which Executive was then entitled under the employee benefit plans of the Company or any affiliate thereof as of the Termination Date. 6. Confidentiality. Executive acknowledges that the information, observations and data obtained by him while employed by the Company concerning the business or affairs of the Company and its subsidiaries that (i) are not available to the public, customers, suppliers and competitors of the Company, (ii) are in the nature of trade secrets, or (iii) the disclosure of which could reasonably be expected to cause a financial loss to the Company, or otherwise have a material adverse effect on the Company (collectively, the "Confidential Information") are the property of the Company or such subsidiary. Therefore, Executive agrees that he shall not disclose to any unauthorized person or use for his own account any Confidential Information without the prior written consent of the Board, unless and to the extent that the aforementioned matters become generally known to and available for use by the public other than as a result of Executive's acts or omissions to act. Executive shall deliver to the Company at the termination of employment, or at any other time the Company may request, all memoranda, notes, plans, records, reports, computer tapes and software and other documents and data (and copies thereof) relating to the Confidential Information, work product or the business of the Company or any of its subsidiaries which he may then possess or have under his control. 7. Non-Compete; Non-Solicitation. (a) Executive agrees that during the Non-Compete Period (as defined below), he shall not directly or indirectly own, manage, control, participate in, consult with, render services for, or in any manner engage in any business that competes anywhere in the United States, Canada or anywhere else in the world with the businesses of the Company or its subsidiaries as such businesses exist or are in process on the Termination Date. Nothing herein shall prohibit Executive from owning not more than 5% of the outstanding stock of any class of a corporation which is publicly traded, so long as Executive has no active participation in the business of such corporation. For purposes of this Agreement, the term "Non-Compete Period" means the period beginning on the date of this Agreement and ending on the last day of the Severance Term. (b) Executive shall not directly or indirectly through another entity (i) induce or attempt to induce any Senior Executive of the Company or its subsidiaries to leave the employ of the Company or such subsidiary, or in any way interfere with the relationship between the Company or its subsidiaries and any Senior Executive thereof, (ii) hire any person who was a Senior Executive of the Company or its subsidiaries at any time during Executive's employment with the Company until the later of the first anniversary of the Termination Date and the six month anniversary of such Senior Executive's departure from the Company, or (iii) for the two year period after the termination of his employment with the Company induce or attempt to induce any customer, supplier, licensee or other business relation of the Company or its subsidiaries to cease doing business with the Company or its subsidiaries, or in any way interfere with the relationship between any such customer, supplier, licensee or business relation and the Company or its subsidiaries. -4- (b) If, at the time of enforcement of this Section 7, a court or arbitrator shall hold that the duration, scope or area restrictions stated herein are unreasonable under circumstances then existing, the parties agree that the maximum duration, scope or area reasonable under such circumstances shall be substituted for the stated duration, scope or area and that the court or arbitrator shall be allowed to revise the restrictions contained herein to cover the maximum period, scope and area permitted by law. (c) In the event of the breach or a threatened breach by Executive, of any of the provisions of Section 6 or this Section 7, the Company, in addition and supplementary to other rights and remedies existing in its favor, may apply to any court of law or equity of competent jurisdiction for specific performance or injunctive or other relief in order to enforce or prevent any violations of the provisions hereof (without posting a bond or other security). 8. Notice/Consultation. In consideration of the foregoing, Executive agrees to give the Company no less than 30 days prior written notice if at any time Executive decides to resign from the Company's employ. Since, in certain respects, Executive will be an employee of the Company during any Severance Term, Executive agrees to consult with the Company during such Severance Term. This consultation obligation will not prevent or interfere with Executive seeking, accepting or engaging in full-time employment. 9. Term. This Agreement will be in effect for a period of three years from the date hereof. 10. Tax Withholding. All payments to Executive hereunder will be earned and prorated on a daily basis, but shall be payable at the same time and in the same manner as executives of the Company, or its successor, are paid their salaries. The Company shall have the power to withhold, require Executive to remit to the Company in cash or offset against any amounts otherwise payable Executive, an amount sufficient to satisfy all Federal, state, local and foreign withholding tax requirements relating to such payments, and the Company may defer any payments until such requirements are satisfied. 11. Executive's Employment by the Company. Nothing contained in this Agreement shall be deemed to obligate the Company or any subsidiary of the Company to employ Executive in any capacity whatsoever or to prohibit or restrict the Company (or any such subsidiary) from terminating the employment of Executive at any time or for any reason whatsoever, with or without Cause. 12. Administration by Management Committee. This Agreement shall be administered by the Management Committee, which shall have full power and authority to construe and administer this Agreement as it may deem advisable. Any action taken under the provisions of this Agreement by the Management Committee in connection with the administration of this Agreement shall be, in each case, within the sole discretion of the Management Committee and conclusive and binding upon the Company, Executive, all beneficiaries of Executive, and all persons and entities having any interest therein. -5- 13. Binding Effect. The provisions of this Agreement shall be binding upon and accrue to the benefit of the parties hereto and their respective heirs, legal representatives, successors and assigns. 14. Amendment; Waiver. This Agreement may be amended only by a written instrument signed by the parties hereto. No waiver by any party hereto of any of the provisions hereof shall be effective unless set forth in a writing executed by the party so waiving. The waiver by any party hereto of a breach of any provision of this Agreement shall not operate or be construed as a waiver of any preceding or succeeding breach and no failure by either party to exercise any right or privilege hereunder shall be deemed a waiver of such party's rights or privileges hereunder or shall be deemed a waiver of such party's rights to exercise the same at any subsequent time or times hereunder. 15. Governing Law. This Agreement shall be governed by and construed and enforced in accordance with the laws of the State of New York without regard to the conflicts of law principles thereof. 