-----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, KPj07YWuU/LnZjdAaK4Yw27b9WN5Wb0qbhf3V2fcaiVTSixR59nxyuW7x9sS6Lb4 DsJJ8fyoXzJkZsnENmFf8A== 0001017710-98-000003.txt : 19980330 0001017710-98-000003.hdr.sgml : 19980330 ACCESSION NUMBER: 0001017710-98-000003 CONFORMED SUBMISSION TYPE: 10-K PUBLIC DOCUMENT COUNT: 11 CONFORMED PERIOD OF REPORT: 19971231 FILED AS OF DATE: 19980327 SROS: NONE FILER: COMPANY DATA: COMPANY CONFORMED NAME: REMINGTON PRODUCTS CO LLC CENTRAL INDEX KEY: 0001017710 STANDARD INDUSTRIAL CLASSIFICATION: ELECTRIC HOUSEWARES & FANS [3634] IRS NUMBER: 061451076 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-K SEC ACT: SEC FILE NUMBER: 333-07429 FILM NUMBER: 98575197 BUSINESS ADDRESS: STREET 1: 60 MAIN STREET STREET 2: 60 MAIN STREET CITY: BRIDGEPORT STATE: CT ZIP: 06604 BUSINESS PHONE: 2033674400 10-K 1 ANNUAL REPORT ON FORM 10-K 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, 1997. 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 06-1451076 - ---------------------------------- ---------------------- (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 hair dryers, 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. Description of Business Products Electric Shavers. The Company's primary men's electric shaver line is the MicroScreen(R) line of single, dual and triple foil shavers, each with the MicroScreen(R) cutting system. In addition, the Company also has a line of men's Dual Track(TM), rotary shavers and certain specialty shavers such as the "sport shaver". The Company has recently introduced its new Intercept(TM) line of premium shavers, with the intercept shaving system that sandwiches a trimmer-style cutter between two foil heads. The women's electric shaver lines primarily include the women's wet/dry Dual Foil shaver, the women's wet/dry battery operated shaver and the wet/dry Swirl(TM) 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 and shaver accessories accounted for approximately 42%, 44% and 44% of the Company's total net sales for the years ended December 31, 1997, 1996 and 1995 respectively. Women's Personal Care Appliances. Women's personal care appliances consist primarily of hairsetters, hair dryers, curling irons, hot air brushes and make-up mirrors. The 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 proprietary technology that indicates to users when optimum heat levels have been reached by changing the color of the rollers, and the Style Setter(R) hairsetter. Women's personal care appliances accounted for approximately 25%, 28% and 30% of the Company's total net sales for the years ended December 31, 1997, 1996 and 1995, 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 hair dryers, steamers, irons, voltage converter/adapter plugs and shavers. In the home health appliance -2- product category, Remington sells foot spas and back massagers currently outside the United States, as well as other small appliances such as vacuums. 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 112 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. On a worldwide basis, Wal-Mart accounted for 15%, 16% and 16% of the Company's net sales during the years ended December 31, 1997, 1996 and 1995. No other customer accounted for more than 10% of the Company's net sales during the years ended December 31, 1997, 1996, and 1995. Service Stores As of December 31, 1997, the Company owned and operated a chain of 112 service stores with 93 in the United States, ten in the United Kingdom and nine in Australia. During 1997, the Company opened a net of ten service stores in the United States, one store in the United Kingdom and six 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 and outlet malls within large metropolitan areas. The stores sell and service a variety of Remington and non-Remington shavers and accessories, personal care appliances, knives, scissors, travel appliances and other related products. The service stores also oversee sales of replacement parts to approximately 300 independent authorized shaver service dealers across the United States. In 1997, the Company's service stores generated worldwide net sales of $46.5 million, with $38.6 million in the U.S. and $7.9 million internationally. Sales of Remington products accounted for approximately 40% of the service stores 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. 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 seasonal 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 seasonal workers. Suppliers The majority of the Company's finished goods inventories are manufactured for the Company by third party suppliers primarily located in China, Japan and Thailand. While Remington sources a large portion of its materials and products -3- from third-party suppliers, it continues to manufacture its MicroScreen(R) 3 and certain other shavers in-house and maintains ownership of tools and molds used by many of its suppliers. The Company's two most significant suppliers, Izumi Products, Inc. ("Izumi") and Raymond International, accounted for approximately 35% of the Company's overall cost of sales in 1997. These two suppliers' manufacturing facilities are located in China and Japan. Remington has had a relationship with these suppliers for many years and management considers its present relationships to be good. Research and Product Development The Company believes that research and development activities are an important part of the Company's business and are essential to its long-term prospects. Research and development efforts at Remington allow the Company to maintain its unique manufacturing strength in cutting systems for shavers. The Company is continuously pursuing new innovations for its line of shavers including foil improvements and new cutting and trimmer configurations. The Company also devotes resources to the development of new technology for other products such as women's personal care products, including hairsetters, hair dryers and curling irons, as well as for men's grooming products. The Company has continued to increase its investment in research and development activities in recent years. During 1997, 1996 and 1995, research and development expenditures for the Company amounted to approximately $2.8. $2.1 and $1.9 million, respectively. 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, hair dryers 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 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 -4- 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 and Australia. Employees As of December 31, 1997, the Company employed approximately 1,145 people in the United States and abroad of which approximately 200 were seasonal manufacturing workers and 250 were employed part-time in the Company's service stores. 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 43%, 39% and 36% of the Company's net sales in 1997, 1996 and 1995, respectively. The Company's international network of subsidiaries -5- and distributors currently extends to over 85 countries worldwide. The Company markets products throughout Europe, the Middle East, Africa, and a portion of South America through its subsidiary in the United Kingdom, throughout Asia through its subsidiary in Australia 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 South Africa. In all other parts of the world the Company distributes its products through strategic alliances with local distributors. As in the United States market, the primary asset of the Company's international operations is the 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 In addition to these properties, Remington leases offices and warehouse space in Canada, United Kingdom, Germany, France, Australia, New Zealand, South Africa, Ireland, Sweden and Hong Kong, and 112 service stores, of which 93 are in the United States, ten are in the United Kingdom and nine are in Australia. ITEM 3. Legal Proceedings The Company and Philips are engaged in litigation in the United Kingdom and Australia 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. The U.K. trial court found in favor of the Company and Philips has appealed that -6- decision. The trial in the Australian action is scheduled for mid-1998. The costs of defending the U.K. and Australian 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 ultimately determined adversely to the Company or Izumi, the Company's ability to sell rotary shavers in such countries could be limited or prohibited. In 1997, the Company's net sales of rotary shavers in Europe were not material. In December 1997, the Company settled all litigation with Dickson Industries Co., Ltd. and Charles W. Howard which was pending in the U.S. District Court for the Eastern District of California. The litigation, which was commenced against Remington in December 1996 alleged that Remington infringed a patent owned by Mr. Howard, which was licensed to Dickson, relating to certain curling irons sold by the Company. The Company agreed to cease distribution of the product and the settlement had no material effect on the Company's 1997 financial position or results of operations. 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 15, 1998, there were two holders of the common equity securities of the Company. (c) Dividends No cash distributions have been paid on the common and preferred equity of the Company since the Closing Date. Prior to the reorganization of the Company in May 1996, as discussed in Note 2 of the "Notes to the Financial Statements", 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 appearing elsewhere herein, significantly restrict the payment of dividends. -7- (d) Recent Sales of Unregistered Securities None. 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 -------------------------------------- ----------------------------------------------------------------- Year 31 Weeks 21 Weeks 3 Months Year Ended Ended Ended Year Ended Ended Ended December 31, December 31, May 23, December 31, December 31, Sept. 30 --------------------------- 1997 1996 1996 1995 1994 1993 1993 --------------- ----------------- ----------- --------------- ---------- ------------- --------- Statement of Operations Data: Net sales $241,572 $185,286 $ 56,713 $255,323 $261,446 $71,152 $156,665 Operating income (loss) 14,146 12,508 (16,951) 26,516 21,228 5,459 7,681 Interest expense 19,318 12,164 2,228 7,604 6,414 1,248 4,066 Net income (loss) (7,923) (3,172) (18,191) 17,240 14,725 4,024 3,021 Balance Sheet Data (at period end): Working capital 76,361 $ 77,860 N/A $ 47,223 $ 62,862 $ 70,164 N/A Total assets 205,245 214,823 N/A 170,922 160,543 175,567 N/A Total debt 180,831 171,631 N/A 56,990 55,093 71,931 N/A Cumulative Preferred Dividend (1) 12,932 4,576
- ---------------------------- (1) 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 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 -8- stores in the United Kingdom and Australia) and the Company's results of operations as a percentage of net sales for the years ended December 31, 1997, 1996 and 1995. To facilitate comparison of the operating results of the periods set forth below, results of operations for the year 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 Consolidated Financial Statements and accompanying notes thereto appearing elsewhere herein.
Successor Successor and Predecessor Predecessor --------------------- ------------------------- -------------------------- Year Ended Combined Year Ended Year Ended December 31, 1997 December 31, 1996 December 31, 1995 -------------------- ------------------------ ----------------------- $ % $ % $ % ------ ---- ------- ---- ------ ----- Net Sales: U.S. $ 99.6 41.2 $113.2 46.7 $131.2 51.4 U.S. service stores 38.6 16.0 33.7 13.9 32.9 12.9 International 103.4 42.8 95.1 39.4 91.2 35.7 ------ ------ ---- ----- ------ ----- 241.6 100.0 242.0 100.0 255.3 100.0 Cost of sales 141.3 58.5 152.7 63.1 143.2 56.1 ------ ------ -- ----- ----- ----- Gross profit 100.3 41.5 89.3 36.9 112.1 43.9 Selling, general and administrative 84.3 34.9 91.9 37.9 83.9 32.9 Intangible amortization 1.9 0.8 1.9 0.8 1.7 0.6 -------- ------- ------ ------ ------- ------ Operating income (loss) 14.1 5.8 (4.5) (1.8) 26.5 10.4 Interest expense 19.3 8.0 14.4 5.9 7.6 3.0 Other expense (income) 0.5 0.2 0.3 0.1 0.4 0.2 -------- ------- ------ ------ ------- ---- Income (loss) before income taxes (5.7) (2.4) (19.2) (7.9) 18.5 7.2 Provision for income taxes 2.2 0.9 2.2 0.9 1.3 0.5 -------- ------- ------ ----- ------- ----- Net income (loss) $(7.9) (3.3) $(21.4) (8.8) $17.2 6.7 ====== ====== ======= ====== ===== =====
Year Ended December 31, 1997 compared to the year ended December 31, 1996 Net Sales. Net sales for the year ended December 31, 1997 were $241.6 million compared to $242.0 million for the previous year. International net sales and U.S. service store sales demonstrated strong results for 1997 with -9- increases of 8.7% and 14.5%, respectively over the prior year. These results were more than offset by a decline in net sales in the United States. Net sales in the United States decreased 12.0% from $113.2 million for the year ended December 31, 1996 to $99.6 million in 1997. This decrease was primarily related to lower sales of certain men's and women's shavers. Men's shaver sales were impacted by the effect of transitioning to the updated line of MicroScreen(R) shavers, competitive actions in rotary shavers as well as the decision not to repeat certain promotional programs offered during 1996. The introduction of the new line of MicroScreen(R) 2 shavers in the third quarter of 1997 helped sales of the mid-priced and largest line of Remington shavers come in on line with the prior year, while the impact of the announced 1998 introduction of the new MicroScreen(R) 3 shavers resulted in lower transitional sales of the older Triple Foil(TM) line of shavers in 1997. Women's shaver sales were impacted by an overall decline in the market for women's shavers. Additionally, domestic sales of women's personal care appliances were negatively impacted by competitive actions in hairsetters and the cancellation of a new line of curling irons. Net sales through the Company's U.S. service stores increased 14.5% to $38.6 million in 1997 from $33.7 million in 1996. This increase is primarily attributable to the opening of a net of 10 additional stores for a total of 93 stores open during the holiday shopping season. Additionally, same store sales increased 4.3% from 1996 to 1997 as a result of a strong holiday selling season. International net sales increased to $103.4 million in 1997 from $95.1 million in 1996 as a result of the United Kingdom and Australian operations. Net sales in the United Kingdom increased 14.0% in 1997 as a result of strong demand, particularly in the personal care product sales. Despite a negative currency impact, net sales in Australia increased 11.0% in 1997 due to strong demand for new personal care products and growth in retail service stores from three stores in 1996 to nine stores at December 31, 1997. These results were somewhat offset by lower net sales in Germany in 1997 due to lower demand and a negative currency impact, while Canadian net sales remained flat year to year. Gross Profit. Gross profit increased to $100.3 million, or 41.5% of net sales, in 1997 from $89.3 million or 36.9% of net sales in 1996. Approximately 2.0% of the gross profit margin percentage increase was due to inventory valuation adjustments recorded in 1996, while the remaining increase was due to slightly lower costs and improved mix. Selling, General and Administrative. Selling, general and administrative expenses decreased to $84.3 million in 1997, or 34.9% of net sales, from $91.9 million, or 37.9% of net sales in 1996. The 1996 expenses included $10.9 million in non-recurring charges related to the reorganization and a $1.3 million charge related to the bankruptcy of the Company's largest customer in Canada. After considering the effect of these charges in 1996, expenses in 1997 increased over 1996, as a result of a 25% increase in advertising expenses and investments the Company has made in marketing and new product development. Operating Income (Loss). Operating income increased to $14.1 million in 1997, or 5.8% of net sales, from an operating loss of $(4.5) million in 1996, or (1.8)% of net sales. -10- Interest Expense. Interest expense increased to $19.3 million in 1997 from $14.4 million in 1996. This increase is primarily attributable to a full year of interest charged on senior subordinated notes in 1997 in connection with the May 1996 reorganization, as well as increased average borrowings on revolving credit facilities. Provision for Income Taxes. The provision for income taxes was $2.2 million in 1997 and in 1996 and relates to the Company's foreign operations. Year Ended 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 $131.2 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. 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 which were subsequently cancelled. 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 December 31, 1996. International net sales increased 4.0% to $95.1 million in 1996 from $91.2 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 -11- $10.9 million in non-recurring expenditures related to the reorganization in May 1996. 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. 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. This increase was partially offset by 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. Liquidity and Capital Resources For the year ended December 31, 1997, the Company used approximately $8.0 million in cash for operating activities, compared to providing cash of $5.8 million in 1996. The primary reasons for the lower cash flow in 1997 were lower receivable collections resulting from lower fourth quarter sales in 1996 versus 1995 and increased interest payments as a result of the new Senior Subordinated Notes issued May 23, 1996. The Company's operations are not capital intensive. During 1997 and 1996, the Company purchased property, plant and equipment of $5.1 million and $3.7 million, respectively. The Company's 1998 capital expenditure budget is $4.7 million, of which approximately $1.7 million will be used for purchases of tools and molds for new products. During 1997, the Company repaid aggregate scheduled principal amounts on term loans of $1.0 million, and increased its net borrowings under revolving credit agreements by $10.9 million. 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 through March 31, 2002. Borrowings under the Revolving Credit Facilities mature on June 30, 2002. 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. -12- 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 certain foreign markets such as Europe, Canada and Australia in local currency. While many of the Company's foreign 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. As of December 31, 1997, forward contracts to sell $15.3 million U.K. Pounds Sterling were outstanding, all of which mature in 1998. 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. Year 2000 Compliance The Company continues to assess its exposure related to the impact of the Year 2000 date issue. The Year 2000 date issue arises from the fact that many computer programs use only two digits to identify a year in a date field. The Company's key financial and operational systems have been reviewed and it has been determined that the majority of the systems do not require modification. Accordingly, management does not expect that any costs to be incurred will have a material adverse impact on the Company's financial position, results of operations or cash flows. However, the Company could be adversely impacted by the Year 2000 date issue if suppliers, customers and other businesses do not address this issue successfully. Management continues to assess these risks in order to reduce the impact on the Company. -13- 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 PART III ITEM 10. Directors and Executive Officers. The following table sets forth certain information (ages as of March 15, 1998) with respect to each executive officer of the Company and individuals who are directors on the Remington Management Committee. Name Age Positions and Offices - --------------------- ------ ------------------------------- Neil P. DeFeo 51 Chief Executive Officer,President and Director Alexander R. Castaldi 47 Executive Vice President and Chief Financial Officer Lawrence D. Handler 52 President, Remington Service Stores Geoffrey L. Hoddinott 54 Vice President, Remington Europe, Africa and Middle East H. Graham Kimpton 62 Vice President, Remington Australia and Asia Lester C. Lee 37 Senior Vice President Sales and Integrated Logistics Michael A. Linton 41 Vice President, Marketing Allen S. Lipson 55 Vice President, Administration, General Counseland Secretary Timothy G. Simmone 32 Vice President, Chief Technical Officer Victor K. Kiam, II 71 Chairman and Director Norman W. Alpert 39 Director William B. Connell 57 Director Victor K. Kiam, III 38 Director Kevin A. Mundt 44 Director Arthur J. Nagle 59 Director Daniel S. O'Connell 43 Director Robert L. Rosner 38 Director -14- Neil P. DeFeo has served as President, Chief Executive Officer and a Director of the Company since January 1997. From 1993 to 1996, Mr. DeFeo was Group Vice President, U.S. Operations for The Clorox Company. For 25 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. 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. Lawrence D. Handler has been President, Remington Service Stores, since 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 and 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 and Asia. Mr. Kimpton joined the Company in April 1988 and has been managing the Australian/New Zealand operation since that time. Lester C. Lee has been Senior Vice President Sales and Integrated Logistics of the Company since July 1997. From 1995 until 1997, he was with Pacific Bell Mobile Services, a Division of Pacific Telesis, most recently as Vice President of Sales, and from 1989 until 1995, he was with Norelco Consumer Products Company in various sales positions, including Director of Sales, Western Division. 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 since May 1996. Mr. Lipson has been the General Counsel of the Company since October 1988. Timothy G. Simmone was appointed Vice President, Chief Technical Officer of the Company in June 1997. From 1988 until 1997, he was with The Stanley Works Corporation in various engineering position, most recently as Vice President, Product Development of the Stanley Fastening Systems Division. 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 the Chairman of RPI Inc., and a director of Citadel Technology and News Communication. -15- 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 of International AirParts Corporation, Aearo Corporation and Advanced Organics, Inc., and a director of Clark-Schwebel, Inc. 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., New Day Schools, Inc. and Retail Optical Holdings. Victor K. Kiam, III has been a Director of Remington since 1992. Mr Kiam has been Executive Vice President of RPI Corporation since 1996 and was with the Company from 1986 until 1996 in a variety of positions in manufacturing, sales and marketing, including Vice President Corporate Development. He is the son of Victor K. Kiam, II. Kevin A. Mundt has been a Director of Remington since July 1996. Mr. Mundt is Vice President, Group Business Head of Mercer Management Consulting since 1997 and was co-founder and Managing Director of Corporate Decisions, Inc. since its inception in 1983 until its merger with Mercer Management Consulting in 1997. Mr. Mundt is a director of Russell Stanley Corporation, Advanced Organics, Inc. and Reid Plastics, companies in which Vestar or its affiliates have a significant equity interest and in Telephone Data Systems, Inc. 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. and La Petite Holdings Corporation, 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 Advanced Organics, Inc., Aearo Corporation, Clark-Schwebel, Inc., Pinnacle Automation, Inc., Reid Plastics Holdings, Inc., Sun Apparel, Inc. 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 serves as Chairman of the Board of Directors of Russell-Stanley Corporation, a company in which Vestar or its affiliates have a significant equity interest. -16- ITEM 11. Executive Compensation Compensation of Executive Officers The following Summary Compensation Table includes individual compensation information during each of the years ended December 31, 1996 and 1997 for each individual who served in the position of the Company's Chief Executive Officer ("CEO") during 1997 and each of the next four most highly compensated executive officers of the Company who were serving as executive officers of the Company at the end of 1997 (collectively, the "Named Executive Officers") for services rendered in all capacities to the Company.
