-----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, UF0/rKpP1GGevCJtjEqnpa4D96lGeKFJUFldZzIYw1eiG8OqTBUE1W3SG3TIR3cx DWwnxnEN6I6i9PcCSpJ2Iw== /in/edgar/work/20000811/0000750339-00-000005/0000750339-00-000005.txt : 20000921 0000750339-00-000005.hdr.sgml : 20000921 ACCESSION NUMBER: 0000750339-00-000005 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 4 CONFORMED PERIOD OF REPORT: 20000630 FILED AS OF DATE: 20000811 FILER: COMPANY DATA: COMPANY CONFORMED NAME: AMERICAN SAFETY RAZOR CO CENTRAL INDEX KEY: 0000750339 STANDARD INDUSTRIAL CLASSIFICATION: [3420 ] IRS NUMBER: 541050207 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 033-60298 FILM NUMBER: 692440 BUSINESS ADDRESS: STREET 1: 240 CEDAR KNOLLS RD STREET 2: SUITE 401 CITY: CEDAR KNOLLS STATE: NJ ZIP: 07927 BUSINESS PHONE: 5042488000 MAIL ADDRESS: STREET 1: 240 CEDAR KNOLLS RD STREET 2: SUITE 401 CITY: CEDAR KNOLLS STATE: NJ ZIP: 07927 10-Q 1 0001.txt SECOND QUARTER FORM 10-Q FOR AMERICAN SAFETY RAZOR UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q [x] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the Quarter Ended June 30, 2000 OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from ________ to ___________ Commission File Number 0-21952 AMERICAN SAFETY RAZOR COMPANY (Exact name of registrant as specified in its charter) Delaware 54-1050207 -------- ---------- (State of incorporation) (I.R.S. Employer Identification Number) 240 Cedar Knolls Road, Suite 401, Cedar Knolls, New Jersey 07927 - ----------------------------------------------------------------- (Address of principal executive offices, including zip code) (973) 753-3000 -------------- (Registrant's telephone number) 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 the number of shares outstanding of each of the issuer's classes of common stock, as of August 2, 2000. Class Outstanding at August 2, 2000 ----- ----------------------------- Common Stock, $.01 Par Value 12,110,349 AMERICAN SAFETY RAZOR COMPANY Index Page Number ----------- Part I. Financial Information Item 1. Financial Statements Condensed Consolidated Balance Sheets 1 Condensed Consolidated Statements of Operations (Unaudited) 3 Condensed Consolidated Statements of Comprehensive Income (Unaudited) 4 Condensed Consolidated Statements of Cash Flows (Unaudited) 5 Notes to Condensed Consolidated Financial Statements (Unaudited) 6 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 20 Item 3. Quantitative and Qualitative Disclosures About Market Risk 28 Part II. Other Information Item 1. Legal Proceedings 28 Item 6. Exhibits and Reports on Form 8-K 28 Signatures 29 AMERICAN SAFETY RAZOR COMPANY CONDENSED CONSOLIDATED BALANCE SHEETS (In thousands) Company ---------------------------- June 30, December 31, 2000 1999 ----------- ------------ (Unaudited) ASSETS Current assets: Cash and cash equivalents $ 3,776 $ 12,500 Accounts receivable, net 47,280 46,252 Inventories 60,819 54,404 Deferred income taxes 6,795 6,814 Prepaid expenses 2,345 1,882 -------- -------- Total current assets 121,015 121,852 Property and equipment 104,661 98,398 Less accumulated depreciation (14,878) (8,407) -------- -------- 89,783 89,991 Intangible assets, net: Goodwill, trademarks and patents 157,506 159,675 Other 5,976 6,826 -------- -------- 163,482 166,501 Prepaid pension cost and other 25,886 24,527 -------- -------- Total assets $400,166 $402,871 ======== ======== See accompanying notes. -1- AMERICAN SAFETY RAZOR COMPANY CONDENSED CONSOLIDATED BALANCE SHEETS (In thousands, except share data)
Company ------------------------------- June 30, December 31, 2000 1999 ----------- ---------------- (Unaudited) LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Accounts payable $ 16,334 $ 13,711 Accrued expenses and other 21,465 23,131 Current maturities of long-term obligations 10,070 10,508 -------- -------- Total current liabilities 47,869 47,350 Long-term obligations 180,126 175,108 Retiree benefits and other 27,662 27,333 Deferred income taxes 24,451 24,078 -------- -------- Total liabilities 280,108 273,869 -------- -------- Stockholders' equity: Common stock, $.01 par value, 25,000,000 shares authorized; 12,110,349 shares issued and outstanding at June 30, 2000 and December 31, 1999 121 121 Additional paid-in capital 172,843 172,843 Advances to RSA Holdings Corporation, net (52,383) (42,714) Retained earnings (accumulated deficit) 334 (1,258) Accumulated other comprehensive (loss) income (857) 10 -------- -------- 120,058 129,002 -------- -------- Total liabilities and stockholders' equity $400,166 $402,871 ======== ========
See accompanying notes. -2- AMERICAN SAFETY RAZOR COMPANY CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED) (In thousands, except per share data)
Company Predecessor Company Predecessor ----------------- ----------- ------- ----------- Period Period Period Three from from Six from Months April 24, April 1, Months January 1, Ended 1999 to 1999 to Ended 1999 to June 30, June 30, April 23, June 30, April 23, 2000 1999 1999 2000 1999 -------- --------- --------- -------- ---------- Net sales $79,921 $59,942 $17,304 $157,130 $87,591 Cost of sales: Cost of sales 53,419 38,185 11,691 105,220 58,520 Purchase accounting adjustment to inventory - 9,008 - - - ------- ------- ------- -------- ------- Gross profit 26,502 12,749 5,613 51,910 29,071 Selling, general and administrative expenses 17,308 13,130 4,922 37,008 21,429 Amortization of intangible assets 1,174 919 188 2,362 835 Transaction expenses - - 11,440 - 11,440 ------- ------- ------- -------- ------- Operating income (loss) 8,020 (1,300) (10,937) 12,540 (4,633) Interest expense 4,839 3,972 877 9,553 3,907 ------- ------- ------- -------- ------- Income (loss) before income taxes and extraordinary item 3,181 (5,272) (11,814) 2,987 (8,540) Income taxes (benefit) 1,486 (1,547) (2,142) 1,395 (842) ------- ------- ------- -------- ------- Income (loss) before extraordinary item 1,695 (3,725) (9,672) 1,592 (7,698) Extraordinary item, net of income tax benefit - 611 118 - 118 ------- ------- ------- ------- ------- Net income (loss) $ 1,695 $(4,336) $(9,790) $ 1,592 $(7,816) ======= ======= ======= ======= ======= Basic earnings per share: Income (loss) before extraordinary item $0.14 $(0.31) $(0.80) $0.13 $(0.64) Extraordinary item - (0.05) (0.01) - (0.01) ----- ------ ------ ----- ------ Net income (loss) $0.14 $(0.36) $(0.81) $0.13 $(0.65) ===== ====== ====== ===== ====== Weighted average number of shares outstanding 12,110 12,110 12,110 12,110 12,110 ------- ------- ------- -------- ------- Diluted earnings per share: Income (loss) before extraordinary item $0.14 $(0.31) $(0.80) $0.13 $(0.64) Extraordinary item - (0.05) (0.01) - (0.01) ----- ------ ------ ----- ------ Net income (loss) $0.14 $(0.36) $(0.81) $0.13 $(0.65) ===== ====== ====== ===== ====== Weighted average number of shares outstanding 12,110 12,122 12,207 12,110 12,198 ====== ====== ====== ====== ======
See accompanying notes. -3- CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (UNAUDITED) (In thousands)
Company Predecessor Company Predecessor ------------------- ----------- ------- ----------- Period Period Period Three from from Six from Months April 24, April 1, Months January 1, Ended 1999 to 1999 to Ended 1999 to June 30, June 30, April 23, June 30, April 23, 2000 1999 1999 2000 1999 -------- --------- --------- -------- ---------- Net income (loss) $1,695 $(4,336) $(9,790) $1,592 $(7,816) Other comprehensive income (loss): Foreign currency translation adjustments (559) (310) 317 (867) (116) ------ ------- -------- ------ ------- Comprehensive income (loss) $1,136 $(4,646) $(9,473) $ 725 $(7,932) ====== ======= ======= ====== =======
See accompanying notes. -4- AMERICAN SAFETY RAZOR COMPANY CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) (In thousands)
Company Predecessor --------------------- ----------- Period Period Six from from Months April 24, January 1, Ended 1999 to 1999 to June 30, June 30, April 23, 2000 1999 1999 -------- ---------- ----------- Operating activities Net income (loss) $1,592 $(4,336) $(7,816) Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities: Extraordinary item - 611 118 Depreciation and amortization 8,917 2,960 4,105 Amortization of financing costs 726 346 180 Retiree benefits and other (1,897) (872) (719) Deferred income taxes 392 (3,326) 232 Changes in operating assets and liabilities: Accounts receivable (1,028) (6,062) 7,710 Inventories (6,415) 9,623 (7,748) Income taxes receivable - 1,518 (2,252) Prepaid expenses (463) (18) 205 Accounts payable 2,623 216 1,723 Accrued and other expenses (1,666) 1,768 (1,072) ------ ------ ------ Net cash provided by (used in) operating activities 2,781 2,428 (5,334) Investing activities Capital expenditures (6,347) (1,354) (3,638) Other - 2 49 ------ ------- ------- Net cash used in investing activities (6,347) (1,352) (3,589) Financing activities Repayment of long-term obligations (5,450) (33,793) (25,846) Proceeds from borrowings 10,000 32,801 65,337 Deferred loan fees (39) - (7,606) Proceeds from exercise of stock options - - 2 Advances to parent, net (9,669) - (24,155) ------ ------- ------- Net cash (used in) provided by financing activities (5,158) (992) 7,732 ------ ------- ------- Net (decrease) increase in cash and cash equivalents (8,724) 84 (1,191) Cash and cash equivalents, beginning of period 12,500 2,262 3,453 ------ ------ ------- Cash and cash equivalents, end of period $3,776 $2,346 $2,262 ====== ====== ======
See accompanying notes. -5- AMERICAN SAFETY RAZOR COMPANY Notes to Condensed Consolidated Financial Statements (Unaudited) NOTE A - BASIS OF PRESENTATION The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with generally accepted accounting principles for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. Operating results for the three and six month periods ended June 30, 2000, are not necessarily indicative of the results that may be expected for the year ended December 31, 2000. The balance sheet at December 31, 1999 has been derived from the audited financial statements at that date but does not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. For further information, refer to the consolidated financial statements and footnotes thereto included in the Registrant's Annual Report on Form 10-K for the year ended December 31, 1999. As a result of the acquisition of the Company, effective April 23, 1999, and new basis of accounting, the Company's financial statements for the period subsequent to the acquisition are not comparable to the Predecessor's financial statements for the period prior to the acquisition. NOTE B - INVENTORIES Inventories consisted of: Company ------------------------------------- June 30, 2000 December 31, 1999 ------------- ----------------- (In thousands) Raw materials $29,008 $27,928 Work-in-process 6,260 4,521 Finished goods 21,319 18,098 Operating supplies 4,232 3,857 ------- ------- $60,819 $54,404 ======= ======= NOTE C - LONG TERM OBLIGATIONS In May 2000, the Company amended its $190.0 million credit agreement to provide for the Company to make a $10.0 million advance to its parent company, RSA Holdings Corporation, for the partial prepayment of its outstanding note payable. In May 2000, the Company borrowed $10.0 million under its revolving credit facility and advanced the $10.0 million to RSA Holdings Corporation to prepay a portion of its outstanding note payable. At June 30, 2000, the Company had approximately $15.0 million available for future borrowings under its revolving credit facility. -6- NOTE D - EARNINGS PER SHARE The difference between the weighted average number of shares outstanding for computing basic earnings per share and diluted earnings per share related to the Predecessor's employee stock options outstanding which were assumed to be converted for the diluted earnings per share calculation when the average market price of the Predecessor's common stock for the period exceeded the exercise price of the employee stock options which were outstanding. NOTE E - SEGMENT INFORMATION
Company Company Predecessor --------------------- --------------------- ---------------------- Three Months Period from Period from Ended April 24, 1999 to April 1, 1999 to June 30, 2000 June 30, 1999 April 23, 1999 --------------------- ---------------------- ---------------------- Operating Operating Operating Net Income Net Income Net Income Sales (Loss) Sales (Loss) Sales (Loss) --------- ---------- --------- ---------- --------- ---------- (In Thousands) Razors and Blades $52,840 $7,867 $40,332 $(1,861) $10,907 $(10,639) Cotton and Foot Care 19,420 (364) 13,566 (151) 4,998 (169) Custom Bar Soap 7,661 517 6,044 712 1,399 (129) ------- ------- ------- -------- ------- -------- $79,921 8,020 $59,942 (1,300) $17,304 (10,937) ======= ======= ======= Interest expense 4,839 3,972 877 ------- -------- -------- Income (loss) before income taxes and extraordinary item $3,181 $(5,272) $(11,814) ====== ======= ========
Company Predecessor ----------------------- --------------------- Six Months Period from Ended January 1, 1999 to June 30, 2000 April 23, 1999 ----------------------- --------------------- Operating Operating Net Income Net Income Sales (Loss) Sales (Loss) --------- ---------- ------- ---------- Razors and Blades $103,308 $12,451 $55,189 $(4,673) Cotton and Foot Care 39,646 (309) 25,551 258 Custom Bar Soap 14,176 398 6,851 (218) --------- -------- -------- ------- $157,130 12,540 $87,591 (4,633) ======== ======= Interest expense 9,553 3,907 -------- ------- Income (loss) before income taxes and extraordinary item $ 2,987 $(8,540) ======= =======
Total Assets ------------ June 30, 2000 ------------- Razors and Blades $312,809 Cotton and Foot Care 56,646 Custom Bar Soap 30,711 -------- $400,166 ======== -7- NOTE F - CONTINGENCIES Cotton Matter: - -------------- During 1998, the Company purchased bleached cotton from an outside supplier for use in its pharmaceutical coil business. The Company converted this cotton from incoming bales into a coil, which was shipped to its pharmaceutical customers to be used as filler in bottles of oral dosage forms of pharmaceutical products to prevent breakage. During the period from March through November of 1998, the process by which the Company's supplier bleached this cotton was changed by introducing an expanded hydrogen peroxide treatment. Subsequent testing indicated varying levels of residual hydrogen peroxide in the cotton processed during this time period and the supplier in November 1998 reduced the levels of residual hydrogen peroxide in its bleaching process. The Company, to date, has received complaints from a number of customers alleging defects in the cotton supplied them during the period and asserting these defects may have led to changes in their products pharmaceutical appearance, and with respect to a limited number of products, potency. No lawsuits have been filed by any of these customers. The Company has received written notice of claims for damages in the aggregate amount of approximately $117.0 million. In addition, $113.0 million of this amount is for alleged lost profits from two customers, which lost profits have not been substantiated. It is possible that additional damage claims might be forthcoming. On March 2, 1999, at the request of the Food and Drug Administration, the Company notified all (numbering approximately 85) of its pharmaceutical cotton coil customers that it was withdrawing from the market those lots of cotton coil which may contain elevated levels of hydrogen peroxide. The Company has notified its supplier that, in the Company's view, the supplier is primarily responsible for damages, if any, that may arise out of this matter. At this time, the Company's supplier has agreed to be responsible for the cost of fiber, bleaching and freight of returned product, but has not agreed to be responsible for any other damages and has expressed an intention to assert defenses to the Company's claims. The Company's insurance carriers have been timely notified of the existence of the claim and have agreed to provide defense in a reservation of rights letter, but are continuing to evaluate whether coverage would apply to all aspects of the claims. The Company is advised by outside counsel that it has strong legal arguments that the aggregate amount of insurance available for these claims would be sufficient to cover the magnitude of the claims currently expressed. The Company also has been advised by its outside counsel that it has a number of valid defenses to potential customer claims as well as a third party claim against its suppliers for damages, if any, incurred by the Company. However, management cannot at this time make a meaningful estimate of the amount or range of loss that could result from an unfavorable outcome relating to this overall issue, and accordingly, there can be no assurance that the Company's exposure from this matter might not potentially exceed the combination of its insurance coverages and recourse to its suppliers. It is therefore possible that the Company's results of operations or cash flows in a particular quarterly or annual period or its financial position could be significantly or adversely affected by an ultimate unfavorable outcome of this matter. Other Matter: - ------------- In June 1999, the Company received notice of the filing of a lawsuit by The Gillette Company ("Gillette") asserting claims for damages and injunctive relief for alleged patent infringement, misappropriation of trade dress, false advertising and breach of contract in connection with the marketing of the Company's two-bladed and three- bladed shaving cartridge systems (the MBC(TM) introduced in 1994 and the Tri-Flexxx(TM) introduced in 1999). In August 1999, the Company filed an answer and counterclaims in which it denied Gillette's allegations, sought a declaration that Gillette's patents are not infringed, are invalid and unenforceable, and asserted counterclaims against Gillette for damages and injunctive relief for, among other things, alleged antitrust violations and false advertising. Gillette's time to respond to the Company's answer and counterclaims has been postponed pending ongoing settlement discussions. The Company believes that Gillette's claims are without merit and intends to defend against them vigorously, as well as to vigorously pursue the Company's counterclaims against Gillette. The Company does not believe it has any material liability with respect to Gillette's claims described