16. Jurisdiction. Any suit, action or proceeding with respect to this Agreement, or any judgment entered by any court in respect thereof, shall be brought in any court of competent jurisdiction in the State of New York, and both the Company and Executive hereby submit to the exclusive jurisdiction of such courts for the purpose of any such suit, action, proceeding or judgment. Executive and the Company hereby irrevocably waive any objections which either may now or hereafter have to the laying of the venue of any suit, action or proceeding arising out of or relating to this Agreement brought in any court of competent jurisdiction in the State of New York, and hereby further irrevocably waive any claim that any such suit, action or proceeding brought in any such court has been brought in any inconvenient forum. 17. Notices. All notices and other communications hereunder shall be in writing and shall be deemed to have been duly given when personally delivered, telecopied (with confirmation of receipt), two days after deposit with a reputable overnight delivery service (charges prepaid) and three days after deposit in the U.S. Mail (postage prepaid and return receipt requested) to the address set forth below or such other address as the recipient party has previously delivered notice to the sending party. (i) If to the Company: Remington Products Company, L.L.C. 60 Main Street Bridgeport, CT 06604 Attention: Allen S. Lipson Telecopy: 203-366-7707 -6- and Remington Products Company, L.L.C. c/o Vestar Equity Partners, L.P. 245 Park Avenue, 41st Floor New York, NY 10167 Attention: Robert L. Rosner Telecopy: 212-808-4922 with a copy to: Kirkland & Ellis 655 Fifteenth Street, N.W. Washington, D.C. 20005-5793 Attention: Jack M. Feder Telecopy: 202-879-5200 (ii) If to Executive: 18. Integration. This Agreement and the documents referred to herein or delivered pursuant hereto which form a part hereof contain the entire understanding of the parties with respect to the subject matter hereof and thereof. There are no restrictions, agreements, promises, representations, warranties, covenants or undertakings with respect to the subject matter hereof other than those expressly set forth herein and therein. This Agreement supersedes all prior agreements and understandings between the parties with respect to such subject matter. 19. Counterparts. This Agreement may be executed in separate counterparts each of which shall be deemed an original, but all of which shall constitute one and the same instrument. 20. Injunctive Relief. The Executive acknowledges and agrees that a violation of any of the terms of this Agreement will cause the Company irreparable injury for which adequate remedy at law is not available. Accordingly, it is agreed that the Company shall be entitled to an injunction, restraining order or other equitable relief to prevent breaches of the provisions of this Agreement and to enforce specifically the terms and provisions hereof in any court of competent jurisdiction in the United States or any state thereof, in addition to any other remedy to which it may be entitled at law or equity. 21. Rights Cumulative. The rights and remedies of Executive and the Company under this Agreement shall be cumulative and not exclusive of any rights or remedies which either would otherwise have hereunder or at law or in equity or by statute, and no failure or delay by either party in exercising any right or remedy shall impair any such right or remedy or operate as a waiver of such right or remedy, nor shall any single or partial exercise of any power or right preclude such party's other or further exercise or the exercise of any other power or right. * * * * * -7- [END OF PAGE] [SIGNATURE PAGE FOLLOWS] -8- IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first above written. REMINGTON PRODUCTS COMPANY, L.L.C. By:__________________________ Name: Title: __________________________ ALEXANDER R. CASTALDI EX-21 3 OPTION AGREEMENT EXHIBIT 10.21 OPTION AGREEMENT for ALEXANDER R. CASTALDI THIS OPTION AGREEMENT (this "Agreement") is made as of November 25, 1996 (the "Grant Date"), by and between Remington Products Company, L.L.C., a Delaware limited liability company (the "Company"), and Alexander R. Castaldi (the "Executive"). WHEREAS, on the terms and subject to the conditions hereof, the Company desires to grant Executive, and Executive wishes to acquire, options to purchase and acquire the number of Common Units of the Company set forth on Schedule I attached hereto (the "Options"); and WHEREAS, this Agreement is one of several agreements entered into by the Company with certain persons who are or will be key employees of the Company (collectively with Executive, the "Management Option Holders") as part of a management option plan designed to comply with Rule 701 promulgated under the Securities Act (as defined below); NOW, THEREFORE, in order to implement the foregoing and in consideration of the mutual representations, warranties, covenants and agreements contained herein, the parties hereto agree as follows: 1. Definitions. "Agreement" shall have the meaning set forth in the preface. "Applicable Percentage" shall mean (i) 25% during the one-year period commencing on the first anniversary of the Grant Date; (ii) 50% during the one-year period commencing on the second anniversary of the Grant Date; (iii) 75% during the one-year period commencing on the third anniversary of the Grant Date; and (iv) 100% on and after the fourth anniversary of the Grant Date. The Applicable Percentage shall be 100% after an IPO Exit Transaction. "Cause" shall mean a termination of the employment of Executive by the Company or any subsidiary thereof due to (i) the commission by Executive of an act of fraud or embezzlement (including the unauthorized disclosure of confidential or proprietary information of the Company or any of its subsidiaries which results in material financial loss to the Company or any of its subsidiaries), (ii) the commission by Executive of a felony, (iii) the willful misconduct of Executive as an employee of the Company or any of its subsidiaries which is reasonably likely to result in material injury or financial loss to the Company or any of its subsidiaries or (iv) the willful failure of Executive to render services to the Company or any of its subsidiaries in accordance with the terms of Executive's employment which failure amounts to a material neglect of Executive's duties to the Company or any of its subsidiaries. "Chase Bank" means Chase Manhattan Bank, N.A. "Common Units" shall mean the common units of the Company, together with any securities issued in exchange therefor. "Company" shall have the meaning set forth in the preface. "Cost" shall mean, with respect to each of the Common Units, the exercise price per unit paid by Executive (as proportionately adjusted for all subsequent stock splits, stock dividends and other recapitalization). "Disability" shall mean the inability of Executive to perform the essential functions of Executive's job, with or without reasonable accommodation, by reason of a physical or mental infirmity, for a continuous period of six months. The period of six months shall be deemed continuous unless Executive returns to work for at least 30 consecutive business days during such period and performs during such period services at the level and competence that were performed prior to the beginning of the six-month period. The date of such Disability (for purposes of determining the Termination Date in the event of such Disability) shall be on the first day of such six-month period. "Employee" shall mean any employee (as defined in accordance with the regulations and revenue rulings then applicable under Section 3401(c) of the Internal Revenue Code of 1986, as amended) of