Annual Compensation All Other Name and Principal Position Year Salary ($)(1) Bonus ($)(2) Compensation ($) - --------------------------- ----- ------------- ------------ --------------- Neil P. DeFeo, President, CEO and 1997 $392,000 $200,000 $ 214,048(4) Director (3) Alexander R. Castaldi, Executive VP 1997 265,000 132,000 3,189(6) and CFO (5) 1996 25,500 -- Allen S. Lipson, VP, Administration 1997 195,400 78,400 4,413(7) General Counsel & Secretary 1996 188,900 452,123(8) 5,521(7) Lawrence D. Handler, President, 1997 154,100 65,500 2,745(6) Remington Service Stores 1996 133,200 76,065(9) 1,394(6) Michael A. Linton, VP Marketing (10) 1997 129,500 61,868 1,637(6) F. Peter Cuneo, former President 1997 32,308 -- 151,483(12) and CEO(11) 1996 418,200 -- 6,156(12)
- ----------------------- (1) Includes compensation earned during the year but deferred pursuant to the Company's Deferred Compensation Plan. (2) Bonus amounts shown are those accrued for and paid in or after the end of the year and include amounts deferred pursuant to the Company's Deferred Compensation Plan. (3) Mr. DeFeo became President and CEO in January 1997. (4) The amounts shown include Company matching contributions to the Company's 401(k) Plan of $ 2,415 and $211,633 of relocation and travel expenses. (5) Mr. Castaldi became Executive Vice President and CFO in November 1996. (6) Company matching contribution to the Company's 401(k) Plan. (7) The amounts shown include Company matching contributions to the Company's 401 (k) Plan of $ 2,631 and $3,738 for 1997 and 1996 and disability insurance premium payments of $1,782 for 1997 and 1996. (8) A special bonus paid in connection with the reorganization of the Company which occurred in May 1996. (9) Includes a special bonus of $39,315 paid in connection with the reorganization of the Company which occurred in May 1996. (10) Mr. Linton became Vice President Marketing in March 1997. (11) Mr. Cuneo ceased to be employed by the Company in January 1997. (12) The amounts shown include payments upon termination pursuant to a termination agreement totaling $150,512, Company matching contributions to the Company's 401 (k) Employee Savings Plan of $646 and $2,250 in 1997 and 1996 and disability insurance premium payments of $325 and $3,906 in 1997 and 1996. -17- 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 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 The Company has an employment agreement with Mr. DeFeo which provides for his continued employment as President and Chief Executive Officer through the year 2000, unless earlier terminated. The agreement provides for a base salary of not less than $400,000, of which $100,000 is deferred, and an annual bonus not less than $200,000 in the event the Company achieves 100% of the criteria established by the Management Committee for such year. The agreement provides for Mr. DeFeo to receive 18 months of salary continuation plus the annual bonus he would have been entitled to if his employment is involuntarily terminated other than for "cause" or if he resigns for "good reason ", or 12 months of salary continuation plus annual bonus in the event the agreement is not renewed by the Company. The Company is required to provide Mr. DeFeo with a letter of credit equal to the severance benefit payable to Mr. DeFeo until such time as the Company's earnings (before interest, taxes, depreciation and amortization) exceeds $26 million. The Company is also required to provide Mr. DeFeo with term life insurance in the amount of not less than $500,000. The Company has entered into agreements with Messrs. Castaldi, Lipson, Linton and Handler whereby such employees would be entitled to salary continuation for a specified period if their employment was involuntarily terminated other than for "cause" during the term of the agreement and, for Mr. Castaldi, if he resigns for "good reason". Messrs. Castaldi and Lipson are each entitled to 12 months of salary continuation and Messrs. Linton and Handler are each entitled to 6 months of salary continuation. Deferred Compensation Plan During 1997, the Company established a Deferred Compensation Plan pursuant to which eligible executive employees (including the Named Executive Officers) may elect to defer all or a portion of the bonus otherwise payable under the Company's Bonus Plan and up to 33% of their annual salary, and such amounts are placed into a deferral account. The participants may select various mutual funds in which all or a part of their deferral accounts shall be deemed to be invested. Distributions from a participant's deferral accounts will be paid in a lump sum or in equal annual installments over a period of up to 15 years -18- beginning upon their termination of employment, death or retirement. All amounts deferred by the participants in the Plan are paid to a Deferred Compensation Plan Trust to be held in order to fund the Company's obligations under the Deferred Compensation Plan. The assets of the trust, however, are subject to the claims of the creditors of the Company in the event the Company is Insolvent, as such term is defined in the trust agreement. 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, representing up to 75% of his or her annual base salary that will be paid if predetermined performance goals are achieved. Performance goals for the various areas of the Company are established annually by the Compensation Committee of the Company. Phantom Equity Program In January 1998, the Company replaced its Management Option Program and adopted a Phantom Equity Program under which a maximum of 21% of the value of the Company's Common Units and Preferred Equity (together, the "Equity") can be awarded to selected officers and other key employees of the Company and its affiliates. Awards under the Phantom Equity Program replaced all of the Management options previously issued to management and also resulted in the Company repurchasing from management all Common Units originally purchased in connection with the reorganization of the Company in May 1996. See Item 13, Certain Relationships and Related Transactions. The Phantom Equity Program is comprised of time based (consisting of 12 1/2% of the Equity), performance based (6 1/2%) and super performance (2%) based awards. All awards grant to the recipient a specified percentage of the Equity (the "applicable percentage"). A time based award vests in five equal annual installments, upon the sale of the Company or upon an initial public offering of the Company's stock ("IPO"), whichever comes first. If the individual's employment with the Company is terminated for any reason other than death or disability within three years of the date of grant of the award, the award is automatically terminated. The amount received under the award and how it is paid is based upon the event which gave rise to the payment. If the payment is due to a Company sale, the individual will receive the applicable percentage of the net amount available for distribution for the outstanding Equity payable, at the Company's option, in a lump sum upon the closing of the sale or in the same manner as the selling shareholders. If the payment is due to an IPO, the payment is an amount equal to the applicable percentage of the Equity implied in the public offering payable, at the option of the Company, either entirely in cash or 40% in cash and the remainder in Company stock. If the payment is due to termination of employment, the participant receives the applicable percentage of the fair market value of the Equity, determined by the Management Committee payable, at the Company's option, in up to five equal annual installments or upon an IPO or Company sale. The performance and super performance based awards are similar to the time based awards except that performance based award vests in stages as the Company achieves specified performance targets while the super performance based award vests entirely upon the achievement of a single target. Payment of the awards does not occur until and is dependent upon the achievement of both a performance criteria and an event criteria. The event criteria is a Company sale or when Vestar's ownership falls below 10% of the Common Units. The performance criteria -19- for the performance based award vests in segments as the Company achieves specified performance targets while there is only one target for the super performance based award. Any performance or super performance based award which is not fully vested by December 31, 2002 is automatically terminated. The Phantom Equity Program and all awards are subject to readjustment in the event of a reorganization of the Company required in connection with a refinancing, and the applicable percentages are subject to readjustment to take into consideration new issuances of Common Units or Preferred Capital. The following table contains information with respect to grants of phantom awards to each of the Named Executive Officers in January, 1998:
Assumed Annual Rated of Stock Individual Grants Appreciation for Award Term(4) -------------------------------------------------------------------------------------------------- Number of Securities Exercise or Underlying % of Total Base Price Expiration Name Award's Granted(1) SARs Granted(2) ($/Sh)(3) Date 5%($) 10%($) - ------------------ ------------------ --------------- --------- ----------- ------ ------- Neil P. DeFeo 4.00(5) 32.9 N/A 12/31/2009 N/A N/A 2.00(6) 34.2 N/A 12/31/2002 N/A N/A Alexander R. Castaldi 1.30(5) 10.7 N/A 12/31/2009 N/A N/A 0.50(6) 8.5 N/A 12/31/2002 N/A N/A 0.22(7) 13.0 N/A 12/31/2002 N/A N/A Allen S. Lipson 0.90(5) 7.4 N/A 12/31/2009 N/A N/A 0.35(6) 6.0 N/A 12/31/2002 N/A N/A 0.16(7) 9.5 N/A 12/31/2002 N/A N/A Lawrence D. Handler 0.35(5) 2.9 N/A 12/31/2009 N/A N/A 0.20(6) 3.4 N/A 12/31/2002 N/A N/A 0.09(7) 5.3 N/A 12/31/2002 N/A N/A Michael A. Linton 0.60(5) 4.9 N/A 12/31/2009 N/A N/A 0.30(6) 5.1 N/A 12/31/2002 N/A N/A 0.13(7) 7.7 N/A 12/31/2002 N/A N/A
- --------------------- (1) Indicates the applicable percentage of the Company's Equity underlying each award granted. (2) Indicates the % of total time, performance and super performance based award granted. (3) There is no exercise price and as of the time of the grant, there was no market price for the Company's Equity. (4) The Company's Equity is not registered under the Securities Act of 1933 and is therefore not publically traded. Accordingly, there is no market price for the Company's Equity. Payments to holders of phantom equity awards are dependent upon the realized value of the Equity upon a sale of the Company or and IPO. See above for a complete description of the Phantom Equity Program and the determination of payouts. (5) Grant of Time Based award. (6) Performance Based award. (7) Super Performance Based award. 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 Company in the United States who have completed three months of service are eligible to participate in the Savings Plan. For each employee who -20- 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. 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, 1998. 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) % Number % - --------------------- ----------- ---- ------ ---- Vestar Equity Partners (2)(3) $30,000,000 48.4% 34,400 50% 245 Park Avenue, 41st Floor New York, New York 10167 RPI Corp. (3) 32,000,000 51.6% 34,400 50% 350 Fifth Avenue, Suite 5408 New York, New York 10118 Victor K. Kiam, II (3)(4) 32,000,000 51.6% 34,400 50% Norman W. Alpert(5) 30,000,000 48.4% 34,400 50% Arthur J. Nagle (5) 30,000,000 48.4% 34,400 50% Daniel S. O'Connell (5) 30,000,000 48.4% 34,400 50% Robert L. Rosner (5) 30,000,000 48.4% 34,400 50% Directors and executive officers as a group (5 persons) $62,000,000 100.0% 68,800 100%
- ----------------------- (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 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 and RPI 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. -21- Ownership of Remingtonequity 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 in connection with the reorganization of the Company in 1996, Vestar Capital Partners ("Vestar Capital") receives an annual advisory fee equal to the greater of $500,000 or 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. The Management Agreement will be in effect until May 23, 2006, 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 May 23, 1996, and provided further that Vestar Capital may terminate the Management Agreement at any time. Vestar Capital owns, indirectly through Vestar Corp., 50% 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. Pursuant to a consulting and transitional services agreement (the "Consulting Agreement") entered into in connection with the reorganization of the Company in 1996, RPI receives an aggregate annual fee equal to the sum of: (i) the greater of $500,000 or 1.5% of EBITDA (as defined in such agreement) of the Company on a consolidated basis and (ii) $250,000 in 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 May 23, 2006, 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 May 23, 1996, 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 50% 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") dated May 23, 1996, 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 -22- 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. In connection with the adoption of the Phantom Equity Program and the issuance of Phantom Equity Agreements in January 1998, the Company repurchased from Messrs. Lipson, Hoddinott and Kimpton all shares of Common Units they had purchased from the Company in May 1996 in connection with the reorganization of the Company at the same price they had originally paid for such units. The Company paid for the repurchased Common Units by issuing promissory notes for the full purchase price, payable within 60 days following the termination of employment for reasons other than cause (as defined in the promissory note) or upon the payment of any phantom equity award to such individuals. The phantom equity agreements with each of these individuals provided that any payment under the promissory note would reduce, dollar for dollar, the applicable phantom equity payment. The promissory note issued to Mr. Lipson was for $150,000, together with interest of 6 1/2% and the non-interest bearing notes issued to Messrs. Hoddinott and Kimpton were each for $46,000. 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. Incorporated by reference to Exhibit 3.1 in Registration Statement onForm S-4 (File Number 333-07429). 3.2 Certificate of Formation of Remington Products Company, L.L.C.("Remington"). Incorporated by reference to Exhibit 3.2 in 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. Incorporated by reference to Exhibit 4.1 in Registration Statement on Form S-4(File Number 333-07429). 4.2 Form of 11% Series B Senior Subordinated Notes. Incorporated by reference to Exhibit 4.2 in Registration Statement on Form S-4(File Number 333-07429). -23- 4.3 Purchase Agreement dated May 16, 1996 between Remington, Capital and Bear, Sterns & Co. Inc. Incorporated by reference to Exhibit 4.3 in Registration Statement on Form S-4(File Number 333-07429). 4.4 Registration Rights Agreement dated as of May 23, 1996 between Remington, Capital and Bear Stearns & Co. Inc. Incorporated by reference to Exhibit 4.4 in 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 "Credit and Guarantee Agreement"). Incorporated by reference to Exhibit 10.1 in Registration Statement on Form S-4 (File Number 333- 07429). 10.2 First Amendment and Waiver Number 1,dated as of December 27,1996, to the Credit and Guarantee Agreement. Incorporated by reference to Exhibit 10.1 in the Company's Current Report on Form 8-K dated December 24, 1996. 10.3 Second Amendment, dated as of March 30, 1997 to the Credit and Guarantee Agreement. Incorporated by reference to Exhibit 10.1 in the Company's Quarterly Report on Form 10-Q for the quarter ended March 29, 1997. 10.4 Third Amendment, dated as of May 16, 1997 to the Credit and Guarantee Agreement. Incorporated by reference to Exhibit 10.1 in the Company's Quarterly Report on Form 10-Q for the quarter ended June 28, 1997. 10.5 Fourth Amendment, dated as of March 20, 1998 to the Credit and Guarantee Agreement. 10.6 Company Security Agreement dated as of May 23, 1996 made by Remington in favor of the Agent. Incorporated by reference to Exhibit 10.2 in Registration Statement on Form S-4(File Number 333-07429). 10.7 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. Incorporated by reference to Exhibit 10.3 in Registration Statement on Form S-4(File Number 333-07429). 10.8 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. Incorporated by reference to Exhibit 10.4 in Registration Statement on Form S-4(File Number 333-07429). -24- 10.9 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. Incorporated by reference to Exhibit 10.5 in Registration Statement on Form S-4(File Number 333-07429). 10.10 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. Incorporated by reference to Exhibit 10.6 in Registration Statement on Form S- 4(File Number 333-07429). 10.11 Conditional Assignment of and Security Interest in Trademark Rights(United Kingdom) dated as of May 23, 1996 made by IP Subsidiary in favor of the Agent. Incorporated by reference to Exhibit 10.7 in Registration Statement on Form S- 4(File Number 333-07429). 10.12 Members Limited Recourse Pledge Agreement dated as of May 23, 1996 made by Remington in favor of the Agent. Incorporated by reference to Exhibit 10.8 in Registration Statement on Form S-4(File Number 333-07429). 10.13 Company Pledge Agreement dated as of May 23, 1996 made by Remington in favor of the Agent. Incorporated by reference to Exhibit 10.9 in Registration Statement on Form S-4(File Number 333-07429). 10.14 Subsidiaries Pledge Agreement dated as of May 23, 1996 made by Rand in favor of the Agent. Incorporated by reference to Exhibit 10.10 in Registration Statement on Form S-4(File Number 333-07429). 10.15 Subsidiaries Guarantee dated as of May 23, 1996 made by Capital, IP subsidiary and Rand in favor of the Agent. .Incorporated by reference to Exhibit 10.11 in Registration Statement on Form S-4(File Number 333-07429). 10.16 Purchase Agreement dated as of May 1, 1996 by and among Vestar Corp I., Remington, Remsen, Isaac Perlmutter, RPI and Victor K. Kiam, II. Incorporated by reference to Exhibit 10.12 in Registration Statement on Form S-4(File Number 333- 07429). 10.17 Agreement and Plan of Merger dated as of May 23, 1996 between Remington Products Company and Remington. Incorporated by reference to Exhibit 10.13 in Registration Statement on Form S-4(File Number 333-07429). 10.18 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. Incorporated by reference to Exhibit 10.14 in Registration Statement on Form S-4(File Number 333-07429). -25- 10.19 Management Agreement dated as of May 23, 1996 between Remington and Vestar Capital Partners. Incorporated by reference to Exhibit 10.15 in Registration Statement on Form S-4(File Number 333-07429). 10.20 Consulting and Transitional Services Agreement dated as of May 23,1996 between Remington and RPI. Incorporated by reference to Exhibit 10.16 in Registration Statement on Form S-4(File Number 333-07429). 10.21 Employment Agreement made as of January 8, 1997 between the Company and Neil P. DeFeo. Incorporated by reference to Exhibit 10.2 in the Company's Quarterly Report on Form 10-Q for the quarter ended March 29, 1997. 10.22 Form of Executive Severance Agreement dated as of May 23, 1996 by and between Remington and Allen S.Lipson is incorporated herein by reference to Registration Statement on Form S-4(File Number 333-07429). 10.23 Executive Severance Agreement dated as of November 25, 1996 between Remington and Alexander R. Castaldi. Incorporated by reference to Exhibit 10.20 in the Company's Annual Report on Form 10-K for the year ended December 31, 1996. 10.24 Form of Severance Agreement 10.25 Form of Time Based Phantom Equity Agreement with participants in the Phantom Equity Program. 10.26 Form of Performance Based Phantom Equity Agreement with participants in the Phantom Equity Program. 10.27 Form of Super Performance Based Phantom Equity Agreement with participants in the Phantom Equity Program. 10.28 Promissory Note dated January 14, 1998 from Remington to Allen S. Lipson for $150,000. 10.29 License Agreement made May 23, 1996 by and between IP Subsidiary and Act II Jewelry, Inc. Incorporated by reference to Exhibit 10.23 in Registration Statement on Form S-4 (File Number 333-07429). 10.30 License Agreement made May 23, 1996 by and between IP Subsidiary and VKK Equities Corporation. Incorporated by reference to Exhibit 10.24 in Registration Statement on Form S-4 (File Number 333-07429). 10.31 Tradename Agreement made May 23, 1996 by and between IP Subsidiary and Remington Apparel Company, Inc.. Incorporated by reference to Exhibit 10.25 in Registration Statement on Form S-4 (File Number 333-07429). -26- 10.32 License Agreement dated as of May 23, 1996 by and between Remington and IP Subsidiary. Incorporated by reference to Exhibit 10.26 in Registration Statement on Form S-4 (File Number 333-07429). 10.33 1998 Remington Bonus Plan. 21 Subsidiaries of Remington. 24. Powers of Attorney. 27 Financial Data Schedule. -27- 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 27, 1998 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 27, 1998. * * - -------------------------------------- ---------------------------------- 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 Director Controller * * - ------------------------------------- ---------------------------------- 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 -28- INDEX TO FINANCIAL STATEMENTS
Pages ------- Financial Statements - -------------------- Independent Auditors' Report F-2 Report of Independent Accountants F-3 Consolidated Balance Sheets as of December 31, 1997 and December 31, 1996 F-4 Consolidated Statements of Operations for each of the years in the three-year period ended December 31, 1997 F-5 Consolidated Statements of Members' Deficit/Partners' Capital for each of the years in the three-year period ended December 31, 1997 F-6 Consolidated Statements of Cash Flows for each of the years in the three-year period ended December 31,1997 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 for each of the years in the three year period ended December 31,1997 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 sheets of Remington Products Company, L.L.C. and subsidiaries (the "Company") as of December 31, 1997 and 1996, and the related consolidated statements of operations, members' deficit/partners' capital, and cash flows for the year ended December 31, 1997 and for the thirty-one week period ended December 31, 1996 and for Remington Products Company and subsidiaries (the "Predecessor") for the twenty-one week period ended May 23, 1996. Our audits also included the consolidated financial statement schedule for 1997 and 1996 listed in the index to the consolidated financial statements. The 1997 and 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 provide a reasonable basis for our opinion. In our opinion, such consolidated financial statements referred to above present fairly, in all material respects, the financial position of the Company as of December 31, 1997 and 1996, and the results of their operations and their cash flows for the year ended December 31, 1997 and the thirty-one week period ended December 31, 1996 and of the Predecessor for the twenty-one week period ended May 23, 1996 in conformity with generally accepted accounting principles. Also, in our opinion, such 1997 and 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 20, 1998 F-2 Report of Independent Accountants To the Management Committee of REMINGTON PRODUCTS COMPANY: We have audited the accompanying consolidated statements of operations, total partners' capital and cash flows of Remington Products Company and Subsidiaries (the "Company") for the year ended December 31, 1995. 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 audit. We conducted our audit in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated results of operations and cash flows of Remington Products Company and Subsidiaries for the year ended December 31, 1995, 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 (in thousands)