above. However, management and counsel at this time are unable to make a meaningful estimate of the amount or range of loss that could result from an unfavorable outcome relating to this matter. The Company will reassess this matter as new facts become available. -8- NOTE G - ADOPTION OF STOCK INCENTIVE PLAN In June 2000, RSA Holdings Corporation, the Company's parent, adopted a stock incentive plan, whereby stock options may be granted to directors, officers and other key employees of RSA Holdings Corporation and its subsidiaries to purchase a specified number of shares of common stock for a term not to exceed 10 years. The plan provides for the granting of options to purchase up to 110,000 shares of common stock of RSA Holdings Corporation. Grants of options to be issued to directors, officers and other key employees vest and become exercisable upon the attainment of certain performance goals at the end of certain performance periods, as defined in the plan or after nine years. At June 30, 2000, there were 95,500 stock options outstanding under the RSA Holdings Corporation stock plan. In accordance with APB Opinion No. 25, "Accounting for Stock Issued to Employees," the Company has accounted for the provisions of the RSA Holdings Corporation stock plan in its consolidated financial statements. Accordingly, because the exercise price of the stock options equaled the fair market value of the underlying stock on the measurement date, no compensation expense was recognized. NOTE H - NEW ACCOUNTING STANDARDS In June 1998, the Financial Accounting Standards Board (the "FASB") issued Statement of Financial Accounting Standards No. 133, "Accounting for Derivative Instruments and Hedging Activities" ("FAS 133"). FAS 133 establishes standards for accounting and disclosure of derivative instruments. This new standard, as amended by FAS 137 and FAS 138, is effective for fiscal quarters of fiscal years beginning after June 15, 2000. The Company is required to adopt FAS 133 on January 1, 2001. The implementation of this new standard is not expected to have a material effect on the Company's results of operations or financial position. In March 2000, the FASB issued FASB Interpretation No. 44, "Accounting for Certain Transactions Involving Stock Compensation", an interpretation of APB Opinion No. 25, "Accounting for Stock Issued to Employees." The Interpretation clarifies guidance for certain issues that arose in the application of APB Opinion No. 25. The Company is required to adopt the Interpretation on July 1, 2000. The implementation of this new standard is not expected to have a material effect on the Company's results of operations or financial position. In December 1999, the Securities and Exchange Commission issued Staff Accounting Bulletin (SAB) No. 101, "Revenue Recognition in Financial Statements". SAB No. 101 provides additional guidance relating to revenue recognition. The Company is required to adopt SAB No. 101, as amended by SAB No. 101A and SAB No. 101B, in the fourth quarter of 2000 and is currently assessing the impact, if any, that SAB No. 101 may have on the Company's results of operations or financial position. -9- NOTE I - SUPPLEMENTAL GUARANTOR FINANCIAL INFORMATION The Company's $69.3 million of 9 7/8% Series B Senior Notes due 2005 have been guaranteed, on a joint and several basis by certain domestic subsidiaries of the Company, which guarantees are senior unsecured obligations of each guarantor and will rank pari passu in right of payment with all other indebtedness of each guarantor. However, the guarantee of one of the guarantor subsidiaries ranks junior to its outstanding subordinated note. The following condensed consolidating financial information presents condensed consolidating financial statements as of June 30, 2000 and December 31, 1999 (the Company), for the six months ended June 30, 2000 (the Company), for the period from April 24, 1999 to June 30, 1999 (the Company), and for the period from January 1, 1999 to April 23, 1999 (Predecessor) of American Safety Razor Company - the parent company, the guarantor subsidiaries (on a combined basis), the non-guarantor subsidiaries (on a combined basis), and elimination entries necessary to combine such entities on a consolidated basis. Separate financial statements and other disclosures concerning the guarantor subsidiaries are not presented because management has determined that such information would not be material to the holders of the 9 7/8% Series B Senior Notes. -10- Condensed Consolidating Balance Sheets (Unaudited) June 30, 2000
Company ----------------------------------------------------------------- Non- Guarantor guarantor ASR Subsidiaries Subsidiaries Eliminations Consolidated --------- ------------ ------------ ------------ ------------ (In thousands) Assets Current assets: Cash and cash equivalents $ 124 $ 1,612 $ 2,040 $ - $ 3,776 Accounts receivable, net 21,305 10,265 16,042 (332) 47,280 Advances receivable--subsidiaries 72,490 - - (72,490) - Inventories 32,146 15,796 13,486 (609) 60,819 Income taxes and prepaid expenses 6,180 2,513 447 - 9,140 -------- ------- ------- --------- -------- Total current assets 132,245 30,186 32,015 (73,431) 121,015 Property and equipment, net 58,491 24,399 6,893 - 89,783 Intangible assets, net 135,951 22,496 5,035 - 163,482 Prepaid pension cost and other 17,110 8,756 20 - 25,886 Investment in subsidiaries 32,588 - 7,171 (39,759) - -------- ------- ------- --------- -------- Total assets $376,385 $85,837 $51,134 $(113,190) $400,166 ======== ======= ======= ========= ======== Liabilities and Stockholders' Equity Current liabilities: Accounts payable, accrued expenses and other $ 22,064 $ 9,892 $ 5,847 $ (4) $ 37,799 Advances payable--subsidiaries 7,633 48,339 17,455 (73,427) - Current maturities of long-term obligations 9,946 99 25 - 10,070 -------- ------- ------- --------- -------- Total current liabilities 39,643 58,330 23,327 (73,431) 47,869 Long-term obligations 179,992 134 - - 180,126 Retiree benefits and other 17,007 10,655 - - 27,662 Deferred income taxes 19,679 4,448 324 - 24,451 -------- ------- ------- --------- -------- Total liabilities 256,321 73,567 23,651 (73,431) 280,108 -------- ------- ------- --------- -------- Stockholders' equity Common stock 121 - - - 121 Additional paid-in capital 172,843 12,948 23,736 (36,684) 172,843 Advances to RSA Holdings Corporation, net (52,383) - - - (52,383) Retained earnings (accumulated deficit) 334 (678) 4,604 (3,926) 334 Accumulated other comprehensive loss (851) - (857) 851 (857) -------- ------- ------- --------- -------- 120,064 12,270 27,483 (39,759) 120,058 -------- ------- ------- --------- -------- Total liabilities and stockholders' equity $376,385 $85,837 $51,134 $(113,190) $400,166 ======== ======= ======= ========= ========
-11- Condensed Consolidating Balance Sheets December 31, 1999
Company ---------------------------------------------------------------- Non- Guarantor guarantor ASR Subsidiaries Subsidiaries Eliminations Consolidated --------- ------------ ------------ ------------ ------------ (In thousands) Assets Current assets: Cash and cash equivalents $ 6,221 $ 1,180 $ 5,081 $ 18 $ 12,500 Accounts receivable, net 19,927 12,906 13,751 (332) 46,252 Advances receivable--subsidiaries 59,790 - - (59,790) - Inventories 29,825 13,322 11,947 (690) 54,404 Income taxes and prepaid expenses 6,511 1,912 273 - 8,696 -------- ------- ------- --------- -------- Total current assets 122,274 29,320 31,052 (60,794) 121,852 Property and equipment, net 58,005 24,731 7,255 - 89,991 Intangible assets, net 138,404 22,994 5,103 - 166,501 Prepaid pension cost and other 16,133 8,373 21 - 24,527 Investment in subsidiaries 32,506 - 8,587 (41,093) - -------- ------- ------- --------- -------- Total assets $367,322 $85,418 $52,018 $(101,887) $402,871 ======== ======= ======= ========= ======== Liabilities and Stockholders' Equity Current liabilities: Accounts payable, accrued expenses and other $ 19,299 $10,830 $ 6,714 $ (1) $ 36,842 Advances payable--subsidiaries - 44,289 16,504 (60,793) - Current maturities of long-term obligations 7,964 1,417 1,127 - 10,508 -------- ------- ------- --------- -------- Total current liabilities 27,263 56,536 24,345 (60,794) 47,350 Long-term obligations 174,954 154 - - 175,108 Retiree benefits and other 16,750 10,583 - - 27,333 Deferred income taxes 19,353 4,392 333 - 24,078 -------- ------- ------- --------- -------- Total liabilities 238,320 71,665 24,678 (60,794) 273,869 -------- ------- ------- --------- -------- Stockholders' equity Common stock 121 485 87 (572) 121 Additional paid-in capital 172,843 12,463 23,391 (35,854) 172,843 Advances to RSA Holdings Corporation, net (42,714) - - - (42,714) Retained earnings (accumulated deficit) (1,258) 805 3,852 (4,657) (1,258) Accumulated other comprehensive income 10 - 10 (10) 10 -------- ------- ------- --------- -------- 129,002 13,753 27,340 (41,093) 129,002 -------- ------- ------- ---------- -------- Total liabilities and stockholders' equity $367,322 $85,418 $52,018 $(101,887) $402,871 ======== ======= ======= ========= ========
-12- Condensed Consolidating Statements of Operations (Unaudited) Six Months Ended June 30, 2000
Company --------------------------------------------------------------- Non- Guarantor guarantor ASR Subsidiaries Subsidiaries Eliminations Consolidated -------- ------------ ------------ ------------ ------------ (In thousands) Net sales $82,276 $54,284 $33,506 $(12,936) $157,130 Cost of sales 46,888 46,253 25,015 (12,936) 105,220 ------- ------- ------- -------- -------- Gross profit 35,388 8,031 8,491 - 51,910 Selling, general and administrative expenses 23,625 7,442 5,941 - 37,008 Amortization of intangible assets 1,796 498 68 - 2,362 ------- ------- ------- -------- -------- Operating income 9,967 91 2,482 - 12,540 Other income (expense): Equity in earnings (losses) of affiliates 685 - (1,416) 731 - Interest expense (8,333) (2,297) 1,077 - (9,553) ------- ------- ------- -------- -------- Income (loss) before income taxes 2,319 (2,206) 2,143 731 2,987 Income taxes (benefit) 727 (723) 1,391 - 1,395 ------- ------- ------- -------- -------- Net income (loss) $ 1,592 $(1,483) $ 752 $ 731 $ 1,592 ======= ======= ======= -======= ========
-13- Condensed Consolidating Statements of Income (Unaudited) For the Period from April 24, 1999 to June 30, 1999 (In thousands)
Company -------------------------------------------------------------- Non- Guarantor guarantor ASR Subsidiaries Subsidiaries Eliminations Consolidated ------- ------------ ------------ ------------ ------------ Net sales $32,902 $19,729 $11,751 $(4,440) $59,942 Cost of sales: Other costs 17,452 16,358 8,815 (4,440) 38,185 Purchase accounting adjustment to inventory 7,910 215 883 - 9,008 ------- ------- ------- ------- ------- Gross profit 7,540 3,156 2,053 - 12,749 Selling, general and administrative expenses 8,898 2,287 1,945 - 13,130 Amortization of intangible assets 676 236 7 - 919 ------- ------- ------- ------- ------- Operating income (loss) (2,034) 633 101 - (1,300) Operating income (expense): Equity in earnings (losses) of affiliates 286 - (484) 198 - Interest expense (3,561) (764) 353 - (3,972) ------- ------- ------- ------- ------- Income (loss) before income taxes and extraordinary item (5,309) (131) (30) 198 (5,272) Income taxes (benefit) (1,584) (16) 53 - (1,547) ------- ------- ------- ------- ------- Income (loss) before extraordinary item (3,725) (115) (83) 198 (3,725) Extraordinary item 611 - - - 611 ------- ------- ------- ------- ------- Net income (loss) $(4,336) $ (115) $ (83) $ 198 $(4,336) ======= ======= ======= ======= =======
-14- Condensed Consolidating Statements of Income (Unaudited) For the Period from January 1, 1999 to April 23, 1999 (In thousands)
Predecessor ---------------------------------------------------------------- Non- Guarantor guarantor ASR Subsidiaries Subsidiaries Eliminations Consolidated ------- ------------ ------------ ------------ ------------ Net sales $46,889 $32,731 $17,136 $(9,165) $87,591 Cost of sales 26,237 28,514 12,934 (9,165) 58,520 ------- ------- ------- ------- ------- Gross profit 20,652 4,217 4,202 - 29,071 Selling, general and administrative expenses 13,665 3,860 3,904 - 21,429 Amortization of intangible assets 470 318 47 - 835 Transaction expenses 11,440 - - - 11,440 ------- ------- ------- ------- ------- Operating income (loss) (4,923) 39 251 - (4,633) Operating income (expense): Equity in earnings of affiliates (135) - (394) 529 - Interest expense (3,193) (1,300) 586 - (3,907) ------- ------- ------- ------- ------- Income (loss) before income taxes and extraordinary item (8,251) (1,261) 443 529 (8,540) Income taxes (benefit) (553) (570) 281 - (842) ------- ------- ------- ------- ------- Income (loss) before extraordinary item (7,698) (691) 162 529 (7,698) Extraordinary item 118 - - - 118 ------- ------- ------- ------- ------- Net income (loss) $(7,816) $ (691) $ 162 $ 529 $(7,816) ======= ======== ======== ======= =======
-15- Condensed Consolidating Statements of Comprehensive Income (Unaudited) Six Months Ended June 30, 2000
Company -------------------------------------------------------------- Non- Guarantor guarantor ASR Subsidiaries Subsidiaries Eliminations Consolidated ------- ------------ ------------ ------------ ------------ (In thousands) Net income (loss) $1,592 $(1,483) $ 752 $ 731 $1,592 Other comprehensive loss: Foreign currency translation adjustments (861) - (867) 861 (867) ------ ------- ------ ------ ------ Comprehensive income (loss) $ 731 $(1,483) $(115) $1,592 $ 725 ====== ======= ===== ====== ======
Condensed Consolidating Statements of Comprehensive Income (Unaudited) For the Period from April 24, 1999 to June 30, 1999 (In thousands)
Company --------------------------------------------------------------- Non- Guarantor guarantor ASR Subsidiaries Subsidiaries Eliminations Consolidated --------- ------------ ------------ ------------ ------------ (In thousands) Net income (loss) $(4,336) $(115) $ (83) $198 $(4,336) Other comprehensive loss: Foreign currency translation adjustments - - (313) 3 (310) ------- ----- ----- ---- ------- Comprehensive income (loss) $(4,336) $(115) $(396) $201 $(4,646) ======= ===== ===== ==== =======
Condensed Consolidating Statements of Comprehensive Income (Unaudited) For the Period from January 1, 1999 to April 23, 1999 (In thousands)
Predecessor --------------------------------------------------------------- Non- Guarantor guarantor ASR Subsidiaries Subsidiaries Eliminations Consolidated --------- ------------ ------------ ------------ ------------ (In thousands) Net income (loss) $(7,816) $(691) $162 $529 $(7,816) Other comprehensive loss: Foreign currency translation adjustments - - (116) - (116) ------- ----- ---- ---- ------- Comprehensive income (loss) $(7,816) $(691) $ 46 $529 $(7,932) ======= ===== ==== ==== =======
-16- Condensed Consolidating Statements of Cash Flows (Unaudited) Six Months Ended June 30, 2000
Company -------------------------------------------------------------- Non- Guarantor guarantor ASR Subsidiaries Subsidiaries Eliminations Consolidated ------- ------------ ------------ ------------ ------------ (In thousands) Operating activities Net cash provided by (used in) operating activities $6,434 $(1,064) $(2,571) $ (18) $2,781 Investing activities Capital expenditures (4,776) (1,186) (385) - (6,347) Advances from (to) subsidiaries (5,067) - - 5,067 - ------ ------- ------- ------ ------ Net cash used in investing activities (9,843) (1,186) (385) 5,067 (6,347) Financing activities Repayment of long-term obligations (2,980) (1,368) (1,102) - (5,450) Proceeds from borrowings 10,000 - - - 10,000 Deferred loan fees (39) - - - (39) Advances to parent (9,669) - - - (9,669) Advances from (to) subsidiaries - 4,050 1,017 (5,067) - ------ ------ ------ ------ ------ Net cash (used in) provided by financing activities (2,688) 2,682 (85) (5,067) (5,158) Net (decrease) increase in cash and cash equivalents (6,097) 432 (3,041) (18) (8,724) Cash and cash equivalents, beginning of period 6,221 1,180 5,081 18 12,500 ------ ------ ------ ------ ------ Cash and cash equivalents, end of period` $ 124 $1,612 $2,040 $ - $3,776 ====== ====== ====== ====== ======
-17- Condensed Consolidating Statements of Cash Flows (Unaudited) For the Period from April 24, 1999 to June 30, 1999 (In thousands)
Company -------------------------------------------------------------- Non- Guarantor guarantor ASR Subsidiaries Subsidiaries Eliminations Consolidated ------- ------------ ------------ ------------ ------------ Operating activities Net cash provided by (used in) operating activities $2,341 $(892) $ 941 $ 38 $2,428 Investing activities Capital expenditures (1,132) (206) (16) - (1,354) Other (34) - 36 - 2 Advances from (to) subsidiaries (1,587) - (641) 2,228 - ------ ------- ------ ----- ------- Net cash used in investing activities (2,753) (206) (621) 2,228 (1,352) Financing activities Repayment of long-term obligations (32,209) (1,280) (304) - (33,793) Proceeds from borrowings 32,801 - - - 32,801 Advances from (to) subsidiaries - 2,266 - (2,266) - ------- ----- ----- ------ ------- Net cash provided by (used in) financing activities 592 986 (304) (2,266) (992) Net increase (decrease) in cash and cash equivalents 180 (112) 16 - 84 Cash and cash equivalents, beginning of period (173) 297 2,138 - 2,262 ------ ----- ------ ------ ------ Cash and cash equivalents, end of period $ 7 $ 185 $2,154 $ - $2,346 ====== ===== ====== ====== ======
-18- Condensed Consolidating Statements of Cash Flows (Unaudited) For the Period from January 1, 1999 to April 23, 1999 (In thousands)
Predecessor -------------------------------------------------------------- Non- Guarantor guarantor ASR Subsidiaries Subsidiaries Eliminations Consolidated -------- ------------ ------------ ------------ ------------ Operating activities Net cash (used in) provided by operating activities $(7,976) $1,545 $ 124 $ 973 $(5,334) Investing activities Capital expenditures (2,538) (824) (276) - (3,638) Other 49 - - - 49 Advances from (to) subsidiaries 2,132 - (691) (1,441) - ------ ------ ------ ------ ------- Net cash used in investing activities (357) (824) (967) (1,441) (3,589) Financing activities Repayment of long-term obligations (25,401) (62) (383) - (25,846) Proceeds from borrowings 65,337 - - - 65,337 Deferred loan fees (7,606) - - - (7,606) Proceeds from exercise of stock options 2 - - - 2 Advances to parent, net (24,155) - - - (24,155) Advances from (to) subsidiaries - (468) - 468 - ------ ------ ------ ------ ------- Net cash provided by (used in) financing activities 8,177 (530) (383) 468 7,732 Net (decrease) increase in cash and cash equivalents (156) 191 (1,226) - (1,191) Cash and cash equivalents, beginning of period (17) 106 3,364 - 3,453 ------ ------ ------ ------ ------ Cash and cash equivalents, end of period $ (173) $ 297 $2,138 $ - $2,262 ====== ====== ====== ====== ======