the Company or any of its subsidiaries, and the term "Employment" shall include service as a part- or full-time Employee to the Company or any of its subsidiaries. "Executive" shall have the meaning set forth in the preface. "Executive Group" shall have the meaning set forth in Section 4.1(a). "Exercise Price" shall have the meaning set forth in Section 2.1. "Expiration Date" shall have the meaning set forth in Section 2.2. "Fair Market Value" shall mean the average of the closing prices of the sales of the Company's Common Units on all securities exchanges on which the Common Units may at the time be listed, or, if there have been no sales on any such exchange on any day, the average of the highest bid and lowest asked prices on all such exchanges at the end of such day, or, if on any day the Common Units are not so listed, the average of the representative bid and asked prices quoted in the NASDAQ System as of 4:00 p.m., New York time, or, if on any day the Common Units are not quoted in the NASDAQ System, the average of the highest bid and lowest asked prices on such day in the domestic over-the-counter market as reported by the National Quotation Bureau Incorporated, or any similar successor organization, in each such case averaged over a period of 21 days consisting of the day as of which the Fair Market Value is being determined and the 20 consecutive business days prior to such day. If at any time the Common Units are not listed on any securities exchange or quoted in the NASDAQ System or the over-the-counter market, the Fair Market Value shall be the fair value of the Common Units determined in good faith by the Management Committee (without -2- taking into account the lack of liquidity and minority position of the Common Units subject to repurchase). "Financing Default" shall mean an event which would constitute (or with notice or lapse of time or both would constitute) an event of default under any of the following as they may be amended, supplemented or modified from time to time: (i) the Credit and Guarantee Agreement and Indenture (collectively, the "Senior Financing Agreements") dated as of May 23, 1996 among the Company and the financial institutions, agents and trustees party thereto, and any extensions, renewals, refinancings or refundings thereof in whole or in part; (ii) any provision of the Limited Liability Company Agreement or any of its subsidiary's certificate of incorporation or limited liability company agreement, as the case may be, as in effect on the Grant Date; and (iii) any of the securities issued pursuant to or whose terms are governed by the terms of any of the agreements set forth in clauses (i) and (ii) above, and any extensions, renewals, refinancings or refundings thereof in whole or in part. "Good Reason" shall have the meaning set forth in the Executive Severance Agreement dated as of November __, 1996, between Executive and the Company. "Grant Date" shall have the meaning set forth in the preface. "IPO" means the consummation of an initial public offering of Common Units or common stock of a corporation that is the successor to the Company or which owns, directly or indirectly, more than 50% of the Common Units of the Company or its successor. "IPO Exit Transaction" means the first date after an IPO, on which Vestar Equity Partners, L.P., a Delaware limited partnership ("Vestar") and its affiliates (not including employees of the general partner of Vestar) own less than 10% of the Common Units or of the outstanding common stock of a corporation that is the successor to the Company or which controls the Company or its successor. "Limited Liability Company Agreement" shall mean the Amended and Restated Limited Liability Company Agreement of the Company, dated as of May 16, 1996, by and between RPI Corp. (formerly Remington Products, Inc.), a Delaware corporation ("RPI"), Vestar Shaver Corp., a Delaware corporation ("Shaver"), Vestar Razor Corp., a Delaware corporation ("Razor"), and the individuals listed as management members on Schedule A thereto, as the same may be amended from time to time. "Management Committee" shall mean the Company's Management Committee or any board of directors or similar governing body of a successor to the Company. "Management Common Units Subscription Agreements" shall mean the ____________________. "Management Option Holders" shall have the meaning set forth in the preface. "Members Pledge Agreement" shall mean _______________. -3- "Options" shall have the meaning set forth in the preface. "Person" shall mean any individual, corporation, partnership, limited liability company, trust, joint stock company, business trust, unincorporated association, joint venture, governmental authority or other entity of any nature whatsoever. "Public Offering" shall mean a registered public offering of the Company's Common Units. "Reorganization" means the consummation of the transactions contemplated by the Reorganization Agreement dated as of May 1, 1996, by and among RPI, Victor K. Kiam, II, Vestar/Remington Corp., a Delaware corporation ("Vestar Corp.") and Vestar. "Retirement" shall mean Executive's retirement as an employee of the Company or any of its subsidiaries on or after reaching age 65 or such earlier age as may be otherwise determined by the Management Committee after at least four years employment with the Company after the Grant Date. "Sale of the Company" shall mean a Company Sale, as that term is defined in the Limited Liability Company Agreement. "Securities Act" shall mean the Securities Act of 1933, as amended, and all rules and regulations promulgated thereunder, as the same may be amended from time to time. "Securityholders Agreement" shall mean the Securityholders Agreement dated as of May 16, 1996 among Shaver, Razor, Vestar, RPI, Victor K. Kiam, II and other equity holders of the Company. "Termination Date" means the date upon which Executive's employment with the Company and its subsidiaries is terminated. 2. Grant of Options. 2.1 Confirmation of Grant; Option Price. Pursuant to the terms and subject to the conditions set forth in this Agreement, the Company hereby evidences and confirms the grant to Executive, effective on the Grant Date, of the Options to purchase from the Company the number of Common Units set forth in Schedule I attached hereto at an exercise price per unit (the "Exercise Price") and for an aggregate exercise price set forth in Schedule I attached hereto. If Executive exercises the Options, Executive must exercise the Options for all of the Common Units subject thereto. 2.2 Expiration Date. The Options shall terminate on the tenth anniversary of the Grant Date; provided, however, that if Executive's Employment with the Company is terminated for any reason, the Options shall terminate on the 90th day following the Termination Date unless the Management Committee otherwise specifies a later date (such tenth anniversary of the Grant Date or earlier date as specified in the proviso is referred to as the "Expiration Date"). The Options may -4- be exercised, subject to the terms of this Agreement, only (a) in connection with a Sale of the Company, (b) after the effectiveness of a public offering of the Common Units pursuant to an underwritten offering registered under the Securities Act and (c) at any time during the 90-day period preceding the Expiration Date. At 5:00 p.m. (New York time) on the Expiration Date, unexercised Options shall be canceled and of no further force and effect. Notwithstanding the foregoing, the Management Committee may require that the Options be exercised in connection with any Sale of the Company or, if not so exercised, provide that the Options terminate. 