December 31, December 31, 1997 1996 ------------ ------------ ASSETS Current assets: Cash and cash equivalents $ 5,408 $ 7,199 Accounts receivable, less allowance for doubtful accounts of $734 in 1997 and $1,340 in 1996 53,052 54,262 Inventories 60,507 63,785 Prepaid and other assets 1,525 4,212 ----------- ---------- Total current assets 120,492 129,458 Property, plant and equipment, net 16,033 13,982 Intangibles, net 60,538 62,520 Other assets 8,182 8,863 ----------- ---------- Total assets $205,245 $214,823 ======== ======== LIABILITIES AND MEMBERS' DEFICIT Current liabilities: Accounts payable $ 13,359 $ 16,414 Short-term borrowings 1,300 1,153 Current portion of long-term debt 1,417 1,067 Accrued liabilities 28,055 32,964 ---------- -------- Total current liabilities 44,131 51,598 Long-term debt 178,114 169,411 Other liabilities 1,278 1,521 Commitments and contingencies Members' deficit: Members' deficit (15,894) (7,351) Cumulative translation adjustment (2,384) (356) ---------- ----------- Total members' deficit (18,278) (7,707) --------- ---------- Total liabilities and members' deficit $205,245 $214,823 ======== ========
See notes to consolidated financial statements. F-4 Remington Products Company, L.L.C. Consolidated Statements of Operations (in thousands)
Year Ended December 31, 1996 Year ------------------------------------- Year Ended 31 Weeks 21 Weeks Ended December 31, Ended Ended December 31, 1997 December 31 May 23 1995 -------------- ------------- ------------ ------------ (Successor) (Successor) (Predecessor) (Predecessor) Net sales $241,572 $185,286 $ 56,713 $255,323 Cost of sales 141,296 117,723 35,102 143,203 ---------- -------- --------- -------- Gross profit 100,276 67,563 21,611 112,120 Selling, general and administrative 84,194 53,860 37,912 83,949 Amortization of intangibles 1,936 1,195 650 1,655 ---------- -------- --------- -------- Operating income (loss) 14,146 12,508 (16,951) 26,516 Interest expense 19,318 12,164 2,228 7,604 Other expense (income) 526 498 (115) 408 ---------- -------- --------- --------- Income (loss) before income taxes (5,698) (154) (19,064) 18,504 Provision (benefit) for income taxes 2,225 3,018 (873) 1,264 ---------- -------- --------- -------- Net income (loss) $ (7,923) $(3,172) $(18,191) $ 17,240 ========== ======== ========= ======== Net loss applicable to common units $(16,279) $(7,748) ========== ========
See notes to consolidated financial statements. F-5 Remington Products Company, L.L.C. Consolidated Statements of Members' Deficit/Partners' Capital (in thousands)
Total Partners' Cumulative Capital/ Preferred Common Other Accumulated Translation Members' Equity Units Capital Deficit Adjustments Deficit ----------- -------- --------- ---------- ------------ ---------- REDECESSOR 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) Net loss (7,923) (7,923) Preferred dividend 8,356 (8,356) - Repurchase of common units (620) (620) Foreign currency translation (2,028) (2,028) -------- ------- ---------- -------- --------- --------- Balance, December 31, 1997 $74,932 $7,122 $(73,921) $(24,027) $ (2,384) $(18,278) ======= ====== ========= ======== ========= ==========
See notes to consolidated financial statements. F-6 Remington Products Company, L.L.C. Consolidated Statements of Cash Flows (in thousands)
Year Ended December 31, 1996 Year -------------------------------- Year Ended 31 Weeks 21 Weeks Ended December 31, Ended Ended December 31, 1997 December 31 May 23 1995 ------------ ------------ ------------ ----------- (Successor) (Successor) (Predecessor) (Predecessor) Cash flows from operating activities: Net income (loss) $ (7,923) $(3,172) $(18,191) $17,240 Adjustment to reconcile net income (loss) to net cash provided by (used in) operating activities: Depreciation 2,831 1,184 1,355 3,283 Amortization of intangibles 1,936 1,195 650 1,655 Amortization of deferred financing fees 1,072 1,260 262 690 Deferred income taxes (44) 1,251 (561) (735) Foreign currency forward losses 115 1,501 - - Changes in assets and liabilities: Accounts receivable 1,210 (27,291) 41,043 (13,955) Inventories 3,278 (2,546) (8,339) 299 Accounts payable (3,055) 5,392 1,187 (11,605) Accrued liabilities (5,267) 10,731 (933) 3,579 Other, net (2,133) ( 70) (158) 202 -------- -------- --------- -------- Cash provided by (used in) operating activities (7,980) (10,565) 16,315 653 -------- -------- -------- ------- Cash flows from investing activities: Capital expenditures (5,078) (2,399) (1,310) (3,291) Payment for purchase of Company, net - (139,750) - - Proceeds from working capital adjustment 2,500 - - - Other 204 (181) - - -------- --------- --------- --------- Cash used in investing activities (2,374) (142,330) (1,310) (3,291) -------- --------- -------- -------- Cash flows from financing activities: Proceeds from sale of senior subordinated notes - 129,026 - - Net repayments under term loan facilities (965) (3,463) (3,600) (13,550) Net borrowings (repayments) under credit facilities 10,938 1,564 (12,353) 14,965 Equity investments (repurchases) (620) 34,302 - - Debt issuance costs - (9,075) - - Other, net (251) 1,595 - 354 -------- --------- ---------- -------- Cash provided by (used in) financing activities 9,102 153,949 (15,953) 1,769 Effect of exchange rate changes on cash (539) 503 (214) 51 -------- --------- --------- --------- Increase (decrease) in cash and cash equivalents (1,791) 1,557 (1,162) (818) Cash and cash equivalents, beginning of period 7,199 5,642 6,804 7,622 -------- --------- --------- -------- Cash and cash equivalents, end of period $ 5,408 $ 7,199 $ 5,642 $ 6,804 ======== ========= ========= ======== Supplemental cash flow information: Interest paid $18,756 $ 9,121 $ 1,874 $ 6,936 Income taxes paid $ 2,493 $ 1,563 $ 440 $ 1,073
See notes to consolidated financial statements. Remington Products Company, L.L.C. F-7 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 sheets as of December 31, 1997 and 1996 include 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 year ended December 31, 1997 and for the period from May 24, 1996 to December 31, 1996. The statements also include the 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 15% of the consolidated inventories as of December 31, 1997 and 28% at 1996, are stated at the lower of cost or market, with cost determined by the last-in, first-out (LIFO) method. As of December 31, 1997 and 1996, 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-8 Remington Products Company, L.L.C. Notes to Consolidated Financial Statements (continued) Property, Plant and Equipment: Property, plant and equipment is recorded primarily at cost. In conjunction with the Reorganization (See Note 2), 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 3 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. Costs 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 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 totaled $2.8 million for the year ended December 31, 1997; $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 for the year ended December 31, 1995. Income Taxes: Federal income taxes on net earnings of the Company are payable directly by the partners. In jurisdictions where partnership status is not recognized or foreign corporate subsidiaries exist, the Company provides for income taxes currently payable as well as for those deferred because of 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 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 totaled $(0.7) million for the year ended December 31, 1997; $(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 million for the year ended December 31, 1995. F-9 Remington Products Company, L.L.C. Notes to Consolidated Financial Statements (continued) Recent Accounting Pronouncements: In June of 1997, the Financial Accounting Standards Board ("FASB") issued SFAS No. 130, "Reporting Comprehensive Income," which requires disclosures of comprehensive income to be included in the financial statements for fiscal years beginning after December 15, 1997. The Company will include such statement, if applicable, beginning with the first quarter of 1998. In addition, in June of 1997, the FASB issued SFAS No. 131, "Disclosure About Seqments of an Enterprise and Related Information." SFAS No. 131 requires disclosures of certain information about operating segments and about products and services, the geographic areas in which a company operates, and their major customers. The Company is presently in the process of evaluating the effect this new standard will have on disclosures in the Company's financial statements and the required information will be reflected in its financial statements for the year eneded December 31, 1988. 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. 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-10 Remington Products Company, L.L.C. 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. (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, 1997 and 1996 (in thousands):
1997 1996 --------- --------- Finished goods $ 55,099 $ 59,205 Work in process 5,392 4,556 Raw materials 16 24 -------- -------- $ 60,507 $ 63.785 ======== ========
F-11 Remington Products Company, L.L.C. Notes to Consolidated Financial Statements (continued) 4. Property, Plant and Equipment Property, plant and equipment as of December 31, 1997 and 1996 consisted of (in thousands):
1997 1996 --------- -------- Land and buildings $ 2,459 $ 2,441 Leasehold improvements 3,308 1,981 Machinery, equipment and tooling 9,237 7,487 Furniture, fixtures and other 4,769 3,283 -------- -------- 19,773 15,192 Less accumulated depreciation (3,740) (1,210) -------- -------- $ 16,033 $ 13,982 ======== ========
5. Intangibles Intangibles were comprised of the following (net of accumulated amortization of $3,129 and $1,195 thousand) as of December 31, 1997 and 1996, respectively (in thousands):
1997 1996 --------- --------- Goodwill $ 31,142 $ 31,994 Tradenames 25,473 26,136 Patents 3,923 4,390 -------- -------- $ 60,538 $ 62,520 ======== ========
6. Accrued Liabilities Accrued liabilities were comprised of the following as of December 31, 1997 and 1996 (in thousands):
1997 1996 -------- --------- Advertising and promotion expenses $ 7,953 $10,012 Compensation and benefits 4,182 4,787 Income and other taxes payable 3,790 3,855 Interest 1,900 2,454 Other 10,230 11,856 ------- ------- $28,055 $32,964 ======= =======
7. Debt Senior Credit Agreement 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. F-12 Remington Products Company, L.L.C. Notes to Consolidated Financial Statements (continued) 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, 1997, availability under the Revolving Credit Facilities was approximately $12.5 million. The availability has been reduced by approximately $1.9 million in short-term commercial and stand-by letters of credit outstanding as of December 31, 1997. The term loans under the Senior Credit Agreement are payable in quarterly installments. Aggregate scheduled installments over the next five years ending December 31, 2002 are $1.4, $1.6, $1.9, $3.1 and $1.0 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 "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 5.9% in 1997 and 5.1% in 1996. 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. Subsequent to December 31, 1997, the Company amended the Senior Credit Agreement to adjust the financial covenants prospectively based upon a review of expected future operating performance. As a result of the amendment, F-13 Remington Products Company, L.L.C. Notes to Consolidated Financial Statements (continued) the Revolving Credit Facilities' borrowing base can be increased as needed by $10 million over the applicable percentage of eligible receivables and inventories, (still limited to the $70 million total facilities) for the period April 1, 1998 through June 30, 1999. In addition, the interest rate on borrowings under the Revolving Credit Facilities will be increased by one quarter percent during any period that any of the additional $10 million in borrowing base is utilized. Details of long-term debt at December 31, 1997 and 1996 are as follows (in thousands):
1997 1996 --------- ---------- Revolving Credit Facilities $ 40,523 $ 30,224 Senior Subordinated Notes 130,000 130,000 Term Loans 9,008 10,254 --------- --------- 180,831 170,478 Less current portion (1,417) (1,067) --------- --------- $ 178,114 $ 169,411 ========= =========
8. Members' Equity 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 members' equity (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, 1997 the aggregate unpaid Preferred Equity dividend amounted to $12.9 million. As a result of the Reorganization, on the Closing Date, RPI had a $35.4 million equity interest in the Company ($32.0 million in Preferred Equity) and the Vestar Members had a $33.4 million equity interest in the Company ($30.0 million in Preferred Equity). As of December 31, 1997, the Company's Common Units were owned 49.8% by the Vestar Members, 49.8% by RPI and 0.4% by certain Management Investors. 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. The effect of applying the fair value method as prescribed by SFAS No. 123 to the Comany's stock-based awards results in net losses that are not materially different than those reported. In January 1998, the Company repurchased the remaining outstanding common units owned by the Management Investors and cancelled all outstanding Management Options and adopted a new Phantom Equity Program. Under this program a maximum of 21% of the value of the Company's Common Units and Preferred Equity (together, the "Equity") can be awarded to selected officers and other key employees of the Company . The Phantom Equity Program is comprised of time based (consisting of 12 1/2% of the Equity), performance based (6 1/2%) and super performance (2%) based awards. All awards grant to the recipient a specified percentage of the Equity (the "applicable percentage"). A time based award vests in five equal annual installments, upon the sale of the Company or upon an initial public offering of the Company's stock ("IPO"), whichever comes first. The performance and super performance based awards are similar to the time based awards except that performance based award vests in stages as the Company achieves F-14 Remington Products Company, L.L.C. Notes to Consolidated Financial Statements (continued) specified performance targets while the super performance based award vests entirely upon the achievement of a single target. Payment of the performance based awards does not occur until and is dependent upon the achievement of both a performance criteria and an event criteria. The event criteria is a Company sale or when Vestar's ownership falls below 10% of the Common Units. The performance criteria for the performance based award vests in segments as the Company achieves specified performance targets while there is only one target for the super performance based award. Any performance or super performance based award which is not fully vested by December 31, 2002 is automatically terminated. The Phantom Equity Program and all awards are subject to readjustment in the event of a reorganization of the Company required in connection with a refinancing, and the applicable percentages are subject to readjustment to take into consideration new issuances of Equity. 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 $6,023, $7,785, $(2,433) and $7,632 thousand for the year ended December 31, 1997, the 31 weeks ended December 31, 1996, the 21 weeks ended May 23, 1996, and the year ended December 31, 1995, respectively. The provision (benefit) for income taxes consists of the following (in thousands):
Year Ended December 31, 1996 Year ------------------------------ Year Ended 31 Weeks 21 Weeks Ended December 31, Ended Ended December 31, 1997 December 31 May 23 1995 --------- ----------- ---------- ---------- (Successor) (Successor) (Predecessor) (Predecessor) Current: State and local $ 15 $ 5 $ - $ 40 Foreign 2,254 1,762 (312) 1,959 Deferred: Foreign (44) 1,251 (561) (735) --------- ------- ------- ------- Total $ 2,225 $3,018 $ (873) $ 1,264 ========= ====== ======= ======= Income taxes computed at statutory U.S. Federal income tax rate $(1,994) $ (54) $(6,672) $ 6,476 Partnership status for U.S. federal income tax purposes 4,102 2,779 5,821 (3,805) State and local income taxes 15 5 - 40 Adjustment for foreign income tax rates 102 288 (22) 506 Utilization of foreign net operating loss - carryforwards - - (1,340) Recognition of foreign deferred tax asset - - - (613) ----------- ------- Income taxes as reported $ 2,225 $ 3,018 $ (873) $ 1,264 --------- ------- ------- --------
Current deferred tax assets of the foreign subsidiaries as of December 31, 1997 and 1996 totaled $145 and $101 thousand, respectively. F-15 Remington Products Company, L.L.C. Notes to Consolidated Financial Statements (continued) 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):
1998 $ 4,122 1999 3,581 2000 2,474 2001 1,778 2002 962 2003 and thereafter 158 -------- $13,075
Rent expense was $6,014, $3,760, $2,095 and $5,469 thousand for the year ended December 31, 1997, the thirty-one weeks ended December 31, 1996, the twenty-one weeks ended May 23, 1996 and for the year ended December 31, 1995, 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. 11. Employee Savings Plan 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 years ended December 31, 1997 and 1996 were approximately $271and $388 thousand, respectively. The plan's funded status as of December 31, 1997 and 1996 are as follows (in thousands):
1997 1996 ------- -------- Accumulated benefit obligations $(5,831) $(4,446) -------- -------- Projected benefit obligation (6,222) $(4,788) Plan assets at fair value (principally marketable securities) 5,996 5,369 -------- -------- Plan assets greater (less than)projected benefit obligation (226) 581 Unrecognized (gain)/loss 323 (480) -------- -------- Prepaid pension cost $ 97 $ 101 ======== ========
F-16 Remington Products Company, L.L.C. Notes to Consolidated Financial Statements (continued) 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 $237, $94, $52 and $104 thousand for the year ended December 31, 1997, the thirty-one weeks ended December 31, 1996, the twenty-one weeks ended May 23, 1996 and for the year ended December 31, 1995, 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, 1997, the difference between contract rate and fair value on the Company's foreign currency forward contracts was not material. The fair value of long-term debt was approximately $157.3 million (book value of $178.1 million). 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 December 31, 1997, the Company had uncollateralized receivables with two mass-merchant retailers which represented approximately 22% of the Company's accounts receivable balance. During calendar 1997, sales to these two customers represented approximately 19% 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, 1997, forward contracts to sell 15.3 million UK Pounds Sterling were outstanding, all of which mature in 1998. At December 31, 1996, forward contracts to sell 18.7 million UK Pounds Sterling were outstanding and matured at various dates through 1997. 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 suppliers to be good, any adverse change in the relationships with these suppliers, the financial condition of such F-17 Remington Products Company, L.L.C. Notes to Consolidated Financial Statements (continued) 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 or 1.5% 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 thousand for barter credits that can be used to pay for media advertising at a predetermined rate of cash and barter credits. During 1995, RPC incurred $2,948 thousand for media advertising purchased through the related entity, of which $521 thousand represented utilization of the barter credits. The entity ceased being a related party as of the Closing Date. 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 and $381 thousand for related services during the twenty-one weeks ended May 23, 1996 and for the year ended December 31, 1995, 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. F-18 Remington Products Company, L.L.C. Notes to Consolidated Financial Statements (continued) RPC acquired certain products for resale in its service stores from companies owned by each of RPC's partners. Such purchases aggregated approximately $80 and $94 thousand during the twenty-one weeks ended May 23, 1996 and for the year ended December 31, 1995, respectively. In 1995, RPC paid $984 thousand of costs incurred on behalf of the partners. Approximately $800 thousand of such costs related to various change in ownership transactions, which were not completed. The remaining $184 thousand was paid to one of RPC's partners. 14. Geographic Information 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 Australia and Canada). Information by geographical location is as follows (in thousands):
Year Ended December 31, 1996 Year -------------------------------- Year Ended 31 Weeks 21 Weeks Ended December 31, Ended Ended December 31, 1997 December 31 May 23 1995 ------------ ------------ ------------- -------------- (Successor) (Successor) (Predecessor) (Predecessor) Net sales*: United States $ 138,202 $ 112,153 $ 34,747 $ 164,080 Europe 69,809 50,122 13,927 62,288 Other 33,561 23,011 8,039 28,955 --------- --------- -------- --------- $ 241,572 $ 185,286 $ 56,713 $ 255,323 ======== ========= ======== ========= Operating income (loss): United States $ 5,532 $ 2,749 $(14,745) $ 18,402 Europe 5,145 6,394 (1,168) 4,914 Other 3,469 3,365 (1,038) 3,200 --------- --------- --------- --------- $ 14,146 $ 12,508 $(16,951) $ 26,516 ========= ========= ========= ========= Identifiable assets: United States $ 129,329 $ 143,581 $ 106,606 Europe 52,494 48,193 45,366 Other 23,422 23,049 18,950 --------- --------- --------- $ 205,245 $ 214,823 $ 170,922 ========= ========= =========
*Net Sales exclude sales from the United States to affiliate companies and sales between affiliates of $8,638, $7,812, $2,716 and $11,366 thousand for the year ended December 31, 1997, the 31 weeks ended December 31, 1996, the 21 weeks ended May 23, 1996 and the year ended December 31, 1995, 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-19 Report of Independent Accountants To the Management Committee of REMINGTON PRODUCTS COMPANY: Our report on the consolidated statements of operations, total partner's capital and cash flows of Remington Products Company is included on page F-3 of this Form 10-K. In connection with our audit of such financial statments, we have also audited the related financial statement schedule listed in the index on page F-1 of this Form 10-K. In our opinion, this financial statement schedule referred to above, 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 (in thousands)
Additions Balance of Charged to Balance at Beginning Costs and End of Period Expenses Deductions of Period ---------- ----------- ----------- ----------- Successor Year Ended December 31, 1997 Allowance for doubtful accounts $1,340 $ 188 $ 794 $ 734 Allowance for cash discounts and returns 9,419 16,007 16,501 8,925 31 Weeks Ended December 31, 1996 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 16,140 7,852