-19- MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS General The following discussion and analysis of financial condition and results of operations is based upon and should be read in conjunction with the consolidated financial statements of the Company and notes thereto included in this Report and the Registrant's Annual Report on Form 10-K for the year ended December 31, 1999. Additionally, management has prepared pro forma results of operations for the three and six months ended June 30, 1999 to enable a meaningful comparison between 2000 and 1999 results of operations. Accordingly, see "Three Months Ended June 30, 2000 Compared to Pro Forma Three Months Ended June 30, 1999 and Six Months Ended June 30, 2000 Compared to Pro Forma Six Months Ended June 30, 1999" discussions below, which compare the three and six months ended June, 30, 1999 on a pro forma basis assuming the acquisition and related financing transactions had occurred on April 1, 1999 and January 1, 1999, respectively, with 2000 actual results for a more meaningful comparison of operations. Forward-Looking Statements Management's discussion and analysis of financial condition and results of operations and other sections of this Report contain "forward-looking statements" within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. We intend for the forward-looking statements to be covered by the safe harbor provisions for forward-looking statements in these sections. All statements regarding the Company's expected financial position, business and financing plans are forward-looking statements. Such forward-looking statements are identified by use of forward-looking words such as "anticipates," "believes," "plans," "estimates," "expects," and "intends" or words or phrases of similar expression. These forward-looking statements are subject to various assumptions, risks and uncertainties, including but not limited to, changes in political and economic conditions, demand for the Company's products, acceptance of new products, technology developments affecting the Company's products and to those discussed in the Company's filings with the Securities and Exchange Commission. Accordingly, actual results could differ materially from those contemplated by the forward-looking statements. Pro Forma Condensed Consolidated Statement of Operations for the Three Months Ended June 30, 1999 The following unaudited pro forma condensed consolidated statement of operations has been prepared by management from the historical financial statements of the Predecessor for the period from April 1, 1999 to April 23, 1999, and the historical financial statements of the Company for the period from April 24, 1999 to June 30, 1999. The acquisition, and the related financing transactions, are assumed to have occurred on April 1, 1999. The pro forma condensed consolidated statement of operations for the three months ended June 30, 1999, is not necessarily indicative of the results of operations that would have occurred for the three months ended June 30, 1999, had the acquisition and relating financing transactions occurred on April 1, 1999. In preparation of the pro forma condensed consolidated statement of operations, management has made certain estimates and assumptions that affect the amounts reported in the unaudited pro forma condensed consolidated statement of operations. The unaudited pro forma condensed consolidated statement of operations for the three months ended June 30, 1999, should be read in conjunction with the historical financial statements and related notes thereto of the Company which are included in this Form 10-Q and in the Company's Annual Report on Form 10-K for the year ended December 31, 1999. -20- Unaudited Pro Forma Condensed Consolidated Statement of Operations for the Three Months Ended June 30, 1999 (In Thousands)
Predecessor Predecessor Company Historical Pro Forma Historical Company Period from Period From Period From Pro Forma April 1, 1999 April 1, 1999 April 24, 1999 Three Months to April 23, Pro Forma to April 23, to June 30, Pro Forma Ended 1999 Adjustments 1999 1999 Adjustments June 30, 1999 ------------- ----------- --------------- -------------- ------------ ------------ Net sales $17,304 $ 17,304 $59,942 $ - $ 77,246 Cost of sales: Cost of sales 11,691 $ 94 (a) 11,785 38,185 - 49,970 Purchase accounting adjustment to inventory - 3,453 (b) 3,453 9,008 (3,453)(b) 9,008 ------- ------- -------- ------- ------ -------- Gross profit 5,613 (3,547) 2,066 12,749 3,453 18,268 Selling, general and administrative expenses 4,922 14 (c) 4,936 13,130 - 18,066 Amortization of intangible assets 188 118 (d) 306 919 - 1,225 Transaction expenses 11,440 - 11,440 - - 11,440 ------- ------- -------- ------- ------ -------- Operating loss (10,937) (3,679) (14,616) (1,300) 3,453 (12,463) Interest expense 877 406 (e) 1,283 3,972 (138)(g) 5,117 ------- ------- -------- ------- ------ -------- Loss before income taxes and extraordinary item (11,814) (4,085) (15,899) (5,272) 3,591 (17,580) Income taxes (benefit) (2,142) (1,653)(f) (3,795) (1,547) 1,426 (f) (3,916) ------- ------- -------- ------- ------ -------- Loss before extraordinary item $(9,672) $(2,432) $(12,104) $(3,725) $2,165 $(13,664) ======= ======= ======== ======= ====== ========
(a) Adjustment to provide pro forma depreciation expense resulting from the application of purchase accounting adjustments computed based on the remaining useful lives of plant and equipment. (b) Adjustment to reflect the impact on cost of sales of additional inventory costs resulting from adjusting the carrying value of acquired inventories to reflect their estimated fair market value assuming the acquisition occurred on April 1, 1999. (c) Adjustment to reflect the elimination of amortization of unrecognized prior service cost and unrecognized gains related to the Predecessor's pension and postretirement benefit plans. (d) Adjustment to reflect the elimination of $159 of amortization related to historical goodwill and record pro forma amortization of $277 related to intangible assets including goodwill, trademarks and patents recorded in connection with the acquisition. Goodwill and trademarks are being amortized over a 40-year useful life and patents are being amortized over a 15-year useful life. These periods are believed by management to be reasonable based on the expected lives of the underlying processes, products, and equipment assumed to be acquired. (e) Adjustment to reflect (i) the elimination of historical interest expense of $108 related to the Predecessor's credit facilities, loan commitment fees, and the amortization of deferred financing costs, (ii) pro forma amortization of $72 for the $8,001 in deferred financing costs incurred in connection with the financing, amortized over the respective lives of the Company's credit facilities, and (iii) pro forma interest expense of $442 on the Company's credit facilities related to the balances assumed to be outstanding on April 1, 1999. Interest expense has been computed assuming that the LIBOR-based interest rate (plus the applicable margin) option is selected by the Company. Balances assumed to be outstanding on April 1, 1999, include $5,000 under the revolving credit facility and $88,000 under the Term Loan Facility. In addition, the purchase of -21- $30,700 in Senior Notes on June 10, 1999, was assumed to occur on April 1, 1999. (f) Adjustment to reflect the income tax consequences of the pro forma adjustments computed at the statutory rate of 39.7% excluding the net adjustment for goodwill of $80 which is not tax deductible. (g) Adjustment to reflect pro forma interest expense of $261 on the Company's credit facilities related to the balances assumed to be outstanding on April 24, 1999. Interest expense has been computed assuming that the LIBOR-based interest rate (plus the applicable margin) option is selected by the Company. Balances assumed to be outstanding on April 24, 1999, are the same as described in (e) above. Adjustment to reflect pro forma interest expense reduction of $399 related to the $30,700,000 in Senior Notes which were assumed to be purchased on April 24, 1999. Three Months Ended June 30, 2000 Compared to Pro Forma Three Months Ended June 30, 1999 Net Sales. Net sales for the three months ended June 30, 2000, and for the pro forma three months ended June 30, 1999, were $79.9 million and $77.2 million, respectively, an increase of $2.7 million, or 3.5%. Razors and Blades. Net sales of our razors and blades segment for the three months ended June 30, 2000, and for the pro forma three months ended June 30, 1999, were $52.8 million and $51.2 million, respectively, an increase of $1.6 million or 3.1%. Net sales of shaving razors and blades for the three months ended June 30, 2000, and for the pro forma three months ended June 30, 1999, were $35.3 million and $32.8 million, respectively, an increase of $2.5 million, or 7.4%. Net sales of domestic value branded shaving products decreased 13.3%. Net sales for the three months ended June 30, 1999, were favorably affected by the launch of the Tri-Flexxx shaving product and by sales of the Revlon Perfect Finish(TM) shaving system which was discontinued in September 1999. The decrease in domestic value branded shaving products net sales also reflects a decline in promotional programs and inventory reductions by a key customer. Net sales of domestic private label shaving products increased 5.0% primarily reflecting sales gains relating to the Tri-Flexxx and Premier Comfort shaving products. Net sales of shaving products in international markets increased 28.0% (net of a 6% negative impact of unfavorable exchange rates) reflecting stronger sales in most of the Company's markets. Net sales of blades and bladed hand tools for the three months ended June 30, 2000, and for the pro forma three months ended June 30, 1999, were $13.3 million and $14.2 million, respectively, a decrease of $0.9 million, or 5.8%. The decrease primarily reflects the timing of seasonal promotional volume. Net sales of specialty industrial and medical blades for the three months ended June 30, 2000, and for the pro forma three months ended June 30, 1999, were unchanged at $4.2 million. Cotton and Foot Care. Net sales of cotton and foot care products for the three months ended June 30, 2000, and for the pro forma three months ended June 30, 1999, were $19.4 million and $18.6 million, respectively, an increase of $0.8 million or 4.6%. The increase results primarily from an increase in promotional programs with several customers which was somewhat offset by reduced sales resulting from issues related to the cotton coil matter (see Note F to the condensed consolidated financial statements). Custom Bar Soap. Net sales of the Company's custom bar soap products for the three months ended June 30, 2000, and for the pro forma three months ended June 30, 1999, were $7.7 million and $7.4 million, respectively, an increase of $0.3 million or 2.9%. The increase results primarily from increased sales volume to several of the Company's skin care and specialty customers. Gross Profit. Gross profit increased $8.2 million to $26.5 million during the three months ended June 30, 2000, from $18.3 million for the pro forma three months ended June 30, 1999 due primarily to the purchase accounting adjustment to inventory of $9.0 million for the pro forma three months ended June 30, 1999. As a percentage of net sales, gross profit was 33.2% for the three months ended June 30, 2000, and 23.6% for the pro forma three months ended June 30, 1999. Excluding the 1999 purchase accounting adjustment to inventory of $9.0 million, gross profit decreased $0.8 million to $26.5 million for the three months ended June 30, 2000, from $27.3 million -22- for the pro forma three months ended June 30, 1999, and as a percentage of net sales, gross profit was 33.2% for the three months ended June 30, 2000, and 35.3% for the pro forma three months ended June 30, 1999. Blade margins declined due primarily to product mix, higher material costs, higher depreciation expense related to capacity expansion projects and from the negative impact of unfavorable exchange rates, primarily the Euro. Cotton margins declined due primarily to product mix and higher manufacturing overheads. Operating and Other Expenses. Selling, general and administrative expenses were 21.7% of net sales for the three months ended June 30, 2000, compared to 23.4% for the pro forma three months ended June 30, 1999. The decrease primarily reflects a decrease in promotional spending for our shaving blade products which was somewhat offset by an increase in product development costs and an increase in marketing and administrative overhead associated with the new management team and the new corporate headquarters. Amortization of intangible assets was substantially unchanged at $1.2 million for the three months ended June 30, 2000, and the pro forma three months ended June 30, 1999. Interest expense decreased $0.3 million to $4.8 million for the three months ended June 30, 2000, from $5.1 million for the pro forma three months ended June 30, 1999, due primarily to lower commitment fee expense relating to the permanent reduction in the amount of available borrowings under the Company's term loan facility of $52.5 million in July 1999. The decrease was substantially offset by increased interest expense resulting from additional debt and amortization of deferred loan fees incurred in connection with the acquisition, additional borrowings under the Company's revolving credit facility and an increase in interest rates. In connection with the 1999 acquisition the Predecessor incurred approximately $11.4 million in transaction expenses related primarily to (i) amounts paid to redeem all of the outstanding options to purchase common stock of the Predecessor, (ii) costs incurred by or on behalf of the Predecessor in connection with the acquisition, including legal and other advisory fees, and (iii) costs incurred by or on behalf of the Predecessor related to payments made to certain employees of the Predecessor in connection with the change of control. Costs of $0.7 million (net of tax benefit) associated with the 1999 purchase of the Senior Notes and repayment of the terminated credit facility are reflected in the consolidated statement of operations as an extraordinary item. The Company's effective income tax rate was 46.7% for the three months ended June 30, 2000, versus (22.3)% for the pro forma three months ended June 30, 1999, and varies from the United States statutory rate due primarily to nondeductible goodwill amortization, certain nondeductible transaction expenses in 1999 and state income taxes, net of the federal tax benefit. Pro Forma Condensed Consolidated Statement of Operations for the Six Months Ended June 30, 1999 The following unaudited pro forma condensed consolidated statement of operations has been prepared by management from the historical financial statements of the Predecessor for the period from January 1, 1999 to April 23, 1999, and the historical financial statements of the Company for the period from April 24, 1999 to June 30, 1999. The acquisition, and the related financing transactions, are assumed to have occurred on January 1, 1999. The pro forma condensed consolidated statement of operations for the six months ended June 30, 1999, is not necessarily indicative of the results of operations that would have occurred for the six months ended June 30, 1999, had the acquisition and relating financing transactions occurred on January 1, 1999. In preparation of the pro forma condensed consolidated statement of operations, management has made certain estimates and assumptions that affect the amounts reported in the unaudited pro forma condensed consolidated statement of operations. The unaudited pro forma condensed consolidated statement of operations for the six months ended June 30, 1999, should be read in conjunction with the historical financial statements and related notes thereto of the Company which are included in this Form 10-Q and in the Company's Annual Report on Form 10-K for the year ended December 31, 1999. -23- Unaudited Pro Forma Condensed Consolidated Statement of Operations for the Six Months Ended June 30, 1999 (In Thousands)
Predecessor Predecessor Company Historical Pro Forma Historical Company Period from Period From Period From Pro Forma January 1, 1999 January 1,1999 April 24,1999 Six Months to April 23, Pro Forma April 23, to June 30, Pro Forma Ended 1999 Adjustments 1999 1999 Adjustments June 30, 1999 --------------- ----------- --------------- -------------- ----------- ------------- Net sales $87,591 $87,591 $59,942 $ - $147,533 Cost of sales: Cost of sales 58,520 $ 460 (a) 58,980 38,185 - 97,165 Purchase accounting adjustment to inventory - 9,008 (b) 9,008 9,008 (9,008)(b) 9,008 --------- ------- -------- ------- ------ --------- Gross profit 29,071 (9,468) 19,603 12,749 9,008 41,360 Selling, general and administrative expenses 21,429 68 (c) 21,497 13,130 - 34,627 Amortization of intangible assets 835 638 (d) 1,473 919 - 2,392 Transaction expenses 11,440 - 11,440 - - 11,440 ------- ------ -------- --------- -------- -------- Operating loss (4,633) (10,174) (14,807) (1,300) 9,008 (7,099) Interest expense 3,907 2,030 (e) 5,937 3,972 (138)(g) 9,771 -------- ------ -------- ------- ------- --------- Loss before income taxes and extraordinary item (8,540) (12,204) (20,744) (5,272) 9,146 (16,870) Income taxes (benefit) (842) (4,666)(f) (5,508) (1,547) 3,631 (f) (3,424) -------- ------- ------- ------- ------ --------- Loss before extraordinary item $(7,698) $(7,538) $(15,236) $(3,725) $5,515 $(13,446) ======= ======= ======== ======= ====== ========