2.3 Exercise and Payment. The Executive may exercise the Options by delivering written notice of exercise to the Company, which notice must (i) contain the representations and warranties set forth in Section 3.2 and (ii) be accompanied by the aggregate Exercise Price for the Common Units subject to the Option in the form of cashier's check, certified check or wire transfer of immediately available funds; provided that the Options may not be exercised by Executive unless, to the extent applicable, all of the following conditions are met: (a) Legal counsel for the Company must be satisfied at the time of exercise that the issuance of Common Units upon exercise will be in compliance with the Securities Act and other applicable United States federal, state, local and foreign laws; (b) Executive must execute the Limited Liability Company Agreement and Securityholders Agreement; (c) Executive must deliver to the Company a completed and executed election under 83(b) of the Internal Revenue Code of 1986, as amended, and the regulations promulgated thereunder in the form of Exhibit A attached hereto (which election may be filed by the Company); and (d) Executive must, if required by the Management Committee, execute and deliver the Members Pledge Agreement or such other pledge agreement containing provisions substantially similar to the Members Pledge Agreement and such other documents and instruments contemplated thereunder. The Management Committee may impose such additional procedural requirements to the exercise of the Options as it may deem necessary or advisable in connection therewith. The Executive consents to the filing of the election contemplated by Section 2.3(c). 3. Investment Representations and Covenants of the Executive. 3.1 Options and Common Units Unregistered. The Executive acknowledges and represents that Executive has been advised by the Company that: (a) the Options and the Common Units have not been registered under the Securities Act; (b) any Common Units issued upon exercise of the Options must be held indefinitely and Executive must continue to bear the economic risk of such investment in the -5- Common Units unless the offer and sale of such Common Units is subsequently registered under the Securities Act and all applicable state securities laws or an exemption from such registration is available; (c) there is no established market for the Options and the Common Units and it is not anticipated that there will be any public market for the Options or the Common Units in the foreseeable future; (d) a restrictive legend in the form set forth below shall be placed on the certificates representing the Options and the Common Units acquired on exercise thereof: "THE SECURITIES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO CERTAIN REPURCHASE RIGHTS AND OTHER PROVISIONS SET FORTH IN AN OPTION AGREEMENT BETWEEN THE ISSUER AND [NAME] CASTALDI DATED AS OF JANUARY __, 1997, AS AMENDED AND MODIFIED FROM TIME TO TIME, A COPY OF WHICH MAY BE OBTAINED BY THE HOLDER HEREOF AT THE ISSUER'S PRINCIPAL PLACE OF BUSINESS WITHOUT CHARGE"; (e) a notation shall be made in the appropriate records of the Company indicating that the Options and the Common Units are subject to restrictions on transfer and, if the Company should at some time in the future engage the services of a securities transfer agent, appropriate stop-transfer instructions will be issued to such transfer agent with respect to the Options and the Common Units acquired on exercise thereof; (f) upon exercise of the Options Executive must, if applicable, execute and deliver the Limited Liability Company Agreement, Securityholders Agreement and, if requested by the Management Committee, the Members Pledge Agreement (all of which Executive has had access to and understands the contents of), and become subject to the terms thereof; and (g) the exercise of the Options, and becoming a member of the Company, may subject Executive to taxation in the various jurisdictions where the Company conducts business. 3.2 Additional Investment Representations. Upon each exercise of the Options, Executive shall represent and warrant that: (a) Executive's financial situation is such that Executive can afford to bear the economic risk of holding the Common Units for an indefinite period of time, has adequate means for providing for Executive's current needs and personal contingencies, and can afford to suffer a complete loss of Executive's investment in the Common Units; -6- (b) Executive's knowledge and experience in financial and business matters are such that Executive is capable of evaluating the merits and risks of the investment in the Common Units; (c) Executive understands that the Common Units are a speculative investment which involves a high degree of risk of loss of Executive's investment therein, there are substantial restrictions on the transferability of the Common Units, and, on the date of Executive's exercise of the Options and for an indefinite period thereafter, there may be no public market for the Common Units and, accordingly, it may not be possible for Executive to liquidate Executive's investment in case of emergency, if at all; (d) the terms of this Agreement provide that in the event that Executive ceases to be an Employee, the Company has the right to repurchase the Common Units issued upon exercise of the Options at a price which may be less than the Fair Market Value of such Common Units; (e) Executive understands and has taken cognizance of all the risk factors related to the purchase of the Common Units, and, other than as set forth in this Agreement, no representations or warranties have been made to Executive or Executive's representatives concerning the Common Units or the Company or their prospects or other matters; (f) Executive has been given the opportunity to examine all documents and to ask questions of, and to receive answers from, the Company and its representatives concerning the Company and its subsidiaries, the Reorganization, the Securityholders Agreement, the Limited Liability Company Agreement and the terms and conditions of the purchase of the Common Units and to obtain any additional information which Executive deems necessary; and (g) all information which Executive has provided to the Company and the Company's representatives concerning Executive and Executive's financial position is complete and correct as of the date of this Agreement. 4. Certain Sales Upon Termination of Employment. 4.1 Put Option. (a) If Executive's Employment terminates due to Disability, death or Retirement (such date of termination, the "Put Date"), in either case prior to the earlier of a Public Offering or the fifth anniversary of the Grant Date, each of Executive and the Executive's Permitted Transferees (hereinafter sometimes collectively referred to as the "Executive Group") shall have the right, subject to the provisions of Section 5 hereof, for 90 days following the Put Date (or, if the Options are exercised after the Put Date, 90 days following the date of such exercise), to sell to the Company, and the Company shall be required to purchase (subject to the provisions of Section 5 hereof), on one occasion from each member of the Executive Group, all (but not less than all) of the Common Units then held by the Executive Group at a price per Common Unit equal to the greater of Fair Market Value (measured as of the Put Date) or Cost for the Applicable Percentage (measured as of the Put -7- Date) of the Common Units and (y) Cost for the remainder of the Common Units; provided that in any case the Management Committee shall have the right, in its sole discretion, to increase any of the foregoing purchase prices. (b) If the Executive Group desires to exercise its option to require the Company to repurchase Common Units obtained upon exercise of the Option pursuant to Section 4.1(a), the members of the Executive Group shall send one written notice to the Company setting forth such members' intention to collectively sell all of their Common Units within the applicable 90-day period described above, which notice shall be signed by each member of the Executive Group. Subject to the provisions of Section 5.1, the closing of the purchase shall take place at the principal office of the Company on a date specified by the Company no later than the 60th day after the giving of such notice. 