S-2 EX-10.5 2 FOURTH AMENDMENT Exhibit 10.5 FOURTH AMENDMENT FOURTH AMENDMENT, dated as of March 20, 1998 (this "Amendment"), to the Credit end Guarantee Agreement, dated as of May 23, 1996 (as amended, supplemented or otherwise modified from time to time, the "Credit Agreement"), among: (a) REMINGTON PRODUCTS COMPANY, L.L.C., a Delaware limited liability company (the "Company"); (b) REMINGTON CONSUMER PRODUCTS LIMITED, a corporation organized and existing under the laws of the United Kingdom (the "UK Borrower"); (c) each Acquisition Subsidiary from time to time party thereto (together with the Company and the UK Borrower, the "Borrowers"); (d) the Lenders from time to time parties to the Agreement including the Issuing Bank; (e) FLEET NATIONAL BANK and BANQUE NATIONALE DE PARIS, as Co- Documentation Agents (in such capacity, the "Co Documentation Agents"); and (f) THE CHASE MANHATTAN BANK (formally known as CHEMICAL BANK), a New York banking corporation, as administrative agent (in such capacity, the "agent") for the Lenders hereunder. W I T N E S S E T H WHEREAS, the Borrowers, the Lenders and the Agent are parties to the Credit Agreement; WHEREAS, the Borrowers have requested that the Agent and the Lenders agree to amend certain provisions of the Credit Agreement in and with the terms hereof; WHEREAS, the Agent, the Lenders and The Chase Manhattan Bank (as Issuing Lender) are willing to amend such provisions of the Credit Agreement, but only upon the terms and subject to the conditions set forth herein; NOW THEREFORE, in consideration of the premises contained herein, the parties hereto agree as follows: 1. Defined Terms. Unless otherwise defined herein, capitalized terms which are used herein shall have the meanings assigned thereto in the Credit Agreement. 2. Amendment of Subsection 1.1. Subsection l.1 of the Credit Agreement hereby is amended by (a) deleting tberefrom in their entireties the definitions of the terms "Domestic Borrowing Base" and "UK Borrowing Base" contained thereto (b) inserting therein in proper alphabetical order the following new definitions: "Domestic Borrowing Base": as of any date of determination an amount equal to the sum, without duplication of (a) 85%. of the total of Eligible Domestic Accounts of the Company and in Domestic Subsidiaries as of such date less the Domestic Dilution Reserve then in effect, (b) 60% of the Eligible Domestic Inventory of the Company and its Domestic Subsidiaries as of such date and (c) during any Overadvance Period, $10,000,000 minus any Seasonal Overadvance Utilization then in effect. For purposes of determining the Domestic Borrowing Base from time to time, Eligible Domestic Accounts and Eligible Domestic Accounts of the Company and its Domestic Subsidiaries shall be determined from time to time by the Agent by reference to the Domestic Borrowing Base Certificate then most recently delivered to it; provided that the information contained in such Domestic Borrowing Base Certificate shall not be conclusive in calculating the amount of Eligible Domestic Accounts and Eligible Domestic Inventory and, after consultation with the Company, the Agent shall be entitled to adjust the amounts and other information contained therein to the extent that it believes in its reasonable credit judgment that such adjustment is appropriate to reflect (x) the then current amount of Eligible Domestic Accounts and Eligible Domestic Accounts or (y) changes in the business practices of the Company and its Domestic Subsidiaries (or newly disclosed matters with respect to them). "Lock Box Agreement" shall mean a Lock Box Agreement among the Company or a Subsidiary, the Agent and a Lock Box Bank (as defined therein; .provided that each Lock Box Bank shall be a Bank party to this agreement), substantially in the form of Exhibit G hereto (with such changes therein as shall (x) in the case of any lock Box Agreement with the UK Borrower or any of its Subsidiaries, be appropriate in accordance with customary practice in the United Kingdom and (y) in any case, be negotiated by the Agent and the respective Lock Box Bank), as the same may be amended, supplemented or otherwise modified from time to time in accordance with the terms thereof and of this Agreement. "Overadvance Period" shall mean the period from April 1, 1998 through June 30, 1999; provided that, in the reasonable judgment of the Required Lenders, the Company is proceeding in good faith to enhance its option in order to achieve an Interest Coverage Ratio of 1.35 to 1.0. "UK Borrowing Base": as of any date of determination, an amount equal to the Sum, without duplication of (a) 85% of the total of Eligible UK Accounts of the UK Borrower as of such date less the UK Dilution Reserve then in effect, (b) 60% of the Eligible UK Inventory of the UK Borrower and (c) during any Overadvance Period, the pounds Sterling equivalent of $10,000,000 minus any Seasonal Overadvance Utilization then in effect. For purposes of determining the UK Borrowing Base from time to time, Eligible UK Accounts ant Eligible UK Inventory of the UK Borrower shall be determined from time to time by the Agent by reference to the UK Borrowing Base Certificate then most recently delivered to it; provided that the information contained in UK Borrowing Base Certificate shall not be conclusive in calculating the amount of Eligible UK Accounts and Eligible UK Inventory and, after consultation with the Company, the Agent shall be entitled to adjust the amounts and other information contained therein and/or the advance rates set forth above to the extent that it believes in its reasonable credit judgment that such adjustment is appropriate to reflect (x) the then current amounts of Eligible UK Inventory and Eligible UK Accounts or (y) changes in the business practices of the UK Borrower (or newly disclosed matters with respect to it). 3. Amendment of Subsection 10.7. Subsection 10.7 of the Credit Agreement hereby is amended by inserting therein as a new clause (d} thereof the following: (d) The Company agrees to pay to the Agent for the account of each Lender, an overadvance fee for each day upon which there is any Seasonal Overadvance Utilization in effect in the amount equal to 1/4 of 1% per annum on the then outstanding amount of such Lender's Domestic Revolving Credit Exposure, UK Revolving Credit Exposure, Domestic Terms Loans and UK Term Loans. Such overadvance fee shall be payable quarterly, in arrears on the last day of each March, June, September and December to occur after the date of the occurrence of any Seasonal Overadvance Utilization. Such overadvance fee shall be payable for the period from April 1, 1998 until June 30, 1999. 4. Amendment of Subsection 11.21. Subsection 11.21 of the Credit Agreement hereby is amended by inserting therein as new clause (d) thereof the following: (f) Each Lock-Box Agreement is effective to create in favor of the Agent, for the ratable benefit of the Agent and the Lenders, a perfected first Lien on, and security interest in, all right, title and interest of the Company or its Subsidiary (as the case may be) party thereto in the proceeds of accounts receivable and in all other monies received in any lock box established pursuant to any Lock Box Agreement. The Company and each of its Subsidiaries has notified the account debtors in respect of each Account to make all payments in respect of such Accounts through the lock boxes established pursuant to the Lock Box Agreement. Notwithstanding the foregoing, the representations and warranties contained in this subsection 11.21(d) shall be made by the Company only from and after March 31, 1998. 5. Amendment of Section 10. Section 10 of the Credit Agreement hereby is amended by inserting therein as new subsection 10.15 thereof the following: 10.15 Lock Box Accounts. Any amounts received from time to time in the Lock Box Account (as defined in the Lock Box Agreements) or otherwise paid in accordance with the requirements of subsection 14.21 shall be applied: (a) in the case of amounts owing to the Company and its Domestic Subsidiaries, to repay, first, any then outstanding Domestic Swing Line Loans, second , any then outstanding Domestic Revolving Credit Loans, third, to cash collateralize any then outstanding Domestic Letters of Credit and, fourth, to prepay any then outstanding Domestic Term Loans; and (b) in the case of other amounts, to repay, first, any then outstanding UK Swing Line Loans, second, any then outstanding UK Revolving Credit Loans and, third, to cash collateralize any then outstanding UK Letters of Credit. The Company hereby acknowledges and agrees that all fees and expenses incurred by the Agent, any Lender or the Company with regard to a Lock Box Agreement, the lock boxes established pursuant thereto and any concentration accounts established in connection therewith shall be the obligation of the Company. 6. Amendment of Subsection 13.4. Subsection 13.4 of the Credit Agreement hereby is amended by: (a) deleting from clause (e) thereof the phrase "concurrently with any delivery of any such financial statements" and by substituting therefor the phrase "concurrently with any delivery of any such financial statements contemplated by clauses (a) through (d) hereof"; and (b) deleting therefrom in its entirety clause (j) thereof and substituting therefor the following: (j) on each "delivery date" for the relevant "reporting date," deliver to the Administrative Agent for each of a Domestic Borrowing Base Certificate and a UK Borrowing Base Certificate (and any applicable supporting documentation described in Schedule XIV) setting forth the Domestic Borrowing Base or the UK Borrowing Base, as the case may be, as of the relevant reporting date, duly completed and signed by a Responsible Officer of the Company (in his or her capacity as such); for purposes of this clause (j), the term: (x) "reporting date" shall mean each of (I) the last day of each calendar month, (ii) the fifteenth day of each of each calendar month during the period from September of 1998 through January 1999, (iii) the fifteenth day of each calendar month during the period from September 1999 through January 2000 and (iv) any other time when the Agent notifies the Company that it reasonably believes that the then existing Domestic Borrowing Base or UK Borrowing Base (as the case may be) is materially inaccurate; and (y) "delivery date" shall mean fifteen days after the corresponding reporting date (or, to the extent that the relevant Borrowing Base Certificate is being delivered pursuant to clause (x)(iii) above, ten days after the date upon which the notice described therein is delivered); ; provided that, for purposes of completing any Borrowing Base Certificates delivered pursuant to clause (x)(ii) or (xx)(iii) above. the relevant Borrowing Base shall be calculated based upon a reasonable, good faith estimate by the Company of its Eligible Domestic Inventory and Eligible Domestic Accounts or the UK Borrower of its Eligible UK Inventory and Eligible UK Accounts (as the case may be) on the relevant reporting date; (c) inserting therein as new clauses (m) and (n) the following: (m) as soon as available. and in any event not later than 30 days after the end of each month occurring during each fiscal year (other than the third, sixth, ninth and twelfth such month) the unaudited consolidated balance sheets of the Company and its consolidated Subsidiaries as at the end of such month and the related unaudited consolidated statements of income and of cash flows for such month and the portion of the fiscal year through the end of such month, setting forth in each case in comparative form the figures for the previous year, accompanied by a certificate of a Responsible Officer certifying that (I) such financial statements are fairly stated in all material respects (subject to normal year-end audit adjustments) and (ii) such Responsible Officer has no actual knowledge of the occurrence of any Event of Default or Default, or if s/he has knowledge of any Event of Default or Default, specifying the nature and extent thereof any corrective action taken or proposed to be taken with respect thereto; and (n) as soon as available, and in any event not later than 30 days after the end of each month occurring during each fiscal year (other than the third, sixth, ninth and twelfth such month), the unaudited consolidated balance sheets of the UK Borrower and its consolidated Subsidiaries as at the end of such month and the related unaudited consolidated shots of income and of cash flows for such month and the portion of the fiscal year through the end of such month, setting forth in each case in comparative form the figures for the previous year, accompanied by a certificate of a Responsible Officer certifying that (I) such financial statements are fairly stated in all material respects (subject to normal year-end audit adjustments) and (ii) such Responsible Officer has no actual knowledge of the occurrence of any Event of Default or Default or, if s/he has knowledge of any Event of Default or Default, specifying the nature and extent thereof and any corrective action taken or proposed to be taken with respect thereto. 7. Amendment of Subsection 14.12. Subsection 14. 12 of the Credit Agreement hereby is amended by deleting therefrom clause (b) and by substituting therefor the following: (b) not more than $1,500,000 of such Capital Lease Obligations at any one time outstanding shall, at the time of its incurrence, have an average life to maturity which is shorter than the average life to maturity of the Domestic Term Loans outstanding at such time and 8. Amendment of Subsection 14.14. Subsection 14.14 of the Credit Agreement is amended by deleting therefrom the dates set forth under the heading "Period" and the ratios set forth under the heading "Ratio" contained therein and by substituting therefor the following: Period Ratio 03/31/99 - 06/30/99 1.00 to 1.0 07/01/99 - thereafter 1.05 to 1.0 9. Amendment of Subsection 14.15. Subsection 14.15 of the Credit Agreement hereby is amended by deleting therefrom the dates set forth under the heading "Period" and the ratios set forth under the heading "Ratios" contained therein and by substituting therefor the following: Period Ratio Closing Date - 12/31/98 1.00 to 1.0 01/01/99 - 06/30/00 1.60 to 1.0 07/01/00 - 06/30/01 1.70 to 1.0 07/01/01 - 12/31/01 1.80 to 1.0 01/01/02 - thereafter 2.00 to 1.0 10. Amendment of Subsection 14.16(a). Subsection 14.16(a) of the Credit Agreement hereby is amended by deleting therefrom the dates set form under the heading "Period" and the ratios set forth under the heading "Ratio" contained therein and by substituting therefor the following: Period Ratio 01/01/99 - 06/30/99 5.5 to 1.0 07/01/99 - 0630/00 5.0 to 1.0 07/01/00 - 06/30/01 4.5 to 1.0 07/01/01 - thereafter 4.0 to 1.0 11. Amendment of Section 14. Section 14 of the Credit Agreement hereby is amended by inserting therein as new subsections 14.16(b), 14.21 and 14.22 the following: 14.16(b) Senior Leverage Ratio. Permit the Senior Leverage Ratio for the period of four consecutive fiscal quarters ending on the last day of any fiscal quarter ending during any period set forth below (commencing with the period ending March 31, 1998) to be in excess of the ratio set for opposite such period: Period Ratio 01/01/98 - 03/31/98 2.8 to 1.0 04/01/98 - 09/30/98 2.9 to 1.0 10/01/98 - 06/30/99 3.2 to 1.0 14.21 Payments in Respect of Account. The Company shall not, nor shall it permit any of its Subsidiaries organized under the laws of the United States or the United Kingdom to, instruct or otherwise permit any Person obligated under any of the Accounts (as defined in the Security Agreements) to remit any payment (whether by check, wire transfer or otherwise) to any account other than a Lock Box Account (as defined in the Lock Box Agreement) established by the Agent pursuant to a Lock Box Agreement, other than, in the case of amounts owed to the UK Borrower and its Subsidiaries, payments which are made through an alternate means which (in the reasonable judgement of the Agent) (a) enables the Agent to maintain a perfected, first priority security interest in such payments and the proceeds thereof and (b) provides for the application of such proceeds in the same manner as payments deposited in a Lock BOX Account. The Company hereby agrees that it shall not, and shall not permit any of its Subsidiaries to, cause or permit any amounts which are not Collateral to be deposited in the Lock Box Account (as defined in the Lock Box Agreement). 14.22 Bank Accounts. The Company shall not nor shall it permit any of its Subsidiaries to, establish or maintain, or permit to be established or maintained, any bank accounts in the name of, or for the benefit of, the Company or any of its Domestic Subsidiaries, other than (x) bank accounts establishes or maintained with a Bank, (y) other bank accounts containing operating funds required to cover substantially immediate payment obligations (including, without limitation, payroll obligations) and (z) other operating bank accounts which are debited on a daily basis so that they do not contain any material overnight deposits. 12. Amendment of Exhibits. The Credit Agreement hereby is amended by inserting therein as new Exhibit G thereof the form of Lock Box Agreement which is attached hereto as Exhibit A. 13. Acknowledgment. The Company hereby acknowledges and agrees that, without limiting the provisions of subsection 13.7(b) of the Credit Agreement: (a) the Agent intends to conduct (or to cause to be conducted) an audit and/or collateral examination of the Accounts and Inventory of the Company and its Subsidiaries, and of the Domestic Borrowing Base and UK Borrowing Base, not less frequently than twice per annum; and (b) the Agent intends to conduct (or to cause to be conduced) an appraisal of the inventory of the Company and its Domestic Subsidiaries [and of the UK Borrower and its Subsidiaries] The Company hereby (x) covenants and agrees to cooperate, and to cause its Subsidiaries to cooperate, fully with the Agent and its agents in the conduct of such audits, collateral examinations and appraisals and (y) acknowledges and agrees that the reasonable costs and expenses of the Agent and its agents in connection with such audits, collateral examinations and appraisals shall be for the account of the Company. 14. Conditions to Effectiveness. This Amendment shall become effective on the date upon which the Agent receives (a) counterparts hereof, executed and delivered by a duly authorized officer of each Borrower and the Required Lenders and (b) an amendment fee, for ratable account of the Lenders which execute and deliver this Amendment on or prior to March 20, 1998, in the amount equal to 1/4 of 1% of the amount of the Domestic Revolving Credit Commitments then then in effect, the UK Revolving Credit Commitments then in effect and the aggregate then outstanding principal amount of the Domestic Term Loans and the UK Term Loans. 15. Representations and Warranties. The Borrowers hereby confirm, reaffirm and restate the representations and warranties set forth in Section 6 of the Credit Agreement; provided that each reference to the Credit Agreement therein shall be deemed to be a reference to the Credit Agreement giving effect to this Amendment. The Borrowers represent and warrant that no Default or Event of Default has occurred and is continuing. 16. Continuing Effect of Credit Agreement. This Amendment shall not constitute a waiver or amendment of any other provision of the Credit Agreement not expressly referred to herein and shall not be construed as a waiver or consent to any further or future action on the part of a Borrower that would require a waiver or consent of the Agent or the Lenders. Except as expressly amended hereby, the provisions of the Credit Agreement are and shall remain in full force and effect. 17. Counterparts. This Amendment may be executed by the parties hereto in any number of counterparts, and all of such counterparts taken together shall be deemed to constitute one and the same instrument. 18. GOVERNING LAW. THIS AMENDMENT SHALL BE GOVERNED BY, AND CONSTRUED AND INTERPRETED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be executed and delivered by their respective duly authorized offices as of the date first above written. REMINGTON PRODUCTS COMPANY, L.L.C. /s/ By:----------------------------- Title: REMINGTON CONSUMER PRODUCTS LIMITED /s/ By:----------------------------- Title THE CHASE MANHATTAN BANK, as Administrative Agent, as a Lender and as (or on behalf of) the Issuing Bank. /s/ By: ---------------------------- Title: BANQUE NATIONALE DE PARIS, as a Co- Documentation Agent and as a Lender /s/ By:------------------------------ Title: FLEET NATIONAL BANK, as a Co- Documentation Agent and as a Lender /s/ By:----------------------------- Title: CORESTATES BANK, N.A. /s/ By:---------------------------- Title: THE FIRST NATIONAL BANK OF BOSTON /s/ By:---------------------------- Title: FIRST UNION BANK OF CONNECTICUT By:----------------------------- Title: HELLER FINANCIAL, INC. /s/ By:----------------------------- Title: PEOPLE'S BANK /s/ By:----------------------------- Title: PNC BANK, NATIONAL ASSOCIATION /s/ By:------------------------------- Title: THE PROVIDENT BANK /s/ By:------------------------------ Title: EXHIBIT A to FOURTH AMENDMENT EXHIBIT G to Credit Agreement FORM OF LOCK BOX AGREEMENT LOCK BOX AGREEMENT, dated as of March _, 1998, among [ ], as lock box bank (in such capacity, the "Lock Box Bank"), [______________} (the "Grantor") and THE CHASE MANHATTAN BANK, as administrative agent (in such capacity, the "Agent) pursuant to the Credit and Guarantee Agreement, dated as of May 23, 1996 (as amended, supplemented or otherwise modified from time to time, the "Credit Agreement), among the Borrowers named therein, the banks and other financial institutions parties thereto (the "Lenders"), the Co-documentation Agents named therein and the Agent. For good and valid consideration, the receipt of which hereby is acknowledged, the parties hereto hereby agree as follows: 1. (a) The Lock Box Bank has rented Post Office Box [ ] (the "Post Office Box) into which the Grantor has directed and shalt direct debtors in respect of the Accounts (as defined in the Security Agreement) to mail payments in respect of the Accounts (unless such debtors are to make payment directly into the Lock Box Account described below or into the relevant concentration account described in paragraph 4 below by wire transfer of immediately available fiends). The Lock Box Bank shall instruct the Agent and the Grantor how mail intended for the Lock Box Account should be addressed. The Lock Box Bank shall have exclusive access to the Post Office Box ant shall collect the mail delivered to such Post Office Box (even though addressed to the Grantor or to the Agent) on each business day in accordance with the Lock Box Banks regular collection schedule. For hereof, the term "Security Agreement" shall mean the Security Agreement dated as of May 23, 1996, made by the Grantor in favor of the Agent, as the same may be amended, supplemented or otherwise modified from time to time. (b) The Lock Box Bank has opened a bank account in the name of the Grantor entitled the "Remington Products Company LLC Lock Box Account for the benefit of The Chase Manhattan Bank, as Agent" (Account No._____________) (the "Lock Box Account") Nothing shall be deposited in the Lock Box Account other than amounts constituting proceeds of Collateral (as defined in the Security Agreement) in which the Agent has a security interest pursuant to the Security Agreement. (c) The Grantor hereby grants to the Agent a first priority security interest in all items received in the Post Office Box and in all amounts on deposit in the Lock Box Account. The Grantor and the Lock Box Bank hereby acknowledge and agree that the Lock Box Bank holds all amounts on deposit in the Lock Box Account, and constitutes a bailee in possession thereof, for the benefit of the Agent. 2.