(a) Adjustment to provide pro forma depreciation expense resulting from the application of purchase accounting adjustments computed based on the remaining useful lives of plant and equipment. (b) Adjustment to reflect the impact on cost of sales of additional inventory costs resulting from adjusting the carrying value of acquired inventories to reflect their estimated fair market value assuming the acquisition occurred on January 1, 1999. (c) Adjustment to reflect the elimination of amortization of unrecognized prior service cost and unrecognized gains related to the Predecessor's pension and postretirement benefit plans. (d) Adjustment to reflect the elimination of $705 of amortization related to historical goodwill and record pro forma amortization of $1,343 related to intangible assets including goodwill, trademarks and patents recorded in connection with the acquisition. Goodwill and trademarks are being amortized over a 40-year useful life and patents are being amortized over a 15-year useful life. These periods are believed by management to be reasonable based on the expected lives of the underlying processes, products, and equipment assumed to be acquired. (e) Adjustment to reflect (i) the elimination of historical interest expense of $494 related to the Predecessor's credit facilities, loan commitment fees, and the amortization of deferred financing costs, (ii) pro forma amortization of $353 for the $8,001 in deferred financing costs incurred in connection with the financing, amortized over the respective lives of the Company's credit facilities, and (iii) pro forma interest expense of $2,171 on the Company's credit facilities related to the balances assumed to be outstanding on January 1, 1999. Interest expense has been computed assuming that the LIBOR-based interest rate (plus the applicable margin) option is selected by the Company. Balances assumed to be outstanding on January 1, 1999, include $5,000 under the revolving credit facility and $88,000 under the Term Loan Facility. In addition, the purchase -24- of $30,700 in Senior Notes on June 10, 1999, was assumed to occur on January 1, 1999. (f) Adjustment to reflect the income tax consequences of the pro forma adjustments computed at the statutory rate of 39.7% excluding the net adjustment for goodwill of $451 which is not tax deductible. (g) Adjustment to reflect pro forma interest expense of $261 on the Company's credit facilities related to the balances assumed to be outstanding on April 24, 1999. Interest expense has been computed assuming that the LIBOR-based interest rate (plus the applicable margin) option is selected by the Company. Balances assumed to be outstanding on April 24, 1999, are the same as described in (e) above. Adjustment to reflect pro forma interest expense reduction of $399 related to the $30,700,000 in Senior Notes which were assumed to be purchased on April 24, 1999. Six Months Ended June 30, 2000 Compared to Pro Forma Six Months Ended June 30, 1999 Net Sales. Net sales for the six months ended June 30, 2000, and for the pro forma six months ended June 30, 1999, were $157.1 million and $147.5 million, respectively, an increase of $9.6 million, or 6.5%. Razors and Blades. Net sales of our razors and blades segment for the six months ended June 30, 2000, and for the pro forma six months ended June 30, 1999, were $103.3 million and $95.5 million, respectively, an increase of $7.8 million, or 8.2%. Net sales of shaving razors and blades for the six months ended June 30, 2000, and for the pro forma six months ended June 30, 1999, were $69.7 million and $61.9 million, respectively, an increase of $7.8 million, or 12.6%. Net sales of domestic value branded shaving products decreased 4.5%. Net sales for the six months ended June 30, 1999, were favorably affected by sales of the Revlon Perfect Finish(TM) shaving system which was discontinued in September 1999. The decrease in domestic value branded shaving products net sales also reflects a decline in promotional programs and inventory reductions by a key customer. Net sales of domestic private label shaving products increased 12.0% primarily reflecting sales gains relating to the Tri-Flexxx and Premier Comfort shaving products. Net sales of shaving products in international markets increased 28.2% (net of a 5% negative impact of unfavorable exchange rates) reflecting stronger sales in most of the Company's markets. Net sales of blades and bladed hand tools for the six months ended June 30, 2000, and for the pro forma six months ended June 30, 1999, were $25.5 million and $25.7 million, respectively, a decrease of $0.2 million, or 1.0%. The decrease primarily reflects the timing of seasonal promotional volume. Excluding this impact, core volume increased 3.2%. Net sales of specialty industrial and medical blades for the six months ended June 30, 2000, and for the pro forma six months ended June 30, 1999, were $8.1 million and $7.9 million, respectively, an increase of $0.2 million, or 3.3%. Sales of specialty industrial products increased 9.0% reflecting distribution gains. Sales of medical products were substantially unchanged. Cotton and Foot Care. Net sales of cotton and foot care products for the six months ended June 30, 2000, and for the pro forma six months ended June 30, 1999, were $39.6 million and $39.1 million, respectively, an increase of $0.5 million or 1.4%. The increase results primarily from an increase in promotional programs with several customers which was somewhat offset by reduced sales resulting from issues related to the cotton coil matter (see Note F to the condensed consolidated financial statements). Custom Bar Soap. Net sales of the Company's custom bar soap products for the six months ended June 30, 2000, and for the pro forma six months ended June 30, 1999, were $14.2 million and $12.9 million, respectively, an increase of $1.3 million or 9.9%. The increase results primarily from increased sales volume to several of the Company's skin care and specialty customers. Gross Profit. Gross profit increased $10.5 million to $51.9 million for the six months ended June 30, 2000, from $41.4 million for the pro forma six months ended June 30, 1999 due primarily to the purchase accounting adjustment to inventory of $9.0 million for the pro forma six months ended June 30, 1999, and to higher sales volume. As a percentage of net sales, gross profit was 33.0% for the six months ended June 30, 2000, and 28.0% -25- for the pro forma six months ended June 30, 1999. Excluding the 1999 purchase accounting adjustment to inventory of $9.0 million, gross profit increased $1.5 million to $51.9 million for the six months ended June 30, 2000, from $50.4 million for the pro forma six months ended June 30, 1999, and as a percentage of net sales, gross profit was 33.0% for the six months ended June 30, 2000, and 34.1% for the pro forma six months ended June 30, 1999. Blade margins declined due primarily to product mix, higher material costs, higher depreciation expense related to capacity expansion projects and from the negative impact of unfavorable exchange rates, primarily the Euro. Operating and Other Expenses. Selling, general and administrative expenses were 23.6% of net sales for the six months ended June 30, 2000, compared to 23.5% for the pro forma six months ended June 30, 1999. The increase primarily reflects an increase in legal fees arising from the Gillette lawsuit and an increase in marketing and administrative overhead associated with the new management team and the new corporate headquarters. The increase was substantially offset by a decrease in promotional spending for our shaving blade products. Amortization of intangible assets was substantially unchanged at $2.4 million for the six months ended June 30, 2000, and for the pro forma six months ended June 30, 1999. Interest expense decreased $0.2 million to $9.6 million for the six months ended June 30, 2000, from $9.8 million for the pro forma six months ended June 30, 1999, due primarily to lower commitment fee expense relating to the permanent reduction in the amount of available borrowings under the Company's term loan facility of $52.5 million in July 1999. The decrease was substantially offset by increased interest expense resulting from additional debt and amortization of deferred loan fees incurred in connection with the acquisition, additional borrowings under the Company's revolving credit facility and an increase in interest rates. In connection with the 1999 acquisition the Predecessor incurred approximately $11.4 million in transaction expenses related primarily to (i) amounts paid to redeem all of the outstanding options to purchase common stock of the Predecessor, (ii) costs incurred by or on behalf of the Predecessor in connection with the acquisition, including legal and other advisory fees, and (iii) costs incurred by or on behalf of the Predecessor related to payments made to certain employees of the Predecessor in connection with the change of control. Costs of $0.7 million (net of tax benefit) associated with the 1999 purchase of the Senior Notes and repayment of the terminated credit facility are reflected in the consolidated statement of operations as an extraordinary item. The Company's effective income tax rate was 46.7% for the six months ended June 30, 2000, and (20.3)% for the pro forma six months ended June 30, 1999, and varies from the United States statutory rate due primarily to nondeductible goodwill amortization, certain non deductible transaction expenses in 1999 and state income taxes, net of the federal tax benefit. Liquidity and Capital Resources The Company's primary sources of liquidity are cash flow from operations and borrowings under its revolving credit facility. Net cash provided by operating activities amounted to $2.8 million for the six months ended June 30, 2000. Net cash provided by operating activities amounted to $2.4 million for the period from April 24, 1999, to June 30, 1999, and net cash used in operating activities amounted to $5.3 million for the period from January 1, 1999, to April 23, 1999. Net cash provided by operating activities for the six months ended June 30, 2000 primarily reflects an increase in net income and net changes in working capital accounts. Net cash used in investing activities related to capital expenditures of $6.3 million for the six months ended June 30, 2000. Net cash used in financing activities resulted from $9.7 million in net advances to the Company's parent which was somewhat offset by $4.6 million in net borrowings for the six months ended June 30, 2000. In May 2000, the Company amended its $190.0 million credit agreement to provide for the Company to make a $10.0 million advance to its parent company, RSA Holdings Corporation, for the partial prepayment of its outstanding note payable. In May 2000, the Company borrowed $10.0 million under its revolving credit facility and advanced the $10.0 million to RSA Holdings Corporation to prepay a portion of its outstanding note payable. At June 30, 2000, the Company had approximately $15.0 million available for future borrowings under its revolving credit facility. -26- Management believes that the Company's cash on hand, anticipated funds from operations, and the amounts available to the Company under its revolving credit facility will be sufficient to cover its working capital needs, capital expenditures and debt service requirements as well as support the Company's growth-oriented strategy for its existing business for at least the next 12 months. The Company's ability to fund operations, make capital expenditures and make scheduled principal and interest payments or to refinance the Company's indebtedness will depend upon future financial and operating performance, which will be affected by prevailing economic conditions and financial, business and other factors, some of which are beyond the Company's control. Market Risk The Company is exposed to various market risk factors such as fluctuating interest rates and changes in foreign currency rates. These risk factors can impact results of operations, cash flows and financial position. The Company manages these risks through regular operating and financing activities and periodically uses derivative financial instruments such as foreign exchange option and forward contracts and interest rate cap and swap agreements. These derivative instruments are placed with major financial institutions and are not for speculative or trading purposes. The following analysis presents the effect on the Company's earnings, cash flows and financial position as if the hypothetical changes in market risk factors occurred on June 30, 2000 and June 30, 1999. Only the potential impacts of hypothetical assumptions are analyzed. The analysis does not consider other possible effects that could impact the business. Interest Rate Risk At June 30, 2000, the Company carried $190.2 million of outstanding debt on its balance sheet, with $119.7 million of that total held at variable interest rates. The Company has entered into an interest rate cap agreement and an interest rate swap agreement with a bank covering $56.3 million of its variable rate debt outstanding to manage its interest rate risk. Holding all other variables constant, if interest rates hypothetically increased or decreased by 10%, for the six months ended June 30, 2000 and 1999, the impact on earnings, cash flow and financial position would not be material. In addition, if interest rates hypothetically increased or decreased by 10% on June 30, 2000, with all other variables held constant, the fair market value of our $69.3 million 9 7/8% Series B Senior Notes would increase or decrease by approximately $3.5 million. Foreign Currency Risk The Company sells to customers in foreign markets through foreign operations and through export sales from plants in the U.S. These transactions are often denominated in currencies other than the U.S. dollar. The primary currency exposures are the Euro, British Pound Sterling, Canadian Dollar and Mexican Peso. The Company limits its foreign currency risk by operational means, mostly by locating its manufacturing operations in those locations where it has significant exposures to major currencies. The Company periodically enters into currency option contracts to partially offset the risk of foreign currency fluctuations. There were no currency contracts outstanding at June 30, 2000. Contingencies Refer to Note F - Contingencies to the Notes to Condensed Consolidated Financial Statements for a discussion of legal contingencies. New Accounting Standards In June 1998, the Financial Accounting Standards Board (the "FASB") issued Statement of Financial Accounting Standards No. 133, "Accounting for Derivative Instruments and Hedging Activities" ("FAS 133"). FAS 133 establishes standards for accounting and disclosure of derivative instruments. This new standard, as amended by FAS 137 and FAS 138, is effective for fiscal quarters of fiscal years beginning after June 15, 2000. The Company is required to adopt FAS 133 on January 1, 2001. The implementation of this new standard is not expected to -27- have a material effect on the Company's results of operations or financial position. In March 2000, the FASB issued FASB Interpretation No. 44, "Accounting for Certain Transactions Involving Stock Compensation", an interpretation of APB Opinion No. 25, "Accounting for Stock Issued to Employees." The Interpretation clarifies guidance for certain issues that arose in the application of APB Opinion No. 25. The Company is required to adopt the Interpretation on July 1, 2000. The implementation of this new standard is not expected to have a material effect on the Company's results of operations or financial position. In December 1999, the Securities and Exchange Commission issued Staff Accounting Bulletin (SAB) No. 101, "Revenue Recognition in Financial Statements". SAB No. 101 provides additional guidance relating to revenue recognition. The Company is required to adopt SAB No. 101, as amended by SAB No. 101A and SAB No. 101B, in the fourth quarter of 2000 and is currently assessing the impact, if any, that SAB No. 101 may have on the Company's results of operations or financial position. Inflation Inflation has not been material to the Company's operations within the periods presented. Item 3. Quantitative and Qualitative Disclosures About Market Risk The information called for by this item is provided under the captions "Market Risk", "Interest Rate Risk" and "Foreign Currency Risk" under Part I, Item 2 - Management's Discussion and Analysis of Financial Condition and Results of Operations of this Report. PART II, OTHER INFORMATION Item 1. Legal Proceedings The information called for by this item is provided in Note F - Contingencies to Notes to Condensed Consolidated Financial Statements under Part I, Item 1. - Financial Statements of this Report. Item 6. Exhibits and Reports on Form 8-K a. Exhibits - Exhibit 4.19 - Amendment No. 1 to the Credit Agreement dated as of April 23, 1999, among RSA Acquisition Corp., ("Purchaser"), the Registrant ("Borrower"), RSA Holdings Corp. of Delaware ("Holdings"), and the Initial Lenders, the Swing Line Bank and the Initial Issuing Bank and NationsBank, N.A. ("Administrative Agent"). - Exhibit 10.10 - RSA Holdings Corp. of Delaware 1999 Stock Incentive Plan. - Exhibit 27 - Financial Data Schedule. b. Reports on Form 8-K: On April 20, 2000, the Registrant filed a report on Form 8-K reporting that it had changed its independent public accountants from PricewaterhouseCoopers LLP to Ernst & Young LLP. -28- SIGNATURES Pursuant to the requirements 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. AMERICAN SAFETY RAZOR COMPANY August 10, 2000 By /s/James D. Murphy - ----------------- --------------------------------------- Date James D. Murphy President and Chief Executive Officer August 10, 2000 By /s/Alan R. Koss - ----------------- --------------------------------------- Date Alan R. Koss Senior Vice President Chief Financial Officer -29- EX-99 2 0002.txt AMENDMENT NO. 1 TO THE CREDIT AGREEMENT EXECUTION COPY AMENDMENT NO. 1 TO THE CREDIT AGREEMENT Dated as of March 24, 2000 AMENDMENT NO. 1 TO THE CREDIT AGREEMENT dated as of April 23, 1999 among RSA Acquisition Corp., a Delaware corporation, as Purchaser, American Safety Razor Company, a Delaware corporation (the "Borrower"), RSA Holdings Corp. of Delaware, a Delaware corporation ("Holdings"), the banks, financial institutions and other institutional lenders listed on the signature pages thereof under the caption "Initial Lenders", as Initial Lenders, Bank of America, N.A., as successor by merger to NationsBank, N.A. ("BofA"), as an Initial Issuing Bank, BofA, as the Initial Swing Line Bank, DLJ Capital Funding, Inc. ("DLJ") as the syndication agent (in such capacity, the "Syndication