4.2 Call Options. (a) Upon termination of Executive's Employment, the Company shall have the right and option to purchase, for a period of 90 days following the Termination Date (or, if the Options are exercised after the Termination Date, 90 days following the date of such exercise), and each member of the Executive Group shall be required to sell to the Company, any or all of the Common Units obtained upon exercise of the Options then held by each member of the Executive Group at a price per Common Unit as follows: (i) if Executive's Employment is terminated at any time due to Disability, death or Retirement, the purchase price shall be (x) the greater of Fair Market Value (measured as of the Termination Date) or Cost for the Applicable Percentage (measured as of the Termination Date) of the Common Units being purchased and (y) the average of the Fair Market Value (measured as of the Termination Date) and Cost for the remainder of the Common Units being purchased; (ii) if Executive's Employment is terminated by the Company at any time without Cause or by Executive for Good Reason, the purchase price shall be (x) the greater of Fair Market Value (measured as of the Termination Date) or Cost for the Applicable Percentage (measured as of the Termination Date) of the Common Units being purchased and (y) Cost for the remainder of the Common Units being purchased; (iii) if after the fifth anniversary of the Grant Date Executive's Employment is terminated (A) by Executive for any reason other than Disability, death, Retirement, or Good Reason, or (B) by the Company with or without Cause, the purchase price shall be the greater of Fair Market Value (measured as of the Termination Date) or Cost of the Common Units being purchased; and (iv) if Executive's Employment is terminated prior to the fifth anniversary of the Grant Date (A) by Executive for any reason other than Disability, death, Retirement, or Good Reason, or (B) by the Company for Cause, the purchase price shall be the Cost of the Common Units being purchased; -8- provided further that, in any case, the Management Committee shall have the right, in its sole discretion, to increase any purchase price set forth above. (b) If the Company desires to exercise its option to purchase any Common Units pursuant to this Section 4.2, the Company shall, not later than end of the applicable 90 day period referred to above, send written notice to each member of the Executive Group of its intention to purchase the Common Units, specifying the number of Common Units to be purchased (the "Call Notice"). Subject to the provisions of Section 5, the closing of the purchase shall take place at the principal office of the Company on a date specified by the Company no later than the 60th day after the giving of the Call Notice. 4.3 Obligation to Sell Several. In the event there is more than one member of the Executive Group, the failure of any one member thereof to perform its obligations hereunder shall not excuse or affect the obligations of any other member thereof, and the closing of the purchases from such other members by the Company shall not excuse, or constitute a waiver of its rights against, the defaulting member. 5. Certain Limitations on the Company's Obligations to Purchase Common Units. 5.1 Deferral of Purchases. (a) Notwithstanding anything to the contrary contained in this Agreement, the Company shall not be obligated to purchase any Common Units at any time pursuant to Section 4, regardless of whether it has delivered a notice of its election to purchase any such Common Units, (i) to the extent that the purchase of such Common Units (together with any other purchases of Common Units pursuant to Section 4 of other management Option Agreements or the Management Common Unit Subscription Agreements) would result (A) in a violation of any law, statute, rule, regulation, order, writ, injunction, decree or judgment promulgated or entered by any federal, state, local or foreign court or governmental authority applicable to the Company or any of its subsidiaries or any of its or their material property (which violation is material to the Company, its directors or members or the repurchase of units) or (B) after giving effect thereto, in a Financing Default, or (ii) if immediately prior to such purchase there exists a Financing Default which prohibits such purchase. The Company shall within fifteen days of learning of any such fact so notify the members of the Executive Group that it is not obligated to purchase units hereunder. (b) Notwithstanding anything to the contrary contained in Section 4, any Common Units which a member of the Executive Group has elected to sell to the Company or which the Company has elected to purchase from members of the Executive Group, but which in accordance with Section 5.1(a) are not purchased at the applicable time provided in Section 4, shall to the extent then owned by the Executive Group be purchased by the Company on or prior to the fifteenth day after such date or dates that it is no longer prohibited from purchasing such units under Section 5.1(a) (after taking into account any purchases to be made at such time pursuant to the agreements with other Management Option Holders), and the Company shall give the members of the Executive Group five days prior notice of any such purchase. -9- 5.2 Payment for Common Units. If at any time the Company elects or is required to purchase any Common Units pursuant to Section 4, the Company shall pay the purchase price for the Common Units it purchases (i) first, by the cancellation of indebtedness, if any, owing from Executive to the Company or any of its subsidiaries (which indebtedness shall be applied pro rata against the proceeds receivable by each member of the Executive Group receiving consideration in such repurchase) and (ii) then, by the Company's delivery of a check or wire transfer of immediately available funds for the remainder of the purchase price, if any, against delivery of the certificates or other instruments representing the Common Units so purchased, duly endorsed; provided that if any of the conditions set forth in Section 5.1(a) exists which prohibits such cash payment, the portion of the cash payment so prohibited may be made, to the extent such payment is not prohibited, by the Company's delivery of an unsecured subordinated promissory note (which shall be subordinated and subject in right of payment only to the prior payment of any debt outstanding under the Senior Financing Agreements and any modifications, renewals, extensions, replacements and refunding of all such indebtedness) of the Company (a "Repurchase Note") in a principal amount equal to the balance of the purchase price, payable in up to five equal annual installments commencing on the first anniversary of the issuance thereof and bearing interest payable annually at the publicly announced prime rate of Chase Bank, on the date of issuance and each June 30 and December 31 thereafter; and, provided further, that in the case of a purchase pursuant to either (A) Section 4.1(a), or (B) any of Sections 4.2(a)(iii) or 4.2(a)(iv), the Company may elect to deliver a Repurchase Note in a principal amount equal to all or a portion of the cash purchase price (in lieu of paying such portion of the purchase price in cash), which Repurchase Note shall mature on the fifth anniversary of its issuance, require principal payments to be made in five equal, annual installments and bear interest payable annually at the publicly announced prime rate of Chase Bank on the date of issuance and each June 30 and December 31 thereafter. The Company shall have the right set forth in clause (i) of the first sentence of this Section 5.2 whether or not the member of the Executive Group selling such Option Units is an obligor of the Company. 