(a) The Lock Box Bank shall have unrestricted and exclusive access to the Post Office Box for the purpose of collecting mail for delivery and deposit into the Lock Box Account. The Lock Box Bank shall remove the contents of the Post Office Box periodically (and, in any event on each Business Day) in accordance with the Lock Box Bank's schedule of calls to this postal station. (b) The Lock Box Account shall be under the sole dominion and control of the Agent, which shall be exercised in accordance with this Lock Box Agreement. Neither the Grantor nor any other Personal claiming by, through or under the Grantor shall have any control over the use of, or any right to withdraw any amount from, the Lock Box Account, provided that the Lock Box Bank shall withdraw funds from the Lock Box Account and make such funds available to the Agent as provided in this Lock Box Agreement. The Lock Box Bank shall be entitled to rely on, and shall act in accordance with, all instructions given to it by the Agent with respect to the Lock Box Account, which instructions the Agent will give only in accordance wit this Lock Box Agreement. (c) Except as expressly set forth herein, and without in any way derogating from the Agent's sole dominion and control of the Lock Box Account, the Grantor has the right to instruct the Lock Box Bank with respect to matters (other than with respect to the matters set forth in the next succeeding sentence) relating to the operation and administration of the Lock Box Account; provided that upon the occurrence and during the continuance of any Event of Default (as defined in the Credit Agreement) the Agent shall have the right to notify the Lock Box Bank that an Event of Default has occurred, in which case the Agent shall thereafter have the exclusive right to so instruct the Lock Box Bank unless the Agent notifies the Lock Box Bank to the contrary. Such matters with respect to which the Grantor has the exclusive right shall not include matters relating to the collection of nay items in (or to the credit of) the Lock Box Account and the withdrawal and use of proceeds thereof. The Lock Box Bank may rely on all instructions given by the Grantor in accordance with this paragraph 2(c) as fully as if such instructions were given by the Agent. 3(a) The contents of the mail colleted from the Post Office Box, whether consisting of cash, checks, notes, drafts, bills of exchange, money orders, commercial paper or other item of payment, shall be promptly deposited by the Lock Box Bank into the Lock Box Account in accordance with the terms of this Lock Box Agreement. The Lock Box Bank shall endorse all checks which appear to be in order for deposit into the Lock Box Account and shall process each item under the same terms and conditions as would apply if the Agent or the Grantor had made the deposit directly. In endorsing the checks, the Lock Box Bank may use the payee endorsement stamp. (b) The Lock Box Bank shall make a photocopy of each check, draft, note, bill of exchange, money order, commercial paper or other item of payment (collectively, the "checks") deposited into the Lock Box Account, with the date of deposit to be shown on the right-hand side and bottom edges. Promptly after receipt thereof, such photocopies, together with (I) all attachments received with payments, such as detachable stubs, (ii) any correspondence and the individual envelope and (iii) all other materials rejected for various reasons shall be sent by the Lock Box Bank to the Grantor or , at any time after written notice by the Agent (which the Agent agrees only to give after the occurrence and during the continuance of an Event of Default, as defined in the Agreement), to the Agent; provided that the Lock Box Bank shall send copies thereof to the Agent from time to time upon its request. Checks returned unpaid because of uncollected or insufficient Funds shall be redeposited without advice. Checks returned a second time shall be charged to the Lock Box Account and mailed under appropriate advice to the Grantor or, at any time after written notice by the Agent (which the Agent agrees only to give after the occurrence and during the continuance of an Event of Default, as defined in the Credit Agreement), to the Agent. (c) The Lock Box Bank shall process in accordance with its usual operating procedure all checks postdated up to seven days, and shall forward to the Grantor for, upon a notice given in accordance with the penultimate sentence of this paragraph, to the Agent) all checks postdated eight days or more. Undated checks may be dated by the Lock Box Bank to agree with the postmark date and included in the regular deposit. Checks incorrectly made out, where fill and amount differ, are to be deposited for the written amount only. Checks bearing no signature are to be returned with daily lock box detail. Third-party checks may be deposited into the Lock Box Account if properly endorsed. Checks bearing the legend "Payment in Full" or words of similar import, either typed or handwritten, shall be withheld from the clearing system and sent to the Grantor or, at any time after written notice by the Agent (which the Agent agrees only to give after the occurrence and during the continuance of an Event of Default, as defined in the Credit Agreement), to the Agent. Should such an item be cleared, the Agent and the Grantor hereby agree that no liability shall accrue to the Lock Box as a result of such actions. (d) The Lock Box Bank shall maintain a microfilm record of each check included in the Lock Box Account. This film shall be available for use by the Agent, the Grantor or any Lender. (e) The Lock Box Bank shall exercise due diligence in examining all checks which are received and processed under this Agreement 4. (a) On each day as which both the branch office of the Lock Box Bank at which the Lock Box Account is being maintained the offices of the Agent located in New York City are open, the Lock Box Bank shall transfer (by wire transfer of immediately available funds) all collected funds on deposit in the Lock Box Account to the concentration account or accounts from time to time notified to the Lock Box Bank by the Agent. (b) Upon the request of the Agent at any time and from time to time, the Lock Box Bank will notify the Agent (at __________________ or at such other telephone number which the Agent may from time to time designated) of the amounts deposited in the Lock Box Account on such day and of the amounts transferred to the Agent in accordance with the provisions of this Section 4. 5. The Lock Box Bank waives, with respect to all of its existing and future claims against the Grantor or any affiliate thereof, all existing and future rights of set-off and banker's liens again the Lock Box Accounts and all items (and proceeds thereof) that come into its possession in connection with the Lock Box Account, provided that the Lock Box Bank retains the right to charge any Lock Box Account (a) for all items deposited in such Lock Box Account after the date hereof and subsequently returned to the Lock Box Bank unpaid and (b) for all compensation and expense with respect to the Lock Box Account. 6. (a) This Lock Box Agreement is to become effective as of the date hereof, and the Lock Box Bank shall be in a position to process remittances on test date. (b) This Lock Box Agreement may be terminated by any party upon 30 days' written notice to the other parties hereto. In the event that such notice is given by any party, the Grantor shall, with the consent of the Agent (which consent shall not be unreasonably withheld) designate an alternate lock box bank; provided, however, that if the Grantor and the Agent are unable to agree upon an alternate lock box bank prior to the termination date, the Agent may designate any of the Lenders willing to serve as an alternate lock box bank as such alternative lock box bank and such designation shall be to be acceptable to the Grantor. Upon termination of this Agreement, the Lock Box Bank shall, at the direction of the Agent, deliver all checks and other funds received by it to ( I) a lock box account governed by a Lock Box Agreement (as defined in the Credit Agreement) maintained by the institution selected or deemed to be selected by the Grantor and the Agent or (ii) one or more concentration accounts maintained by the Agent. Until such checks and funds are so delivered, the Lock Box Bank shall hold such checks and funds for the benefit of the Agent, which shall have exclusive dominion and control over them. 7. The Grantor shall pay or reimburse the Lock Box Bank for its reasonable and customary fees and its costs and expenses as Lock Box Bank as shall be mutually agreed upon by the Grantor and the Lock Box Bank from time to time. 8. (a) The Grantor agrees to pay, indemnify and hold the Lock Box Bank harmless from any and any all liabilities, obligations, losses, damages. penalties. actions, judgments, suits, costs, expenses or disbursements of any kind or nature whatsoever (including, without limitation, reasonable legal fees, but not including income taxes) with respect to the performance of this Lock Box Agreement in accordance with its terms by the Lock Box Bank's directors, officers, agents or employees, unless arising from its or their own gross negligence or willful misconduct. (b) The Lock Box Bank undertakes to perform only such duties as are expressly set forth herein. Notwithstanding any other provision of this Lock Box Agreement, it is agreed by the parties hereto that the Lock Box Bank shall not be liable for any action taken by it or any of its directors, officers, agents or employees in accordance with this Lock Box Agreement, except for its or their own gross negligence or willful misconduct. In no event shall the Lock Box Bank: be liable for losses or delays resulting from forces majeure, computer malfunctions, interruption of communications facilities, labor difficulties or other causes beyond the Lock Box Bank's reasonable control or for indirect, special consequential damages. 9. All notices, requests and demands to or upon the respective parties hereto to be effective shall be in writing (including telegraph, telecopy or telex) and shall be deemed to have been duly given or made when delivered by hand, or five days after being deposited in the United States mail, postage prepaid, or, in the case of telegraphic notice, when delivered to the telegraph company, or, in the case of telex notice, when sent, addressed as set forth below under the signature of such party, or to such other address as may be hereafter notified by the respective parties thereto. 10. THIS LOCK BOX AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED AND INTERPRETED IN ACCORDANCE WITH THE LAW OF THE STATE OF NEW YORK. IN WITNESS WHEREOF, the partied hereto have caused this Lock Box Agreement to be duly executed and deliverer by their respective officers thereunto duly authorized as of the date first above written. [ ], as Lock Bank By: ------------------------------ Title Address: --------------------------------- --------------------------------- Attention:------------------------ Telecopy: ------------------------ THE CHASE MANHATTAN BANK, as Agent By: ------------------------------- Title Address: ----------------------------------- ------------------------------------- Attention: --------------------------- Telecopy: ---------------------------- [NAME OF GRANTOR] By:---------------------------------- Title Address: ------------------------------------ ------------------------------------ Attention:-------------------------- Telecopy:--------------------------- EX-10.24 3 FORM OF SEVERANCE AGREEMENT Exhibit 10.24 SEVERANCE AGREEMENT Agreement ("Agreement") between Remington Products Company, L.L.C. ("Remington") and _________________ ("Employee"). 1. Remington agrees that in the event of any involuntary termination of Employee's employment (other than for Cause or Disability) on or before July 31, 1998, and subject to the Employee's compliance with the terms of this Agreement and signing the Release attached hereto as Exhibit A (the "Release"), Remington agrees to continue to pay Employee his then annual base salary for a period of 6 months after the effective date of the termination of Employee's employment (the "Salary Continuation Period"). Remington also agrees that during the Salary Continuation Period, it will continue to provide Employee the medical benefits he was entitled to on the date hereof (hereinafter "Health Benefits") and to the extent Remington's insurance plans permit, the long-term disability and life insurance benefits Employee was entitled to on the date hereof (hereinafter "Insured Benefits"); provided, however, that the continued provision of the Health Benefits and the Insured Benefits will cease when Employee becomes employed and such new employer provides Employee medical benefits substantially similar to the Health Benefits. Any sums due pursuant to the provisions of this Section 1 shall be reduced (a) by any sums payable to Employee pursuant to any severance or termination pay program maintained by the Company for employees generally and (b) 75% of any compensation earned by Employee during the Salary Continuation Period. 2. For purposes of this Agreement, the following definitions shall apply: a. "Cause" shall mean a termination of the employment of Employee by the Company or any subsidiary thereof due to (i) the commission by Employee 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), (ii) the commission by Employee of a felony, (iii) the willful misconduct of Employee as an employee of the Company or any of its subsidiaries which is reasonably likely to result in injury or financial loss to the Company or any of its subsidiaries or (iv) the willful failure of Employee to render services to the Company or any of its subsidiaries in accordance with the terms of Employee's employment which failure amounts to a material neglect of Executive's duties to the Company or any of its subsidiaries. b. "Disability" shall mean the inability of Employee to perform the essential functions of Employee'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 Employee returns to work for at least 30 consecutive business days during such period and performs 1 during such period services at the level and competence that were performed prior to the beginning of the six-month period. 3. Employee agrees that during the Salary Continuation Period, he will not, without Remington's consent, directly or indirectly: a. Own, manage, participate in, consult with, render services for, or in any manner engage in any business that competes anywhere in the United States with the business of Remington or its subsidiaries as businesses exist or are in the process on the date of Employee's termination of employment; or b. Induce or attempt to induce any employee of Remington or its subsidiaries to leave the employ of Remington or such subsidiary, or in any way interfere with the relationship between Remington or its subsidiaries and any employee thereof c. Hire any person who was employed by Remington or its subsidiaries as of the date of Employee's termination of employment or during the Salary Continuation Period; or d. Induce or attempt to induce any customer, supplier, licensee or other business relation of Remington or its subsidiaries to cease doing business with Remington or its subsidiaries or in any way interfere with the relationship between any such customer, supplier, licensee or business relation and Remington or its subsidiaries. 4. Employee acknowledges that the information, observations and data obtained by him while employed by Remington concerning the business or affairs of Remington and its subsidiaries that (i) are not available to the public, customers, suppliers and competitors of Remington (ii) are in the nature of trade secrets, or (iii) the disclosure of which could reasonably be expected to cause a financial loss to Remington, or otherwise have a material adverse effect on Remington (collectively, the "Confidential Information") are the property of Remington or such subsidiary. Therefore, Employee 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 Remington, 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 Employee's acts or omissions to act. 5. Employee agrees that he will, after termination of employment, promptly return to Remington any property in his possession, custody or control that belongs to Remington or any of its subsidiaries (such property includes, without limitation, equipment, credit cards, keys, files, 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 Remington or any of its subsidiaries). 2 6. Employee agrees that if: (A) any provision of this Agreement or the Release is declared illegal or unenforceable by any court competent jurisdiction as the result of efforts by the Employee, or any person or entity acting on his behalf; or (B) Employee brings a claim against any of the Released Entities (as such term is defined in the Release), or any of their partners, members, management committee members, officers, employees or agents, Employee will return to Remington all consideration that he has received pursuant to this Agreement. In the event that Employee fails to return any consideration under such circumstances, Employee will pay Remington the attorneys fees and other expenses incurred by Remington in recovering such consideration, and in otherwise enforcing the terms of this Agreement. 7. Employee understands and agrees that in the event he breaches the provisions of paragraph 3, Remington shall have the right to immediately cease all further Salary Continuation payments. 8. This Agreement contains the entire agreement between Remington and Employee relating to subject matter hereof. ----------------------------------------- Employee Signature Date REMINGTON PRODUCTS COMPANY, L.L.C. By: ---------------------------------- Date: 3 Exhibit A to Severance Agreement RELEASE 1. As consideration for Employee's agreement to be bound by the terms of the Severance Agreement, and provided that Employee does not revoke this Release, Remington agrees to make the payments as provided in the Severance Agreement between Remington and Employee to which this Release is attached as Exhibit A. 2. Employee agrees that neither he nor his heirs, executors, administrators or assigns will make, bring or file, or cause to be made, brought or filed against Remington or any parent, subsidiary, or affiliated corporation or entity (herein after Remington and such other corporations and entities will be collectively referred to as the "Released Entities"), or any of the Released Entities current or former partners, members, management committee members, officers, employees or agents, any demand, complaint, cause of action, claim or charge of any kind whatsoever as a result of any act that has heretofore occurred. 3. Without in any way limiting the scope and effect of Paragraph 2: A. Employee represents that he is able to read the language, and understand the meaning and effect of this Release. B. Employee acknowledges that among the rights knowingly and voluntarily waived in Paragraph 2 are the rights to bring any demands, complaints, causes of action, claims, and charges under the Age Discrimination in Employment Act, and under any other federal, state or local law, regulation or decision, including without limitation laws that prohibit discrimination in employment on the basis of age, race, color, religion, sex, national origin, ancestry, marital status, sexual orientation and physical or mental disability. C. Employee understands that the waiver contained in Paragraph 2 includes a waiver of all demands, complaints, causes of action, claims and charges against the Released Entities and their current and former partners, members, management committee members, officers, employees and agents, whether known or unknown, asserted or unasserted, suspected or unsuspected, which Employee may have as a result of any act that has heretofore occurred. D. Employee acknowledges that he would not otherwise be entitled to the consideration described in the Severance Agreement, and that Remington is providing such consideration in return for Employee's Agreement to be bound by the terms of this Release. 4 E. Employee acknowledges that he has been advised to consult with an attorney regarding this Release. F. Employee acknowledges that he was first provided with this Release on _____________ and has been given until ______________ to consider its terms; therefore, Employee has been given at least twenty-one days to consider the terms of this Release and understands that this Release will not become effective or enforceable until the 8th day following its execution. An Employee may revoke this Release during the first seven (7) days following its execution. ----------------------------------------- Employee Signature Date 5 EX-10.25 4 TIME BASED PHANTOM EQUITY AGREEMENT Exhibit 10.25 TIME BASED PHANTOM EQUITY AGREEMENT TIME BASED PHANTOM EQUITY AGREEMENT (this "Agreement") is made as of _______________ 1998, by and between Remington Products Company, L.L.C., a Delaware limited liability company (the "Company"), and _________________ ("Executive"). WHEREAS, on the terms and subject to the conditions hereof, the Company desires to grant Executive certain rights in any increase in the value of the equity of the Company under certain events. 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. For the purposes of this Agreement, the following terms shall have the meanings set forth below: 1.1 "Agreement": the meaning set forth in the preface. 1.2 "Applicable Percentage": the percentage set forth in Schedule A attached hereto; provided, that such percentage may be adjusted, from time to time, by the Management Committee pursuant to Section 12.2 herein. . 1.3 "Cause": termination of the employment of Executive by the Company or any subsidiary thereof due to (a) 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), (b) the commission by Executive of a felony, (c) 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 (d) 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. In the event Executive terminates his employment and at such time Executive was under active investigation by the Company or any of its subsidiaries for possible termination for Cause and thereafter the Company makes a good faith determination that sufficient facts existed to support Executive's termination for Cause or, within 45 days following such resignation, the Company or any of its subsidiaries obtains information which, if known prior to Executive's resignation, would have permitted the Company to terminate Executive for Cause, the Executive shall be deemed 1 terminated for Cause for all purposes of this Agreement notwithstanding the fact that Executive had resigned. 1.4 "Common Units": the common units of the Company or the common stock of a corporation that is the successor of the Company. 1.5 "Company": the meaning set forth in the preface. 1.6 "Company Sale": the meaning set forth in the Limited Liability Company Agreement. Under no circumstances that a Company Sale be deemed to include liquidation or bankruptcy of the Company. 1.7 "Disability": 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 date of the termination of Employment in the event of such Disability) shall be on the first day of such six-month period. 1.8 "Employee": 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 1.9 "Equity": the Common Units and Preferred Capital 1.10 "Fair Market Value": 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, plus in each case the value of the outstanding Preferred Capital, if any, determined in good faith by the Management Committee. 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 2 of the Equity determined in good faith by the Management Committee taking into consideration the current, historical and projected EBITDA of the Company and recognizing that control of the Company is not being sold at such time. 1.11 "Financing Default": 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: (a) the Credit and Guarantee Agreement and Indenture (collectively, the "Senior Financing Agreements") dated as of May 23, 1996, as amended, 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; (b) any provision of the Limited Liability Company Agreement or the certificate of incorporation or limited liability company agreement of any of its subsidiaries, as the case may be, as in effect on the Grant Date and (c) any of the securities issued pursuant to or whose terms are governed by the terms of any of the agreements set forth in clauses (a) and (b) above, and any extensions, renewals, refinancings or refundings thereof in whole or in part 1.12 "Fully Diluted Basis": assumes all outstanding options, warrants and other rights to receive Common Units are fully vested and have been exercised, excluding any Phantom Equity Payment (as defined in Section 3) hereunder. 1.13 "Grant Date": ___________. 1.14 "IPO" : 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. 1.15 " IPO Exit Transaction" means the first date after the consummation of an IPO on which Vestar Equity Partners, L.P., a Delaware limited partnership and its affiliates (not including employees of the general partner of Vestar) own less than 10% of the Common Units. 