Agent") for the Facilities (as defined therein), DLJ and Banc of America Securities LLC, as successor by merger to NationsBanc Montgomery Securities LLC, as co-arrangers (the "Co-Arrangers"), and NationsBank, as the administrative and collateral agent (the "Administrative Agent") for the Lender Parties (and together with the Syndication Agent and the Co-Arrangers, the "Agents"). PRELIMINARY STATEMENTS: (1) The Borrower, Holdings, the Lenders and the Agents have entered into a Credit Agreement dated as of April 23, 1999 (the "Credit Agreement"). Capitalized terms defined in the Credit Agreement and not otherwise defined in this Amendment are used herein as therein defined. (2) The parties hereto have agreed to amend the Credit Agreement as hereinafter set forth. SECTION 1. Amendments. Subject to the satisfaction of the conditions precedent set forth in Section 2 hereof, the ---------- Credit Agreement is hereby amended, effective as of the date hereof, as follows: (a) Section 5.02(f)(i)(E) is hereby amended by deleting the word "and" at the end thereof and replacing it with a comma; (b) Section 5.02(f)(i)(F) is hereby amended by (i) deleting the reference to clause "(E)" contained therein and replacing it with a reference to clause "(F)" and (ii) by deleting the semicolon at the end thereof and replacing it with the word "and"; (c) Section 5.02(f)(i) is hereby amended by adding to the end thereof a new clause (G) to read as follows: "(G) at any time prior to May 31, 2000, declare and pay to Holdings a single dividend in an amount not to exceed $10,000,000, which dividend shall, within three Business Days of receipt thereof by Holdings, be used to prepay the Holdings Debt;"; and (d) Section 5.02(j) is hereby amended in its entirety and replaced with the following: "(j) Prepayments, Etc., of Debt. Prepay, redeem, purchase, defease or otherwise satisfy prior to the scheduled maturity thereof in any manner, or make any payment in violation of any subordination terms of, the Holdings Debt or any Subordinated Debt, other than (i) regularly scheduled or required repayments or redemptions of such Debt, (ii) the prepayment of the Holdings Debt with the Net Cash Proceeds of the Subordinated Notes and (iii) the prepayment of the Holdings Debt with the proceeds of the dividend permitted under Section 5.02(f)(i)(G), or amend, modify or change in any manner materially adverse to the interests of the Lender Parties any term or condition of any Surviving Debt or Subordinated Debt, or permit any of its Subsidiaries to do any of the foregoing." SECTION 2. Conditions of Effectiveness. This Amendment shall become effective as of the date first above written when, and only when, (i) the Administrative Agent shall have received counterparts of this Amendment executed by the Borrower, Holdings and the Required Lenders or, as to any of the Lenders, advice satisfactory to the Administrative Agent that such Lender has executed this Amendment, (ii) each Subsidiary Guarantor shall have executed a consent to this Amendment in the form attached hereto and (iii) each Lender that executes this Amendment shall have received payment of the amendment fee referred to in Section 5(b). Furthermore this Amendment is subject to the provisions of Section 9.01 of the Credit Agreement. SECTION 3. Representations and Warranties of the Borrower. Each of the Borrower and Holdings represents and warrants as follows: (a) the representations and warranties contained in each Loan Document are correct in all material respects on and as of the date hereof, before and after giving effect to this Amendment, as though made on and as of the date hereof, other than any such representations or warranties that by their terms, refer to a specific date, in which case, as of such specific date; (b) no Default has occurred and is continuing under the Credit Agreement, as amended hereby, or would result from this Amendment. SECTION 4. Reference to and Effect on the Loan Documents. (a) On and after the effectiveness of this Amendment, each reference in the Credit Agreement to "this Agreement", "hereunder", "hereof" or words of like import referring to the Credit Agreement, and each reference in the Notes and each of the other Loan Documents to "the Credit Agreement", "thereunder", "thereof" or words of like import referring to the Credit Agreement, shall mean and be a reference to the Credit Agreement as amended by this Amendment. (b) The Credit Agreement, the Notes and each of the other Loan Documents, as specifically amended by this Amendment, are and shall continue to be in full force and effect and are hereby in all respects ratified and confirmed. (c) The execution, delivery and effectiveness of this Amendment shall not, except as expressly provided herein, operate as a waiver of any right, power or remedy of any Lender or any Agent under any of the Loan Documents, nor constitute a waiver of any provision of any of the Loan Documents. SECTION 5. Costs, Expenses; Taxes; Fees, Etc. (a) The Borrower agrees to pay on demand all costs and expenses of the Administrative Agent in connection with the preparation, execution and delivery of this Amendment (including, without limitation, the reasonable fees and expenses of counsel for the Administrative Agent) in accordance with the terms of Section 9.04 of the Credit Agreement. (b) Concurrently with the effectiveness of this Amendment, the Borrower shall pay to each Lender that executes this Amendment on or prior to 12:00 p.m. (New York time) on Friday, March 24, 2000, for its own account, an amendment fee equal to 0.05 of 1% of such Lender's Commitment as on the date hereof. SECTION 6. Execution in Counterparts. This Amendment may be executed in any number of counterparts and by different parties hereto in separate counterparts, each of which when so executed shall be deemed to be an original and all of which taken together shall constitute but one and the same agreement. Delivery of an executed counterpart of a signature page to this Amendment by telecopier shall be effective as delivery of a manually executed counterpart of this Amendment. SECTION 7. Governing Law. This Amendment shall be governed by, and construed in accordance with, the laws of the State of New York. IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be executed by their respective officers thereunto duly authorized, as of the date first above written. AMERICAN SAFETY RAZOR COMPANY By: /s/ Alan R. Koss -------------------------- Name: Alan R. Koss Title: SVP &CFO RSA HOLDINGS CORP. OF DELAWARE By: /s/James D. Murphy ---------------------------- Name: James D. Murphy Title: President BANK OF AMERICA, N.A., as Administrative Agent and as Lender By /s/Heidi Anne Sandquist ------------------------------------ Name: HEIDI-ANNE SANDQUIST Title: VICE PRESIDENT BANC OF AMERICA SECURITIES LLC, as Co-Arranger By /s/Heidi Anne Sandquist -------------------------------- Name: HEIDI-ANNE SANDQUIST Title: VICE PRESIDENT DLJ CAPITAL FUNDING, INC., as Syndication Agent and Co-Arranger By /s/James L. Paradise ------------------------------ Name: James L. Paradise Title: Senior Vice President COMERICA BANK By /s/Dan M. Roman ------------------------------ Name: Dan M. Roman Title: Vice President EATON VANCE INSTITUTIONAL SENIOR LOAN FUND By: EATON VANCE MANAGEMENT AS INVESTMENT ADVISOR By /s/Payson F. Swaffield ------------------------------- Name: PAYSON F. SWAFFIELD Title: VICE PRESIDENT EATON VANCE SENIOR INCOME TRUST BY: EATON VANCE MANAGEMENT AS INVESTMENT ADVISOR By /s/Payson F. Swaffield ----------------------------- Name: PAYSON F. SWAFFIELD Title: VICE PRESIDENT FLEET BANK N.A. By /s/Michael J. Sullivan -------------------------------- Name: Michael J. Sullivan Title: Vice President MORGAN STANLEY DEAN WITTER PRIME INCOME TRUST By /s/ Sheila A. Finnerty -------------------------- Name: Sheila A. Finnerty Title: Sr Vice President OLYMPIC FUNDING TRUST SERIES 1999-1 By /s/Kelly C. Walker ------------------------------- Name: KELLY C. WALKER Title: AUTHORIZED AGENT THE PROVIDENT BANK By /s/Thomas W. Doe -------------------------------- Name: Thomas W. Doe Title: VP SENIOR DEBT PORTFOLIO BY: Boston Management and Research As Investment Advisor By /s/Payson F. Swaffield -------------------------------- Name: Payson F. Swaffield Title: Vice President SIMSBURY CLO LIMITED By: Massachusetts Mutual Life Insurance Co., As Collateral Manager By /s/Steven J. Katz ---------------------------------------- Name: Steven J. Katz Title: Second V.P. & Associate General Counsel SUMMIT BANK By /s/Timothy E. Doyle ------------------------------------ Name: Timothy E. Doyle Title: VP/Director THE TRAVELERS INSURANCE COMPANY By /s/Teresa M. Torrey ------------------------------ Name: TERESA M. TORREY Title: SECOND VICE PRESIDENT TRAVELERS CORPORATE LOAN FUND INC. By Travelers Asset Management International Company LLC By /s/Teresa M. Torrey ---------------------------- Name: TERESA M. TORREY Title: SECOND VICE PRESIDENT CITIZENS BANK OF MASSACHUSETTS AS SUCCESSOR TO U.S. TRUST By /s/Thomas F. Macina -------------------- ------- Name: THOMAS F. MACINA Title: DIRECTOR VAN KAMPEN CLO 1, LIMITED By: VAN KAMPEN MANAGEMENT, INC. As Collateral Manager By /s/Darvin D. Pierce --------------------------- Name: DARVIN D. PIERCE Title: VICE PRESIDENT CONSENT Dated as of March 24, 2000 Each of the undersigned corporations, as a Guarantor under the Subsidiary Guaranty dated April 23, 1999 (the "Guaranty") in favor of the Secured Parties under the Credit Agreement referred to in the foregoing Amendment, hereby consents to such Amendment and hereby confirms and agrees that notwithstanding the effectiveness of such Amendment, the Guaranty is, and shall continue to be, in full force and effect and is hereby ratified and confirmed in all respects, except that, on and after the effectiveness of such Amendment, each reference in the Guaranty to the "Credit Agreement", "thereunder", "thereof" or words of like import shall mean and be a reference to the Credit Agreement, as amended by such Amendment. SUBSIDIARY GUARANTORS AMERICAN SAFETY RAZOR CORPORATION By /s/ Alan R. Koss ------------------------ Title: SVP & CFO ASR HOLDINGS, INC. By /s/ Alan R. Koss ----------------------------- Title: VP, Treas. & Asst. Sec PERSONNA INTERNATIONAL DE PUERTO RICO, INC. By /s/Alan R. Koss ----------------------------- Title: VP, Treas. & Asst. Sec THE HEWITT SOAP COMPANY, INC. By /s/Alan R.Koss ----------------------------- Title: VP, Treas. & Asst. Sec. MEGAS BEAUTY CARE, INC. By /s/Alan R. Koss ------------------------------- Title: VP, Treas. & Asst. Sec VALLEY PARK REALTY, INC By /s/Alan R. Koss ------------------------------ Title: VP, Treas. & Asst. Sec EX-99 3 0003.txt RSA 1999 STOCK INCENTIVE PLAN RSA HOLDINGS CORP. OF DELAWARE 1999 Stock Incentive Plan RSA Holdings Corp. of Delaware 1999 STOCK INCENTIVE PLAN TABLE OF CONTENTS Page ---- 1. PURPOSE.................................................1 2. ADMINISTRATION OF THE PLAN..............................1 3. SHARES..................................................2 4. AUTHORITY TO GRANT AWARDS...............................2 5. WRITTEN AGREEMENT.......................................2 6. ELIGIBILITY.............................................2 7. OPTION PRICE............................................2 8. DURATION OF OPTIONS.....................................3 9. RESTRICTIONS ON EXERCISE OF AWARDS, ETC.................3 10. EXERCISE OF AWARDS......................................3 11. NON-TRANSFERABILITY OF AWARDS...........................4 12. REQUIREMENTS OF LAW.....................................4 13. NO RIGHTS AS STOCKHOLDER................................5 14. NO EMPLOYMENT OBLIGATION................................5 15. CHANGES IN THE COMPANY'S CAPITAL STRUCTURE..............5 16. AMENDMENT OR TERMINATION OF PLAN........................8 17. CERTAIN RIGHTS OF THE COMPANY...........................8 18. EFFECTIVE DATE AND DURATION OF THE PLAN.................8 -ii- RSA HOLDINGS CORP. OF DELAWARE 1999 STOCK INCENTIVE PLAN 1. PURPOSE The purpose of this 1999 Stock Incentive Plan (the "Plan") is to encourage directors, consultants and key employees of RSA Holdings Corp. of Delaware (the "Company") and its Subsidiaries (as hereinafter defined) to continue their association with the Company and its Subsidiaries by providing opportunities for such persons to participate in the ownership of the Company and in its future growth through the granting of stock options (the "Options" or the "Awards") that are not intended to qualify for any special tax treatment under the Internal Revenue Code of 1986, as amended (the "Code"). The term "Subsidiary" as used in the Plan means a corporation or other business organization of which the Company owns, directly or indirectly through an unbroken chain of ownership, fifty percent (50%) or more of the total combined voting power of all classes of stock, partnership interests or other equity interests. 2. ADMINISTRATION OF THE PLAN (a) The Plan shall be administered by a committee (the "Committee") consisting of those Directors of the Company who shall at any time and from time to time be serving as members of the Compensation Committee of the Board of Directors of the Company (the "Board"). (b) The Committee shall, from time to time, report to the Board the names of employees or other persons to whom Awards are granted, the type of Awards granted, the number of shares covered by each Award and the terms and conditions of each such Award. (c) The Committee shall have the sole authority, in its absolute discretion, to adopt, amend and rescind such rules and regulations as, in its opinion, may be advisable in the administration of the Plan, and to continue and interpret the Plan, the rules and regulations, and the instruments evidencing Awards and to make all other determinations deemed necessary or advisable for the administration of the Plan. All decisions, determinations and interpretations of the Committee shall be final, binding and conclusive on all Participants. 8 3. SHARES AVAILABLE FOR AWARDS The stock subject to Awards under the Plan shall be shares of the Company's Common Stock, par value $.01 per share (the "Stock"). The total amount of Stock with respect to which Awards may be granted (the "Awards Pool") shall not exceed in the aggregate 110,000 shares. In the event that any outstanding Award shall expire for any reason or shall terminate by reason of the death or severance of employment of the Participant (as hereinafter defined), the surrender of any such Award, or any other cause, the shares of Stock allocable to the unexercised portion of such Award may again be subject to an Award under the Plan. 4. AUTHORITY TO GRANT AWARDS The Committee may consult with and consider the recommendations of other directors and the Chief Executive Officer of the Company, and may determine from time to time which key employees of the Company or any Subsidiary or other persons shall be granted Awards under the Plan, the terms of the Awards and the number of shares which may be purchased under the Awards. Subject only to any applicable limitations set forth elsewhere in the Plan, the number of shares of Stock to be covered by any Award shall be as determined by the Committee. 5. WRITTEN AGREEMENT Each Award granted hereunder shall be for such number of shares of Stock, and otherwise subject to such terms and conditions, as the Committee shall determine and specify in a written award agreement (an "Option Agreement"). Each Option Agreement shall be signed by the Participant and by the Chief Executive Officer or the Chief Financial Officer of the Company for and in the name and on behalf of the Company. 6. ELIGIBILITY The individuals who shall be eligible for an Award under the Plan shall be key employees, directors (whether or not employees) and other persons who render services of importance to the management, operation or development of the Company or a Subsidiary, and who have contributed or may be expected to contribute materially to the success of the Company or a Subsidiary. An employee, director or other person to whom an Award has been granted pursuant to an Option Agreement is sometimes referred to herein as a "Participant". 7. OPTION PRICE The price at which shares of Stock may be purchased pursuant to an Option shall be specified by the Committee at the time the Option is granted. 8. DURATION OF OPTIONS The duration of any Option shall be specified by the Committee in the Option Agreement, but no Option shall be exercisable after the expiration of ten (10) years from the date such Option is granted. The Committee, in its sole and absolute discretion, may extend any Option theretofore granted subject to the aforesaid limits and may provide that an Option shall be exercisable during its entire duration or during any lesser period of time. 9. RESTRICTIONS ON EXERCISE OF AWARDS, ETC. The Committee may restrict the exercise of any Award by prohibiting such exercise at any time during which and for such period of time as any Participant is engaged in any activity determined by the Committee, after consideration of the facts presented on behalf of the Company and the Participant, to be detrimental to the best interests of the Company and its stockholders. The Committee shall notify the Participant in writing of any such determination and of the scope and duration of any such restriction. If the Committee notifies a Participant in writing that such Participant is engaged or may have engaged in such a detrimental activity and such Participant has exercised or attempts to exercise an Award after such notification but prior to a decision of the Committee based on the consideration of all facts presented on behalf of the Company and the Participant, the Company shall not be required to recognize such exercise until the Committee has made its decision and, in the event any exercise shall have taken place, it shall be of no force and effect (and void ab initio) if the Committee makes an adverse determination; provided, however, that if the Committee finds in favor of the Participant then the Participant will be deemed to have exercised such Award as of the date he or she originally gave written notice of his or her attempt to exercise or actual exercise, as the case may be. The decision of the Committee as to the detrimental nature of the Participant's activities shall be final, binding and conclusive. 