6. Miscellaneous. 6.1 Tax Withholding. Whenever Common Units are to be issued pursuant to the exercise of an Option or any cash payment is to be made hereunder or under the Limited Liability Company Agreement, the Company shall have the power to withhold, or require Executive to remit to the Company in cash or offset against any amounts otherwise payable Executive, an amount sufficient to satisfy all Federal, state, local and foreign withholding tax requirements relating to such transaction, and the Company may defer payment of cash or issuance of Common Units until such requirements are satisfied. 6.2 Transfers to Permitted Transferees. The Executive may transfer Options only upon his death pursuant to applicable laws of descent and distribution and may transfer Common Units only as contemplated by the Limited Liability Agreement and clauses (f) and (g) of the definition of "Exempt Employee Transfers" as defined in the Securityholders Agreement. Prior to any transfer of Common Units, Executive shall deliver to the Company a written agreement of the proposed transferee (a) evidencing such Person's undertaking to be bound by the terms of this Agreement and (b) acknowledging that Common Units transferred to such Person will continue to be Common Units for purposes of this Agreement in the hands of such Person. Any transfer or attempted transfer of Common Units in violation of any provision of this Agreement, the Limited -10- Liability Company Agreement or the Securityholders Agreement shall be void, and the Company shall not record such transfer on its books or treat any purported transferee of such Common Units as the owner of such Common Units for any purpose. 6.3 Recapitalizations, Exchanges, Etc., Affecting Common Units. The number, class and Exercise Price of any outstanding Options (and the number of Common Units subject to outstanding Options) shall be adjusted by the Management Committee if, in its good faith judgment, it shall deem such an adjustment to be necessary or appropriate to reflect any transaction involving the Common Units having the same effect as a stock dividend, stock split, stock issuance or reverse stock split or any combination, recapitalization, reclassification, merger, consolidation or other reorganization. The provisions of this Agreement shall apply, to the full extent set forth herein with respect to Options, Common Units, and all other equity interests or options to acquire equity interests of the Company or any successor or assign of the Company (whether by merger, consolidation, sale of assets or otherwise) which may be issued in respect of, in exchange for, or in substitution of the Common Units, by reason of any stock dividend, stock split, stock issuance, reverse stock split, combination, recapitalization, reclassification, merger, consolidation or otherwise. Nothing contained in this Agreement shall prohibit or restrict the Company from reorganizing into a corporation or other entity or otherwise recapitalizing in connection with a Sale of the Company or Public Offering of the Company's equity interests. Each member of the Executive Group shall cooperate with, and take all actions requested by, the Company in effecting such a reorganization. In the event that the Company is reorganized as a corporation (or the interests in the Company are transferred to a corporation) (a "Reorganization"), Executive shall cooperate with such Reorganization. In the event of a Reorganization, the Company's successor or its new parent entity may substitute an option to purchase its stock (with substantially equivalent economic terms as this Agreement) for this Agreement, and Executive will execute such documents as are required to evidence such substitution. 6.4 Requirements of Law. The issuance of Common Units shall be subject to all applicable laws, rules and regulations and to such approvals by any governmental agencies or national securities exchanges or quotation systems as may be required. The Company will be under no obligation to issue, sell or transfer any Common Units upon Executive's election to exercise any Options granted hereunder if such issuance, sale or transfer would, in the reasonable opinion of the Company, result in a violation of applicable law, including the federal securities laws. The Company shall use commercially reasonable efforts to obtain the approvals referred to in this Section 6.4 and otherwise to permit any such issuance, sale or transfer of Common Units to comply with applicable law; provided, however, that the Company shall not have any obligation to register the Common Units or otherwise take any other action to make available any exemption from the registration requirements of any federal or state securities law to permit the issuance, sale or transfer of such Common Units. 6.5 Executive's Employment by the Company. Nothing contained in this Agreement shall be deemed to obligate the Company or any subsidiary of the Company to employ Executive in any capacity whatsoever or to prohibit or restrict the Company (or any such subsidiary) from terminating the employment of Executive at any time or for any reason whatsoever, with or without Cause. -11- 6.6 No Rights as Equity Holder. Except as otherwise required by law, Executive shall not have any rights as an equity holder with respect to any Common Units until such time as the Common Units have been so issued. 6.7 Administration by Management Committee. This Option Agreement shall be administered by the Management Committee, which shall have full power and authority to construe and administer this Agreement as it may deem advisable. Any action taken under the provisions of this Agreement by the Management Committee in connection with the administration of this Agreement shall be, in each case, within the sole discretion of the Management Committee and conclusive and binding upon the Company, Executive, all beneficiaries of Executive, and all persons and entities having any interest therein. 6.8 Binding Effect. The provisions of this Agreement shall be binding upon and accrue to the benefit of the parties hereto and their respective heirs, legal representatives, successors and assigns; provided, however, that no transferee shall derive any rights under this Agreement unless and until such transferee has executed and delivered to the Company a valid undertaking and becomes bound by the terms of this Agreement. 6.9 Amendment; Waiver. This Agreement may be amended only by a written instrument signed by the parties hereto. No waiver by any party hereto of any of the provisions hereof shall be effective unless set forth in a writing executed by the party so waiving. 6.10 Governing Law. This Agreement shall be governed by and construed and enforced in accordance with the laws of the State of New York without regard to the conflicts of law principles thereof. 