1.16 "Limited Liability Company Agreement" : 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, 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. 1.17 "Management Committee": the Company's Management Committee or any board of directors or similar governing body of a successor to the Company. 1.18 "Payment Date" : the date that is no later than the 60th day after the occurrence of the Payment Event. 3 1.19 "Payment Event" : the occurrence of any of the following (a) a Company Sale, (b) an IPO (c) termination of Executive's Employment because of death or Disability, or (d) at the Company's option, termination of Executive's Employment for any reason other than death or Disability. 1.20 "Phantom Equity Payment": the meaning set forth in Section 3 below. 1.21 "Preferred Capital": the preferred capital of the Company or the preferred stock of a corporation that is the successor of the Company. 1.22 "Residual Equity Value": (a) in the case of a Company Sale, the aggregate net amount (including cash, non-cash and any deferred payout amounts) available for distribution to the issued and outstanding Equity (on a Fully Diluted Basis), after the payment of all fees and expenses of the Company incurred in connection with such sale, (b) in the case of an IPO, the valuation of the Company's Equity implied in the public offering, after giving effect to the shares issued in such IPO, and (c) in the case of a termination of Employment, Fair Market Value of the issued and outstanding Equity (on a Fully Diluted Basis) as of the last day of the last fiscal quarter ending immediately prior to the occurrence of such termination of Employment. 1.23 "Securityholders Agreement": the Securityholders Agreement dated as of May 16, 1996 among Shaver, Razor, Vestar Equity Partners L.P., Victor K. Kiam, II and other equity holders of the Company. 1.24 "Vested Percentage" 100% upon the occurrence of an IPO, a Company Sale and immediately prior to any reorganization of the Company from a limited liability company to a corporation which is necessitated by an IPO or a Company Sale; provided, that if the proposed IPO or Company Sale is not consummated after a reorganization, the Vested Percentage shall automatically revert to zero. 2 Confirmation of Grant, Phantom Equity Payment. 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 right to receive the Phantom Equity Payment. Upon the occurrence of a Payment Event resulting from a Company Sale or IPO, Executive shall be entitled to receive an amount equal to the Vested Percentage of the Applicable Percentage of the Residual Equity Value (the "Phantom Equity Payment"). 2.1 Company Sale. If the Payment Event is a Company Sale, at the Company's option: (a) on the Payment Date, the Company shall pay the Phantom Equity Payment first by the cancellation of indebtedness, if any, owing from Executive to the Company or any of its subsidiaries and the remainder by the Company's delivery of a check or wire transfer of immediately available funds for the remainder of the Phantom Equity Payment, if any; or 4 (b) immediately prior to the closing of the Company Sale, the Company shall convert the Applicable Percentage into an identical percentage of the issued and outstanding Equity (on a Fully Diluted Basis) and issue to Executive certificates for the appropriate number of Common Units and Preferred Capital of the Company, in full satisfaction of the Phantom Equity Payment due Executive hereunder; provided, that if the Company Sale is structured to include non-cash consideration, the Company shall assure that the Executive receives such portion of the Phantom Equity Payment in cash and the balance in Common Units and Preferred Capital of the Company in order to provide Executive with sufficient funds to pay any Federal and state income taxes that will result from the receipt of the Phantom Equity Payment. In the event Executive fails or refuses to comply, if required, with the provisions of Section 5, or to execute the Limited Liability Company Agreement and Securityholders Agreement, the obligation of the Company to make any Phantom Equity Payment to Executive under this Agreement shall immediately cease. 2.2 IPO If the Payment Event is an IPO, on the Payment Date, the Company shall pay the Phantom Equity Payment first by the cancellation of indebtedness, if any, owing from Executive to the Company or any of its subsidiaries and the remainder, at the Company's option: (a) by the Company's delivery of a check or wire transfer of immediately available funds for the remainder of the Phantom Equity Payment, if any, or (b) by the Company's delivery of a check or wire transfer of immediately available funds in an amount equal to 40% of the remainder of the Phantom Equity Payment, if any, and the delivery of stock certificates for the appropriate number of common shares of the Company at the IPO price for the balance of the Phantom Equity Payment. If Executive fails or refuses to comply, if required, with the provisions of Section 5, or to execute the Limited Liability Company Agreement and Securityholders Agreement, the obligation of the Company to make any Phantom Equity Payment to Executive under this Agreement shall immediately cease. 3 Termination of Employment 3.1 Solely for purposes of this Section 3 and notwithstanding anything to the contrary contained herein, Vested Percentage shall be determined by the following Time Criteria and Event Criteria: (a) Time Criteria: (i) 20% after the expiration of 12 months from the Grant Date; (ii) 40% after the expiration of 24 months from the Grant Date; (iii) 60% after the expiration of 36 months from the Grant Date; (iv) 80% after the expiration of 48 months 5 from the Grant Date; and (v) 100% after the expiration of 60 months from the Grant Date; provided, that if Executive's Employment is terminated prior to the third anniversary of the Grant Date for any reason other than Disability or death, or at any time by the Company for Cause, the time based portion of the Vested Percentage shall be equal to zero; provided, further, that if the Executive's Employment is terminated by the Company without Cause prior to the third anniversary of the Grant Date and a Company Sale occurs less than 90 days after such termination, the Time Criteria portion of the Vested Percentage as of the date of termination of Employment shall be determined in accordance with clauses (i) through (v) above but the Payment Event shall be deemed a Company Sale; and (b) Event Criteria: (i) Company Sale, (ii) IPO and (iii) immediately prior to any reorganization of the Company from a limited liability company to a corporation which is necessitated by an IPO or a Company Sale; provided, that if the proposed IPO or Company Sale is not consummated after a reorganization, the Event Criteria shall be deemed not to have been satisfied. 3.2 Upon termination of Executive's Employment for any reason other than death or Disability, the Company shall have the option, at the Company's sole discretion, of waiving the Event Criteria and treating such termination as a Payment Event in which case the Vested Percentage shall be determined solely by reference to the Time Criteria. If the Company does not elect to waive the Event Criteria, the Company shall have no obligation to make any Phantom Equity Payment until the Event Criteria shall be met. Upon the occurrence of the Event Criteria, the Company shall pay Executive the Phantom Equity Payment in accordance with Section 2, but the Time Criteria shall be determined as of the date of termination of Employment. 3.3 Upon termination of Executive's Employment as a result of death or Disability, or in the event the Company elects to waive the Event Criteria, the Vested Percentage shall be determined solely by reference to the Time Criteria and on the Payment Date, the Company shall pay the Phantom Equity Payment first by the cancellation of indebtedness, if any, owing from Executive to the Company or any of its subsidiaries and the remainder, at the Company's option: (a) by the Company's delivery of a check or wire transfer of immediately a available funds for the remainder of the Phantom Equity Payment, if any; or (b) by the Company's delivery of a check or wire transfer of immediately available funds for an amount equal to one fifth of the remainder of the Phantom Equity Payment, if any, and 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 funded indebtedness outstanding) of the Company (a "Payment Note") in a principal amount equal to the balance of the Phantom Equity Payment, payable in four equal annual installments commencing on the first anniversary of the issuance thereof and 6 bearing interest payable annually at the publicly announced prime rate of Chase Manhattan Bank, N.A., on the date of issuance and each June 30 and December 31 thereafter. 4 Suspension of Phantom Equity Payment. 4.1 Notwithstanding anything to the contrary contained in this Agreement, the Company shall not be obligated to pay the Phantom Equity Payment at any time pursuant to Sections 2 and 3, regardless of whether a Payment Event has occurred, to the extent that (a) such Phantom Equity Payment (together with any other Phantom Equity Payments pursuant to other Phantom Equity Agreements) would result (i) 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) or (ii) after giving effect thereto, in a Financing Default, or (b) if immediately prior to such payment there exits a Financing Default which prohibits such payment. The Company shall, within fifteen days of learning of any such default, so notify Executive that it is not obligated to pay the Phantom Equity Payment otherwise due hereunder. 4.2 Any Phantom Equity Payment which the Company is obligated to make to Executive pursuant to Sections 2 and 3, but which in accordance with Section 4.1 is not made on the Payment Date, shall be paid by the Company on or prior to the fifteenth day after such date or dates that it is no longer prohibited from making such payment under Section 4.1 (after taking into account any payments to be made at such time pursuant to other Phantom Equity Agreements), and the Company shall give Executive five days prior written notice of any such payment. 5 Investment Representations and Covenants of the Executive. 5.1 In the event Executive is to receive Common Units pursuant to the provisions of Section 2.2, Executive shall execute and deliver to the Company the Securityholders Agreement. 5.2 The Executive acknowledges and represents that Executive has been advised by the Company that any Common Units delivered to Executive pursuant to Section 2.2: (a) shall not have been registered under the Securities Act; (b) must be held indefinitely and Executive must continue to bear the economic risk of such investment in the 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; 7 (c) a restrictive legend, in the form required by the Securityholders Agreement, shall be placed on the certificates representing the Common Units; (d) a notation shall be made in the appropriate records of the Company indicating that the Common Units are subject to restrictions on transfer and appropriate stoptransfer instructions will be issued to the transfer agent with respect to the Common Units. 5.3 Prior to receiving any Common Units pursuant to Section 2.2, 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; (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, 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. 6 Call Option. 6.1 The Company shall have the right and option to purchase up to all of the Common Units received by Executive pursuant to Section 2.2 at Fair Market Value within 180 days following termination of Executive's Employment prior to the first anniversary of the Payment Event (a) by Executive for any reason other than Disability, death, retirement or (b) by the Company for Cause. 6.2 The Company shall have the right and option to purchase up to fifty (50%) percent of the Common Units received by Executive pursuant to Section 2.2 at Fair Market Value within 180 days following termination of Executive's Employment prior to the second anniversary of the Payment Event (a) by Executive for any reason other than Disability, death, retirement or (b) by the Company for Cause. 6.3 The Company shall have the right to exercise the option granted by Sections 6.1. and 6.2 within 180 following the date of termination of Executives's Employment by sending written notice to Executive of its intention to purchase the Common Units, specifying the number of Common Units to be . 8 purchased Subject to the provisions of Section 4, 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 written notice to Executive. The Company shall pay the purchase price for the Common Units it purchases against delivery of the certificates or other instruments representing the Common Units so purchased, duly endorsed. first, by the cancellation of indebtedness, if any, owing from Executive to the Company or any of its subsidiaries and the remainder, by the Company's delivery of a check or wire transfer of immediately a available funds for the remainder of the purchase price, if any. 6.4 Solely for the purposes of this Section 6, in determining the Fair Market Value of the Common Units to be purchased, the Management Committee may, in good faith, take into consideration the fact that the sale by Executive of such shares may negatively impact the price of the publicly traded Common Units. 6.5 Notwithstanding anything to the contrary contained herein, the Company's right and option to purchase Common Units pursuant to this Section 6shall automatically terminate upon the occurrence of a Company Sale or an IPO Exit Transaction. 7 Transfers of Phantom Equity Payment. Executive may transfer the right to receive the Phantom Equity Payment only upon his death pursuant to applicable laws of descent and distribution. Any transfer or attempted transfer of the right to receive the Phantom Equity Payment in violation of any provision of this Agreement shall be void. 8 Tax Withholding. Whenever any cash payment is to be made hereunder or Common Units are to be issued pursuant to the terms of this Agreement, the Company shall have the power to withhold, require Executive to remit to the Company in cash or offset against any amounts otherwise payable to Executive, an amount sufficient to satisfy all Federal, state, local and foreign withholding tax requirements relating to such transaction and the Company may defer any cash payment or issuance of Common Units until such requirements are satisfied. 9 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. 10 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. 11 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. 9 12 Amendments: Adjustment of Applicable Percentage. 12.1 This Agreement may be amended only by a written consent signed by the parties hereto; provided, that, the Management Committee may, in good faith, make whatever modifications to this Agreement may be necessary as a result of any reorganization of the Company required in connection with refinancing of the Company's outstanding debt for money borrowed. Executive shall be notified in writing of any such modification or change to this Agreement. 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. 12.2 The Management Committee may, in good faith, from time to time make appropriate adjustments to the Applicable Percentage set forth in Schedule A attached hereto as a result of the issuance of new Equity (to include but not be limited to: Common Units, Preferred Capital, options, rights or warrants to acquire Common Units or any security convertible into Equity) by the Company or the creation of additional or new phantom equity programs. Executive shall be notified in writing of any such modification to the Applicable Percentage. 13 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. 14 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 an inconvenient forum. 15 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 10 Bridgeport CT 06604 Attention: General Counsel 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 (ii) If to Executive: 16 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, specifically including the prior grant of or the promise to grant options for the purchase of Common Units of the Company. 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 any prior agreements and understandings between the parties with respect to such subject matter, and shall be deemed to automatically terminate any option agreement previously issued to Executive to purchase Common Units of the Company, including any agreement to issue such options to Executive. 17 Counterparts. This Agreement may be executed in separate counterparts each of which shall be deemed an original and all of which shall constitute one and the same instrument. 18 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 exercise 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 of such power 11 or right 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 right to exercise the same at any subsequent time or times hereunder. 19 Termination of Agreement. This Agreement and Executive's right to receive any Phantom Equity Payment shall terminate on December 31, 2009. IN WITNESS WHEREOF, the parties have executed this Agreement as of the date and year first written above. REMINGTON PRODUCTS COMPANY, L.L.C. By------------------------ --------------------------- Executive 12 Schedule A to Time Based Phantom Equity Agreement with_________________ APPLICABLE PERCENTAGE: __%. 13 EX-10.26 5 PERFORMANCED PHANTOM EQUITY AGREEMENT EXHIBIT 10.26 PERFORMANCE BASED PHANTOM EQUITY AGREEMENT PERFORMANCE BASED PHANTOM EQUITY AGREEMENT (this "Agreement") is made as of ___________________, by and between Remington Products Company, L.L.C., a Delaware limited liability company (the "Company"), and _______________________ Executive"). WHEREAS, on the terms and subject to the conditions hereof, the Company desires to grant Executive certain rights in any increase in the value of the equity of the Company under certain events. 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. For the purposes of this Agreement, the following terms shall have the meanings set forth below: 1.1 "Agreement": the meaning set forth in the preface. 1.2 "Applicable Percentage": the percentage set forth in Schedule A attached hereto; provided, that such percentage may be adjusted, from time to time, by the Management Committee pursuant to Section 12.2 herein. . 1.3 "Cause": termination of the employment of Executive by the Company or any subsidiary thereof due to (a) 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), (b) the commission by Executive of a felony, (c) 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 (d) 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. In the event Executive terminates his employment and at such time Executive was under active investigation by the Company or any of its subsidiaries for possible termination for Cause and thereafter the Company makes a good faith determination that sufficient facts existed to support Executive's termination for Cause or, within 45 days following such resignation, the Company or any of its subsidiaries obtains information which, if known prior to Executive's resignation, would have 1 permitted the Company to terminate Executive for Cause, the Executive shall be deemed terminated for Cause for all purposes of this Agreement notwithstanding the fact that Executive had resigned. 1.4 "Common Units": the common units of the Company or the common stock of a corporation that is the successor of the Company. 1.5 "Company": the meaning set forth in the preface. 1.6 "Company Sale": the meaning set forth in the Limited Liability Company Agreement. Under no circumstances shall a Company Sale be deemed to include liquidation or bankruptcy of the Company. 1.7 "Disability": 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 date of the termination of Employment in the event of such Disability) shall be on the first day of such six-month period. 1.8 "EBITDA":the meaning set forth in the Credit and Guarantee Agreement. 1.9 "Employee": 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 1.10 "Equity": the Common Units and Preferred Capital. 1.11 "Fair Market Value": 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, plus in each case, the value of the outstanding Preferred Capital, if any, determined in good faith by the Management Committee. If at any time the Common Units are not listed on any securities exchange or quoted in the 2 NASDAQ System or the over-the-counter market, the Fair Market Value shall be the fair value of the Equity determined in good faith by the Management Committee taking into consideration the current, historical and projected EBITDA of the Company and recognizing that control of the Company is not being sold at such time. 1.12 "Financing Default": 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: (a) the Credit and Guarantee Agreement (the "Credit and Guarantee Agreement")and Indenture (collectively, the "Senior Financing Agreements") dated as of May 23, 1996, as amended, 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; (b) any provision of the Limited Liability Company Agreement or the certificate of incorporation or limited liability company agreement of any of its subsidiaries, as the case may be, as in effect on the Grant Date and (c) any of the securities issued pursuant to or whose terms are governed by the terms of any of the agreements set forth in clauses (a) and (b) above, and any extensions, renewals, refinancings or refundings thereof in whole or in part. 1.13 "Fully Diluted Basis": assumes all outstanding options, warrants and other rights to receive Common Units are fully vested and have been exercised, excluding any Phantom Equity Payment (as defined in Section 3) hereunder. 1.14 "Grant Date": __________________ 1.15 " IPO" 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, 1.16 " IPO Exit Transaction" means the first date after the consummation of an IPO on which Vestar Equity Partners, L.P., a Delaware limited partnership and its affiliates (not including employees of the general partner of Vestar) own less than 10% of the Common Units. 1.17 "Limited Liability Company Agreement" :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, 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. 1.18 "Management Committee": the Company's Management Committee or any board of directors or similar governing body of a successor to the Company. 1.19 "Payment Date" : the date that is no later than the 60th day after the occurrence of the Payment Event. 3 1.20 "Payment Event" : the occurrence of any of the following (a) a Company Sale (b) an IPO Exit Transaction , (c) an IPO, (d) termination of Executive's Employment because of death or Disability, or (e) at the Company's option, termination of Executive's Employment for any reason other than death or Disability. 1.21 "Phantom Equity Payment": the meaning set forth in Section 3 below. 1.22 "Preferred Capital": the preferred capital of the Company or the preferred stock of a corporation that is the successor of the Company. 1.23 "Residual Equity Value": (a) in the case of a Company Sale, the aggregate net amount (including cash, non-cash and any deferred payout amounts) available for distribution to the issued and outstanding Equity (on a Fully Diluted Basis), after the payment of all fees and expenses of the Company incurred in connection with such sale, (b) in the case of an IPO and IPO Exit Transaction, the valuation of the Company's Equity implied in the public offering, after giving effect to the shares issued in such IPO, and (c) in the case of a termination of Employment, Fair Market Value of the issued and outstanding Equity (on a Fully Diluted Basis) as of the last day of the last fiscal quarter ending immediately prior to the occurrence of such termination of Employment. 1.24 "Securityholders Agreement": 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. 