10. EXERCISE OF AWARDS Awards shall be exercised by the delivery of written notice to the Company setting forth the number of shares of Stock with respect to which the Award is to be exercised, accompanied by payment of the option price of such shares, which payment shall be made in cash or by such cash equivalents, payable to the order of the Company in an amount in United States dollars equal to the option price of such shares, as the Committee in its sole and absolute discretion shall consider acceptable. Such notice shall be delivered in person to the Secretary of the Company or shall be sent by registered mail, return receipt requested, to the Secretary of the Company, in which case delivery shall be deemed made on the date such notice is deposited in the mail. As promptly as practicable after the receipt by the Company of (a) written notice from the Participant setting forth the number of shares of the Stock with respect to which such Award is to be exercised and (b) payment of the option price of such shares, the Company shall (subject to Section 12 hereof) cause to be delivered to such Participant certificates representing the number of paid-up, non-assessable shares with respect to which such Award has been so exercised. 11. NON-TRANSFERABILITY OF AWARDS Awards shall not be transferable by the Participant otherwise than by will or under the laws of descent and distribution and, during his or her lifetime, shall be exercisable only by the Participant. Awards shall be null and void and without effect upon any attempted assignment or transfer, except as hereinabove provided, including without limitation any purported assignment, whether voluntary or by operation of law, pledge, hypothecation or other disposition contrary to the provisions hereof, or levy of execution, attachment, trustee process or similar process, whether legal or equitable upon the Awards. 12. REQUIREMENTS OF LAW The Company shall not be required to sell or issue any shares of Stock upon the exercise of any Option if the issuance of such shares shall constitute or result in a violation by the Participant or the Company of any provisions of any law, statute or regulation of any governmental authority. Specifically, in connection with the Securities Act of 1933, as amended (the "Securities Act"), and any applicable state securities or "blue sky" law (a "Blue Sky Law"), upon exercise of any Option the Company shall not be required to issue such shares unless the Committee has received evidence satisfactory to it to the effect that the holder of such Option will not transfer such shares except pursuant to a registration statement in effect under the Securities Act and Blue Sky Laws or unless an opinion of counsel satisfactory to the Company has been received by the Company to the effect that such registration and compliance is not required. Any determination in this connection by the Committee shall be final, binding and conclusive. The Company shall not be obligated to take any action in order to cause the exercise of an Option or the issuance of shares of Stock pursuant thereto to comply with any law or regulations of any governmental authority, including, without limitation, the Securities Act or applicable Blue Sky Law. Notwithstanding any other provision of the Plan to the contrary, the Company may refuse to permit transfer of shares of Stock or of any Option if in the opinion of its legal counsel such transfer would violate any federal or state securities laws or subject the Company to liability thereunder. Any sale, assignment, transfer, pledge or other disposition of shares of the Stock received upon exercise of any Option (or any other shares or securities derived therefrom) or of any Option which is not in accordance with the provisions of this Section shall be void and of no effect and shall not be recognized by the Company. The Committee may cause any certificate representing shares of Stock acquired upon exercise of an Option (and any other shares or securities derived therefrom) to bear a legend to the effect that the securities represented by such certificate have not been registered under the Securities Act, as amended, or any applicable state securities laws, and may not be sold, assigned, transferred, pledged or otherwise disposed of except in accordance with the Plan and applicable agreements binding the holder and the Company or any of its stockholders. 13. NO RIGHTS AS STOCKHOLDER No Participant shall have any rights as a stockholder with respect to shares covered by his or her Option until the date of issuance of a stock certificate for such shares; except as otherwise provided in Section 15, no adjustment for dividends or otherwise shall be made if the record date therefor is prior to the date of issuance of such certificate. 14. NO EMPLOYMENT OBLIGATION The granting of any Award shall not impose upon the Company or any Subsidiary any obligation to employ or continue to employ any Participant, or to engage or retain the services of any person, and the right of the Company or any Subsidiary to terminate the employment or services of any person shall not be diminished or affected by reason of the fact that an Award has been granted to him or her. The existence of any Award shall not be taken into account in determining any damages relating to termination of employment or services for any reason. 15. CHANGES IN THE COMPANY'S CAPITAL STRUCTURE (a) The existence of outstanding Awards shall not affect in any way the right or power of the Company or its stockholders to make or authorize any subdivisions, splits, combinations or consolidations of shares of capital stock of the Company (including the Stock) or the payment of a dividend in shares of the Stock or other securities of the Company, adjustments, recapitalizations, reclassifications, reorganizations or other changes in the Company's capital structure or its business or any merger or consolidation of the Company or any issue of bonds, debentures, preferred or preference stock, whether or not convertible into or exchangeable or exercisable for shares of the Stock or other securities, ranking prior to or pari passu with the Stock or affecting the rights thereof, or warrants, rights or options to acquire the same, or the dissolution or liquidation of the Company or any sale or transfer of all or any part of its assets or business or any other corporate act or proceeding, whether of a similar character or otherwise. (b) Subject to the provisions of Section 15(d) of the Plan, the number of shares of Stock in the Award Pool (less the number of shares theretofore delivered upon exercise of Options) and the number of shares of Stock covered by any outstanding Option and the price per share payable upon exercise thereof (provided that in no event shall the option price be less than the par value of such shares) shall be appropriately adjusted by the Board in the event that the outstanding shares of Stock are changed into or exchanged for a different number or kind of shares or other securities of the Company or of another corporation by reason of any reorganization, merger, consolidation, recapitalization, reclassification, stock split, combination of shares, or dividends payable in capital stock. The decision of the Board as to the adjustment, if any, required by the provisions of this Section shall be final, binding and conclusive. (c) If the Company merges or consolidates with a wholly-owned subsidiary for the purpose of reincorporating itself under the laws of another jurisdiction, the Participants will be entitled to acquire shares of Stock of the reincorporated Company upon the same terms and conditions as were in effect immediately prior to such reincorporation (unless such reincorporation involves a change in the number of shares or the capitalization of the Company, in which case proportional adjustments shall be made as provided in this Section), and the Plan, unless otherwise rescinded by the Board, will remain the Plan of the reincorporated Company. (d) Unless otherwise determined by the Board in its sole discretion and except as otherwise provided in Section 15(c) of the Plan, if while unexercised Awards remain outstanding under the Plan (i) the Company is merged or consolidated with another corporation or other entity, whether or not the Company is the surviving entity, or (ii) the Company is liquidated or sells or otherwise disposes of all or substantially all of its assets to another entity, or (iii) there takes place a Change in Control (as hereinafter defined), or (iv) in other circumstances in which the Board in its sole and absolute discretion deems it appropriate for the provisions of this paragraph to apply, (A) the purchaser(s) of the Company's assets or capital stock may, in his, her or its discretion, deliver to the Participant, in the case of an Option, to the extent that the right to purchase shares of Stock under an Option has vested, the same kind of consideration (less the price per share payable upon exercise of the Option) that is delivered to the holders of Stock as a result of such merger, consolidation, liquidation, sale, disposition, Change in Control or other circumstances or (B) the Board may, in its sole determination, cancel the Option, to the extent not theretofore exercised, in exchange for consideration in cash or in kind, which consideration in the case of (A) or (B) shall be equal in value to the value of those shares of stock or other consideration the Participant would have received had the Option been exercised (to the extent the Option has not been exercised, and, in the case of an Option, to the extent it has vested) and no disposition of the shares so acquired upon such exercise been made prior to such merger, consolidation, liquidation, sale, disposition, Change in Control or other circumstances, less the price per share payable upon exercise thereof. Upon receipt of such consideration by the Participant, the Option shall immediately terminate and be of no further force and effect, including with respect to the vested and unvested portion thereof. The value of the stock or other consideration the Participant would have received if the Option had been exercised shall be determined in good faith by the Board. In addition, in the case of any such merger, consolidation, liquidation, sale, disposition, Change in Control or other circumstance, the Board may, in its sole discretion, accelerate the vesting of an Option. For purposes of this Section, a "Change in Control" shall be deemed to have occurred if any person, or any two or more persons acting as a group, and all affiliates of such person or persons, who prior to such time owned less than fifty percent (50%) of the then outstanding Common Stock of the Company, shall acquire such additional shares of the Company's Common Stock in one or more transactions, or series of transactions, such that following such transaction or transactions, such person or group and affiliates beneficially own fifty percent (50%) or more of the Company's Common Stock outstanding; and "Common Stock" shall mean the Stock, or if changed, the capital stock of the Company as it shall be constituted from time to time entitling the holders thereof to share generally in the distribution of all assets available for distribution to the Company's stockholders after the distribution to any holders of capital stock with preferential rights. (e) Upon dissolution or liquidation of the Company, the Award shall terminate, but the Participant (if at such time in the employment of the Company) shall have the right, immediately prior to such dissolution or liquidation, to purchase shares of Stock pursuant to the Option to the extent such Option is then vested. (f) No fraction of a share of Stock shall be purchasable or deliverable upon the exercise of the Option, but in the event any adjustment hereunder of the number of shares covered by an Award shall cause such number to include a fraction of a share, such fraction shall be adjusted to the nearest smaller whole number of shares. (g) Except as expressly provided herein, the issue by the Company of shares of Stock or other securities of any class or series or securities convertible into or exchangeable or exercisable for shares of the Stock or other securities of any class or series for cash or property or for labor or services either upon direct sale or upon the exercise of rights or warrants to subscribe therefor, or upon conversion of shares or obligations of the Company convertible into such shares or other securities, shall not affect, and no adjustment by reason thereof shall be made with respect to, the number, class or price of shares of the Stock then subject to outstanding Options. 16. AMENDMENT OR TERMINATION OF PLAN The Board may, in its sole and absolute discretion, modify, revise or terminate the Plan at any time and from time to time; provided, however, except as otherwise permitted herein, no amendment shall adversely affect outstanding Options, and no termination shall terminate outstanding Options, without the consent of the Participant. 17. CERTAIN RIGHTS OF THE COMPANY The Committee may, in its sole and absolute discretion, also require a key employee or other person, as a condition to receiving any Award, to enter into a noncompetition agreement or other agreement in such form as the Committee may, from time to time in its sole and absolute discretion, determine. 18. EFFECTIVE DATE AND DURATION OF THE PLAN The Plan shall become effective and shall be deemed to have been adopted as of April 24, 1999. Unless the Plan shall have terminated earlier, the Plan shall terminate on December 31, 2009. No Option shall be granted pursuant to the Plan after December 31, 2009. RSA HOLDINGS CORP. OF DELAWARE ---------------------------- Non-Qualified Stock Option Agreement Option Certificate: No. ---------------------------- Specific Terms of the Option - ---------------------------- Subject to the terms and conditions hereinafter set forth and the terms and conditions of the RSA Holdings Corp. of Delaware 1999 Stock Incentive Plan (the "Plan"), RSA Holdings Corp. of Delaware, a Delaware corporation (the "Company"), hereby grants the following option to purchase shares of the Common Stock, par value $.01 per share (the "Stock"), of the Company: 1. Name of Person to Whom the Option Is Granted (the "Optionee"):_________________________________. 2. Date of Grant of Option: April 24, 1999. 3. An Option for ( ) Shares of the Stock. --------------- --- 4. Option Exercise Price (per Share): $90.00. 5. Term of Option: Subject to Section 9 below, this Option expires at 5:00 p.m. Eastern Standard time on April 23, 2009. 2 6. Exercise Schedule: Subject to the provisions of Section 9 below, this Option shall vest and become exercisable with respect to the number of shares of Stock and upon the attainment of certain performance goals on or prior to the end of certain performance periods, as shown on Schedule I attached hereto and incorporated herein. RSA HOLDINGS CORP. OF DELAWARE [Name of Optionee] By: --------------------------- Title: (Signature of Optionee) ------------------------ Date: Optionee's Address: OTHER TERMS OF THE OPTION - ------------------------- WHEREAS, the Board of Directors (the "Board") has authorized the grant of stock options upon certain terms and conditions set forth in the Plan and herein; and WHEREAS, the Compensation Committee (the "Committee") has authorized the grant of this stock option pursuant and subject to the terms of the Plan, a copy of which is available from the Company and is hereby incorporated herein; NOW, THEREFORE, in consideration of the premises and the mutual covenants and agreements herein contained, the Company and the Optionee, intending to be legally bound, covenant and agree as set forth on the first page hereof and as follows: 7. Grant. Pursuant and subject to the Plan, the Company does hereby grant to the Optionee a stock option (the "Option") to purchase from the Company the number of shares of Stock set forth in Section 3 on the first page hereof upon the terms and conditions set forth in the Plan and upon the additional terms and conditions contained herein. This Option is a non-qualified stock option and is not intended to qualify for special federal income tax treatment as an "incentive stock option" pursuant to Section 422 of the Internal Revenue Code of 1986, as amended (the "Code"). 8. Option Price. This Option may be exercised at the option price per share of Stock set forth in Section 4 on the first page hereof, subject to adjustment as provided herein and in the Plan. 5 9. Term and Exercisability of Option. This Option shall expire on the earliest of (a) the date determined pursuant to Section 5 on the first page hereof, (b) the date determined pursuant to Section 8 of the Plan, and (c) the date determined pursuant to this Section 9, and shall be exercisable prior to such expiration in accordance with and subject to the terms and conditions set forth herein and in the Plan (including but not limited to Section 9 of the Plan) and those terms and conditions, if any, set forth in Section 6 on the first page hereof. If the Optionee's employment or involvement with the Company is terminated for Cause (as defined below) or the Optionee voluntarily terminates his or her employment or involvement with the Company without Good Reason (as defined below), the Option hereby granted to the Optionee shall terminate on the date of such termination of employment or involvement. If the Optionee is terminated by the Company without Cause or terminates his or her employment or involvement with the Company for Good Reason, the Option shall terminate on the date of such termination of employment or involvement with respect to the unvested portion thereof, and with respect to the vested portion of the Option, on the day which is three months after such termination of employment or involvement. If the Optionee is terminated by the Company due to death or permanent disability (as determined under the Company's long-term disability plan) of the Optionee, the Option shall terminate with respect to any unvested portion thereof on the date of such termination of employment or involvement, and with respect to the vested portion of the Option, on the 181st day after the date of such termination of employment or involvement. If the Optionee dies before this Option has been exercised in full, the personal representative of the Optionee may exercise this Option prior to its expiration. For purposes of this Section 9: "Cause" shall mean (i) conduct involving dishonesty in the performance of the Optionee's duties,(ii) an act or acts on the Optionee's part constituting a felony under the laws of the United States or any state thereof (iii) Optionee's continued failure, whether willful, intentional or negligent, after written notice to perform substantially his duties hereunder (other than as a result of a disability), (iv) any other willful act or omission on Optionee's part which is materially injurious to the financial condition or business reputation of the Company or any of its subsidiaries or (v) violation of an employment agreement by the Optionee; and "Good Reason" shall mean (i) any significant reduction by the Company of the Optionee's duties or responsibilities,(ii)a reduction in the Optionee's base salary; provided, however, that in order for the Optionee to terminate his or her employment or involvement with the Company for Good Reason, the Optionee must give the Company written notice of the event constituting Good Reason within 30 days following such event, and the Company must not remedy the Good Reason within 30 days of its receipt of the Optionee's notice or (iii) violation of an employment agreement by the Company. 