6.11 Jurisdiction. Any suit, action or proceeding with respect to this Agreement, or any judgment entered by any court in respect thereof, shall be brought in any court of competent jurisdiction in the State of New York, and each of the Company and the members of the Executive Group hereby submits to the exclusive jurisdiction of such courts for the purpose of any such suit, action, proceeding or judgment. Each of the members of the Executive Group and the Company hereby irrevocably waives any objections which it may now or hereafter have to the laying of the venue of any suit, action or proceeding arising out of or relating to this Agreement brought in any court of competent jurisdiction in the State of New York, and hereby further irrevocably waives any claim that any such suit, action or proceeding brought in any such court has been brought in any inconvenient forum. 6.12 Notices. All notices and other communications hereunder shall be in writing and shall be deemed to have been duly given when personally delivered, telecopied (with confirmation of receipt), two days after deposit with a reputable overnight delivery service (charges prepaid) and three days after deposit in the U.S. Mail (postage prepaid and return receipt requested) to the address set forth below or such other address as the recipient party has previously delivered notice to the sending party. -12- (a) If to the Company: Remington Products Company, L.L.C. 60 Main Street Bridgeport, CT 06604 Attention: Allen S. Lipson Telecopy: 203-366-7707 and Remington Products Company, L.L.C. c/o Vestar Equity Partners, L.P. 245 Park Avenue, 41st Floor New York, NY 10167 Attention: Robert L. Rosner Telecopy: 212-808-4922 with a copy to: Kirkland & Ellis 655 Fifteenth Street, N.W. Washington, D.C. 20005-5793 Attention: Jack M. Feder Telecopy: 202-879-5200 (b) If to Executive, to the address as shown on the equity interest register of the Company. 6.13 Integration. This Agreement and the documents referred to herein or delivered pursuant hereto which form a part hereof contain the entire understanding of the parties with respect to the subject matter hereof and thereof. There are no restrictions, agreements, promises, representations, warranties, covenants or undertakings with respect to the subject matter hereof other than those expressly set forth herein and therein. This Agreement supersedes all prior agreements and understandings between the parties with respect to such subject matter. 6.14 Counterparts. This Agreement may be executed in separate counterparts each of which shall be deemed an original, but all of which shall constitute one and the same instrument. 6.15 Injunctive Relief. The Executive and Executive's Permitted Transferees each acknowledges and agrees that a violation of any of the terms of this Agreement will cause the Company irreparable injury for which adequate remedy at law is not available. Accordingly, it is agreed that the Company shall be entitled to an injunction, restraining order or other equitable relief to prevent breaches of the provisions of this Agreement and to enforce specifically the terms and provisions hereof in any court of competent jurisdiction in the United States or any state thereof, in addition to any other remedy to which it may be entitled at law or equity. -13- 6.16 Rights Cumulative; Waiver. The rights and remedies of Executive and the Company under this Agreement shall be cumulative and not exclusive of any rights or remedies which either would otherwise have hereunder or at law or in equity or by statute, and no failure or delay by either party in exercising any right or remedy shall impair any such right or remedy or operate as a waiver of such right or remedy, nor shall any single or partial exercise of any power or right preclude such party's other or further exercise or the exercise of any other power or right. The waiver by any party hereto of a breach of any provision of this Agreement shall not operate or be construed as a waiver of any preceding or succeeding breach and no failure by either party to exercise any right or privilege hereunder shall be deemed a waiver of such party's rights or privileges hereunder or shall be deemed a waiver of such party's rights to exercise the same at any subsequent time or times hereunder. * * * * * -14- IN WITNESS WHEREOF, the parties have executed this Option Agreement as of the date first above written. REMINGTON PRODUCTS COMPANY, L.L.C. By:__________________________ Name: Title: __________________________ ALEXANDER R. CASTALDI -15- SCHEDULE I Options - -------------------------------------------------------------------------------- AGGREGATE NUMBER OF OPTIONS EXERCISE PRICE EXERCISE PRICE - -------------------------------------------------------------------------------- Common Units equaling The same price per Common $162,327 2%of the Common Units on a Unit paid at the original fully-diluted basis* closing - -------------------------------------------------------------------------------- * The maximum number of Common Units to be acquired under the Options shall be adjusted at the first anniversary of the Grant Date so that the number will be 2% of the Common Units on a fully-diluted basis on that date taking into account (1) any issuances of options or Common Units to executives who become employed by the Company and (2) repurchases (or cancellations) of options or Common Units from executives whose employment with the Company is terminated, in each case prior to the first anniversary of the Grant Date. Any other changes in ownership of the Common Units shall be ignored for purposes of the adjustment. -16- CONSENT OF SPOUSE The undersigned spouse of Executive hereby acknowledges that I have read the foregoing Option Agreement (the "Agreement") and that I understand its contents. I am aware that the Agreement provides for the repurchase of the early termination of the Options (as defined in the Agreement) under certain circumstances, Common Units (as defined in the Agreement) issuable upon exercise of the Options and imposes other restrictions on the transfer of such Options and Common Units. I agree that my spouse's interest in the Options and the Common Units is subject to the Agreement and any interest I may have in such Options and Common Units shall be irrevocably bound by the Agreement and further that my community property interest, if any, shall be similarly bound by the Agreement. I am aware that the legal, financial and other matters contained in the Agreement are complex and I am free to seek advice with respect thereto from independent counsel. I have either sought such advice or determined after carefully reviewing the Agreement that I will waive such right. Name:______________________________ Print Name:________________________ ___________________________________ Witness -17- EXHIBIT A _________, ____ ELECTION TO INCLUDE STOCK IN GROSS INCOME PURSUANT TO SECTION 83(b) OF THE INTERNAL REVENUE CODE The undersigned purchased Common Units (the "Units") of Remington Products Company, L.L.C., a Delaware limited liability company (the "Company"), on , . Under certain circumstances, the Company has the right to repurchase the Units at cost from the undersigned (or from the holder of the Units, if different from the undersigned) should the undersigned cease to be employed by the Company and its subsidiaries. Hence, the Units are subject to a substantial risk of forfeiture and are nontransferable within the meaning of Section 83 of the Internal Revenue Code, as amended (the "Code"). The undersigned desires to make an election to have the Units taxed under the provision of Code ss. 83(b) at the time the undersigned purchased the Units. Therefore, pursuant to Code ss.83(b) and Treasury Regulation ss.1.83-2 promulgated thereunder, the undersigned hereby makes an election, with respect to the Units (described below), to report as taxable income for calendar year the excess (if any) of the Units' fair market value on , over the purchase price thereof. The following information is supplied in accordance with Treasury Regulation ss.1.83-2(e): 1. The name, address and social security number of the undersigned: ______________________________ ______________________________ SSN:__________________________ 2. A description of the property with respect to which the election is being made: _______ Common Units of the Company. 