1.25 "Vested Percentage" : shall be determined by meeting the Performance Criteria and Event Criteria. In order to be fully vested, both the Performance Criteria and Event Criteria must be met. (a) Performance Criteria : (i) 20% when EBITDA is $27 million or greater for any trailing 12 months period, measured at the end of any calendar quarter prior to January 1, 2002 and not less than $24.3 million for the immediately following 12 month period; (ii) 50% when EBITDA is $31 million or greater for any trailing 12 month period, measured at the end of any calendar quarter prior to January 1, 2002 and not less than $27.9 million for the immediately following 12 month period; and (iii) 100% when EBITDA is $35 million or greater for any trailing 12 month period, measured at the end of any calendar quarter prior to January 1, 2002 and not less than $31.5 million for the immediately following 12 month period. Performance Criteria shall be determined by achievement, if any, of only the initial EBITDA targets under clauses (i) through (iii) above if less than 12 months has lapsed following achievement of such EBITDA target and the satisfaction of the Event Criteria. 4 (b) Event Criteria: (i) a Company Sale, or (ii) an IPO Exit Transaction, or (iii) an IPO, to the extent Performance Criteria was met prior to the IPO, and (iv) immediately prior to any reorganization of the Company from a limited liability company to a corporation which is necessitated by a Company Sale, IPO Exit Transaction or IPO; provided, that if the proposed Company Sale, IPO Exit Transaction or IPO is not consummated after a reorganization, Event Criteria shall have be deemed not to have been satisfied. 2 Confirmation of Grant, Phantom Equity Payment. 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 right to receive the Phantom Equity Payment. Upon the occurrence of a Payment Event resulting from a Company Sale, an IPO Exit Transaction or an IPO, Executive shall be entitled to receive an amount equal to the Vested Percentage of the Applicable Percentage of the Residual Equity Value (the "Phantom Equity Payment"). 2.1 Company Sale If the Payment Event is a Company Sale, at the Company's option: (a) on the Payment Date, the Company shall pay the Phantom Equity Payment first by the cancellation of indebtedness, if any, owing from Executive to the Company or any of its subsidiaries and the remainder by the Company's delivery of a check or wire transfer of immediately available funds for the remainder of the Phantom Equity Payment, if any; or (b) immediately prior to the closing of the Company Sale, the Company shall convert the Applicable Percentage into an identical percentage of the issued and outstanding Equity (on a Fully Diluted Basis) and issue to Executive certificates for the appropriate number of Common Units and Preferred Capital of the Company, in full satisfaction of the Phantom Equity Payment due Executive hereunder; provided, that if the Company Sale is structured to include non-cash consideration, the Company shall assure that the Executive receives such portion of the Phantom Equity Payment in cash and the balance in Common Units and Preferred Capital of the Company in order to provide Executive with sufficient funds to pay any Federal and state income taxes that will result from the receipt of the Phantom Equity Payment. In the event Executive fails or refuses to comply, if required, with the provisions of Section 5 of this Agreement, or to execute the Limited Liability Company Agreement and Securityholders Agreement, the obligation of the Company to make any Phantom Equity Payment to Executive under this Agreement shall immediately cease. 2.2 IPO Exit Transaction. If the Payment Event is an IPO Exit Transaction, on the Payment Date, the Company shall pay the Phantom Equity Payment first by the cancellation of indebtedness, if any, owing from Executive 5 to the Company or any of its subsidiaries and the remainder by the Company's delivery of a check or wire transfer of immediately available funds for the remainder of the Phantom Equity Payment. 2.3 IPO If the Payment Event is an IPO, on the Payment Date, the Company shall pay the Phantom Equity Payment first by the cancellation of indebtedness, if any, owing from Executive to the Company or any of its subsidiaries and the remainder, at the Company's option: (a) by the Company's delivery of a check or wire transfer of immediately available funds for the remainder of the Phantom Equity Payment, if any, or (b) by the Company's delivery of a check or wire transfer of immediately available funds in an amount equal to 40% of the remainder of the Phantom Equity Payment, if any, and the delivery of stock certificates for the appropriate number of common shares of the Company at the IPO price for the balance of the Phantom Equity Payment. In the event Executive fails or refuses to comply, if required, with the provisions of Section 5, or to execute the Limited Liability Company Agreement and Securityholders Agreement, the obligation of the Company to make any Phantom Equity Payment to Executive under this Agreement shall immediately cease. In the event that the effective date of the IPO is prior to December 30, 2002 and the Performance Criteria at such time was less than 100%, this Agreement shall remain in effect after the IPO; provided, that after the IPO, the Applicable Percentage shall be automatically reduced by the Performance Criteria of the Applicable Percentage as of the IPO in order to reflect the Phantom Equity Payment made to Executive pursuant to this Section 2.3. 3 Termination of Employment 3.1 Solely for purposes of this Section 3 and notwithstanding anything to the contrary contained herein, if the Executive's Employment is terminated by the Company without Cause prior to the third anniversary of the Grant Date and a Company Sale occurs less than 90 days after such termination, the Performance Criteria portion of the Vested Percentage as of the date of termination of Employment shall be determined in accordance with clauses (i) through (iii) of Section 1.25(a) but the Payment Event shall be deemed the Company Sale. 3.2 Upon termination of Executive's Employment for any reason other than death or Disability, the Company shall have the option, at the Company's sole discretion, of waiving the Event Criteria and treating such termination as a Payment Event in which case the Vested Percentage shall be determined solely by reference to the Performance Criteria. If the Company does not elect to waive the Event Criteria, the Company shall have no obligation to make any Phantom Equity Payment until the Event Criteria shall be met. Upon the occurrence of the Event Criteria, the Company shall pay Executive the Phantom Equity Payment in accordance with Section 2, but the Performance Criteria shall be determined as of the date of termination of Employment. 6 3.3 Upon termination of Executive's Employment as a result of death or Disability, or in the event the Company elects to waive the Event Criteria, the Vested Percentage shall be determined solely by reference to the Performance Criteria and on the Payment Date, the Company shall pay the Phantom Equity Payment first by the cancellation of indebtedness, if any, owing from Executive to the Company or any of its subsidiaries and the remainder, at the Company's option: (a) by the Company's delivery of a check or wire transfer of immediately a available funds for the remainder of the Phantom Equity Payment, if any; or (b) by the Company's delivery of a check or wire transfer of immediately available funds for an amount equal to one fifth of the remainder of the Phantom Equity Payment, if any, and 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 funded indebtedness outstanding) of the Company (a "Payment Note") in a principal amount equal to the balance of the Phantom Equity Payment, payable in four 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 Manhattan Bank, N.A., on the date of issuance and each June 30 and December 31 thereafter 4 Suspension of Phantom Equity Payment. 4.1 Notwithstanding anything to the contrary contained in this Agreement, the Company shall not be obligated to pay the Phantom Equity Payment at any time pursuant to Sections 2 and 3, regardless of whether a Payment Event has occurred, to the extent that (a) such Phantom Equity Payment (together with any other Phantom Equity Payments pursuant to other Phantom Equity Agreements) would result (i) 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) or (ii) after giving effect thereto, in a Financing Default, or (b) if immediately prior to such payment there exits a Financing Default which prohibits such payment. The Company shall, within fifteen days of learning of any such default, so notify Executive that it is not obligated to pay the Phantom Equity Payment otherwise due hereunder. 4.2 Any Phantom Equity Payment which the Company is obligated to make to Executive pursuant to Sections 2 and 3, but which in accordance with Section 4.1 is not made on the Payment Date, shall be paid by the Company on or prior to the fifteenth day after such date or dates that it is no longer prohibited from making such payment under Section 4.1 (after taking into account any payments to be made at such time pursuant to other Phantom Equity 7 Agreements), and the Company shall give Executive five days prior written notice of any such payment. 5 Investment Representations and Covenants of the Executive. 5.1 In the event Executive is to receive Common Units pursuant to the provisions of Section 2.3, Executive shall execute and deliver to the Company the Securityholders Agreement. 5.2 The Executive acknowledges and represents that Executive has been advised by the Company that any Common Units delivered to Executive pursuant to Section 2.3: (a) shall not have been registered under the Securities Act; (b) must be held indefinitely and Executive must continue to bear the economic risk of such investment in the 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) a restrictive legend in the form required by the Securityholders Agreement shall be placed on the certificates representing the Common Units; (d) a notation shall be made in the appropriate records of the Company indicating that the Common Units are subject to restrictions on transfer and appropriate stop transfer instructions will be issued to the transfer agent with respect to the Common Units. 5.3 Prior to receiving any Common Units pursuant to Section 2.3, 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; (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, there may be no public market for the Common Units and, accordingly, it may not be possible for 8 Executive to liquidate Executive's investment in case of emergency, if at all. 6 Call Option. 6.1 The Company shall have the right and option to purchase up to all of the Common Units received by Executive pursuant to Section 2.3 at Fair Market Value within 180 days following termination of Executive's Employment prior to the first anniversary of the Payment Event (a) by Executive for any reason other than Disability, death, retirement or (b) by the Company for Cause. 6.2 The Company shall have the right and option to purchase up to fifty (50%) percent of the Common Units received by Executive pursuant to Section 2.3 at Fair Market Value within 180 days following termination of Executive's Employment prior to the second anniversary of the Payment Event (a) by Executive for any reason other than Disability, death, retirement or (b) by the Company for Cause. 6.3 The Company shall have the right to exercise the option granted by Sections 6.1. and 6.2 within 180 following the date of termination of Executives's Employment by sending written notice to Executive of its intention to purchase the Common Units, specifying the number of Common Units to be purchased. Subject to the provisions of Section 4, 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 written notice to Executive. The Company shall pay the purchase price for the Common Units it purchases against delivery of the certificates or other instruments representing the Common Units so purchased, duly endorsed. first, by the cancellation of indebtedness, if any, owing from Executive to the Company or any of its subsidiaries and the remainder, by the Company's delivery of a check or wire transfer of immediately a available funds for the remainder of the purchase price, if any. 6.4 Solely for the purposes of this Section 6, in determining the Fair Market Value of the Common Units to be purchased, the Management Committee may, in good faith, take into consideration the fact that the sale by Executive of such shares may negatively impact the price of the publicly traded Common Units. 6.5 Notwithstanding anything to the contrary contained herein, the Company's right and option to purchase Common Units pursuant to this Sections 6 shall automatically terminate upon the occurrence of a Company Sale or an IPO Exit Transaction. 7 Transfers of Phantom Equity Payment. Executive may transfer the right to receive the Phantom Equity Payment only upon his death pursuant to applicable laws of descent and distribution. Any transfer or attempted transfer of the right to receive the Phantom Equity Payment in violation of any provision of this Agreement shall be void. 8 Tax Withholding. Whenever any cash payment is to be made hereunder or Common 9 Units are to be issued pursuant to the terms of this Agreement, the Company shall have the power to withhold, require Executive to remit to the Company in cash or offset against any amounts otherwise payable to Executive, an amount sufficient to satisfy all Federal, state, local and foreign withholding tax requirements relating to such transaction and the Company may defer any cash payment or issuance of Common Units until such requirements are satisfied. 9 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. 10 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. 11 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. 12 Amendments: Adjustment of Applicable Percentage. 12.1 This Agreement may be amended only by a written consent signed by the parties hereto; provided, that, the Management Committee may, in good faith, make whatever modifications to this Agreement may be necessary as a result of any reorganization of the Company required in connection with refinancing of the Company's outstanding debt for money borrowed or the acquisition or disposition of a material amount of assets. Executive shall be notified in writing of any such modification or change to this Agreement. 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. 12.2 The Management Committee may, in good faith, from time to time make appropriate adjustments to the Applicable Percentage set forth in Schedule A attached hereto as a result of the issuance of new Equity (to include but not be limited to: Common Units, Preferred Capital, options, rights or warrants to acquire Common Units or any security convertible into Equity) by the Company, the creation of additional or new phantom equity programs. Executive shall be notified in writing of any such modification to the Applicable Percentage. 13 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. 14 Jurisdiction. Any suit action or proceeding with respect to this Agreement, or any judgment entered by any court in respect thereof, shall be 10 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 an inconvenient forum. 15 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: General Counsel 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 (ii) If to Executive: 11 16 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, specifically including the prior grant of or the promise to grant options for the purchase of Common Units of the Company. 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 any prior agreements and understandings between the parties with respect to such subject matter, and shall be deemed to automatically terminate any option agreement previously issued to Executive to purchase Common Units of the Company, including any agreement to issue such options to Executive. 17 Counterparts. This Agreement may be executed in separate counterparts each of which shall be deemed an original and all of which shall constitute one and the same instrument. 18 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 exercise 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 of such power or right 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 right to exercise the same at any subsequent time or times hereunder. 19 Termination of Agreement. This Agreement and Executive's right to receive any Phantom Equity Payment shall terminate on December 31, 2009. This Agreement shall also terminate upon the consummation of a Company Sale or IPO Exit Transaction; provided, that such termination shall not effect any accrued right or obligation of either party or any provision hereof which is intended to survive termination, including the Company's obligation to make any payment to Executive pursuant to Sections 2.1 or 2.2. 20 Off-Set Against Promissory Note. Simultaneously with the execution of this Agreement, Executive is selling Common Units to the Company and is receiving a promissory note (the "Note") from the Company for the purchase price for such units. Executive understands and agrees that notwithstanding anything else to the contrary contained herein, any Phantom Equity Payment made to Executive hereunder shall be reduced by an amount equal any payment of principal of the Note. IN WITNESS WHEREOF, the parties have executed this Agreement as of the date and year first written above. REMINGTON PRODUCTS COMPANY L.L.C. By:----------------------------- --------------------------- Executive 12 Schedule A to Performance Based Phantom Equity Agreement with ------------------------ APPLICABLE PERCENTAGE: ____%. 14 EX-10.27 6 SUPER PERF PHANTOM EQUITY AGREEMENT EXHIBIT 10.27 SUPER PERFORMANCE BASED PHANTOM EQUITY AGREEMENT SUPER PERFORMANCE BASED PHANTOM EQUITY AGREEMENT (this "Agreement") is made as of ______________, by and between Remington Products Company, L.L.C., a Delaware limited liability company (the "Company"), and __________________ ("Executive"). WHEREAS, on the terms and subject to the conditions hereof, the Company desires to grant Executive certain rights in any increase in the value of the equity of the Company under certain events. 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. For the purposes of this Agreement, the following terms shall have the meanings set forth below: 1.1 "Agreement": the meaning set forth in the preface. 1.2 "Applicable Percentage": the percentage set forth in Schedule A attached hereto; provided, that such percentage may be adjusted, from time to time, by the Management Committee pursuant to Section 12.2 herein. . 1.3 "Cause": termination of the employment of Executive by the Company or any subsidiary thereof due to (a) 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), (b) the commission by Executive of a felony, (c) 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 (d) 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. In the event Executive terminates his employment and at such time Executive was under active investigation by the Company or any of its subsidiaries for possible termination for Cause and thereafter the Company makes a good faith determination that sufficient facts existed to support Executive's termination for Cause or, within 45 days following such resignation, the Company or any of its subsidiaries obtains information which, if known prior to Executive's resignation, would have 1 permitted the Company to terminate Executive for Cause, the Executive shall be deemed terminated for Cause for all purposes of this Agreement notwithstanding the fact that Executive had resigned. 1.4 "Common Units": the common units of the Company or the common stock of a corporation that is the successor of the Company. 1.5 "Company": the meaning set forth in the preface. 1.6 "Company Sale": the meaning set forth in the Limited Liability Company Agreement. Under no circumstances shall a Company Sale be deemed to include liquidation or bankruptcy of the Company. 1.7 "Disability": 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 date of the termination of Employment in the event of such Disability) shall be on the first day of such six-month period. 1.8 "EBITDA":the meaning set forth in the Credit and Guarantee Agreement. 1.9 "Employee": 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 1.10 "Equity": the Common Units and Preferred Capital. 1.11 "Fair Market Value": 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, plus in each case, the value of the outstanding Preferred Capital, if any, determined in good faith by the Management Committee. 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 2 market, the Fair Market Value shall be the fair value of the Equity determined in good faith by the Management Committee taking into consideration the current, historical and projected EBITDA of the Company and recognizing that control of the Company is not being sold at such time. 1.12 "Financing Default": 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: (a) the Credit and Guarantee Agreement (the "Credit and Guarantee Agreement")and Indenture (collectively, the "Senior Financing Agreements") dated as of May 23, 1996, as amended, 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; (b) any provision of the Limited Liability Company Agreement or the certificate of incorporation or limited liability company agreement of any of its subsidiaries, as the case may be, as in effect on the Grant Date and (c) any of the securities issued pursuant to or whose terms are governed by the terms of any of the agreements set forth in clauses (a) and (b) above, and any extensions, renewals, refinancings or refundings thereof in whole or in part. 1.13 "Fully Diluted Basis": assumes all outstanding options, warrants and other rights to receive Common Units are fully vested and have been exercised, excluding any Phantom Equity Payment (as defined in Section 3) hereunder. 1.14 "Grant Date": ___________________ 1.15 " IPO" 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, 1.16 " IPO Exit Transaction" means the first date after the consummation of an IPO on which Vestar Equity Partners, L.P., a Delaware limited partnership and its affiliates (not including employees of the general partner of Vestar) own less than 10% of the Common Units. 1.17 "Limited Liability Company Agreement" :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, 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. 1.18 "Management Committee": the Company's Management Committee or any board of directors or similar governing body of a successor to the Company. 1.19 "Payment Date" : the date that is no later than the 60th day after the occurrence of the Payment Event. 3 1.20 "Payment Event" : the occurrence of any of the following (a) a Company Sale (b) an IPO Exit Transaction , (c) an IPO, (d) termination of Executive's Employment because of death or Disability, or (e) at the Company's option, termination of Executive's Employment for any reason other than death or Disability. 1.21 "Phantom Equity Payment": the meaning set forth in Section 3 below. 1.22 "Preferred Capital": the preferred capital of the Company or the preferred stock of a corporation that is the successor of the Company. 1.23 "Residual Equity Value": (a) in the case of a Company Sale, the aggregate net amount (including cash, non-cash and any deferred payout amounts) available for distribution to the issued and outstanding Equity (on a Fully Diluted Basis), after the payment of all fees and expenses of the Company incurred in connection with such sale, (b) in the case of an IPO and IPO Exit Transaction, the valuation of the Company's Equity implied in the public offering, after giving effect to the shares issued in such IPO, and (c) in the case of a termination of Employment, Fair Market Value of the issued and outstanding Equity (on a Fully Diluted Basis) as of the last day of the last fiscal quarter ending immediately prior to the occurrence of such termination of Employment. 1.24 "Securityholders Agreement": 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. 