10. Method of Exercise. To the extent that the right to purchase shares of Stock has accrued hereunder, this Option may be exercised from time to time by written notice to the Company substantially in the form attached hereto as Exhibit A, stating the number of shares with respect to which this Option is being exercised, and accompanied by payment in full of the option price for the number of shares to be delivered, by means of payment acceptable to the Company in accordance with Section 10 of the Plan. Subject to the Plan and to Section 13 hereof, as soon as practicable after its receipt of such notice, the Company shall, without transfer or issue tax to the Optionee (or other person entitled to exercise this Option), deliver to the Optionee (or other person entitled to receive the shares of the Stock issuable upon exercise of this Option), at the principal executive offices of the Company or such other place as shall be mutually acceptable, a certificate or certificates for such shares out of theretofore authorized but unissued shares or reacquired shares of its Stock as the Company may elect; provided, however, that the time of such delivery may be postponed by the Company for such period as may be required for it with reasonable diligence to comply with any applicable requirements of law. Payment of the option price may be made in cash or cash equivalents in accordance with the terms and conditions of Section 10 of the Plan. If the Optionee (or other person entitled to exercise this Option) fails to pay for and accept delivery of all of the shares specified in such notice upon tender of delivery thereof, his or her right to exercise this Option with respect to such shares not paid for may be terminated by the Company. 11. Forfeiture; Restrictions on Exercise. This Option may be subject to forfeiture upon the occurrence of the events specified in Section 9 hereof or restrictions on exercise upon the occurrence of events specified in Section 9 of the Plan. 12. Nonassignability of Option Rights. This Option shall not be assignable or transferable by the Optionee except by willor by the laws of descent and distribution. During the life of the Optionee, this Option shall be exercisable only by him or her. 13. Compliance with Securities Act. The Company shall not be obligated to sell or issue any shares of Stock or other securities pursuant to the exercise of this Option unless the shares of Stock or other securities with respect to which this Option is being exercised are at that time effectively registered or exempt from registration under the Securities Act of 1933, as amended, and applicable state securities laws. In the event shares or other securities shall be issued which shall not be so registered, the Optionee hereby represents, warrants and agrees that he or she will receive such shares or other securities for investment and not with a view to their resale or distribution, and will execute an appropriate investment letter satisfactory to the Company and its counsel as a condition precedent to any exercise of this Option in whole or in part. 14. Legends. The Optionee hereby acknowledges that the stock certificate or certificates evidencing shares of the Stock or other securities issued pursuant to any exercise of this Option will bear a legend setting forth the restrictions on their transferability described in Section 13 hereof, in Section 12 of the Plan, and under any applicable agreements between the Optionee and the Company or any of its stockholders. 15. Rights as Stockholder. The Optionee shall have no rights as a stockholder with respect to any shares of the Stock or other securities covered by this Option until the date of issuance of a certificate to him or her for such shares or other securities. No adjustment shall be made for dividends or other rights for which the record date is prior to the date such stock certificate is issued. 16. Certain Agreements. The Optionee hereby agrees to and joins in as a "Management Holder", and agrees to be bound as a "Management Holder" by the terms and conditions of, the Stockholders Agreement, dated as of April 23, 1999, among the Company and the other persons named therein. The Optionee hereby further acknowledges and agrees that the Option and the shares of Stock issuable upon exercise of the Option are and shall be subject to the terms and provisions of said Stockholders Agreement, as the same may be amended or modified from time to time in accordance with its terms. 17. Withholding Taxes. The Optionee hereby agrees, as a condition to any exercise of this Option, to provide to the Company an amount sufficient to satisfy its obligation to withhold certain federal, state and local taxes arising by reason of such exercise (the "Withholding Amount") by remitting the Withholding Amount to the Company in cash; provided, however, that to the extent that the Withholding Amount is not provided by such method, the Company in its sole and absolute discretion may refuse to issue such shares of Stock. 18. Termination or Amendment of Plan. The Board may in its sole and absolute discretion at any time terminate or from time to time modify or amend the Plan, but no such termination or amendment will adversely affect rights and obligations under this Option without the consent of the Optionee. 19. Effect Upon Employment. Nothing in this Option or the Plan shall be construed to impose any obligation upon the Company to employ or retain in its employ, or continue its involvement with, the Optionee. 20. General Provisions. ------------------ (a) Amendment; Waivers. This Agreement, including the Plan, contains the full and complete understanding and agreement of the parties hereto as to the subject matter hereof and may not be modified or amended, nor may any provision hereof be waived, except by a further written agreement duly signed by each of the parties. The waiver by either of the parties hereto of any provision hereof in any instance shall not operate as a waiver of any other provision hereof or in any other instance. (b) Binding Effect. This Agreement shall inure to the benefit of and be binding upon the parties hereto and, to the extent provided herein and in the Plan, their respective heirs, executors, administrators, representatives, successors and assigns. (c) Construction. This Agreement is to be construed in accordance with the terms of the Plan. In case of any conflict between the Plan and this Agreement, the Plan shall control. The titles of the sections of this Agreement and of the Plan are included for convenience only and shall not be construed as modifying or affecting their provisions. The masculine gender shall include both sexes; the singular shall include the plural and the plural the singular unless the context otherwise requires. (d) Governing Law. This Agreement shall be governed by and construed and enforced in accordance with the applicable laws of the United State of America and the law (other than the law governing conflict of law questions) of the State of Delaware except to the extent the laws of any other jurisdiction are mandatorily applicable. (e) Notices. Any notice in connection with this Agreement shall be deemed to have been properly delivered if it is in writing and is delivered in hand or sent by registered or certified mail, return receipt requested, to the party addressed as follows, unless another address has been substituted by notice so given: To the Optionee: To his or her address as listed on the books of the Company. To the Company: RSA Holdings Corp. of Delaware c/o American Safety Razor Company 240 Cedar Knolls Road Cedar Knolls, NJ 07297 Attention: Lawrence Friedman, Esq. Copy to: Alvin H. Brown Simpson Thacher & Bartlett 425 Lexington Avenue New York, NY 10017 RSA HOLDINGS CORP. OF DELAWARE SCHEDULE I Option Vesting Schedule ----------------------- Subject to the provisions of Section 9 of the Option Agreement to which this Option Vesting Schedule is attached: A. For purposes hereof: (1) "EBITDA" means consolidated earnings of the Company and its subsidiaries, exclusive of passive pension income except for 1999, before interest, taxes, depreciation and amortization and after deduction of all operating expenses, subject to adjustment by the Board for extraordinary and non-recurring items, all as calculated in accordance with generally accepted accounting principles consistently applied, and as reflected in the Company's most recently available audited consolidated financial statements for the immediately preceding fiscal year and certified by an officer of the Company. (2) "Shares" means the number of shares of Stock set forth in Section 3 of the Option Agreement to which this Option Vesting Schedule is attached. (3) "Target Period" means one of the fiscal years of the Company set forth in Table A hereinbelow. B. If the Company's EBITDA in any Target Period is equal to the Base Target EBITDA for such period, the Option will vest and be exercisable with respect to 10% of the Shares. If the Company's EBITDA in any Target Period is equal to or greater than the Optimistic Target EBITDA for such period, the Option will vest and be exercisable with respect to 20% of the Shares. If the Company's EBITDA for any Target Period is between the Base Target and the Optimistic Target EBITDA, then the percentage of the Shares with respect to which the Option shall vest shall be determined according to a linear extrapolation such that at the Base Target EBITDA the Option will vest for 10% of the Shares and at the Optimistic Target EBITDA the Option will vest for 20% of the Shares. 3 C. Notwithstanding the foregoing, (1) if (a) the Company's EBITDA for the 2003 Target Period is equal to or greater than the Base Target EBITDA for such period, and (b) the Company's cumulative EBITDA for all five Target Periods is equal to the cumulative Base Target EBITDA for such five-year period, then the Option shall vest and be exercisable with respect 50% of the Shares(to the extent not theretofore vested in accordance with this Schedule I); (2) if (a) the Company's EBITDA for the 2003 Target Period is equal to or greater than the Base Target EBITDA for such period, and (b) the Company's cumulative EBITDA for all five Target Periods is equal to or greater than the cumulative Optimistic Target EBITDA, then the Option shall vest and be exercisable with respect to 100% of the Shares (to the extent not theretofore vested in accordance with this Schedule I); and (3) if (a) the Company's EBITDA for the 2003 Target Period is equal to or greater than the base Target EBITDA for such period, and (b) the Company's cumulative EBITDA for all five Target Periods is between the cumulative Base Target EBITDA and the cumulative Optimistic Target, then the percentage of the Shares with respect to which the Option shall vest shall be determined according to a linear extrapolation such that at the cumulative Base Target EBITDA the Option will vest for 50% of the Shares and at the cumulative Optimistic Target EBITDA the option will vest for 100% of the Shares (to the extent not theretofore vested in accordance with this with Schedule I). D. Notwithstanding the foregoing, if there shall occur a Change of Control (as defined in the Plan) prior to the end of Fiscal Year 5, then the Option shall vest and be exercisable, effective immediately prior to such Change in Control, with respect to a percentage of the Shares reserved (but for this paragraph) for vesting in any Target Period ending after the occurrence of such Change in Control equal to the quotient (expressed as a percentage) of (1) the number of Shares with respect to which the Option shall have theretofore vested, divided by (2) the maximum number of Shares with respect to which the Option would have theretofore vested had the Company's EBITDA for each Target Period ending prior to the occurrence of such Change in Control been equal to or greater than the Optimistic Target EBITDA for the each such Target Period; provided, however, that such percentage determined pursuant to this paragraph shall be rounded down to the nearest tenth of a percent. E. Notwithstanding the foregoing, provided that (1) Optionee shall continue to be an employee, director or consultant of the Company or a subsidiary, and (2) the Company shall not have (a) merged or consolidated with another corporation or other entity, whether or not the Company is the surviving entity, or (b) liquidated or sold or otherwise disposed of all or substantially all of its assets to another entity, or (c) been subject to a Change in Control (as defined in the Plan), the unvested portion of the Option shall vest and be exercisable, effective immediately nine (9) years from the date of the grant of such Option. F. Upon the Company's making an acquisition or disposition of any material business or line of business, the EBITDA Targets set forth above for Target Periods ending after the date of such transaction will be adjusted by the Board of Directors of the Company to take into account the changes in EBITDA expected as a result of such transaction. EXHIBIT A to Stock Option Agreement [FORM FOR EXERCISE OF STOCK OPTION] RSA Holdings Corp. of Delaware [Address as specified in Section 21(e) of the Option Agreement] RE: Exercise of Option under the RSA Holdings Corp. of Delaware 1999 Stock Incentive Plan ---------------------------------- Gentlemen: Please take notice that the undersigned hereby elects to exercise the stock option granted to___________ on ________ , by and to the extent of purchasing ________ shares of, Common Stock, par value $.01 per share, of RSA Holdings Corp. of Delaware (the "Company") for the option price of $_________ per share, subject to the terms and conditions of the Stock Option Agreement between ___________ and the Company dated as of ____________ , (the "Option Agreement"). The undersigned encloses herewith payment, in cash or in such other property as is permitted under the Plan, of the purchase price for said shares. The undersigned hereby agrees to provide the Company an amount sufficient to satisfy the obligation of the Company to withhold certain taxes, as provided in Section 17 of the Option Agreement. The undersigned hereby specifically confirms to RSA Holdings Corp. of Delaware that he or she is acquiring said shares for investment and not with a view to their sale or distribution, and that said shares shall be held subject to all of the terms and conditions of said Stock Option Agreement. Very truly yours, Date ------------------------- (Signed by ___________________ or other party duly exercising option) 3 RSA HOLDINGS CORP. OF DELAWARE ---------------------------- Non-Qualified Stock Option Agreement Option Certificate: No. ---------------------------- Specific Terms of the Option - ---------------------------- Subject to the terms and conditions hereinafter set forth and the terms and conditions of the RSA Holdings Corp. of Delaware 1999 Stock Incentive Plan (the "Plan"), RSA Holdings Corp. of Delaware, a Delaware corporation (the "Company"), hereby grants the following option to purchase shares of the Common Stock, par value $.01 per share (the "Stock"), of the Company: 1. Name of Person to Whom the Option Is Granted (the "Optionee"):_________________________________. 2. Date of Grant of Option: January 1, 2000. 3. An Option for ( ) Shares of the Stock. --------------- --- 4. Option Exercise Price (per Share): $90.00. 5. Term of Option: Subject to Section 9 below, this Option expires at 5:00 p.m. Eastern Standard time on December 31, 2009. 6. Exercise Schedule: Subject to the provisions of Section 9 below, this Option shall vest and become exercisable with respect to the number of shares of the Stock and upon the attainment of certain performance goals on or prior to the end of certain performance periods, as shown on Schedule I attached hereto and incorporated herein. RSA HOLDINGS CORP. OF DELAWARE [Name of Optionee] By: --------------------------- Title: (Signature of Optionee) ------------------------ Date: Optionee's Address: OTHER TERMS OF THE OPTION - ------------------------- WHEREAS, the Board of Directors (the "Board") has authorized the grant of stock options upon certain terms and conditions set forth in the Plan and herein; and WHEREAS, the Compensation Committee (the "Committee") has authorized the grant of this stock option pursuant and subject to the terms of the Plan, a copy of which is available from the Company and is hereby incorporated herein; NOW, THEREFORE, in consideration of the premises and the mutual covenants and agreements herein contained, the Company and the Optionee, intending to be legally bound, covenant and agree as set forth on the first page hereof and as follows: 7 Grant. Pursuant and subject to the Plan, the Company does hereby grant to the Optionee a stock option (the "Option") to purchase from the Company the number of shares of Stock set forth in Section 3 on the first page hereof upon the terms and conditions set forth in the Plan and upon the additional terms and conditions contained herein. This Option is a non-qualified stock option and is not intended to qualify for special federal income tax treatment as an "incentive stock option" pursuant to Section 422 of the Internal Revenue Code of 1986, as amended (the "Code"). 