3. The date on which the property was transferred: ________, _____. The taxable year for which such election is made: calendar____ . 4. The restrictions to which the property is subject: If the undersigned ceases to be employed by the Company or any of its subsidiaries as a result of the undersigned's resignation during the first five years after the grant of options that the undersigned exercised to acquire the Units, all of the Units are be subject to repurchase by the Company at cost. -18- 5. The fair market value on ________, _____ of the property with respect to which the election is being made, determined without regard to any lapse restrictions: $__________ per Common Unit. 6. The amount paid for such property: $___________ per Common Unit. A copy of this election has been furnished to the Secretary of the Company pursuant to Treasury Regulations ss.1.83-2(e)(7). Dated: ________, _____ __________________________________ [Name] EX-24 4 POWER OF ATTORNEY EXHIBIT 24 POWER OF ATTORNEY REMINGTON PRODUCTS COMPANY, L.L.C. KNOW ALL MEN BY THESE PRESENTS, that each person whose name appears below constitutes and appoints Alexander R. Castaldi, Allen S. Lipson and Kris J. Kelley and each of them, his true and lawful attorneys-in-fact and agents, with full power of substitution and resubstitution, for and in his name, place and stead, in any and all capacities which such person serves or may serve with respect to Remington Products Company, L.L.C. and Remington Capital Corp., to sign the Annual Report on Form 10-K of Remington Products Company, L.L.C. and Remington Capital Corp. for the fiscal year ended December 31, 1996, and any or all amendments to such Annual Report, and to file the same, with all exhibits thereto, and other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorneys-in-fact and agents, and each of them, full power and authority to do and perform each and every act and thing requisite and necessary to be done in and about the premises, as fully to all intents and purposes as he might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents or any of them, or their or his substitutes, may lawfully do or cause to be done by virtue hereof. This power of attorney has been signed as of the 26th day of March, 1997, by the following persons: /s/ Neil P. DeFeo /s/ Victor K. Kiam, II - -------------------------------------- ------------------------------------ Neil P. DeFeo, Victor K. Kiam, II, Chief Executive Officer, President and Chairman and Director Director /s/ Victor K. Kiam, III /s/ Robert L. Rosner - -------------------------------------- ------------------------------------ Victor K. Kiam, III, Robert L. Rosner, Director Director /s/ Norman W. Alpert /s/ Kevin Mundt - -------------------------------------- ------------------------------------ Norman W. Alpert, Kevin Mundt, Director Director /s/ Arthur J. Nagle - -------------------------------------- ------------------------------------ Arthur J. Nagle, Daniel S. O'Connell, Director Director /s/ Kris J. Kelley ______________________________________ ------------------------------------ William B. Connell, Kris J. Kelley, Director Vice President and Controller /s/ Alexander R. Castaldi - -------------------------------------- Alexander R. Castaldi, Executive Vice President and Chief Financial Officer EX-25 5 WORLDWIDE BONUS PLAN EXHIBIT 10.25 WORLDWIDE BONUS PLAN KEY ELEMENTS 1. Salaried jobs only both in U.S. and International. 2. Each position classified into salary grade levels 10 to 25. 3. Target bonus based on % of base salary for each grade level. 4. Percent of base salary increases as salary grade increases (see attachment for U.S. business). This will be different for each country. 5. For senior executives 50% of target bonus will be dependent upon performance against EBITDA budget for entire company with remainder, where applicable, dependent upon performance of managed business (i.e. retail, UK, Australia, etc.) against EBITDA budget. At level immediately below senior executives, 25% of target bonus will be dependent upon performance of entire company against EBITDA budget with 75% dependent upon performance of applicable business. At levels below direct reports, 100% of bonus dependent upon performance of applicable business. 6. Sliding scale which cuts off at 90% of budgeted EBITDA (no bonus paid below 90%) with no maximum for portion dependent upon worldwide results and a maximum of 200% for that portion of bonus dependent upon applicable business. 7. Payment scale: Achievement of Budget % of Target Bonus --------------------- ----------------- 90% 50% 95 75 100 100 100+ Increases 2 points for every point above 100 8. Individuals not in bonus program can be awarded a bonus on an exceptional basis as approved by the CEO. 9. Payment of bonus: Entire bonus paid upon completion of year-end audit. 10. Individual must be employed by July 1st in order to be eligible for bonus. Any exception for grade level 18 and below must be approved by the Vice President Administration and by the CEO for any grade level above 18. 11. Individual must be employed at time of bonus payment in order to receive. An exception is if employment is terminated for reasons other than "cause" after June 30th and before payment of bonus, individual will receive a proportionately reduced bonus based upon the number of months employed during the fiscal year. "Cause is defined as a) commission of an act of fraud or embezzlement (including the unauthorized disclosure of confidential or proprietary information of the Company or any of its subsidiaries which results in financial loss to the Company or any of its subsidiaries, b) conviction of a felony, c) willful misconduct which is reasonably likely to result in injury or financial loss to the Company or any of its subsidiaries, or d) the willful failure to render services to the Company or any of its subsidiaries in accordance with the employee's employment which failure amounts to a material neglect of the employee's duties to the Company or any of its subsidiaries. GRADE LEVEL/SALARY/BONUS (U.S.) Target Job Grade Salary Range Bonus % - --------- ----------------- ------------ 10 $21,000 - $ 32,000 5% 11 23,000 - 36,000 5 12 25,000 - 40,000 5 13 27,000 - 44,000 5 14 29,000 - 48,000 5 15 32,000 - 55,000 5 16 38,000 - 65,000 7 17 42,000 - 80,000 10 18 50,000 - 95,000 15 19 60,000 - 115,000 20 20 70,000 - 135,000 25 21 80,000 - 165,000 30 22 100,000 - 225,000 35 23 125,000 - 275,000 40 24 150,000 - 325,000 45 25 200,000 - 50 2 EX-27 6 FDS --
5 This schedule contains summary financial information extracted from the results of operations for the twelve months ended December 31 and include the combined results for predecessor and successor companies, and is qualified in the entirely by reference to such financial statements. 1,000 YEAR DEC-31-1996 DEC-31-1996 7,199 0 55,602 1,340 63,785 129,458 15,982 (1,210) 214,823 51,598 169,411 0 0 0 (7,707) 214,823 241,999 241,999 152,825 152,825 90,665 2,952 14,392 (19,218) 2,145 (21,363) 0 0 0 (21,363) 0 0
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