1.25 "Vested Percentage" : shall be determined by meeting the Performance Criteria and Event Criteria. In order to be fully vested, both the Performance Criteria and Event Criteria must be met. (a) Performance Criteria : 100% when EBITDA is (i) $50 million or greater for any trailing 12 months period, measured at the end of any calendar quarter prior to January 1, 2002 and (ii) not less than $45 million for the immediately following 12 month period. Performance Criteria shall be determined by achievement, if any, of only the initial EBITDA target under clause (i) above if less than 12 months has lapsed following achievement of such EBITDA target and the satisfaction of the Event Criteria. (b) Event Criteria: (i) a Company Sale, or (ii) an IPO Exit Transaction, or (iii) an IPO, to the extent the Performance Criteria was met prior to the IPO, and (iv) immediately prior to any reorganization of the Company from a limited liability company to a corporation which is necessitated by a Company Sale, IPO Exit Transaction or IPO; provided, that if the proposed Company Sale, IPO Exit Transaction or IPO is not consummated after a reorganization, the Event Criteria shall have be deemed not to have been satisfied. 4 2 Confirmation of Grant, Phantom Equity Payment. 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 right to receive the Phantom Equity Payment. Upon the occurrence of a Payment Event resulting from a Company Sale, an IPO Exit Transaction or an IPO, Executive shall be entitled to receive an amount equal to the Vested Percentage of the Applicable Percentage of the Residual Equity Value (the "Phantom Equity Payment"). 2.1 Company Sale If the Payment Event is a Company Sale, at the Company's option: (a) on the Payment Date, the Company shall pay the Phantom Equity Payment first by the cancellation of indebtedness, if any, owing from Executive to the Company or any of its subsidiaries and the remainder by the Company's delivery of a check or wire transfer of immediately available funds for the remainder of the Phantom Equity Payment, if any; or (b) immediately prior to the closing of the Company Sale, the Company shall convert the Applicable Percentage into an identical percentage of the issued and outstanding Equity (on a Fully Diluted Basis) and issue to Executive certificates for the appropriate number of Common Units and Preferred Capital of the Company, in full satisfaction of the Phantom Equity Payment due Executive hereunder; provided, that if the Company Sale is structured to include non-cash consideration, the Company shall assure that the Executive receives such portion of the Phantom Equity Payment in cash and the balance in Common Units and Preferred Capital of the Company in order to provide Executive with sufficient funds to pay any Federal and state income taxes that will result from the receipt of the Phantom Equity Payment. In the event Executive fails or refuses to comply, if required, with the provisions of Section 5 of this Agreement, or to execute the Limited Liability Company Agreement and Securityholders Agreement, the obligation of the Company to make any Phantom Equity Payment to Executive under this Agreement shall immediately cease. 2.2 IPO Exit Transaction. If the Payment Event is an IPO Exit Transaction, on the Payment Date, the Company shall pay the Phantom Equity Payment first by the cancellation of indebtedness, if any, owing from Executive to the Company or any of its subsidiaries and the remainder by the Company's delivery of a check or wire transfer of immediately available funds for the remainder of the Phantom Equity Payment. 2.3 IPO If the Payment Event is an IPO, on the Payment Date, the Company shall pay the Phantom Equity Payment first by the cancellation of indebtedness, if any, owing from Executive to the Company or any of its 5 subsidiaries and the remainder, at the Company's option: (a) by the Company's delivery of a check or wire transfer of immediately available funds for the remainder of the Phantom Equity Payment, if any, or (b) by the Company's delivery of a check or wire transfer of immediately available funds in an amount equal to 40% of the remainder of the Phantom Equity Payment, if any, and the delivery of stock certificates for the appropriate number of common shares of the Company at the IPO price for the balance of the Phantom Equity Payment. In the event Executive fails or refuses to comply, if required, with the provisions of Section 5, or to execute the Limited Liability Company Agreement and Securityholders Agreement, the obligation of the Company to make any Phantom Equity Payment to Executive under this Agreement shall immediately cease. In the event that the effective date of the IPO is prior to December 30, 2002 and the Performance Criteria at such time was not achieved, this Agreement shall remain in effect after the IPO. 3 Termination of Employment 3.1 Solely for purposes of this Section 3 and notwithstanding anything to the contrary contained herein, if the Executive's Employment is terminated by the Company without Cause prior to the third anniversary of the Grant Date and a Company Sale occurs less than 90 days after such termination, the Performance Criteria portion of the Vested Percentage as of the date of termination of Employment shall be determined in accordance with clause (i) of Section 1.25(a) but the Payment Event shall be deemed the Company Sale. 3.2 Upon termination of Executive's Employment for any reason other than death or Disability, the Company shall have the option, at the Company's sole discretion, of waiving the Event Criteria and treating such termination as a Payment Event in which case the Vested Percentage shall be determined solely by reference to the Performance Criteria. If the Company does not elect to waive the Event Criteria, the Company shall have no obligation to make any Phantom Equity Payment until the Event Criteria shall be met. Upon the occurrence of the Event Criteria, the Company shall pay Executive the Phantom Equity Payment in accordance with Section 2, but the Performance Criteria shall be determined as of the date of termination of Employment. 3.3 Upon termination of Executive's Employment as a result of death or Disability, or in the event the Company elects to waive the Event Criteria, the Vested Percentage shall be determined solely by reference to the Performance Criteria and on the Payment Date, the Company shall pay the Phantom Equity Payment first by the cancellation of indebtedness, if any, owing from Executive to the Company or any of its subsidiaries and the remainder, at the Company's option: 6 (a) by the Company's delivery of a check or wire transfer of immediately a available funds for the remainder of the Phantom Equity Payment, if any; or (b) by the Company's delivery of a check or wire transfer of immediately available funds for an amount equal to one fifth of the remainder of the Phantom Equity Payment, if any, and 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 funded indebtedness outstanding) of the Company (a "Payment Note") in a principal amount equal to the balance of the Phantom Equity Payment, payable in four 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 Manhattan Bank, N.A., on the date of issuance and each June 30 and December 31 thereafter 4 Suspension of Phantom Equity Payment. 4.1 Notwithstanding anything to the contrary contained in this Agreement, the Company shall not be obligated to pay the Phantom Equity Payment at any time pursuant to Sections 2 and 3, regardless of whether a Payment Event has occurred, to the extent that (a) such Phantom Equity Payment (together with any other Phantom Equity Payments pursuant to other Phantom Equity Agreements) would result (i) 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) or (ii) after giving effect thereto, in a Financing Default, or (b) if immediately prior to such payment there exits a Financing Default which prohibits such payment. The Company shall, within fifteen days of learning of any such default, so notify Executive that it is not obligated to pay the Phantom Equity Payment otherwise due hereunder. 4.2 Any Phantom Equity Payment which the Company is obligated to make to Executive pursuant to Sections 2 and 3, but which in accordance with Section 4.1 is not made on the Payment Date, shall be paid by the Company on or prior to the fifteenth day after such date or dates that it is no longer prohibited from making such payment under Section 4.1 (after taking into account any payments to be made at such time pursuant to other Phantom Equity Agreements), and the Company shall give Executive five days prior written notice of any such payment. 5 Investment Representations and Covenants of the Executive. 5.1 In the event Executive is to receive Common Units pursuant to the provisions of Section 2.3, Executive shall execute and deliver to the Company the Securityholders Agreement. 7 5.2 The Executive acknowledges and represents that Executive has been advised by the Company that any Common Units delivered to Executive pursuant to Section 2.3: (a) shall not have been registered under the Securities Act; (b) must be held indefinitely and Executive must continue to bear the economic risk of such investment in the 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) a restrictive legend in the form required by the Securityholders Agreement shall be placed on the certificates representing the Common Units; (d) a notation shall be made in the appropriate records of the Company indicating that the Common Units are subject to restrictions on transfer and appropriate stop transfer instructions will be issued to the transfer agent with respect to the Common Units. 5.3 Prior to receiving any Common Units pursuant to Section 2.3, 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; (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, 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. 6 Call Option. 6.1 The Company shall have the right and option to purchase up to all of the Common Units received by Executive pursuant to Section 2.3 at Fair Market Value within 180 days following termination of Executive's Employment prior to the first anniversary of the Payment Event (a) by Executive for any reason other than Disability, death, retirement or (b) by the Company for Cause. 8 6.2 The Company shall have the right and option to purchase up to fifty (50%) percent of the Common Units received by Executive pursuant to Section 2.3 at Fair Market Value within 180 days following termination of Executive's Employment prior to the second anniversary of the Payment Event (a) by Executive for any reason other than Disability, death, retirement or (b) by the Company for Cause. 6.3 The Company shall have the right to exercise the option granted by Sections 6.1. and 6.2 within 180 following the date of termination of Executives's Employment by sending written notice to Executive of its intention to purchase the Common Units, specifying the number of Common Units to be purchased. Subject to the provisions of Section 4, 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 written notice to Executive. The Company shall pay the purchase price for the Common Units it purchases against delivery of the certificates or other instruments representing the Common Units so purchased, duly endorsed. first, by the cancellation of indebtedness, if any, owing from Executive to the Company or any of its subsidiaries and the remainder, by the Company's delivery of a check or wire transfer of immediately a available funds for the remainder of the purchase price, if any. 6.4 Solely for the purposes of this Section 6, in determining the Fair Market Value of the Common Units to be purchased, the Management Committee may, in good faith, take into consideration the fact that the sale by Executive of such shares may negatively impact the price of the publicly traded Common Units. 6.5 Notwithstanding anything to the contrary contained herein, the Company's right and option to purchase Common Units pursuant to this Sections 6 shall automatically terminate upon the occurrence of a Company Sale or an IPO Exit Transaction. 7 Transfers of Phantom Equity Payment. Executive may transfer the right to receive the Phantom Equity Payment only upon his death pursuant to applicable laws of descent and distribution. Any transfer or attempted transfer of the right to receive the Phantom Equity Payment in violation of any provision of this Agreement shall be void. 8 Tax Withholding. Whenever any cash payment is to be made hereunder or Common Units are to be issued pursuant to the terms of this Agreement, the Company shall have the power to withhold, require Executive to remit to the Company in cash or offset against any amounts otherwise payable to Executive, an amount sufficient to satisfy all Federal, state, local and foreign withholding tax requirements relating to such transaction and the Company may defer any cash payment or issuance of Common Units until such requirements are satisfied. 9 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. 9 10 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. 11 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. 12 Amendments: Adjustment of Applicable Percentage. 12.1 This Agreement may be amended only by a written consent signed by the parties hereto; provided, that, the Management Committee may, in good faith, make whatever modifications to this Agreement may be necessary as a result of any reorganization of the Company required in connection with refinancing of the Company's outstanding debt for money borrowed or the acquisition or disposition of a material amount of assets. Executive shall be notified in writing of any such modification or change to this Agreement. 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. 12.2 The Management Committee may, in good faith, from time to time make appropriate adjustments to the Applicable Percentage set forth in Schedule A attached hereto as a result of the issuance of new Equity (to include but not be limited to: Common Units, Preferred Capital, options, rights or warrants to acquire Common Units or any security convertible into Equity) by the Company, the creation of additional or new phantom equity programs. Executive shall be notified in writing of any such modification to the Applicable Percentage. 13 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. 14 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 an inconvenient forum. 15 Notices. All notices and other communications hereunder shall be in writing and shall be deemed to have been duly given when personally delivered, 10 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: General Counsel 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 (ii) If to Executive: 16 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, specifically including the prior grant of or the promise to grant options for the purchase of Common Units of the Company. 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 any prior agreements and understandings between the parties with respect to such subject matter, and shall be deemed to automatically terminate any option agreement 11 previously issued to Executive to purchase Common Units of the Company, including any agreement to issue such options to Executive. 17 Counterparts. This Agreement may be executed in separate counterparts each of which shall be deemed an original and all of which shall constitute one and the same instrument. 18 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 exercise 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 of such power or right 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 right to exercise the same at any subsequent time or times hereunder. 19 Termination of Agreement. This Agreement and Executive's right to receive any Phantom Equity Payment shall terminate on December 31, 2009. This Agreement shall also terminate upon the consummation of a Company Sale or IPO Exit Transaction; provided, that such termination shall not effect any accrued right or obligation of either party or any provision hereof which is intended to survive termination, including the Company's obligation to make any payment to Executive pursuant to Sections 2.1 or 2.2. IN WITNESS WHEREOF, the parties have executed this Agreement as of the date and year first written above. REMINGTON PRODUCTS COMPANY L.L.C. By:----------------------------- ----------------------- Executive 12 Schedule A to Super Performance Based Phantom Equity Agreement with------------ APPLICABLE PERCENTAGE: ____%. 13 EX-10.28 7 PROMISSORY NOTE EXHIBIT 10.28 PROMISSORY NOTE $150,000 New York, New York January 14, 1998 FOR VALUE RECEIVED, receipt of which is hereby acknowledged, REMINGTON PRODUCTS COMPANY, L.L.C., a Delaware limited liability company (the "Company"), hereby promises to pay to the order of Allen S. Lipson ("Executive'), the principal sum of $150,000 (the "Principal Amount"), in lawful money of the United States of America, together with interest on the unpaid Principal Amount of six and one half percent (6.5%) per annum, such interest to be paid on the date of issuance and on each and every March 31, June 30, September 30 and December 31 thereafter. 1. The outstanding Principal Amount and any unpaid and accrued interest shall be paid in full by the Company without notice or demand on the first to occur of the following: a. Within sixty days following the termination of Executive's employment with the Company or any of its subsidiaries; provided, that if Executive's employment is terminated for Cause, the Company shall have no further obligation to make any payment of the Principal Amount and this Promissory Note shall be deemed canceled. b. Upon the Payment Date, as such term is defined in the Time Based Phantom Equity Agreement, Performance Based Phantom Equity Agreement and Super Performance Based Phantom Equity Agreement, each between the Company and Executive and each dated the same date as this Payment Note (the "Agreements"); provided, that if (i) the Payment Date occurs for any reason other than termination of Executive's employment with the Company or any of its subsidiaries and (ii) the aggregate amount of all Phantom Equity Payments (as defined in the Agreements) due Executive is less than the outstanding Principal Amount, the outstanding Principal Amount shall be automatically reduced so that it equals the aggregate amount of such Phantom Equity Payments and any remaining amounts that may have been due under this Note are forfeited. 2. For purposes of this Promissory Note, "Cause" shall mean termination of the employment of Executive by the Company or any subsidiary thereof due to (a) 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), (b) the commission by Executive of a felony, (c) 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 (d) 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. In the event Executive terminates his employment and at such time Executive was under active investigation by the Company or any of its subsidiaries for possible termination for Cause and thereafter the Company makes a good faith determination that sufficient facts existed to support Executive's termination for Cause or, within 45 days following such resignation, the Company or any of its subsidiaries obtains information which, if known prior to Executive's resignation, would have permitted the Company to terminate Executive for Cause, the Executive shall be deemed terminated for Cause for all purposes of this Agreement notwithstanding the fact that Executive had resigned. 3. All payments of the Principal Amount and interest thereon shall be made by the Company to an account designated by the holder of this Note. 4. The Company may, at its option, prepay all or any part of the Principal Amount at any time before maturity, provided that such prepayment is first applied to all accrued and unpaid interest through the date of prepayment. 5. The Company hereby waives presentment for payment, demand, notice of nonpayment, notice of protest and all other notices in connection the delivery, acceptance, performance, default, dishonor or enforcement of the payment of this Note. 6. No delay or omission by Executive in the exercise of any rights or remedies shall operate as a waiver thereof and no single or partial exercise by Executive of any rights or remedies shall preclude other or further exercise thereof or of any other right or remedy. 7. This instrument shall be construed according to and be governed by the laws of the State of New York without regard to laws as to the conflict of laws. REMINGTON PRODUCTS COMPANY, L.L.C. /s/ Neil P. DeFeo By:-------------------- President EX-10.33 8 1998 BONUS PLAN Exhibit 10.33 REMINGTON PRODUCTS COMPANY 1998 BONUS PROGRAM Except where indicated, the program would be identical to the 1997 Bonus Program. 1. In U.S., all exempt (not paid for overtime) employees participate. In foreign operations, local standards dictate who receives bonus. 2. Target bonuses: a. In US, target bonuses would be: Grade Level Target as % of Salary ---------------- --------------------- 10 5% 11 5 12 5 13 5 14 5 15 5 16 7 17 10 18 15 19 20 20 25 21 30 22 35 23 40 24 45 25 50 26 55 27 60 28 65 29 70 30 75 (b) Outside U.S., target bonuses run from 2% to maximum of 35% (other than Hoddinott and Kimpton). 3. For senior executives (Castaldi, Handler, Hoddinott, Kimpton, Lee, Linton, Lipson and Simmone) 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 1 below direct reports, 100% of bonus dependent upon performance of applicable business. Target bonus for many people in the U.S. (i.e. manufacturing and finance) will be entirely dependent upon worldwide results. NEW FOR 1998: CEO has discretion to provide that up to 20% of target bonus for any senior executive and for individuals in level immediately below will be dependent upon achievement of measurable personal goals. 4. 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. The same scale would apply to that portion of the bonus dependent upon achievement of a personal goal, i.e . no bonus paid unless 90% of goal achieved with a maximum of 200% of the possible. 5. Payment scale: Achievement of Budget % of Target Bonus 90% 50% 95 75 100 100 100+ Increases 2 points for every point above 100 6. The CEO has the authority to increase an individual's bonus above the applicable amount and to grant a bonus to individuals not in the bonus program. 7. Payment of bonus: Entire bonus paid upon completion of year-end audit. 8. 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. 9. 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. 2 EX-21 9 SUBSIDIARIES EXHIBIT 21 SUBSIDIARIES State or Other Jurisdiction of Incorporation or Registrant Subsidiary Organization - ---------- ---------- ------------ Remington Remington Capital Corp. Delaware Remington Remington Consumer Products United Kingdom Limited Remington Remington Corporation, L.L.C. Delaware Remington Remington Licensing Corporation Delaware Remington Remington Products Australia Victoria,Australia Pty. Ltd. Remington Shaver Shop Pty. Ltd. Victoria,Australia Remington Remington Products (Canada), Inc. Canada Remington Remington Products GmbH Germany Remington Remington Products New Zealand New Zealand Limited Remington Remington Rand Corporation Delaware EX-24 10 POWERS 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, 1997, 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 ____ day of March, 1998, by the following persons: /s/ Neil P. DeFeo - ----------------------------------- -------------------------- Neil P. DeFeo, Victor K. Kiam, II, Chief Executive Officer, President and Director Chairman and 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 /s/Daniel S. O'Connell - ----------------------------------- -------------------------- Arthur J. Nagle, Daniel S. O'Connell, Director Director /s/William B. Connell /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-27 11 FDS FOR YEAR ENDED DECEMBER 31, 1997
5 EXHIBIT 27 This schedule contains summary financial information extracted from the audited financial statements of the Company for the year ended December 31, 1997, and is qualified in its entirety by reference to such financial statements. 1,000 YEAR DEC-31-1997 JAN-01-1997 DEC-31-1997 5,408 0 53,052 734 60,507 120,492 16,033 3,740 205,245 44,131 178,114 0 0 0 (18,278) 205,245 241,572 241,572 141,296 141,296 86,130 0 19,318 (5,698) (2,225) (7,923) 0 0 0 (7,923) 0 0
-----END PRIVACY-ENHANCED MESSAGE-----