8 Option Price. This Option may be exercised at the option price per share of Stock set forth in Section 4 on the first page hereof, subject to adjustment as provided herein and in the Plan. 5 9 Term and Exercisability of Option. This Option shall expire on the earliest of (a) the date determined pursuant to Section 5 on the first page hereof, (b) the date determined pursuant to Section 8 of the Plan, and (c) the date determined pursuant to this Section 9, and shall be exercisable prior to such expiration in accordance with and subject to the terms and conditions set forth herein and in the Plan (including but not limited to Section 9 of the Plan) and those terms and conditions, if any, set forth in Section 6 on the first page hereof. If the Optionee's employment or involvement with the Company is terminated for Cause (as defined below) or the Optionee voluntarily terminates his or her employment or involvement with the Company without Good Reason (as defined below), the Option hereby granted to the Optionee shall terminate on the date of such termination of employment or involvement. If the Optionee is terminated by the Company without Cause or terminates his or her employment or involvement with the Company for Good Reason, the Option shall terminate on the date of such termination of employment or involvement with respect to the unvested portion thereof, and with respect to the vested portion of the Option, on the day which is three months after such termination of employment or involvement. If the Optionee is terminated by the Company due to death or permanent disability (as determined under the Company's long-term disability plan) of the Optionee, the Option shall terminate with respect to any unvested portion thereof on the date of such termination of employment or involvement, and with respect to the vested portion of the Option, on the 181st day after the date of such termination of employment or involvement. If the Optionee dies before this Option has been exercised in full, the personal representative of the Optionee may exercise this Option prior to its expiration. For purposes of this Section 9: "Cause" shall mean (i) conduct involving dishonesty in the performance of the Optionee's duties,(ii) an act or acts on the Optionee's part constituting a felony under the laws of the United States or any state thereof (iii) Optionee's continued failure, whether willful, intentional or negligent, after written notice to perform substantially his duties hereunder (other than as a result of a disability), (iv) any other willful act or omission on Optionee's part which is materially injurious to the financial condition or business reputation of the Company or any of its subsidiaries or (v) violation of an employment agreement by the Optionee; and "Good Reason" shall mean (i) any significant reduction by the Company of the Optionee's duties or responsibilities,(ii)a reduction in the Optionee's base salary; provided, however, that in order for the Optionee to terminate his or her employment or involvement with the Company for Good Reason, the Optionee must give the Company written notice of the event constituting Good Reason within 30 days following such event, and the Company must not remedy the Good Reason within 30 days of its receipt of the Optionee's notice or (iii) violation of an employment agreement by the Company. 10 Method of Exercise. To the extent that the right to purchase shares of Stock has accrued hereunder, this Option may be exercised from time to time by written notice to the Company substantially in the form attached hereto as Exhibit A, stating the number of shares with respect to which this Option is being exercised, and accompanied by payment in full of the option price for the number of shares to be delivered, by means of payment acceptable to the Company in accordance with Section 10 of the Plan. Subject to the Plan and to Section 13 hereof, as soon as practicable after its receipt of such notice, the Company shall, without transfer or issue tax to the Optionee (or other person entitled to exercise this Option), deliver to the Optionee (or other person entitled to receive the shares of the Stock issuable upon exercise of this Option), at the principal executive offices of the Company or such other place as shall be mutually acceptable, a certificate or certificates for such shares out of theretofore authorized but unissued shares or reacquired shares of its Stock as the Company may elect; provided, however, that the time of such delivery may be postponed by the Company for such period as may be required for it with reasonable diligence to comply with any applicable requirements of law. Payment of the option price may be made in cash or cash equivalents in accordance with the terms and conditions of Section 10 of the Plan. If the Optionee (or other person entitled to exercise this Option) fails to pay for and accept delivery of all of the shares specified in such notice upon tender of delivery thereof, his or her right to exercise this Option with respect to such shares not paid for may be terminated by the Company. 11 Forfeiture; Restrictions on Exercise. This Option may be subject to forfeiture upon the occurrence of the events specified in Section 9 hereof or restrictions on exercise upon the occurrence of events specified in Section 9 of the Plan. 12 Nonassignability of Option Rights. This Option shall not be assignable or transferable by the Optionee except by will or by the laws of descent and distribution. During the life of the Optionee, this Option shall be exercisable only by him or her. 13 Compliance with Securities Act. The Company shall not be obligated to sell or issue any shares of Stock or other securities pursuant to the exercise of this Option unless the shares of Stock or other securities with respect to which this Option is being exercised are at that time effectively registered or exempt from registration under the Securities Act of 1933, as amended, and applicable state securities laws. In the event shares or other securities shall be issued which shall not be so registered, the Optionee hereby represents, warrants and agrees that he or she will receive such shares or other securities for investment and not with a view to their resale or distribution, and will execute an appropriate investment letter satisfactory to the Company and its counsel as a condition precedent to any exercise of this Option in whole or in part. 14 Legends. The Optionee hereby acknowledges that the stock certificate or certificates evidencing shares of the Stock or other securities issued pursuant to any exercise of this Option will bear a legend setting forth the restrictions on their transferability described in Section 13 hereof, in Section 12 of the Plan, and under any applicable agreements between the Optionee and the Company or any of its stockholders. 15 Rights as Stockholder. The Optionee shall have no rights as a stockholder with respect to any shares of the Stock or other securities covered by this Option until the date of issuance of a certificate to him or her for such shares or other securities. No adjustment shall be made for dividends or other rights for which the record date is prior to the date such stock certificate is issued. 16 Certain Agreements. The Optionee hereby agrees to and joins in as a "Management Holder", and agrees to be bound as a "Management Holder" by the terms and conditions of, the Stockholders Agreement, dated as of April 23, 1999, among the Company and the other persons named therein. The Optionee hereby further acknowledges and agrees that the Option and the shares of Stock issuable upon exercise of the Option are and shall be subject to the terms and provisions of said Stockholders Agreement, as the same may be amended or modified from time to time in accordance with its terms. 17 Withholding Taxes. The Optionee hereby agrees, as a condition to any exercise of this Option, to provide to the Company an amount sufficient to satisfy its obligation to withhold certain federal, state and local taxes arising by reason of such exercise (the "Withholding Amount") by remitting the Withholding Amount to the Company in cash; provided, however, that to the extent that the Withholding Amount is not provided by such method, the Company in its sole and absolute discretion may refuse to issue such shares of Stock. 18 Termination or Amendment of Plan. The Board may in its sole and absolute discretion at any time terminate or from time to time modify or amend the Plan, but no such termination or amendment will adversely affect rights and obligations under this Option without the consent of the Optionee. 19 Effect Upon Employment. Nothing in this Option or the Plan shall be construed to impose any obligation upon the Company to employ or retain in its employ, or continue its involvement with, the Optionee. 20 General Provisions. ------------------ (a) Amendment; Waivers. This Agreement, including the Plan, contains the full and complete understanding and agreement of the parties hereto as to the subject matter hereof and may not be modified or amended, nor may any provision hereof be waived, except by a further written agreement duly signed by each of the parties. The waiver by either of the parties hereto of any provision hereof in any instance shall not operate as a waiver of any other provision hereof or in any other instance. (b) Binding Effect. This Agreement shall inure to the benefit of and be binding upon the parties hereto and, to the extent provided herein and in the Plan, their respective heirs, executors, administrators, representatives, successors and assigns. (c) Construction. This Agreement is to be construed in accordance with the terms of the Plan. In case of any conflict between the Plan and this Agreement, the Plan shall control. The titles of the sections of this Agreement and of the Plan are included for convenience only and shall not be construed as modifying or affecting their provisions. The masculine gender shall include both sexes; the singular shall include the plural and the plural the singular unless the context otherwise requires. (d) Governing Law. This Agreement shall be governed by and construed and enforced in accordance with the applicable laws of the United State of America and the law (other than the law governing conflict of law questions) of the State of Delaware except to the extent the laws of any other jurisdiction are mandatorily applicable. (e) Notices. Any notice in connection with this Agreement shall be deemed to have been properly delivered if it is in writing and is delivered in hand or sent by registered or certified mail, return receipt requested, to the party addressed as follows, unless another address has been substituted by notice so given: To the Optionee: To his or her address as listed on the books of the Company. To the Company: RSA Holdings Corp. of Delaware c/o American Safety Razor Company 240 Cedar Knolls Road Cedar Knolls, NJ 07297 Attention: Lawrence Friedman, Esq. Copy to: Alvin H. Brown Simpson Thacher & Bartlett 425 Lexington Avenue New York, NY 10017 RSA HOLDINGS CORP. OF DELAWARE SCHEDULE I Option Vesting Schedule ----------------------- Subject to the provisions of Section 9 of the Option Agreement to which this Option Vesting Schedule is attached: A. For purposes hereof: (1) "EBITDA" means consolidated earnings of the Company and its subsidiaries, exclusive of passive pension income, before interest, taxes, depreciation and amortization and after deduction of all operating expenses, subject to adjustment by the Board for extraordinary and non-recurring items, all as calculated in accordance with generally accepted accounting principles consistently applied, and as reflected in the Company's most recently available audited consolidated financial statements for the immediately preceding fiscal year and certified by an officer of the Company. (2) "Shares" means the number of shares of Stock set forth in Section 3 of the Option Agreement to which this Option Vesting Schedule is attached. (3) "Target Period" means one of the fiscal years of the Company set forth in Table A hereinbelow. B. If the Company's EBITDA in any Target Period is equal to the Base Target EBITDA for such period, the Option will vest and be exercisable with respect to 10% of the Shares. If the Company's EBITDA in any Target Period is equal to or greater than the Optimistic Target EBITDA for such period, the Option will vest and be exercisable with respect to 20% of the Shares. If the Company's EBITDA for any Target Period is between the Base Target and the Optimistic Target EBITDA, then the percentage of the Shares with respect to which the Option shall vest shall be determined according to a linear extrapolation such that at the Base Target EBITDA the Option will vest for 10% of the Shares and at the Optimistic Target EBITDA the Option will vest for 20% of the Shares. 3 C. Notwithstanding the foregoing, (1) if (a) the Company's EBITDA for the 2004 Target Period is equal to or greater than the Base Target EBITDA for such period, and (b) the Company's cumulative EBITDA for all five Target Periods is equal to the cumulative Base Target EBITDA for such five-year period, then the Option shall vest and be exercisable with respect 50% of the Shares(to the extent not theretofore vested in accordance with this Schedule I); (2) if (a) the Company's EBITDA for the 2004 Target Period is equal to or greater than the Base Target EBITDA for such period, and (b) the Company's cumulative EBITDA for all five Target Periods is equal to or greater than the cumulative Optimistic Target EBITDA, then the Option shall vest and be exercisable with respect to 100% of the Shares (to the extent not theretofore vested in accordance with this Schedule I); and (3) if (a) the Company's EBITDA for the 2004 Target Period is equal to or greater than the base Target EBITDA for such period, and (b) the Company's cumulative EBITDA for all five Target Periods is between the cumulative Base Target EBITDA and the cumulative Optimistic Target, then the percentage of the Shares with respect to which the Option shall vest shall be determined according to a linear extrapolation such that at the cumulative Base Target EBITDA the Option will vest for 50% of the Shares and at the cumulative Optimistic Target EBITDA the option will vest for 100% of the Shares (to the extent not theretofore vested in accordance with this with Schedule I). D. Notwithstanding the foregoing, if there shall occur a Change of Control (as defined in the Plan) prior to the end of Fiscal Year 5, then the Option shall vest and be exercisable, effective immediately prior to such Change in Control, with respect to a percentage of the Shares reserved (but for this paragraph) for vesting in any Target Period ending after the occurrence of such Change in Control equal to the quotient (expressed as a percentage) of (1) the number of Shares with respect to which the Option shall have theretofore vested, divided by (2) the maximum number of Shares with respect to which the Option would have theretofore vested had the Company's EBITDA for each Target Period ending prior to the occurrence of such Change in Control been equal to or greater than the Optimistic Target EBITDA for the each such Target Period; provided, however, that such percentage determined pursuant to this paragraph shall be rounded down to the nearest tenth of a percent. E. Notwithstanding the foregoing, provided that (1) Optionee shall continue to be an employee, director or consultant of the Company or a subsidiary, and (2) the Company shall not have (a) merged or consolidated with another corporation or other entity, whether or not the Company is the surviving entity, or (b) liquidated or sold or otherwise disposed of all or substantially all of its assets to another entity, or (c) been subject to a Change in Control (as defined in the Plan), the unvested portion of the Option shall vest and be exercisable, effective immediately nine (9) years from the date of the grant of such Option. F. Upon the Company's making an acquisition or disposition of any material business or line of business, the EBITDA Targets set forth above for Target Periods ending after the date of such transaction will be adjusted by the Board of Directors of the Company to take into account the changes in EBITDA expected as a result of such transaction. EXHIBIT A to Stock Option Agreement [FORM FOR EXERCISE OF STOCK OPTION] RSA Holdings Corp. of Delaware [Address as specified in Section 21(e) of the Option Agreement] RE: Exercise of Option under the RSA Holdings Corp. of Delaware 1999 Stock Incentive Plan ---------------------------------- Gentlemen: Please take notice that the undersigned hereby elects to exercise the stock option granted to _____________ on _________ , by and to the extent of purchasing _____________ shares of, Common Stock, par value $.01 per share, of RSA Holdings Corp. of Delaware (the "Company") for the option price of $_________ per share, subject to the terms and conditions of the Stock Option Agreement between ______________ and the Company dated as of ____________ , (the "Option Agreement"). The undersigned encloses herewith payment, in cash or in such other property as is permitted under the Plan, of the purchase price for said shares. The undersigned hereby agrees to provide the Company an amount sufficient to satisfy the obligation of the Company to withhold certain taxes, as provided in Section 17 of the Option Agreement. The undersigned hereby specifically confirms to RSA Holdings Corp. of Delaware that he or she is acquiring said shares for investment and not with a view to their sale or distribution, and that said shares shall be held subject to all of the terms and conditions of said Stock Option Agreement. Very truly yours, Date ------------------------- (Signed by ___________________________ or other party duly exercising option) EX-27 4 0004.txt FDS --
5 This schedule contains summary financial information extracted from the financial statements included in the Form 10-Q of American Safety Razor Company for the quarter ended June 30, 2000, and is qualified in its entirety by reference to such financial statements. 0000750339 American Safety Razor Company 1,000 U.S. Dollar 6-MOS DEC-31-2000 JAN-01-2000 JUN-30-2000 1 3,776 0 47,280 0 60,819 121,015 104,661 14,878 400,166 47,869 180,126 0 0 121 119,937 400,166 157,130 157,130 105,220 105,220 0 0 9,553 2,987 1,395 1,592 0 0 0 1,592 0.13 0.13
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